Interdisciplinary Journal of Contemporary Research in Business

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MAY 2011
ISSN
2073-7122
VOL 3, NO 1
INTERDISCIPLINARY JOURNAL OF CONTEMPORARY RESEARCH
IN BUSINESS
IJCRB
Vol .3, No. 1
May 2011
Interdisciplinary Journal of
Contemporary Research in Business
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Institute of Interdisciplinary Business Research~ IIBR

NTERNATIONAL
RESEARCH
CENTRE
COPY RIGHT 2011 Institute of IInterdisciplinary
Business
Research
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INTERDISCIPLINARY JOURNAL OF CONTEMPORARY RESEARCH IN BUSINESS
MAY 2011
VOL 3, NO 1
Editorial Board
IJCRB is a peer reviewed Journal and IJCRB Editorial Board consists of Phd doctors from all
over the world including USA, UK, South Africa, Canada, European and Asian countries.
Prof. Renee Pistone

Harvard University, Lifetime Fellow - Harvard URI.
706 McCormick Dr Toms River, New Jersey USA
Voice: 732.668.4533
Lord David K
Oxford University , St Catherine's College, Oxford, OX1 3UJ www.stcatz.ox.ac.uk/ ,

www.ox.ac.uk/ Phone: +44 1865 271700 , Fax: +44 1865 271768
Dr. Kenan Peker
Department of Agricultural Economics, University of Selcuk, http://www.selcuk.edu.tr/
University of Selcuk, 42079 Konya, Turkey, Tel: 90-332-231-2877
Dr. A. Sathiyasusuman
Senior Lecturer, Dept. of Statistics, University of the Western Cape, South Africa
Dr Mahdi Salehi
Assistant Professor, Accounting and Management Department, http://www.znu.ac.ir/
Zanjan University , D.N 1 Nagilo Alley, Hidaj City, Zanjan Province, Zanjan, Iran ,
Tel: 98-9121-425-323
Dr Heryanto
Regional Development Bank of West Sumatra
Jalan Pemuda No. 21 PO Box 111 Padang 25117 West Sumatra Indonesia
Tel: +62-8126771699
Dr. Dave Hinkes
Assistant Professor of Managment & Marketing
Sam Walton Fellow , Lincoln Memorial University , Harrogate, TN ,UK Tel 423.869.6441
Dr. Francis A. Ikeokwu
Sr., Ph.D., MAC, MBA, CFC
Adjunct Professor, American Intercontinental University http://www.aiuniv.edu/
Dr Charles C. Dull
Sr. MBA, Ph.D.
American Intercontinental University http://www.aiuniv.edu/
COPY RIGHT 2011 Institute of Interdisciplinary Business Research
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MAY 2011
VOL 3, NO 1
Dr Cara Peters
Assistant professor of marketing , Winthrop University , Rock Hill, South Carolina.
PhD in business administration , University of Nebraska
Peer-reviewer of the Journal of Consumer Psychology; Consumption, Markets, and Culture; and
Journal of Academy of Marketing Science.
Dr Mahmoud M. Haddad
PhD in Finance
214 Business Administration Building
University of Tennessee-Martin ,Martin, TN 38238 Tel No +1731-881-7249
Dr G.A. Abu
Department of Agricultural Economics, College of Agricultural Economics, Extension and
Management Technology, University of Agriculture, P.M.B.2373, Makurdi, Benue State,
Nigeria. Phone: +234-803-607-4434; fax: +234-44-534040
Dr.Rashid Rehman
Associate Professor , College of Business Studies
Al Ghurair University , Dubai, UAE.
Dr Ebrahim Soltani
Lecturer in Operations Management
Kent Business School University of Kent , UK
Dr Pu Xujin
Business School, Jiangnan University,
Jiangsu Wuxi,P.R.China ,214122
Tel: (86510) 85913617 , FAX: (86510) 62753617 , Mobile: (86) 13616193600
Dr. E. B. J. Iheriohanma
Ph. D. Sociology
Directorate of General Studies, Federal University of Technology, Owerri Imo State Nigeria.
Tel +2348037025980.
Dr Etim Frank
Departmentof Political Science-University of Uyo-Akwa Ibom State-Nigeria
Phd (Political Science/Public Administration) University of Calabar
SL Choi
University Teknologi Malaysia
School of Business Management Southern College Malaysia
Dr. Nek Kamal Yeop Yunus
Senior Lecturer, Department of Business Management
Faculty of Business & Economics, Universiti Pendidikan Sultan Idris, Tanjong Malim,
Malaysia.
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MAY 2011
VOL 3, NO 1
Dr. S. I. Malik
PhD Bio Chemistry & Molecular Biology (National University of Athens)
NHEERL. Envrironmental carcinigenei division
RTP Complex NC 27713, US Environmental protection Agency , 919-541-3282
Dr. Bhagaban Das
Reader, Department of Business Management Vyasa Vihar, Balasore-756019 Orissa
T. Ramayah http://www.ramayah.com
Associate Professor , School of Management ,University Sains Malaysia,
Tel 604-653 3888
Dr. Wan Khairuzzaman bin Wan Ismail
Assoc. Professor International Business School, UTM International Campus
Jalan Semarak 54100 Kuala Lumpur, MALAYSIA
Zainudin Hj Awang
Faculty of Information Technology and Quantitative Sciences, MARA University Technology
MARA Kelantan 18500, Malaysia ,Tel: 60-9-9762-302
Ravi Kiran
Associate Professor, School Of Management & Social Sciiences, Thapar University.
Dr.Suguna Pathy
Head, Department of Sociology, VNSG University, Surat
Birasnav M
Assistant professor, Park Global School of Business Excellence, Kaniyur, Coimbatore
Dr. C.N. Ojogwu
Phd Education Management - University of Benin, Benin City, Edo state, Nigeria.
Senior lecturer - University of Benin.
Dr. Nik Maheran Nik Muhammad
General Conference Co-Chair, GBSC 2009, www.nikmaheran.com
Dr. A. Abareshi
Lecturer, School of Business IT and Logistics
RMIT University, Melbourne, Australia
Office: +61 3 99255918
Dr Ganesh Narasimhan
Lecturer, Management Sciences ,Sathyabama University
Board of Advisor - AN IIM Alumina Initiative & International Journal Economics, Management,
& Financial Markets Denbridge press, New York, USA
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MAY 2011
VOL 3, NO 1
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UK CHAPTER: CANTERBURY , KENT , CT2 , 7PE , UNITED KINGDOM
SOUTH AFRICA CHAPTER: WESTERN CAPE , PRIVATE BAG X17, BELLVILLE 7535 , SOUTH AFRICA
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MAY 2011
VOL 3, NO 1
Contents
Title
Page
A STUDY OF LECTURERS JOB SATISFACTION IN SELECTED

HARBIN CITY UNIVERSITIES, CHINA
Jiang Na, Ismail Hussein Amzat, Jaber Hassan Abolhaija
17
THE PROPOSED CRITERIA FOR EGYPTIAN COMMERCIAL CREDIT RISK

40
MANAGEMENT AND DESCRIPTION OF A MODEL FOR MEASURING THESE RISKS
Dr. Marwan M. Shammot, Dr. Mohamed Mohamed Atta
EXPLORATORY FACTOR ANALYSIS: VALIDATION
64
OF MATHEMATICAL VALUES INCULCATION MODEL AMONG SECONDARY
SCHOOLS MATHEMATICS TEACHERS IN NORTH-EASTERN REGION, NIGERIA
Mukhtar Alhaji Liman, Muhammad Burhan Ibrahim, Shittu, Ahmed Tajudeen
THE ROLE OF RISK MANAGEMENT IN STIMULATING
STAKEHOLDERS INVESTMENT IN INSURANCE INDUSTRY
Dr Festus M Epetimehin , Oluwayomi Ekundayo
73
DETERMINANT OF INCENTIVE FACTORS IN KNOWLEDGE SHARING

Ali Reza Heydari ,Hamed Armesh ,Saied Behjatie, Mahmoud Manafi
83
THE MEASUREMENT OF USER SATISFACTION ON MALAYSIAN

METEOROLOGICAL DEPARTMENT ONLINE INFORMATION SERVICES
Faizal Haini Fadzil , Mohammad Fazli Baharuddin
96
ECONOMIC CRISIS AND ITS IMPACT ON JOB MOTIVATION

AND JOB SECURITY: A CASE OF BANKING SECTOR
Muhammad Jawad Iqbal, Mohammadghorban Mehri
105
THE ROLE OF GOOD GOVERNANCE IN FIGHTING AGAINST CORRUPTION

AND FINANCIAL CRIMES
Freyedon Ahmadi, Golamhosain Homauni
115
TRAFFIC MANAGEMENT, A SOCIAL CONCERN

Danish Iqbal Raina, Shahid Mushtaq
137
SURVEY RELATIONSHIP BETWEEN OCB AND ORGANIZATIONAL

CULTURE IN GENERAL INSPECTION ORGANIZATION IN IRAN
Seyed Ali Akbar Ahmadi, Freyedon Ahmadi, Golamhosain Homauni
148
NEW PRODUCT DEVELOPMENT PROCESSES

A CASE STUDY OF APPLES SUCCESS WITH ICONIC IPOD AND IPHONE
Muhammad Tariq , Rabia Ishrat, Hashim Khan
158
ijcrb.webs.com
MAY 2011
VOL 3, NO 1
Title
Page
DOES DISCLOSURE QUALITY REDUCE DEFAULT RISK?

EMPIRICAL EVIDENCE FROM PAKISTAN
Zahid Irshad Younas, Dr. Muhammad Wasif Siddiqi, Jamshaid ur Rehman
Bilal Mehmood
170
SCREENING FOR DEPRESSION IN THE COMMUNITY BY

LADY HEALTH WORKERS.
Farooq Naeem, Zahid Javed, Nadia Arshad, Aneesa Bandial, Muhammad Mujtaba,
Mozzam Khalil, Muhammad Ayub
180
MUTUAL FUNDS GROWTH AND PROSPECTS IN PAKISTAN

Hassan Mobeen Alam , Mamoona Rafique, Saba Farooq, Muhammad Akram
189
ORGANIZATIONAL KNOWLEDGE FORMATION PROCESS,

ORGANIZATIONAL LEARNING AND HUMAN RESOURCE DEVELOPMENT
Hassan Mobeen Alam , Dr. Mubbsher Munawar Khan & Muhammad Khyzer Bin Dost
210
IMPACT OF ORGANIZATIONAL STRUCTURE AND TIME ON EFFICIENCY:

EVIDENCE FROM PAKISTAN
Hassan Mobeen Alam
222
SMS ADVERTISING: YOUTH ATTITUDE TOWARDS PERCEIVED

INFORMATIVENESS, IRRITATION AND CREDIBILITY.
Faria Muzaffar, Sohail Kamran
230
ORGANIZATIONAL STRATEGIC LIFE CYCLE WITH SYSTEM

DYNAMICS PERSPECTIVE
Bahman Hajipour , Mohammadreza Zolfagharian, Maysam Chegin
246
DEVELOPMENT OF ISLAMIC BANKING IN PAKISTAN

Hassan Mobeen Alam , Muhammad Arslan, Muhammad Saleem,
Hassan Raziq &Abdul Aleem
261
ENTREPRENEURIAL SKILLS ENHANCE THE ACHIEVEMENT

LEVEL OF SCHOOL LEADERS
Farah Naz, Farhat Munir , Abida Khalid , Ijaz Ahmed
277
EMPIRICAL ANALYSIS OF DETERMINANTS OF DIVIDEND

PAYOUT: PROFITABILITY AND LIQUIDITY
Muhammad Adil, Nousheen Zafar, Noman Yaseen
289
A PARADIGM SHIFT IN SOCIAL WORK IN PAKISTAN

Zahid Javed , Muhammad Arshad, Aliya Khalid
301
FINANCIAL FACTORS IN CAPITAL STRUCTURE DECISIONS: PANEL DATA

ANALYSIS OF PAKISTANS MAJOR MANUFACTURING SECTORS
Farah Riaz, Dr. Muhammad Afzal
310
ijcrb.webs.com
MAY 2011
VOL 3, NO 1
Title
Page
COMPARISON OF THE MULTIPLE INTELLIGENCES OF THE STUDENTS

WHOSE MOTHERS ARE ILLITERATE AND GRADUATE
Gulap Shahzada , Dr. Safdar Rehman Ghazi, Habib Nawaz
Fayyaz Khan, SaifUllah
327
IMPACT OF CORPORATE GOVERNANCE ON FINANCIAL PERFORMANCE:

335
EVIDENCE FROM TEXTILE INDUSTRY OF PAKISTAN.
Dr. Mubbsher Munawar Khan, Zia-ur-Rehman, M. Khyzer Bin Dost, Mubashra Mumtaz
RATIONALE AND PROCLIVITY OF SALES PROMOTION INFLUENCING
346
THE IMPULSIVE BUYING BEHAVIOR OF THE CUSTOMERS: AN
EXPERIMENTAL STUDY ON CELLULAR SERVICE PROVIDERS IN PAKISTAN
Dr. Mubbsher Khan, Zia-ur-Rehman Khizer Bin Dost
TRACING CONSUMER ANIMOSITY LITERATURE FOR
PREDICTING NEGATIVE CONSUMER RESPONSE
Dr. Mubbsher Munawar Khan
363
WEBSITE QUALITY OF HIGHER EDUCATION WEBSITES: YOUNG

USERS PERCEPTION
Dr. Sayyid Salman Rizavi, Dr Mubbsher Munawar Khan
Sayyid Haider Mustafa Rizavi
370
EFFECTIVENESS OF FOREIGN AID IN THE LIGHT OF MILLENNIUM

DEVELOPMENT : GOAL ON THE EDUCATION SECTOR: A CASE
STUDY OF PAKISTAN
Muhammad Khalid Rashid, Mumtaz Anwar
377
BIS: AUTOMATED INFORMATION SYSTEM FOR KNITTING IN TEXTILE

M. Shakeel Faridi , Zahid Javed , Fahad Jaan, Tasleem Mustafa ,
Chaudhry. Muhammad Nadeem Fasial
390
ANALYZING DEVELOPMENT IN IRAN INDUSTRIAL PRODUCTIVITY

DURING 4TH DEVELOPMENT PLAN BY NUMERICAL TAXONOMY
Mohsen Fathi Almas, Taranoosh Jafari
395
ROLE OF EMOTIONAL INTELLIGENCE ON THE RELATIONSHIP

AMONG LEADERSHIP STYLES, DECISION MAKING STYLES
AND ORGANIZATIONAL PERFORMANCE: A REVIEW
Rana Rashid Rehman
409
ARE EQUITY MARKETS EFFICIENT? EVIDENCE FROM

EMERGING ECONOMY
Syed Kashif Saeed, Shahid Mehmood Sargana, Usman Ayub
417
ORGANIZATIONAL CLIMATE: STIMULATING CREATIVITY

AND IDEA GENERATION FOR DISCOVERY OF INNOVATIVE SOLUTIONS
Jahanzeb Shah , Dr. Bakhtiar Ali
429
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MAY 2011
VOL 3, NO 1
Title
Page
TRIANGULAR RELATIONSHIP AMONG POVERTY, INCOME

INEQUALITY AND GROWTH IN PAKISTAN: 1973-2006
Muhammad Usman, ,Saima Sarwar, Bilal Mehmood
448
EMPIRICAL RELATIONSHIP BETWEEN CORRUPTION AND POVERTY:

A CASE STUDY OF PAKISTAN
462
Muhammad Gulzaib Chaudhary, Saima Sarwar

IMPACT OF MACRO-ECONOMIC FACTORS ON STOCK PRICES
Aima khan, Hira Ahmad, Zaheer Abbas
472
FRUITS OF STATES FINANCIAL LIBERALIZATION

IN JAPAN AND KOREA, LESSONS FOR PAKISTAN.
Dr. Nasir Karim, Syed Muhammad Taqi, Dr. Ayaz Khan
484
E-PROCUREMENT IN THE ORGANIZATIONAL PERFORMANCE:

BUSINESS CASE OF EXPORT BASED TEXTILE INDUSTRY
Salman Khalid, Shahbaz Ahmad, Muhammad Zohaib Irshad
494
CONTROL MECHANISMS IN NON-FINANCIAL CORPORATIONS

Shama Sadaqat, Nadeem Ayub Bhutta, Farah Adnan
Muhammad Farhan Akhtar, Khizer Ali
503
MONEY SUPPLY & STOCK MARKET PRICES: A STUDY

ON KARACHI STOCK EXCHANGE
Qurat-Ul-Ain Zafar, Mahira Rafique, Dr. Zaheer Abbas
515
TRADE FLOW FACTORS & CAPITAL ACCOUNT:

A STUDY OF ECONOMIC GROWTH IN SAARC COUNTRIES
Ms. Nishwa iqbal, Ms. Shazia Iqbal Khalid, Mohammad Nisar, Dr. Zaheer Abbas
522
BUSINESS PROCESSES REENGINEERING IN THE ISLAMIC REPUBLIC

OF IRAN CUSTOMS ADMINISTRATION (A CASE STUDY IN ZAHEDAN
CUSTOMS ORGANIZATION )
Dr. Badrodin Orei Yazdani, Dr. Habibollah Salarzehi, Mohsen Shahbeigi
531
OBSCURITY and AMBIGUITY in IGBO ORAL TRADITION

Mrs Ekwutosi Onwukwe
542
AFFORDABLE HOUSING DELIVERY IN NIGERIA SOME FUNDAMENTAL

CHALLENGES.
Arc. Ikechukwu Onyegiri
549
BALANCE OF PAYMENTS, EXCHANGE RATE REGIME AND

MONETARY POLICY
Dr. Saqib Gulzar, Khuram Shafi
558
ijcrb.webs.com
MAY 2011
VOL 3, NO 1
Title
Page
CLOUD COMPUTING: SMES ISSUES AND UGI BASED

INTEGRATED COLLABORATIVE INFORMATION SYSTEM TO
SUPPORT PAKISTANI TEXTILE SMES
Chaudhry Muhammad Nadeem Faisal, Engr. Muhammad Khalil Azher
Engr. Babar Ramzan, Muhammad Sheraz Arshad Malik
564
PSYCHOLOGICAL CONTRACT BREACH AND WORK PLACE

DEVIANCE: MODERATING ROLE OF RELATIONAL CONTRACT
Muahammad Farooq Hussain, Muahammad Farhan Younas,Numan Ahmed
Adil Humyaun, Rizwan-ul-haq, Fahim-ul-noor, Hassan Yameen
574
DOMESTIC AND MACRO ENVIRONMENTAL

SOURCES OF STRESS TO THE NIGERIAN WORKERS
Nkwam C. Uwaoma
587
COMPARATIVE STUDY OF ENGLISH TEACHERS BEHAVIOR OF PUBLIC

AND PRIVATE SCHOOLS AS PERCEIVED BY THEIR STUDENTS.
Liaquat Hussain, Muhammad Abrar Khan Sadozai, Khuda Bakhsh Malik
594
RELATIONSHIP BETWEEN THE JOB SATISFACTIONS OF ELEMENTARY

SCHOOL TEACHERS WITH THEIR TEACHING BEHAVIOR
Liaquat Hussain, Muhammad Abrar Khan Sadozai, Khuda Bakhsh Malik
600
SURVEY OBSTACLES OF IMPLEMENTATION OF ELECTRONIC

COMMERCE IN TRANSPORT INDUSTRY
Freyedon Ahmadi, Zahra Avajyan
607
EXPLORING THE CASUAL RELATIONSHIPS BETWEEN ORGANIZATIONAL

618
CITIZENSHIP BEHAVIOR, ORGANIZATIONAL AGILITY AND PERFORMANCE
Freyedon Ahmadi
MEASUREMENT OF ORGANIZATIONAL CITIZENSHIP BEHAVIOR (OCB) IN
GENERAL INSPECTION ORGANIZATION IN IRAN
Freyedon Ahmadi, Seyed Ali Akbar Ahmadi, Golamhosain Homauni
628
SURVEY AND STUDY ANTI-CORRUPTION STRATEGIES IN IRAN

Freyedon Ahmadi, Zahra Avajyan
635
SURVEY RELATIONSHIP BETWEEN ORGANIZATIONAL

ENTREPRENEURSHIP AND SOCIAL CAPITAL IN PUBLIC SECTOR IN IRAN
Freyedon Ahmadi
644
QUALITY MANAGEMENT OF TECHNOLOGY RELATED SERVICES FOR

STUDENT SATISFACTION AT PRIVATE UNIVERSITIES OF PAKISTAN
Ms. Seema Arif, Ms. Maryam Ilyas
653
WORKPLACE FRIENDSHIPS AND ORGANIZATIONAL OUTCOMES

Pakeeza, Mohammad Haris, Dr. Muhammad Sajjad
667
10
ijcrb.webs.com
MAY 2011
VOL 3, NO 1
Title
Page
KNOWLEDGE ENGINEERING: HOW TO DESIGN KNOWLEDGE

BASED E-RECRUITMENT PORTAL USING COMMONKADS
Chaudhry Muhammad Nadeem Faisal, Inam Illahi
Engr. Sajid Hussain, Muhammad Sheraz Arshad Malik
680
A STUDY OF OWNERS INHERITED FACTORS AFFECTING

712
ENTREPRENEURIAL ORIENTATION IN KHYBER PAKHTUNKHWA-PAKISTAN.
HafizUllah,Dr. Bahadar Shah Dean, Muhammad Kaleem
AN EMPIRICAL STUDY OF ANALYZING CUSTOMER SATISFACTION
726
TOWARDS SERVICE QUALITY IN ISLAMIC BANKS OF SARGODHA, PAKISTAN.
Rizwan Ahmad Ch. & Usman Asif
REVISIONING SAARC
Dr. Muhammad Saleem Mazhar,Naheed S. Goraya,Jafar R. Kataria
734
IMPACT OF MODERNIZATION ON THE SOCIAL STATUS OF AGED

Jafar R. Kataria, Mughees Bin Aziz
746
ANALYZING EMPIRICAL RELATIONSHIP BETWEEN TRADE

OPENNESS, INDUSTRIAL VALUE ADDED AND ECONOMIC GROWTH:
Nazima Ellahi, Dr. Hafiz Zahid Mehmood
Prof Dr. Mehboob Ahmad, Naveed Azim Khattak
754
PROBLEMS FACED BY SCIENCE TEACHERS AT

SECONDARY LEVEL IN DISTRICT KARAK
Prof Dr. Rabia Tabbssum, Dr. Muhammad Imran, Dr. Ali Murtaza
Dr Muhammad Naseer Ud Din
764
ROLE OF BOADCAST M EDIA IN DISTANCE EDUCATION

Dr. Ali Murtaza, Prof Dr. Rabia Tabbssum, Dr. Muhammad Imran
773
PROBLEMS FACED INTO THE USE OF

INFORMATION TECHNOLOGY IN DISTANCE EDUCATION
Dr. Ali Murtaza, Dr. Syed Shafqat Ali Shah
784
ATTITUDE OF UNIVERSITY STUDENTS TOWARDS ETHNIC PREJUDICE

S. Farhana Kazmi, Tahir Pervez, , Nagina Bano
794
MERGERS AND ACQUISITIONS: AN IMPACT ON FINANCIAL

804
PERFORMANCE. (A CASE STUDY OF STANDARD CHARTERED BANK-PAKISTAN)
Dr. Nasir Karim, Amjad Ameen, Dr Muhammad Ayaz
11
ijcrb.webs.com
MAY 2011
VOL 3, NO 1
Title
Page
AN INVESTIGATION OF INFLUENCE OF LOCAL EVENTS ON

PERFORMANCE OF KARACHI STOCK EXCHANGE 100 INDEX
Dr. Ashfaq Ahmad , Dr. Mumtaz Ali, Asad Afzal Humayoun
814
IMPACT OF UNCERTAINTY CAUSED BY INTERNATIONAL

EVENTS ON KARACHI STOCK EXCHANGE
Dr. Ashfaq Ahmad , Dr. Sadia Rafi, Dr. Mahmood Ahmad Bodla
823
ASSESSING THE TRAINING TRANSFER IN NATIONAL INSTITUTES

832
OF MANAGEMENT (NIM) OF PAKISTAN: A PROPOSED RESEARCH STRATEGY
Muhammad Kaleem, Dr. Abdul Qaiyum Khan, Hafizullah
MICROFINANCE INDUSTRY IN PAKISTAN CHALLENGES AND
OPPORTUNITIES
Dr. Rehman Gul Gilal, Muhammad Masihullah Jatoi
Rahim Bux Soomro
845
IMPACT OF STAFF TRAINING ON CUSTOMER SATISFICATION USING

SERVQUAL MODEL: A CASE STUDY OF RETAIL BANKS OF PAKISTAN
Rahim Bux Soomro, Muhammad Masihullah Jatoi, Dr. Rehman Gul Gilal
853
EXAMING THE IMPACT OF HUMAN RESOURCES MANAGEMENT (HRM)

PRACTICES ON EMPLOYEES PERFORMANCE
A CASE STUDY OF PAKISTANI COMMERCIAL BANKING SECTOR
Rahim Bux Soomro, Dr. Rehman Gul Gilal, Muhammad Masihullah Jatoi
865
STOCK MARKET REACTIONS DUE TO ANNOUNCEMENTS OF

CONSUMER PRICE INDEX AND THE INVESTIGATION OF ENDOGENEITY
Dr. Muhammad Imtiaz Subhani, MS. AMBER OSMAN
878
PROFESSIONALISATION OF ELT IN SAUDI ARABIA

Dr Intakhab Alam Khan
885
ASSOCIATION BETWEEN HUMAN CAPITAL AND PHYSICAL CAPITAL

FORMATION IN PAKISTAN: A DISINTEGRATED TIME SERIES ANALYSIS
Muhammad Amir, Bilal Mehmood, Dr. Muhammad Wasif Siddiqui, Saima Sarwar
896
RELATIONSHIP MARKETING IN MICROFINANCE INDUSTRY: A

PAKISTAN PERSPECTIVE
Dr. Rehman Gul Gilal, Muhammad Masihullah Jatoi , Rahim Bux Soomro
904
TIMELINESS ATTRIBUTES AND THE EXTENT OF ACCOUNTING

DISCLOSURE: A STUDY OF BANKING COMPANIES IN BANGLADESH
Dr. Alim Al Ayub Ahmed , Dr. Madan Mohan Dey, Dr. Waheed Akhter, Mr. Ali Raza
915
PERCEPTION OF ADVERTISEMENT AS A SOURCE OF KNOWLEDGE

ON CONSUMING BEHAVIOR OF UNIVERSITY STUDENTS
Aneeza Bashir, Najma Iqbal Malik
926
12
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MAY 2011
VOL 3, NO 1
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THE RELATIONSHIP BETWEEN THE LEADERSHIP STYLES OF HEADS OF

DEPARTMENTS AND ACADEMIC STAFF'S SELF-EFFICACY IN A SELECTED
MALAYSIAN ISLAMIC UNIVERSITY
Ismail Hussein Amzat, Ali Khamis Ali
940
THE DEMOGRAPHICS IMPACT OF OWNER ON ENTREPRENEURIAL

ORIENTATION: EVIDENCE FROM KHYBER PAKHTUNKHWA-PAKISTAN.
Hafiz Ullah, Dr. Bahadar Shah , Dr. Najeeb Ullah Khan
965
COMPARATIVE SIGNIFICANCE OF THE FOUR PERSPECTIVES

OF BALANCED SCORECARD
Zafar Ahmed, Zulfiqar Ahmed, Muhammad Musarrat Nawaz
Khyzer Bin Dost, Muhammad Asim Khan
981
THE RELATIONSHIP OF EMOTIONAL INTELLIGENCE WITH THE

STUDENTSACADEMIC ACHIEVEMENT
Gulap Shahzada , Dr. Safdar Rehman Ghazi
Abdullah Khan, Habib Nawaz Khan, M. Tahir Shah
994
ENFORCEMENT OF FOREIGN ARBITRATRAL AWARDS AND POSSIBLE

DEFENSES: CHALLENGES AND OPPORTUNITIES FOR PAKISTAN
Naeem Ullah Khan , Samee Ozair Khan
1002
IMPACT OF MANUFACTURING INDUSTRY ON ECONOMIC GROWTH IN

CASE OF PAKISTAN: A KALDORIAN APPROACH
Khizra Safadr Khan , Dr. M. Wasif Siddiqi
1021
PRINCIPALS LEADERSHIP STYLES AND THEIR IMPACT ON SCHOOLS

ACADEMIC PERFORMANCE AT SECONDARY LEVEL IN
KHYBER PAKHTOONKHWA, PAKISTAN
Muhammad Javed Sawati, Saeed Anwar, Dr. Muhammad Iqbal Majoka
1038
ASSESSING EFFECTIVENESS OF SOCIAL MEDIA AND TRADITIONAL

MARKETING APPROACHES IN TERMS OF COST AND TARGET SEGMENT
COVERAGE
Muhammad Tariq , Fazal Wahid
1049
THE EFFECTS OF PEER TEACHING IN ACADEMICS ACHIEVEMENT LEVEL 1075

OF STUDENTS IN SUBJECT OF CHEMISTRY AT SCONDARY LEVEL IN PAKISTAN
Shafqat Hussain Jameel Akhtar , Zahid Basher, Serwat Mobeen
STATUS OF PAKISTANI HALAL MEAT EXPORT AND FORECASTING IT`S
EXPORT REVENUE, IMPLICATIONS AND OPPORTUNITIES
Rana Muhammad Ayyub , Muhammad Bilal
1081
MODELING RICE PRODUCTION IN PAKISTAN

Rana Muhammad Ayyub , Muhammad Bilal
1093
13
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MAY 2011
VOL 3, NO 1
Title
Page
COMPARATIVE ANALYSIS OF NBP & MCB PERFORMANCE UNDER

CAMELS MODEL
Minhoon Khan Laghari, Dr. Amant Ali A Jalbani, Iram Rani
1105
THE IMPACT OF POLITICAL EVENTS ON LAHORE STOCK EXCHANGE

DURING 2003-2009
Lubna Ali, Komal Daniel, Dr. Qais Aslam, Manal Talat, Zafar Ahmed
1128
RELATIONSHIP BETWEEN THE FAMILY BACKGROUND AND SCHOOL

BEHAVIOR AT PRIMARY SCHOOL LEVEL.
Fehmida, Liaquat Hussain, Allah Noor Khan, Shehla Sheikh
1141
ATTITUDE OF GOMAL UNIVERSITY TEACHERS TOWARD PRE-STEP

PROGRAMME OF H.E.C
Allah Noor Khan, Liaquat Hussain, Fehmida, Shehla Sheikh
1147
RISK FACTORS OF LOW BACK PAIN AMONG RURAL & URBAN

AREAS OF PAKISTAN.
Dr.Muhammad Naveed Babur, Dr.Waqar Ahmed Awan
1160
A STUDY OF FACTORS EFFECTING CUSTOMER CITIZENSHIP BEHAVIOR

Abbas , Abbasi , Hasan , Safarnia , Mehdi, Baradaran , Rasoul.Abbasi
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MEDIA INFLUENCE ON MARKETING COMMUNICATIONS

Ms.Ume-Amen
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CORPORATE CITIZENSHIP, IDENTITY AND IMAGE MANAGEMENT:

A FUNCTIONAL APPROACH IN PROMOTING CORPORATE
GOVERNANCE IN BANKS
Okorie Nelson, Oyewole Oyedayo Sharon
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LIQUIDITY SQUEEZE AND THE REAL SECTOR OF THE NIGERIAN

ECONOMY: A THEORETICAL EXPOSITION
OJEKA, Stephen A. AJAYI Anijesushola Olusegun
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AN ANALYSIS OF PREVENTIVE HEALTH CARE IN PAKISTAN

Ahsan Ali Mangi, Hafeez ur Rehman, Imtiaz Ahmed
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WAR OF INDEPENDENCE 1857: LESSONS FOR PRESENT SITUATION

OF SOUTH ASIA
Dr. Muhammad Saleem Mazhar, Mussarat Jabeen
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HEALTH-RELATED QUALITY OF LIFE ASSESSMENT IN PATIENTS

WITH HEPATITIS: A CASE OF PAKISTAN
Masood Sarwar Awan, Muhammad Waqas, Muhammad Amir Aslam, Faisal Abbas
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Title
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STUDY OF MARKET EFFICIENCY: FACTS FROM PAKISTANI MARKET

Abdul Hafeez Qureshi, Dr.Babar Zaheer Butt, Umbreen Sharif, Muhammad Bilal
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ANALYSIS OF MERGERS AND ACQUISITION IN BANKING SECTOR

OF PAKISTAN
Abdul Hafeez Qureshi , Umbreen Sharif, Dr.Babar Zaheer Butt, Muhammad Bilal
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RELATIONSHIP BETWEEN POPULATION CHANGES AND POVERTY:

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EVIDENCE FROM DERA ISMAIL KHAN KHYBER PAKHTUNKHWA(PAKISTAN)
Muhammad Nadeem, Shehla Sheikh, Allah Noor Khan, Fehmida Bibi
DOES LEARNING OF SCIENCE EDUCATION AT SCHOOL LEVEL MATTERS?
Dr. Saeed-ul-Hasan Chishti, Shaheen Ashraf Tahirkheli
Ijaz Mehmood, Shahinshah Babar Khan
1302
CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN

Shahid Jan, Qadar Bakhsh Baloch
1308
AN EMPIRICAL STUDY ON FACTORS INFLUENCES THE EMPLOYEES

TOWARDS ORGANIZATIONAL COMMITMENT IN A PRIVATE SECTOR
ORGANIZATION IN INDIA
P. Na .KANCHANA, Dr. N. Panchanatham,
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GLOBALIZATION AND EFFECTS; A STUDY ON THE EFFECTS OF

GLOBALIZATION IN THE SOCIETY
Farhad Nezhad Haj Ali Irani , Mohammad Reza Noruzi
1344
IMPACT OF MONETARY POLICY ON GROSS DOMESTIC PRODUCT (GDP)

Irfan Hameed, Ume-Amen
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PUBLIC TRANSPORT : AN INFERIOR GOOD-A CASE STUDY OF LAHORE

Maryam Wasif, Ghias-ul-Haq
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THE EFFECTS OF JOB SATISFACTION ON PRODUCTIVITY: ORANGE

TELECOMMUNICATION COMPANY ON JORDAN: CASE STUDY
Mohammad. T. Bataineh,
1377
DETERMINANTS OF FIRM GROWTH: AN EMPIRICAL EXAMINATION

OF SMES IN GUJRANWALA, GUJRAT AND SIALKOT DISTRICTS.
Khizra Safadr Khan, Dr. M. Wasif Siddiqi
1389
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Title
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THE DETERMINANTS OF EXPORT PERFORMANCE: EVIDENCE FROM

SMALL ENGINEERING UNITS IN GUJRANWALA, GUJRAT AND
SIALKOT DISTRICTS.
1410
ROLE OF LIGHT ENGINEERING SECTOR IN POVERTY REDUCTION

AMONGST ITS EMPLOYEES. A CASE STUDY OF GUJRANWALA, GUJRAT
AND SIALKOT DISTRICTS.
1431
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A STUDY OF LECTURERS JOB SATISFACTION IN SELECTED

HARBIN CITY UNIVERSITIES, CHINA
Jiang Na
Faculty of Education, Department of Educational Management, Planning & Policy,
University of Malaya.
Ismail Hussein Amzat
Jaber Hassan Abolhaija
Abstract
This study examines the level of job satisfaction among lecturers in the field of teaching Chinese
as a foreign language (TCFL) in two universities in Harbin city, China. The instrument used for
the research methodology was a modified version of the Job Descriptive Index (JDI)
questionnaire with items on demographic factors, the work itself, co-workers, supervision /
supervisor, income, opportunities for promotion and overall job satisfaction. The data was
analyzed using the Statistical Package for the Social Sciences (SPSS) version 16.0 through
frequency counts, T-test and Analysis of Variance (ANOVA). The result of the study indicates
that TCFL lecturers are satisfied with the work itself, their co-workers and supervision, but are
not satisfied with the income and opportunities for promotion. There is no significant difference
between male and female TCFL lecturers with respect to satisfaction on five job factors. TCFL
lecturers with PhD degrees have higher job satisfaction than lecturers with a bachelors and
masters degree. Lecturers with more than 10 years of service feel more satisfied in the aspects of
supervision, income and opportunities for promotion than lecturers with less than 10 years
experience. Permanent lecturers express higher satisfaction in terms of income and opportunities
for promotion than non permanent lecturers.
Keywords: Lecturer, Job Satisfaction, Harbin City, China
1. Introduction
Lecturers job satisfaction is one of the top issues in every school worldwide and it is a
serious topic for debate since long time ago. It is an argumentative topic that should be argued
because lecturer satisfaction and employment are not only contributing to the motivation of
lecturers and their improvement, but also to student learning and development (Perie, Baker &
Bleach, 1997). In China, although a lot of previous research has been conducted on lecturers' job
satisfaction, studies of lecturers in the field of teaching Chinese as a Foreign Language (TCFL)
are much neglected. As a popular profession in recent years, TCFL is attracting the attention both
of people interested in the profession and job seekers more `than ever before. To provide some
reference for future candidates and perfect/effective TCFL lecturer administration, there should
be an increment in lecturers activity. This study examines TCFL lecturers job satisfaction in two
universities in Harbin city, China.
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Education, to some extent, is closely related to the development of the country and its
economy. National development can afford the investment in education. For example, currently
in China's rural areas tuition fees and miscellaneous expenses at the stage of compulsory
education are all free of charge in contrast with the previous years when tuition fees were
charged. On the other hand, to pay their debt to society for their education talented high-quality
educators should unite for the sustained development of the economy and the country. To some
extent, education reflects the national development situation from a certain angle. Since entering
the 21st century, the world has been paying closer attention to China than ever before due to the
growing Chinese economic and development potential. A result of this is the increased time
devoted to studying Mandarin by foreigners from different countries.
With the rise of the popularity of studying Chinese by foreigners, there has been a
corresponding growth in language teaching institutions, schools, new positions and training
courses. Among them, the most famous and influential institution is "Hanban" which is
"committed to the development of Chinese language and culture teaching resources and making
its services available worldwide, meeting the demands of overseas Chinese students to the
maximum degree, and contributing to global cultural diversity and harmony. " Hanban selects
and trains lecturers to teach on the TCFL volunteer board for the purpose of supporting schools
and colleges abroad and the spread of Chinese language and culture. Under its guidance, lots of
lecturers have been selected to come on board, many Confucius Institutes have been established,
and teaching Chinese as a foreign language has also become a popular job. The Ministry of
Education of the People's Republic of China (MOE of the People's Republic of China) has TCFL
as an integral part of China's reform because "education is a means by which society perpetuates
and disseminates its own culture "(C. Jalaja Kumari, 2007).
Job satisfaction plays an important role in working life. Brayfield and Crockets (1955)
found that the higher the individual or group satisfaction, the lower the likelihood that they will
leave their jobs. This is because the job not only provides economic stability, but also the
personal feelings and emotion to work every day. From work you can get self-confidence,
happiness, a sense of accomplishment, team spirit, etc. These feelings lead to job satisfaction.
But a job can also get tedious as a result of workers being underpaid, bored, and stressed and
frustrated with the job that leads to job dissatisfaction.
Lecturer satisfaction with employment is a key determinant of lecturer commitment and
is related to the retention of lecturers (Reyes & Shin, 1995). Whiteford (1990) identifies some
indicators of lecturer satisfaction with employment and the sense of efficacy which include a
positive relationship with colleagues, satisfactory working conditions, and prestige and esteem
associated with teaching.
2. Problem Statement
So far, according to statistics from the Ministry of Education of the People's Republic of
China, more than 330 universities are offering TCFL programmes in China. The years of rapid
growth in the number of foreign students each year have made a big difference for TCFL
lecturers, especially lecturers who are highly qualified. To change this situation, today there are a
lot of universities who employ very professional TCFL lecturers to encourage those who possess
knowledge of how to teach students Chinese language. Moreover, a large number of graduates
with degrees in Chinese language and literature or the major of English are also becoming TCFL
lecturers. Beyond all doubt, TCFL has become a popular occupation.
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A study by Walde (1986) shows that the repetitive nature of the task was the factor which
most dissatisfied lecturers while payment and security are factors of satisfaction. Most TCFL
lecturers pay "is higher than the traditional ones because more Chinese language lecturers are
teaching on an hourly basis. While due to limited classes, lecturers often do not have highincome. In addition, the proceeds for TCFL lecturers' come in each semester according to their
teaching hours. The more lessons lecturers are willing to teach, the more income they earn. As
we know, TCFL lecturers have more opportunities to go abroad to teach, by the nature of their
work. This experience abroad could not only sharpen their ability to work, but also enriches their
life. However, not all could have these opportunities because of the selection policy and other
factors.
3.
Objective
1. The level of job satisfaction among TCFL lecturers in Harbin city, China.
2. To what extent extrinsic factors such as co-workers, supervision and income contribute to
job satisfaction among TCFL lecturers.
3. To what extent intrinsic factors such as the work itself and opportunities for promotion
contribute to job satisfaction among TCFL lecturers.
4. The influence of the demographic profile such as sex, education level, years of service
and nature of appointment on the level of job satisfaction among TCFL lecturers.
4. Research Question
1. How do TCFL lecturers perceive the characteristics of the job?
2. How do TCFL lecturers perceive their co-workers?
3. How do TCFL lecturers perceive the supervision?
4. What is the attitude regarding income?
5. What is the comment regarding opportunities for promotion?
6. Are there significant differences in job satisfaction between male and female, permanent
and nonpermanent TCFL lecturers? Do lecturers who differ in education level or years of
service have obviously diverse comments regarding job factors?
5. Limitations of the Study
The limitations of the study are as follows:
The study was conducted only in two universities in Harbin city, China. Thus the findings
and conclusions cannot be entirely generalized to other areas of the country.
Because of the large proportion of female and young lecturers in the field of teaching
Chinese as a foreign language and in the present sample, the views of the male lecturers
may not be reflected fairly and exactly.
The two universities are both public institutions, thus the results of the study cannot be
completely extended to private universities, schools and institutions.
6. Definition of Terms
Job satisfaction: Job satisfaction is a sense of achievement, happiness and enjoyment felt
by a person when he fulfils his needs during his working life. Locke (1976) defines job
satisfaction as pleasure or positive emotional state resulting from the appraisal of ones
job or job experiences.
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Lecturers job satisfaction: The degree of sense of satisfaction experienced by lecturers.

Teaching Chinese as a foreign language (TCFL): Lecturers whose mother language is
Mandarin Chinese use Chinese to teach foreign students Chinese language.
7. Literature Review
Definition of Job Satisfaction
Job satisfaction has been defined by researchers in many ways. Locke (1976) defines it as a
pleasure or a positive emotional state resulting from the valuation of the job or work experience.
He also states that job satisfaction is "a function of the perceived relationship between what one
wants in a work and what they perceive as an offering" (Locke 1969, p.316).
7.1 Content Theories
There are several theories related to job satisfaction. Campbell (1970) classifies them into
two categories, which are content theories and process theories. Content theories, are the
identification and explanation of the needs, values or expectations of the persons acting on job
satisfaction. Content theories also explain the specific factors that motivate human behaviour and
maintain the changing needs of human beings. Maslow's hierarchy of needs theory, the twofactor theory of Herzberg and Alderfers ERG (existence, relation and growth) are the theories in
question.
7.1.1 Maslows Hierarchy of Needs Theory

The hierarchy of needs theory is one of the theories of content that was developed by the
humanistic psychologist Maslow in 1943. He sees human needs at different levels. Low-level
needs must be satisfied before higher level needs. Maslow says that the hierarchy of needs from
the low to a higher level is as follows: physiological needs, security needs, social needs, esteem
needs and self-actualization. Physiological and safety needs are relatively lower needs, and the
other three are the greatest needs. Furthermore, physiological needs are the needs at the
grassroots level. They are the basic requirements for people to live. These people need support to
survive in the world. Physiological needs comprise factors such as water, air, food, sleep and so
on. If you cannot comply with these physiological needs, your body cannot be continuously in a
healthy condition. According to Maslow, if the physiological needs of the people are met, people
will consider paying attention to their security needs. Security has to do with protecting people
from physical and emotional harm. Security requirements include living in safe and healthy
conditions, and financial security.
7.1.2 Herzbergs Two-Factor Theory
The two-factor theory of Herzberg is another one of the leading theories of content. It is
also called the theory of Motivation and Hygiene. This theory pays attention to individual needs
and the hierarchy of needs theory, and was created to determine the factors leading to job
satisfaction and dissatisfaction. Herzberg (1959) states that job satisfaction and dissatisfaction
are caused by factors of motivation and hygiene, respectively. Motivating factors are what make
people want to perform well at work and feel satisfied with the work they do. Achievement,
recognition, work, responsibility, advancement and growth are the most important motivating
factors generating job satisfaction. Hygiene factors relate to the working environment, such as
company policies, supervision, working conditions, wages and supervision.
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From Herzbergs perspective, satisfaction and dissatisfaction are caused by different factors.
That is, we cannot consider job satisfaction as the opposite of job dissatisfaction. Similarly, job
satisfaction is not the opposite of job dissatisfaction. In fact, from the standpoint of Herzberg, the
opposite of satisfaction is "no satisfaction", and the opposite of dissatisfaction is "no
dissatisfaction". According to Herzberg, when people feel satisfied with work, the intrinsic
factors usually come into play, such as achievement, recognition and growth. When they are not
satisfied with work, they tend to seek extrinsic factors, such as salary, company policies and
working conditions. Herzberg states that employees will not be satisfied when the hygiene
factors are not met.
7.1.3 Alderfers EGR Theory
In content theory, there is another theory that is also based on individual needs. That is
the theory of EGR that was proposed by Alderfer in 1969. Similar to the theory of hierarchy of
needs, Alderfers ERG theory classifies human needs at different levels. The difference is that
Alderfer classifies individual needs at only three levels: the needs of existence, relationship
needs and growth needs.
7.1.4 McClellands Three Needs Theory
This theory was formulated to help understand the needs of people, their motivation and
behaviour. McClelland classifies them into three needs: the need for achievement, the need for
power and the need for affiliation. The need for achievement means that people want success and
have the feeling of accomplishment. If they were given difficult and challenging tasks, they will
make every effort to complete the task in the hope of success. This will be a sort of motivation to
make people work harder and be more active. According to McClelland, the need for power
shows the desire of people to control others. Organizationally, this need is shown as the desire of
other leaders or leaders of the organization. If people have this need, but do not have the
opportunity to be a leader, they will be disappointed and lose their passion. The way to motivate
these people and meet their requirements is to lead them or put them in office-oriented positions.
7.1.5 Adams Equity Theory
Adams (1965) proposed the equity theory of job satisfaction which emphasizes the
importance of reaching the balance between employee contributions and results. If the inputs of
workers are higher than the results, they will be discouraged and demotivated. In general, the
inputs include the effort, time, tolerance, loyalty, enthusiasm, ability, confidence in superiors etc.
Typically they include safety outputs of employment, salary, self-esteem, sense of
accomplishment, praise, reputation and so on. Each employee is willing to be treated fairly. They
want to get the results as well as equal pay. But the number of outputs and inputs cannot be
calculated exactly, so the theory identifies the manager's responsibility to balance them.
8. Studies on the Determinants of Job Satisfaction
8.1 Work Itself
Schwartz (1963) identifies the work itself is an important factor leading to job
satisfaction or dissatisfaction. Herzberg (1966) takes the work itself is an intrinsic reward that
can be an important motivator for a worker due to individual development needs
.
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8.2 Co-workers
Maslow (1943) identifies social need, which means interaction with people, as the first
top-level requirement. Khaleque (1984) states that there is no doubt that the relationship with
ones colleagues is an important factor in job satisfaction.
8.3 Income
Naylor (1968) argues that the encouragement of income has seen as one of the most
important determinants of job satisfaction in most investigations. Gruneberg (1979) also supports
the argument that pay is an important element in job satisfaction. But there are also some studies
which show little relationship between income and job satisfaction. Butler (1961) points out that
the level of satisfaction is no different between groups of different salaries. Wernimont and
Fitzpatrick (1972) assert the varieties of the symbolic values of money, but confirmed that they
differ according to individual merits.
8.4 Supervision
Locke (1975) notes the importance of supervisors in the contribution of subordinate job
satisfaction and satisfaction. They can promote or be embarrassing to the achievement of value
work of subordinates. Misshawk (1971) states that all levels of people look for something more
than human relations skills in their supervisors. Ahuja (1976) identifies that if employees are
working under the supervision of an incompetent, inefficient and unresponsive superior, their
dissatisfaction will increase.
8.5 Promotion
According to Herzberg (1959), promotional opportunities benefit increased job
satisfaction. Van Mannen and Katz (1976) also report a positive correlation between the
opportunities for promotion and job satisfaction in general. However, Blum (1952) suggests that
opportunities for promotion are more important for skilled workers compared to unskilled
workers.
9. Studies on the Relationship between Personal Variables and Job Satisfaction
9.1 Educational Level
Some studies show a relationship between educational level and job satisfaction.
However, the relationship can be positive or negative depending on unspecified moderator
variables (Srivastva et al., 1975). Rao (1970) and Carrell and Elbert (1974) found that there is a
significant relationship between job satisfaction and educational level of lecturers and this is
considered more as a significant determinant of job satisfaction.
9.2 Years of Service
Yezzi and Lester (2000) reported that the years of service is not a predictor of job
satisfaction. Lowther et al. (1985) indicate that increases in job satisfaction as the experience of
years increases. Similarly, Hodge (1977) shows that the level of job satisfaction for lecturers
increases as the years of employment in the institutions increase in number. Meanwhile, Klecker
and Loadman (1997) found that job satisfaction decreased with the number of years the person
has been in the profession.
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9.3 Studies on Lecturer Job Satisfaction

Based on studies of job satisfaction, some research has been conducted relating to
lecturers' job satisfaction. Herzberg, Maunser and Snyderman (1959) argue that recognition and
achievement are the most important factors that influence a lecturers job satisfaction. This
shows that if school leaders give positive respect and appreciate the value of lecturers, lecturers
will be at a high level of satisfaction.
Ratsoy (1973) asserts that the satisfaction of the job lecturers are doing is related to the
organization of schools. The more bureaucratic and centralized the school is, the less the
satisfaction of lecturers. Miskel, DeFrain and Wilcox (1980) suggest that lecturers with the belief
that they have the ability to do the job and have received positive response for their hard work
will experience satisfaction of a high level. At the same time, Nicholson (1980) identifies three
factors that most affect lecturer satisfaction with employment, which are leadership, decision
making and the communication process. He believes that if lecturers are given g more
opportunities to participate in the process of decision-making in schools and communicate
openly about school goals, that will lead to an increase in the satisfaction of lecturers with work.
Most lecturers feel more satisfaction when they are assigned to work as a team. Some research
shows that lecturers in schools have developed a strong sense of professionalism as a result of
the opportunity to work together on important professional concerns (Garner, 1995; Lipsitz,
1984). The sense of belonging to a team with real responsibilities that gives members challenges
and reasons to be proud of themselves and the team, thus enhances job satisfaction (Curtis,
1994).
Sergiovanni (1992) reports that lecturer satisfaction relates to job involvement and
performance. Participation makes lecturers feel the need for and value of commitment. He also
emphasizes the importance of recognition, empowerment and the sense of job opportunities in
job satisfaction. Whiteford (1990) identifies some indicators of lecturer satisfaction with
employment as being the sense of efficacy, a positive relationship with colleagues, satisfactory
working conditions, the directors 'leadership style, and the prestige and esteem associated with
teaching. To increase job satisfaction in the interest of increasing lecturers' commitment and
productivity, organizations should pay more attention to pay, promotion, working conditions,
supervision and the organization itself (Lock, Schweiger, & Latham, 1986; Mitchell, Holton,
Lee, & Graske, 2001; Pitt & Foreman, 1999).
Evans (1998) describes the factors affecting lecturer satisfaction with employment at
different levels. Level I includes the policy and conditions of service and a good salary structure.
Afternoon work brings more satisfaction among lecturers. Level II includes the leadership style
and organizational climate. Level III identifies the determinants of job satisfaction as generally
meeting the individual needs, expectations, personality and emotions. With regard to lecturer
satisfaction with employment in China (1996), Fengs research can be seen as a significant step.
He suggests five factors which must be taken into account: personal fulfillment, job stress,
income, relationship with managers and colleagues. Xiao and Li (2003) state that lecturers in
urban China are less satisfied with their salary, in comparison, but more satisfied with job
security, the work environment and self-realization.
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10. Sampling Design

There are eleven public universities in the city of Harbin, and only a part of them have
special colleges of international education. The sample consists of lecturers who teach Chinese
as a foreign language in two selected universities: Harbin Engineering University (HEU) and
Harbin Institute of Technology (HIT). These two universities have provided Chinese language
courses for foreign students for a period of time, and have already established their own
organizational structure and curriculum system. Because of the limited number of lecturers in
this field in each university, 40 questionnaires were distributed to HEU and 60 questionnaires to
HIT. Thirty-eight questionnaires were received from HEU and 56 questionnaires were obtained
from HIT. The response rate was 94%. Two questionnaires from HIT were rejected as they were
incomplete. Thus, the final number of analyzed questionnaires was 92.
11. Research Instrument
In this study, the research instrument in the form of a questionnaire was the main tool for
collecting data. The questionnaire had three sections, Section I, II and III. Section I comprises the
demographic profile of respondents. Section II comprises the Job Descriptive Index (JDI).
Section III comprises five multiple-choice questions to explore respondents overall attitudes
about the job, and three voluntary-reply subject questions to benefit from a deeper understanding
of the respondents.
Section I
There were 9 items in this section with the purpose of gathering demographic data of the
respondents. These data will not only provide respondents background information, but will also
be useful for data analysis. The items related to sex, age, marital status, education level, years of
service, nature of the appointment, teaching subject, class level and monthly salary.
Section II
In this section, the Job Descriptive Index is used which was developed by Smith, Kendall
and Hulin (1969). The JDI is one of the most widely-used instruments for measuring job
satisfaction (DeMeuse, 1985; Zedeck, 1987). It has been translated into many different languages
including Mandarin Chinese. The JDI comprises five dimensions of job satisfaction: the work
itself, co-workers, supervision, income and opportunities for promotion. These dimensions are
measured by words or phrases and are easy to read. In this study, a few items were added to the
instrument to make it more suitable for lecturers teaching Chinese as a foreign language and for
the present working conditions.
Kamaruddin (1995) made further changes to the JDI introducing a five-point Likert-type
scale. Respondents indicate the number which best represents their feelings for each item.
Numbers 1 to 5 represent strongly disagree, disagree, neutral, agree and strongly agree,
respectively. In measuring job satisfaction, the more satisfied the respondents were perceived to
be, the higher was the score, with 1 being the minimum score and 5 being the maximum score.
The scores for the positive and negative items are as in Table 1 and 2.
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Table 1: Scale Reference of Positive and Negative Items
Scale reference
Positive item
Strongly Disagree
1
Disagree
2
Neutral
3
Agree
4
Strongly Agree
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Negative item
5
4
3
2
1
There are a total of 71 items used for measuring lecturers satisfaction and dissatisfaction with the teaching
profession in this section. They are divided into five parts:
A.
B.
C.
D.
E.
Work Itself
Co-workers
Supervision / Supervisor
Income
Opportunities for Promotion
21 items
14 items
19 items
8 items
9 items
It consists of both positive and negative items as seen in Table 2:

Table 2: Positive and Negative Items on Job Satisfaction
Dimensions
Positive item numbers
Work itself
1, 3, 5, 6, 7, 8, 10, 12,
13, 16, 17, 18, 19, 21
Co-workers
1, 4, 5, 6, 7, 8, 11, 14
1, 4, 5, 6, 7, 8, 9, 14,
15, 16, 17, 18, 19
Income
2, 6, 7, 8
Opportunities
1, 3, 4, 6, 7
Negative item numbers

2, 4, 9, 11, 14, 15, 20
2, 3, 9, 10, 12, 13
2, 3, 10, 11, 12, 13,
1, 3, 4, 5
2, 5, 8, 9
Section III
This section comprises five multiple-choice questions to explore respondents overall
attitudes about the job, such as whether they are satisfied with their job, whether they like
teaching foreign students and cross-culture work, and whether they will they stay in the
workplace until they retire. There are also three voluntary-reply subject questions, with the
purpose of having a deeper understanding from the respondents.
12.
Data Analysis
All data collected from the participants was coded and analyzed using the Statistical
Package for the Social Science (SPSS) version 16.0. In this research, the following data analysis
techniques were used:
i) Descriptive statistics including frequency, percent, mean and standard deviation. They were
used to analyze the demographic profile in Section I of the questionnaire; job factors in Section
II, job factors comparison; and choices related to overall job satisfaction in Section III.
ii) T-test and Analysis of Variance (ANOVA) was applied to analyze the significance of the
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demographic profile with respect to job factors.

13. Findings
13.1 Demographic Profile of the Respondents
A total of 100 copies of the questionnaire were distributed to the two universities. Thirtyeight questionnaires and 56 questionnaires were received respectively from the two of them. The
total number of questionnaires received was 94 with the response rate of 94%. Because of the
incompleteness of 2 questionnaires, the final number of analyzed questionnaires was 92. Besides,
from the 92 respondents, a majority of them are female lecturers, with 72 female respondents or
78.3 percent. The sample of male respondents consists of 20 male lecturers which makes only
21.7% of the total number. Nearly half (48.9%) of the respondents are between the age of 26 to
30 years old, which is the majority group of the sample. Following this is the age group from 20
to 25 which comprises 21 respondents or 22.8% of the total sample. The 31-35 years age group
consists of 10 respondents or 10.9% of the total. The other age groups account for 4.3%, 6.5%,
2.2%, and 4.3%, respectively.
In terms of marital status, 41 respondents or 44.6% are single compared to 47 or 51.1%
of the respondents who are married. Four respondents or 4.3% are in other situations such as
being divorced. On the issue of education level, more than half (51 out of 92 or 55.4%) of the
respondents are graduates, 34 respondents or 37% hold a Masters degree while only 7
respondents are PhD holders, accounting for 7.6% of the total. To some extent, this data shows a
situation in which most of the lecturers in the field of teaching Chinese as a foreign language
hold a bachelors or masters degree, with only a few of them holding a PhD.
As for years of service, the majority of the respondents have no more than 5 years
experience, accounting for 69.4%. This indicates the fact that at least in these two universities
most of the TCFL lecturers are young and without too much teaching experience. Sixteen
respondents or 17.4% have workplace experience of 6 to 10 years. Only 13% of the respondents
have served more than 10 years. In terms of the present reality of TCFL lecturers. Most of their
working positions are not permanent. Universities sign employment contracts with TCFL
lecturers, usually from 1 to 5 years. After the employment contract expiration, universities have
the right to decide whether to renew or end the contract. Among the respondents, only 27 or no
more than 30% (29.3%) are on a permanent appointment compared to 43.5% who have
contracts. Meanwhile, 20.7% of the respondents are temporary lecturers and 6.5% are still on
probation.
In terms of subjects taught, 48 respondents or more than half (52.2%) teach more than
one subject, while 8.7%, 9.8%, 6.5%, 9.8%, 13% of the respondents teach listening, reading,
writing, speaking and synthesis, respectively. The exactly reflects the teaching reality of TCFL
lecturers. Most of them teach two or even more subjects, such as listening and speaking, reading
and synthesis etc. In terms of the class level, 33.7% of the respondents teach different class
levels, 22.8% (21 respondents) teach the low level followed by 23.9% (22 respondents) who
teach the middle level and 19.6% (18 respondents) who teach the high level. In terms of monthly
income, none of the respondent earns below RMB 1,000 with 38% of the respondents earning
between RMB 2001- RM3000 followed by 26 respondents or 28.3% who earn RMB3001RMB4000 and 15.2% of the respondents who earn RMB1000-RMB2000, compared to 13% who
earn above RMB5000. The minority of the respondents (5.4%) earn RMB4001- RMB5000.
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14. 2 Analysis of Job Factors

Each of the job factors, work itself, co-workers, supervision / supervisor, income, and
opportunities for promotion are analyzed by calculating mean value and standard deviation. The
items of each factor were arranged in descending order according to the mean value with the
purpose of having a clear view of the research results. The minimum score is 1 and the maximum
is 5, a cut-off point of 3 is chosen. The higher the score, the more satisfied respondents feel.
Work Itself
Table 3 shows the mean and standard deviation results for the item of work itself. The
majority of the respondents were strongly satisfied that the information technology is used
extensively since the mean value of 4.054 is very close to 5 with S.D=0.96492. Improvement
from the work is also a very important item in job satisfaction since the mean value of 3.9674 is
very close to 4 with S.D=1.06339. Most of the respondents agree the work is challenging,
creative, useful, and also makes them feel fresh because of the cross-cultural aspects, since all of
these four items are above 3.90, near 4 and become the important factors in job satisfaction.
From the negative items we may see respondents do not feel the work is frustrating since the
mean value is 3.9130 with S.D=0.95678. Most of the respondents are not satisfied because of the
stressful nature and simple specialty of the work since the mean is below 2. These results mean
that TCFL lecturers have too much pressure, thus to enhance their job satisfaction administrators
must find solutions to reduce lecturers work pressure.
Table 3 Mean score and Std. Deviation for work itself items on job satisfaction
Items
Mean
Standard Deviation
Information technology is used extensively
4.054
.96492
I can improve myself from the job
3.9764
1.06339
Challenging
3.9565
1.09858
Creative
3.9457
.83025
Useful
3.9348
.96993
Frustrating *
3.9130
.95678
Cross-culture makes me feel fresh
3.9130
.89752
Boring *
3.8913
.88276
Give sense of accomplishment
3.6957
1.02431
Interesting
3.6739
.89084
Respectable
3.6413
.98986
Satisfying
3.5870
.85359
Endless *
3.5652
1.19802
Pleasant
3.5217
.99976
Pleasant environment
3.4674
.94289
Fascinating
3.4130
1.04988
Cross-culture brings difficulties into the job *
3.2174
1.28239
Tiresome *
2.8696
1.31949
Routine *
2.6087
.92530
Stressful *
1.8804
1.05708
Simple *
1.8043
.96350
* denotes negative items
Co-workers
From Table 4 we could see that all these 14 items are important in determining job
satisfaction as the means of all the items are above 3. Among them, mean values for the negative
items of being unpleasant, boring, slow, lazy and the positive item of talkative are all above 4.
That means that pleasant, interesting, fast, hardworking and talkative co-workers could bring
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more satisfaction to TCFL lecturers.

Table 4 Mean score and Std. Deviation for co-workers items on job satisfaction
Items
Unpleasant *
Boring *
Slow *
Lazy *
Talkative
Active
No privacy *
Responsible
Intelligent
Smart
Narrow interest *
Stimulating
Ambitious
Cooperative
Mean
4.3152
4.2283
4.1413
4.1413
4.1304
4.0000
3.9891
3.9565
3.9457
3.8913
3.8696
3.6957
3.6413
3.5870
Standard Deviation
.83770
.71358
.81983
.79257
.94016
.75593
.97771
.82426
,95347
.97729
.89218
.98046
.98986
1.07061
Supervision/Supervisor
The items of impolite, knows job well, lazy and influential have the highest mean value
of 4.2609, 4.2391, 4.1087 and 4.0761, respectively which are all above 4 with the S.D=0.84995,
0.91831, 1.09400, 1.04022 . From this, we could see the information that being polite, knowing
the job well, being hardworking and influential are extremely vital factors contributing to job
satisfaction. Since nearly all the items means are above 3 except the item of around when
needed, we could infer, to some extent, that respondents are satisfied with their supervisors and
their supervision. The item of being around when needed only has a mean value of 2.6630,
below 3, which indicates a problem of the untimely help from the supervisor. So, when
supervisors consider ways of making TCFL lecturers more satisfied with their work, giving
prompt instruction is something they cannot neglect as it is shown in table 5.
Table 5: Mean score and Std. Deviation for supervision items on job satisfaction
Items
Mean
Standard Deviation
Impolite *
4.2609
.84995
Knows job well
4.2391
.91831
Lazy *
4.1087
1.09400
Influential
4.0761
1.04022
Supervise clearly
3.9783
.85135
Responsible
3.9565
.83749
Annoying *
3.9457
.91824
Knowledgeable
3.8913
1.02127
Trustworthy
3.8696
.81493
Praises good work
3.8370
1.00850
Tactful
3.8043
1.11177
Up to date
3.7500
.92136
Quick tempered *
3.6522
1.05283
Stubborn *
3.5652
1.06187
Tell me what I stand
3.5109
1.13384
Hard to please *
3.4674
1.21756
Ask my opinion
3.4348
1.04097
Knows how to be a good
3.3478
1.18075
supervisor
Around when needed
2.6630
1.16993
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Income
In terms of income, the means of four items are above 3 and the other four are below it.
From Table 6 we may see most of the respondents think the income is sufficient to cover normal
expenses since the mean value is 3.465 with the S.D=1.08347. But the negative item of insecure
with a mean of 2.6413 shows that the income is not secure and not high (mean=2.087).
Respondents are not quite satisfied with their income (mean=2.7826), and even think it is less
than what they deserve (mean=2.9239). From these results we could see dissatisfaction of the
workers for the income they receive and perceived that their efforts worth than what is given.
Table 6: Mean score and Std. Deviation for items of income on job satisfaction
Items
Mean
Standard Deviation
Sufficient to cover normal
3.4565
1.08347
expenses
Low paid *
3.3696
1.00239
Motivation for work
3.1848
1.13805
Barely live on income *
3.1304
1.22445
Less than what I deserve *
2.9239
1.06114
Satisfactory
2.7826
.87488
Insecure *
2.6413
1.25428
High paid
2.0870
.93353
Opportunity for Promotion

Compared to others, items under the opportunities for promotion do not bring much
satisfaction from the respondents. Although they do not completely believe it is a dead-end job
with the mean value of 3.2826, most of them do not think there is a good opportunity for
promotion since the mean value is 2.630 with the S.D=0.9.514 as it is shown in Table 7.
Table 7: Mean score and Std. Deviation for opportunities for promotion items
Items
Mean
Standard Deviation
Dead-end job *
Promotion based on seniority
Infrequent promotion *
Promotion on ability
Promotion policy is unfair *
Regular promotion
Opportunity somewhat limited *
Good opportunity for advancement
Fairly good chance promotion
3.2826
3.1196
2.9130
2.8913
2.8043
2.5000
2.3370
2.2935
2.1630
1.30364
1.17522
1.22835
1.25319
1.18821
1.10444
1.01934
.96690
.90514
Job Factors Comparison

Each item of the five job factors has been calculated in the above. They supply detailed
information about the elements influencing TCFL lecturers job satisfaction. Furthermore, we
could through the total mean of each job factor have a general view about lecturers job
satisfaction as it is shown in Table 8.
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Table 8: Mean score and Std. Deviation for opportunities for promotion items
Items
Dead-end job *
Promotion
based
on
seniority
Infrequent promotion *
Promotion on ability
Promotion policy is unfair
*
Regular promotion
Opportunity
somewhat
limited *
Good
opportunity
for
advancement
Fairly
good
chance
promotion
Mean
3.2826
3.1196
Standard Deviation
1.30364
1.17522
2.9130
2.8913
2.8043
1.22835
1.25319
1.18821
2.5000
2.3370
1.10444
1.01934
2.2935
.96690
2.1630
.90514
Comparison of Job Factors

From Table 9, it is obvious that the majority of respondents feel satisfied with work itself,
co-workers, supervision and their supervisor, since their mean values are all above 3. Among
them, co-workers bring the most satisfaction to respondents as the mean value of 3.9666 is very
close to 4. Most of the respondents are not satisfied with their income and opportunities for
promotion since the mean values of 2.9407 and 2.7005 respectively are both below 3.
Table 9: Mean Comparison of Job Factors
Items
Work itself
Co-workers
Income
Opportunities for promotion
Mean
3.4534
3.9666
3.7557
2.9470
2.7005
Standard Deviation
.37352
.47833
.51418
.63582
.72716
15.
Analysis of Overall Job Satisfaction

Section III of the questionnaire comprises five multiple-choice questions to explore
respondents overall attitudes about the job, such as whether they are satisfied with their job,
whether they like teaching foreign students and cross-cultural work, and whether they will stay
in the workplace until they retire.
From Table 10 we see that the majority of the respondents are satisfied with the job since
all their means are above 3. Furthermore, they indicate a high level of satisfaction with teaching
foreign students and doing cross-cultural work with means of 4.1522 and 4.1413.Moreover,
64.2% of the respondents feel satisfied with their job (45.7% satisfied and 18.5% strongly
satisfied).Meanwhile, 82.6% of the respondents like or extremely/very much like doing crosscultural work and nearly 80% of them (78.3%) like teaching foreign students. However, only
44.6% of the respondents see teaching as their lifelong career and 40.2% believe they will stay in
the workplace until they retire. On the other hand, 34.8% of the respondents hold neutral views
on these two aspects.
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Table 10: Overall job satisfaction

Items
I feel satisfied
with my job
I like doing
cross-cultural
work
I like teaching
foreign students
I see teaching as
my lifelong
career
I will stay in
this workplace
until I retire
SD
5
(5.4%)
3
(3.3%)
D
6
(6.5%)
3
(3.3%)
N
22
(23.9%)
10
(10.9%)
A
42
(45.7%)
38
(41.3%)
SA
17
(18.5%)
38
(41.3%)
2
(2.2%)
7
(7.6%)
2
(2.2%)
12
(13.0%)
16
(17.4%)
32
(34.8%)
32
(34.8%)
17
(18.5%)
40
(43.5%)
24
(26.1%)
8
(8.7%)
15
(16.3%)
32
(34.8%)
16
(17.4%)
21
(22.8%)
Mean
3.6522
Std. D
1.03175
4.1413
.96740
4.1522
.93685
3.4239
1.22460
3.2935
1.23625
16. Significance Analysis between Demographic Profile and Job Factors

To make it facilitate the data analysis, some changes were made to the demographic part
of the questionnaire. Four of the demographic characteristics were chosen: sex, education level,
years of service and nature of appointment. For education level, we deleted the option of others
since no respondents chose it. For years of service, we combined five options into two, 1-10
years and above 10 years. For nature of appointment, we combined them into two options,
namely permanent and non-permanent. The T-test was applied to compare demographic profiles
that contained only two groups, such as sex, years of service, and nature of appointment. For the
demographic profile that contained more than two groups such as education level, the Analysis
of Variance (ANOVA) was conducted. For the purpose of analysis, p-values which are above
0.05 are considered as not significant, while the p-value which is equal to 0.05 and below is
considered as significant.
17.
Sex and Job Factors
From Table 11, we can see that there is no significant difference between male and
female on five job factors since all the p-values are above 0.05. We could also see that the mean
for male and female on five job factors are all nearly the same without much mean difference.
That is sufficient to say that males and females have a similar attitude on job factors and hold the
similar levels of job satisfaction from the five aspects of the job.
Table 11: T-test analysis for five job factors by Sex
Job factors
Sex
N
Work itself
Male
20
(21.7%)
Female
72
(78.3%)
Mean
3.47
Std. D
.27
3.45
.40
t-value
.18
Sig.
.86
Co-workers
Male
Female
20
72
3.87
3.99
.37
.50
-1.04
.30
Supervision /
Supervisor
Male
Female
20
72
3.66
3.78
.36
.55
-.99
.37
Income
Male
Female
20
72
3.01
2.93
.78
.60
.47
.64
Opportunities
for promotion
Male
Female
20
72
2.87
2.65
.86
.68
1.16
.25
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18. Education Level and Job Factors

Table 12 shows that people at different education levels have significant differences in
their attitudes to the factors of work itself, supervision, income and promotion since the p-values
of these factors are equal to or below 0.05. There is no significant difference in the factor of coworkers by education level with the p-value of 0.94. From the mean value we could see that
graduates and PhDs are more satisfied with work itself than lecturers with a masters degree.
PhD lecturers have much higher levels of satisfaction in the supervision factor than graduates
and masters degree lecturers with the mean value of 3.95. In terms of income, graduates are less
satisfied than masters holders with the mean of 2.73 and 3.16, respectively. Compared to that,
PhD lecturers are the most satisfied with their income with the mean value of 3.54. On the issue
of opportunities for promotion, graduate lecturers do not feel satisfied since the mean is only
2.38. Masters and PhD lecturers are satisfied with the opportunities with a mean difference of
0.46 between them.
Table 12: ANOVA for job factors by education level
Job factors
Work itself
Co-workers
Supervision
Income
Promotion
Sum of
Squares
Mean
Graduate
(55.4%)
Master
(37.0%)
PhD
(7.6%)
3.53
3.98
3.71
2.73
2.38
3.30
3.95
3.78
3.16
3.02
3.63
4.00
3.95
3.54
3.48
1.37
.03
.37
6.44
13.01
df
2
2
2
2
2
Mean
Square
.69
.01
.19
3.22
6.51
F-ratio
5.40
.06
.71
9.45
16.50
Sig.
.01
.94
.50
.00
.00
19. Years of Service with Job Factors

The years of service groups are recoded from the original five groups into two groups to
facilitate the analysis. The two groups are:
i) 1-10 years
ii) Above 10 years
From Table 13, we see that there is no significant difference between service years with
respect to work itself and co-workers since the p-value is above 0.05 (0.51 and 0.95
respectively). In terms of supervision or the supervisor, income and opportunities for promotion,
there is a significant difference between the two groups with the p-value of 0.03, 0.00 and 0.00
respectively. Lecturers with more than 10 years of service feel more satisfied from the
perspective of supervision than lecturers with no more than 10 years with a mean difference of
0.34. 1-10 years of service lecturers do not feel satisfied with their income with the mean value
of 2.88. On the contrary, lecturers with more than 10 years of service are satisfied with the
income since the mean is 3.43. This is similar to the income situation in which lecturers with
more than 10 years of service feel much more satisfaction from the perspective of opportunities
for promotion than those with no more than 10 years with the mean difference of 0.69.
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Table 13: T-test for five job factors by years of service
Job factors
Years of service
Work itself
1-10
(87%)
Above 10
(13%)
Co-workers
1-10
Above 10
Supervision/
1-10
Supervisor
Above 10
Income
1-10
Above 10
Opportunities
1-10
for promotion
Above 10
Mean
3.44
Std. D
.38
3.52
.30
3.97
3.96
3.71
4.05
2.88
3.43
2.61
3.30
.50
.28
.52
.34
.60
.71
.72
.51
t-value
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Sig.
.51
.06
.95
-2.19
.03
-2.92
.00
-3.19
.00
20. Nature of Appointment with Job Factors

The nature of appointment is recoded from the original four groups into two groups to
facilitate the analysis. The two groups are:
i) Permanent
ii) Non-permanent
Table 14 shows that there is no significant difference between permanent and nonpermanent lecturers in the aspects of work itself, co-workers and supervision since their p-values
are all above 0.05 (0.22, 0.43, 0.15, respectively). In contrast, there are significant differences in
terms of income and opportunities for promotion with p-values of 0.02 and 0.00, respectively.
Non-permanent lecturers are not quite satisfied with their income with the mean of 2.84.
Compared to that, permanent lecturers are satisfied with their income with the mean value of
3.19. Their mean difference is 0.35. Similar to this, permanent lecturers are satisfied with the
opportunities for promotion with a mean value of 3.17, but non-permanent lecturers are not
satisfied with the opportunities with a mean value of only 2.50.
Table 14: T-test for five job factors by nature of appointment
Job factors
Work itself
Co-workers
Supervision/
Supervisor
Income
Opportunities
for promotion
Nature of
appointment
Permanent
(29.3%)
Non-permanent
(70.7%)
Permanent
Non-permanent
Permanent
Non-permanent
Permanent
Non-permanent
Permanent
Non-permanent
Mean
Std. D
t-value
Sig.
3.38
.33
-1.23
.22
3.48
.39
3.90
3.99
.29
.54
-.80
.43
3.88
3.71
3.19
2.84
3.17
2.50
.50
.51
.60
.63
.56
.70
1.47
.15
2.37
.02
4.40
.00
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21. Summary
In terms of the demographic profile of the respondents, there are more female
respondents than males, accounting for 78.3% of the total number. Most of them hold a
bachelors or masters degree. More than 70% (71.7%) are no more than 30 years old, and 87%
have no more than ten years of teaching experience. More than half of respondents (52.2%) teach
more than one subject. Only less than 30% (29.3%) of respondents are permanent lecturers, and
the other 70.7% are working on contract, on probation or are temporary TCFL lecturers. The
result of the data analysis indicates that TCFL lecturers are satisfied with the work itself, their
co-workers and supervision, but not satisfied with the income and opportunities for promotion
(with mean values of 2.9470 and 2.7005, respectively, both less than 3).
There is no significant difference between male and female TCFL lecturers with respect
to satisfaction on five job factors since p>0.05. TCFL lecturers with PhD degrees have higher
levels of job satisfaction than lecturers with bachelors and masters degrees. Indeed,, graduates
are not satisfied with the income and opportunities for promotion with the mean value below 3.
There is no significant relationship between lecturers with more than 10 years of service and
lecturers with no more than 10 years of experience in the factors of the work itself and coworkers, but there are significant differences between then in terms of supervision, income and
opportunities for promotion. There are significant differences between permanent and nonpermanent lecturers with respect to income and opportunities for promotion since p<0.05.
Permanent lecturers show higher levels of satisfaction than non-permanent lecturers with these
two job factors. .
With regards to the three voluntary-reply subject questions, only a few lecturers answered
them. Nearly all of the respondents prefer being TCFL lecturers to being traditional Chinese
lecturers due to the strong usability of language knowledge in the process of TCFL. Most of the
reasons for leaving the position are the insecure income and few opportunities for promotion.
22. Discussion of Findings
The findings of the study reveal that nearly four-fifths of the respondents are female
lecturers. Actually, female TCFL lecturers account for a large part of the total TCFL lecturers
group. Less than one-third of the respondents are above 30 years old and less than a quarter of
them have more than ten years of service. Being young and having a lack of rich teaching
experience is a universal phenomenon among TCFL lecturers. More than half of the respondents
teach more than one subject. This brings certain pressure to bear on TCFL lecturers due to the
need to prepare different contents of teaching plans at the same time. Most of them hold
bachelors or masters degrees, and less than one -third are permanent lecturers. Job security is a
big problem for TCFL lecturers.
The result of the study indicates that TCFL lecturers are satisfied with the work itself,
their co-workers and supervision, but not satisfied with their income and opportunities for
promotion. The results of the data analysis indicate that there is no significant difference between
male and female TCFL lecturers with respect to satisfaction on five job factors. This finding is
contrary to the studies of Benge (1944) and Cole (1940) which report that females are more
satisfied than men or males are more satisfied than females. It is consistent with studies which
show no significant difference between males and females in terms of job satisfaction.
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The analysis results show that there are significant differences among lecturers at
different education levels in the aspect of work itself, supervision, income and opportunities or
promotion. From the mean value we could see that TCFL lecturers with a PhD degree have a
higher level of job satisfaction than lecturers with bachelors and masters degrees. The current
study is in line with the studies conducted by Rao (1970) and Carrell and Elbert (1974) which
indicates that there is a significant relationship between job satisfaction and the educational level
of individual lecturers and it is considered as a significant determinant of job satisfaction.
Another finding is that there is no significant difference between lecturers with more than
10 years of service and lecturers with no more than 10 years of experience in the factors of work
itself and co-workers, but there are significant differences between them in terms of supervision,
income and opportunities for promotion. Lecturers with more than 10 years of service feel more
satisfied than lecturers with less than 10 years in nearly in all job factors related to this study,
especially in terms of income and promotion. These results run counter to the studies of Beverly
Klecker and William E. Loadman (1997) which shows that job satisfaction decreased with the
number of years the person has been in the profession. They are, however, it consistent with the
study of Hodge (1977) which shows that the level of job satisfaction increases for professors as
years of employment at the institutions increase in number.
23. Conclusions
Five determiners of job satisfaction are related to test the level of TCFL lecturers job
satisfaction: work itself, co-workers, supervision / supervisor, income and opportunities for
promotion. On the issue of work itself, there is no significant difference between male and
female TCFL lecturers. But lecturers at different education levels have different attitudes to the
work. TCFL lecturers with PhD degree show most satisfaction to it followed by lecturers with
bachelors degrees. Lecturers with masters degrees feel less satisfied with it. There is no
significant difference among lecturers with different teaching experience and in permanent or
non-permanent positions. In terms of co-workers, all the four demographic characteristics have
no obvious influence on the five job factors. All the lecturers show high levels of satisfaction
with their co-workers.
With respect to supervision or the supervisor, there is no significant difference between
male and female lecturers, lecturers with different education levels, permanent or non-permanent
lecturers towards supervision or the supervisor. But lecturers with different years of teaching
experience have different satisfaction levels regarding supervision. Lecturers with more than ten
years experience show a quite high level of satisfaction. Compared to that, lecturers with no
more than ten years of service do not have that kind of high level satisfaction with the
supervision. All of the demographic characteristics differ towards income except for gender. PhD
lecturers are more satisfied than masters holders, in a similar way to graduates. Lecturers with
more than ten years of service feel satisfied with the income, while lecturers with no more than
ten years of service do not feel satisfied. Non-permanent lecturers are not quite satisfied, while
permanent lecturers are satisfied with the income. These seem to show the problem of fresh
lecturers not having high incomes because of limited classes. Permanent lecturers are more
satisfied than non-permanent lecturers due to low pressure about the job insecurity.
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In terms of opportunities for promotion, males and females both show less satisfaction.
Lecturers with masters and PhD degrees express satisfaction with the opportunities for
promotion compared to the extremely low satisfaction exhibited by lecturers with a bachelors
degree. Lecturers with more than ten years of working experience feel more satisfied with the
opportunities for promotion they have obtained. There is a significant difference between
permanent lecturers and non-permanent lecturers in terms of the opportunities for promotion.
Non-permanent lecturers are not satisfied with the available opportunities. This indicates that
graduate lecturers, less experienced lecturers and non-permanent lecturers should be given more
opportunities for practising their skills. From the results of overall job satisfaction we see that
TCFL lecturers are satisfied with their work, and are especially quite satisfied with doing crosscultural work and teaching foreign students.
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The proposed criteria for Egyptian Commercial credit risk management

and description of a model for measuring these risks
Dr. Marwan M. Shammot
Associate Professor, King Saud University, Riyadh Community College, Faculty of
Administrative Science, P.O.Box 28095, Kingdom of Saudi Arabia
Dr. Mohamed Mohamed Atta
Assistant Professor, University of Sohag, Erypt, Faculty of Commerce
Abstract
This study aims to analyze the Credit Risks faced by Commercial banks in Egypt , to Propose
standards for measuring credit risk of commercial bank and to Describe of a model for measuring
credit risk based on scientific grounds. For achieving the objective of this research, under the
hypothesis and its limitations, the researchers divided the study into the following four subjects:
Section
1:
the
nature
of
the
risk
of
bank
credit.
Section
2:
management
and
reduction
of
bank
credit
risks.
Section
3:
the
proposed
standards
for
measuring
credit
risk.
Section 4: The proposed model for measuring credit risk in commercial bank in Egypt. The study
came to important findings such as; proposed criteria by researchers to adopt in Egyptian commercial
banks for measuring credit risk in banking system , Activating the proposed model for measuring
credit risks of commercial banks and To rely on the results of measuring the credit risk of commercial
banks within the framework of the proposed model in the composition of credit provisions, so that
these provisions are more objective and realistic as well as safety.
Keywords: Proposed , criteria , Egyptian Commercial , Credit risk management , Description of a
model for measuring these risks
Introduction:
Banks face today a variety of banking risks, varying in severity from one bank to another. Therefore,
good evaluation, analysis, study, and manage the potential risks is the factors that related to bank's
success and ensures the stability and continuity in the banking market with the satisfactory returns
and low risk. The risk is an integral part of banking business, according to several factors, including:
increased competition, technological development, increasing the volume of banking transactions,
and the need for banks with large sizes. As the banks, is the institutions of a private nature, facing the
risks and making return of different forms at the same time, the credit risk is one of the most
important risks faced by banks, resulting from banking transactions with customers and institutions,
which are classified into different types that can be measured using indicators developed to help the
bank to identify and predict them in future, and help to control or minimize their effects. Accordingly,
the focus of contemporary studies is how to manage and control credit risk, decision-making
investment and finance in the light of the systems and methods of strict control and management,
which ensure clear identification and classification of those risks to the bank, and thus make the
appropriate decisions that lead to better achievement of its objectives. In spite of the different nature
of credit in the size, purpose and interest rates, date of maturity, type of security is required from a
client to another, the biggest risk is the loan granted, which is one of the most prominent forms of risk
facing banks activities and the bank have to deal with it always.
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The research and its importance

Bank credit plays an important role in achieving the objectives of commercial banks; Loans
controlled by the existing assets in most banks (1), where a loan represented o 70% - 50% of the total
assets, and loans are that generate the largest share of operational income. So, the fact that good credit
is the most profitable bank's assets (2).Until now, the biggest challenge facing the bank credit is the
shortcomings of credit risk; where these risks work in a reverse direction against the achievement of
this credit to its objectives.
The International Accounting Standards confirm the need to demonstrate and clarify the risks related
to assets, and liabilities with a balance sheets of the bank and such that does not appear in the balance
sheets in the format that meets the requirements and needs of users of financial statements of the
Bank, as underlined by these standards on the need to disclose any amounts are set aside to meet
potential losses on loans whether this amounts to meet the specific loans or to meet the common risks
of lending.
The researchers found that the financial disclosure on the risks of credit and a provision of this credit
in the financial statements of banks facing problems, as the disclose came in a brief and vague
manner that does not meet the requirements of international accounting standards, and does not meet
the needs of users of financial statements of the banks as owners, lenders, depositors and regulators.
Where this disclosure did not explain the size of the credit risk faced by the bank, as well as the
volume of good debt and bad debt, and the value of allotments that must be configured according to
the size of credit risk. The researchers found a lack of clear grounds relied upon by the banks in the
composition of the provision as a means to address the credit risk, which have been identified as an
urgent requirement that must be fulfilled in order to provide a clearer vision about the safety and
adequacy of these provisions. From that perspective, and to address the former shortcomings, the
researchers proposed standards for measuring credit risk, as have also proposed a model for
measuring credit risk in order to develop the disclosure of accounting for these risks, as well as the
development of accounting disclosure on an credit provision to address those risks, in addition to
developing the bases used in the formation of a credit provision to commercial banks, in order to
provide clearer and more comprehensive disclosure to meet the needs of users of financial statements
of the banks, and composition of credit provision more integrity and objectivity, which would
contribute to the strengthening of the financial position of the bank.
Research Objectives:
This research objective is as follows:
1 - Analysis of credit risk faced by commercial banks in Egypt.
2- Proposing standards for measuring credit risk of commercial bank in Egypt.
3 Description of a model for measuring credit risk based on scientific grounds.
Limitation of research:
Researchers deal with data imposed by the nature of the study, and the quality of effort; formed in the
total the limitations of the study, which was as follows:
1 - Address the risk management of bank credit to commercial banks within the credit activity of
banks without extending it to other activities of the banks.
2 - The study deals with theoretical aspects only, without the practical application.
Research plan:
For achieving the objective of this research, under the hypothesis and its limitations, the researchers
divided the study into the following four subjects:
Section 1: the nature of the risk of bank credit.
Section 2: management and reduction of bank credit risks.
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Section 3: the proposed standards for measuring credit risk.

Section 4: The proposed model for measuring credit risk in commercial bank in Egypt.
The first section the nature of credit risk
Contemporary studies deal with credit risks, in terms of analysis and prediction, which would help the
bank to make objective decisions. Risk defines as a case of adverse deviation of expected result,
which leaded to damage or loss.
Banking risks in the banking industry define as a potential Bank's exposure to unexpected losses or
volatility of return on an investment; which affect the attainment of the desired objectives of the bank.
The main risks faced by banks are credit risk, which means the following:
- Risks that arise due to non-payment in full and on time, resulting a financial loss. (4)- credit risk
defines in the possibility of the inability of the borrower to repay the loan in accordance with the
agreed terms for credit granted (5).Accordingly, the credit risk is a potential loss arising from the
inability of the borrower to repay the value of the original amount borrowed and interest to the lender
at the maturity date specified in the terms of the contract credit, including those items related to risk
within the balance sheet, such as: loans, bonds, and items outside it, such as: letters of guarantee,
letters of credit and documentary credit.
1/2 sources of credit risk:
For credit risk, it may be divided into particular risks and general risks, as follows
1- Unsystematic risk
It means the internal risks that are related to a company or an industry under certain conditions. so ,
examples of this type of risk; poor banking management, administrative mistakes , labor strikes, and
the changing tastes of customers as a result of the emergence of new products. Such type of
exceptional nonmarket risk would affect the ability of the client and his desire to repay its obligations
to the bank within the time agreed upon.
2- Systematic risk
It means all the risks that affect all loans, regardless of the circumstances of the bank lender, due to
uncontrolled economic, political and social factors. Examples of such risks are; risk of interest rates
change, change in customer tastes, inflation, and changing of foreign exchange rates, in addition to
technological changes (6).
In summary, credit risks occur because of internal factors that affect the ability of the bank, which
would require an occurrence prediction in the future, and can be minimized or controlled through
diversification.Contrary to general risks, affecting the movement of the market as a whole and it is
difficult for the bank to control and predict in the future as well as response, so we cannot avoid
general risk by using the policy of diversification.The overall risk due to systemic risks, and the other
part to unsystematic illustrated by the following equation: total risk = systemic risk +unsystematic
risk the following figure shows the sources of risk, diversification and lack of diversification:
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Expected return
Systematic risk
Total risks
Unsystematic risk
Risks
3/1 the most important credit risk and some indicators of measurement:
Credit risk can occur because of circumstances and variables unexpected come from the inability of
the client to pay and the total deficit. Accordingly, negative effects resulted on the bank and its
goodwill. Therefore, on financial transactions. The following represents the most important images
of credit risk facing the banking activity and some indicators of measurements.
A - Credit risk:
Liquidity risk: the policy of granting credit to customers related to the existence of compatibility with
the sources of funds for the bank to provide sufficient liquidity to meet withdrawal requests on
deposits by other clients, as the inability of the bank to instant liquidation of the assets at an
acceptable cost on profitability. Therefore, the risk of failing arises in conformity and harmonization
of cash withdrawals for customers and the client borrower repayments. However, the causes of
exposure to liquidity risk is as follows: (7)
- Poor planning for the bank liquidity, leading to inconsistencies between the maturities of assets and
liabilities.
- Poor asset allocation of the uses is difficult to turn into liquid assets.
- The sudden shift of some contingent liabilities to the actual commitments.
- The impact of external factors; such as economic stagnation, and acute crises in financial markets.
Risk pricing: the Bank shall study the prices of the lent products that are beard to
customers in the form of burden, and linked them to the level of risk, the more the degree of risk the
higher the expected return by the facilities, and it related to added margin, which distinguishes
between a client and another, so basic lending rate determined through the historic cost of funds or
market plus the reserve ratio and the cost of debt management. By the meeting of the Management
Committee of the assets and liabilities of the Bank on a regular basis .a discussion taken place
concerning to the basic lending rate and modified it according to need.
Risks associated with the period of facilitation: when the bank grants credit facilities ,
it shall conform with the nature of the client's business, the goal of funding, the period of recovery of
the expected return of the funding, where the Bank's role in making the facility period balanced
which do not be short, , or long affecting the direction of the expected returns and, in general, not be
directed towards financing the activities of a quick return to intermediate-term or long term, as the
bank needs to focus the control on the activity of new customers and their financial position.
Currency risk: represented by realized losses as a result of changes in currency exchange

rate related to the reference foreign currency for the bank, including the listing the debts in foreign
currency. The differences occur because of gains in income and expenditure linked to exchange rates
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by means of indicators, or to link of the values of assets and liabilities in foreign currencies, which
requires hedge against currency fluctuations to avoid potential losses.
Execution risk (8): From the necessary decisions, in the granting of credit; that the bank
shall consider, is updating information for customers (positions of accounts) on a daily basis, and that
any delay in the impact on the obligations of customers, by increment or decrement, during the day
to day operations which reflect the risk of credit decision, whether approved or rejected.
Risk of notifying and reporting: to ensure a proper implementation of the approval of the
resolution of credit, both internal (departments of the bank) and external (client), on all the terms of
the contract for credit and clearly, without omission of any condition, and that subjecting internal
reporting on control, but deviation from the implementation of the credit approval terms results a
great risk.
Risk of non-regularity of the periodic inspection of the credit: usually, the Bank faces
when granting the credit risks arising from the non-examination, and periodic inspections of the
credit department. and to identify the gaps that are a recurrent phenomenon such as bad debts , and
not to focus largely on the phase before granting credit for analysis and study the causes and
reviewed internally and on a regular basis.
Risk of rapid evolution of the volume of facilities: The growth of the size of the credit
facility and increase after a short period on the grant involves a significant risk in light of the stability
of the financial statements and not commencing of the repayment period, and then, the decision on
the performance during this period distinguished by lack of objectivity, which requires: (9)
The proposed increases do not exceed a certain percentage of the credit facility at a time, as
25% maximum
The periods between the granting of facilities and the increase is not less than six months, which
required good reasons .
The rise in facilities is to ensure a satisfactory manner by the good performance of the existing
facilities.
Increases must be reviewed during the financial year to the financial statements approved at the end
of the year.
No
use
of
increases
in
the
payment
of
arrears.
avoiding duplication of facilities when renewal even if the reason was lack of studies when granting.
risks of information exchange: economic studies have shown that transparency in the
exchange of information between workers in the field of credit (in the credit sector and marketing,
credit risk, and dealing of loans) or branches between officials of the accounts, represents a great
importance in determining the size of the potential risks, and forecasting them, which helps to
measure and control them relatively.
Risk of dealing of the assets and the interests of irregular debt: The early dealing of the
irregular debt contributes significantly to the mitigation of future increases in debt and this important
appears when you published the balance sheet quarterly showing the existence active securities, and
that any decline in profit will be frequent intervals. Accordingly, this requires from commercial banks
to abide by the instructions of the Central Bank to avoid interest, and the composition of allocations.
Risk of profitability versus safety: the greater the risks, the increasing the interests at the
expense of the safety margin. Therefore, higher risk leads to lower quality of the bank's loan
portfolio, and increase profits lead to the rapid growth of risk. However, the result that the risk of
profitability will affect the quality.
risk of inability to pay: risks differs for full credit, which are the risk arising mainly from the
client (10), since the reasons vary according to the bad credit situations, and include:
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- The risk of a human: in which related to the character of the client, her/his eligibility and the extent
of his/ her ability to pay its financial obligations based on the reputation and creditworthiness.
- The risk of providing misleading information to the bank (11) as the client sometimes hides
information about his/ her identity to obtain credit or raise the ceiling of credit facilities.The borrower
cannot repay the value of the borrowed amount with interest accrued by the time agreed upon. So. A
declaration of inability to pay will be when it cannot make payments scheduled in a timely manner
for a period of less than three months after the date of payment maturity.
Therefore, the Bank considers studying the financial statements to its customers for the three previous
years and determining the adequacy of the transfer of assets into cash and the size of the payment
guaranteeing of the loan value with accrued interest
Market risk: this risk associated with market and competitive position for products of the client
and the bank focuses on the various financial resources available to the client , analysis of his/her
performance during the previous three years, making future assumptions about his /her performance
also the bank focus on its analysis is to avoid financing new products, or trading in products which
increase the need of the market.
Risk of decline in guarantee value: the Bank typically focuses, in granting credit to customers and
institutions, on the request of the strong guarantees to ensure payment of the loan amount with
interest in full. The bank focuses also on monitoring and evaluation of the size of permanent
guarantees to avoid the risk of low value, and the focus is, in general, to provide the following
guarantees: real estate, securities, commercial papers and concessions.
Focus risks : Banks consider to reduce the risks in the loan portfolio and to achieve an
optimal degree of quality so a considerable concern is to
the following:
Client: when granting of credit, the focus by the concerned credit staff is on the size of the potential
risks, as an integral part of credit study, so that the distribution of credit portfolio, either on the
number of customers or market segments with a good manner, and within the minimum or maximum
terms is important.
Activity: when distribution of credit portfolio, a focus should be on the lending limit to each subactivity, and compliance to credit limits for each sector, as well as adherence to the instructions of
supervisory authority.
Guarantees: the bank should not focus on one type of guarantees and relied upon in the granting
of
credit
due
to
the
decline
of
its
value
in
future.
Maturity: The concentration of maturity of facilities is one of the significant risks to the liquidity
position, and it related to documentary credits, letters of guarantee, and various external obligations.
Political and legal risk: The follow-up of political and legal aspects is the most important matters
that required of the concerned staff of lending operations to follow-up, where the non-compliance
and adhere to them is a real threat to the industry, banking services. One of the political risk is that
related to State's ability to comply with its obligations and meet its debt and which related how to
supervising of financial institutions, regulations and laws governing the financial system within the
state. (12)
B - The basis of indicators for measuring credit risk:
The identification of credit risk accurately, and to develop indicators and data that help to measure, is
one of helpful matter to manage of the risks and control them ; and then reduce the risks to the
lowest levels.
The
most
important
indicators
for
measuring
credit
risk
are
as
follows:
- data of the distribution of loan portfolio sectors on economic activity according to a quarterly basis.
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- Data of the distribution of the portfolio on collateralized facilities with determining the value of
security at the last evaluation according to a quarterly basis and facilities without collateral.
- asset quality indicators adopted within the Bank in accordance with warning system, which is
calculated on a monthly basis as follows:
O The proportion of the credit portfolio to total deposits.
O The distribution of the portfolio on the sectors of economic activity.
O The proportion of unsecured loans to total portfolio.
O A statement on focus up to 25% or more of the bank's capital base, whether in the form of
employment of the bank with the client, in the form of share capital and credit facilities, or in the
form of different funding types.
O Total data on the focus of more than 10% of the bank's capital base (with max)
O The proportion of total allocations to the facilities represented by loans and facilities
O The proportion of unorganized facilities / total credit portfolio.
O The Proportion of bad debts / total credit portfolio.
O The rate of expected return to total loans.
O Total net return to total loans.
- Data on the compatibility of existing securities with the granted facilities to determine the amount
of allocations, it is calculated by dividing the present value of guarantees on the total facilities
granted.
- Reports on some cases of credit that require identifying and positioning to ensure the regularity of
payment, and identify the causes of the bad debts that are not organized.
The following are the most important indicators to measure the risks including credit risks:
Type of risk
- Credit risk
- Liquidity risk
- Exchange rate risk
- Operational risk
- capital risk
Indicators used in the measurement

- Burden of loans / total loans
- allocation for bad debts / total ns
- allocation for bad debts / outstanding loans
- Basic deposit / total assets
- Volatile deposits / Total assets
- Sensitive assets - sensitive liabilities
- Open position in each currency / capital base
- Total open interest / capital base
- Total assets / Number of Employees
- Working expenses / number of employees
- Equity / total assets
- The first class of capital / risk-weighted assets.
- Rule of capital / risk-weighted assets.
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Section II
Credit risk management and reduction of risks
Based on the above, we find it is necessary to assume the central management at banks the
supervising of risks, working to reduce them and mitigate them to modify the path of credit and to
ensure the banking performance. The following represents how to manage the risk and bad loans
managements:
1/1 risk management in banks, according to the requirements of the Basel Committee on
Banking Supervision:
With the worsening crisis of external indebtedness of third world countries and the high proportion of
bad debts. Therefore, the Basel Committee on Banking Supervision was created, with the
participation of the major industrialized countries, in the presence of representatives of central bank
governors of twelve countries (Belgium, Canada, France, Germany, Italy, Japan, Netherlands,
Sweden, Switzerland United Kingdom, United States of America, and Luxembourg) in 1988. An
agreement on a rate of 8% minimum capital adequacy for banks, which applied these rules at the end
of 1992.
The Basel Committee on Banking is a regulatory system of risks facing the banking activity, risk
measurement systems, methods to mitigate them and maintain the stability of the banking system.
The function of risk management at the level of the bank is essential
which concerns to
coordination between all departments of the bank in terms of identifying the various risks facing the
bank as credit risk, liquidity risk, periodically market risk that shall be compiled in the form of reports
to senior management for discussion.
The main objective is to "measure the expected size of risk which may occur in order to mitigate,
control and not to completely revoke.
We note in this regard that good risk management requires the banks commitment to the following
basic principles: (13)
- Each bank shall have an independent committee called "Committee for Risk Management" that
concerns to preparation of policy. In addition, specialized risk management will undertake the
implementation of those policies, and monitor as well as measure risk on a regular basis.
- Appointment of "risks responsible" for each type of risk who has a wide experience in the field of
banking.
- develop a specific system to measure, control the risk in each bank, and determine a limit of credit
and liquidity.
- Assessment of the assets of each bank and specially investment as a basic principle of risk and
measurement of profitability.
- use the modern information systems for risk management and security controls appropriate to
them.
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- the need for an independent internal audit unit at banks controlled by the Board of Directors which
review all the Bank's business, including risk management .
1/ 2 credit risk management approaches:
Credit management process means how to take credit decision at various levels of administrative and
organizational matters. This policy includes general standards and guidelines that should be adhered
by the branches of credit to avoid credit risk. (14)
In general, credit management focuses on two types of approaches by which the credit analysis is
done to determine the degree of risk as follows:
- first approach : it is known as " discriminatory approach " and is based on the idea of clients
appraisal and take a general idea of their personality , their social situation and the extent of their
credibility. Then determine the objective of the credit application. Type of activity financed, and the
nature of the security provided. However, the focus of credit department is to study the possibility of
the client and his / her desire to repay the loan with interest on the due date and that by concerning on
his/her financial solvency.
- Second approach: it is known as the "experimental approach" after verifying the identity of the
borrower, the financial solvency, and compliance of the secured provided with the volume of credit.
So point or the weight given to each measurement that shall correspond to the weights specified by
credit management.
The risk analysis and forecasting in advance allows for the management of credit to control , mitigate
and to avoid bad effects on the banking system so generally goals of risk management is to ensure
that:
- Total risk.
- Focus of risk.
- Risk measurement.
- Control of risk and preparation of reports and in accordance with legal norms.
The following deals with how to manage credit risk and reduce the risk of bad loans:
1/2/1 credit risk management:
Risk management means a set of administrative arrangements designed to protect the assets, profits,
reduce the loss to the lowest levels and select the quality of these risks and measure them, as well as
working to adopt measurement to control. The process of risk is on three basic principles: (15)
o Optional: choosing a lowest number of the bad debt risk.
o Put a limit to risk: by the type and class of the loan.
o Diversity: This is to avoid the focus of loans on certain customers.
the banks processes the credit risk of possible occurrence according to banking information to
assess the risks arising from the decision to grant credit, and focus on the method of preventive
approach by credit management to avoid risk, or the approach of dealing in case of risk where
required to face its negative effects on the performance of the bank. These approaches addresses as
follows:
- Banking information: Before granting the credit. The bank uses the query and investigates all
possible ways and means on the status of the client, his /her financial position information and the
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extent of its ability to meet his/ her obligations when due in accordance with the agreed terms, and the
most important sources for information are:
- an interview with a loan applicant : that a personal interview with the client disclose to the Bank a
great side about his/her character and reputation and the truth of the information provided on the
status of the institution ,its activities , its competitive position and future plans.
In addition, it reveals about the history the organization and its finances, which would assist credit
management responsible in the assessment and knowledge of the risks that may face credit granted.
- Internal resources: The internal organization of the Bank is an important source in the decision to
credit, especially if the loan applicant who had previously dealt with the bank, and is determined by
the internal sources of information through:
o Bank accounts for the client that reveal his/her position either creditor or debtor and determine the
nature of its relationship with the bank.
o the financial position of the client and record checks drawn on it.
o A commitment of the client with the contract terms and his / her ability in the payment of
obligations by the agreed due dates.
- external sources of information: external departments represented by other banks , suppliers,
brochures of Department of Statistics Chambers of Commerce, the official newspapers and the
courts .(16) which help to provide management of credit with information concerning to borrowers
. In addition, the exchange of information between banks about the debtors would help them to assess
the
magnitude
of
risk.
- Financial Statement Analysis: It is the most important sources for obtaining information so
administration of credit analyzes the financial statements of past years of the institution and
preparation of future statements as well as analysis thereof in addition to analysis of the estimate
balance sheet that reveals the financial position of the institution at a specific date, which provides
credit management of information on the financial position of the borrower and his / her ability to
generate cash flows to ensure payment of the loan amount with interest.
2 - Preventive approach: For the prevention of risk of bad debts, before it occurs so credit
management follows up on the credit granted to avoid risks resulting from it by focusing on the
following elements:
- provision of appropriate securities: in order to avoid potential risks, credit management has to
assess the value of the loan, and on the basis of, or more than, it is determined appropriate security,
and is one of the most important and most effective preventive measures to face the threat of nonpayment arising from the client whereas this procedure allows to compensate the bank and obtaining
the funding. The bank usually focuses on two types of guarantees as follows:
- Personal guarantees: which is a personal commitment by the borrower to ensure payment of the loan
amount; interest and thus they reflect the security to cover the loan and includes: (17)
o Guarantees: guarantee is a contract whereby a person called the guarantor undertakes to the creditor
to
fulfill
this
obligation
if
not
fulfilled
by
the
creditor
himself/herself.
o Reserve guarantee : a contract written by a particular person which undertakes to pay the amount of
commercial paper or part thereof in the case of the inability of the payment, and securities that are
being under this type are bonds and checks.
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o Credit Insurance: A form of personal guarantees, which involves ensuring provided by insurance
institution for the beneficiary's account to cover the risk of non-payment and the fact that the
coverage of credit potentially; that makes him/ her the subject of insurance.
- Real Guarantees: These guarantee is based on what made the subject of security of goods and
equipment, real estate, and provide these guarantees for the mortgage and not by way of transfer of
ownership so as to ensure paying off of loan (18) this type takes the form of mortgage, pledge, and
excellence, and generally the bank . The bank, when determine the security, has to take into account:
o the value of the security is not of large fluctuation during the period of credit.
o The adequacy of guarantee to cover the loan with interest and other commissions.
- Limiting of credit focus: it means directing credit to a single client due to the magnitude of his / her
position, which includes risks that should be limited and reduced by: (19)
O Some countries impose limits on the credit facilities per customer ranging between 10% - 25% of
the capital. Follow-up focuses on the credit risk of any economic activity or geographical area with
periodic follow-up.
O To ask guarantees when estimating the size of risk, which is essential because the real guarantees
are not reached until after the collection of such value.
O Capital adequacy of commercial banks as a preventive system internationally agreed - the Basel
Committee on banking solvency - and requires that the finding out of the adequacy of the capital
expense that ensuring the quality of existing assets.
Efficiency in the preparation of credit policy: In order to access the credit policy and avoid the risk
of bad debts , the Bank's management has to train credit staff constantly to raise the level and
efficiency, which helps to set goals and plans properly and then determining the level of potential
risks and processing them according to the standard rules.
3 Treatment approach: represented by he use of methods and techniques for risk management so
this approach is based on:
- Organization of collecting credit: In order to pay off the credit granted in appropriate
circumstances and in order to avoid losses, the bank has to follow the policy of the collection of dues
on the clients by organizing mechanism for the granting of credit, and the development of effective
standards to ensure collection full of the loan and interest within the deadline, this depends on:
- The development of approach reveals cases of current and future non-payment.
- Continuity in follow-up and processing credit.
- Set standards developed o obtain the largest possible of the current and future due.
1/2/2 managing of bad debts
Bad debts resulted from certain reasons and can be divided into three groups:
A - Causes by bank leads to bad credit: these reasons resulted from nonobjective study of the decision
of the credit and considering the potential risks in terms of risk management, market risk, capital risk,
and guarantees real estate risk (20) so the facility is done at once without monitoring and follow-up.
B Causes by customers leads to bad loans: this risk resulted from false information by the client
about his/her financial position , incomplete information lack of efficiency of technical and
administrative in the use of the loan and directing it to inappropriate activities and the nature of the
loan, which
entails inability to fulfill its obligation towards the bank.
C - External causes: represented by causes that is beyond the control of the Bank's management and
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the client. These causes concerns to the economic situation of the country (recession phase) or the
political and legal conditions when you make changes in regulations and legislation governing the
state.
Bad loans are due to the inability or no interest of the client to pay off so bank has to take actions,
which differ depending on the situation of the borrower.
If the borrower is in a case of hardship to fulfill the obligations, credit management analyzes financial
statements to examine and correct the imbalances and it may require from the borrower to provide
estimate balance sheet to determine the size of cash flows and ability to repay the loan granted.
If it was observed that the situation of the borrower is temporary, credit management works to help
the client and provide advice to rescheduling reduction of interest rates on loans and additional
facilities may be granted to facilitate its activities. (21)
Credit management uses this friendly method to make close relationship with customers who have a
confident and good reputation in order to keep the bank's position with existing customers and attract
new customers.
if the case shows through the process of credit analysis that it is a difficult situation of the borrower,
so the credit management faces bad debt required to take the necessary to settle the rights of the
client and declaration of bankruptcy .credit risks faced by banks and standards adopted in the its
measurement and its management as follows (22)
Financial
risks
Traditional measures
Advanced measures
Methods of
Risk Management
Credit risk
Average loans / assets
- The degree of loan

focus
- The growth rate of
loans
- Analysis of credit
- Documentation
Credit
- Credit control
- A special
assessment of credit
risk
- uncollected loans /
total losses
- Loan losses / Total loss
- Reserve for loan losses
/ loans
Liquidity risk
- Loans / Deposits
- Liquid assets / deposits
- The high lending

rates
- outstanding reserves /
loans
-Borrowed money
- Borrowing costs
- Liquid assets
- Borrowing / deposits
Interest rate
risk
Leverage risk
- sensitive assets to
interest rate / sensitive
liability
- The Gap
- Equity / deposit
- equity / assets
- Total Debt / Assets
-liquidity
-liquidity for the
emergency
- The cost model or
change
- development of
funding sources
- A series of gaps
- Flow Analysis
- Moving gabs
- Managing the
moving gap
- Flow Analysis
- Modified risky assets /

property right
- Growth in assets
compared to growth in
the equity
- Capital planning
- Dividend policy
- Capital adequacy
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2 - Means of reducing the risk of bank credit:

The credit risk prediction, the development of benchmarks and indicators help credit management in
analyzing, studying and taking their risks, as the risks are difficult to eliminate so the reduction and
mitigation of them is strategies of banking performance. Among the means and methods to manage
the credit risk is diversification at the level of loans and the level of portfolio investment. The
following addresses the diversification of credit risk and the theory of Markowitze:
First: credit risk and the theory of Markowitze
The idea of diversification of risk is the most important way adopted by the credit department.
Moreover, the idea of diversification is based on: (23)
- Portfolio analysis according to economic activities that belong to existing facilities, which were
awarded to customers.
Portfolio analysis in accordance with terms of facilities granted (short, medium, long).
Portfolio analysis according to the size of customers (small, large).
Portfolio analysis according to the type of currency granted by the facilities (the preparation
of the financial position of the bank in accordance with the main certain process).
Simply, diversification means is the application of the maxim "Do not put all eggs in one basket" .so,
based on this perception. Theory of Markowitze presented the following scenarios:
In the case of investment projects to be fully related to each others and negative to each other as the
return on investment (a) greater than the return on investment (b) which means that the correlation
coefficient -1" Therefore, Diversification in this case eliminate of the risk, but it is not possible in
practice.''
In case of non-correlation of investment projects, "and the correlation coefficient= 0", so
diversification in this case leads to the reduction of the degree of risk dramatically.
In the case of investment projects with a correlation is full and positive, "and the correlation
coefficient +1". Diversification in this case does not entail any reduction of the risk."
Thus, the theory of diversification reflected on the credit decision of the bank. Which determines on
its basis the trend of risk, to ensure the achievement of return and avoid risk the credit? However, the
risk management shall adopt the diversification and Markiwitz portfolio theory to which allow
hedging against the potential risks and reduction to the lowest possible level and as diversification
large the less risk.
Second: the diversification of investment portfolio
As well as diversification of credit risk , the management of credit risk diversify its credit portfolio
which is known as " simple diversification " . The main perception of Markiwitz is to diversify
investment portfolio in light of two main dimensions (24)
I: rate of return on assets.
II: This expected change to this return based on the standard deviation of return.
In the case of composition of an investment portfolio consisting of two assets or more, there is no
perfect correlation between them and by the measure of standard deviation the level of risk is
determined relatively lower than the complete or large correlation.
The theory of diversification aimed at creating an investment portfolio with the efficiency of the
meaning of return and risk, under the possible highest-level return against a certain level of risk
whereas an investment risk is lower when there is a diversified investment portfolio.
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Section three:
Proposed criteria for measuring credit risk
The preliminary phase towards building a model for measuring credit risk represented in the
development of criteria to measure credit, risks. Researchers believe that these criteria are a set of
variables that relate to the rank of credit risk.
The researchers measure the risk of dividing the criteria of credit
(26):
A A Criteria for the nature of the client.
B Management criteria.
C - The financial criteria.
risk to three groups as follows
So that each group covered a number of criteria consistent with one another in nature, and address the
following criteria for each
A Suggested criteria for the nature of the client
These criteria concerned with a number of characteristics or measurements related to the nature of the
client and are as follows:
1 The first impression of the client:
this criterion related to character of the client, where the credit analyst initially must have first
impression by his meeting and discussion with the client and must identify the ideas , expertise and
efficiency in the conducting of his/her business, and
Thus
can
determine
the
risks
faced
by
this
client.
2 - The nature of the product:
The nature of the product that the customer producing or handling contributes largely in determining
the degree of credit risk for the client. Nature of the product means how important it are for the
market, there are products considered strategic or vital, while there are other products that included
limited importance in the market, the degree of credit risk varies depending on the nature product.
3 - Demand for the product:
the demand for the product on the market controlled by several factors as price and quality of this
product, the product that is approved in the market achieves the client's high level of sales, while the
product faces a weak demand included a decline in sales, and hence the degree of credit risk ranges
between the increase and decrease depending on the size of the demand for the product on the market
4 - Market competition:
The degree of competition varies from a client to another. Some clients face strong competition,
while other clients face limited competition. The degree of market competition is controlled by
several factors as nature of the product, price, quality, and the degree of credit risk faced by the client
depending on the degree of available competition.
5 Guarantee:
One of the important criteria that contribute to determine the credit risk to customers is the guarantee.
Therefore, when there is an availability of adequate and good insurance for the client, the credit risks
are lower and, consequently, credit risk varies that arising from these guarantees between the rise and
fall.
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B Administration criteria:
these criteria related to administrative features or characteristics of the client on the grounds that the
administrative aspects is an influencing factor in the success or failure of organizations, these criteria
are as follows:..
1 - Quality of the product:
The high-quality product enjoys high demand in the market and thus achieves a good level of sales.
Therefore, the client who enjoys high quality product or products faces low risks of credit, but the
low quality products cannot achieve the optimal level of sales and thus higher credit risk associated
with them. Quality associated mainly with management component, which can create this quality
and control in order to preserve them.
2 - Acceptable profit margin:
Mainly associated with the degree of efficient productivity of the institution and which they can either
increasing the volume of production at lower costs and maximize sales revenue and thus increase the
profit marginn. Therefore, the opposite of this case reduces the profit margin and, in general, the
client who enjoy achieving a high profit margin, has a slower the credit risks, while the client who
achieves a low profit margin faces high credit risk.
3 - Average cost of the product:
The administrative efficiency of the institution reflected significantly on the cost of the product.
Therefore, the establishment enjoyed by high efficiency can govern the cost of the product in order
to maximize sales and profits, and therefore, such an institution faces low credit risk. However, the
institution that cannot control the level of the cost of their products to increase this cost faces high
credit risk due to lower sales and profits.
4 - Sales and marketing efficiency:
The most important criteria on the administrative efficiency of the institution are sales and marketing
efficiency of the institution. By these criteria, the establishment can maximize sales and then profit
through the different sales and marketing tools. The establishment, which has effective sales and
marketing, has lower credit risk, but the institution suffers from low efficiency of sales and marketing
experiences high credit risk
5 - Administrative capacity:
The success of institution depends largely on the administrative capacity available to management.
Therefore, the management who has large capacity has viable success, growth and lower credit
risk. However, the institution suffers from weak or bad management must face the problems that limit
its success and therefore facing high credit risks.
Efficiency of operational activity:
operational activity related to a range of activities of the efficient production turnover of inventory
and assets , the collection of debts, notes receivable, control in general and administrative expenses.
So that you can assess these activities to judge the efficiency of the institution to manage its
operational activities. The institution characterized by high efficiency productivity and high turnover
rates inventory, assets rapid collection of debts, low rate of administrative and general expenses has
its high operational efficiency and thus lower credit risk. However, the institution suffers from poor
management of previous activities, faces high credit risk with a lower operational efficiency.
The efficiency of operational activity can be measured through the following indicators (10):
Efficient production = (input/output) x100
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Or (net sales/sales cost) x100

Inventory Turnover= net sales / inventory
Assets turnover= net sales/ total assets
Average collection period = {(debtors+ promissory notes) / net sales} x365
Administrative, general and sales expenses = {(administrative + general and sales expenses)/ net
sales} x100
C - The financial criteria:
The financial aspect of the business is considered the most important criteria by which to determine
the strength and success of this enterprise, as well as financial criteria characterized by objectivity and
this makes them trustworthy as well as these criteria are reliable when measuring credit risks are as
follows:
1 The pervious financial matter :
The previous customer's financial matter is related to a set of financial criteria that will be addressed
later, starting from the standard number (3) and up to the standard number (7), and that for the past
three years, where they are assessing the previous financial client through these criteria. The client
who has precedent good financial matter faces lower credit risk whereas the client who suffers from
past weak financial matter usually faces high credit risk.
2 - Credit history:
The credit history of the client related to his/her credit situation with the banks over the past years.
There are clients with good credit, which were marked by their credit dealings with banks in the
payment of the due of banks in a timely manner, and these customers characterized by lower risks of
credit, customers who suffer from bad history credit face high credit risk.
3 - Cash Flow (28):
The case of present and future cash flows is the most important financial criteria that can be relied
upon when measuring credit risk of the institution, so institution enjoyed the achievement of net cash
flows within high value has a high capacity to repay the credit granted to it from the bank and thus
lower their credit risk. The institution suffer from weak cash flows is unable to pay its obligations for
the bank in due dates, and thus higher credit risk.
4 - Liquidity (29):
Liquidity plays an important role in determining the financial efficiency of the institution, which
indicates the degree of liquidity for the institution to its capacity to fulfill its obligations in the shortterm maturity dates, so the institution achieves a good rate of liquidity has high efficiency to pay its
debits, which reduced credit risk. However, institution suffers from bad liquidity will fail to achieve
liquidity ratio; and thus face high credit risk because of their inability to repay short-term obligations.
Liquidity can be measured through the following indicators:
Current ratio= current assets/current liabilities
Acid test ratio= (current assets- inventory) / current liabilities
5 - Profitability:
Profitability is still the main criterion to judge the efficiency of the institution. Therefore, it is a strong
indicator on how success of the institution in achieving its objectives, profitability supports the
financial position of the business and adding value. Especially if we add the profit in completely or in
part, to the equity, the financial indicators of the institution improved and become stronger in its
financial position.
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The institution , which is characterized by the achievement of numbers and percentage of high profit
has the ability to expansion , growth and resilience in the market and thus lower their credit risk,
whereas the institution with has low rates of profitability, or they make losses, unable to compete
and
to
continue
and
this
increases
their
credit
risk.
Profitability can be measured through the following indicators:
Return on sales = (net profit after tax/ net sales) x100
Return on equity = (net profit after tax/ equity) x100
Return on assets = (net profit after tax/ total assets) x100
6 - Leverage (29):
one of the most important financial criteria that must be taken into account when measuring credit
risk is the case of leverage for the institution , leverage indicates to the ability of equity to bear
external debt for the institution ,so institution must have a limit to the leverage and external debt
must be limited in the light of the value of equity. The more the leverage is declines , the increasing
dependence of funding on their own resources that are greater than the external debt resulted the
power of the financial position of the institution and reduced the burden of funding and thus lower
the credit risk of the institution . but institution which its leverage rations more than limits, depends
on external debt that exceeds the equity . Accordingly, it weakens the financial position of the
business and increases their credit risk; advantage can be measured in the following ratios:
= total short term liabilities / (total assets /equity)
7 - Balance sheet Rating (30)
the balance sheet indicated to rank of the strength of the financial position of the institution in light of
the entire liquidity situation and the state has advantage. Rating can be measured by the following
equation:
Rating = {+ (Current Assets Inventory) /
(total liabilities+ equity)}
Current Liabilities} - {(Current Liabilities/ equity) +
Rating can be assessed by the following classification (31):

- If rating> 1, this indicates that to quality.
- If one> Rating> - 2.5, this indicates to medium quality.
- If Rating <- 2.5, this indicates to bad.
Thus, the institution that achieve Rating> 1 bear the low credit risk, and the institution that achieves
one> Rating> - 2.5 take the medium risk of credit, whereas the institution that achieves Rating <- 2.5,
bear high credit risk.
Section IV
The proposed model for measuring credit risk
The proposed model can be formulated to measure the credit risk through the following steps:
1 - Determine the levels of credit risk:
Levels of credit risk that could be faced with the client can be classified to the following levels, range
from Low to High:
The first level
low risk
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The second level

moderate risk
The third level
Acceptable risk
The fourth level
relatively high risk
The Fifth level
High risk
Sixth grade
very high risk
2 - Application of levels of credit risk on the criteria for measuring credit risk:
We dealt, in the previous section, with criteria for measuring credit risk and we divided them into
three groups; the first group is the nature of the client and it includes five criteria. The second group
is administrative standards, includes six criteria, while the latter group is the financial criteria, and
includes seven criteria. When application the levels of credit risk in the previous steps on the
eighteen
criteria,
each
criterion
has
six
levels
of
credit
risk.
3 - Study and evaluate all of the criteria for measuring credit risk and identify the score:
At this stage, study and evaluate of each of the criteria for measuring credit risk for each client to
measure the risks of credit is done. in light of this assessment, a score is given to each criterion, and
the previous Score has a specific range of 1-6, depending on the degree of risk, so that the lowest
level of risk has 6, and then moving to higher standard risk scores (without fractions) to get to the top
of the standard risk, which is taken a score of 1.
4 - Linking the Score of measuring credit risk with levels of credit risk:
Score of measuring credit risk, which specified in the previous step, is linked with levels of credit risk
According to the following table:
Level of credit risk
Score
Degree of credit risk
Low risk
First
6
Second
Third
Fourth
Fifth
5
4
3
2
Sixth
Moderate risk
Acceptable risk
Relatively high risk
High risk
Very high risk
5 - Determination of weights of importance to the eighteen criteria for measuring credit risk:
Due to the different nature of each of the criteria for credit risk, there will be a difference in the extent
of the importance of this criterion when measuring credit risk, so it is necessary to determine weights
of the importance of each of the criteria for eighteen criteria that related to measuring credit risk,.
However, the researchers suggest that these weights are as follows; ranging value of 1-10.
No
1
2
3
4
5
Criteria
Initial impression of the client
Nature of the product
Demand for the product
Market competition
Guarantee
Weights
2
7
9
5
7
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Administrative criteria:
Number
Criteria
Weight
Product quality
Acceptable profit margin
Average cost of the product
Efficient sales and marketing
10
Administrative capacity
11
Activity and operational efficien 8
Financial criteria:
Number
Criteria
Wieghts
12
The previous financial matter
13
Credit history
14
Cash flows
15
Liquidity
16
Profitability
17
Leverage
18
Rating
6 weighted score related to criteria of measuring credit risk:

score achieved by each of the criteria of measuring credit risk weighted by the importance which
identified during the previous step to obtain the Score weighted by importance.
7 determining the percentage of the credit risk for the client (16):
After you select the weighted score by importance for each of the eighteen criteria to measure the
credit risk of the client , the percentage is calculated of each set of criteria to measure the degree of
efficiency of the nature of the client and the administrative and financial efficiency to him/ her . Then,
calculating the percentage of the credit risk of the client.
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8 - Determine the level of credit risk in the light of the percentage accruing to the credit risk of
the client:
Levele of credit rsik
Score percentage
Degree of credit risk
First
More than %90 - % 100
Low risk
Second
More than 75%- %90
Moderate risk
Third
More r than 50%- 75%
Acceptable risk
Foruth
More than 40%- 50%
Fifth
More than 25% - 40%
High risk
Sixth
For 1%-25%
Very high risk
9 - determining credit ratings in light of the outcome of measure of credit risks measure
Customers who achieve the results from the first to the third level are classified as regular clients
and their debts classified as good debt, and customers who achieve results fall from the fourth level
until the sixth grade are classified as clients with bad debt . For bad debts, reclassification of their
debts shall be done to under standard debts, doubtful debts and bad debts according to the level of the
fourth to sixth grade, respectively, and thus can be classified as a debt under the credit risk levels as
follows:
LEVEL
Credit risk
Debt ratings
First
Low risk
Good debt
Second
Moderate risk
Good debt
Third
Acceptable risk
Good debt
Fourth
Bad debt (under the standard)
Fivth
High risk
Bad debt (collection is doubtful )
Sexth
Very high risk
Bad debt ( very bad)
Making a credit provision :

a credit or debt provision will be constituted in light of the results obtained from the
measurement of credit risk, so it can be constituted with certain percentages in accordance of
the nature of each level of credit risk as follows:
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The level of credit risk
The degree of credit risk
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Provision credit ratio

( of the value of debt)
First
Low risk
%5
Second
Moderate risk
%8
Third
Acceptable risk
%13
Fourth
%30
Fifth
High risk
%60
Sixth
Very high risk
%100
It is clear from this category with the ratio of credit provision that good credit is allocated low
rates thereto which fit with the degree of risks of credit, but bad credit has allocated a provision that
has high ratios so that to fit also level of risk the credit,. However, it worthy notes that when the risk is
almost certainly at the level of the sixth within the bad debts , a provision with 100% ratio is allocated
thereto and the assumption being that these debts are fully losses.
Results and recommendations:
First: Results:
In the light of this research, the main conclusions of the researchers is as follows:
1 - the most important shortcomings faced by the credit risk management is the failure to indicate the
volume of bank credit risk for credit-based bank, and failure to indicate the size of good and bad debt.
2 - We can rely on specific criteria to measure the credit risk of the banking and make a provision.
3 - We can measure the risk of bank credit through a specific model depends mainly on the idea of "Score
System".
4 Making the credit provision could be more integrity and objectivity if it has been based on correct
measuring of the risk of bank credit.
5 - The possibility of developing credit risk management and provision is when it is in the context of the
availability of sound and objective measure of credit risk to meets well the needs of users of financial
statements of the banks.
Second: Recommendations
In the light of the results of research, the researchers recommend the following:
one - the adoption of standards proposed by the researchers to measure the credit risk of commercial
banks, which is on objective basis to measure these risks.
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2 - Activating the proposed model for measuring credit risks of commercial banks.
3 To rely on the results of measuring the credit risk of commercial banks within the framework of the
proposed model in the composition of credit provisions, so that these provisions are more objective and
realistic as well as safety.
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References
[1]. Muktar, Ibrahim. (1984) bank financing, a methodology for decision-making, Egyptian
Anglo press, Cairo.
[2]. Said , Shawky Seif El-Nasr. (2009) practical and theoretical principles process of risk and
insurance. Alnahdah Alarabiah Publishing House, Cairo.
[3]. Al-Zubaidi, Hamza Mahmoud. (2000) Management of credit and credit analysis. Warraq for
Publishing and Distribution, Amman.
[4]. Abdul Rahman, Ibtihaj Mustafa. (2000) management of commercial banks. Second edition,
Dar El Nahda El-Arabia, Cairo.
[5]. Hindi , Mounir Ibrahim. (2000) Management of commercial banks. Third edition, Alarabi
alhadith office , Alexandria.
[6]. Belajos, Hussein. (2005) Risk management and control. National Forum on the banking
system in the Third Millennium: Competition - Risk - Techniques, University of Jijel Algeria.6 to 7 Jwan P- 7 .
[7]. Al-Khatib, Samir. (2005) measurement and management of bank risks , Munshat Alamrif ,
Alexandria.
[8]. Al-Khatib, Samir. (2005) measurement and management of bank risks , Munshat Alamrif ,
Alexandria.
[9]. Hammad, Tarek Abdel-Al. (2003) Risk management (individuals managements Companies - Banks). University House, Alexandria.
[10].Rashid, Abdul Muti Rida and Joudih , Mahfouz Ahmad . (1999), credit management, Dar
Wael Printing and Publishing, Amman, Jordan.
[11]. Abdul Rahman, Ibtihaj Mustafa s, previous reference , P. 449.
[12].Belajos, Hussain, previous reference, P. 9.
[13].Hamzawi, Mohammed Kamal Khalil. (2000) Economics of bank credit. Second edition,
Munshat Alamrif, Alexandria.
[14].Atta, Mohammed Mohammed Mohammed Bakhit, Ali Sayed. (2009) risk management of
marketing activities in Egyptian business organizations, "An Empirical Study." Journal of
Contemporary Business Research, Faculty of Commerce - University of Sohag, Volume 23,
No. II, December, P. 98.
[15].Ghoneim, Ahmed. (2000) bad debts and fugitive credit (unpublished), P. 38.
[16].Latrash , Tahir. (2001) Banks Techniques, Office of University Publications, Algeria.
[17].Previous reference ,P.168.
[18].Sisi, Salah al-Din Hassan. (1998) banking facilities to institutions and individuals.
Alwesam House for printing, Cairo.
[19].Al-Zubaidi, Hamza Mahmoud , previous reference.
[20].Rashid, Abdul Muti Ridah and joudeh , Mahfouz Ahmed. , previous reference, P. 287.
[21].Hammadah, Tarek Abdel-Al. (2003) Previous reference, PP. 241-347.
[22].Mohamed Kamal Khalil Hamzawi, previous reference, P.39
[23].Ibtihaj Mustafa Abdul Rahman, previous reference , P.455
[24].Makawi , Nadia Abu Fakrah. (1998) analysis of banking risks in the commercial bank in
Egypt (empirical model ) the scientific journal of economy and trade, Faculty of Commerce,
Ain Shams University, No. II, April.
[25].Saban, and Samir and Abu El Makarem, Wasfi and Helal, Abdullah. (2000) medium
Financial Accounting - measurement, evaluation and accounting disclosure. University
House, Alexandria.
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[26].Koch Timothy(1995). Bank Management, 3 rd . Edition: Florida, the Dryden Press.

[27].George, Hempen& Coleman, Alan & Simon son, Donald, (1983) Bank Management. Text
and cases. N.Y, John Wiley& sons.
[28].Roger, Hale(1983). credit Analysis A complete Guide. U.S.A, John Wiley& Sons.
[29].John, Coleslaw (1989) credit Analysis How to Measure and Manage Credit Risk.
Cambridge, Wood head Faulkner limited.
[30].I bid. , p. 106.
[31].I bid, pp .113 117.
EXPLORATORY FACTOR ANALYSIS: VALIDATION OF MATHEMATICAL

VALUES INCULCATION MODEL AMONG SECONDARY SCHOOLS
MATHEMATICS TEACHERS IN NORTH-EASTERN REGION, NIGERIA
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MUKHTAR ALHAJI LIMAN

MUHAMMAD BURHAN IBRAHIM
SHITTU, AHMED TAJUDEEN
Abstract
The use of Exploratory Factor Analysis (EFA) on researches based on certain theoretical frameworks in both social sciences and education cannot be over-emphasized, as such this study
employed the Exploratory Factor Analysis (EFA) in an attempt to validates the mathematical
values inculcation measurement model developed and used in the western cultural society by
Professor Emeritus Alan J. Bishop, in order to see whether the model works among secondary
schools mathematics teachers in the north-eastern part of Nigeria with aim of finding whether or
not the model also suit the north-eastern cultural community to which schools mathematics
teaching and learning is also paramount. The preliminary sample size for the study is (n=101)
secondary schools mathematics teachers that are involved in the study. The instrument for the
data collection was a 40-item Questionnaire with some of the items designed and adopted. The
factor extraction method was a Principle Component Analysis (PCA) and only factors with
eigenvalues >1 were extracted and three factor solution was realized. Twenty one items loaded
on the three factors, with eleven items on the first factor (sociological mathematical values
(SMV)), five items on the second factor (attitudinal mathematical values (AMV)) and lastly five
items on third factor (ideological mathematical values (IMV)). The reliability of each factor was
greater than 0.6 and the overall reliability of the three factor solution converges at 0.636. The
total variance explained was 54.3% and Kaiser-Meyer-Olkin Measure of Sampling Adequacy
(KMO) was found to be 0.850 which was greater than the required merging of 0.6. The purpose
of this study is to validate mathematical values inculcation model with three main construct,
which include: sociological mathematical values (SMV), attitudinal mathematical values (AMV)
and ideological mathematical values (IMV) among mathematics teachers in the north-eastern
cultural society of Nigeria and at the same time acquaint secondary schools mathematics
teachers the need for the inculcation of mathematical values in mathematics teaching and
learning with sole objective of enhancing better understanding of mathematical concepts.
Keywords: Exploratory Factor Analysis, Validation , Mathematical Values, Inculcation Model,
Secondary Schools, Mathematics Teachers , North-Eastern Region, Nigeria
INTRODUCTION
The role of values in mathematics teaching and learning cannot be over-emphasized in the sense
that for a successful mathematics teaching and understanding of mathematical concepts,
mathematical values inculcation in the course of mathematics teaching plays a vital role and
should be imbibed by every mathematics teacher. The contemporary discipline of mathematics
has been developed over millennia to incorporate a rich history and tradition that draws on the
work of many societies and cultures (Lancaster,2010). The aspects of mathematics developed,
the way mathematics was regarded, and the approaches to working mathematically have also
varied across these societies and cultures, and changed over time (Lancaster,2010). In some
societies and cultures knowledge of mathematics and its applications has been the province of an
elite class of philosophers, priests or scribes, in others merchants and explorers, in yet others
scientists and industrialist (Lancaster, 2010).
It can be deduced that, the conception of values in mathematics differ from one society to
another and at time from one culture to another, as such there is an increasing demand for the
mathematics teachers to know better the learners societal norms and values and their cultural
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affiliations, this will enable them to inculcated the desirable and needed mathematics values
based on the need and aspiration of society and culture where they came from. In many societies
and indeed in contemporary Nigerian society, strong numeracy is expected of all adolescents,
and a sound mathematical background is an essential requirement for many pathways of further
study and it is a required as part of the compulsory years curriculum for senior secondary school
students in the late adolescents years of schooling (Lancaster,2010). This poses challenges to
mathematics teachers as to have tried to over-come through knowing the values they are teaching
in mathematics classroom and the purposes to which mathematics is being a subject of study.
LITERATURE REVIEW
The research field of values in schools mathematics teaching and learning has been
conceptualized in explicit ways and developed since the late 1980s by Alan Bishop and stated
that, there is need for the academic community to bring together considerations of mathematics
teaching and values education if we are to teach mathematics successfully for democracy, and
also argued that both considerations of education for democracy and of making school
mathematics more relevant to the demands of everyday living involve the teaching and
inculcation of values to students (Bishop,). In Bishops views, values in mathematics education
are the deep affective qualities which education fosters through the school subject of
mathematics. They appear to survive longer in peoples memories than does conceptual and
procedural knowledge, which unless it is regularly used tends to fade (Bishop, 1999, p. 2).
(Bishop, 1988) in (Bishop, etal, 2010), noted that, human beings everywhere and throughout
time have used mathematics and mathematics typically can be observed as behaviors illustrating
the following six universal activities (i.e. every cultural group does them): counting,
measuring, locating, designing, explaining, and playing. These behaviors are reflective of the
culture of the people demonstrating them and are inexorable influenced by what that cultural
group values.
As a result of demands that students become more economically oriented and globally conscious,
mathematics educators are being challenged about which values should be developed through
mathematics education and the major concern is that, although values teaching and learning
inevitably happen in all mathematics classrooms, they appear to be mostly implicit
(Bishop,etal,2010).
More-over, in the modern knowledge economy, societies are demanding greater mathematical
and scientific literacy and expertise from their citizens than ever before and at the heart of such
demands, there is need for greater engagement of students with school mathematics and science
(Bishop,2008). The organization for economic co-operation and development (OECD) and the
program for international students assessment (PISA) put forward the definition of numeracy as:
Mathematical literacy is an individuals capacity to identify and understand the
role that mathematics plays in the world, to make well-founded judgments and to use
and engage with mathematics in ways that meet the needs of that individuals life as
a constructive, concerned and reflective citizen (OECD, 2003).
As a result of that, there is an ever increasing demand for mathematical values inculcation in a
more explicit ways so that the learners of mathematics can realize and appreciate the beauty
aspect of learning school mathematics as a subject of study and contribute meaningfully to the
betterment and development of the societies to which they were belong. From above analysis, it
has been established that, successful mathematics class should be one that, which mathematical
values are portrayed in an explicit manner to the extent that the linkages between mathematical
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concepts and its usefulness or application to the learners immediate environment exhibited high
degree of comprehensiveness.
(Bishop,1999) reiterated the earlier conception of mathematical values in (Bishop,1998, p. 3)
regarding the different groups into which values in the mathematics classroom in the western
world might be categorized and stated that, the three interrelated sources of values which
permeate mathematics classrooms are: the general educational, mathematical, and specifically
mathematics educational. Initial analyses from other studies of mathematical values, which
reveal that there are three kinds of values which teachers intend to teach: the general educational,
mathematical, and mathematics educational.
Currently, there is little knowledge about what values teachers are teaching in mathematics
classes, and how mathematics teachers are aware of their own value positions (Bishop, 1998). In
addition to how these affect the teaching of mathematics, and how their teaching thereby
develops certain values in mathematics learning (Bishop,etal,2010). Values are rarely
considered in any discussions about mathematics teaching, and a casual question to teachers
about the values they are teaching in mathematics class, often produces an answer to the effect
that they don't believe they are teaching any values (Bishop,etal,2010).
Therefore, values in mathematics education as discussed above, are conceptualized as the deep
affective qualities which mathematics teachers promote and foster through the school subject of
mathematics teaching and learning and the theoretical frame-work of this study is based on the
six values cluster model developed by Professor Emeritus Alan J. Bishop 1988. It is important to
note that, the emphasis in most of the researches conducted by the author were not primarily on
which values might be, are, or, should be, emphasized in mathematics education, but rather on
the development of mathematics as a subject of study throughout western history.
From the above we can deduce that for effective transmission of mathematical values in
mathematics education classes, there is need for growing awareness about what kind of values
mathematics teachers are fostering in mathematics teaching and learning and its relationship to
the understanding of the contemporary mathematical issues outside the school setting. See below
the conceptual model of mathematical values inculcation.
Rationalism
Mathematical
Values
Objectivism
Control
Progress
Openness
Mystery
Ideological
Values
Sentimenta
l Values
Sociologic
al Values
AIMSFigure
OF THE
STUDY
1
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The studys aims (1) to identify whether or not mathematics teachers inculcate mathematical
values in mathematics teaching and learning processes; (2) to explore whether or not
mathematics teachers are aware of the existing concept of mathematical values inculcation model
in mathematics classroom. The findings will provide useful information for mathematics
teachers on the ways to improve mathematics teaching and learning processes through the
understanding of mathematical values that could make the teaching of mathematical concepts
real, free from any ambiguity and appreciable by the mathematics learners. It will also going to
benefit curriculum planners/designers, text book writers on the ways that mathematics
curriculum should explicitly dictate the components of mathematical values attached to each
module, units and sub-units of mathematics syllabus for the easy conveyance by mathematics
teachers.
METHODOLOGY
INSTRUMENT
A self-administrated questionnaire survey containing 40-items on mathematical values
inculcation based on the six cluster model of the three constructs of mathematical values was
used to assess 150 secondary schools mathematics teachers in the north eastern region of
Nigeria, out of which the preliminary sample size for this study was (n=101) of mathematics
teachers teaching in various secondary schools in the north-eastern region of Nigeria. The
Statistical Package for Social Sciences (SPSS version 17.0) computer software was used for data
analysis. The 40 item questionnaire, 80% of the item in the questionnaire were adopted with only
20% were constructed by the authors based on the six cluster model for mathematical values
inculcation (Bishop,1998). As result of that, the exploratory factor analysis (EFA) was used to
investigate the mathematical values inculcation model based on the three components of the
model: sociological, attitudinal, and ideological mathematical values by the measure in order to
provide preliminary evidence of reliability and validity. The results of the pilot study consistently
indicated that the measure described, were relevant and culturally appropriate for this population.
POPULATION AND SAMPLE
The population of the study comprises all secondary schools mathematics teachers from both
junior and senior secondary schools in the north-eastern part of Nigeria. But due to the time
constrain and limited number of days for my vacation was unable to cover the area under-study.
Furthermore, purposeful Sampling technique was adopted this was because not all secondary
schools teachers teaches mathematics as a subject. One hundred and fifty questionnaires were
distributed in thirty secondary schools, twenty senior secondary schools and ten junior secondary
schools with the sub-region, out of which (101) which constituted 70% of the questionnaires
were returned and as such the sample size was considered in this study as the preliminary sample
size, as the collection of data is still ongoing. The data were collected by the researcher and with
the assistance of some of the colleagues whom we were teaching together in secondary school
before leaving to the University of Maiduguri, Nigeria. The researcher sought the permission of
the principals of the secondary schools visited for the purpose of data collection for the study.
MEASUREMENT DEVELOPMENT
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The respondents completed a personal survey questionnaire that included questions about the
basic characteristics of the respondents' gender, age and academic qualification. The items were
also designed to assess attitude and perception of secondary schools mathematics teachers in
relation to mathematical values inculcation in their mathematics teaching: Mathematical values
inculcation among mathematics teachers in western culture were studied predominantly by
Professor Emeritus Alan J. Bishop from Monash University Australia for examples
(Bishop,1988, 1999, 2001, and 2010). 80% of the mathematical values inculcation questionnaire
items were adopted with only 20% of the items was constructed by the researchers and that
necessitated the validation of the items. Forty items were rated using a multi-item method to
increase the accuracy of measurement, and each item was based on a five-point Likert- scale
ranging from (1) strongly disagree to (5) strongly agree.
THE PROCESS OF ANALYSIS AND FINDINGS

In an attempt to identify and validates the factor structure of the 40-item of mathematical values
inculcation model Questionnaire which comprises, sociological, attitudinal and ideological
mathematical values, Exploratory Factor Analysis (EFA) by principal component analysis (PCA)
was used to detect the factor structure of the 40-item questionnaire using eigen-value >1 as the
selection criterion. This method generated three factors as restricted and the result shows that, the
Kaiser-Meyer-Olkin measure of sampling adequacy (KMO) = 0.698, which indicates the
strength level of the items, (Pallant,2007). But the anti-image revealed that ten out of the 40item were found to have anti-images < 0.5, as result the items were removed and the data set was
run for the second time, (Field, 2005). The results show that, the KMO shut-up to 0.837 and the
rotated component matrixa shows the convergence of items into three different factor with factor
loadings > 0.5, the total variance explained was 54.3% which shows adequate support for the
population involved in the study,(Field, 2005). See table1 below: the rotated component matrixa
table for the factor loadings against each construct.
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TABLE:1 ROTATED COMPONENT MATRIX FOR MATHEMATICS TEACHERS

Component
SOC
(SMV)
Q37
Q40
Q35
Q34
Q2
Q36
Q32
Q20
Q3
Q38
Q29
Q8
Q5
Q7
Q9
Q12
Q26
Q23
Q30
Q24
Q27
ATT
(AMV)
IDE
(IMV)
.767
.749
.746
.742
-.740
.724
.722
.598
.558
.536
.536
.781
.629
.627
.563
.543
.687
.675
.653
.630
.581
In this survey, The Kaiser-Meyer-Oklin value was 0.850, exceeding the recommended
value of 0.6 (Kaiser 1970, 1974) and Bartlett's Test of Sphericity (Bartlett 1954) reached
statistical significance, supporting the factorability of the correlation matrix.
TABLE 2: RELIABILITY OF FACTORS

Factor
Reliability
Overall reliability
Sociological (SMV)
0.773
0.636
Attitudinal (AMV)
0.735
Ideological (IMV)
0.644
Table 2, above shows the reliability of the data collected for the study, the Cronbach's alphas of
each factor were statistically strong; the factor one (Sociological) value was 0.773, factor two
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(Attitudinal) value was 0.735 and factor three (Ideological) value was 0.644, (Pallant, 2007).
These also supported the adequacy of the internal consistency of the overall Cronbach's alpha of
the construct. Reliability from our sample showed a reasonable level of reliability (0.636).
TABLE 3: TOTAL VARIANCE EXPLAINED
Component
Initial
Eagenvalues
Total
Sociological SMV)
Cumulative %
6.625
% of
variance
31.548
Attitudinal (AMV)
3.084
14.687
46.234
Ideological (IMV)
1.685
8.023
54.257
31.548
Table 3, above shows the total variance explained by the three factors solution. In conducting
the factor analysis the researchers followed (Bishop,1988) and (Bishop,1999) and from the
Bishops conceptualized model of mathematical values inculcation, three factors identified and
explained 54.3% of the total variance. The extraction method used was principal component
analysis (PCA) with varimax rotation. Principal component analysis is psychometrically sound
and simpler to apply mathematically, and it avoids some of the potential problems of factor
indeterminacy associated with factor analysis, (Stevens,1996).
RESULT AND DISCUSSION
The result shows that the attitude and perception of secondary school mathematics teachers in the
north eastern region of Nigeria concurred with the analysis of the three constructs of
mathematical values inculcation model by (Bishop, 1999) in the western cultural diversity. As
such the study confirmed and validated the used of the six cluster model for the inculcation of
mathematical values in sub-sahara Africa north-eastern region, Nigeria, which was the ultimate
aim of this study.
Furthermore, the finding shows that there is need for advocating the inculcation of mathematical
values inculcation in mathematics teaching and learning, this is because the result shows the
existence of complete agreement or rather relationship between mathematics teachers responses
on mathematical values inculcation and its respective components of values, that is, the
sociological (SMV), attitudinal (AMV) and ideological (IMV). Additionally, it is important for
secondary school mathematics teachers to become aware that for a successful conveyance and
understanding of mathematics concepts, there will be an enduring need for valuing mathematical
concepts in mathematics classroom in such a way that the learners could be able to appreciate
the beauty aspect of learning mathematics as a school subject.
CONCLUSION
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Conclusively, the finding of this study is another contribution to the existing body of empirical
information about how inculcation of mathematical values is also conceived and perceived by
the secondary mathematics teachers in the north-eastern region of Nigeria, and the finding
concurred with that of the western cultural societies. This shows that, there is still light at the end
of the tunnel as mathematics teachers and mathematics educators are striving to see the future of
mathematics education and indeed the future of mathematics teaching and learning
metamorphose from its traditional ways and techniques. More-over, mathematics curriculum
planners and designers and mathematics text-book writers should strategies on the components
of mathematical values attached to each module or chapter for easy identification and
conveyance in mathematics classroom. Finally, refreshers courses, workshops, seminars,
mathematics teachers inter-schools collaboration and national and international mathematics
pedagogical collaborative effort should be encouraged by the management of secondary schools
education. If this happens, the ultimate aim of mathematics learning will be realized.
LIMITATIONS AND RECOMMENDATION:
The study has its own shortcoming though, among this was that the finding cannot be
generalized beyond the present setting of the study, the researchers therefore encourages more
similar study in other geographical zone of the country in order to validate the usage of this
model. Finally, there is a dare need of changing trend in the conceptualization of mathematics as
a schools subject both in terms of curriculum and the executors of mathematics curriculum, it
should be done with love and fashion. As part of the limitation of the study that it involved only
secondary school mathematics teachers from the north eastern region, Nigeria, in which that
restricted the generalizability of the validation of mathematical values inculcation model on the
other region or part of Nigeria, whereby differs in term of culture and values system from the
region this study was conducted. Therefore, the outcome of the study can only be generalized to
the attitude and perception of the north-eastern region mathematics teachers on mathematical
values inculcation in mathematics teaching and learning. We recommend that further analysis is
needed on whether or not gender and academic qualification of mathematics teachers
significantly affect the inculcation of mathematical values in mathematics classroom.
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References
Bishop A.J. (1999). Mathematics teaching and values education - an intersection in need
research. Zentralblatt fur Didaktik der Mathematik, 31(1), 1-4
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Bishop, A. J. (1988). Mathematical Enculturation: A cultural perspective in Mathematics

Education. Dordrecht, Holland: Kluwer.
Clarkson, P.C. (1998). Reflections on mathematics learning and teaching: Implications of
cultural perspectives. In A. Olivier & K. Newstead (Eds.),Proceedings of the annual
conference of the International Group for the Psychology for Mathematics Education (Vol.
1, pp. 131-135). University of Stellenbosch, South Africa.
Field, A. (2005). Discovering Statistics Using SPSS, London Sage Publication.
FitzSimons, G.E., Seah, W.T., Bishop, A.J. & Clarkson, P.C. (2000). What might be learned
from researching values in mathematics eduication? In T.Nakahara & M. Koyama (eds.),
Proceedings of the 24th conference of the International Group for the Psychology of
Mathematics Education (Vol. 1), (P.153) Hiroshima: Hiroshima University.
Seah, W.T. (1999). The portrayal and relative emphasis of mathematics and mathematics
educational values in Victoria and Singapore lower secondary school textbooks: a
preliminary study. Unpublished Master of Education thesis, Monash University,
Melbourne, Australia.
Seah, W. T., & Bishop, A.J. (2001). Teaching more than numeracy: The socialisation experience
of a migrant teacher. In J. Bobis, B. Perry, & M. Mitchelmore (Eds.), Numeracy and
beyond. (pp. 442-450). Turramurra, NSW: Mathematics Education Research Group of
Australasia Incorporated
Kline, R. (2000). Principles and practices of structural equation modeling. New York: The
Guilford Press.
OECD (2003). Assessment Framework mathematics, reading, science and problem solving:
knowledge and skills. Paris: OECD.
Pallant, J. (2007). Survival Manual: A step by step Guide to Data Analysis Using SPSS for
window, New York, Open University Press.
Stevens, J. (1996). Applied mulivariate statistics for the social sciences.
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The Role of Risk Management in Stimulating Stakeholders

Investment in Insurance Industry
Dr Festus M Epetimehin
PhD, Joseph Ayo Babalola University, Ikeji-Arakeji
Dept. of Actuarial Science and Insurance
Oluwayomi Ekundayo
Joseph Ayo Babalola University, Ikeji-Arakeji
Dept. of Actuarial Science and Insurance
Abstract
The paper suggests a rationale for firm risk management that has been largely ignored in
financial economics literature. It presents an argument for harnessing the influence of a
companys stakeholders who, whether as employees, suppliers or customers, make a valuable
investment specific to the company. Such investments are crucial for a firms competitive
advantage, yet because they are firm-specific and therefore cannot be transformed or transferred,
stakeholders are often concerned about the risks involved in making them. A companys effort to
manage risk can therefore persuade stakeholders to make even greater firm-specific investments,
bringing benefits to shareholders and stakeholders alike.
Keywords: Insurance, Risk management, Firm-specific Investment, Stakeholders
Introduction
Every insurance company has its own exposures to a variety of risks, like any other business.
Some of these risks are potential reductions in service demand due to shift in consumer taste
shifts, political and exchange rate risks associated with international operations, the possibility of
Research and Development project failure, and so on. The question is whether executive should
engage in activities to manage risks such as these? Intuitively, the answer to this question seems
obvious. Thus, it seems reasonable to expect corporate executives to engage in risk management
activities. Wang et al (2003)
However, the conventional wisdom in financial economics is consistent with this intuitive
conclusion. Financial economists argue that, firms equity holders are in a better position to
manage business risks than are firms managers (Titman, 1984). This is because equity holders
can invest in a diversify portfolio of equity investments and completely eliminate the business
risks associated with investing in a particular firm. Moreover, equity holders can invest in this
portfolio at very low cost. Put differently the conventional wisdom in financial economics is that
equity holders do not hire a firms managers to engage in risk management activities that these
equity holders can do on their own. Rather, equity holders hire a firms managers to generate
higher rates of economic profit, even when obtaining these levels of profit involves substantial
risk taking on the part of a firm.
Despite the conventional wisdom in financial economics, clearly many corporate executives do
engage in risk management activities. For example, the number of firms that are using financial
hedging instruments to manage risks associate with fluctuations in the value of currency and raw
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materials continues to increase. Firms can also alter their capital structures; invest in real options,
and use product market or geographic diversification to manage risks. For example, despite
significant restructuring during the 1990s, the percentage of assets in the US economy owned by
highly diversified corporations continue to increase. Such risk management diversification is
hard to understand in light of the conventional wisdom in financial economics.
The purpose of this paper is to suggest that the conventional wisdom is limited in some important
ways and that, in fact, risk management by a firm executive team can sometimes be consistent
with maximizing returns to a firms equity holders. Our argument depends on four simple
observations:
1. One of the most important sources of economics value for a corporation and ultimately
equity holder wealth are the firm-specific investment made by its stakeholders.
2. While a firms equity holders can use portfolio diversification to efficiently manage the
risks associated with investing in a particular firm, other stakeholders cannot use
diversification to manage the risks associated with their significant firm-specific
investments.
3. The risks associated with firm-specific investments made by stakeholders are directly
linked to the probability that a company will experience a financial distress.
4. An important way to encourage stakeholders to make firm-specific investments the
kind of investments that can create real economic value for a firm and its equity holders
is to manage the riskiness of these investments by engaging in risk management activities
that reduce the probability that a company will experience financial distress.
It is important to note that the major argument made in this paper is still consistent with
conventional finance literature in that it maintains the assumptions that: (1) the objective of a
firm is to maximize equity holder wealth; and (2) equity holders are risks neutral while
stakeholders are risk averse. However, the important departure of the view proposed here
from financial theories is that this article recognizes that the overall risk level of a company,
which is not supposed to affect equity holder wealth directly, can have a significant impact
on the incentives of the stakeholders to make firm-specific investments. Put differently, while
traditional financial theory argues that managing risks for stake holders is not necessary, or is
even value destroying, this paper submits that managing risks for stakeholders can actually
be consistent with equity holders interest because risk management can stimulate firmspecific investments by stakeholders, which are in turn important sources of firm value and
competitive advantage.
After discussing the nature and effects of company-specific investments, we consider the
relationship between risk management and firm-specific investment. We then introduce and
compare a few important risk management mechanisms that companies can employ. We
conclude with a brief summary of the implications of this risk management perspective for
corporations risk management policies and future research on the topic.
The Insurance Industry and Its Key Stakeholders
The stakeholder concept provides a theoretical framework for analyzing the relationships of
an organization with relevant constituencies its industry, as well as its political, social, economic
and legal environment. (Kochan et al 2000). The term stakeholder was first introduced in the
strategic management literature by Freeman (1984) who states that a stakeholder in an
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organization is any group or individual who can affect or is affected by the achievement of the
activities of an organization.
Post/Preston/Sachs (2002) states that the stakeholders in an organization are the individuals
and constituencies that contribute either voluntarily or involuntarily to its wealth creating
capacity and activities and that are therefore its potential beneficiaries and/ or risks bearers.
The insurance industrys primary stakeholders in the sense of Carol (1996) are its investors,
equity holders, employees, policyholders and intermediaries. Investors, that are shareholders or
lenders, provide insures with the capital needed to assume risk. Compared to other sectors,
capital is a particularly crucial factor of production for the insurance industry. Against this
backdrop, managing investors relations is of utmost strategic importance top insurers in order to
persuade investor to support new stock offerage and bond issues and to hold the companys
securities.
Equity holders focus on achieving a return which is commensurate with the risks of their
investment. Meeting their expectation is major challenge to the insurance companies in an
environment characterised by mounting volatility. The main driver in this context are low
barriers to market entry and exit, increasingly unpredictable financial markets, legal uncertainties
and growing exposure to major natural and man-made catastrophes.
Employees, in addition to capital, are the basis for any successful insurance operation. As
knowledge-based
providers, insures heavily open on the skills, knowledge and know-how of
their staff. As such, favorable employee relations can contribute to reducing staff turn over,
fostering long term commitment to the organization and attracting new talent.
Policyholders, both household and commercial customers focus on product quality i.e. the
economics and the reliability of the contingent payment promise made by their insurers,
supplemented by competent service.
Favorable customer relations usually pay off in the form of lower marketing cost and a
stabilization of premium income base on customer loyalty.
Intermediaries, i.e. brokers are important and even vital to many insurance companies business
organization.
Mutual trust, familiarity and knowledge based on favorable supply chain relations can serve as a
lubricant for the insurers value chain and therefore increase profitability. Other key stakeholders
which have gained in relative importance over the past few years are governments, regulators
and rating agencies.
What is Firms Specific Investment?
A variety of stakeholders make different kind of investments in companies. Equity and debt
holders provide financial capital, employees provide human capital, suppliers provide raw
materials and other supplies, customers provide demand for firms products, and so forth.
Despite this variety, stakeholders investment can be divided into two broad categories: specific
and general. Specific investments are investments that have more value in a particular exchange
than in alternative exchanges. Specific investments therefore cannot be redeployed to other
exchanges without a significant loss in value. By contrast, the value of general investment does
not vary across different changes. (Jensen 2000).
Stakeholders firm-specific investments take many different forms. Employees specific
investment include a workers close relationships with others in a firm, knowledge about a firms
culture, and knowledge about how to mange critical processes within a firm, suppliers firmspecific investment include production system designed by suppliers for unique products or colocated facilities; customers firm-specific investments include the purchase of products that
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request a great deal of customized knowledge to use. The common feature of all these
investments is that they cannot b e transferred to some other business setting without a
significant loss in value.
Benefits of Firm Specific Investment for equity holders.
Equity holders can benefit from the specific investments made by stakeholders because equity
holders are residual claimants and because specific holder investments increase a firms ability
to generate economic profits. As residual claimants, equity holders receive payment on their
investment in a firm only after all other claims are satisfied. In order for there to be some
residual to pay equity holders, the total economic value created by integrating all the assets made
available to a firm by all of its stakeholders must be greater than the payments required to induce
these other stakeholders to make their sources available to a firm.
Previous work suggest that the total economic value created by a firm can be increased when a
firm uses valuable, rare, costly-to-imitate and non-substitutable resources in developing and
implementing strategies. One important class of these resources is the specific investments made
by a firms employees, suppliers, and customers. Because these firm-specific investment can
often be valuable, rare, costly-to-imitate and non-substitutable, they can often be sources of
superior economic performance that can then be used to make residual payment to a firms equity
holders. Thus, a firms equity holders have a strong incentive to induce its other stakeholders to
make large specific investments in that firm.
Benefits of Firm Specific Investments for other Stakeholers.
Naturally, the simplest way to induce employees, suppliers and customers to make specific
investment in a firm is to share some of the economic value these specific investments create
with these stakeholders. While the residual payment received by equity holders will be smaller
than what would have been the case if this extra value had not been shared, without sharing,
there may have been no specific investments made by employees, suppliers, and customers with
these stakeholders to induce them to make these investments.
The sharing in the economic value created by these specific investments made by stakeholders
can take many forms. For example, employees that have made significant firm specific
investments may receive higher levels of compensation than employees that have not made these
investments. This is one reason that employee compensation is often tied to employee tenure
the longer an employee stays with a firm, the more likely that this employee will have more firmspecific investments with the firm, and this employee will be more likely to receive a larger
share of the profits. Customers that have made specific investments may gain access to new
products or technologies before their competitors. Suppliers that have made these investments
may be able to continue selling to a firm long after other suppliers have been cut off.
The Role of Risk Management
Firm-specific investment made by employees, suppliers and customers can, in principle, benefit
both a firms equity holders and other stakeholders. On the other hand, concerns with the risk
associated with these investments can lead key stakeholders to avoid making such investments.
Thus the task facing firms to implement strategies that have the effect of reducing the impact of
these impediments on the willingness of employees, suppliers and customers to make specific
investments, and to do so at the lowest cost possible. When effective, these strategies will have
the effect of reducing the probability that a firm will experience financial distress.
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Alternative Risk Management Mechanisms

There are varieties of risk management mechanisms that can be used to reduce the probability
that a firm will experience financial distress (Miller, 1998). A few of the commonly-used risk
management tools will be examined, including (1) altering capital structure, (2) trading financial
hedging contracts, (3) investing in real options, and (4) diversifying into other business.
Altering Capital Structure
An insurance firm is likely to be under financial distress or may even be liquidated if it cannot
generate enough income to pay its claims. Thus, everything else equal, an insurance firm with a
higher debt burden will have a higher probability of financial distress than a firm with lower debt
burden. A firm can retire debt or issue equity to change its capital structure and thus reduce its
probability of financial distress. Thus, by changing a firms capital structure, managers can
change stakeholders incentives to make firm specific investments: a firm that chooses a lower
level of debt will lower the probability that it will face financial distress and thereby induce more
firm specific investments by its stakeholders.
Although it may appear relatively easy for a firm to reduce its debt by issuing more equity,
adjusting a firms capital structure can sometimes not be enough to reduce the probability that a
firm will experience financial distress. As long as this probability remains high, stakeholders
may still be reluctant to make specific investments in a firm. Consider the following limitations
to adjusting capital structure as a way to manage risk. (Cornell et al 1987)
There are many important factors that influence the optimal capital structure of a firm
besides the impact of capital structure on the probability of financial distress. These
other factors including agency costs, product/input market interactions, corporate
control and taxes must be accounted for when making capital structure decisions.
Managers will be reluctant to issue equity during periods in which they believe their
stock is undervalued. If managers do issue new equity, it sends a strong signal to the
stock market that the managers think their shares are overvalued. In fact, research
statistics show that when companies issue stock, on average the price of that stock
tends to fall by about 3 per cent.
Other factors besides capital structure may be more relevant in affecting a companys
financial stability. Therefore, even though reducing a firm level of debt can reduce its
probability of financial distress, it does not eliminate that probability.
Trading Financial Hedging Contracts
As suggested earlier, firms are beginning to use hedging contracts more frequently as a risk
management device. Perhaps the most basic type of investment tool is the forward contract. With
a forward, the user promises to buy or sell an asset say, oil, treasury bills at a specified price or
specified date. Long positions enable hedgers to protect themselves against price increase in the
underlying asset; short positions protect hedgers against price decreases. Other commonly used
financial hedging contracts are futures, swaps, and options.
These financial instruments can be used to reduce the probability of a firms financial distress at
low cost. This will particularly be the case when the probability of such financial distress
depends on the price of raw materials and commodities, or risk associated with short-term
movements in exchange rates or interest rates. On the other hand, for many other factors, such as
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those that have a longer time horizon or those that are not priced directly (e.g., moves by key
competitors) such instruments will be significantly less effective.
Another potential cost of using financial contracts is that there have been financial disasters that
are associated with derivatives. Numerous cases of derivatives trading have backfired in the last
few years. Some companies lost due to the position they took in derivative trading. Therefore, in
using financial hedging contracts to hedge firm risks, managers need to be aware of the danger of
taking positions to try to beat the market.
Investing in Real Options
Unlike financial options, real options come into existence through the opportunities created by
the firms strategic investments. For an investment to create a real option, it must create (1) the
right, (2) but not the obligation, (3) to make some specified action in the future in order to (4)
minimize the firms downside risk while (5) providing access to upside opportunities.
This asymmetry between right and obligation makes real option attractive from a risk
management perspective: the right component means the firm can pursue opportunities if it is in
the firms best interest to do so after new information arrives in the form of external and internal
cues. The fact that the firm is not obligate to act in the future means that the downside can be
limited to the initial investment, at least in theory. Real options are attractive relative to financial
options because the market for financial options is incomplete and the time horizon for many real
options is much longer than the time horizon for typical financial options.
Real options come in many varieties. For example, growth options enable the firm to capture
value by expanding if market conditions prove to be unexpectedly favorable. If a demand shock
materializes for the ventures product or a technology proves to be more attractive than initially
anticipated, the firm is in a position to buy out a partner at a capped price. However, if the
situation is worse than expected, the firm is not compelled to expand through acquisition.
Switching options enable the firm to shift production or other value chain activities to attractive
plants or host countries based on foreign exchange rate movements, other price changes, and
other sources of uncertainty.
There are many other types of real options, including options to abandon, delay, switch outputs,
alter scale, and so forth that are valuable in different degrees in different sectors. One of
managements objectives in using real options to manage risks is to frame the firms operations
and future investment decisions using taxonomy of real options. Using the lens of real options,
executives can also creatively design options into supply contracts and other deals.
While real options hold out considerable promise for firms to manage risks, they also have a
number of characteristics that differ from financial options and that also make them far more
difficult to manage in practice:
Unlike financial options, real options often require additional investments over time, and
these carrying costs imply that the downside risk of real options is often far greater
than simply the initial price of obtaining the option. For example, firms often need to
continue to invest in collaborative relationships or undertake unexpected investments in
the development of a technology to keep follow-on options open.
Real options also are often considerably more difficult to value as risk management tools
compared with financial options as the former sometimes involve underlying assets that
are not traded in liquid markets; shared claims on underlying assets; multiple sources of
uncertainty (e.g., rainbow options), some of which like competitors moves and internal
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learning are difficult to model; and multiple options that are interdependent (e.g.,
compound options)
Dividends in the form of competitor pre-emption, skills degradation, and so forth must
enter into a firms valuation efforts and exercise calculus, as might potential changes in
the exercise price over time and complex internal and external cues of value, all of which
challenge risk management via real options.
The management of real options is further complicated by the firms organizational
capacity to manage the appropriate exercise of a portfolio of options in the form of
acquisitions, divestitures, and so forth.
Diversifying into Other Business

A firm that diversifies increases the number of its sources of cash flow, and to the extent that this
cash flow is not perfectly correlated over time, diversification reduces the chance that serious
problems in one particular business will put the entire firm at risk. Thus, diversification can
reduce the probability of financial distress and can therefore stimulate firm specific investment
by the firms stakeholder.
Risk management through diversification carries its own benefits and liabilities. On the one
hand, the types of risks that diversification can manage are mush broader than financial hedging
instruments, and the risk reduction effect of diversification is also greater than altering capital
structure. On the other hand, diversification is a comparatively blunt instrument that can involve
significant costs due to the manipulation of real assets. For example, managers actions may alter
the underlying risk profiles of the combined business. Although managers can intervene in
positive ways, they may introduce new sources of variance through improper planning,
implementing and controlling of the diversification process.
Moreover, in order for diversification to reduce the risks of each business effectively, it requires
an active internal capital market to allocate resources from high performing divisions to divisions
that have financial problems. However, there are opportunity costs associated with allocating
resources in such a manner, especially when resources are limited and therefore involve
opportunity costs. Specifically, when headquarters uses resources to cross-subsidize weak
division, it foregoes the opportunity of using these resources to invest in project with better
growth opportunities.
While each of the risk management mechanisms discussed above can be effective in some
settings, they each involve unique benefits and costs. Therefore, they sometimes may be
substitutes to one another and sometimes may be valuable when used in combination with one
another. The challenge for executives, therefore, is to select risk management tools that serve the
firms objective of encouraging stakeholders to make firm specific investments and to do so in
the most efficient manner.
Discussion
So far we have provided a rationale for firm risk management that is different from that
suggested by traditional finance theory. We have also described a variety of risk management
mechanisms at firms disposal that may induce stakeholders to make firm-specific investments.
Since most of the arguments above have been made in a general sense, it is important for top
executive and risk managers to understand the relevancy of the arguments of specific
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organizational settings, and we will suggest how risk management activities may benefit firms
differently.
1. Private versus public firms. Although throughout our discussion we have explicitly or
implicitly focused our attention on publicly-traded, large with dispersed ownership
structures, the arguments can be equally applied to a private firm setting or to public firms
with more concentrated ownership structures. The reason for our focus is that, traditionally,
finance theorys argument that risk management does not add to firm value is more closely
applied to publicly traded firm with dispersed ownership structure. This is because it is
efficient for shareholders of such firms to reduce business risks by diversifying their
investment portfolios. Put another way, while risk management by private firms and public
firms with concentrated ownership structure can be relatively easily justified due to their
owners or large shareholders inability to diversify, public firms with dispersed ownership
structure have lacked a sound rationale for risk management efforts under traditional
perspectives.
2. Risk management costs. Our argument for the benefit of firm risk management does not
imply that it is always value-enhancing for a firm to engage in risk management activities,
since there are costs associated with virtually any type of risk management mechanism. For
example, even though financial hedging is generally considered the most cost efficient way
to manage risks, is still involves potentially large opportunity costs. The human resources
that are use to engage is hedging activities may be applied in other functional areas to add
firm value. Moreover, firms can go so far in trading financial contracts that they take
positions in hedging activities, which, instead of reducing firm risks, can run be danger of
increasing the companys risk exposure. Thus the potential benefits gained from risk
management need to be weighed against the costs associated with risk management
activities.
3. Role of firm strategy. Another factor that affects the risk reduction benefit to the firm is
the degree to which a firm relies on specific investment by its stakeholders. Although firmspecific investments are important to almost all firms, the degree of their importance differs
across firm and industries, specifically; firms that implement a differentiated strategy with
more unique products are generally more dependent on stakeholder to make firm-specific
investments. Thus, it would be more important for these firms to engage in risk management
activities in order to encourage their stakeholder to make these investments...
In addition to the above factors that affect the relevance of risk management for a firm, other
factors may also determine which risk management mechanism is more or less appropriate for a
particular firm. For example, a firm that has the unique capability of forming alliances may find
itself more likely to adopt real options approach to manage its risk exposures, while another firm
can be better off managing its risks through reducing its debt obligations. In the end, it is the task
of managers to appropriately evaluate the cost-benefit tradeoffs within an across the risk
management mechanism discussed above.
Conclusion
In recent years, managers have become increasingly aware of how their organizations can suffer
from various risks. As illustrated in the article, one of the important reasons that a firm should
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manage risk exposures concerns the firm-specific investments made by its employees, suppliers,
and customers. These firm-specific investments can be important sources of a firms competitive
porter advantage, (Porter, 1985) but also are risky for stakeholders to make. Thus, reducing
stakeholders risks associated with these investments can encourage stakeholders to make more
of these investments, to the benefit of stakeholders and equity holders alike. Although received
wisdom offers little room for risk management efforts by firms seeking to enhance their equity
values, we have provided a rationale for risk management that links such efforts to the
competitive advantages of firms, and in so doing we reach very different conclusions on the role
of risk management.
We have described a variety of risk management mechanisms at firms disposal that may induce
stakeholders to make firm-specificity, investments. These mechanisms differ in terms of their
bluntness or specificity, their costs and risk reduction potential, their time horizons, and their
implementation complexity.
If firm-specific investments by a companys stakeholders are central to the companys
competitive advantage, and risk management can facilitate the incentives for the stakeholders to
make firm-specific investments then the company should take risk management seriously. We
propose the following agenda for executive and risk managers contemplating how to set up a
specific risk management strategy.
1. First, evaluate the extent to which the company depends on firm-specific investments by
its stakeholders. The evaluation can focus on the companys core employees, suppliers
and customers by exploring the answer to the following question: would these core
stakeholders investment be less valuable if they switch to the different firm? To what
extent does this shape the willingness to make specific investments?
2. The second step is to evaluate the riskiness of the companys current business and the
specific risk factors that affect the level of the companys risk exposures. Specifically, if
the answer to the question in step 1 is yes, then we ask here Whats the probability that
the business will be in financial distress and stakeholders need to switch to the different
firm?
3. As a last step, we compare the effectiveness of alternative risk management mechanism
or what combinations of risk management mechanism would be the most efficient way
for the company to manage its risk exposures?
Finally, it is worth noting that the risk management is not a task only for a companys risk
management functional department. As risk management directly affects the companys core
stakeholders incentives to engage in value-enhancing firm-specific investments, risk
management should be incorporated into the companys strategic planning. And this requires the
effort and involvement of not only risk managers, but those who craft the firms strategy within
and across business units.
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References
Carroll A.B (1996) Business and Society: Ethics and Stakeholders Management, Cincinnati
Cornell A.C and Shapiro (1987) Corporate Stakeholder and Finance. Journal of Financial and
Strategic Decisions. Vol 9(2) pp21-31
Freeman R.E (1984) Strategic management: A Stakeholder Approach. Boston Jensen M.C
(2000) Value Maximization, Stakeholder Theory and The
Corporate Objective function. In: Beer M and Nohria N. eds. Breaking the Code of change pp
37-57
Kochan T and Rubinstein (2000) toward a Stakeholders theory of the firm: The Saturn
Partnership. Organizational Science II (4) pp 367-86
Miller K.D (1998) Economic Exposure and Integrated Risk Management, Strategic
Management Journal vol.19: 497-514
Nalini P. T (2007) Insurance Theory and Practice. New Delhi. Prentice- Hall of India Olowe,
R.A (1998) Financial Management, Concept, Analysis and Capital Investments. Lagos,
Panaf Press Ltd.
Porter M.E (1985) Competitive Advantage Creating and Sustaining Superior
Performance, New York.
Titman S. (1984) The Effect of Capital Structure on a firms liquidation decision. Journal of
Financial Economics vol.13 (1) pp137-151
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Determinant of incentive factors in knowledge sharing

Ali Reza Heydari1 ,Hamed Armesh 2 ,Saied Behjatie3 and Mahmoud Manafi4
Doctoral of business administration candidate, MMU, Cyberjaya, Malysia
PhD candidate, MMU, Cyberjaya, Malaysia
Abstract
In this uncertain economic climate, knowledge has a key role, where it emerges as an asset.
Land, labor, and capital are not as significant resources as they were before. Land, labor, and
capital - the classical factors of production - have become secondary to knowledge as the
primary resource for the new economy (Drucker, 1992). This study mainly examines the factors
affecting the incentives factors of organizational members to share knowledge via MMU
knowledge sharing system. The main focus on this research is based on social factors
considering the motives and agents which describe some of the reasons and rationales behind the
sharing knowledge. This study tries to give a wider scope of sharing knowledge to clarify
concept of organizational collaboration and synergy which is lead to competitiveness. What we
try to do is to analyze characteristics of importance motives in the social perspective to share
their knowledge with each other, considering the knowledge sharing platform of Multimedia
University (MMU) as the channel of communication among the participants. The problem
definition is thus derived from the gap between the current state and the desired future state of
knowledge sharing via MMU knowledge sharing system.
Keywords: Determinant , Incentive factors, Knowledge sharing
Introduction
Retention in market which day to day is stormed with new innovation and ever more customized
products needs an unending struggle to grasp differentiates from other relentless competitors.
Differentiator factors are core competency of organization that takes a very long time to
imitate because they are produced gradually through experience and continuous learning.
Further, organizations endeavor to achieve sustainable competitive advantage cannot be stagnant
over time, due to environmental change and market conditions, hence they need to adjust their
core competencies by continuously improving their knowledge. Therefore the most significant
source of competitive advantage which is nothing just knowledge management (KM) has
burgeoned. Meanwhile, literatures show a strong link between organizations core competency
and knowledge management (KM) since it can help to absorb valuable tacit knowledge to utilize
it towards creating competitive advantage.According to Peter Drucker (1993) the only or at
least the most important source of wealth in contemporary post-capitalist society is knowledge
and information rather than capital or labor. Recently, there have been great leaps to apply all
technological advancement into use to get required knowledge; numerous researches on
knowledge managements topics have gained increasing popularity in business. Nonetheless only
a few studies pertaining to the pillar of knowledge management have been made, when in fact,
Knowledge has always been a fundamental part of human existence.
The fact that has been deep into concern after development of all these technologies, policies and
equipments, people are willing to use them. In spite of valuable insight to the implementation of
knowledge management system, provided by numerous constructive academic studies still there
are great numbers of failures on achieving its expected objects. Malhotra (2005) admitted that
despite increasing sophistication of knowledge management technologies, we are observing
increasing failures of implementation of this technologys. He expressed "an urgent need for
understanding how technologies, people, and processes together influence business
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performance".It can be argued lack of understanding on human resource and cultural impact, is
possible obstacles of well exploiting of knowledge management systems. Rational foreseeing of
social fundamentals during design and implementation, developing a social planning and holistic
framework to describe the human force during exploitation stage, are critical issues for well
exploiting of knowledge management.
Subsequently, there have been many studies recently on motivational factors to dice their
knowledge on the board and share it with others. But overlay most of them binding their study on
only one affecting factor, such as rewards or culture whereas there are numerous elements such
as colleagues action and repercussion, management standpoint and participation, overall scope of
adoption of the system and sharing knowledge, and returnable benefits that influence peoples
attitude towards participation on exploiting of knowledge management systems.With respect to
previous investigations, this research has targeted to find some important motives through focus
on the social aspect that keep people from sharing and disseminating their experience and
knowledge via knowledge sharing system.
Problem Statement
Many organizations failed on their investment on knowledge management due to overlooked the
social aspects of the system; The main research problem of this study is to identify the
preliminary factors that contribute to the success of participation on knowledge management and
dissemination of knowledge. While there are so many motivates, that can affect individual
contribution rate, this research by focus on social aspect aim to identify some factors that
influence social participation, and the rate of influence on individual participation behavior.
Whereas vitality of available relevant and usable information is comprehensive matter;
participation and dissemination the knowledge plays the key role; therefore, the challenging
questions here are: identify cause people not to share their knowledge and how to stimulate and
encourage them in this matter? What motives can affect knowledge contribution in social aspect
and what their degree of influence is? What factors can be ensure the success and which one may
hinder the achievement of success?
Literature review
Importance of Knowledge Sharing
The reason why knowledge sharing is becoming an increasingly important tool is due to
acknowledgment that knowledge resources have been accepted as one of the chief factors for
sustainable competitive advantage by organizations at large. Several case studies demonstrated
many companies made costly mistakes by ignoring knowledge sharing. They suffered severe
damage from the loss of a crucial part of their knowledge asset. Managers may be left wondering
what happened as they frantically try to repair a situation which could have been avoided.
Knowledge sharing motives
Since knowledge is the key source of retaining the market, all struggles to design incentive
structures and implement knowledge management systems are to help share knowledge and to
encourage individuals to do so. By looking precisely at previous literature, all these motives
behind knowledge sharing behaviors can play an important role on how to improve and maintain
these knowledge networks in the way to have the maximum benefit out of our organization;
However, organizations are missing out on a huge opportunity when their use of incentives does
not take personal motivational factors into account.
The motives developed in this part are based on the Heng-Li Yang & Cheng-Yu Lai and Volker
Braun, David Czech, Benjamin Fletschinger, Silke Kohler, Verena Lber, has been simplified
and integrated to mere concept rather than complex mathematical models.
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Individual intentions (Relative Payoff)

By examining many cases percept the insight that individual's commitment into transferring and
sharing knowledge cannot be achieved unless organizations integrate the concept of motivation
and rewards to its employees. Even if people do not expect payback for their knowledge
contributions, still the natural question "what's in it for me" is often not clear for them, which is
suffering from a lack of motivation. The motivation could be either intrinsic or extrinsic.
Rewarding and recognizing an employee with tangible (Money, commission etc.) form for their
knowledge sharing efforts is extrinsic motivation while intrinsic motivation is intangible nature
(gaining privileges and special rights etc.)
In order to encourage employee behavior, organizations need to maintain a balance between
tangible and intangible rewards. People share because they want to see their expertise being
used, and they like being respected by their peers, however if ones does not find value on the
system, will not sustain their participation. Without the establishment of organizational reward
and recognition systems, it is very difficult to align the knowledge management and organization
human capital. Lack of motivation and reward system is a big barrier because it discourages
people to create, share, and use knowledge.
Individual sensation (personal feeling)
Passing the experienced knowledge and know-how to colleagues or putting working results into
a knowledge sharing system to be available for others disposal may be feel depth in to Individual
sensation because it proclaims that efficient and effective of such this system is directly based on
consistent, reliable, plausible behavior of participants. Goman (2002) states that employees at all
levels in organizations believe unanimously that knowledge is power. "Knowledge is power" is
the well-known line to describe situations, where experts with rare knowledge have the highest
reputation and position. People do not like to share their best ideas and therefore dilutes their
standing and position in their organization, and impede their ability to move ahead .This is a
common phenomena in many companies.
Individual perception (personal Esteem)
The Individual perception is equally important as most knowledge maturing activities involve
interpersonal Participation and perceived efficacy. As social exchange theory (Blau, 1964)
suggests, the dominant reason that motivate people to participate in social interaction and
disseminate their knowledge is expecting to get participate and involve in community and
acquire benefit in return. Davenport and Prusak (2000) indicated that knowledge exchange occur
when both the knowledge owner and receiver believe that they will benefit through the exchange
behavior. According to Davenport and Prusak (1998) employees are motivated to contribute
knowledge because they expect to receive useful knowledge in return in the future. We can
conclude participants involve in prisoners dilemma game situation.
Organization culture and norms
As with most problems, Obstacles to Knowledge Sharing, it is difficult to determine the solution
for cultural matter. Norms or in similar concept culture is the holistic view of social mind which
distinguishes the members of one community from another. It is based on values which have a
broad tendency to prefer certain states of affairs over others (G. Hofstede, 1994). In other
words, culture consists of the common values and behavioral background of members of one
group and reflection of this bear in an environment. Furthermore, it defines organizational
culture as the core beliefs, value norms and social customs that dominate individual behavior in
an organization. According to G. Hofstede, 1994, peoples reaction and their attitude in an
environment can be leaning into human nature, culture and personality of individuals. As figure
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10 shows, personality and individual attitude is inherited from the exposed culture, which in turn
is shaped based on the human nature. That is why analyzing the cultural dimensions of
knowledge sharing is taking vital place. The participation of individuals is the most important
thing for fostering a knowledge sharing system. Prior studies have suggested that employees
interactions play an important rule for building up extensive scope and identity about sharing
knowledge (Messick and Brewer, 1983; Van Lange et al., 1992). Furthermore, Wiener (1982)
posed high commitment to the group will lead to responsibility or obligation to participate in a
specific action, such as sharing knowledge
Organization reciprocity (Corporate rules and regulations)
The final obstacle to knowledge sharing identified in this section is the issue of organization
reciprocity. Knowledge workers are the means of production knowledge; this simply means that
people are deciding what to contribute to the organization and how great the yield from their
knowledge will be (Lang, 2001). The key success, of discovering and utilizing professional
intellect is when people are consistently recognized and rewarded for their understanding of the
entire knowledge process and for using their creativity and intuition at work (Smith-2001),While
it is perceived that the key factor in sharing knowledge is organization culture, if the
organizational culture generates a habit of hoarding knowledge rather than sharing it most likely
employees will not share their knowledge (Arora, 2002). A lack of incentives is an obstacle to
knowledge sharing, as people are reluctant to share without recompense either in the short or in
the long term (Davenport, 1997). Employees are evaluated on how well they immerse
themselves in disseminating what they know and experienced in various work and projects.
Developing right evaluating system and criterion of employees performance and their
cooperation bound to advance personal interests and encourage them to participate in knowledge
sharing.McDermott and O'Dell (2001) highlights that , the way to make the importance of
sharing knowledge visible depends on understanding the individuals behavior, truthful
recognizing and rewarding (in) their efforts and performance. Thus, employees are made to
understand that sharing knowledge is a criterion to get the highest rating on a performance
evaluation and the success and advancement in their career will be based on knowledge
management principles.
Research Design
This research is designed to analyse the important incentive factors in knowledge sharing that
affect organization performance in knowledge management system and collaboration network. It
will cover the motives that increase the knowledge sharing behavior and the factors that can have
impact on these motives in organizational context. The preceding discussions from chapter two
beg the question of what individual factors and organization ethical pertinent can play in relation
to a knowledge base in an organization. the design of this research is taken based on the
approach of reductionism instead of constructivism. Simplified this research is designed to get
feedback from the population of the study which are academics and executive staff in
Multimedia University of Malaysia (MMU) in order to reach the target of this study. as long as
no external force is implemented by the researcher, and all is mapping of the feedback that
comes from the designed questionnaire with using the right semantics that can convert a
qualitative value into a quantitative one for statistical purposes.
Theoretical Framework
For the purpose of this study, general framework is simplified as it can be seen from figure 1.
The model considers the incentive factors that have considerable impact on knowledge sharing
behavior in knowledge management system. Specifically, the adoption of Knowledge
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management processes in the paper is based on a combination of Knowledge management

processes that are identified by Okunoye (2003), McShane and Von Glinow (2000) , Natarajan
and Shekhar (2000) and Coukos Semmel, E.D, (2001).
Figure 1: Theoretical Framework of incentive factors on Knowledge Sharing Behavior.
As it is seen, the research framework consists of 3 independent variables and two moderate
variables. All together, this framework will focus on the individual incentives aspect of the
knowledge sharing behavior and how these motives can affect the behavior.
Hypothesis Development
On the basis of the developed research framework that was depicted in figure 1, this study will
examine five different hypotheses. These hypotheses are as follows.
H1. Individuals intention such as tangible or intangible rewards creates positive impact on
knowledge sharing behavior.
H2. Individuals sensation such as unwillingness or fear influences knowledge sharing behavior
positively.
H3. Individual perception (perceived efficiency or participation) creates positive impact on
knowledge sharing behavior.
H4. Favorable organization norms expedite knowledge sharing behavior positively. This
hypothesis is developed on the moderating variable of organization norms.
H5. Proper organization reciprocity accelerates knowledge sharing behavior positively.
Results
Personal Profile of the Respondents
The studied population is almost heavy in part of females (73%) due to majority occupied
positions in the organization by females. Majority of the population (40%) are in the age range of
25 to 30 years old. Majority of the studied population (76 %) do have higher education degree.
More than half of the population (64 %) has basic job experience with minimum of 2 years of
experience. Almost half of the population (54 %) has occupied staff position in organization.
4.3.1 Individuals intention Hypothesis Testing
The first factor to have the test on is the monetary value of sharing the knowledge with peers
(e.g. getting commission). Table 21 shows the one sample T-test analysis of tangible rewards.
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H0: Individuals intention in the form of tangible monetary rewards cannot influence
knowledge sharing behavior positively.
H1: Individuals intention in the form of tangible monetary rewards can influence
knowledge sharing behavior positively.
Table 21. One Sample T- test on tangible rewards Influence on Knowledge Sharing behavior
One-Sample Test
Tangible Reward
Test Value = 3
t
df
7.928
79
Sig. (2-tailed)
Mean
Difference
.60000
.000
95% Confidence Interval of the Difference

Lower
.4494
Upper
.7506
Conclusion: according to results gained by One Sample T- test and with 95% confidence level
and P value is less than 0.05, So we can interpret that answerers believe individuals intention in
forms of tangible rewards has positive effect on cooperative knowledge sharing behavior. And
therefore, H0 is rejected.
Table 22 will show the One Sample T test for intangible rewards that is the second factor. Here:
H0: Individuals intention in the form of intangible rewards cannot influence knowledge sharing
behavior positively.
H1: Individuals intention in the form of intangible rewards can influence knowledge sharing
Table 22. One Sample T test on Intangible Rewards Influence on Knowledge Sharing Behavior
One-Sample Test
Intangible
Reward
Test Value = 3
t
df
Sig. (2-tailed)
Mean
Difference
95% Confidence Interval of the Difference

Lower
18.620
79
.96250
.000
.8596
Upper
1.0654
Conclusion:
95% confidence interval for the mean difference is [0.85, 1.06] which does not contain zero.
Meaning level of the test is less than 0.05 (The P-Value 0.002<0.05), So we can interpret that
respondents believe individuals intention in forms of intangible rewards has positive effect on
cooperative knowledge sharing behavior. And therefore, H0 is rejected.
4.3.2 Individuals sensation Hypothesis Testing
In this part, hypothesis testing based on two factors of Unwillingness and Fear (job security).
Table 23 will show the One Sample T test for this factor.
H0: Individuals sensation in the form of Unwillingness cannot influence knowledge sharing
H1: Individuals sensation in the form of Unwillingness can influence knowledge sharing
Table 23. One Sample T test on Unwillingness Influence on Knowledge Sharing Behavior
One-Sample Test
Unwillingness
Test Value = 3
t
df
Sig. (2-tailed)
Mean
Difference
95% Confidence Interval of the

Difference
3.252
.002
.24375
Lower
.0946
79
Upper
.3929
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Conclusion:
answerers believe individuals sensation in forms of Unwillingness has positive effect on
cooperative knowledge sharing behavior. And therefore, H0 is rejected. Table 24 will show the
One Sample T test for individuals sensation as the second factor:
H0: Individuals sensation in the form of frightened cannot influence knowledge sharing
H1: Individuals sensation in the form of frightened can influence knowledge sharing behavior
positively.
Table 24. One Sample T test on frightened Influence on Knowledge Sharing Behavior
One-Sample Test
Frightened
Test Value = 3
t
df
Sig. (2-tailed)
Mean
Difference

Difference
.082
.935
.01250
Lower
-.2911
79
Upper
.3161
Conclusion:
95% confidence interval for the mean difference is [-0.29, 0.31] which contain zero.
Meaning level of the test (0.93>0.05) The P-Value of the test is more than 0.05, So it means that
individual sensation in the form of fear is almost equal to the mean and somehow has effect on
knowledge sharing behavior until the mean limit.
4.3.3 Individual perception Hypothesis Testing
Here the hypothesis is developed on the factors of Perceived Efficacy and Perceived
Participation.
H0: Individual perception in the form of Perceived Efficacy cannot influence knowledge sharing
H1: Individual perception in the form of Perceived Efficacy can influence knowledge sharing
One-Sample Test
Perceived
Efficacy
Test Value = 3
t
df
22.983
79
Sig. (2-tailed)
Mean
Difference
.000
1.27500

Difference
Lower
Upper
1.1646
1.3854
Conclusion:
Meaning level of the test is less than 0.05 (The P-Value 0.001<0.05), so we can interpret that
answerers believe individuals perception in forms of Perceived Efficacy has positive effect on
cooperative knowledge sharing behavior. And therefore, H0 is rejected.
Next is to have the analysis on the perceived participation factor.
H0: Individual perception in the form of perceived participation cannot influence knowledge
sharing behavior positively.
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H1: Individual perception in the form of perceived participation can influence knowledge sharing
One-Sample Test
perceived
participation
Test Value = 3
t
df
Sig. (2-tailed)
Mean
Difference

Difference
16.514
.000
1.21875
Lower
1.0719
79
Upper
1.3656
Conclusion
answerers believe individuals perception in forms of perceived participation has positive effect
on cooperative knowledge sharing behavior. And therefore, H0 is rejected.
4.3.4 Organization culture and norms Hypothesis Testing
Here the hypothesis is developed on two factors of Extensive scope of sharing knowledge and
colleague Identity & Lessons.
In the first part, the hypotheses are as follows:
H0: Organization culture and norms cannot expedite knowledge sharing behavior in the form of
Extensive scope of sharing knowledge.
H1: Organization culture and norms expedite knowledge sharing behavior in the form of
Extensive scope of sharing knowledge.
One-Sample Test
Extensive
scope
sharing knowledge
of
Test Value = 3
t
df
Sig. (2tailed)
Mean
Difference

Difference
Lower
6.095
79
.46250
.000
.3115
Upper
.6135
Conclusion: 95% confidence interval for the mean difference is [0.31, 0.61] which does not
contain zero. Meaning level of the test is less than 0.05 (The P-Value 0.001<0.05), So we can
interpret that the respondents believe Organization culture in forms of Extensive scope of sharing
knowledge has positive effect on cooperative knowledge sharing behavior. And therefore, H0 is
rejected.
Next, we develop the hypothesis based on colleague Identity & Lessons as follows:
H0: Organization culture and norms cannot expedite knowledge sharing behavior in the form of
colleague Identity & Lessons
H1: Organization culture and norms can expedite knowledge sharing behavior in the form of
colleague Identity & Lessons
One-Sample Test
colleague
Lessons
Identity
&
Test Value = 3
t
df
7.957
79
Sig. (2tailed)
Mean
Difference
.000
.58125

Difference
Lower
.4359
Upper
.7266
Conclusion:
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answerers believe Organization culture in forms of colleague Identity & Lessons has positive
effect on cooperative knowledge sharing behavior. And therefore, H0 is rejected.
4.3.5 Organization reciprocity Hypothesis Testing
In this part, the hypothesis is developed on two factors of Proper Citation of sharing knowledge
and System Evaluation & Accessibility
In the first part, the hypothesis can be developed as follow
H0: Organization reciprocity cannot expedite knowledge sharing behavior in the form of Proper
Citation.
H1: Organization reciprocity expedites knowledge sharing behavior in the form of Proper
Citation.
One-Sample Test
Proper Citation
Test Value = 3
t
df
13.454
79
Sig. (2tailed)
Mean
Difference
.000
.93750

Difference
Lower
.7988
Upper
1.0762
Conclusion: 95% confidence interval for the mean difference is [0.79, 1.07] which does not
contain zero. Meaning level of the test is less than 0.05 (The P-Value 0.001<0.05), So we can
interpret that the respondents believe Organization reciprocity in forms of Proper Citation has
positive effect on cooperative knowledge sharing behavior. And therefore, H0 is rejected.
And finally, we move to the second factor ocity which is System Evaluation & Accessibility.
H0: Organization reciprocity cannot expedite knowledge sharing behavior in the form of System
Evaluation & Accessibility
H1: Organization reciprocity can expedite knowledge sharing behavior in the form of System
Evaluation & Accessibility
System Evaluation &
Accessibility
One-Sample Test
Test Value = 3
t
df
Sig.
tailed)
10.163
79
.000
(2-
Mean
Difference

Difference
.75625
Lower
.6081
Upper
.9044
Conclusion: according to results gained by One Sample T- test, The Mean Difference is 0.75,
and the Standardized Deviation is 0.66.
Meaning level of the test is less than 0.05 (The P-Value 0.001<0.05), So theory of equality of
sample mean with rank 3 refuse and it can be said that it there is significant with the mean value
of 3. Since rank sample more than 3, i.e. has more than mean, so we can interpret that answerers
believe Organization reciprocity in forms of System Evaluation & Accessibility has positive
effect on cooperative knowledge sharing behavior. And therefore, H0 is rejected.
Discussion and Implications
Social tie
According to collected data, almost all participates are members of any form of web based
networking sites. While social web based linkage is basically a very attractive environment but
when it comes in forms of on-line chatting and VOIP as a communication medium. Out of 80
participants, only around 3% communicate through knowledge sharing system (MMU
knowledge book) and the rest prefer on-line chat and VOIP while the option of knowledge
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sharing system is also available to them. In fact, people are easily persuaded to join in their
organization sharing systems, but it is hard to participate and influence their communication and
share their knowledge as long as they get less in compare of some old doohickey like chat rooms
or VOIP mediums. What can be suggested is that developing a glamorous platform to generation
and dissemination knowledge in the way that gives a common sense to each member.
Social propensity
As the research results shows people do need to achieve their social needs in the first place and if
unsatisfied they will become shadow users who do not participate. In fact, people are swayed
to what they find useful with their presence. What they are looking for is not solidly commercial
base in the first place; they want to keep their social needs , what bring people in this network is
to present themselves and feel of being a member of the society they know.
Social perception
In this research there is no strong relationship between computer expenditures, IT based and
knowledge sharing behaviors. As long as many constraining factors influence on the willingness
of organizational members to share knowledge this study shows that rewards in the form of
monetary incentives are less helpful and ineffective towards knowledge sharing , whereas
intangible rewards will bring in organizational members better impact towards knowledge
sharing. As a conclusion, in order to motivate people to share what they know, it is of paramount
importance to gives them highly extensive scope of sharing knowledge and perceived
participation by the people around them.
Recommendations
Elaborating on previous research, and manipulating collected data, this study has some
suggestions as below.
Recruiting: Recruiting and enlisting employees should be based on organization knowledge
sharing culture. To achieve this importance, organization need to have evaluation structure on
individual propensity to share knowledge
Training: Often employees are willing to participate simply because they dont know about it,
they dont know how it works or what related behaviours they need to practice. The training
processes help employees to understand what the system is, what it does, and how it can benefit
them. Employees should be trained regarding the usage system, technology tools and IT structure
as well as the expected behaviors with respect to the value of sharing knowledge to support
knowledge sharing.
Awareness: It is important to ensure that entire organizational members have common
definition, understanding, and Confidence about the relevancy and efficiency of knowledge
sharing on individual performance and organization competence. Hence, the popularity of
participants in knowledge sharing system will be easily permeated throughout the whole
organization.
Measurement mechanism: Apparently, a good feedback mechanism will increase knowledge
providers perceived efficacy. Individuals who perceived worth on reliability of sharing
knowledge system will be more likely to share the knowledge that they have. This can be
accomplished by setting roadmap and scheme on proper citation coupled with the relevancy,
amount and quality of shared knowledge.
Limitation of the study
There are a couple of limitations that need to be acknowledged in regard to the present study.
The first involves sampling. A convenience sample was used and the sample size was small. The
evaluation took place in only one campus which is Cyberjaya of the Multimedia University
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(MMU) whereas the second one, Melaka campuses was connive due to inconvenient for author
to collect data. Furthermore, the total amount of population was unknown due to not responded
of human resource department of giving right information. Second, this study did not purport to
and could not possibly develop a comprehensive picture of the implementing knowledge
management, Instead, it attempted to create a snapshot of social factors and incentives which
create a basic topology of strategic approaches to knowledge management. And lastly, many
barriers to knowledge management and motives factors arise which are not covered in this
research thus there is lack of sufficient number of independent variables and moderating
variables used to predict the dependent variable (willingness to share knowledge).
Suggestions for future research
this study focused on crucial issue of social aspect of knowledge sharing behavior, hence, to
pave the way for further research suggested, expanding the findings of this study in the areas of
theory, methodology, technology and scope. The opinion of the researcher may be fruitful further
crystallization of the tacit knowledge construct. While, due to the mobility of lecturers or skill
employees for reasons of promotion, resignation and more over revoking the contract of foreign
lecturer due to localization standpoint of president their knowledge is overlooked, leading to loss
of vast amounts of valuable tacit knowledge which are based on experience gained over a long
period of time. By the way, there is a need to continue investigating and examining other aspects
of the knowledge management implementation and processes in Multimedia University. Another
improvement that further research may bring is sknowledge sharing system which is employee,
impact of knowledge management processes on efficiency improved.
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The Measurement of User Satisfaction on Malaysian Meteorological

Department Online information services
Faizal Haini Fadzil
Faculty of Information Management, Universiti Teknologi MARA
40150 Shah Alam, Selangor, Malaysia
Mohammad Fazli Baharuddin
Faculty of Information Management, Universiti Teknologi MARA
40150 Shah Alam, Selangor, Malaysia
Abstract
User satisfaction is considered to be one of the most widely used measures of information and
communication technology (ICT) implementation success. Therefore there is a need to measure
user satisfaction of Malaysian Meteorological Department (MMD) website. MMD is govern
under Ministry of Science, Technology and Innovation (MOSTI) and has been commence its
operation since 1820 in Singapore. Until now the department are strive their best effort to issue
timely and accurate weather and meteorological information to public. The research sample was
48 students from 3 different faculties in University Putra Malaysia. The data were analyzed with
Rasch Multi-dimensional Models for Measurement (RUMM) software.
Keywords: User satisfaction, online weather service, Rasch measurement, Malaysian
Meteorological Department.
1. INTRODUCTION
In the era of globalization, the vast development of innovation in information, technology and
communication (ICT) have experienced substantial influences on the community and businesses.
The development of technology provide cheaper and more advance workstation, with the
integration of telecommunication facility either wired or wireless, has put computing power into
group of much greater number of person in the business (Willcocks, 1994; Kraemer & Rischard,
1996; Dedrick, 1997).
Upon the introduction of World Wide Web (WWW), the increasing numbers of
companies are using it to provide their customers with information related to their service or
direct service through their web. Compared to conventional method of delivering, WWW have
great potential to reach wide audience with global market access. The website can store rich
content and information in user-friendly interface which can attracts more user. According to
Wang and Head (2001), most WWW integrates more than other current systems to support
business process.
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The process of making products and services available to customers has changed from
conventional communication channels to web based information system. Comparing with
conventional customer information services, web based customer service required a set of
webpage that act like a magazine, which can allow user to navigate, request content resource, ask
question, download current news, and provide solution to users.
Since a primary objective of a web based service is to meet the demand and requirement
of user, the measurement of user satisfaction will be discussed. The question is what to measure,
and how the existing web based service can deliver information to the user. In the research, it is
necessary to ask on Who are the web user?, How can the service quality can be measured?,
and What is web based service quality?. In this paper, the general framework is introduced to
identify and measure what factor that can lead into user satisfaction in MMD web based service.
Web based quality is defined as the degree of which the service could facilitate the effectiveness
and efficiency of communication through online. The objective of this paper is identifying
attributes in online services and to measure user satisfaction of MMD online services.
2. OBJECTIVE OF THE STUDY
The objective of this study is:
To identify of which extent the website function may help to deliver informative content
to the user.
To assess the level of readiness and acceptance by websites users of web-based
information and services provided by MMD.
To measure user satisfaction on the effectiveness and efficiency of the website
deliverable.
To provide recommendations to enable MMD online service to implement suitable
strategies in enhancing the quality of electronic service delivery towards MMD Direction
2007 - 2015
3.
LITERATURE REVIEW
INFORMATION SYSTEMS
ON
USER
SATISFACTION
OF
WEB-BASED
Web-based information systems provide a dynamic and multiple distributed platforms for
interactive business applications. They facilitate some process of integration between other
systems, e-business, and e commerce to advance. The qualities of the service offered by this
web-based information service bring more research to be conducted to measure the level of user
satisfaction in using the service.
3.1 Definition of Web-based information System
From the emergence of the World Wide Web, there is no standard definition for the term Webbased information system. In general, web-based system is a part of World Wide Web. The
appearance of the web is the part of web application and the web browsers acts as a user
interface. Web-based information system can be generally considered as a general system such
other existing standalone system, but not a set of web pages. There are different between web
pages and web-based information system. The different is that web-pages are designed to be
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used and browse like newspaper, magazines, and books but web-based information system have
an extra capability to enable user or visitor to perform some task which is usually integrated to
other system such as databases and transaction processing systems.
From the classification views, the web-based information system can be classified
according to their scope of area from the system that are locally made for internal or the system
that made to be viewed globally. As referred to Isakowitz (1998), the system can be from simple
web page to the sophisticated and highly complex integrated system. From the article, the
difference between web sites and e-commerce is not a big different because there are many
websites has been integrating their websites with direct service such as online shopping, support
centre, and user interaction.
3.2 Features of Web-based Information System
There are four stage model of the evolution of web-based communication that introduced by
McMillan (1999). The four stage are explain as at stage 1, there are static web-based information
system comprising corporate brochures that created to attracts more audience, promoting
products and services, and marketing. At stage 2, the web-pages go more complex with dynamic
web-based information systems that facilitate searchable content from database and archived
information such as news archive. In dynamic web-based system, it has established a new two
way communication with the user. For example feedback, ordering, and online polls or survey.
At stage 3, the development of web based information system focus on any active environment
that facilitates the e-commerce or online transactions. The application including auction,
negotiation, and shopping cart application. Lastly at stage 4, commercial function that using wide
range of multimedia taken place. For example, photo pages, video streaming and blogging.
3.3 The Complexity and Sophisticated Online Service
The design of web-based system is not easy as designing common web pages. The need of one
business differs the need from other business. According to an article written by Scharl (2000),
each organization or business entity may not be necessary adopting all four stages that
introduced by Mcmillan (2009). Before considering the application of web-based information
system, factors such as utility, cost, required resources, skills, and manpower should be taken
into account. There are relationship between service attributes and the overall of web-based
service quality. Some web user demand large amount of information and graphics, while the
other group demand simple webpage. The restriction of these two variant of content and design
is the connection speed.
4. RESEARCH METHODOLOGY
The sample
This research measured user satisfaction in using online services provided by
MMD.
There are three faculties in UPM that suggesting their student to use MMD weather service in
their study. The faculties are; Faculty of
Agriculture, Faculty of Forestry, and Faculty of
Environmental. The variety of
population and diversity of faculty need make the research
interesting to measure the satisfaction of web-based information service that being used.
The Questionnaire
The research used a six-page questionnaire for data collection. On the first page is the
introduction and the second page are the question about the demographic background of
the respondent. These are the age of respondent, their gender, from which faculty, where
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did they find out about

the service, and the frequent access of the website in a
week. Then the
question continues with a series of statement where respondents
were asked to indicate their opinion as to their level of acceptance and satisfaction on
the website content and electronic service with respect to quality of online information,
electronic services, feedback, resources, and website
link. The use of likert scale
ranging from 1 which means strongly disagree to 5 which represents strongly agree to
measure the website users level of acceptance and usage of the website and electronic
services.
The population sample for survey questionnaire
The self-administered questionnaire were distributed to 150, 50 to each
faculty in the
university compound. The survey questionnaires are
distributed to randomly selected
respondent who visiting the faculty office. This survey was conducted in 3 days in September
for data collection and
finding analysis is done in month of October.
5. FINDINGS
In Rasch model, winstep give two value of reliability to reflect the upper and lower limits. The
lower limit is model 'root mean square standard error' (RMSE) that represents the "worst case"
reliability. The upper limit is real RMSE that represents the "best case" reliability. Table 1 shows
the person reliability ranges from 0.75 to 0.78 while item reliability is 0.98.
Table 1: Summary statistics for 37 person and 27 items
SUMMARY OF 37 MEASURED Persons
+-----------------------------------------------------------------------------+
|
RAW
MODEL
INFIT
OUTFIT
|
|
SCORE
COUNT
MEASURE
ERROR
MNSQ
ZSTD
MNSQ
ZSTD |
|-----------------------------------------------------------------------------|
| MEAN
104.3
27.0
4.62
.55
.95
-.2
1.00
-.1 |
| S.D.
3.9
.0
1.19
.03
.53
1.4
.81
1.2 |
| MAX.
110.0
27.0
6.46
.59
2.71
3.9
4.01
3.0 |
| MIN.
95.0
27.0
2.09
.47
.30
-2.4
.17
-1.8 |
|-----------------------------------------------------------------------------|
| REAL RMSE
.60 ADJ.SD
1.03 SEPARATION 1.73 Person RELIABILITY .75 |
|MODEL RMSE
.55 ADJ.SD
1.06 SEPARATION 1.91 Person RELIABILITY .78 |
| S.E. OF Person MEAN = .20
|
+-----------------------------------------------------------------------------+
SUMMARY OF 27 MEASURED Items

+-----------------------------------------------------------------------------+
|
RAW
MODEL
INFIT
OUTFIT
|
|
SCORE
COUNT
MEASURE
ERROR
MNSQ
ZSTD
MNSQ
ZSTD |
|-----------------------------------------------------------------------------|
| MEAN
142.9
37.0
.00
.51
.92
-.3
1.00
-.3 |
| S.D.
18.1
.0
3.58
.13
.50
1.4
.94
1.4 |
| MAX.
173.0
37.0
7.93
.71
2.26
3.4
5.08
4.3 |
| MIN.
97.0
37.0
-6.05
.34
.06
-2.7
.04
-2.5 |
|-----------------------------------------------------------------------------|
| REAL RMSE
.57 ADJ.SD
3.53 SEPARATION 6.24 Item
RELIABILITY .97 |
|MODEL RMSE
.53 ADJ.SD
3.54 SEPARATION 6.73 Item
RELIABILITY .98 |
| S.E. OF Item MEAN = .70
|
+-----------------------------------------------------------------------------+
Reliability is on a scale from 0 to 1. The closer the value is to 1, the greater the reliability.
Therefore, person reliability is adequate while item reliability is excellent. Table 2 shows the
measures and fit statistics for all 27 items. The measure refers to the item measures. They give
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the level of satisfaction scale. For an example, the higher measure means the service is the worst
among all. A low measure means the service is efficient and gives the best to the web user.
Table 2: Item measure of items
Item CATEGORY/OPTION/DISTRACTOR FREQUENCIES:
MEASURE ORDER
+-------------------------------------------------------------------------------+
|ENTRY
DATA SCORE |
DATA
| AVERAGE S.E. OUTF PTMEA|
|
|NUMBER CODE VALUE | COUNT
% | MEASURE MEAN MNSQ CORR.| Item
|
|--------------------+------------+--------------------------+------------------|
|
27
1
1 |
1
3 |
3.03
.9 -.22 |admin_response
| 1
|
2
2 |
12 32 |
3.91
.36 1.2 -.41 |
| 2
|
3
3 |
24 65 |
5.03
.20
.9
.47 |
| 3
|
|
|
|
|
|
20
2
2 |
5 14 |
3.25
.48
.9 -.45 |relevant_links
| 2
|
3
3 |
29 78 |
4.68
.19
.8
.11 |
| 3
|
4
4 |
3
8 |
6.24
.11
.7
.40 |
| 4
|
|
|
|
|
|
26
2
2 |
4 11 |
3.00
.36
.7 -.47 |feedback_response | 2
|
3
3 |
29 78 |
4.77
.20
.9
.25 |
| 3
|
4
4 |
4 11 |
5.10
.70 1.1
.14 |
| 4
|
|
|
|
|
|
25
3
3 |
32 86 |
4.56
.21 1.2 -.12 |text_read
| 3
|
4
4 |
5 14 |
4.97
.56 1.4
.12 |
| 4
|
|
|
|
|
|
2
2
2 |
1
3 |
4.13
1.1 -.07 |access
| 2
|
3
3 |
26 70 |
4.25
.22
.9 -.48 |
| 3
|
4
4 |
10 27 |
5.62
.30
.9
.51 |
| 4
|
|
|
|
|
|
22
3
3 |
11 30 |
3.59
.27
.6 -.56 |navigation
| 3
|
4
4 |
26 70 |
5.05
.21
.9
.56 |
| 4
|
|
|
|
|
|
1
3
3 |
10 27 |
3.78
.28
.8 -.43 |response_time
| 3
|
4
4 |
26 70 |
4.88
.23 1.1
.34 |
| 4
|
5
5 |
1
3 |
6.13
1.1
.21 |
| 5
|
|
|
|
|
|
15
3
3 |
9 24 |
3.86
.29
.9 -.36 |quick_search
| 3
|
4
4 |
28 76 |
4.86
.23 1.2
.36 |
| 4
|
|
|
|
|
|
16
3
3 |
8 22 |
5.06
.42 3.4
.20 |search_result
| 3
|
4
4 |
27 73 |
4.37* .22 1.5 -.34 |
| 4
|
5
5 |
2
5 |
6.13
.00 1.2
.30 |
| 5
|
|
|
|
|
|
6
3
3 |
5 14 |
3.05
.25
.4 -.52 |recent
| 3
|
4
4 |
32 86 |
4.86
.19
.9
.52 |
| 4
|
|
|
|
|
|
19
2
2 |
1
3 |
3.03
.9 -.22 |links
| 2
|
3
3 |
2
5 |
2.32* .23
.2 -.46 |
| 3
|
4
4 |
34 92 |
4.80
.18
.8
.51 |
| 4
|
|
|
|
|
|
18
3
3 |
4 11 |
2.81
.32
.4 -.53 |terms_used
| 3
|
4
4 |
32 86 |
4.80
.19
.8
.38 |
| 4
|
5
5 |
1
3 |
6.13
1.1
.21 |
| 5
|
|
|
|
|
|
23
3
3 |
3
8 |
4.22
.82 1.8 -.10 |corporate
| 3
|
4
4 |
34 92 |
4.65
.21 1.1
.10 |
| 4
|
|
|
|
|
|
11
4
4 |
37 100 |
4.62
.20 1.0
.00 |issues
| 4
|
|
|
|
|
|
12
3
3 |
2
5 |
3.74
.70 1.3 -.18 |understandable
| 3
|
4
4 |
33 89 |
4.62
.21 1.0
.01 |
| 4
|
5
5 |
2
5 |
5.45 1.01 1.2
.17 |
| 5
|
|
|
|
|
|
17
4
4 |
37 100 |
4.62
.20 1.0
.00 |search_website
| 4
|
|
|
|
|
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|
21
4 |
4.62
.20
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.00 |dead_links
| 4
|
|
|
24
4
4 |
37 100 |
4.62
.20 1.0
.00 |text_size
| 4
|
|
|
|
|
|
14
3
3 |
1
3 |
3.29
1.1 -.19 |arrangement
| 3
|
4
4 |
34 92 |
4.69
.19 1.0
.19 |
| 4
|
5
5 |
2
5 |
4.11* 2.02
.8 -.10 |
| 5
|
|
|
|
|
|
5
4
4 |
35 95 |
4.61
.20 1.0 -.03 |download
| 4
|
5
5 |
2
5 |
4.74 1.71 1.6
.03 |
| 5
|
|
|
|
|
|
13
4
4 |
35 95 |
4.53
.20 1.0 -.30 |reference
| 4
|
5
5 |
2
5 |
6.12
.33
.6
.30 |
| 5
|
|
|
|
|
|
10
3
3 |
1
3 |
2.09
1.0 -.35 |bulletins
| 3
|
4
4 |
30 81 |
4.50
.20 1.0 -.20 |
| 4
|
5
5 |
6 16 |
5.62
.33
.9
.37 |
| 5
|
|
|
|
|
|
3
4
4 |
29 78 |
4.31
.21
.9 -.50 |loading_page
| 4
|
5
5 |
8 22 |
5.74
.30
.7
.50 |
| 5
|
|
|
|
|
|
7
4
4 |
21 57 |
3.99
.23
.9 -.60 |accuracy
| 4
|
5
5 |
16 43 |
5.44
.22
.8
.60 |
| 5
|
|
|
|
|
|
4
4
4 |
20 54 |
4.00
.22
.8 -.56 |article_access
| 4
|
5
5 |
17 46 |
5.34
.26 1.0
.56 |
| 5
|
|
|
|
|
|
9
4
4 |
13 35 |
3.62
.28
.8 -.61 |meteorological
| 4
|
5
5 |
24 65 |
5.15
.19
.7
.61 |
| 5
|
|
|
|
|
|
8
4
4 |
12 32 |
3.67
.30
.9 -.55 |weather_info
| 4
|
5
5 |
25 68 |
5.07
.20
.8
.55 |
| 5
+-------------------------------------------------------------------------------+
|
37 100 |
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1.0
In this research, admin response is the worst part of online service in MMD web-based
information service while weather info is the best part of the web service offered by MMD.
Figure 1: Item map for level of satisfaction in using service
8
7
6
5
Persons MAP OF Items

<more>|<rare>
+ admin_response
T+T
XXXXXXXXXXX S+ feedback_response
XXXXXXX M+ text_read
4 XXXXXXXXXXXX +S access
3
XXXXXX S+
2
X T+ navigation
1
+ links
0
+M corporate
-1
-2
-3
-4
-5
-6
arrangement
search_website
download
bulletins
+
+
+S
+ accuracy
+ meteorological
<less>|<frequ>
Group 1
relevant_links
quick_search
recent
terms_used
dead_links
text_size
reference
loading_page
response_time
search_result
Group 2
issues
understandable
article_access
weather_info
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The item-person map in figure shows graphically the items from the highest to the lowest
satisfaction in using online service. The person-map shows the level of satisfaction of the items
is well matched with the ability of the persons. The are two major groups in this figure which
labeled group 1 and group 2. Group 2 has higher level of satisfaction with attributes stated in the
figure, while group 1 not satisfied with admin response, feedback response, relevant link and text
read. But group 1 satisfied with the access, navigation, links, corporate, quick search, recent,
terms used, response time and the search result.
Figure 3: Probability of response to items
CATEGORY PROBABILITIES: MODES - Structure measures at intersections
++-----+-----+-----+-----+-----+-----+-----+-----+-----+-----++
1.0 +
+
|
444444444
|
|
333
44
44
|
|1
33
33
4
4
|
.8 + 1
3
3
4
4
5+
| 1
3
3
4
4
5 |
|
1
222
3
3
4
4
5 |
|
1
2
2
3
3
4
4
5 |
.6 +
1 2
2 3
3 4
4 5
+
|
12
23
34
4 5
|
.5 +
12
23
*
*
+
O
|
21
32
43
5 4
|
F
.4 +
2 1
3 2
4 3
5 4
+
|
2 1
3 2
4
3
5
4 |
R
|
2
1
3
2
4
3
5
4 |
E
| 2
1
3
2
4
3
5
4 |
S
.2 + 2
1 3
2
4
3
5
4+
P
|2
*
2
4
3
5
|
O
|
3 11
22 4
3
55
|
N
|
333
11
44**2
3333
555
|
S
.0 +*************************************************************+
E
++-----+-----+-----+-----+-----+-----+-----+-----+-----+-----++
-9
-7
-5
-3
-1
1
3
5
7
9
11
Person [MINUS] Item MEASURE
P
R
O
B
A
B
I
L
I
T
Y
In figure 3, the probability curve shows that respondents are selecting 4 as the most answers. The
rating scale categories were labeled as follows:
1
Strongly disagree
Disagree
Neutral
Agree
Strongly agree
The problem in this curve is the rating curve should be revise because there are a small distant
between 4 and 5. The respondent may be not understood the meaning of particular statement or
how they interpret their level of satisfaction in answering the questionnaire.
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6. Discussion
The use of Rasch in general measure user satisfaction of online information service provided by
MMD has an implication for management of the service in the organization. The management of
administrator and user support determined to be the problem in the service provided. This
measurement will allow upper management to evaluate the performance of their user support
capabilities and the availability of administrator to respond users email and feedbacks. Using the
scale as a general measure as well as an application-specific measure could help the
administrator gain a wider perspective of user satisfaction with the systems and applications
across the organization.
From the findings, there should be another research to be conducted to study about the
relationship between website response time and the current network speed. This is to further
determine the optimum level of user satisfaction is different location that differs in network
speed of accessing the particular website.
7. CONCLUSION
Web-based information systems are important in society today, however most of literature study
with the systems development, technology and design. Little was conducted to studies from the
user service point of view.
The result in this study surprisingly shows that most of respondent are satisfied with the
overall performance of the MMD information service. The weather info that integrates with the
website are the most favorable that satisfies user need. Since the respondents are come from 3
different faculties, even then, they need to use the same information. The same problem appear
in this study which are expected from the beginning. The admin response to user and the
feedback from the website are the lowest score in level of satisfaction.
The Rasch model can convert a subjective measurement to objective measurement. This
is possible because the model converts ordinal data into interval data. Researchers who want to
use the Rasch model can do so using the program Winsteps. They should know how to interpret
the statistics, item person map, item measures and person measures. The Rasch analysis shows
pattern of satisfaction level for respondent from 3 faculties in UPM on using MMD online
services. The level of satisfaction relates to the performance of the website and its availability to
support multiple users at one time.
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References
Isakowitz, T., Bieber, M. & Vitali, F. (1998). Web information systems. Communications of
the ACM. (41) (7): 78-80.
Li, Y.N., Tan, K.C. & Xie, M. (2002). Measuring Web-based sevice quality. Total
Quality
Management. (13) (5): 687-99.
McMillan, S. J. (1999). Four models of cyber-interactivity, paper presented at the 49th Annual
Conference of the International Communication Association (ICA-99), San Diego, CA.
Scharl, A. (2000). Evolutionary Web Development. Springer-Verlag London, London.
Sullivan, J. R. & Walstrom, K.A. (2001). Consumer perspectives on service quality of
electronic commerce Web sites. Journal of Computer Information Systems. Vol. 41: 8-14.
Wang, H., Xie , M. & Goh, T.N. (1999). Service quality of internet search engines. Journal of
Information Science. (76) (3): 499-507.
Economic Crisis and its Impact on Job Motivation and Job Security:
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A Case of Banking Sector

Muhammad Jawad Iqbal(Corresponding Author)
Faculty of Management and Human Resource Development
Universiti Teknologi Malaysia, Malaysia
Mohammadghorban Mehri
Islamic Azad University of Ghorveh, Ghorveh, Iran
Abstract
In the current changing and competitive environment and to achieve the competitive advantage
satisfied human capital has become a strategically very important for the organizations. During
the past decade the financial crises has shattered the economic stability of different economies all
over the world. This research demonstrates how a global financial crisis has recently affected the
occupational and skill profiles of job in banking industry of Pakistan. On the basis of different
views of authors, a conceptual framework has been developed which determined the association
between the impact of global economic crisis and job motivation and job security. The research
gives a new insight into explaining the impact of global financial crises on employees job
satisfaction and security. This framework also investigated the impact on job motivation and job
satisfaction for the employees having both pre & post crisis job experience and on the
employees having only post crisis experience.
Key Words: Economic downturn, Global Crisis, Job Security, Job Satisfaction, Job Motivation.
1. Introduction
The economic crisis of 2007 presents substantial challenges. It has exposed the flaws in the
global economy operations all over the world and has developed a need to work for the reform of
international financial architecture. The impact of the global crisis on economy became visible
during the last quarter of 2008 when the real GDP growth rate starts showing downward trends.
Almost each sector in the economy, including financial/banking sector, which is the leading
sector, registered negative growth rates.
In the US, the financial downturn has created unprecedented challenges for the economy, it start
spreading its devastating impact on rest of the world. Financial sector, originally affected by the
financial crises, seemed immune to most responses, while policy tools and other fiscal stimuli
have been slothful to ascertain at least some stability in economies dealing with the spill-over of
the economic crisis into other sectors and a general economic slowdown.
The impact of the crises also engulfed the South Asian region. South Asia suffered a huge loss of
income between January 2003 and May 2008 from a severe terms-of-trade shock on account of
the surge in global commodity prices. The economy of Pakistan has also witnessed a period of
momentous instability and a deterioration of most macroeconomic indicators, as the slump in the
global economy prevailed.
2. PROBLEM STATEMENT:
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The crisis impacted firms at the micro level. This research will be conducted to find out the
effect of economic down turn on the job security and motivation of employees working in the
financial sector in Pakistan. The existing literature supports the view that the sensitivity of
employee motivation and job security level magnifies during economic downturn. Previous
studies conducted by Opler & Titman, (1994); Kien (2006); Malcolm, Liou (2007) has also
supported this relationship. Present research work is to apply the model in the context of
Pakistans financial sector.
3. OBJECTIVE:
3.1 Main objective of the research will be to study the
Impact of economic downturn on Job Security
Impact of economic downturn on Job Motivation
3.2 To find the underlying causes of sensitivity of employee satisfaction level to financial
crises.
4. SIGNIFICANCE OF STUDY:
In the current global economic scenario, virtually few research studies have been conducted on
the dimension of job security and job motivation in the context of economic downturn. The
current study will be conducted to find out the relationship between economic distress &
employee satisfaction of banking sector industries of Pakistan during the economic crises. This
study is important to company employees as it will show how the economic/financial crises can
disturb their jobs.
5. LITERATURE REVIEW:
The Global Economic Crises has an effect on all the regions of the world. It is evident from the
past that a crisis has always created problems for all the sectors of the economy and negatively
affected the performance of the industries.
The relationship between economic distress and employee performance has been examined in
various studies during diverse periods of economic downturn, recession or crises. In a study
conducted by the researcher Claessens, to test the relationship between economic distress and
employee performance during the Asian Economic Crisis of 1997-1998, he studied eight East
Asian economies using a sample of 277 firms. The study was meant to test the endogenous
issues between employee performance and leverage and see if firms with a low financial
leverage have a tendency to outperform with high financial leverage. When hit by an exogenous
shock, the high-leverage firms experience worse performance relatively. Thus financial leverage
is used as a proxy for economic distress, and the results suggest that economically distressed
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firms under perform. His results supported the hypothesis that leverage has an impact on
economic distress of firms.
Similar studies have been conducted on a regional basis, and in a report compiled by the World
Bank, the impact of Asian economic crisis has been studied pertaining to its effect on Malaysian
Production Industry. In the result of the survey conducted, it was observed that all the firms
faced a reduction in output resulted in reduction in employment level. Another study by United
Nations Economic and Social Council Economic Commission for Africa discussed about the
impact of economic crises on Africa.
The impact of economic distress on the employees performance has been tested. The study
conducted by Bergstrom and Sundgren (2002), has negated this relation in light of restructuring
of the firms. According to Bergstrom and Sundgren, the effects of economic distress on
employees are negligible. They further studied the changes in performance after the
reorganization of firms along with the costs and benefits of economic distress on Swedish firms
and found no significant impact on employee after reorganization.
Various models have been used as proxy for employees satisfaction and determining its relation
with economic distress. One such study has been conducted by Sori (2006), to test the
employees satisfaction in economically distressed firms in Malaysia due to the Asian Economic
Crisis of 1997. He made use of Multiple Discriminant Analysis (MDA) to ascertain the
discriminating power of the variables, particularly to test the corporate distress for Malaysian
companies. John, in his article presented a model to manage economic distress. Mechanisms to
deal with economic distress involved restructuring the financial contract, asset restructuring,
private debt restructuring. Another model of financial restructuring used was, to raise additional
current liquidity by issuing new financial claims against future cash flows generated by the
assets, which may avoid or reduce premature liquidation of these assets.
Additionally, it was observed that economic distress did not obstruct the satisfaction level of the
employee, which was as efficient prior to reorganization as after, and that the economic distress
is not particularly costly in the sense that it may affect the performance of firms.
Studies conducted by Bergstrm and Sundgren (2002), have negated this relation in light of
restructuring of the firms. According to Bergstrom and Sundgren, the effects of economic
distress on employees satisfaction level are negligible. They further studied the changes in
performance after the reorganization of firms along with the costs and benefits of economic
distress on Swedish firms and found no significant changes in performance after reorganization.
Additionally, it was observed that economic distress did not obstruct the performance of the
employee, which was as efficient prior to reorganization as after.
Several models have been designed to test the potential failure of countries during the economic
crisis. One such study has been conducted by Sori (2006), to test the economically distressed
firms in Malaysia due to the Asian Economic Crisis of 1997. He made use of a model, which he
developed to test the corporate distress for Malaysian companies. The study found that the final
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variables used in the model and the variables which have been used by most of the researchers
are strongly correlated.
Another study by United Nations Economic and Social Council Economic Commission for
Africa discussed the impact of economic crises on Africa. It was observed that the crisis has
affected all the economies of the region irrespective of their economic condition; either they are
rich, poor having fragile political conditions, small or large economy or oil or non-oil producing
and exporting country.
In the study conducted by Smith & Liou (2007), the impact of economic sector in response to
economic distress is analyzed. As a matter of evidence, several studies have proven the negative
impact caused by the economic distress on employee job motivation and job security level. Sori
(2006) noticed a strong relationship between the final variables in the prediction model. Further
studies have also proven similar results.
Another study has focused on the economic crises & how does the firms can rectify the situation.
This study is conducted by Kose John (2007). This article presents a model to manage economic
distress, mechanisms to deal with economic distress involve restructuring the financial contract,
asset restructuring, private debt restructuring.
The purpose of this research was to analyze the impact of economic crises on the job motivation
and job security of financial industry, using regression statistical methods. The relationship
between economic distress and employee performance has been examined in various studies
during diverse periods of economic downturn, recession or crises. This research will be
conducted to check the impact of Economic Crises on the job security and job motivational level
of firms employee as per following model
Job Motivation
Economic Crisis
Job Security
Figure: 1. Model presenting economic crisis impact on job motivation and security
6. METHODOLOGY:
For this research the data used will be gathered through constructive questionnaires, distributed
to middle and lower management as well as the lower level employees of financial sector in
Islamabad.
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The method of data collection for this research will be through a constructive questionnaire
distributed to the employees of financial sector in Islamabad. 165 questionnaires will be
circulated among employees. The sample will comprise of 94 respondents. All the banks in
Islamabad/Rawalpindi will be short listed; questionnaires will then be distributed by hand to
employees and managers of short listed banks. The employees and managers of few banks will
be personally interviewed with the aim to investigate the impact of economic crises on the
employees job motivation and job security.
The questionnaire1 developed will consist of 8 questions each having a scale of 5 possible
outcomes. Following will be the research questions used in conceptual framework,
6.1 HYPOTHESIS
Ho1:
Ho1:
Economic Crises has a negative impact on the employees job security.

Economic Crises has negative impact on employees job motivation.
6.2 VARIABLES
Independent Variable: The Economic Crises (EC) in banking sector.
Dependent Variable:
i)
ii)
Impact of EC on Employees Job Motivation.

Impact of EC on Employees Job Security.
7. ANALYSIS:
Data has been analyzed electronically by using SPSS. Regression analysis was conducted.
Table. 1
Impact of Economic Crisis
Job Motivation Level
Questions
Bands
1 (No
Impact)
2 (Low
Impact)
3( Some
Impact)
4 (High
Impact)
5 (Very High
Impact)
Q1
7%
13%
25%
38%
17%
Q2
8%
20%
14%
36%
22%
Q3
15%
20%
13%
23%
29%
Q4
4%
11%
32%
24%
29%
Q5
2%
10%
14%
36%
38%
Total
7%
15%
20%
31%
27%
The impact of the financial crisis on labor in the civil aviation industry by Dr Geraint Harvey &
Professor Peter Turnbull
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Table 2.1 demonstrates the impact of Economic Crisis on banking employees Job Motivation,
who have been working in pre-crisis and post crisis as well. Table 2 results represent the
tendency of employees motivation. The results shows this perception as, 7% employees
consider that economic crisis has no impact on motivation level, 15% consider that the impact is
low, 20% were of the opinion that to some extent the crisis impacted the motivation level,
according to 31% this impact is high and 27% were of the opinion that the economic crisis has a
very high impact on motivation level. These results are derived through bands assigned to the
questions regarding Job Motivation.
Table 2
Job Security
Questions
Bands
1 (No
Impact)
2 (Low
Impact)
3( Some
Impact)
4 (High
Impact)
5 (Very High
Impact)
Q6
12%
14%
13%
31%
30%
Q7
9%
11%
18%
25%
37%
Q8
11%
10%
22%
37%
20%
Total
11%
12%
18%
31%
29%
Table 2.2 is consisting of 3 questions regarding Job Security showing the impact of global
economic on banking employees, who have been working in pre-crisis and post crisis as well.
Table 2.2 results shows this perception as, in the opinion of 11% employees economic crisis has
no impact on job security, 12% consider this impact to be very low, 18% thought that it has some
impact, whereas, 31% were of the opinion that crisis has affected the job security level highly
and 29% consider this impact very high. These results are derived through bands assigned to the
questions regarding Job Security.
IMPACT ON EMPLOYEES HAVING POST CRISIS EXPERIENCE
Table 3
RESPONDENTS HAVING EXPEREINCE OF POST CRISIS ENVIORNMENT
Job Motivation
Questions
Bands
1 (No
Impact)
2 (Low
Impact)
3( Some
Impact)
4 (High
Impact)
5 (Very High
Impact)
Q1
21%
38%
30%
10%
1%
Q2
18%
46%
28%
8%
0%
Q3
26%
23%
36%
9%
6%
Q4
40%
20%
32%
6%
2%
Q5
40%
32%
14%
12%
2%
Total
29%
32%
28%
9%
2%
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Table 3.1 is showing 5 questions regarding Job Motivation showing the impact of global
economic crisis on banking employees, who have started working after the crisis. Table 4 results
shows this perception as, 29% employees thought that economic crisis has no impact on job
motivation, 32% thought the impact is very low, 28% thought that the economic impact has
somewhat affected the level of job motivation of the employees who joined the sector after the
crisis, 9% thought that the affect is high and 2% thought it very high. These results are derived
through bands assigned to the questions regarding Job Motivation.
Table 4
Job Security
Questions
Bands
1 (No
Impact)
2 (Low Impact)
3( Some
Impact)
4 (High Impact)
5 (Very
High
Impact)
Q6
12%
29%
14%
17%
28%
Q7
17%
17%
40%
14%
12%
Q8
14%
20%
40%
14%
12%
Total
14%
22%
31%
15%
17%
Table 3.2 is consisting of 3 questions regarding Job Security showing the impact of global
economic crisis on banking employees job security, who have started working after the crisis.
Table 3.2 results shows that 14% employees thought that economic crisis has no impact on job
security, 22% thought the impact is very low, It was thought that the economic crisis has some
effect on job security by 31% for the employees who joined the sector after the crisis, 15%
thought that the affect is high and 17% thought it very high. These results are derived through
bands assigned to the questions regarding Job Security.
8. RESEARCH FINDINGS
The information gathered has been used to evaluate different scenarios. Based on the findings of
this research study, the following repercussions have been drawn regarding the impact of global
economic crisis on banking sector employees of Pakistan.
The employees who worked in both scenarios i.e. before crisis and after crisis environment have
strongly feels that the crisis has affected their motivation level unsatisfactorily. The employees
who worked in both scenarios i.e. before crisis and after crisis environment feel strong threat to
job security. On the other hand the employees having only post crisis job experience had shown
satisfactory results as they didnt work in a pre-crisis environment. Therefore, their response was
positive regarding job motivation and job security.
The employees join the bank after merger are satisfied with the security and are highly motivated
as well because they are not looking any threat in the near future therefore, they feel themselves
motivated and satisfied.
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9. DISCUSSION & RECOMMENDATIONS

The current research focused on exploring the impact of global economic crises on Job security
and Job motivation of banking sector employees. The global crisis reduces the job security which
resultantly reduces the job motivation. The employees in the banking sector are highly motivated
and dedicated towards their job if they find their job secure and long lasting. Job security is
observed to be the important ingredient for keeping an employee loyal, affiliated and motivated.
The success of the financial sector depends on the policy strategy developed for the human
resource. As pointed out by Ehasan, Danish & Usman (2010) that in the banking sector,
employees attachment with their organization is increased if they found their parent organization
supportive and protective. Therefore, this study also supports the findings of Ehasan, Danish &
Usman (2010).
The result of this study also support the findings of Joseph & Chang (2010; pp. 151) that
interesting work; good pay; full appreciation of work done and job security are outstanding
drivers for employee motivation. Employees will feel highly affiliated and try to be the part of
their organization if their organization is providing them secure and long term job opportunities.
Generally, the banking sectors outlook depends on the policies which it adopted in response to
the economic crisis. Due to the global impact of the crisis, it is imperative to take corrective
measures in the form of bail out packages and global coordination to break the vicious circle of
failing capital market, increasing job losses, drying-up of credits and rapidly declining
confidence that decreases the output and lowers the employment, which resultantly reduces the
confidence.
Policy reforms are required to stabilize the banking sector and reestablish the confidence on the
market. Moreover, macroeconomic measures are also required to be taken to improve the overall
demand, in order to support the economy and job market. To soften the negative impact of the
crisis on incomes, a social support system is needed to be reinforced by introducing workers
rights protected laws and regulations. These steps are necessary to measures are essential to put
the economy on the right track and for the betterment of the banking sector.
10. LIMITATIONS & FUTURE RESEARCH
o In the current condition of banking sector the respondents are very reluctant to respond the
questionnaires.
o A limited set of parameters have been used to define the motivation and security level,
although the research had got support from the findings, however, detailed parameters would
have put forward the significant facts. For this purpose a comprehensive research is proposed
to be conducted.
o Apart from above the Time Factor was also one of the limitations for this study.
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References
Afshan
S. (2008) Pakistan and the global financial crisis. Retrieved from

http://www.dawn.com/2008/02/04/ebr17.htm
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John, K. (2007) Managing financial distress and valuing distressed securities: a survey & a
research agenda , financial management journal / autumn 1993.
Mansoor, A. (2009). Global Financial Crisis: Impact on Pakistan and Policy Response. Retrieved
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Ehasan, M. Danish, R. & Usman, A. (2010): Impact of Job Climate and Extrinsic Rewards on
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Contemporary Research in Business, Vol. 1, No. 12, pp 125-139
The World Bank Report (1997) The Asian financial crisis impact at the firm level - the
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case
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Assem, Reda & Hatab (2008). Egypt within the Framework of the Global Financial Crisis:
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Jenny, F. (2009). Responses to the economic and financial crisis in developing countries: what
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Malcolm, S. Dah-Kwei, L. (2007). Industrial sector and financial distress, Managerial Auditing
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Firms
during
the
Asian
Financial
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Joseph, K. E. & Chang, J. D. (2010): Human Resources Motivation in a work place. A Case
Study of a Utility Company in Abidjan, Cote D Ivoire. Interdisciplinary Journal of
Contemporary Research in Business, Vol. 1, No. 12, pp 151-159
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Explaining Cross-Country Differences in the Output Impact. The IMF Working Paper
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Global
financial
crises:
Impact
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The Role of Good Governance in Fighting Against Corruption and Financial Crimes
Freyedon Ahmadi
Public management Department, Payame Noor university, 19395-4697 Tehran, I.R. of IRAN
Golamhosain Homauni
Abstract
Good governance in a new model for sustainable development. In this model there is an
emphasis on cooperation based on participation and the interaction between government, private
sector and the civil society so that countries can utilize all their capabilities for an all-out
development.Apart from expressing definitions and concepts on good governance offered by
valid international organizations and institutions, this paper articulates the relationship between
governance and corruption in domestic and international arenas. Moreover, this paper makes
mention of the capacities and adopted measures by the Islamic Republic of Iran in order to
establish good governance and combat money laundering and other financial crimes.
Key Words: Good Governance Financial Crimes Corruption Accountability Voice Rule
of Law Control of Corruption Public Management Deregulation Money Laundering
Introduction
Although new, one of the most important subjects which has been paid attention to in the
development literature since 1980's is the theory of "Good Governance". This theory is raised in
the area of micro economy and is one of the main subcategories of institutionalism. The
institutionalists consider inappropriate institutions as the reasons of un-development. In their
view, good governance strengthens the mechanisms of resource allocation through market by
reforming the institutions. Transparency, accountability, flexibility, envisaging the later
situations and rule of law are the signs of good governance which can create social solidarity and
increase the legitimacy of the government and economic growth and prepare the ground for
sustainable development. Of course reforming institutions and making basic changes in the way
and methods are the prerequisites of achieving these goals. Such changes are very timeconsuming and need long-term commitments from the high-ranking authorities of a country as
well as their profound wisdom and support to bear fruits.
Considering the characteristics of good governance, we may therefore say that corruption
(nepotism and bribery) is a characteristic of bad governance which tarnishes the principle of no
discrimination in the enjoyment of all the walks of life of the facilities and opportunities and
ruins the participation of all the beneficiaries in managing the society and causes lack of
accountability. Basically, corruption and good governance are in contrast to one another and do
not interact effectively. In other words, good governance reduces corruption through raising
awareness the knowledge of the public and strengthening anti-corruption laws. Moreover,
corruption undermines the abilities of good governance and prepares the ground for deviations in
decisions and implementation of policies.
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1- Definitions of Good Governance

A- The World Bank defines good governance according to six characteristics2:
1- Democratic Voice and Accountability
2- Political Stability, No Violence
3- Government Effectiveness
4- Regulatory Burden
5- Rule of Law
6- Combating Corruption
From this viewpoint, governance can be divided into the following six components organized
under three general categories:
a) Voice and accountability which includes civil freedoms, press freedoms and political stability.
b) Government effectiveness which involves the quality of policy making and public services
and the paucity of legal hindrances (lack of regulatory burden)
c) Rule of law which involves protection of ownership rights, judicial independence and
corruption control.
Therefore analyzing the subject (governance) gives us the conclusion that corruption is one of
the six components closely associated with governance.
B- The officials of International Monetary Fund (IMF) attach a great value to the observance of
the above-mentioned items in granting monetary, counseling and technical aid to the member
states. In this line, IMF considers "financial and monetary transparency" as the prerequisite to
enhancing accountability3.
C- The following figure shows the major characteristics for good governance according to
United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP):
Figure 1: Characteristics of good governance (UNESCAP, 2002)

The concepts presented in the figure can be expounded as follows:
2
3
- http.//info.worldbank.org/governance/kkz2002/tables.asp
- http.//www.imf.org/external/np/exr/facts/gov.htm
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Accountability: Not only governmental institutions but also the private sector and civil
society organizations must be accountable to the public and to their institutional
stakeholders.
- Transparency: Transparency means that information is freely available and directly
accessible to those who will be affected by such decisions and their enforcement.
- Rule of law and following it: Good governance requires fair legal frameworks that are
enforced impartially. It also requires full protection of human rights, and strong judicial and
security systems so that it can enforce the laws impartially and efficiently.
- Participation: the voice of the public needs to be considered in decision makings. In other
words all the people concerned must participate either directly or indirectly in decision
makings. Of course, in order for this objective to be materialized, the citizens first needs to
practice participation and gradually an organized civil society need to be formed and basic
freedoms like freedom of speech and communities should be guaranteed beside such a
society.
- Responsiveness: Good governance requires that institutions and processes try to serve all
stakeholders within a reasonable timeframe. This can happen if the said institutions are
responsive and sensitive to the demands, expectations and needs of the individuals and
groups.
- Consensus oriented: Good governance requires mediation of the different interests in
society to reach a broad consensus in society on what is in the best interest of the whole
community and how this can be achieved. Such governance must provide all individuals and
groups with opportunities.
- Effectiveness and efficiency: Good governance means that processes and institutions
produce results that meet the needs of society while making the best use of resources at their
disposal. The concept of efficiency in the context of good governance also covers the
sustainable use of natural resources and the protection of the environment.
- Equity and inclusiveness: A societys well being depends on ensuring that all its members
feel that they have a stake in. This requires all groups, but particularly the most vulnerable
ones, have opportunities to improve or maintain their well being.
D- United Nations Millennium Declaration (2000) invites the countries of the world to respect
human rights, promote democracy and good governance including effective and efficient
national management.
In this declaration certain goals have been set as the Millennium Development Goals (MDGs)
which must be achieved by 2015. Good governance is deemed as the necessary condition for
achieving any of the MDGs: eradicate extreme poverty and hunger, achieve universal primary
education, empowering women, reduce child mortality, improving the health conditions, combat
HIV/AIDS, malaria, and other major diseases, ensure environmental sustainability and develop a
global partnership for development.
According to the above definition, confronting the challenges and opportunities caused by
globalization and advancements made in IT and communications requires a proper interaction
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between the government, private sector and the civil society. Good governance shows how the
government, market and the institutions of the civil society can interact properly4. In this
regard, the participation of people in governing and the transparency of the measures of the
government are among the basic factors contributing to the fulfillment of good governance.Each
valid international authority has defined good governance or determined characteristics for it
according to its point of view. Having examined the afore-mentioned definitions and
characteristics and their applications we can clearly announce that the foremost characteristics of
good governance are:
- Respect human rights
- Promote democracy
- Political stability and no violence
- Rule of law
- Quality of rules and regulations
- Right to have a voice
- Flexibility
- Identifying the future situations
- Effectiveness and efficiency
- Establishment of proper interactions between the government, people and the institutions of
the civil society
- Participation in international affairs
Although each of the above characteristic has its own weight and importance, there is no doubt
that they play a role in the fulfillment of good governance. One characteristic that has not
received attention by international authorities is the role that universally-accepted moral and
cultural values play in the fulfillment of good governance. There have been various researches
conducted on this subject in different countries and it has been proven that morals play an
effective role in combating corruption and, consequently, in the fulfillment of good governance.
A good example is the researches conducted by Hong Kong's Organization for Combating
Corruption with the cooperation of a UK university.
B) The impacts of governance on economic growth and development5
MENA Development Report refers to the impacts of good governance on economy through the
three following ways:
1- Reducing the freedom of unconstructive or deviatory policies:
Good governance minimizes the effects of distributor policies by providing the proper
mechanisms and, ultimately, prepares the ground for the enforcement of favorable economic
policies for economic growth by obliging the politicians and bureaucrats to be responsive.
2- Improving the performance of administrative system and reducing the costs of trade and
industrial enterprises:
4
5
- 6TH Global forum on Reinventing Government- May 2005,Seoul,Korea

- MENA Development Report.2003
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A responsible and competent administrative system provides the ground for the easiness and
reduction of costs of enterprises in starting, doing and exiting trade and industrial affairs by
offering correct and timely information and, eventually, enhances the accuracies of predictions.
In addition, good governance increases the flexibility in the country against external shocks and
quickly heals institutions and enterprises against regional crises.
3- Promoting the administration of public services and improving efficiency:
The performance of enterprises in a trade atmosphere depends upon satisfactoriness, timeliness
and fair supply of public goods as well as on the efficiency and execution of the needed statutes
(competition rule and regulation of natural privileges, taxes and similar policies).
Good governance enhances the global trade, investments and the government credibility. The
increase in the credibility of the government, in turn, results in promotion of the government's
legitimacy and economic solidarity and growth6.
Good Governace
Increase in the Government's Credibility
Increase in the Government's Legitimacy
Social Solidarity
Economic Growth
Since this paper is entitled "The Role of Good Governance in Fighting against Corruption
and Financial Crimes", I would like to refrain from delving into other governance-related
issues and stay focused on the subject of this paper only:
1- The Relationship between Governance and Corruption
Corruption is generally defined as abusing governmental positions for serving personal interests.
Irrespective of issues related to the classification of corrupt or non-corruptive activities and
without getting into the details of different types of corruption, it can be said that the live and
routine reports by the press and the daily conversations of the people can determine the
boundaries of corruption.
- Matheson, Alex (2002),Better Public Sector Governance: the Rationale For Budgeting and Accounting Reform in
Western Nations, OECD journal on Budgeting, volume 2,
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Governance can be defined as exerting authority through traditions and informal and formal
institutions in order to serve the interests of the public. Governance involves the process of
election, review and replacing the governments and also the ability of drafting and enforcing the
correct policies and dignifying the citizens and institutions that make the economic and social
interactions possible.In addition, governance affects welfare and quality of life through direct
and indirect complex channels. Improving one of the components of governance such as political
and civil freedoms, even when other social-economic factors remain the same, can directly
promote the quality of the lives of the people in a country. Therefore, governance can be deemed
as one of the direct institutions for the well-being of people. Hence, a competent and clean
government, through direct and indirect mechanisms, is an important factor for enforcing and
perpetuating the healthy economic and institutional policies, developing human resources and
eradicating poverty.
2- The Effects of Corruption on Economic Indicators, Growth and Development
A) Market Competitiveness and Economic Growth:
Right now everybody has accepted that corruption has heavy costs for economic development.
There are strong proofs indicating the relationship between the higher levels of corruption and
slower growth and lower income per capita.
- Corruption is one of the hindrances on the path of people trying to enter commerce,
production and agriculture activities. Of course other obstructions like the existence of
complexes and restrictive rules and other monopoly privileges can give entrepreneurs cold
feet and dissuade them from starting businesses.
- Corruption weakens the legitimacy of the government and prevents the creation of
regulatory and institutions supporting the market.
The World Development Report 1997 expresses three root causes for corruption:
1- A changing political environment providing the governmental officials with many
opportunities so that they can alter the laws to their own advantage.
2- The lack of authority and credibility of the Judiciary in punishing the governmental officials
in case their corruption is uncovered.
3- Weak management of administrative system coupled with low salaries paid to government
employees.Recent researches consider others factors as effective in corruption; researches such
as The World Development Report 1997 by the World Bank starting that corruption is less in
those countries enjoying more open international trades. Increasing the openness of economy
also facilitates the flow of information, exposes the incorrect behaviors of the officials and
creates advocates for combating corruption among foreign trade partners.
Studies also show that countries with complicated procedures for registration of new businesses
have more corruption, for complicated rules increase the chances of corruption. On the other
hand, a corrupt bureaucracy supports the rules and regulations which create more opportunities
for corruption. The effects of inflation on corruption become meaningful in such a framework. A
high and changing inflation makes it difficult to acquire information on prices and creates many
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opportunities for corruption to arise in governmental transactions sector. Moreover, studies

conducted internationally have determined that when other factors affecting corruption remain
fixed, the countries with a high and changing inflation have more corruption.
B) Decrease in Investments
Evidences found in the studies and analyses of the situation in a large number of countries are
indicative of the fact that corruption greatly decreases domestic and foreign investments7.
C) No Optimal Allocation of Public Spending
Corruption creates opportunities for deceitful officials to abuse their positions by increasing the
expenses of public investments. It also deviates the direction of public spending from activities
needed for operating and maintaining the installations to buying new equipment. This way, it
reduces the efficiency of public investments especially in infrastructures. In a corrupt regime, the
government officials avoid implementing health projects, because there is less chance for them to
engage in rent seeking. Since it renders blows to the ability of the government in collecting taxes
and tariffs, corruption can also reduce the income generated by taxation.
D) Effects on the Poor
Wherever corruption becomes rife and rampant, growth is harmed and this severely exacerbates
poverty. Furthermore, the poor receive less social services (like education and health).
Corruption puts a distance between infrastructural investments and projects aimed at helping the
destitute and destroys the possibility of using entrepreneurship tools in small-scale enterprises for
uprooting poverty. Besides, corruption increases infant mortality and decreases longevity and
literacy.
E) Effects of Corruption on Trade and the Infiltration of Companies into National Governance
One of the common justifications prevalent in economy literature is that bribery aimed at
circumventing incorrect governmental controls is similar to that of informal deregulation and can
have positive effects like economic briskness and serve as incentives to economic activities
(Huntington, 1968, Leff, 1964, Lui, 1985). This view that is interpreting bribery as lubrication of
the wheels of trade can be correct in a very limited context and only in concept and only when
bad rules have been in place independent of the behaviors of government officials. Anyway, the
corruption of government and public officials imposes detrimental costs on the development of
business.
In light of the above-mentioned items, the main and effective factors in the rise of financial
corruption can be summarized as below:
1- Changing political environment
2- Lack of authority and credibility in the Judiciary
3- Weak management of administrative system
4- Limitation of economic interactions and lack of expansion of international trade
5- Limitation in having access to information
6- Complicated rules
- Maura 1997, Wei 1997. Governance and Anti corruption (chapter 6), page 144-145
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And a number of important channels through which corruption can weaken the economic growth
are as follows:
1- Decrease in domestic and foreign investments
2- Development and growth of businesses in informal economy such as underground dealings,
goods and foreign exchange smugglings, narcotic transactions
3- Imbalance between costs and public investments and destruction of infrastructures
4- Reduction of incomes and the lack of rule of law
5- An over-concentrated government
6- infiltration of the elite and owners of commercial companies in the government by bending
the rules and paying bribes to government officials which itself reduces productivity and
investments in the generative sector of the society.
The governance frameworks to fight corruption and their relations with political, executive and
financial-monetary sectors as well as independent oversight institutions and the private sector
have been explained very well in figure 2. As seen in this figure, transparency as an important
and fundamental cross-cutting theme plays a critical role in all measures of good governance and
in combating corruption.
Measures by I.R. Iran in line with fighting corruption, financial crimes and
good governance
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The Constitution and normal laws of the Islamic Republic of Iran enjoy high capacities for
fulfilling good governance. Having utilized such capacities, Iran is now placed on a path to
independent, democratic, and justice-seeking governance in various economic and social fields
among which we can mention the following:
1- The study is done Constitution emphasize political and social freedoms, freedom of opinion,
voice, freedom in decision making, staging free elections, freedom of minorities, press and
unions. These way different political and civil freedoms are institutionalized in the management
of the public affairs of the country.
2- With regards to economy, article 46 of the Constitution, too, considers people as owners of
their legitimate businesses. Moreover, article 44 of the Constitution divides the economy of Iran
into three sectors: state, private and cooperative. This article considers ownership in any of these
sectors as legitimate. Furthermore, article 59 of the Constitution offers the ways of referendums
in extremely important economic, political, social, and cultural matters and underscores the
importance of people's participation in policy makings and decisions in these areas.
3- Article 101 of the Constitution provides for the participation of all walks of life in decision
makings related to economic matters and activities by forming councils.
As it can be seen, the existence of the aforementioned legal capacities and other correctional
measures in different sectors of the economic system (monetary and financial) as well as paying
attention to the creation of an efficient private sector can help the ruling system in Iran to bridge
the gap between the rich and the poor and contribute to the creation of a democratic working
environment and provide proper pillars for proper and rational decision makings. Moreover, it
can create an environment devoid of corruption for economic activities in the society. Here some
of the most important measures adopted in the area of lawmaking, institution making and
implementation of amendments in the monetary and financial system are mentioned:
A) Legislature:
1- The law of combating money laundering was ratified by the Iranian parliament on January 30,
2007. In article 2 of this law, money laundering is defined and in article 9 of the same law,
punishments are envisaged for it.
2- The legal bill called "promotion of the health of administrative system and confronting
corruption" has been submitted to the parliament and is now going through its final stages. Some
of the items mentioned in this bill are:
a) emphasizing transparency in activities and projects undertaken by the government and
disseminating the relevant information to the public, meaning that the people need to be
informed of all the rules and regulations, directives and circulars, procedures, decisions, working
processes, timetables of undertakings, standards, criteria and indicators via the internet.
b) Drafting of the charter of professional ethics for the brokers by the government.
c) Using non-governmental institutions and empowering them in combating corruption by
creating proper mechanisms for encouraging people and offering facilities for the establishment
or reinforcement of non-governmental institutions.
d) Creating databases on offenders (governmental or private entities)
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e) Creating a new and proportionate structure for detection, prosecution, and timely punishment
of economic/financial offenders and preparing appropriate rules of procedure as well as creating
databases for managing files and convicts' verdicts.
3- A bill has been prepared for supporting witnesses and informants. Moreover, paragraph 4 of
article 17 of the "promotion of the health of administrative system and confronting corruption"
law, has completely envisaged the supportive measures for spiritually and materially supporting
those who report corruptions. The implementation of these measures is the duty of the
government. It has to be mentioned that the said bill has been prepared in line with article 32 of
the UN Convention against Corruption.
4- Right now the bill of I.R. Iran's joining UN Convention against Corruption is going through
its final stages in the Judiciary.
5- Ratification of the law of holding tenders and related statutes including documentation statutes
which provide the public with the chance to have access to the respective database.
6- The law of publishing the names of those who have committed economic/financial offences.
7- issuance of circulars which make government managers and those directly in charge of a unit
duty-bound to effectively supervise their units and to inform the administrative , disciplinary and
judiciary authorities of any possible violations and offences and to establish a system of
incentives and punishments in their units.
8- Ratification of the law of "civil services management". This law which is an advanced law in
which these items are emphasized: the development of management and human assets in
governmental sector, supplying the rights and bonuses of the public sector employees and
development of IT and administrative services. According to this law, the government is obliged
to offer strategies for providing people with high-quality and appropriate services, to fulfill and
maintain the general rights in the administrative system and to thoroughly supervise the way
officials are appointed or promoted in organizations and to ensure the principle of granting posts
to people based on their merits and competence.
9- in line with creating economic institutions, preparing the ground for development and growth,
creating occupations, making the environment of macro economy healthy, and preventing rent
seeking and corruption in monetary-financial areas, the I.R. Iran has ratified and carried out
various laws some of which are succinctly mentioned below:
9-1- amending the law of foreign investments and attracting them.
9-2- amending the law of the general auditing of Iran for governmental companies.
9-3- amending the law of direct taxes in order to force all entities to submit their list of incomes
and expenditures and creating strong guarantees for the true statements and increasing the risk of
false ones.
9-4- ratification of the laws related to capital market including the law of establishing stock
exchange in order to ban the use of information before it is publicly announced and in order to
ban deals of brokers and bourse staff.
9-5- amending the law of the non-interference of ministers and civil servants in governmental
and civil transactions.
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9-6- the bill against monopoly and rent seeking.

9-7- the bill of judicial assistance in the field of exchanging taxation and customs information.
9-8- amending the laws supervising foreign commerce and changing non-tariff hindrances and
deleting the system of issuing permits as one of the most important brewing grounds for
corruption.
9-9- the law of intensifying the punishments for bribery, embezzlement, and swindling in order
to increase the risk and legal capacities for confronting those who commit corruption.
9-10- the law of combating smuggling goods and foreign currency.
9-11- the bill of amending some articles of the trade law.
9-12- the plan for looking into the properties of the authorities, officials, and brokers of I.R. Iran.
10- The bill of the freedom of information and regulation related to the capital market.
11- the law of ban of receiving commissions in foreign transitions made by the three branches of
the country (Legislative, Judiciary and Executive), governmental organizations and companies,
armed forces, revolutionary institutions, municipalities and all other affiliated organizations.
12- The law of obligating the judiciary to hold the open hearings of economic crimes and to
release the names of economically corrupt entities.
13- Statutes of prevention and combating bribery in executive organizations.
B) Supervision and Oversight:
1- I.R. Iran's General Inspection Organization was established the basis of article 174 of the
Constitution and on the right of supervision by the judiciary on the" good conduct of affairs" and
"proper implementation of laws" by the administrative departments, under the supervision of the
Head of the Judiciary. Intent on pursuing its legal mission, this organization does a series of
organized and targeted actions as supervision and ombudsmanship during which the way
administrative organs discharge their duties is examined and the possible deviations are dissected
and their importance appraised so that required proposals may be submitted for rectifying the
status quo , removing the shortcomings and optimizing the behaviors of the employees and
enhancing the performances of organizations, and ultimately, the violators are prosecutes in
order to reform and promote the healthiness of administrative system.
In this regard the General Inspection Organization has chosen the following as the pivots of its
oversight and supervisory programs:
Promoting the satisfaction of the people with the way public organs administer their servicespreventing and combating administrative deviations and corruptions -preserving the environment
and natural resources preparing the lands and combating land grabbing- alleviating povertyestablishing social justice - safeguarding the Iranian identity promoting Islamic values and the
general culture of the society.
Furthermore, this organization has had vast programs with regards to supervising the way the
law of "holding tenders" is enforced and creating transparency in the related matters by obliging
organs to enter the information on tenders into a website called the "national information website
for tenders and auctions".
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the General Inspection Organization also examined 32845 cases in 2007 and has taken
significant steps in safeguarding the citizenship rights, preserving the environment, preventing
the grabbing of national lands and changing the agricultural land into housing and trade ones.
2- Iran's Supreme Audit Court and Article 90 Commission continuously exert financial control
and supervision and examine and audit funds spent and the revenues and other sources of
obtaining revenues in relation to the financial policies stipulated in the approved budget. They
also investigate complaints by real and legal entities and submit the final results to the parliament
or, if needed, to the judiciary authorities.
3- Currently, looking into and investigating economic crimes is done by courts and special
centers within the frameworks of special judicial processes. Some of the administrative
corruptions can be pursued within the framework of the law of investigating administrative
violations and its executive bylaws.
4- Throughout the year, the Parliament's expert committees examine the performance of
executive organs according to the information they receive on them. Also, the investigative
committees of the parliament which are formed based on article 76 of the Constitution can
receive the required information and give them to the members of the parliament or to public.
C) Other Measures
1- With regards to combating corruption, three books have been published by the Parliament's
center for research entitled "The Legal Frameworks of Battling Corruption", "A Series of
Programs for Combating Corruption", and "Guidelines for Implementing the UN Convention
against Corruption" in order to further familiarize the MPs with the concept of corruption and the
ways of combating it.
2- With regards to informing the public, one can mention the annual reports submitted to the
Parliament by the Supreme Audit Court which are read in the open session of the Parliament,
too.
D) Enforcing the General Policies of Article 44 of Iranian Constitution
(Privatization and Decentralization)
Over the course of the first decade after the victory of Islamic Revolution in Iran (1978-1988)
and due to the special economic and social conditions of Iran including the cultural remnants of
the dictatorial regime of Shah and the war imposed on Iran by Iraq, the trend of state interference
in affairs was accelerated and expanded. These conditions stabilized the administrative system
and increased state monopolies and centralization.
In this regard, the Supreme Leader of Iran acted in order to notify the state organs and sectors of
the policies stipulated by article 44 of the Constitution on May 20, 2005. His Eminence reiterated
that enforcement of these policies will ensure the acceleration of economic growth, expansion of
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public's ownership to fulfill social justice, promote the efficiency of economic enterprises,
optimize material, human and technology resources, increase competitiveness in formal
economy, increase the share of private sector and cooperatives in the national economy, ease
government's financial and managerial burdens in incumbency of economic activities, increase
the number and variety of occupations, encourage the people to save and invest their money and
improve the income of their families. All these components would ensure the remarkable
presence of the private sector and cooperatives in various fields (production, baking, insurance
etc.).
E) Enforcing the Plan of Revolutionizing the Monetary and Financial System of
Iran
Being totally aware of the existing shortcomings in the monetary and financial system in sectors
of taxation, customs, banking, distribution of services and goods and insurance sectors, the ruling
system in Iran has been engaged in carrying out various plans in the afore-mentioned sectors in
order to revolutionize them. It is hoped that with the precise and complete implementation of
these plans, Iran will witness ever-increasing growth and advancements, expansion of
competitive markets, proper and systemic business atmosphere for economic activists and the
fulfillment of justice for all the members of the society in the future. We also hope that we will
have better results in combating economic corruption.
Below, some of the most important plans and projects for revolutionizing any of the
subcategories of taxation, customs, banking, distribution of goods and services and insurance
sectors are briefly referred to:
- The operational programs of taxation system:
1- Basic database and financial operation of payers
2- Reforming the operational processes and systems
3- Hardware infrastructures and communications
4- Organizational structure and management of human resources
5- Rules and regulations (reforming the bases, rates and exemptions from taxes)
6- Value added tax
7- Envisaging the needed moderations according to economic changes
- The operational programs of customs system:
1- Developing electronic customs (the ASICODA project)
2- Improving the good value setting
3- Reforming the organizational structure of customs (the customs units preparation project)
4- Prompting the administrative health (the culture elevation and work ethic project)
5- Facilitating the customs formalities for goods
- The operational programs for revolutionizing the banking system:
1- Correct guiding of financial resources towards investment and production
2- Elevation of oversight in banking system
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3- Promotion of the effectiveness of banking system through e-baking, facilitation of affairs

and increasing the supervisions.
4- Establishment of expert financial institutions.
5- Moving the banking system towards the fulfillment of justice in having access to
resources.
6- Developing competitions.
7- Organizing and preparing state-owned banks for privatization
8- Establishment of banking system databases.
9- Preparing the grounds for effective implementation of rules of Islamic banking
10- Developing the praiseworthy tradition of giving interest-free loans to people in banking
and meeting the essential needs of people.
- The operational programs for reforming the distribution system:
1- The project of establishing information center for trade unions and merchants.
2- The project of organizing the good distribution system.
3- The project of establishing retailer chain networks.
4- The project of establishing civil unions.
5- The project of mechanized registration of buying and selling of houses and properties.
6- The project of national classification and coding of goods.
7- Strengthening oversights by NGOs (associations of supporting the rights of the
consumers).
8- Preparing the precursors of enforcement of regulations
9- Envisaging and implementing the special program for regulating the market considering
price corrections related to making he subsidies smart.
-
The operational programs for reforming the insurance industry:

1- Reviewing the insurance laws and identifying the legal vacuums and drafting and
ratifying new laws.
2- Creating competitions in the insurance industry based customers' happiness and
deliverance of appropriate and speedy services to the people.
3- Reforming the ethical systems of insurance industry and promoting the level of justice
and administrative health in the insurance industry.
4- Expanding the culture of insurance and improving the prevalence of insurance.
5- Developing life insurances in order to raise social welfare.
6- Increasing the involvement of the private sector in delivering insurance services.
7- Supporting the producers, investors and merchants through proper insurance coverage.
The Measures Adopted by I.R. against Money Laundering:
The issue of drug trafficking is one of the worst problems in Iran. Presently, the total value of
drug production in the easterly neighbors of Iran amounts to 10505.5 billion dollars (at the
wholesale price). This remarkable figure must be laundered so that it can legally enter the
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economy circle of those narcotics-producing countries. Unfortunately, Iran is geographically

placed on the transit route of narcotics whose destinations are mainly Europe and Russia. This
has imposed huge life and financial costs on the Iranian nation in a way that during the last two
decades, more than 1500 police forces stationed on the eastern borders of Iran have been killed
and many of their pieces of equipment have been targeted by the heavy weapons of drug
trafficking caravans and, as a result, have been damaged or destroyed.
Although the toppling of Taliban resulted in a temporary 1000-ton drop in the poppy cultivation
and production of opium and heroine in Afghanistan and Pakistan, the production rate increased
once again after a while. Consequently Iran is still being invaded by the operations of goods
smuggling and laundering of the dirty money coming from narcotics. This has posed serious
threats to the economic security of Iran.
Considering the money laundering law, the government of I.R. Iran has gained a comprehensive
understanding of the threats caused by the implementation of money laundering operations and
has taken advantage of the legal capacities provided by article 49 of the Constitution and also
article 662 of Islamic penal Code. The following measures are adopted by the government of
Iran in order to combat this financial crime which is undoubtedly the source of sponsoring other
crimes:
1- Ratification of the law of combating money laundering
2- Intensifying the oversight on the activities of the baking system and other money and credit
but non-banking institutes in order to prevent the investments by dirty money in banks and
national institutions of Iran or converting them into other financial tools or properties
3- Developing e-banking and obliging banks to make all their banking services electronic by the
end of the fourth economic-social-cultural development plan of I.R. Iran in line with expanding
the ground of registering and exchanging any money in Iran's service and commerce market.
4- Preparing the statute of combating money laundering by the Central bank of Iran and
supervising it through implementations in all state/private banks and credit institutes and offering
the required trainings to the staff of the monetary and banking system of Iran
5- Making the financial system of Iran sensitive to any activity resulting in money laundering
operation through:
5-1- making the taxation system of Iran capable for identifying the basic ways of avoiding taxes
5-2- making the customs system of Iran capable by developing electronic customs.
5-3- making the goods, services and subsidies system of Iran capable.
5-4- making the insurance system of Iran capable and implementing reform operations in this
industry.
Conclusions:
1- Combating corruption is one of the requirements of the fulfillment of good governance which
itself paves the ground for sustainable development, alleviation of poverty, economic stability
and social solidarity.
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2- Success in combating corruption needs a multi-faceted strategy and creation of checks and
balances system. Governments should not only make reforms in the political system including
political responsiveness, free elections and creation of transparency and legality in the way
political parties are sponsored but also act to make reforms in the following areas, too:
- Financial-monetary sector: including oversight on the banking network, controlling inflation,
taxation and customs reforms, privatization, deregulation, and creation of a competitive
environment for companies to be easily enter into or exit from businesses.
- Creation of oversight institutions: creation of an efficient and strong Judiciary, strengthening
the parliamentary supervisions especially in auditing (Supreme AUDIT Court), creating
transparency in managing public spending, creating national and regional ombudsman systems
and backing them with various applications in supporting and safeguarding human rights,
citizenship rights and preserving the environment.
- Supplying goods in the public sector: supervising the way goods are supplied and arranged
in the public sector (tenders and auctions) as one of the main brewing grounds for corruption in
the executive sector and also strengthening the principle of giving posts and positions to people
in accordance to their merits and competence and creating a service-oriented government
through e-government.
- Civil Society: strengthening civil institutions and NGOs, reinforcing the role of women in
managing social and public affairs and also promoting the role of media and the press and raise
the awareness of the society and reducing the corruption zero tolerance.
It has to be mentioned that, as it was referred to in the body of this paper, I.R. Iran enjoys
numerous legal capacities for developing civil and social liberties and enhancing the
participation of people in the decision makings of the society as well as in economic affairs and
activities. Considering the pieces of advice given by Hazrat Ayatollah Khamenei the Supreme
Leader of Iran on seriously battling corruption to the Heads of the three Branches of Iran to be
intolerant and unrelenting with regards to corruption and those who have committed corruption,
I.R. Iran has taken big steps in making laws in line with "promoting administrative healthiness
and confronting corruption" and making reforms and changes in the taxation, customs, banking,
goods distribution, services and subsidies system and insurance industry and is currently treading
such a path.
3- Developing countries must benefit from international experiences and stay committed to
international conventions including the UN Convention against Corruption. At the same tome
they need to adapt the existing anti-corruption models to their own historical background, history
and culture to achieve good governance.
4- international organizations such as World Bank, The International Monetary Fund and other
non-governmental organization like Transparency International which annually rate countries of
the world in terms of the rampancy of financial corruption and fulfillment of good governance,
must pay a closer attention to the responsibilities of governments in developing countries and the
role of multi-national corporations in spreading corruption in developing countries. They must
pressure inversing companies in undeveloped regions especially in extractive industries so that
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hey would disclose the way they have concluded their agreements and release the precise
information on their projects and financial flows. They must oblige the governments of
developing countries to implement the anti-bribery convention of Organization of for Economic
Cooperation and Development (OECD). Needless to say, OECD countries are duty bound to
prosecute bribery-related crimes and offences in foreign countries by their companies.
5- Taking into the consideration the role the private sector plays as a partner in preventing and
combating corruption, the governments needs to adopt initiatives for promoting the
accountability of companies in combating corruption and creating ethical rules and selfregulations in line with extortion and bribery. They may use the mechanisms prepared by "the
Anti-Corruption Commission of the International Chamber of Commerce" or Global Compact of
UN.
6- with regards to money laundering as one of the main sources for sponsoring various types of
other offences, it has to be said that although some expert international organizations and
institutions such as UN, WB, IMF, OECD, ADB and G8 have prepared and drafted laws against
money laundering and have recommended all countries to adopt them, all the afore-mentioned
institutions and bodies confirm that money laundry is now more common in the world than ever.
There is this belief that international measures have utilized all the existing capacities and that
international organizations and developed countries must increase the volume of their financial
and technical aid to the countries on the frontline of combating money laundering, drug
trafficking and to those countries faced with terrorist attacks or other organized crimes.
7- It is of utmost importance to properly identify the signs of mal-governance in state and private
sectors so that the governments can submit an effective and comprehensive national plan for
confronting financial corruption. Also, it is needed to identify the main sources of money which
have been laundered. Some of these signs are drug trafficking, sponsoring political parties, huge
purchases, budget corruption or tax avoidance.
8- Developing countries with economies in transition must obligate their banking systems to
prevent and uncover financial offences and money laundering and to exchange information with
other international and expert institutions. They have to be careful not to endanger the security of
healthy investments in their countries, for growth and development of these countries depend
upon the perpetuation of foreign investments and creation of favorable atmosphere for
investments.
I wish from the bottom of heart that with the presence of all the honorable and distinguished
figures, professors and intellectuals and all those striving for good governance and fighting
against corruption, this symposium will succeed in causing a desirable environment for a world
far from corruption, poverty and discrimination and achieve its holy objectives.
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Traffic Management, A Social Concern

Danish Iqbal Raina
Assistant Professor,BGSB University, Rajouri, Jammu and Kashmir , India
Shahid Mushtaq
Research ScholarDepartment of Business Administration, Aligarh Muslim University, India
Abstract
An innovative approach is needed for management of road traffic in urban cities.. A rapid
increase in ownership and use of cars has brought with it more pollution and congestion, a higher
accident rate and more health risks. Perceived lack of flexibility of routes of public transport is
the most striking . As urban populations expand and city roads become increasingly congested,
city planners need comprehensive urban development and transport policies to address deepseated social and demographic change. Enforcement is the key element in road safety
management. Non-definition of enforcement, poor expertise and skills of enforcers and a lack of
modern support in terms of tools and systems of enforcement have led to a non- development of
a safe road user culture in Pakistan. This has resulted in an attitude of callousness amongst road
users. Examining the links between transport and social exclusion, analyzing social inclusion
issues and the transport needs of different social groups, and liaising with other Government
departments will lead towards a system where the urban transportation can be effectively
managed. Different patterns of social groups must be involved in the decision making process.
Various strategies framed or the management of this very problem must be in accordance to the
social set and in case of any strategic conflict government must persuade the society towards the
resolution. A social Traffic Management system STMS can be designed to achieve sustainable
management of traffic related issues pertaining to road traffic.
Key words: Traffic management, social inclusion, strategic conflict, Social Traffic management
System STMS.
1.
Introduction
Traffic conditions in most of the cities are very chaotic and crucial, this is particularly
observed in million plus cities. As the urbanization process takes momentum, these
problems crop up due to the lack of commensurate development of infrastructure,
particularly roads, road transport and inadequate public transport system. The uncontrolled
growth in urbanization and motorization generally contributes to an urban land use and
transportation system that is socially, economically, and environmentally unsustainable. Over the
past decade, Pakistan has worked intensively to build and modernize motorways and national
highways as part of the countrys overall economic development efforts. However, traffic-related
fatalities are alarmingly high, and about 41 percent of all crashes involve deaths, a figure that is
significantly higher than in most other countries. Frequent congestion in most urban and
metropolitan areas are adversely affecting travel time, business operating costs, and air quality,
and increased air pollution is affecting public health. These problems require modern solutions
emphasizing efficiency and safety as the primary goals of traffic management.
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Under modem conditions it is becoming increasingly important to manage traffic, rather than
optimise the control of traffic signals to meet the demands of all traffic. Strategies are basically
tools to help implement local policies. This paper concentrates on the potential use of traffic
management strategies. It is concerned with the effects of the choice of, and interactions
between, different possible strategies in terms of their effects on the traffic using the, road
network and, ultimately, on all potential travellers. Integration of strategies with government
polices with a concern from various social groups can alone define a pattern for realization of
various strategies as covered in this paper to ensure a suitable TMS for urban cities in Pakistan
with an equal participation and acceptance from society.
2.Review of literature
Transport system in urban cities of developing nations has been the focus of number of studies
since 1970s (Courtney,1979; Farahmand-Rizwi,1994; ).during last four decades number of
models have been proposed to management traffic related issues in the cities of developing
nations( Hirten & Echenique,1979).
Improving road safety has been the focus of recent research in the developing nation as the
number of accidents due to unmanaged traffic have been increasing at a phenomenal rate (
Vasconcellos,1995).At the same time the impact of income and social empowerment on transport
system has been studies ( silva ,1998).
The latest research in this direction is the World banks initiative on urban development , which
focuses on the transport needs , quality of life and live ability in the urban areas of developing
nations across the globe ( Kessides ,2000).
In the era of globalization , rapid motorization has been the focus of prime concern . studies have
shown that the rate of motorization in the urban areas of developing nation is higher then the rate
at which the population is increasing ( Jraiw,2003).these results are alarming because of the
inadequate transport infrastructure , which is no where compatible with the pace of motorization
in the urban areas. A country like Pakistan where the above mentioned situation posses threats to
the public transport , life of urban cities and is effecting the social structure as one in three
Pakistani household is living below poverty line( Qurashi & Arif ,2001).
Public participation in this regard can be a viable solution to understand , define and manage
effectively the traffic related issue.
2.1 Overview of the potential traffic management policies in Pakistan
National Road Safety Secretariat (NRSS) was established in September, 2006 as lead road safety
agency under the auspices of Ministry of Communications (MOC) to work on permanent
footing. This secretariat is mandated to develop & undertake multi-sectoral road Safety projects
& implement initiatives established by the high level constituted National Road Safety Council.
Primarily, NRSS aimed to take preventive and curative measures for road safety.
2.2 Policies of NRSS:
The principal objective of the NSRR, as stated in the circular is to ensure that the country has the
modern transport system it needs to achieve sustainable economic growth, with as little adverse
impact as possible on the environment in ways that ensure personal safety and give customers
freedom of choice, at a cost it can afford Government of Pakistan is considering following
actions in the forthcoming road safety plan:-
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1. Road Safety be listed among high priority program at National level as it is a major
socioeconomic issue and directly relates with the poverty level in the county.
2. Sustained political will and ownership at the highest level be required for the success of the
program.
3. Establishment of National Road Safety Fund to ensure implementation of Road Safety Plan
and Programs .
4. Effective and functional institutional framework be built to develop and implement polices.
An ambitious but realistic targets be set-up in form of safety goals to achieve measurable
outcomes. Whereas, policy formulation & implementation is to remain a continues process.
5. Magnitude of problems encompassing institutional arrangement and capacity be recognized.
Institutions to be restructured and bottlenecks be removed to achieve the road safety targets.
6. NRSS be established on permanent basis to regulate resources and to coordinate road safety
efforts at national level. Adequate resource be provided to ensure its sustainability.
7. Organizational set-up be extended upto district level to achieve targeted goals, to translate &
implement policy and to coordinate activity at grass root level.
8. Source of data provision be identified and its accuracy & consistency for documentation be
ensured. Information system be cost effective and of standardized; useful for all decision makers.
9. Policy guidelines in collaboration of Provincial Government be developed and duplicate
efforts in various department be identified & removed.
10. RSA should be made mandatory for all projects costing Rs. 10 Million or more and develop
training program for RSA.
11. A monitory organization be designated to perform Quality Assurance/Quality Control on
major RSAs.
12. Traffic Engineering and Road Safety Courses should be taught both at
undergraduate and graduate level in Pakistan universities.
13. Establish Traffic Engineering & Safety Directorate within public highway agencies to take
responsibility for the safety and operational aspects of the road network. Such directorate
monitors the network and identifies congested or unsafe locations for improvement. In doing so,
they often build up unique insights into the range of circumstances that can contribute to road
crashes.
14. Develop National Policy on Road Safety covering both preventive and post-crash aspects.
15. Road Safety should be introduced in School Curricula.
16. Road Safety Park should be established in major cities to educate children, about the aspects
of road safety.
17. Mass Public Transit System such as Light Rail and/or Bus Rapid Transit (BRT) be
introduced in major cities such as Karachi and Lahore.
18. Uniform vehicle inspection centers for the public service vehicles be established around the
country.
19. Speed Monitoring device be installed in public transportation buses and concept of self
enforcement among private transporter be introduced.
20. In urban areas particularly in major cities congestion management program be developed.
21. Separate lane for motorcyclist be considered in urban arteries where motorcycle volume
represents grater share in traffic mix.
22. Centralized licensing system should be introduced initially at provincial level.
23. An Incident Management Center with state of the art communication facilities be established
in major cities.
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24. Satellite Resuscitation (Life Support) Center be established along major highways in
different hotels or in Mobile Units equipped with all first aid treatment including
breathing, respiration, circulation & Automatic Electric Deforgments.
25. Spinal Board made with Fiber Glass should be made a requirement for ambulance services
for transportation of injured patient.
26. Hospital should be required to maintain ambulance fleet size along with trained crew and
necessary equipment, compatible with their coverage area needs and be mandated to respond to
road crash incidents.
27. Emergency rooms should be provided security means to all Emergency Response staff to
perform their function smoothly.
28. Considering growing congestion on urban streets, air transportation of seriously injured be
considered.
The interpretation of some of these objectives is probably more political than technical. For
instance, not all authorities would agree on how to foster economic regeneration; some would
emphasise public transport and others put more emphasis on convenient private access. the
political instability has been creating hindrance to the achievement of above mentioned
objectives.
3.Uncontrolled urbanization and motorization: an overview of Karachi
The uncontrolled growth in urbanization and motorization is continuously contributing to
transport system that is socially , economically and environmentally unsustainable. Karachi
which is the largest urban and economic centre of Pakistan is passing through an uncontrolled
phase of rapid and unmanaged urbanization and motorization. in the last two decades , due to
increase in the economic level of a certain class of society and failure of government in
managing the rising needs of transport system , in sufficient and yet poorly managed public
transport system has stimulated the demand for private vehicles . growing motorization with
inadequate infrastructure to handle the situation and lack of concern from government agencies
has led to the significance level of traffic congestion , road accidents traffic jams and
environmental pollution.
With increased in urbanization and rise in the income level a phenomenal demand for
transportation means has been emerging . As a result 33% of all motorized vehicles in the
country move on the roads of Karachi which is an alarming situation in city where transport
mechanism is not adequate and advanced to manage the rising situation and hence a fear of
system collapsed is appropriate. studies have shown that the rate of motorization in the urban
areas of developing nation is higher then the rate at which the population ig increasing (
Jraiw,2003). In developing nations like Pakistan , urban cities are facing a greater threat due to
unmanaged increase in number of vehicles running on the road. This has been adding to the
problems of common masses in terms of
Road safety
Environmental pollution
3.1 Road safety
Traffic related accidents kill at least 5000 persons per year in Pakistan. As per the finding of
world banks report in Pakistan the average fatality rate is 70 per million person per year( World
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Bank,2002. When compared to the motorization Pakistan has shown worse records in traffic
safety as compared to Japan which has a much higher rate of motorization .Reckless driving ,
over speed , signal violation and lack of adequate safety standards resulted in more than 840 fatal
accidents claimed 940 lives in Karachi during 2009( SRDO,2009).the average reported deaths in
Pakistan / 10,000 vehicles is (14.4) . Allthogh it is lower than those in india(25.3) , china(26.2)
and Bangladesh( 58.7) ( scandiaconsult@ constrains) . but the alarming fact is that 80% of traffic
related accidents are not reported by police in Pakistan( Ghaffar, 2001, Hyder , 2000). There is
dire need of intervention to avoid traffic related accidents in Pakistan particularly in the urban
cities to make life safe and comfortable.
3.2Enviornmental pollution
Phenomenal motorization has been adversely effecting the environmental conditions in urban
areas and are contributing to degrade the quality of life , making life unsafe for present and
future generations. uncontrolled growth in vehicles along with the poorly managed vehicles is
degrading the environment with serious levels of air and noise pollution. The data in the table 1
indicates the air and noise pollution in urban areas due to uncontrolled motorization.
Table 1 Air and noise pollution in Karachi in 2003 -2004( cleanairnet.org/article-509041,2005)
Pollutants
Pollution level
TSP(g/m3 )
PM(g/m3 )
390
280
SO2(10-6)
NO2(10-9)
CO(10-6)
Noise
44
22.8
42
99
Permissible limit
USEPA
260
150
38
10
50
-
NEQS
85
Note: USEPA( United States Environmental Protection Act).NEQS( National Environmental

Quality Standards)
Involvement of society to tackle such a situation is perhaps the only way to minimize the
miseries due to uncontrolled motorization.
The ever-increasing rush of heavy traffic on the roads is resulting in heavy loss of human life.
One day or the other, people suffer form accidents due to reckless driving. Some lose their
vehicles and some go to the police. This is due to lack of civic sense in the citizens and violation
of traffic rules. Traffic jams, road quarrels, untidiness and damage of public property is also a
result of this problem. Traffic jams in Pakistan are not unheard of; in fact the traffic situation in
metropolises like Karachi and Lahore is getting worse with each passing day. On the one hand,
vehicles are increasing exponentially, while on the other hand the roads are getting blocked due
to mega-development in such cities.
Traffic jams are not just a menace to those on the streets, they also impact the overall
productivity of our society and are a real threat to our development. The economic and social
cost to cities with regular traffic jams has been estimated by economists around the world to be
extremely high. Not only must the Traffic Police improve the traffic conditions, but the public
must play its due role for the smooth sailing of traffic in the country.
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4. Increase Public Transport And Reduce Private Transport Use

Increase in economic level has been changing the social set up. Use of private transport has
become a social need rather a private one. People are moving towards cars to symbolise their
economic health in the society . this paradigm shift in the social behaviour has shown a dramatic
effect over the number of private vehicles running on the roads. If the rate at which the private
vehicles are increasing is not alarming but a potential threat to the safety , security and
development of urban areas. Use of public rather than private transport in urban areas is
increasingly being seen as a way of potentially reducing congestion and pollution and increasing
the attraction of urban streets. The policy is easily stated in broad terms, but much harder to
achieve in practice. Both incentives to use public transport and disincentives to travel by car can
be employed as possible tools:
Incentives to use public transport
* Public transport priority
* Trip planning information
* Information at stops
* On-vehicle information
* Vulnerable Road User (VRU) facilities
Disincentives to use private transport
* Traffic restraint
* Parking restraint
* Road pricing
* Enforcement
Most of the items in the above two lists need little explanation, but some may not be obviously
relevant to making public transport more attractive. Enforcement is included as a disincentive to
private transport use. It is not a direct disincentive, but may be a powerful indirect disincentive to
some drivers. One of the main advantages of private travel is that it can provide door-to-door
service. However, sometimes the door-to-door service is provided by parking illegally and the
temptation to do so would increase with any policy of parking restraint. Also, private transport's
superior journey speed may be helped by exceeding the speed limit. Clearly enforcement has a
role to play in mode choice. It may seem odd to list facilities for vulnerable road users as an
incentive to use public transport. However, as mentioned above private transport is much more
likely to provide door-to-door service than is public transport. Therefore, providing improved
facilities for pedestrians between the ends of the public transport part of a trip and the start and
finish of the journey will reduce the inconvenience of making the journey by public transport.
public transport. Information provision, trip planning and specific public transport information
should be designed to encourage the use of public transport.
5 Greater Road Safety
measures should be designed using a traffic assignment model to assess their effects. The control
of access restrictions or recommended routes could be dynamic and respond to network
conditions. For such control the assessment of the network conditions and the predicted effects
of the proposed change in control would be best done by an on-line assignment model.
Increased VRU facilities
Priority for VRUs in control of traffic signals
Enforcement of speed limits, parking restrictions in dangerous locations,
obedience of traffic control devices
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Routing of traffic onto appropriate roads

Access restrictions to areas with high pedestrian activity
6.Public Involvement and the Responsibility of the Government

The ideal situation in public participation in the preparation of a traffic management policy
concerns the cooperation of the project proponents, the stakeholders and the government.
Government should have an
important role in involving the public to frame polices for managing and regulating traffic
related problems.
It is also the role of government to make sure that all sectors are represented regardless of the
social class he belong to. Incompatible traffic management schemes should not be pursued and
the government agencies should be watch full in the implementation of the various rules and
regulations without any upper hand consideration and must ensure that all is well. Social
awareness programs must be conducted at different levels to familiarize the masses about the
various rules and regulations regarding to various issues involved in traffic management system.
Involvement of society can be seen as instrumental in the pursuit of finding a sustainable
solution to the above said problem.
7. Role of society in managing traffic related problems
Road safety one issue that relates to every one and needs active participation from each
individual. Now the million dollar question is what motivates the people? what motivate the
people to get involved in the things of their immediate life? In seeking people participation in
bringing change we need to understand what motivates them to want to participate. We need to
understand the normal human behavioural traits. Abraham Maslows presented that almost every
one wants to be happy and loving , but they have particular needs that they must meet before
they can act unselfishly. From the Maslows hierarchy of needs going up through five levels with
the four being survival needs provide a basic motivation for life. As a need is satisfied , an un
satisfaction is developed at the next level of need, which then provides motivation for action.
movement through the levels may not be a certainty for everyone, but can be described as an
over all tendency. Relating the traffic needs with the Maslows hierarchy of needs , ways can be
sought out as how people can be motivated towards sustainable traffic management.
ci
Self actualisation
Realization
Esteem
Recognition
Social
Acceptance
Safety
Road safety
Physiological
Transportation
Fig.1
Physiological needs are the basic necessities of life. Apart form the food , water and shelter
transportation has been emerging as the potential need for the accomplishment of many other
obligations. by providing the affordable transportation means to the differ sections of the society
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as per their demand and level of income , the government agencies can motivate the general
masses to cooperate them in devising and successfully implementing the traffic management
strategies. Road safety now a day is prime concern in the urban cities of developing nations
because of unplanned urbanization. By providing valuable information to the masses regarding
road safety measures and providing them better road signal facilities , the confidence of the
society cab be gained towards a planned traffic mechanism.
Every individual needs acceptance from the society. people can be realised that their character
can be acceptable only if they go by the traffic laws and maintain sort of discipline in their
driving to avoid any mishaps .People who are actively involved in the traffic management
programs must get recognition from the government agencies and society. This can further
motivate the masses to get involved in bringing much required change to foster traffic
management programs. Motivating the people at these four levels can lead towards self
actualization where in a person in particular and societies in general stand together to help
government agencies to implement the strategies for growth and development.
7.1Who should be involved
A stake holder is a the contemporary description for those expected to be involved in achieving
change.
Stake holders can be divided into three different categories
7.1.1Dirct stake holders- those who are directly affected by what is happening or what is going
to happen. For instance , in consulting the society for the purpose of traffic design , the direct
stakeholders would be the residents of the area where the roads and transport are to be changed
7.1.2Indirect stakeholders-these are the people who have a stake too , but it may not be as
obvious as they may be harder to identify. in traffic design, it includes the people who travel
through the area and will be directly effected by any change.
7.1.3Represenataive stakeholders-true representative from the different sections of the society
who have stake in any of the decisions can be involved.
The involvement of the society in the process of managing the traffic system in the urban areas is
much more important . work being done by sindh education foundation( SDF), Road Safety
Educational program(RSEP), School Management boards (SMB)and many more NGO in krachi
are involved in mobilising public participation and awareness in traffic management issues.lot of
work has been done , below defied model is a description of how traffic can ma managed using
society as an important instrument of change.
8. Social Traffic Management System STMS
After Analysing the various government initiatives and devising various strategies , we can
think of a model STMS to achieve sustainable solution to manage traffic in urban cities. This
model is based on certain assumptions . this model states that , the efficiency in managing road
traffic is achieved by developing public transport system and putting social constraints for
private vehicles respectively. This model is based on following assumption.
1. Information regarding to public transport system should be available to every user.
2. number of private vehicles on road should remain constant or decrease.
3. data base regarding the travelling needs of the various social groups should be available
with the government and must be updated after regular intervals of time
4. Public transport fare should be economical.
5. Developing, monitoring and ensuring zero- tolerance for the offenders of traffic rules.
6. Involvement of society should be maximum.
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If all the above mentioned assumptions are satisfied the at a particular point of time with
increase in the travelling needs the effectiveness in managing the traffic also increases .
E 1/e
E= k/e
E is the efficiency of STMS
K is time period that remains constant
e is the number of private vehicles on road
STMS
Government
Society
Figure 2 (STMS)
For a particular time period the number of vehicles running on the road can be controlled using
the sale reports by creating an intelligent data base. By doing this the extra burden on the
transport infrastructure i.e, Roads can be reduced , parking system can be managed effectively
and future paling can be done which increases the efficiency of the system. Restriction can be
achieved using financial constraints.
In the above mentioned model, the maximum output in terms of sustainable traffic management
system can be achieved by defining the various stake holders of traffic system ,i.e, The
government and the society.
9Merits and limitation of model
9.1Merits:
9.1.1 Sustainable transport system: Applying this modal a sustainable transport system can be
achieved . Restricting the number of vehicles on the road per defined period of time can help the
government agencies to effectively implement the strategies to cope up with the traffic
requirement.
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9.1.2 Public Participation: involvement of common masses can draw massive results towards
change . Realization toward their duties and responsibilities can only fulfil the dream of a safer
and happier tomorrow.
9.1.3 Public transport system: this model emphasize on the development of public sector
transport which can effectively reduce the number of private vehicle on the road and will help
the weaker section of the society to easily and respectfully manage their transport needs.
9.1.4 Developing a centralised transport data base: this model emphasize on developing a
centralised date base for all vehicles on the road which help in maintaining law and order, help in
accidents probing and restricts traffic offenders.
9.2 Limitation:
9.2.1 Political instability: political instability posses threat to any such model where in political
fishes can exploit the sentiments of the society for their mere benefits creating hindrance to any
such change towards positive direction
9.2.2 Technology: urban cities of developing nations are still lacking in the advanced technology
to maintain and operate with a highly sophisticated centralised data base system to manage
traffic related issues.
9.2.3 Restriction of vehicles: a system which survives on corruption it is not possible to restrict
the number of private vehicles on the road for a defined time period.
10.Conclusion:
This paper presents an overview of the traffic related problems in Karchi and tries to come up
with some strategies in term of as model to regulate and balance the traffic on the roads for
sustainable transport system. traffic management must be seen from the view of social concern .
society has a great role to play in much larger spectrum to bring in a hustle free transport system.
participation will give people a sense of ownership of traffic management programs and
guarantee success for those program. Management of traffic in urban areas is becoming
increasingly important. Use of strategies within STMS will be an important tool to implement
traffic management policies. There are likely to be conflicts with the strategies and the proposed
model (STMS) , but a system can be developed to move further more to address the various
alarming issues related with the management of traffic. And the issues will never be resolved
unless a social concern will be addressed.
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References
Courtney, John. Transportation land policy and the urban poor in developing countries.
7-10. 1979. Transportation Research Board.
Farahmand-Razavi,A. (1994). The role of international consultants in developing
countries: Lessons from Tehran (Iran). Transport Policy, 1(2), 117-123.
Ghaffar,A., Hyder,A.A., & Bishai,D. (2001). Newspaper reports as a source for injury
data in developing countries. Health Policy and Planning, 16(3), 322-325.
Ghalli, M. O., and Smith, M. J. (1996) Traffic assignment,traffic control and road
pricing, Proceedings of 12th International symposium on Transportation and Traffic
Theory, University of Califomia, Berkeley, Ed. C. A. Daganzo, pp 147 - 170.
Hirten, John E. and Echenique, Marcial. An operational land use transport model for the
Tehran region, Iran. 6-7. 1979. Transportation Research Board.
Jraiw,K. (2003). Urban road transport in Asia's developing countries: Safety and
efficiency strategy. Transportation Research Record, 1846, 19-25.
7.Kessides, Christine. Cities in Transition. 1-157. 2000. Washington D.C., The World
Bank.
Qureshi, Sarfraz K. and Arif, G. M. Profile of Poverty in Pakistan, 1998-99. 5-27. 2001.
National Injury Research Center (NIRC), Health Services Academy, MOH.
National Road Safety Secretariat (NRSS), Ministry of communication, Government of Pakistan
MacLennan, C., Routiedge, I. W. and Kemp, S. (1996) The development of UTMC
systems, Eighth international conference on Road Traffic Monitoring and Control, IEE,
London, pp 1-6.
Stover, V.G. and Koepke, F.J. (1988) Transportation and Land Development, Institute of
Transportation Engineers, Prentice Hall, Englewood Cliffs, New Jersey.
U.P.N.C.T.S. Foundation, Inc. (2001) Formulation of Guidelines for
Road Traffic Injuries in Pakistan, Trends, Causes, and Policy Implications.
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Survey relationship between OCB and organizational culture in general

inspection organization in Iran
Seyed Ali Akbar Ahmadi
Freyedon Ahmadi
Golamhosain Homauni
Abstract
The relationship between dimensions of organizational and the categorization of Organizational
citizenship behaviors (OCB) as in-role versus extra-role were explored within an Iranian sample.
In order to appropriately address levels-of-analysis issues, this study focused on the relationship
between two side variables at the same level of analysis: the left side of Hofsted OC (Process
oriented , Employee Oriented , Parochial , Open System , Loose Control and Normative) versus
the right side of Hofsted OC (Results Oriented , Job Oriented , Professional , Closed System ,
Tight Control and Pragmatic).Results indicate that OCB is high in units that their organizational
culture was process oriented , employee Oriented ,have an open system and loose control.
Key words: Process oriented-Results Oriented, Employee Oriented -Job Oriented, Parochial
Professional, Loose Control Tight Control, Normative Pragmatic, opened system- closed
system ,Organizational citizenship behavior, organizational culture
Introduction
The Organizational Citizenship Behavior or more precisely OCB is a special type of
organizational behavior necessary for the growth and success of the every organization.
Although this kind of behavior is not a mandatory factor to be maintained in any Organization
but it plays a vital and important aspect in the growth of any organization. The Organizational
Citizenship Behavior is important factor in determining the effectiveness, efficiency and
productivity of the organization. Although Organization cannot impose this vital factor in the
employees mindset forcibly, but a good organization is that where Organization Citizenship
Behavior should be followed. The theory of OCB includes introducing the proper decision
making styles among the servant serving during the job in the firm. Every day market trend and
style keeps on changing to set new and high set of standard, the organization has to follow the
certain principles of Organizational Citizenship Behavior to achieve the fleet of glory. This
factor in fact adds in the mindset of the employees new innovative ideas and sportsmanship to
work collectively and effectively in making the organization successful. This in fact introduces
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the selfless concern to work as team not as a group for the success of the firm. So the
organizations hire the human resources department to bridge the gap of proper communication
channel between the employees on one hand and the management team on other hand. If the
communication between the two teams is not channeled properly then it can lead to dangerous
scenario like employees leaving the organization. So to retain the employees the human
resources departments play a vital role.
The Organizational Citizenship Behavior introduces the new innovative ideas, which are
channeled to the employees in time to time through proper media or source. The organization
even arranges seminars, which lays the guidelines how to implement the theory of
Organizational Citizenship Behavior among the employees. Although it may not be a mandatory
for any individual to attend the theory of OCB but it informs the employees of the firm about the
changes occurring in the firm from time to time. Thus it introduces civic virtue among the
employees for the growth of the organization. The OCB factor in fact bridges the gap not only
between the management team and employee, but also removes the conflict among them to unite
together to march forward to attain success. It self motivates the individuals to attain the peak of
success in the competitive World. The OCB indeed has introduced the new concept of altruism
or the team spirit and sportsmanship. To strive forward and work together as a team should be
the motto or goal of the good and healthy prosperous organization. No organization cant
function effectively without proper collaboration among the employees and management team of
the firm. The Organizational Citizenship Behavior introduces the factor of conscientiousness and
professionalism cultures among the employees of the organization. Thus the Organization should
implement OCB to achieve its target and profitable revenues without sacrificing the goals,
welfare and motives of the employees of the organization.
An organization can prosper only when it offers pleasant working conditions apart while taking
care the interests of its workers. Such an organization that takes due interest in the welfare of its
workers will definitely get the best output and ensure a good growth rate. To ensure evergrowing success of an organization, it is essential to harbor the interests while compensating
them for their hard work while inspiring them to perform better as a part of motivational
measures. While ensuing that your organization achieves all the success, it is essential to devise
models based on the organizational culture that helps in bringing the right change in a company
irrespective of big or small.
To imbibe the right organizational culture, it is essential to have the right human resource
development team in a company that takes care the employee welfare as well as workperformance related issues such as payrolls, training, promotion , redundancy and career
development to name a few.
According to the cardinal principles of human resource development, work force is equivalent to
human capital for any organization that helps in building the company. In any organization that
has strong work culture, it will follow the ethics of organizational values and work jointly to
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achieve the goal of success. From the point of view of organizational theories, it is essential to
understand the golden rules of work culture such as:
Strategic thinking on the part of organization: For any organization that wishes to bring
successful change in its work culture, it is essential to follow strategic thinking that is modeled
on practical understanding of organizational goals. This has to be religiously followed to ensure
a successful organization that growth oriented.
High-level commitment: To ensure that an organization is successful in incorporating the strong
corporate culture, it is essential for the top-management as well as consultants of a company to
show wholehearted trust and commitment to the cause. This will certainly help the company in
achieving and implement the right kind of company culture that becomes the driving force of an
organization.
Change at the highest levels of organizational culture: To get the best corporate culture that is
duly endorsed by the management as well as the employees, it is essential for an organization to
follow the corporate culture in full spirits. This ensures a successful model.
Apart from it, there are many ways for endorsing the right corporate culture in order to carve a
new identity for an organization and its workers. It is a well-known fact that wherever there is a
change, there is resistance in the case of organizational culture; it applies the same in terms of
corporate culture. There can be wide criticism and conflicts of interests and relations. Yet, in the
end, one has to ensure that the interest of an organization is safeguarded without hurting the
sentiments of workers.
Organizational culture is one of important tools that help to development of OCB. But it is not
clear that what dimension of organizational culture is fit to develop of OCB? So in this research
is attempted to indicate proper organizational culture for develop of OCB in general inspection
organization in Iran.
Attendance to OCB
Organizational citizenship behaviors (OCB) have been defined as behaviors that an employee
voluntarily engages in that promote the effectiveness of the organization but are not explicitly
rewarded by the organization (Organ, 1988). Behaviors in this category consist of those that an
employee may engage in at his or her discretion, and that facilitate the effectiveness of the
organization, and promote the organizations interests (Brief & Motowidlo, 1986). Typical
examples of behavioral items used to measure OCB include: Is ready to help or to lend a
helping hand to those around him/her; Reads and keeps up with agency/company
announcements, messages, memos, etc.; and Considers the impact of his/her actions on
others (Mackenzie, Podsakoff, & Fetter, 1991).
The OCB definition has not gone unchallenged. In their meta-analysis of OCB, LePine, Erez,
and Johnson (2002) discuss the need to shift attention away from the antecedents and outcomes
of OCB toward a focus on a more careful explication of the OCB construct itself and its
dimensions. In explicating the OCB construct more fully it is important to consider the factors
that influence what is considered to be OCB and according to whom. This is important because
there is evidence to suggest that variation exists in how individuals implicitly define and measure
OCB (e.g., Morrison, 1994; Vandenberg, Lance, & Taylor, 2005), as some individuals may view
specific behaviors as in-role while others may view these same behaviors as extra-role. One
possible contributor to this variation is the cumulative effect of culture (e.g., social culture) and
culture-related variables (e.g., learned social beliefs). Social culture shapes behavioral norms,
perceptions, and expectations in a myriad of settings (Triandis, 1994) and is typically learned
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during early cultural socialization. Learned social beliefs are internally held beliefs and can be
characterized as being relatively resistant to change and exerting a strong effect on the
perceptions and evaluations of multiple social exchangesincluding the employeremployee
exchange.
Although the debate over the best way to define OCB has not been resolved, and researchers
have often expressed concern over OCBs definitional qualifiers (Bolino, Turnley, & Niehoff,
2004), the underlying question is whether employees do in fact voluntarily engage in OCB or
more broadly, whether OCB is in fact discretionary or extra-role.
Some researchers have responded to this debate by redefining OCB by dropping the extra-role
qualifier (e.g., Organ, 1997), while others have insisted that retaining it is important for greater
conceptual clarity and construct validity (Van Dyne, Cummings, & McLean Parks, 1995). One
thing that has become apparent in support of the latter position is that measurable differences
have been documented in what specific behaviors are viewed as OCB depending on who is doing
the viewing.
Morrisons (1994) study, for example, demonstrated this point well. Her results indicated that the
boundary between what is perceived as in-role versus extra-role (i.e., job breadth) varies across
employees and between employees and their supervisors. Vandenberg et al. (2005) also found
that ratings of OCB differed between managers, subordinates and individuals, and in fact, that
different conceptual frameworks were used to interpret individual organizational citizenship
behaviors. Similar variations were found by Pond, Nacoste, Mohr, and Rodriguez (1997) in a
study of 144 managerial employees in the United States, by Lam, Hui, and Law (1999) in their
cross-cultural study examining 431 independent dyads from four nations (i.e., Australia, ChinaHong Kong, Japan and the United States), and by Vey and Campbell (2004) in their study with
248 undergraduates in the United States.
There is also evidence that from a practical perspective this distinction has utility, since the
perceptions of OCB as in role may relate to employee engagement in such behavior. Morrison
(1994), for example, suggested that individuals who engage in OCB may do so because they
define those behaviors as in-role. Although Morrison (1994) did not directly test this proposition,
more recent empirical work by Coyle-Shapiro, Kessler, and Purcell (2004) provides evidence in
support of Morrisons assertion. In fact, their results indicated that employees who define
behaviors as in-role engage in those behaviors to a greater degree than employees who define
them as extra-role (p. 97). Based on their results, these researchers conclude that the distinction
between in-role and extra-role is important for understanding an individuals motivation to
engage in such behaviors. Kamdar,McAllister, and Turban (2006) also found that employee
definitions of behaviors as in-role versus extra-role were related to employee work behavior. In
their investigation with an Indian sample of 220 engineers and their immediate supervisors from
an oil refinery, Kamder et al. found that employees perceiving OCB as extra-role were less
inclined to engage in those behaviors.
Organizational cultural and OCB
Hofstede (1980) defined culture as the collective programming of the mind that
distinguishes the members of one group from another. He argued that culture is a property of
groups, and that countries boundaries are typically coincident with cultural boundaries. National
culture influences how members of groups think about what is proper, civilized behavior and
influences how one acts toward strangers and colleagues, how one addresses others, and how one
interacts socially.
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Hofstede (1980) identified four dimensions of national culture. Power distance is a measure of
the inequality between leaders and followers, and the extent to which this inequality is accepted.
Uncertainty avoidance characterizes the extent to which ambiguity and uncertainty are tolerable.
Masculinity vs. femininity (e.g., achievement vs. relationship orientation) is a measure of the
extent to which 6 achievement and success are valued rather than caring for others and quality of
life. Finally, individualism vs. collectivism (IC) is the degree to which members of a group tend
to think first of others vs. oneself, and the value placed on membership in groups. During the last
decade, cultural psychology has investigated the degree to which social psychological findings
that have been found in Western societies, in particular in the United States, are generalizable
across cultural borders. One of the most important cultural distinctions is that between
individualistic and collectivistic cultures. The specific individualistic or collectivistic cultural
view subsequently influences several domains of psychological functioning, among which
functioning in relationships.
Individualism-Collectivism (IC) reflects the level of social interconnectedness among individuals
(Hofstede, 1980; Earley & Gibson, 1998). An important attribute of contexts characterized by a
collectivistic character is that individuals within those contexts view and identify themselves
through membership in in-groups (Triandis, 1988), which tends to have systematic effects on
social behavior within team settings (Earley, 1989, 1993). The defining distinction between
contexts that vary along the IC continuum is that for individualists personal interests are more
important than the interests of the (in)group, as are the attainment of individual (as opposed to
group) goals. In contrast, for collectivists the interests of the (in)group are paramount (Triandis,
1989), and as noted by Earley (1989), a driving force within a collectivistic culture is
cooperation so as to attain group goals and safeguard welfare (p. 567). Empirical research,
dealing with the moderating effects of IC on social loafing (Earley,1989), and on OCB
(Moorman & Blakely, 1995), supports these characterizations of individuals within
individualistic or collectivistic cultures. Moorman and Blakely (1995) reported significant
relationships between collectivistic values and the OCB dimensions of interpersonal helping,
loyal boosterism, and individual initiative.
The past researches focused on national culture and its impact on OCB . Few study examine
of organizational culture and its relationship with OCB. Appelbaum and et al indicted that
organizational culture a seem to initiate assumption to improve of OCB (Appelbaum and et al
,2004).
In this study for first time is used of six dimension of organizational culture offered by
hofstede : Process oriented-Results Oriented , Employee Oriented -Job Oriented , ParochialProfessional , Open System- Closed System , Loose Control Tight Control and Normative
Pragmatic .
Methodology
The Sample
In this study 100 people of six section of general inspection organization in iran were selected as
sample. This amount people were determined the below formula:
N Z 2 P (1 P )
500 1.96 2 .05 0.5
2
n
=
= 93
( N 1) d 2 + Z 2 P (1 P ) 499 0.12 + 1.96 2 .05 0.5
2
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The measures
For measuring of OCB were used of seven dimension based of Markoczy & Xin study that were
done in cultural of USA and Chinese in University of California. Based their study seven
dimension of OCB are:
Civic virtue, Altruism, Conscientiousness, Interpersonal harmony, Protecting company
resources, Sportsmanship and Courtesy. A 15 Likert scale was used to measure the degree
subjects considered the listed behaviors to be OCBs.
Also for measuring of OC were used of six dimension based of Hofsted study. Based his study
six dimension of OC are:
Process oriented-Results Oriented, Employee Oriented -Job Oriented, Parochial Professional,
Loose Control Tight Control, Normative Pragmatic ,open system closed system.
The result
Based of data gathering, the mean level of OCB dimension in six section of auditor organization
in Iran were shown in table one.
Table 1: the mean level of OCB dimension in six section of auditor organization in iran
Economy
section
Planning
section
Social
section
Politics
section
Produce
section
Special
section
Total
Civic
virtue
Altruism
Conscienti
- ousness
Interpersonal
harmony
Protecting
company
resources
Sportsmanship
Courtesy
OCB
3.11
2.92
3.06
3.25
3.31
3.15
3.18
3.12
3.35
3.5
3.62
3.83
3.71
3.51
3.46
3.58
3.65
3.58
3.53
3.73
3.64
3.37
3.48
3.57
3.46
3.44
3.72
3.8
3.72
3.64
3.54
3.62
2.98
2.86
2.98
3.23
3.04
3.11
3.01
3.04
3.13
3.03
3.24
3.21
3.06
3.17
3.13
3.11
3.3
3.24
3.39
3.54
3.44
3.36
3.32
3.37
Based of the table 1, resulats indicat although level of OCB was high in sample unit (abve of
medume (3)) but level of OCB in politics section (3.62) , planning section (3.58) and social
section (3.57) was higher than economy section (3.12) , produce section (3.04) and spacial
section(3.11).
Civic virtue has the most mean in social section and lowest mean in produce section. Also the
most mean of altruism belongs to social section and lowest to produce section. Planning section
has the most mark in Conscientiousness and produce section has the lowest mark in
Conscientiousness dimension. The highest mean in Interpersonal harmony belongs to planning
section and lowest belongs to Special section. The Protecting company resources as one
dimension of OCB has the most mean in Politics section and Special section has the lowest mean
in protecting company resources dimension. Finally politics section has the most mean in
Sportsmanship and Courtesy dimensions and Produce section has the lowest mean in these two
dimensions.
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Kind of organizational culture impact on develop of OCB

For survey impact kind of organizational culture on OCB , first the meaning responses for two
classification based on dimensions of organizational culture was computed, then by use of MannWhitney Test , the meaningful their differences was tested, finally by use of Spearman's
correlation, relationship between dimension of OCB and the organizational culture was
computed.
Table 2 indicates the meaning responses for two classification units based on dimensions of
organizational culture
Table 9: meaning responses for two classification units based on dimensions of organizational
culture
Organizational
Dimensions
High OCB units Low OCB unit
culture
Six dimension of
Process
oriented-Results 3.6318
3.2778
Organizational
Oriented
culture
Job
OrientedEmployee 2.6318
2.9444
offered by Hofsete
Oriented
Parochial- Professional
3.3864
3.3167
Closed System - Open System 2.0136
2.4111
Tight Control - Loose Control
3.3682
3.0889
Pragmatic- Normative
2.7909
2.85
Based of table 2, results indicate :

1. In both of units, Process oriented is more than Results Oriented, but Process oriented in High
OCB units (3.6318) is more than low OCB units (3.2778).
2. In both of units, Job Oriented is lower than Employee Oriented, but Job Oriented in High OCB
units (2.6318) is lower than low OCB units (2.9444).
3. In both of units, Parochial is more than Professional, but Parochial in High OCB units
(3.3864) is more than low OCB units (3.3167).
4. In both of units Closed System is lower than Open System, but Closed System in High OCB
units (2.0136) is lower than low OCB units (2.4111).
5. In both of units, Tight Control is more than Loose Control, but Tight Control in High OCB
units (3.3682) is more than low OCB units (3.0889).
6. in both of units, Pragmatic is lower than Normative, but Pragmatic in High OCB units
(2.7909) is lower than low OCB units (2.85).
Table 3 indicates the results of Mann-Whitney Test :
Table 3: The results of Mann-Whitney Test
Process oriented-Results Oriented
Job Oriented- Employee Oriented
Parochial- Professional
Closed System - Open System
Tight Control - Loose Control
Pragmatic- Normative
Mann-Whitney U
Wilcoxon W
727,500
709,500
1113,500
655,000
742,500
1065,000
1762,500
2249,500
2148,500
2195,000
1777,500
2605,000
-3,568
-3,729
-,886
-4,084
-3,479
-1,215
Asymp . Sig.
(2-tailed)
,000
,000
,375
,000
,001
,224
a Grouping Variable :OCB
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Based of table 3 was inferred that the relationship between of OCB and dimensions (Process
oriented, Job Oriented, Closed System and Tight Control) is meaningful (sig=0.000 <0.05). But
relationship between of OCB and dimensions (Parochial and Pragmatic) is not meaningful (sig >
0.05)
So there is positive and meaningful relationship between Process oriented and Tight Control
with higher OCB level .also there is negative and meaningful relationship between Job Oriented
and Closed System with higher OCB level.
In the other hand Process oriented, Employee Oriented, Open System and Tight Control enhance
of organizational citizenship behavior.
Table 4 indicates Spearman's correlation between OCB and its dimension with dimension of
organizational culture
Table 4: The results of Spearman's correlation
Spearman's rho
Process
Job
Closed
Tight
oriented
Oriented
System
Control
OCB
,302(**)
-,286(**)
-,294(**)
,270(**)
Civic Virtue
-,008
-,134
-,053
,051
Altruism
,054
-,076
-,182
,068
Conscientiousness
,278(**)
-,294(**)
-,283(**)
,328(**)
Sportsmanship
,263(**)
-,210(*)
-,237(*)
,251(*)
Courtesy
,231(*)
-,165
-,145
,178
Interpersonal harmony
,252(*)
-,283(**)
-,243(*)
,240(*)
Protecting
company
,281(**)
-,086
-,146
,140
resources
organizational loyalty
,129
-,079
-,168
,039
** Correlation is significant at the 0.01 level (2-tailed).
Based of table 4, results indicate :
1. There is positive and meaningful relationship between Process oriented and Tight Control
with OCB .
2. There is negative and meaningful relationship between job oriented and closed system with
OCB .
3. There are not meaningful correlation between Altruism, Courtesy and organizational loyalty
with dimension of organizational culture.
4. There are positive and meaningful correlation between Conscientiousness, Sportsmanship and
Interpersonal harmony with Process oriented and Tight Control. Also there are negative and
meaningful correlation between this three dimension with Process oriented and Tight Control
5. Courtesy and Protecting company resources have positive and meaningful correlation with
Process oriented
Conclusion
Organizations want and need employees who will do those things that arent in any job
description. And the evidence indicates that those organizations that have such employees
outperform those that dont. As a result, some human subject studies are concerned with
organizational citizenship behavior as a dependent variable.
In this study impact of organizational culture on develop of OCB was examined. Based of
findings of this research, for develop of OCB, organization culture tend to process and employee
oriented, open system and tight control.
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New Product Development Processes
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A Case Study of Apples Success with iconic iPod and iPhone

Muhammad Tariq (Corresponding Author)
Sarhad University of Science and Information technology, 36 B, Chinar Road University Town,
Peshawar, Khyber PukhtoonKhwa, Pakistan
Rabia Ishrat
Sarhad University of Science and Information Technology, 36 B, Chinar Road University Town,
Hashim Khan
(IMS) Institute of Management Studies, University of Peshawar,
Khyber PukhtoonKhwa, Pakistan
Abstract
This paper focuses on NPD processes which show a high failure rate, making businesses to
rethink over their new product and processes. This has lead companies to adopt a more customer
oriented approach where previously unheard voice of the customer is now taken to consideration.
While launching new products level and form of innovation that a particular market could absorb
should be determined in the first place and new product or services should be launched
accordingly. Once the company strikes the right combination for success; the company can
further use its existing image to launch new improvements in the form of line and brand
extensions. Apples frequent usage of its brand name (i) as in iPod, iMac and iPhone as well as in
many other new products symbolizes the companys intentions of leveraging its success pattern
across products and categories. It has been observed that other than costs many products fail
because of a universal but largely ignored psychological prejudice, as consumer resist any
distortion in their current-state-of-affairs. Shrewd companies like Apple devises strategies
compressing the lifecycles of brands iPodiPhone. Besides this companies also try to acquire
network externalities, where a customer is contained by a dominant network such as Macintosh
or PC operating systems. Companies must also realize the fact that new approaches to marketing,
commercialization and NPD must work coherently to maintain a sustained competitive
advantage. In such a case companies must strive to adopt innovative and integrated practices by
coming out of their silos and assume responsibility for new product development via using
strategies such as creative marketing, lean manufacturing, flawless operations, and sophisticated
use of concurrent process reengineering (rugby approach as against rally race) and corporate
entrepreneurship initiatives like Apple so as to attain first mover advantage and reap the
economic benefits from their new product or process innovations.
Key Words: Job based segmentation, first mover advantage, network externalities, Apple, line
and brand extensions, Planned obsolescence, critical mass and voice of customer
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1.Introduction
Gourville, (2006) contends that product failures reveal that new products fail at a startling rate
between 40% and 90% depending on the product category. The commercialization and marketing
stages come in the later stages of New Product Development (NPD) processes; however, they have
a pivotal role to play in new product success. As a consequence, there is greater focus on
commercialization and marketing issues today, up front, than ever realized before. Therefore
companies are now taking into consideration a more detailed job based segmentation approach,
because sometimes the consumer has hard times in precisely expressing, the core benefit of certain
product, as these may be use getting done various jobs in various situations. According to Mueller,
(1997) proposes that consumers follow a six step process to completely absorb innovative products
or services. However, these steps may vary and overlap each other due to level of consumer
network externalities, brand loyalty, transaction, learning, and obsolescence costs. Another
important factor is that consumers over the years develop associations (brand loyalty) with existing
products or services and resist any change in the status quo by over valuing the old products too
much; on the other hand, companies commercializing new products over estimate their innovative
features, design and differentiation. This creates a complex situation where companies need to
create awareness about their new products through innovative new product launching campaigns.
Companies need to find out the success recipe first and then they should launch their products or
services. If the success formula is attained then the company can once and for all use it by
launching new and improved versions of the products in the form of line and brand extension
(Ibid).
1.1
Problem and Purpose
Steven et al. (1957) makes an interesting analogy to launch of a new generation of products and a
journey into an uninhabited area as no one can fathom going out without a blueprint for guidance
into a jungle. The same holds true for new product development process where a large number of
new products fail because the innovators (suppliers) and the end-user do not see and appreciate the
market through the same lenses. There needs to be oneness of thought between companies and
consumer, which is not readily available, as often times there is a gap between the buyer and the
sellers imaginations. A company sells their innovative products to consumers for solving a certain
problem but consumer may not be aware of even the primary usage of the product, its total
transformations and augmentations. Therefore, voice of the customer should be taken to
consideration when embarking on a New Product Development (NPD) process. However, once the
right combination of people, resources and process is attained in the launch of a hit label or brand
and the success formula is revealed, then it becomes easy to launch even more success stories in
the form of new products or services. It is therefore for this case we have chosen the iconic Apple
company brand as our empirical parameter for this scientific paper.
RQ:
To analyze the high rate of new product success on a companies like Apple in comparison
to a higher than normal rate of failures in other firms?
The purpose of the study is to find out ways and means that would help managers in matching
their products with their customers. This is in line with basic marketing principle which stresses
that the wants needs and demands of the customer should be taken to consideration first and then a
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product or service should be commercialized so as to satisfy the consumer in the best possible
manner. However, in practice this is the other way around, especially companies coming up with
really innovative products face difficulty in testing their products on the market as the demand is
latent, and consumer needs are not clear. The consumer needs to be educated first about the
concept and how the product will revolutionalize the way he or she do things currently. In specific
terms, main purpose of the scientific article is to find out the success recipe for New Product
Development and how companies like Apple, Sony, Philips, and Dell make good advantage of the
success recipe.
2.
Literature Review
Song and Montoya (1998), contends that new product development is a high risk proposition
for firms to start, as it involves higher risk in targeting a budding market segment where customer
wants are hidden and service or product requirements are unspoken. On the other hand, new
products often create considerable opportunities for firms to differentiate their offering (product or
service) and helps in attaining a lead from competitors through cost, quality, style and flexibility.
Mueller, (1997), proposes that the innovating firm may achieve a first mover advantage that would
create considerably better results for the company in the short and long term. However, first mover
advantage may not always results in profiting as customers, imitators and rival firms may quickly
emulate your success and take away a greater share of the market share (Teece, 1986). In the same
vein, Steven et al, (1989) proclaim that a successful new product launch creates industry wise
unique standards, which may become barriers of entry for new firms trying to penetrate. It also
helps in refreshing the minds of the engineering personnel; sales force and give them a sense of
accomplishment and may serve the opportunity for strategic corporate renewal and redirection to
the firm (Ibid). It is interesting to note that the EMI, CT scanner lost market share to late entrants;
Bowmar which launched the first pocket calculator, lost market share to Texas Instruments and
Xerox a first mover in the office computers business lost market share to late entrants such as
Apples Macintosh which had striking resemblance with Xeroxs core product ideas such as the
mouse (Teece, 1986).
A study of the US market conducted by John and Gourville (2006) reveals that nearly 30,000
products are introduced yearly in the packaged goods industry. Almost 70% to 90% among these
fail to occupy store shelves for more than a year. Another study, indicates that almost 47 % of the
companies who enjoyed first mover advantage by commercializing before others in a particular
line of business had failed, meaning that firms that introduced new product categories left pursuing
those modern ideas Ibid). One prime example where innovator who was out run by followers is RC
Cola, a small beverage company who first commercialized cola in a can, as well as the first mover
to launch diet coke. Coke and Pepsi entered the market immediately and deprived RC Cola of any
significant gains (Teece, 1986). According to Irwin et al, (1957) NPD is a process of reducing
uncertainty in the minds of managers that as a matter of fact the level of uncertainty associated
with new product development process depends on the degree of innovativeness of the offering.
This view is in conformance with the information processing theory that as the degree of
unpredictability and uncertainty enhances, there is more need for information coordination.
Bonabeau et al, (2008) proposes that companies normally view NPD as a process of total
uniformity, but it can be divided into two separate stages namely Pre-Launch and Post launch,
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where pre-launch stage as truth seeking stage, focusing on assessing the innovative products or
services potential and removing the irrelevant or non functional parts. In the early stages the
product designs are fluid and firms compete on the basis of designs until the emergence of
dominant design such as Model T Ford, IBM 360 and Douglas DC-3 in automobile, computer and
aircraft industries respectively (Teece, 1986) and those firms with dominant designs survive others
normally disappear after this shakeout stage (Mueller, 1997).
According to Christensen, (2007) most firms segment their target market by population
characteristics or their product attributes and try to create differentiation with value added features
and applications. However, the customer simply wants to just carry out a job by acquiring a
specific solution in the shape of some product or service. The job, is an unsatisfied state of
consumer need which he or she wants to satisfy by hiring a certain product and these jobs may
vary from situation to situation (ibid). According to Peter Drucker cited in Clayton et al. (2007),
The customer rarely buys what the business thinks it sells him. Firms many a times find to their
amusement that customers are using their products for getting done tasks other than the firm
intended to serve. In the basic marketing literature Jobber, (2009) argue that general stages for new
product development consist of idea generation, screening, and concept development. Afterwards,
a marketing strategy is developed leading to business analysis and test marketing before full fledge
product launch. Cooper, (1993) has identified five additional steps in NPD process such as
preliminary technical and business assessment, alpha, beta tests, final business plan and production
ramp up.
According to Cooper, (1996) these stages are sequential just like a rally race; however, in a
dynamic industry companies are using concurrent engineering which is similar to rugby game
where players moves forth at back, which resembles a firm having multiple product under
development (ibid) and many companies in Japan and US have adopted the same holistic approach
explained with the help of rugby analogy (Takeuchi & Nonaka, 1986).
Lieberman and Montgomery, (2002) contends that that firms entering the market first are
known as market pioneers. Their competencies and skills mainly depend on better product or
process development, marketing research and technology. If the firm relentlessly preserves these
competencies by making them an integral part of the corporate culture, then the probability of
investments in new product development activities is high and the firm would stress on major
breakthrough innovations. Whereas, Henderson, (1993) argues that competitive advantage depends
on the predictably, predictable activities, such as capitalizing on historic research and development
capabilities as in such a situation small incremental innovations would mainly take place like
better or improved version of products.
According to Schnaars, (1994) late entrants can also overtake the first mover. The late comer
may use superior placement, aggressive promotions, or may even engage in a price war. Therefore
these late entrants stress on non-product competition, thats why they do not invest heavily in
research and development and mostly comes up with imitative products through reverse
engineering in a weak appropriable regime.
Some pitfalls of the NPD process as pinpointed by Steven et al, (1989) are moving target, lack of
product distinctiveness, unexpected technical problems, and mismatches between functional
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departments. Better planning leads to efficient courses of action and the likelihood of success is
increased (ibid). From a marketing orientation viewpoint, there are five competing concepts under
which organizations conduct marketing activities starting with basic production concept and
culminating at holistic marketing concept where everything matters (Kotler, 2000). Normally
organizations try to launch superior products or services and improve their quality gradually,
making implicit assumption that the customer is knowledgeable and differentiates between quality
and ordinary products. This is even true for companies like GM where a top notch executive once
said many years ago, How can the public know what kind of car they want until they see what is
available?
This notion was also common place in the history where phrases like Good wine needs no
bush were used meaning that a good product does not require any promotion. This theme
generated here goes in conformance with Kotler and Armstrong, (2001) where companies are
wonderstruck to reveal that consumer are not necessarily looking for a better product mousetrap
but for a better solution to the mouse problem. In an ideal situation where other things remain the
same, normally consumer follow steps such as seeking awareness about a product or services, then
comprehending the information, afterwards they form a positive or negative attitude about the
product. If they value it positively the start considering it legitimate to use the product, then the
customers uses the products or services on a trial basis so as to check efficiency of the product. If
the product matches expectations they adopt it (Stanton & Kotler 2000). According to Schiff man
et al, (2009) cited in Tariq and Ghaffar, (2010) diffusion is a macro process encompassing the
spread of a new innovation from its creator to the general masses. Whereas, adoption is a micro
process which is concerned with the steps through which a customer passes when accepting or
rejecting a new innovation. Rogers, (1967) proposed a six step profile of consumer innovators as
shown in figure 2-2 stretching from innovators to laggards. Innovators are the pioneers of adopting
a new technology and laggards are the last ones. These six steps as shown in the Figure (2-1) are
innovators 2.5%, early adopters 13.5%, early majority 34%, late majority 34%, and at the end
laggards which constitute 16% of the population (ibid). Schiffman et al. (2009), stresses that time
is the backbone of diffusion process as it determines the rate of adoption of new product (s) or
service (s).
As evident from the above process the consumer behavior can also be traced by a careful
examination of the customer buying and usage behavior. Figuratively speaking, consumers often
need to modify their behavior for new products. And consumer with the passage of time may
change its relationship staus as shows in figure (2-2) starting with a prospect, becoming a
purchaser, turning into a client and subsequently an advocates and finally a partner of the company
(Tariq and Ghaffar, 2010). Mueller, (1997) contends that companies are well aware that such a
change is not easy as it may involve learning costs, planned obsolescence, switching costs,
network externalities and so on. For instance, cost of learning by changing from PC to Apple
Macintosh operating system and the planned obsolescence is a deliberate ploy such as fashion and
fads (Armstrong & Kotler, 2007). Similarly, switching costs incur when consumers switch from
compact disc to DVD players, their previous CD collection becomes obsolete. Finally, the value of
mobile or a telephone service increases with the rise in number of connections and so does is the
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case with credit cards whose utility increases with the number of shops accepting them. These
products are characterized by a phenomenon known as network externalities (Muller, 1997).
However, according to Gourville (2006) there are also psychological costs associated with the
change in behavior. This phenomenon is termed as psychological prejudice as people tend to
overestimate the advantages of products they own in relation to the new products. Whereas,
companies tend to overestimate the value of their new labels or brands. It is over here that
disharmony is created in the perspectives of the both parties. Thats why consumers in first place
may simply refuse new offer or choice, whereas, on the other hand the company is expecting
success which can act as a double-edged sword. Generally, companies should think from the
perspective of customers.
3.
Real Time Case Apple
The Iconic Apple, Yes, it is true that half of the US over slept on the new years eve of 2011
because of the iconic iPhone. This speaks volumes of the impact of Apple on consumers by
becoming a lifestyle brand and that is why we have chose Apple as a special case of success. Due
to the strong marketing focus Apples has been very successful in creating a tribe of loyal
customer base that think, live and act in a differentiated way. In the year (1998) Apple was born
again when Steve Jobs launched the new computer iMac which came with a complete collection of
softwares and new operating system called MAC OS X. It was an instant success. Soon the
corporate entrepreneur and CEO of Apple Steve Jobbs launched its iBook a special kind of
laptop. However, the biggest success was the introduction of iPod in the year 2001 that achieved
market share in excess of 70% in the US. Furthermore, Apple made a deal with Intel to become
compatible with Microsoft Windows. Since then, iPod is enjoying market leadership in the domain
of competition.
Ever since its inception, Apple has remained busy with developing more than one product at a
time. In retrospect, we find that in the year (1984), Apple commercialized two products namely
Apple C and Macintosh, in (1986) it launched Apple llgs and Macintosh Plus, (1987) it
launched Macintosh II and Macintosh SE. In the same continuity in the year (1989) it
commercialized three computers namely Macintosh Portable, Macintosh IIlci and Macintosh
IIfx. In the year (1990) it launched another three computer models Macintosh Classic, Macintosh
IIlsi and Macintosh LC. Similarly in the year 1993 Apples commercialized seven products namely
Color Classic, Quadra 800, Macintosh Centris, Macintosh LCIII, Power book 180c and
Macintosh LC 475.
At the start of new decade in the year (2001) Apple again launched three products namely
Power Macintosh Quick silver, and its bestseller iPod first generation. In the year 2004
Apple commercialized four products namely xServe G5, iMac G5, iPod click wheel and
iPod Mini and in the year (2005) again Apple launched four successful products namely, iPod
shuffle, iPod Nano, Video iPod, and Mac Mini. And finally, as we all know that in the year
2007 Apple scored a home run by launching its premier iPhone. By analyzing the above trends in
NPD and commercialization it can easily be understood that Apple is constantly churning out new
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innovative products at unprecedented rate. This is mainly due to the fact that at Apple is using
concurrent engineering philosophy to good effect. As earlier on stated in such a process the
product under development may lie in more than one stage of development and thus we can also
deduce that Apple is following a rugby approach to new product development which can go back
as well as in forward direction simultaneously. These factors have enabled Apple in terms of
speed, accuracy, and quality.
From a consumers behavior viewpoint in the case of Apple consumers who purchased MP3
can be termed innovators; the early adopters bought the first iPod. Early majority purchased the
second and third models of iPod. We can say that Late Majority purchase models which came after
third iPod. Finally, laggards or hard core loyal would normally buy a used or cheaper version of
iPod.
Similarly, referring to Lieberman and Montgomery (2002) we can interpret that Apple has
invested heavily in new product development process and therefore attained the status of market
pioneer. This was especially true for Apple a couple of decades ago as well as today. As with the
advent of iPod first generation in (2001) on the market it revolutionalizes the electronics industry
and had a major impact on competition. Ever since, Apple has successfully launched several other
line extensions of the older version with small incremental improvements. For example in the year
(2003) Apple launched iPod 3rd Generation and in the subsequent year (2004) it launched two
more extensions of the products namely iPod Mini and iPod click Wheel. Again in the year (2005)
Apple came up with some improved products in the form of iPod Shuffle, Nano and Video iPod.
And finally in the year 2007 iPhone was launched under the same brand umbrella term (i).
Therefore the view point of Henderson, (1993) who states that gaining competitive advantage is a
function of predictably predictable activities within the firm. Thus we see small incremental
changes in Apple product line as well as the view point of Lieberman and Montgomery is best
exemplified by Apple launch of iPhone in the year (2007). If we consider the case of NeXT, a
desktop computer developed by Steve Jobs, the legendary founder of Apple, customers did not
want the optical drive instead of the floppy drive. Because the new feature makes it difficult for
end-users to switch work from a personal computer to a NeXT. The machine enjoyed other
superior features like hi-fi sound; end-users never look beyond the initial resistance. Many people
found it far too expensive, while engineers reckoned the workstations with superior value.
Therefore, Steve Jobs has to abandon the 200 million dollars product. Here it is suggested that if
Steve has listened to the customer voice he could have been successful, because in this scenario
customers were expecting an incremental innovation. However, for almost thirty long years
Apple had remained the trend setter to foresee and foretell the future of the domestic computers.
The balance of probability is high that it would continue to lead the way. The success recipe came
to Apple in the form of iPod, and even Apple personal computers sales started going up because of
this hit product. Apple has been very clever in its ploy of planned obsolescence as it is launching
iPhone after iPod and that too with new improvements. The new improved product has the cool
feeling assorted around it. Therefore it is compelling customers to engage in repeat purchase,
which serves the long term purpose of the company. Thanks to planned obsolescence. Another
very interesting case in point relating to Apple is launch and commercialization of Apple
Macintosh personal computers line. The new Apple Mac customers encounter mistakes while
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using Mac because it doesn't work the same way it would be expected to on a Windows computer?
Simply the Windows users follow and expect everything to word the same way as in Windows.
And on the other hand Macintosh users see and expect their Macs to work in its original way
(Macintosh way). There are substantial commonalities between Apple and Windows operating
systems, but there are some differences which I am reckoned worth mentioning. It is here that the
concept of dominant design and network externalities comes into play with Microsoft having a
clear edge in terms of network externalities and therefore greater market share. Similarly the
Apple has its own network externalities in the form of iTunes that could only be downloaded
for their website.
An interesting case in point is that in the year (1985), Bill Gates was literally begging Apples
CEO Steve Jobs to license his Mac operating system to Personal computer vendors. Apple did not
agree and later on Bill Gates came up with a smack in the face response and now the situation is
that Apple has only 4% market share in PC business. However, this time around the buzz is related
to digital music, encompassing iPod music player and its iTunes made it cheaper and convenient to
download songs at a rate of 99 cents only. But the irony is that Apples iPod music player only
plays songs in the companys "FairPlay" digital rights management (DRM) format and songs
downloaded from iTunes play only on iPod. For example, a customer who gets a song
downloaded from Apples iTunes and wants to play it on his or her real player would be highly
disappointed (www.macnewsworld.com). On the other hand an iPod owner is left limited to get
music from iTunes, even though there are many other services on the Web, such as Napster and
Real Networks. But the customer cant help the situation. Apple must hear the voice of the
customer as customers is always in search of perpetual perfection and who knows who will be the
next?
4.
Conclusions
The new product development activities differ from company to company especially in stages of
commercialization and marketing. Often times the companies overvalue their new product quality,
features and adoptability, whereas the consumers are reluctant to switch the existing products thus
exhibiting a high level of brand loyalty. This is mainly due to the fact that switching entails costs
which can take many forms. Also important is the fact that consumers develop nostalgic fondness
with products therefore not ready to accept innovation many a times.In simple words, consumers
form associations with certain products and therefore become reluctant to other alternatives
because of their habits. Then the sequential new product process with path dependencies is seldom
followed as gigantic companies like Apple are continuously developing three to four products in
pipeline. This practice is also done at Apple with the help project oriented teams working with a
well connected system of links to other areas of the over all value chain. Companies should bear in
mind that apart from internal sources of innovation there is a much neglected and overlooked
source of new product development i.e. the voice of the customer has to be taken into
consideration. Its good to have a visionary and charismatic leader like Steve Jobs and Henry Ford.
However, these leaders should not impose their own prerogatives. In Apple case it lost market
share to Microsoft in past because of the rigidity of then CEO Steve Jobs. Similarly, Mr. Henry
Ford was also fond of influencing the new product development process. Someone asked him in
how many colors do you produce cars? He replied cars in all colors as long as the color is black.
Some of the top notch companies make silly blunders as they do not do proper research before they
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commercialize their products. They misunderstand between needs, wants and demands. So if
consumer is not clear himself about the job he wants to get the product for how can companies
doing marketing research for their new product development elicit the right information from
consumer. So I reckon its better to analyze the market by a job based segmentation approach.
This means figuring out the specific job which for which the consumer hires the product or service
in a particular situation. Companies like Apple who struck the home run in one or two of their
products can help its new product development processes because of historical research and
development capabilities as well as a strong goodwill on the market. The company can then easily
launch brand extensions as well as line extensions to help transfer the brand equity or goodwill of
existing products to new products. A prime example in case of Apple is the use of letter (i) in
many of Apple products nowadays. Finally, from commercialization and marketing viewpoint it is
important for companies not to launch not to launch valuable new products to pre-mature markets
as was the case with NEXT computers at Apple, where customer needs were in the developing
stage, and a new product was introduced which was in a way difficult to handle. Companies are
also exercising to a great extent a phenomenon of planned obsolescence where the companys
products become obsolete after a certain period of time and the consumer is compelled to engage
in repeated purchase so as to serve the firms profit motive. In simple, the chances of success for a
seasoned company becomes more as it becomes a key opinion leader in ship shaping customer
preferences and ways of thinking by design or by default after it makes a home run in the form of
product or services. In nutshell, first understand the customer and then be understood on the
market.
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Robert G. Cooper (1993) Winning at new products, Addison-Wesley, reading, Massachusetts,
p.29
Steven C. Wheelwright, Kim B. Clark (1992), Creating Project Plans to Focus Product
Development, Harvard Business Review, Vol. 70, Issue 2
Robert Veryzer, (1998) Discontinuous innovation and the New Product development Process,
Journal of Product innovation Management, Vol. 15, issue 4
Steven C. Wheelwright, W. Earl Sasser Jr (1989)., The New Product Development Map,
Harvard Business Review, Vol. 67, Issue 3
Song and Montoya (1998), Critical Development activities for Really new versus Incremental
products, Journal of Product innovation Management Vol. 15, Issue 2, March
T. Michael Nevens, Gregory L. Summe, Bro Uttal (1990)., Commercializing Technology:What
the Best Companies Do, Harvard Business Review,Vol.68,Issue3.
William T. Robinso, Jeongwen Chiang (2002). Product development strategies for established
market pioneers, early followers, and late entrants, Strategic Management Journal,
Volume 23 Issue 9,
Preventing the premature death of relationship marketing: by Susan Fournier, Susan Dobscha and
David Glen Mick (Harvard Business Review Jan-Feb 1998 v76 n1 p42(8)
AOL tech, (2006), Common mistakes made by new mac users, available via:
http://www.tuaw.com/2006/01/25/common-mistakes-made-by-new-mac-users/, accessed on
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Applehistory.com, 2008, available via: www.apple-history.com, accessed on Saturday

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Annexure 1
Figure 2-1
Innovators,
Figure 2-2
New Product Adopter Categories (adopted from Everett M. Roger, 1967)
EA
EM
LM
Laggards
Source: Adopted from Tariq and Ghaffar (2010)
Partner: Someone one who has the

relationship of partner with you.
Partner
Advocate
Supporter
Client
Advocate: Someone who actively recommends

you to others, who does your marketing for
you.
Supporter: Someone who likes your
organization, but only supports you passively.
Client: Someone who has done business with
you on a repeat basis neutral, towards your
organization.
Customer: Someone who has done business
just once with your organization.
Customer
Prospect: Someone whom you believe may be

persuaded to do business with you.
Prospects
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Does Disclosure Quality Reduce Default Risk?

Empirical Evidence from Pakistan
Zahid Irshad Younas(Corresponding Author)
Lecturer Department of Economics
GC University Lahore Pakistan
Dr. Muhammad Wasif Siddiqi
Associate Professor Department of Economics
Jamshaid ur Rehman
Lecturer, Department of Economics
Bilal Mehmood
PhD Scholar, Department of Economics, GC University Lahore Pakistan.
Abstract
The purpose of this study is to investigate the relationship between the corporate disclosure quality
and default risk of companies of Pakistan. Study hypothesized that corporate disclosure quality
reduces the default risk of corporate in the mind of lenders and underwriters by improving the
credit rating of corporate. For the quality of disclosures, corporate disclosure index has been
developed to mark the corporate for its disclosure quality on the basis of different disclosures
available in the annual report. Study observed at the end the disclosures quality is significantly
related with the default risk/credit rating of corporate. To see within the corporate disclosures
which of the disclosures more liable for default risk/low credit rating, we decomposed the
corporate disclosure index into its various components and observed, disclosure on ownership
structure of the company, financial information transparency disclosures are more significant
disclosures of corporate, which bring the default risk/lower credit rating.
Key Words: Corporate Disclosures, Credit Rating, Default Risk, Ownership Disclosures,
Financial Disclosures.
1. Introduction
Using the corporate rating as a proxy for the default risk this study investigates whether, the
corporate with quality of disclosures has the higher corporate rating i.e. the low default risk. It is
general argue that detailed and quality of corporate disclosures reduced the default risk by
increasing the credit rating.
The corporate rating reflects a corporate creditworthiness and default risk (Standard and Poors,
2002). Due to this rating agencies are associated with corporate disclosures, because the poor
corporate disclosures does not only destroys the financial position of the corporate but also results
in the losses to major stakeholders i.e. owners and creditors of the companies (Fitch Ratings,
2004). Schneider (2008) asserts firms with better sustainability disclose detailed information on its
affairs and operations as compare to the firm with substandard sustainability. The theory on
voluntary disclosure suggests that high quality firms report quality of disclosures on its
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management and affairs to discriminate themselves from poor companies. The theory on
voluntary disclosures has been applied in the past on environmental disclosures and firm
performance as well and asserted the positive relationship between level of disclosures and firm
performance (Clarkson et al. 2008).
2. Previous Literature
In past few studies have been conducted to find the relationship between corporate disclosures,
firm performance and cost of debt or factors closely related to it. Nevertheless, most recent studies
of (Durnev et al. 2004 and Ting I. Hsiu, 2008) focused on the impact of disclosures on the stock
prices. But in this study it is tried to observe the relationship between the quality of disclosures
disclosed by the corporate in the annual report and corporate ratings. One important factor that
encourages corporate and its BOD (board of directors) to disclose the information in the form of
different disclosures that these disclosures reduces the risk of making investment in company and
also decreases interest cost (S & P 2002).2 Poor corporate disclosures can mar the confidence of
creditor and can make the financial position of the concern doubtful in their minds and thus can
result in the low credit ratings and high default risk.
In order to find the usefulness of these disclosures thus we developed corporate disclosures index
like (James and Cotter, 2007). But our study is superior to it because, we used more disclosures
available in the annual report and introduced reputation as a control variable, which seems to be
missing in the previous studies, and obtained better result as compare to the (James and Cotter,
2007). The construction of index3 is centered on the disclosures on compliance, disclosures on
external audit, disclosures on procedures, disclosures on ownership structure, disclosures on BOD
and financial disclosures.
3. Hypothesis
The study intends to scrutinize the following hypothesis:
H1: There is a positive relationship between corporate disclosure quality and default risk.
To test this hypothesis in the upcoming section detailed methodology is provided, which is
followed by results and conclusion.
4. Methodology
4.1 Development of Corporate Disclosure Index
A corporate disclosure index based on annual report disclosure was developed to rate each
companys corporate disclosure quality. Construction of this index was centered on corporate
disclosure available suggested by prior studies of James and Cotter (2007), Ting I. Hsiu (2008) and
S & Poors (2002). The table 1 summarizes the corporate disclosure index. The maximum possible
score was 38 (4 compliance disclosures, 11 for financial information transparency disclosures, 2
for procedures disclosures, 3 ownership disclosures, 14 disclosures on BOD, 4 external audit).
[Insert Table 1 about here.]
The information for constructing corporate disclosure index was obtained from 2008 annual report
of companies.
4.1.1 Compliance Disclosures
In compliance disclosures one point each was awarded for corporate governance and compliance
statement. While 2 points were awarded for detailed corporate governance statement and
compliance statement.
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4.1.2 Disclosure on BOD

Similarly, the disclosure on board of directors is a second component of corporate disclosure index
to check the quality of disclosures of a concern. One point was awarded for each disclosures if in
annual report of firm list of BOD, list of BOD committee, Details of remuneration of BOD,
experience of BOD, qualification of BOD, attendance of BOD at meeting, directors are classified
as executive and outsiders, job of BOD were disclosed by the company in annual report. Other
wise 0 score was awarded. While 2 score is given in case of each detailed disclosure.
4.1.3 Disclosures of Ownership
Similarly the disclosure on ownership was also a component of corporate disclosure index to
observe the quality of disclosure. The purpose of considering the ownership disclosure is to
observe the ownership structure of firm. The corporate has been marked as follow for their
disclosure quality on ownership structure. Each firm was given one point if, number of shares held
by the directors were disclosed in the annual report. While 2 points were given to the companies in
case top 5 shareholders were disclosed by the company in its annual report.
4.1.4 External Audit
As from the statutory point of view the corporate is liable for the appointment of external auditor.
So, disclosure on external audit has been considered as a part of corporate disclosures index. One
point was given if, audit fee is more than the minimum audit fee4 set by ICAP (The Institute of
Chartered Accountants of Pakistan) and Audit conducting firm is also disclosed in the annual
report of the corporate. One additional point was given, if the audit conducting firm is one of the
big5 four audit firm in Pakistan the firm was given 2 points.
4.1.5 Disclosure on Procedures
Similarly the disclosure on procedures has also been considered a part of corporate disclosure
index to observe the quality of corporate disclosures. In corporate disclosure index each firm was
given one point if the job of the BOD is disclosed; code of conduct for the employees is mentioned
in the annual report.
4.1.6 Financial Disclosures
To check the transparency in the usage of financial resources the study has followed, the different
disclosures of financial transparency suggested by OECD for the financial transparency after the
financial meltdown of 1997 (Dewan, 2006). So, for the confidence of lenders and underwriters
different financial transparency disclosures suggested by OECD was included in corporate
disclosure index. Each firm was given one point if, the company provided an overview of the trend
in its industry, company provided the detail of its product, company provided the detail of its
market share, company provided the details of related party transactions (RPTs) company reported
its earning forecast for upcoming years, company reported its output in the annual report in
physical terms, company reported the efficiency indicators in the annual report like (Return on
Assets and Return on Equity etc), company provided the investment plan in the coming years in its
annual report and company has provided the comparison of its performance with rest of the
companies operating in the same industry.
4.2 Data and Data Sources
For the detailed analysis of the proposed hypothesis default risk of firm is captured by unpublished
data on firms individual credit rating. This unpublished data on corporate rating encompasses all
type of risk like (liquidity risk, credit risk, operational risk etc). Initially 67 companies rated by
PACRA in year 2009 on the basis of their performance in year 2008 were considered, but then to
keep the homogeneity in data and to get the satisfied results, we restricted our sample to 36
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companies, and thus removed 31 companies because of difference in operations and non
availability of data on the variables used in this study. Variables are listed and explained in the
appendix.
5. Results and Discussion
5.1 Descriptive Statistics
The table 3 at the end shows the descriptive statistics of study. The highest CDQSCOREi is 37.
While the lowest CDQSCOREi is 15. The median and mean score of CDQSCOREi are 27 and
26.77 with a wide range of 6.033. The highest score obtained by the company on BODDISCi is 13
while the minimum score obtained by a company on BODDISCi is 05. Similarly, mean and
median score of BODDISCi are 8 and 7 with a wide range of 2.42. The highest score obtained by a
company for COMPDISi is 04, while the lowest score obtained by a company on COMPDISi are
02. The median and mean score of COMPDISi is 4 and 3.5 respectively. The highest score
obtained by a company on external audit EXAUDITi is 03 and lowest score obtained by a
company on EXAUDITi is 01. While the mean and median scores in the external audit are both 3.
Similarly in the descriptive statistics of FIDISCi, the highest score achieved by a company on the
financial disclosure is 11. Moreover, the lowest score obtained by companies in the FIDISCi is 3.
The mean and median score obtained by companies on financial disclosures are 8 and 8.5
respectively with a wide range of 2.5. According to table 2 maximum score obtained by the
companies on PROi is 02. Minimum score obtained by company is 1 with a range of 0.439155.
Table 3: Descriptive Statistics
Mean
Median
Maximum
Minimum
Std. Dev.
Mean
Median
Maximum
Minimum
Std. Dev.
BODDISi
CDQSCOREi
COMPDISi
EXAUDITi
FIDISCi
GROWi
7.75
7
13
5
2.334524
LEVi
0.589751
0.341482
2.136049
0.014443
0.543557
26.77
27
37
15
10.27784
LIQi
1.670797
1.795187
2.530674
0.39388
0.726593
3.472222
4
4
2
0.608798
SIZEi
8.41E+09
5.08E+09
3.39E+10
10647310
8.83E+09
2.597222
3
3
1
0.545363
PERi
0.057852
0.01031
0.232333
-0.0119
0.076812
8.25
8
11
3
2.406836
PROi
1.222222
1
2
1
0.421637
0.456435
0.451179
1.071701
0.032659
0.266919
REPUi
0.833333
1
2
0
0.87831
5.2 Model Estimation

The following model was used to assess the hypothesis that a firms credit rating/default risk is
positively related with its quality of disclosures:
DRt+1 = + 1 CDQSCOREi + 2 SIZEi + 3 LEVi + 4 GROWi + 5 REPUi + 6 LIQi + 7 PERi
In this equation DRt+1 is the credit rating of the firm obtained at 2009 and used as a proxy for the
default risk. As the literature shows the credit rating shows the credit rating indicates the credit
worthiness of the firm (Fitch rating, 2004), thats why it is used as default risk. So, higher credit
rating indicates the higher credit worthiness and lower default risk.
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Table 2: Regression Results of Study

Equation 1
Equation 2
Equation 3
Equation 4
Equation 5
Equation 6
Equation 7
R-Squared
0.93
0.91
0.93
0.92
0.93
0.92
0.92
Variable
Equation 1
Equation 2
Equation 3
Equation 4
Equation 5
Equation 6
Equation 7
Intercept
4.556793
(0.0000)
0.024413
(0.0486)
1.39E-11
(0.1795)
-0.875716
(0.0118)
-0.383371
(0.3407)
0.807141
(0.0014)
2.484862
(0.0010)
5.227902
(0.0000)
5.290813
(0.0000)
4.844539
(0.0000)
5.469460
(0.0000)
5.345694
(0.0000)
3.30E-11
(0.0075)
- 0.753328
(00.0412)
-0.411150
(0.3366)
0.766685
(0.0035)
1.60E-11
(0.1123)
-1.076808
(0.0001)
-0.617898
(0.0976)
0.950277
(0.0000)
0.067862
(0.0563)
1.24E-11
(0.2258)
-1.032498
(0.0003)
- 0.626757
(0.1188)
1.002480
(0.0000)
2.13E-11
(0.0424)
-1.080755
(0.0001)
-0.615950
(0.0882)
0.984432
(0.0000)
1.20E-11
(0.2718)
-0.978269
(0.0081)
-0.687605
(0.0882)
0.952559
(0.0003)
1.28E-11
(0.2466)
-0.967914
(0.0089)
-0.727081
(0.0690)
0.940811
(0.0003)
CDQSCORE
SIZE
LEV
GROW
REPU
BODDIS
0.124204
(0.3935)
COMPDIS
0.083953
(0.5776)
EXAUDIT
FIDISC
LIQ
OWNDIS
0.290571
(0.4121)
0.0178
(0.0313)
1.001092
(0.0015)
0.408897
(0.7640)
0.128747
(0.7250)
0.270466
(0.0195)
PRO
0.090808
(0.6321)
In equation (1) CDQSCOREi is the marks obtained by the corporate out of total score of corporate
disclosure index. Following the prior studies and factors recommended by the credit rating
companies like S&P and PACRA etc. this study has also used the following control variables
performance, size, growth, leverage and reputation for default risk/credit rating.
The result of first equation in table 2 at end shows that CDQSCOREi is significant and positively
related with the default risk for which the credit rating has been used as a proxy. Which indicates
the firm with the good corporate disclosures has better corporate rating and thus enjoys lower
default risk and vice versa. These results are inconsistent to the study of James and Cotter (2007)
and consistent to the study of Asbaugh-Skaife (2006), Collins and La Fond (2006). Moreover,
these results reveal, in the Pakistani framework of corporate, the corporate disclosure quality plays
a vital role in determining its default risk. The other significant variable includes the REPUi of the
firm and leverage, which results in lower credit rating and high default risk. The regression results
in table 2 at end shows performance is positively related with the default risk/corporate rating as it
was expected. Which means those firms whose performance is better they have the higher credit
rating and hence the low default risk. Similarly the regression results in table 2 about leverage
indicates it is negatively associated with the default risk/credit rating which means those firms
which use more debt they have to pay more interest cost which increases their default risk by
decreasing the credit rating Sengupta (1998); Bhojraj and Sengupta (2003); Anderson et al. (2004);
James and Cotter (2007).
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In equation 1 insignificant variables includes size and growth. Though the size is insignificant but
it is insignificant in opposite direction. Similarly the growth is also insignificant but it is
surprisingly insignificant in opposite direction, which might be indicating that growing firm are in
needs of more funds due to which they spend the less money on the improvement of its quality of
disclosures.
In order to observe which of the disclosures in the corporate disclosure index drives the result
more. The CDQSCOREi is decomposed into its various components and substituted the
CDQSCOREi with the FIDISCi in the equation 2 and regressed against the default risk/credit
rating. The result in table 1 indicates there is significant and positive relationship between the
default risk and financial disclosures, which shows the firms with quality of financial disclosures
has higher credit rating and credit worthiness and thus less default risk because as the firm disclose
the more detailed information on financial affairs it increases the confidence level of investors and
creditors due to which it credit rating increases and thus reduces its default risk. For parsimony
purpose and to get the better result from 2nd model the performance and leverage has been
dropped. Thus among the control variable the significant variable includes; size, liquidity and
reputation. While growth is insignificant but is in right direction.
Similarly in 3rd model the CDQSCOREi has been substituted with the BODDIS and regressed
against the default risk and observed at the end the disclosures on board of directors are
significantly and positively related with the credit rating/default risk which means the firms with
disclosures on board of directors have the more trust in the eye of creditors and investors and thus
enjoys higher credit rating and lower default risk. Among the other control variables the significant
variable includes growth, leverage and reputation with the same sign as they were expected.
Moreover, size is insignificant but it is insignificant in right direction.
Similarly in 4th model the CDQSCOREi has been substituted with compliance disclosure score and
regressed against the default risk the results in table 1 indicates the compliance disclosure are
insignificantly and positively related with the default risk. Moreover among the other control
variables like the previous model the significant variable includes Reputation and Leverage.
Though size is insignificant but it is insignificant in right direction.
Similarly in 5th model the CDQSCOREi has been substituted with its ownership disclosure
component and regressed against the default risk. The results in table 2 at end indicate the
ownership disclosures are significantly and positively related with the default risk. Moreover
among the other control variables like the previous model the significant variable includes
reputation, leverage and growth with the same sign as they were expected and surprisingly size is
also significant with ownership against the default risk.
Similarly in 6th model the CDQSCOREi has been substituted with its component of procedures
disclosures and regressed against the default risk and. Results in table 1 indicates the procedures
disclosure are insignificantly and positively related with the default risk. Moreover among the
other control variables like the previous model the significant variable includes reputation,
leverage and with the same sign as they were expected and surprisingly size is insignificant but it
is insignificant in right direction.
Similarly in 7th model the CDQSCOREi has been substituted with its component of disclosure on
external audit and regressed against the default risk and results in table 2 indicates it disclosure on
external audit are insignificantly and positively related with the default risk. Moreover among the
other control variables like the previous model the significant variable includes reputation,
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leverage and growth with the same sign as they were expected and surprisingly size is insignificant
but it is insignificant in right direction.
5.2.1 Multi-collinearity Check
To check Muti-collinearity problem in data the variance inflation factor has been used. Variance
Inflation Factor (VIF) and tolerance are both generally used measures of degree of multicollinearity of the ith independent variable with the other independent variables in a regression
model. Most commonly used rule of thumb associated with the VIF is rule of 10. Which shows if
the value of VIF is greater than 10 it is an indication of multi-collinearity in data. The table 4 at
end shows the value of VIF ranges from 1.0350 to 11.2219. And thus there is only one value which
is slightly higher than 10, which means there is no major threat of multi-collinearity among the
independent variables.
6. Conclusions and Recommendations
Our results shows, default risk/credit rating is significantly related with the corporate disclosure
quality score, which is clear indication that, if the firms want to improve their credit rating and
reduce the default risk in the eyes of lender and creditor they must improve the quality of
disclosure available in their financial reports. Among the different corporate disclosures the results
in the table 1 indicates the FIDISC (financial disclosure), ownership disclosures and board of
directors disclosures showed the significant relationship with the default risk/credit rating. While
within the corporate disclosures, disclosures on external audit, disclosures on procedures, and
disclosures on compliance are proved insignificant which confirms there is not so much role of
these disclosures in bringing the default risk or shaking the lenders and creditors trust in the form
of lower credit ratings. The results also suggest the disclosures available in the annual reports of
Pakistani corporate are not enough in terms of quality to build the confidence of lenders and
underwriter and reduce the default risk by improving the credit ratings. Moreover, the Pakistani
corporate is in need of improving their disclosure quality on ownership and financial transparency.
In the ownership disclosures they must emphasize on disclosing the shareholding patterns and
disclosing the proportion of ownership by top five investors. So that, the creditors and lenders can
assess the default risk of the Pakistani corporate easily in the perspective of its ownership
structure. Similarly results indicate that financial transparency is the question mark of Pakistani
corporate, because they are seriously lacking detailed financial information on financial matters
and key indicator of financial health. Due to which their default risk seems to be high in the eyes
of creditors, financial institutions in the form of low credit ratings. On the basis of these results it
could be recommended to the regulatory bodies in Pakistan to enforce the corporate to show
detailed information on the corporate affairs especially on ownership structure and shareholding
pattern in the company. Moreover, in the financial transparency the regulatory bodies must assure
that corporate has disclosed the information on: related party transactions, output in physical terms,
forecasted revenue, and an overview of trend in industry and its comparison with the performance
of the company. Rather than just focusing the few voluntary financial statements, so that the
confidence level of creditors and investor may increase and the partnership of trust and confidence
could be developed between the corporate and its stakeholders.
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Appendix
Variables and their Definitions:
DRt+1 = PACRA credit rating for the firm and a measurement of default risk
CDQSCOREi = proportional score (x/38) from the corporate disclosure index.
SIZEi = sum of book value of all fixed assets.
LEVi Quotient of total long term loans and advances by total equity.
GROWi = growth is measured as the proportion of tangible assets to total assets.
REPUi = Statement of CSR (Corporate Social Responsibility) given in the annual report of the company has been used
as a proxy for reputation.
LIQi = proportion of current assets to current liabilities.
COMPDISi = the compliance disclosure score from the corporate disclosure index and expressed as proportion, x/4.
BODDISCi = board of directors disclosure score from the corporate disclosure index and expressed as proportion,
x/14.
EXAUDITi = External audits disclosure score from the corporate disclosure index and expressed as proportion, x/4.
OWNDISi = ownership disclosures and expressed as a proportion, x/3.
PROi = Procedure disclosures and expressed as a proportion, x/2
FIDISCi = financial disclosures and expressed as a proportion, x/11.
PERi = Ratio of earnings before interest and tax to total assets.
Table 1: Corporate Disclosure Index
DISCLOSURES
Compliance Disclosures
Presence of corporate governance statement in annual report
Presence of statement of compliance in annual report
Presence of detailed corporate governance statement and statement of compliance
in annual report
Maximum Possible Score for Compliance Disclosures
Disclosures of BOD
Presence of list of BOD in annual report
Presence of list of BOD committee
Presence of information on remuneration of BOD in annual report
Presence of detailed information on remuneration of BOD in annual report
Presence of information on experience of BOD in annual report
Presence of detailed information on experience of BOD in annual report
Presence of information on qualification of BOD in annual report
Presence of detailed information on qualification of BOD in annual report
Presence of attendance of BOD meeting in annual report
Presence of job description of BOD in annual report
Presence of classification of BOD in annual report as executive and non-executive
Maximum Possible Score for BOD Disclosures
Ownership Disclosures
Presence of information on no. of shares held by directors in annual report
Presence of information on top 5 shareholders in annual report
Maximum Possible Score for Ownership Disclosures
External Audit Disclosures
Presence of audit fee in excess of audit fee set by ICAP in annual report
Presence of information on audit conducting firm in annual report
If Audit conducting firm is one of the big four audit firms in Pakistan
Maximum Possible Score for External Audit Disclosures
Procedure Disclosures
Presence of job specification of BOD in annual report
Maximum
1 or 0
1 or 0
2
1
1
2
04
1 or 0
1 or 0
1 or 0
2
1 or 0
2
1 or 0
2
1 or 0
1 or 0
1 or 0
1
1
1
2
1
2
1
2
1
1
1
14
1 or 0
2
1
2
03
1 or 0
1 or 0
2
1
1
2
4
1 or 0
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Presence of code of conduct or code of ethics
Maximum Possible Score for Procedure Disclosures
Financial Transparency Disclosures
Presence of overview of trend of firm related industry
Presence of description of product the firm is producing
Presence of information on market share of company
Presence of information on RPTs
Presence of information on earning forecast for upcoming year
Presence of information on output produced by company
Presence of information on output forecast
Presence of information on efficiency indicators
Presence of investment plan in annual report
Presence of detailed investment plan for upcoming years
Presence of comparison of performance with other companies or industry
Maximum Possible Score for Financial Transparency Disclosures
Total Score
1 or 0
MAY 2011
VOL 3, NO 1
1
2
1 or 0
1 or 0
1 or 0
1 or 0
1 or 0
1 or 0
1 or 0
1 or 0
1 or 0
1 or 0
1 or 0
11
38
Table 4: Results of Variance Inflation Factor

Variables
Equation1
CDQSCOREi
SIZEi
LEVi
GROWi
REPUi
BODDISi
PERi
COMPDISi
EXAUDITi
FIDISCi
LIQi
OWNDISi
PROi
1.37893
1.53560
3.12246
1.87518
6.83709
Equation2
Equation3
Equation4
Equation5
Equation6
Equation 7
1.5070
1.3036
3.0892
1.6911
3.4150
1.2191
1.2500
3.1246
1.7874
3.3550
1.4706
3.0892
1.6818
3.3473
1.3605
5.5491
1.6986
6.4704
1.3810
5.6036
1.6625
6.513036
1.9063
6.8343
5.0541
1.2355
1.0350
1.6265
6.7489
10.9986
11.2219
1.3218
1.0459
End Notes:
1
See Dye (1985).
2
S & P (2002) is an American based credit rating company named Standard and Poors, 2002.
3
The disclosures used in the index are suggested by S & P (2002).
4
ICAP set the minimum audit fee in a circular issued on 13th August, 2008.
5
Information on big four audit firm is obtained from ICAP.
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Screening for Depression in the Community by Lady Health Workers.

Farooq Naeem1, Zahid Javed2, Nadia Arshad3, Aneesa Bandial3, Muhammad Mujtaba3,
Mozzam Khalil4, Muhammad Ayub5.
1
2
Southampton University, Southampton England.
Department of Social Work, University of the Punjab, Lahore.

3
4
Sir Ganga Ram Hospital, Lahore.
National Commission for Human Development, Islamabad.

5
St lukes Hospital, Middlesbrough, England.
Abstract
This research paper focus on Screening for Depression in the Community by Lady Health
Workers. The National Commission for Human Development (NCHD) in Pakistan has been
working in the rural communities to improve the health outcomes. This study was conducted in
one of their project areas. Data Analysis tools like correlation are used. It is concluded that PADS
and BSI can be used by health care workers to screen depression in the general population. They
do not perform well as diagnostic instrument on their own.
Keywords: Screening , Depression , Community , Lady Health Workers
Introduction
Depression is a common problem in the communities all over the world and causes huge disease
burden (Simon, Fleck et al. 2004; Ustun, Ayuso-Mateos et al. 2004). The evidence from
community studies in Pakistan suggests that the rate of Depression is higher than many other
countries (Mumford, Nazir et al. 1996; Mumford, Saeed et al. 1997; Mumford, Minhas et al.
2000). Treatment for the common psychiatric disorders (including depressive disorder) is usually
provided in primary care (Tylee and Jones 2005; Tylee 2006). Taking into consideration the small
number of psychiatrists in Pakistan, treatment costs and cultural issues it is important that
depression is treated in primary care (Sheikh and Furnhaam 2000; Naeem, Ayub et al. 2006). The
general practitioners are in general, not well trained to diagnose and treat these problems in
Pakistan (Gadit and Vahidy 1997). Those working in private sector are usually busy and might not
see psychiatric disorders as a priority in comparison with the life threatening conditions. It has
been suggested that psychiatric patients present with symptoms of physical illness and are often
mis-diagnosed (Patel, Abas et al. 2001; Greden 2003; Stewart 2003).
Primary health care physicians can be supported by other professionals in identifying as
well as monitoring depression. This is likely to reduce the cost of care and may be more acceptable
to the patients for cultural and economic reasons. This has been tried in other countries (Moreno,
Saravanan et al. 2003).
A new workforce of lady health workers has been involved in preventive and monitoring
aspects of health in Pakistan. They can screen and monitor depression in collaboration with
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primary health care physicians. This will form an integrated system of screening and monitoring
which has been found to be the most effective way of tackling the public health problem of
depression (MacMillan, Patterson et al. 2005). These workers need a structured method of
identifying people with symptoms of depression and then provide them the information about the
condition and refer them appropriately. They can then monitor the condition jointly with the
treating physician.
To effectively screen and monitor depression questionnaires are very useful. If the process
is to be repeated on a large scale then they from essential part of the training material. Generally
there are two options for this; translation of an already established questionnaire or development of
an endogenous questionnaire. There are strengths and weakness of both the approaches (Mumford,
Tareen et al. 1991).
Pakistan Depression and Anxiety Questionnaire (PADQ) was developed to measure
psychological symptoms of depression in Pakistan (Mumford, Ayub et al. 2005). It is a useful tool
in the hands of mental health professionals. The Breadford Somatic Inventory (BSI) was
developed in the subcontinent to measure somatic symptoms and has proved to be a useful
screening tool for epidemiological studies in community studies of psychiatric disorder (Mumford,
Bavington et al. 1991).
We wanted to evaluate the usefulness of these two instruments as screening tools by the
lady health workers. We believe that if these scales can be used effectively by the lady health
workers in the rural communities then they can successfully identify the people at higher risk of
depression and refer them for treatment to the general practitioners. This will particularly be useful
for the women in the community who find it hard to access the primary health care facilities. We
evaluated their use by the lady health workers in a sample of people who had not sought any help.
In this paper we are describing the results of the evaluation.
Since Pakistan has a very low literacy rate we assessed the properties of these
questionnaires when they are read to people and their responses are recorded by the person
administering the questionnaire.
Research Questions
Can the community workers using PAQD and BSI identify the cases of depression as effectively as
the clinicians using a clinical interview?
Do BSI and PADQ give similar results when administered by trained clinicians and community
health workers?
In comparisons with Hamilton Depression Rating Scale (as administered by trained clinicians)
how well do BSI and PADQ (as administered by health workers) perform to identify the severity
of depressive symptoms in the community.
Methods
The National Commission for Human Development (NCHD) in Pakistan has been working in the
rural communities to improve the health outcomes. This study was conducted in one of their
project areas. A union council (a local administrative unit with population around twenty
thousand) where the Commission had started its project and had registered all the households and
the names of the residents was identified. A list of the households was randomly selected (whereby
every third house from the housing record of The NCHD was used) and three researchers visited
the households accompanied by the local community health workers. All the adults present in the
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house interviewed. The community health workers administered Pakistan Anxiety Depression
Questionnaire and Bradford Somatic Inventory.
One of the researchers was trained psychiatrist with over ten years of experience in
psychiatry. He had experience of working in Pakistan and the United Kingdom . He had specialist
registration in psychiatry in the United Kingdom and had received the training in SCAN.
Two other researchers had post graduate qualifications in psychology. They had over five
years of experience of working as clinicians. Forth member of the team was a trainee psychiatrist
from Pakistan. All the researchers had training session together to achieve over ninety percent
consensus on ratings for Hamilton Depression Scale (Hamilton 1960). They all knew the local
language. For common psychiatric disorders we made a list of symptoms based on the items of
ICD 10 Research & Diagnostic Criteria (World Health Organization. 1993). The symptoms in
sections Depressive Episode (F32), Dysthymia (F34.1) and Neurotic and Stress Related
Somatoform Disorders (F40-f48) were included. During the training sessions the researchers
interviewed a number of patients together and rated them on these symptoms. They achieved
between 80 to 90% agreement on the symptoms before the training stopped.
Blind to the scores of the scales administered by the community health workers they
interviewed the people using clinical interviews and generated ICD 10 diagnoses. In addition they
administered Hamilton Depression Scale, Pakistan Anxiety Depression Questionnaire and
Bradford Somatic Inventory.
The results were analyzed using SPSS version 11. The comparisons were made between
the researcher administered and community health worker administered PADQ and BSI to assess
the inter-rater reliability.
The scores on BSI and PADQ were compared with the Hamilton Depression Scale
administered by the researchers. There scores were also compared with the clinical diagnoses to
test sensitivity and specificity of the scales.
Using the cut-off of 11 for PADQ and 38 for BSI we compared the case-ness status for these scales
with causes identified through the clinicians interviews.
Scales
Pakistan Anxiety Depression Questionnaire has two subscales; depression scale and depression
and anxiety scale. It enquires about the psychological symptoms of depression. It was developed in
Urdu based on symptoms described by the patients suffering from psychiatric disorders. Bradford
Somatic Inventory was developed in subcontinent again based on the symptoms described by
psychiatric patients. It however focused on bodily symptoms as opposed to psychiatric symptoms.
It has a total 46 items and each item is scored as 0, 1, or 2. The maximum possible scores are 92.
The cut off score of 38 identifies the cases. Both PADQ and BSI are self administered when
people can read and write.
Hamilton Depression Scale is a widely used scale but it is administered by trained clinicians.
Results
The total number of people interviewed was 103. Based on the ICD 10 criteria 23 (22.3%) had
mild depressive episode, 4 (3.9%) had moderate depressive episode and 4(3.9%) had severe
depressive episode. One person met the criteria for Obsessive Compulsive Disorder and one met
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the Criteria for Post Traumatic Stress Disorder. Seven (6.8%) had mild generalized anxiety
disorder, 12 (11.7%) had moderate generalized anxiety disorder and 2 (1.9%) had severe
generalized anxiety disorder.
The correlation between the scales administered by the researchers and community health workers
are given in table 1 and are very high in cases of PADQ and BSI.
Table 1: Correlation between the researchers and community workers scores
Scale
PADQ total
PADQ depression
PADQ anxiety and depression
BSI
Correlation
0.96
0.92
0.98
0.99
Significance (p value)
0.000
0.000
0.000
0.000
Table 2 gives the relationship between the diagnoses based on the cut-off points of 11 for PADQ.
The high kappa values mean that the researchers diagnoses were not much different from the
community workers based on this questionnaire.
Table 2: Kappa value for case-ness between two rater groups
Scale
PADQ depression
PADQ anxiety and depression
PADQ total scores
Kappa
0.88
0.85
0.95
Significance p value
0.000
0.000
0.000
PADQ, BSI (administered by the community health workers) and Hamilton Depression scale had
high correlation. The correlations between PADQ total score and Hamilton Depression scale was
0.78 and BSI scores and Hamilton Depression scale score was 0.97.
The relationship between the clinical diagnoses of Depression based on the interviews by
the researchers and the diagnoses based on the cut off points of scales as administered by the
community workers are given in table 3. The kappa values indicate that the cut off point diagnoses
are not very effective compared with the interview diagnoses. The interviews here are used as gold
standard.
Table 3: The relationship between the clinical diagnoses of Depression and diagnoses based
on scales
Scales
PADS
BSI
Kappa
0.51
0.41
Significance p value
0.00
0.00
In table 4 we have described the sensitivity and specificity of the PADQ at various scores
compared with the diagnoses by the researchers. At the conventional cut off of 11 the PADQ is
100% sensitive for the moderate and severe depression.
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Table 4: The specificity and sensitivity of PADQ scores in comparison with clinicians
diagnoses as gold standard.
PADS
Score
0
1
3
4
5
6
8
9
10
11
12
13
14
15
16
19
20
25
26
29
All diagnoses
sensi
100.00%
100.00%
100.00%
96.88%
96.88%
90.63%
90.63%
78.13%
62.50%
62.50%
62.50%
62.50%
56.25%
50.00%
43.75%
43.75%
31.25%
25.00%
9.38%
0.00%
speci
0.00%
5.63%
18.31%
30.99%
46.48%
60.56%
63.38%
71.83%
78.87%
81.69%
87.32%
91.55%
91.55%
91.55%
94.37%
97.18%
97.18%
97.18%
98.59%
100.00%
Depression all
cases
sensi
100.00%
100.00%
100.00%
96.55%
96.55%
89.66%
89.66%
75.86%
65.52%
65.52%
65.52%
65.52%
58.62%
51.72%
44.83%
44.83%
31.03%
24.14%
6.90%
0.00%
speci
0.00%
5.41%
17.57%
29.73%
44.59%
58.11%
60.81%
68.92%
78.38%
81.08%
86.49%
90.54%
90.54%
90.54%
93.24%
95.95%
95.95%
95.95%
97.30%
100.00%
Depression
Moderate and
Severe
sensi
speci
100.00% 0.00%
100.00% 4.21%
100.00% 13.68%
100.00% 24.21%
100.00% 35.79%
100.00% 48.42%
100.00% 50.53%
100.00% 61.05%
100.00% 71.58%
100.00% 73.68%
100.00% 77.89%
100.00% 81.05%
75.00% 81.05%
75.00% 83.16%
75.00% 87.37%
75.00% 89.47%
50.00% 91.58%
25.00% 91.58%
25.00% 97.89%
0.00% 100.00%
Depression Severe
sensi
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
50.00%
0.00%
0.00%
0.00%
speci
0.00%
4.04%
13.13%
23.23%
34.34%
46.46%
48.48%
58.59%
68.69%
70.71%
74.75%
77.78%
79.80%
81.82%
85.86%
87.88%
89.90%
89.90%
95.96%
100.00%
Sensi is sensitivity and speci is specificity

Table 5 gives the specificity and sensitivity of BSI scores compared with the interview diagnoses
made by researchers. At the cut off point of 38 the BSI is 100 % sensitive for moderate and severe
Depression.
Table 5: Sensitivity and Specificity of BSI scores in comparison with clinicians' diagnoses.
BSI
scores
0
1
4
5
All diagnoses
Depression all
Depression
cases
Moderate and Severe
sensi
speci
sensi
speci
sensi
speci
100.00 0.00% 100.00 0.00% 100.00% 0.00%
93.75% 7.04% 93.10% 6.76% 100.00% 7.37%
93.75% 11.27% 93.10% 10.81% 100.00% 10.53%
93.75% 16.90% 93.10% 16.22% 100.00% 14.74%
Depression Severe
sensi
speci
100.00% 0.00%
100.00% 7.07%
100.00% 10.10%
100.00% 14.14%
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6
7
8
9
11
12
13
14
15
16
17
19
22
25
29
30
36
37
38
39
40
43
46
49
52
57
59
65
69
69
93.75%
93.75%
93.75%
93.75%
93.75%
93.75%
87.50%
87.50%
87.50%
87.50%
81.25%
78.13%
71.88%
71.88%
71.88%
71.88%
71.88%
71.88%
62.50%
62.50%
59.38%
53.13%
50.00%
43.75%
37.50%
31.25%
25.00%
18.75%
6.25%
0.00%
22.54%
25.35%
28.17%
30.99%
39.44%
45.07%
45.07%
50.70%
56.34%
61.97%
61.97%
66.20%
71.83%
77.46%
80.28%
83.10%
85.92%
88.73%
90.14%
92.96%
94.37%
94.37%
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
93.10%
93.10%
93.10%
93.10%
93.10%
93.10%
86.21%
86.21%
86.21%
86.21%
86.21%
82.76%
75.86%
75.86%
75.86%
75.86%
75.86%
75.86%
68.97%
68.97%
65.52%
58.62%
55.17%
48.28%
41.38%
34.48%
27.59%
20.69%
6.90%
0.00%
21.62%
24.32%
27.03%
29.73%
37.84%
43.24%
43.24%
48.65%
54.05%
59.46%
62.16%
66.22%
71.62%
77.03%
79.73%
82.43%
85.14%
87.84%
90.54%
93.24%
94.59%
94.59%
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
75.00%
75.00%
50.00%
25.00%
25.00%
25.00%
0.00%
18.95%
21.05%
23.16%
25.26%
31.58%
35.79%
37.89%
42.11%
46.32%
50.53%
52.63%
56.84%
63.16%
67.37%
69.47%
71.58%
73.68%
75.79%
80.00%
82.11 %
84.21%
86.32%
91.58%
91.58%
93.68%
93.68%
93.68%
95.79%
100.00
100.00
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
50.00%
50.00%
50.00%
0.00%
MAY 2011
VOL 3, NO 1
18.18%
20.20%
22.22%
24.24%
30.30%
34.34%
36.36%
40.40%
44.44%
48.48%
50.51%
54.55%
60.61%
64.65%
66.67%
68.69%
70.71%
72.73%
76.77%
78.79%
80.81%
82.83%
87.88%
89.90%
91.92%
93.94%
93.94%
95.96%
100.00
100.00
Sensi is sensitivity and speci is specificity.

Discussion
There is a strong correlation between the scores of PADQ and BSI as administered by the
community health workers and researchers. The scales were not filled in by the people but were
read to them and responses recorded by researchers and community health workers. This is useful
in Pakistani context where a significant proportion of the people are unable to read and write. We
used the scales among a sample of population from rural areas, so these scales can be used by the
community health workers in the rural communities in uneducated population.
These scales have a strong correlation with Hamilton Depression Scale which is very
widely used to measure the severity of depressive disorder and is sensitive to change in these
symptoms. These scales have potential for monitoring the change in symptoms. However we need
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to see how the scales compare with Hamilton Depression Scale in longitudinal follow up of
patients when they recover from symptoms.
As screening instruments, both PADQ and BSI performed well, for screening of moderate
and severe cases of Depression. At the cut-off score of 11 PADQ successfully identified 62.50% of
cases of all psychiatric diagnoses and 62.52% of cases of all degrees of Depression. At cut off
point of 38 BSI picked only 62.50% of all psychiatric diagnoses and 68.97% of all degrees of
Depression. Both scales identified all the cases of moderate and severe Depression.
The scales were used on their own for purpose of diagnoses as opposed to screening
instruments did not work well. Their ability to distinguish clinically diagnosed cases from noncases was poor.
These scales perform much better for the severe form of psychopathology. We can use
higher thresholds for screening and be confident that we did not miss any severe (and clinically
more significant) cases. For higher thresholds the specificity remains high, which is important
given the pressure on general practitioners time.
Problem with the study
The sample size was relatively small. The clinicians did not use a structured interview to generate
psychiatric diagnoses. The sample was collected from a small area. Pakistan which has a cultural
diversity and the population may not be representative of the rest of the country.
Conclusions
PADS and BSI can be used by health care workers to screen depression in the general population.
They do not perform well as diagnostic instrument on their own.
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330(7495), 800-801.
Ustun, T. B., Ayuso-Mateos, J. L., et al. (2004). Global burden of depressive disorders in the year
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2000. British Journal of Psychiatry, 184, 386-392.

World Health Organization. (1993). The ICD-10 classification of mental and behavioural
disorders: Diagnostic criteria for research. Geneva: World Health Organization.
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Mutual Funds Growth and Prospects in Pakistan

Hassan Mobeen Alam (Corresponding Author)
Assistant Professor, Hailey College of Commerce
University of the Punjab, Lahore Pakistan
Mamoona Rafique
M.com Scholar (2009-11) Enr. No. 218
Hailey College of Commerce, University of the Punjab,
Quaid-e-Azam campus, Lahore, Pakistan
Saba Farooq
M.Com Scholar (2009-11) Enr. No. 230
Hailey College of Commerce, University of the Punjab,
Quaid-e-Azam campus, Lahore, Pakistan.
Muhammad Akram
Lecturer, Hailey College of Commerce
Abstract
The motive behind the study is to evaluate the development of Mutual funds industry as a Fund of
Funds in Pakistan. It discusses different aspects necessary to understand the way Mutual funds
perform along with the dimensions necessary to be focused during growth evaluation. The tools for
the analysis have been discussed in detail, including the statistical tools considering Treynor Ratio,
Sharpe performance analysis and Jensen Alpha analysis. The discussion reveals different strategies
adopted for attainment of the funds objective by all the funds working in Pakistan, differentiated
on the basis of structure, objectives and ownership. Revenues generated by these types of funds
have been shown in the form of graphs. These will be helpful in analysis of growth trends in the
industry. To pay aid, development patterns along with variations in returns have also been shown.
Special discussion on the growth fluctuations during the last decade in terms of assets owned and
the revenues generated is included. The study also carries the measure to improve the functioning
as well as to widen the profit range by enhancing returns. It emphasizes on the contributions of the
organizing authorities for the increased revenues of the sector and awareness of the investors about
the benefits of investing in Mutual funds. The study may help the investors, to analyze the growth
patterns to make the accurate investment decisions about different portfolios. It can also be useful
for the management of portfolio in their decision making process.
Key words: Mutual funds, Treynor Ratio, Fund of funds, NAV, KSE, LSE.
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1. Introduction
A company that pools together funds from different investors in order to invest them in a wide
range of different securities, to generate enormous amount of profit is termed as a Mutual Fund.
According to Special Report on Mutual Funds published in 1993, it is actually a low-cost way to
earn by investment in the stocks of a portfolio. Mutual funds are considered as the companies
established for the purpose of gathering investments and re-investing them in different securities
for the generation of profits. People invest for the sake of getting high return by avoiding the risk
of downfall in case of investment in one company only and enjoy better fund management by
professionals (Artikis, 2003).
Mutual Funds is the accurate prediction of performance as only the past record is not enough to
judge the future compatibility in case of mutual funds. Past performance can only help to reveal
volatility i.e. percentage change in NAV of the fund (Armstrong, 1960). The shares of Mutual
funds working in Pakistan can be purchased from the company directly or from broker, specifically
assigned the job. The shares are not available in secondary markets like KSE & LSE etc. Each
share represents the ownership, and it denotes the amount, up to the owners owe share in Mutual
funds assets.
There are various mutual in Pakistan like NIT, PICIC, ABAMCO, Arif Habib Co. and now the
various banks are also opening and managing the asset management companies. In this the mutual
funds types in terms of structure, objective and ownership are also discussed. The performance of
mutual funds and growth of mutual funds is elaborated in this paper.
This research paper answers the following questions;
RQ.1 What are the mutual funds and its types operating in Pakistan?
RQ.2 What are the various rules to govern mutual funds in Pakistan?
RQ.3 How the mutual funds are evaluated?
R.Q.4
What is the growth of mutual funds in Pakistan?
2. Mutual Funds in Pakistan

Mutual funds working in Pakistan are characterized by different aspects which pay aid in making
them dominant investment entities. These characteristics have become the values of these funds
and are helpful in thorough understanding of the Mutual Funds working in the Pakistan. Mutual
funds are profit seeking organizations. Revenue generation model of Mutual funds working in
Pakistan comprises of the consideration they receive for each share, usually termed as Net Asset
Value (NAV) and Loads. Loads include the fee charged by the funds at purchase or for other
certain purposes. Excess of loads may cause decreased business (Armstrong, 1960). Careful
management of these funds can help them in gaining many benefits. Investment in Mutual funds is
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usually preferred because the funds management and handling is in control of professionals, hired
for financial decisions specifically. It increases the reliability and the credibility of the funds
(Armstrong, 1960).Investment is secondary in nature in these funds. Actual investors dont invest
directly they invest their funds in a pool which is reinvested in some reasonable securities. Another
feature making mutual fund distinct from other investment companies is that the shares are mostly
redeemable. Investor, whenever he wants, can withdraw his money and redeem the shares. A fee
can be charged at redemption like Sales Load or Redemption fee. Mutual funds in Pakistan are
selling their shares in two different styles either continuously or until they achieve a significant
level of Assets under Management. Contrary to many other investment authorities like Banks, in
Pakistan Mutual funds are not guaranteed or insured. There always lies a risk of sudden loss.
2.1 Rules Governing Mutual Funds in Pakistan
In Pakistan, Mutual Funds are operated, managed and conducted under different rules. Closedended funds and open-ended both are governed by Investment Companies and Investment
Advisors Rules, 1971. The management of all kinds of funds has to follow the rules for
investment decisions and managing the funds pool gathered by investment.
2.2 Initiation of mutual funds in Pakistan

Mutual funds were introduced in Pakistan in the year 1962, with the initiation of the public
offering of the units of National Investment Trust, that was an Open ended mutual fund i-e,
encouraging maximum investment. From that time, till date Mutual funds have grown
progressively In Pakistans economy (Huhmann, 2005). But comparison of Mutual Funds in
Pakistan with international market reveals that the market over here is tiny in size (Khorana et al.,
2001).
2.3 Acquisition and Mergers
Mutual funds were introduced in 1962 through the first fund termed as National Investment Unit.
In 1966 another mutual fund company was introduced. It was Investment Corporation of Pakistan.
Two types of funds, Open ended and Closed ended were introduced. First of all in Pakistan, NIT
(national investment trust) introduced the open end mutual fund and ICP (Investment Corporation
of Pakistan) issued close end mutual funds. Till 1990s 26 close end ICP mutual funds had been
issued to the public (Lobell, 1990).
2.3.1. ABAMCO Capital Funds
ABAMCO was formed on 22 February 1955 and registered on 27 February 1955 and on 29 august
1955 established as an Advisory and as an Asset Management Company. Pakistan Credit Rating
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Agency (PACRA) ranked the credibility of ABAMCO to be AA+ & AM2. With the passage of
time performance as well as the reliability of ABAMCO increased. Its institutional shareholder is
AMVESCAP Plc. (a leading global asset management company and international finance
corporation).. Five well known ABAMCO open ended funds list includes UTP-IF, UTP
Aggressive asset, UTP-Islamic fund, UNIT Trust of Pakistan, UTP-Funds of funds. While the
closed ended funds of ABAMCO working well are ABAMCO growth fund, ABAMCO capital
fund, ABAMCO composite fund, ABAMCO stock market fund. The four funds out of the twelve
were acquired as growth funds and were issued to general public for raising the capital. Stock
Market funds were also acquired by ABAMCO funds. These were later merged into the ABAMCO
capital fund. These funds are listed in the SECP. Remaining thirteen ICP mutual funds were
acquired by PICIC INVESTMENT FUND COMPANY. These thirteen ICP funds are called the
Lot-B. This company issued close-end mutual funds to generate the investments. Its shares are
listed in the SECP. It is a high risk taking company.
2.4 Types Of Mutual Funds Working in Pakistan

Mutual funds organizations working in Pakistan can be categorized in three types either according
to structure, or objectives or ownership and this will explain as follows;
2.4.1 Types of Mutual Funds by Structure
When we have to categorize mutual funds according to structure, we get open- ended mutual
funds and closed-ended mutual funds. Open-ended Mutual funds are recognized by their
continuity. Their capitalization is not fixed and they keep on issuing shares to the public without
any blockage. In fact they are helpful for the investment for small investors, thus are thought to
have more shareholders rather than customers (Zera, 2001). They issue redeemable shares.
Because of consistent sale and purchase of shares, the market values of the shares vary from day to
day and it is reflected in consistently changing NAV (Net Asset Value). Closed-ended Funds, as
their name depicts, are recognized by limited capitalization. Shares over here are not redeemable
however they can be traded in stock market or over-the-counter market, and transferred (Azfa and
Rauf, 2009). Price fluctuations are also obvious over here, but these are caused by the variation in
demand and supply of the shares. Less liquidity may cause a sense of dissatisfaction (Johnson,
2004).
2.4.2 Types of Mutual Funds by Objective
Considering objectives, mutual funds can be divided in different categories. These funds either
open ended or closed ended vary from each other in their investment decisions as their motive of
getting earnings are different as their way of selection of securities become different. These types
of portfolios run down from taxable to tax-free, from conservative to aggressive, from domestic to
international portfolios, from virtually no-risk money market funds to high-risk which precisely
various types of funds and their primary objectives are described below options funds and from
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stocks to bonds.(Arranged in the sequence of increasing risk factor). Most common type of Mutual
funds is Equity fund. Equity funds manage to invest the funds of the pool in the stock of different
companies. These funds select shares of different companies as their investment securities. Their
lies a high risk factor because if the market goes down, the pool of funds have to suffer. As
compared to investment in stock, some funds seek for the most liquid form of return from SECP
securities, and are termed as Money Market Funds. Money Market funds are most preferable as
they are safest, easiest to deal with, and most compatible to understand. They invest in the liquid
assets in order to avoid risk. Their portfolio seeks stability by investment in short-term securities.
They are providing 1% to 3 % more return than banks.
These funds invest in the shares generating aggressive income. The revenue depends on the level
of risk taken. Higher the risk, higher the income is generated. Also there is higher risk of default.
Investors who are risk inverse prefer Balanced funds that do not focus on enormous profit and just
rely on little growth shares. Risk is also avoidable by investment in Growth funds, which invest in
shares which assure long term appreciation of capital. In Pakistans investment market, fluctuation
in the performances of sectors is obvious. Mutual funds that invest in a specific sector to enjoy the
gains of its peak time are termed as Sector funds. Their lies a high risk as with a down fall of one
sector, whole investment may sunk. In Pakistan, Islamic Funds are working within the religious
boundaries. These are managed according to the regulations of Sharia.
2.4.3 Types of Mutual Funds according to ownership
Public sector mutual fund is an enterprise under the government sector ownership. This is
registered under SECP. Its 50percent of equity fund invested in Asset Management Company is
owed by Government. Manager or a broker is responsible to decide the best securities in which to
invest the stock holders money. Net Asset Value of public sector funds varies from day to day and
from time to time. Public remained aware of the current situation through brokers and market
sources and can make decisions about sell and purchase. Mutual funds have their risks factor that
attracts the people most as people know that high risk means high return. Public mutual fund also
provides the portfolio of stocks and bonds and many other securities that brought returns at lower
risks. Public mutual fund makes it easy for their investors to invest in the securities because they
provided them with ease as the investors just have to watch and the whole process is to be carried
out by the fund management.
People participation in securities means collection of capital for the business. (Panigrahi, 1996;
Mundheim,1991). When we consider the private sector funds we analyze that private sector mutual
funds are those funds which do not enjoy the benefit as the public company does because these
funds are not bound to follow the rules and regulations of the SBP. They are not deemed to follow
Investment Companies and Investment Advisors Rules, 1971 or Investment Companies and
Investment Advisors Rules, 1971. In the case these are registered, the obligations become
different but yet, there lies a much enhanced factor of risk for the investors when compared to the
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public sector mutual funds. At present 43 open-ended and 22 closed-ended mutual funds are
working in private sector
2.5 Mutual Fund Strategies in Pakistan
Mutual funds working all over the world, adopt different strategies to meet their obligations, but
these strategies vary from place to place and from one type of fund to another type of fund. At
present Mutual funds in Pakistan are following different strategic plans to achieve their objectives.
Mutual funds investment strategies are based on the regulatory issues, the ability of money
managers, the desire of the investor of establishing such funds and demand from investor for this
type of funds. (Otten et al, 2004). Laddered portfolio is a commonly adopted strategy. Buying a
series of securities is demanded by the Laddered portfolio i.e. bonds with stagnant or staggered
maturity. It can consider splitting funds having investment in bonds with one, three and five years
of maturity. Some financial planners prefer to use Thornburg funds. These funds follow laddered
strategy in traditional structure. The trend of replacing the bonds before maturity is rarely seen
over here.
(Glenn et al, 2004. The most commonly adopted strategy in Pakistan is Automatic Investment
Plan, also known as dollar-cost averaging. It provides an efficient way of increasing the
investment. Another commonly used strategy is Buy & Hold strategy. The best way of establishing
a productive buy and hold pool of funds is to use of a very low or no-load asset class funds.
2.6. Performance Evaluation of Mutual funds
Evaluation of the performance of the funds is important for investors and professional managers as
it helps in assessing the return generation and risk level or portfolios ( Shah and Tahir, 2005).
Both open-ended and close-ended mutual funds require a detailed analysis of the performance to
avoid the repetition of mistakes during taking investment decisions. ). Previously better performing
companies will perform better in future ( Blake and Timmermann, 1998 ).
2.6.1. Top Ten Mutual Funds
The list of top ten mutual funds working in Pakistan is as follows;
1-Al-Meezan mutual fund: it is the top fund which has goodwill of paying regular dividends and
having high returns. It is close-ended.
2- Asian stock fund: it is also close-ended mutual fund and having the high records of returns.
3- Atlas funds of funds: this was established in 2004. It provides the advisory and trustee
services.
4- Dominon stock fund: this is highly profitable funds and it has information of financial data and
credit of stocks.
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5- First capital investment ltd mutual fund: this working under rules of NBFC 2003. Its
subsidiary to First Capital securities Co.
6- First dawood fund: it was formed in 1882 and now it has high yield to return.
7- Golden arrow: this is close-ended mutual fund and it has the investment of marketable
securities.
8-Meezan balanced fund: it has investment of equity securities Islamic funds. It has return in
long term capital increment.
9- JS growth fund: it is the management investment co of funds. It has prudent investment
management.
10- Pakistan premier fund: it has the investment of Pakistani equities only. Arif-Habib Co. is its
holding company in terms of providing advisory services.
2.6.2 Evaluation Tools

Mutual funds performance relies on different aspects. CPA/financial planners use different
analytical tools including software, internet databases and other online research tools for
determining the dividend to be paid as a return (Malkiel, 2001).
It is casually seen that portfolios with smaller size in equity perform much better than others
(Gorman, 1991; Becker and Vaughan, 2001; Symth, 2004). Thus the pools of the funds should be
minimized to the optimal investors only. Return evaluation shows that return has a negative relation
to cost specially in open-ended portfolios (Brown, 1995; Livingston and Oneal, 1998; Elton,1993).
For performance analysis of the funds, costs should not be considered as the cause of declined
returns or vice versa. In fact it is more a case of management than of cost effect. Load/no-load
expense and turnover rate of these funds cannot be differentiated on performance basis with respect
to risk- adjusted/unadjusted (DrPoms et al, 1995; Symthe, 2004). Huge returns shows active
management while in open-ended mutual fund there is relatively less investment and consequently
low return (Carhart, 1997; Glenn, 2004). Corporate governance in portfolios carries immense
importance in order to protect minority investors in Pakistan (Cheema and Shah, 2006).The
Comparison of the funds becomes easier for CPAs from using the reporting standards. (Lehmann
and Modest, 1083). Professional managers efficiency of open-ended portfolios is benefiting for
investors (Afza and Rauf, 2009 ). There is an increase in net asset value of Rs. 44 billion of closeended mutual fund from 1997 to 2004 in its historical performance (Shah and Tahir, 2005).
At beginning performance evaluated by beta but currently it is evaluated by indexes (Brown and
gotzmann, 1995; Gruber, 1996; Rafique et al. 2009). Previously performance is evaluated on
securities selection and investment timing (Henriksson and Merton, 1981; Grinblatt and Titman,
1989b). Security selection is inversely related with investment timing and may adjust with better
skills (Fabozzi and Rahman, 1993; Bollen and Busse, 2001). Performance of portfolios management
decision is based on selectivity and timing (Treynor and Mazuy, 1996).
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In portfolios performance risk is correlated with return (Artikis, 2006). Only those portfolios
survived who evaluate their performance time to time (Elton et al. 1996). Performance is based on
risk return relationship and it is contradictory to expenses (Fama, 1972; Carhart, 1997). It is
difficult to select the portfolios with higher performance (Rafique et al, 2009).
Different techniques are used for the performance measurement of these funds. Mostly the excess
return is measured using different statistical tools. Four major techniques used for the analysis are
Jensen Alpha index of performance measurement, Sharpe index of Performance evaluation, Treynor
Ratio analysis and Fama French Measures. Except these the Fama French Analysis, discussed and
convenient to be used. Fama French Analysis requires the Book to market price ratio of all the
companies listed at KSE, which is practically next to impossible to be conducted. Amir and Tahir
discussed the same draw back in the year 2005. Other techniques of evaluation are discussed as
under
2.6.2.1 Jensen Alpha
This technique was developed by Michel Jenson in 1970s. It was specially designed for the
accurate measurement of excess return earned. This evaluation is helpful in pricing the funds
shares and also
Under Jensen Alpha, return is measured by following formula
Jensen Alpha = Portfolio Return [Risk free rate+ Portfolio Beta (Market return- Risk free rate)]
2.6.2.2 Sharpe Ratio
William Sharpe in 1966 developed Sharpe Ratio. It measures the extent of the performance of a
fund by comparison of the return and the degree of risk. It is helpful in checking the money value
of the investment as it gives a comprehensive answer regarding the sufficiency of return.
The computation of this ratio is a result of the relation of Expected value of excess of return over
the bench mark return in the numerator and sigma as a sign of standard deviation from return in
denominator.
2.6.2.3 Treynor Ratio or Reward to Volatility Ratio
It is also considered as an effective method of calculation of extent of excess of return received
from a Mutual fund for diversifiable risks. Beta (fund risk to all market situations) is used as a
variable to analyze the risk associated.
These days, new tools such as portfolio software & holding analyzer are used by planners, as well
as old tools are being updated with new concepts which shows focus on downsize deviation as a
measure of risk instead of standard deviation used by the planners since 1950s (Otten, 2004).
2.7. Development and Prospects of Mutual funds in Pakistan
Government has taken many steps for the encouragement of these funds. There is remarkable
development in net assets and number of fund. The future of mutual funds seems to be very
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promising .Out of the total financial sectors banks largely sponsored mutual funds. According to
SBP the deposits of schedule banks are above 4 trillion. Similarly insurance companies account
for 3% and non bank financial companies account for 2% of the system. (Carhart, 1997). It is
hoped that in next 3 to 4 years by increase in mutual funds deposits there will be around about 10
billion dollars increase in deposits. The past records reveal that there is an increase in net asset
value of Rs. 38.68 billion of open ended mutual funds and Rs 44 Billion in closed ended funds
from 1997 to 2004 (Shah, and Tahir, 2005). The growth of Mutual funds in Pakistan can be clearly
viewed with the help of different graphs. These graphs are made by taking the revenues generated
on y- axis and the fiscal years on the x-axis. All the graphs are made with the reference of the data
provided by Mutual Funds Association of Pakistan.
Figure 1 shows the net decline in the revenues generated by funds of funds in last couple of years.
It shows the declined performance of all the funds of funds including mutual funds, Hedge funds
etc. The year 2008-09 has caused the sudden decline in the revenues generated by different
investment funds.
Figure 1: Fund of Funds
(Source: Mutual funds Association of Pakistan)

The overall industry growth has declined in the era 2007-09. Closed ended funds show the
decreased business but the rate of downfall is more in open ended funds as compared to closed
ended funds. The funds showed rapid growth in preceding years but in last two year, 2008 and
2009 and performance has declined. The AMCs have decreased the number of assets allocated for
the investment purposes. This step has adversely affected the growth pattern of the funds.
Overall decline in the industry depicts the downfall of all the kinds. There is possibility that some
of the funds have progressed, but their positive growth has not been sufficient to minimize the net
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negative effect. Years 2008-09 have caused serious distraction to the funds industry. Most popular
kinds of funds to be invested in, the equity funds showed decreased earnings, especially during the
period 2008-09.
The sudden decline in the net earnings of these funds is obvious from the graph. After the rapid
and almost consistent growth in last few years, they have declined in performance and the
generations. The Islamic mutual funds have shown a slight decline in the revenue over the same
period of time.
Another important type of funds, preferred for investment in Pakistan is Income funds, that focus
on the generation of aggressive income by reinvesting the pool of investment. Like others, the
revenues generated by Income funds have also suffered.
It is revealed that the year 2008-09 has not been good enough for the growth of mutual fund
industry, rather it caused decline, but the bright side of the picture reveals that the industry has
risen again towards boom. Till the end of year 2010, all types of mutual funds have progressed
well and made the performance curve rise again. If we analyze the past records regarding the
returns, mutual funds are providing, a sharp view of the increased returns in the year 2010 is seen.
After a period of low business in 2008 and 2009, the industry has again developed and shown
growth. The growth pattern is no more stagnant or consistent. It has shown variation to a greater
extent in last few years.
Tables showing the returns of both open ended and closed ended mutual funds for last five years
are shown below.
Table 3
Open ended fund returns
June 30
2006
2007
2008
2009
2010
Equity
27.66%
42.93%
-3.88%
-38.12%
19.83%
Income
8.27%
11.88%
7.61%
0.10%
10.47%
8.75%
8.49%
10.39%
Balanced
28.98%
24.05%
1.76%
-21.31%
13.5%
Assets
46.51%
20.14%
- 0.93%
14.89%
8.47%
5.57%
4.67%
13.47%
9.34%
Money market
allocation
Capital
protected
The analysis of the table shows the decreased returns are followed by the sudden growth. Thus the
table is giving the significance of early discussions. All types of funds along with returns have
been discussed. Equity funds, being the most favorite of the investors usually show more growth
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with the passage of time as the number of investments in the pool of funds continues to enhance,
but these funds have shown the growth in a negative fashion and with the same extent. Rapid
growth was followed by rapid decline. Other funds have also suffered. Severity of the condition is
obvious as Equity funds, balanced funds and Asset allocation funds have suffered negative growth.
Similarly if we analyze the closed ended funds, rapid fluctuations are obvious in the growth and
revenue patterns of the funds.
Table 4
Closed ended scheme
30 JUNE
2006
2007
2008
2009
2010
EQUITY
9.20%
24.24%
-1.62%
-32.16%
13.49%
If we analyze the closed ended scheme, considering Equity funds, the similar effects are seen.
Negative growth reaches to the limit of 32.16 %, because of the decrease in the investments. As
closed ended funds promote the restricted investment, a minor downfall of the industry causes
more adverse affects as there remain no investments to provide support to uplift the industry.
Discouraged investments along with the economic sanctions and enhanced tax rates caused bitter
results and the earnings scenario suffered a dramatic change in a negative fashion.
The analysis of open ended and closed ended mutual funds and their NAVs shows the growth of
the funds and depicts the evolution of mutual funds in Pakistan with the passage of time. Since the
incorporation of National Investment Trust, the mutual funds industry has progressed well. In
1990s, the investment trend turned its face towards securities, after implementation of privatization
policy by Pakistan Pepels Party.
Historical review and the performance evaluation of the closed ended mutual funds industry depict
the casual growth pattern over many years since 1997. Closed ended funds went through a
dramatic change in the returns and the market capitalization in the start of 20th century. 2002-03
was the era when this industry progressed in out of fashion manner and with a real speed and it
was even more enhanced in the year 2004 when the rapid growth pattern caused the Net Asset
Value of closed ended funds to meet the limit of PKR Rs 50,000,000,000.
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Figure 2
140
120
100
80
60
40
20
0
Open ended funds

Closed ended funds
Pension funds
No. of AMCs
No. of Funds
Despite of the fluctuations in the earnings and the growth trends measured in terms of the Assets of
these funds, a review of the number of funds shows a consistent growth pattern. Number of funds
working in the market has increased consistently in last ten years. Increase in the funds depicts the
scope of the industry. Investors are still interested in investing their money in creation of Asset
Management Companies to provide the facility of Mutual funds, in order to attract the capital from
other investors.
Though the progress reports have not been very positive but the consistent growth trend, since the
date of incorporation of first Mutual fund in Pakistan, the National Investment Trust Units is still a
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sound ground for the investors to have faith in the strength of Mutual funds for attracting the
investors money.
Table shows a consistent increase in the number of Open ended funds in the previous ten years but
if we analyze the closed ended funds, a strange fact is revealed. In the period of boom in the
industry, during the years 2003-2004, the number of closed ended funds has dramatically
decreased. 35 Closed ended funds decreased to form 15 only in the year 2004, but the revenue
generation didnt carry negative impact from this decrease. Later they increased in number but yet
they havent met the previous heights. On the whole, total number of funds, as well as total
number of Asset Management Companies has been continuously increasing irrespective of the
industry downfall and decreased business of the Mutual funds
Following Table discusses the Net assets of mutual funds in last ten years. It is very useful for
understanding the growth trends of mutual funds industry in Pakistan. With the increment in funds
assets, the revenue generation becomes rapid, there is more money available to invest and
consequently more returns are provided to the investors of the pool of funds. As the earlier
discussions reveal, there have been dramatic changes in the growth pattern of the Mutual funds
industry in Pakistan in last decade. Consistently growing industry showed fluctuations and a
sudden down fall within a couple of years. The down fall was later on compensated by the
enormous growth and revenue generation. These facts are more obvious in the Table 5.
Table 5
Net Assets of Mutual funds in Pakistan (2001-10)
Years
Amount in Rs( Millions)
Amount in USD(millions)
2001
21,070
331
2002
25,341
425
2003
50,455
871
2004
93,819
1616
2005
125,058
2105
2006
159,798
2654
2007
300,841
4975
2008
335,226
4903
2009
204,826
2519
2010
199,699
2342
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Table shows the growth in the assets of the funds in the ascending order from the year 2001 to
2010. Maximum assets accumulated by these funds amounted to PKR 335,226 million in the year
2008. But suddenly the industry faced a downfall and the assets owned by the Mutual funds
decreased in value by 38.92 % when the assets decreased to a value of PKR 204,826 million.
Many factors like double taxation by government on the mutual funds investors, economic
sanctions and international economic crises played part in this downfall. Investment was
undoubtedly discouraged, and consequently the growth trend was adversely affected.
Decrease in the assets of Mutual funds resulted in the decreased volume of portfolio. Later though
the investment enhanced but the funds are not yet able to recover the growth of assets.
Mutual funds Association of Pakistan reveals that the maximum increase in the assets of the
Mutual funds in Pakistan was in the year 2004. 2004 was a year of enormous growth. Assets
increased by almost 85.94% during that year but the industry became incapable of maintaining the
quality performance in the following years. In the year 2005 assets grew by 33.29 % only. There
was a decrease in the growth of assets of about 52.65 %. That was a severe jolt, industry suffered
as it put a bad impact on the trust of the investors. In the year 2006, the growth was reduced to
27% of the previous year growth. 2007-08 are considered as the most crucial year for the growth
of Mutual funds industry in Pakistan. Assets analysis of mutual funds at the end of the year 2007
showed the growth rate equivalent to 86.28% growth as significance of the evolution and progress
of the portfolio funds while that of year 2008 amounted to 11%. Right after 2008 the boom period
faced critical situation and the assets of the industry suffered.
Number of assets owned by the mutual funds is not significant enough to develop a clear image of
the effect of the growth of funds on the investment decisions of the investors. Following tables are
helpful in determining the actual scenario, as they discuss the number of assets according to the
different types of funds.
Analysis of the investment in the assets of open ended and closed ended funds, considering the
types of investors can also depict the growth prospects of mutual funds industry. Following tables
are helpful in explaining the difference in the investment scenario in last year.
Assets of individual and institutional investors in Open ended Mutual funds, by type of funds.
Table7
June 30, 2010

Individual
Banking and financial
Provident and pension
Net assets
PKR
Millions
No of
investors
accounts
Net assets
PKR
Millions
No of
investors
accounts
Net assets
PKR
Millions
No of
investors
accounts
Equity
14564
72866
5647
179
14288
1094
Income
11011
20092
28440
239
7616
674
Balanced
1105
7166
2055
32
2012
189
Money market
7459
7093
8215
82
1750
189
Category
(Sources: Mutual funds Association of Pakistan)
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A clear decrease in the investment in the Open ended funds during the year 2009-10 is the outcome
of the double taxation and the reduced economic privileges available for the stock holders of the
mutual funds in Pakistan. All kinds of funds, either they are income, or equity, balanced or capital
protected have suffered the reduced trust of the market investors. Investments by individual
investors as well as the investment by the banks and the financial institutions have declined within
last couple of years.
Closed-ended mutual funds also faced the lack of investors confidence because of the fluctuations
in the market capitalization and the NAVs of the shares of their portfolios. Decreased trend of
investment by different kinds of investors in the closed-ended mutual funds during the years 2009
and 2010 is obvious from following table.
Table 9 reveals the same facts regarding the year 2010. They are help full for the estimation of the
decrease investment in closed ended mutual funds in previous years.
Table 9
Assets of individual and institutional investors in Closed ended Mutual funds, by type of funds.( June 30, 2010)
Individual investors
Banking & financial
Provident and
pensions.
Net
assets
PKR
Millions
Number
Of
investors
Accounts
Net assets
PKR
Millions
Number
Of
investors
Accounts
Net
assets
PKR
Millions
Number
Of
investors
Accounts
Equity
8,262
84,577
6,024
260
402
204
Income
95
941
17
Balanced
344
3,652
883
30
188
45
Capital protected
372
5,052
482
23
354
17
Category
Contrary to the trend of market and the slight decrease in the assets and earnings of other mutual
funds, closed-ended mutual funds have shown positive results in last two years. Mostly the number
of investors accounts and the assets of the pools have enhanced in volume pointing towards the
progress of the closed ended funds. As these funds discourage continuous investments, they have
not been affected by the reduced investment in previous years and have progressed well.
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3. Conclusions
This study provides an over view of Mutual funds history in Pakistan. From initiation to the date,
mutual fund industry has gone through a lot of variations. The analysis of growth trends reveal that
the industry has gain attention of investors rapidly because of its different types of portfolios are
providing a wide area for the investors to decide their area of interest according to their risk
tolerance capacity and the demand for the return both in terms of money and time, Data reveals
that the funds have shown almost consistent growth since the time they have started working in
Pakistan but the mutual funds are proven to be sensitive to outside factors and the economic
sanctions. Harder the policies are, lower is the performance of the portfolio industry. The decline
in the growth of these funds is apparently the result of the double taxation policy of the
government on the mutual funds investors. It has not only affected the returns adversely but also
has discouraged the investors from investing in the securities of mutual funds. Mutual funds
industry is facing many challenges like great competition among mutual funds, limited investment
avenues, and increased volatility in the markets caused effective management of risk.
There is a need of attention at the part of Government and the concerned agencies. Different steps
should be taken to avoid any future decline in the performance by Mutual funds association of
Pakistan, SECP and ICP (Investment Corporation of Pakistan). SECP can encourage the
investment in portfolios by providing the help to reduce the risk element so to ensure the more
return, by providing Operational autonomy, by discouraging fragmentation, by giving protection to
interest of investor and by providing the flexibility to the manager for the trust purpose.
Similarly the Mutual funds association of Pakistan can pay aid in development of the sector by
Ethical and professional enhancement in all areas of mutual funds industry, by providing the
Facility of centre of excellence for the development of industry and by Promotion activities for the
public understanding.
With a support from the organizational authorities, the Mutual funds industry can withstand
international markets as it will be more strengthen by the promotional measures from government,
because the economically strong sector can face the challenges of international market. It reduces
the chances of being effected from the outside fluctuations (Grinblatt and Titman, 1988).
Although this study reveals the overall mutual funds growth and performance in detail but still this
study is limited as in this all the mutual funds running in Pakistan. So, this study may provide the
basis for future study of all the mutual funds perspective in Pakistan. As in this study mutual funds
shows consistency and continuity in growth and increasing rate of performance so it is expected
that the mutual funds will also grow in the future and that will be perform better as well. Its assets
and funds will comparatively grow more in the future as compared to the previous years growth.
Lack of knowledge and awareness is also acting as a major factor of slow growth process. Most
of the investors are not aware of the benefits they can enjoy by investing in portfolios. To
overcome this problem there must be education among people about the advantages of investments
in funds like the professional management, reduced risk because of investment in variety of
securities and the opportunity of redemption of investment money. Mutual funds give opportunity
to earn more from the expectations while other investment companies including banks, give a fixed
or below expectation returns. Awareness can be developed through advertisement for asset
management, investment advisory services to promote fair competition.
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INTERDISCIPLINARY JOURNAL OF CONTEMPORARY RESEARCH IN BUSINESS VOL 3, NO 1

Organizational Knowledge Formation Process, Organizational Learning and
Human Resource Development
Hassan Mobeen Alam , Dr. Mubbsher Munawar Khan & Muhammad Khyzer Bin Dost
Hailey College of Commerce, University of the Punjab, Lahore-Pakistan
Abstract
Organizational learning, organizational knowledge formation process and human resource
development (individual learning process) are theoretically but a very little attention has been paid
to study the sequential relation of these variables (Song& Chermack, 2008). Literature review
gives evidences that the Conceptual study has been done but empirical work is not found.
Therefore a gap found in the literature that necessitated exploring & proving sequential relation
among these variables. What is the Co-relation among organizational learning, organizational
knowledge formation process and human resource development?
Keywords: Organizational Knowledge Formation Process, Organizational Learning and Human
Resource Development
Introduction and Literature Review
Technological changes and consequent globalization is phenomenon is transforming not only the
structure & nature of markets but also a change in the production methods, in marketing concepts
and practices, and financial products. In such a competitive and volatile environment companies
are obliged to act promptly and innovatively. It is, therefore, imperative upon a company efficient
management of risk, products, markets and its human resources.
The change management, in this age of information technology, is combination of knowledge &
time management by the organizations. A knowledge management is the process by which an
organization has access to the information sources; determine the usefulness of information and
disseminate the information among companys human resource.
Organizational Learning:
The phenomenon of organizational learning is one of the strong empirical regularities observed in
the life of institutions. Simply stated, organizational learning refers to the increase in productivity
that are observed as firms gain experience in production.(Humberman1997) According to
Godkin& Allcorn (2009) Organizational learning is defined as the process by which knowledge
about action- outcome relationships between the organization and the environment is developed.
Organizational learning is a dynamic process which occurs overtime and across levels, but it also
creates tension between assimilating new learning (i.e. feed-forward where new ideas and actions
flow from the individual to the group and to the organization) and exploiting or using what has
already been learned (feed-back which flows from the organization to the group and to the
individual. (Crossan1999). Opportunity of learning within the organizations for top on the
hierarchy can be achieved by the development and effective implementation but rarely
materialized. Stein and Vandenbosch 1996). Organizational learning is an ongoing phenomenon
containing multi-dimensional processes that may entail in knowledge creation and cultural change
in organizations with respect to the learning, termed as(OLC) organizational learning culture. This
encompasses acquisition, comprehension and interpretation of information involved.
Organizational learning as a continuous testing of experience and its transformation into
knowledge available to whole organization and relevant to their mission (Kerlavaj, Temberger,
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Krinjar and Dimovski).The author Zhou, and Uhlaner define organizational learning as the actual
change in thought and action of the groups and individuals in the firm which leads to 8 new
knowledge generation, whereas the practices designed to acquire, transfer, share and store
knowledge are viewed as the domain of knowledge management. The organization learning refers
to the increase in product that are observed as firm gain experience in production.
(Huberman:1997). Organizational learning occurs through knowledge management practices on
one hand and stimulates knowledge management implemented in a more active and systematic
way on the other hand. The concept of organizational learning, such as the tendency of the firm to
rely on non-management employees to come up with new ideas and a culture where employees
share experiences and new ideas with each other are positively associated with a number of other
practices we refer to in this paper as knowledge management practices, which involve more formal
ways to acquire, share, and store knowledge within the firm. (Haibo, Zhou, and Lorraine Uhlaner,
2009)
Some authors have divided organizational learning in to two process and some have divided it into
four processes. Much of the management literature divides organizational learning into two types.
Argyris and Schon, categorized learning aso single-loop and double-loop learning. Senge identifies
two behaviors as adaptive learning (learning to cope) and generative learning (learning to create).
Adaptive learning is based upon individuals past experiences, knowledge, trainings and believed
knowledge, mental model (Nonaka & Takeuchi, 1995) and generative learning may be the
outcome of purposeful deliberations within the organizations through skillful application of
scientific methods methods (Sessa & London, 2006). March characterizes learning as the
exploration of new horizons in the light of past. He believes that "maintaining an appropriate
balance between exploration and exploitation is a primary factor in survival and prosperity.(Stein
and Vandenbosch, 1996).The authors Rhodes, Lok, Hung and Fang used four-stage process that
includes information acquisition, dissemination, and interpretation
blended in refined
organizational memory system .This will lead to understanding of the learning cultures role and
will help in accomplishment of higher targets of performance. Organizational performance may
lead to the development of learning culture in an organization.
Organizational Knowledge Formation Process:
Peer mentors facilitate the knowledge creation and sharing processes. Knowledge has been defined
as justified true belief (Nonaka and Takeuchi, 1995). Organizational knowledge
may be a combination of all the information an individual holds,codified or otherwise, acquiring
fom data base or data bank, about the product or service, express or implied in relation to the
organization. (Grant, 1996; Kogut & Zander,1992; Nahapiet & Ghoshal, 1998; Nonaka&
Takeuchi, 1995). The term Organizational knowledge formation process is inter changeably used
with the terms knowledge creation process as whole and also with knowledge management by
different researchers (Song, H.J. & Chermack, J.T. 2008 & Chou, S.W. and Tsai, Y.H. 2004 &
Bryant.E.S 2005).
According to Nonaka, Organizational knowledge creation involves the gathering of and addition
to existing stock of knowledge developed by the persons and refining it for the use of organization
and linking that to the MIS of the organization.
Organizational knowledge creation is also termed, the capability of a company as a whole to
create new knowledge, disseminate it throughout the organization, and embody it in products,
services, and systems ( Nonaka & Takeuchi, 1995).Individual employees of the company are the
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main drivers of the knowledge creation process.( Nonaka, 1994) Wei & Hung, (2004) stated that
mechanism of organization in handling the information and uses of the information affect the
process of knowledge creation. This knowledge creation enhances the organizational performance
but it depends on the individual learning (Xianjungeng, Lin and Whinstone, 2009). Krogh &
Voelpel, (2006) individual knowledge creation has an impact on organizational performance, this
approach later on use by Song & Chermack. Individual knowledge contributes critically as it is the
collection of individuals knowledge that forms the learning value system of the organization
(Song & Chermack, 2008). After creation of knowledge at individual level, team members and
colleauge facilitate the knowledge creation and sharing processes (Bryant.E.S 2005). Mitchell,
Boyle, Nicholas (2009) explore the role of dynamics of goal setting in creation of group norms
and standards of behavior.
Study done by Verstegen, Biemans, Mulder & Omta,(2007) says
various groups of
people/organizations join hands to develop new innovative products or exclusive services or
explore new markets may also lead to knowledge creation but sometimes it may backfire also. He
also evaluates the interaction techniques of such people and identifies opportunities & threats in
this regard. Another aspect of knowledge creation is studied and tested by Schulze & Hoegl,
(2006). He developed and test hypotheses relating the four knowledge creation modes. In this
connection he identified socialization of individuals, externalization of groups, combination of
various knowledge and finally internationalization of information and practices as modes of
knowledge creation. Simonin (1999) conducted study to know about the factors of knowledge
transfer. He termed the process as outcome of knowledge based variables and partners based
variables. He admitted the decisive role the ambiguity plays in such knowledge construction and
transfers. Effects of these variables can be moderated by firms abilities and level of know-how,
time period of collaboration and above all learning capacity.
To support the approach of division of knowledge into tacit and explicit forms Polanyi (1966) says
that Organizational knowledge is created through a continuous dialogue between tacit and explicit
knowledge. As organizational knowledge creation is a continuous process with no ultimate end, an
organization needs convergence of this process at some point in order to accelerate the sharing of
created knowledge beyond the boundary of the organization for further knowledge creation.
Human Resource Development:
HRD is e relatively new discipline originating from organizational development. HRD targets the
organizational development through individual development. HRD, human empowerment, employ
the tools of skill building, training opportunities etc.
According to (Hassan, 2006), Human resource development is a process of developing and /or
unleashing expertise through organization development, (OD), personnel training and development
for the purpose of improving performance. HRD is based on the beliefs that organizations are
human-made entities that rely on human expertise in order to establish and achieve their goals and
that HRD professionals are advocates of individual and group, work processes and organizational
integrity.
According to (Raiden and Dainty, 2006) Human resource development (HRD) is summary of all
the activities to develop individual as well as organization to achieve greater efficiency in a firm.
Smith, (2004) terms Human resource development (HRD) as an effort to raise the knowledge and
skills level of the people in relation to their work.HRD improves the skills of individuals resulting
in improved performance that strengthens the organization. HRD is an important developmental
program to ensure that the organization has an institutionalized way of developing, utilizing and
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committing human resources in order to meet current and future organizational challenges.HRD
contributes to the strengthening of a firms human capital base by raising the level of know-how,
skills and capabilities of individuals in an organization and thus contributes to improved
performance and competitive advantage. HRD supports both the process and the outcomes of PM
to deliver properly at different levels of organizations. Adhiakari,( 2010).
In recent years, attempts to define and characterize the emerging field of HRD have increasingly
acknowledged the influence of OD on HRDs development, to the extent that HRD may be seen as
living in the shadow of OD .In the U.S., HRD is often seen as encompassing OD, career
development and individual training and development .Grieves and Redman (1999) draw attention
to HRDs role in organizational solutions to strategic issues, focusing on identifying the core skills
and knowledge of the HRD professional by comparing the roles of HRD and OD practitioners as
internal change agents. Iles and Yolles(2003).HRD is studied differently at different levels.The
concept of HRD changes as we move from individual to organization and to societal level.
In micro level analysis of HRD, an idividual seems to be autonomous, casual as well as formal,
having long term orientation, aimed at development of competence and promoting the mobility of
labour.On the contrary, at macro level it reflects the characteristics of in voluntary and more
formal actions, looking for short term goals. Macro level analyses generally assume that HR
activities are multidirectional which include both types of opposing traits/ features mentioned
earlier, such as proactive and passive etc. Garavan, McGuire and Donnell(2009).
Organizational Learning V.S Organizational Knowledge Formation Process:
The similarity between organizational learning and organizational knowledge formation is that
both starts form an individual, and organizational learning helps in creation and formation of
knowledge or we can say that organizational learning helps in organizational knowledge formation
process. Individuals, within the organization, are involved in interactions through the various
entities in terms of interpersonal knowledge and behaviors, organizational environment and
intergroup/intragroup teamwork. In learning process individuals act as the agent of the
organizational learning process; on the other hand, organizational learning acts as vehicle for the
knowledge-sharing activities. Therefore an individual assumes a key role in the learning of the
organization and contributes in knowledge formation (Song & Chermack, 2008).
Organizational learning V.S HRD:
Organizational learning and HRD are also linked, HRD assists organizational learning process.
HRD provide knowledge to the organizations, it helps to develop skills of individuals and provide
knowledge to the organizations. HRD activities promote both, the organization and individual.
Individual learning owe too heavily on personal motivation of the employee. Although it is
rhetorically related to career motivation by the organizations but lack certainty hence less believed.
Strategic HRD assumes the duty for the construction of learning culture that not only responds to
the corporate strategy but also shape the strategy. This view may be taken as contrary to the
agenda of HRD, claiming for the self-actualization of employees. Donnell, McGuire and Cross
(2005). Organizational learning occurs when members of the organization act as learning agents
for the organization, responding to changes in the internal and external environments of the
organization by detecting and correcting errors in organizational theory-in-use, and embedding the
results of their inquiry in private images and shared maps of organization. In addition,
organizational learning establishes a link between the environment and the HRD outcomes that
encourages proactive rather than reactive behavior. Thus, SHRD practices have the objectives to
channel organizational inquiry, implement organizational learning and maximize HRD outcomes.
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To fulfill these objectives, SHRD must be well-organized and planned, as well as integrated into
every aspect of the organization. Tseng and McLean (2008).
Knowledge Creation Process V.S HRD:
Individual and organizational learning processes have been dominant themes in the disciplines of
HRD and other adult education fields. However, literature does not explain the knowledge creation
process. It does not throw light on the interplay of individual and organizational learning processes
and creation of knowledge in the organization.
Although these variables are logically related; however, limited attention has been paid in
academic literature to integrate these and explore any influence on sequential basis. Song &
Chermack, (2008).
Methodology:
Sample
Purposive sampling was designed for the collection of data. Respondents from different working
business were selected for attempting the questionnaires. Data from 100 individuals were possibly
collected.
Instrument
To make the understanding of this research easier and convenient a 5 point Likert scale was used
for measuring the dimensions of all variables.
Hypothesis
Organizational learning is positively linked with Human resource development with the
moderating effect of Organization knowledge formation.
Now we can see from Table 3 that The Cronbachs alpha value for 100 results of performance
related questions is 0.966 which is higher than 0.6 which shows that there is internal consistency
of items or respondents answers and our instrument of research is good
Table 1
Reliability Analysis for Social Networking Websites, Social Capital and Career (N=134)
Cronbach's Alpha
Cronbach's Alpha Based on Standardized Items
N of Items
.966
.966
25
Here we use the descriptive statistics to measure the basic feature of all received data from the
respondents. We can observe the Mean, Standard Deviation, Variance and Standard Error, etc are
shown in this table.
Table 2
Descriptive Statistics to Evaluate Validity of Scales (N=100)
N
Minimum
Maximum
Mean
Std.
Kurtosis
Deviation
Statistic
Statistic
Statistic
Statistic
Statistic
Statistic
Std. Error
OL1
100
1.98
.943
.975
.478
OL2
100
2.02
.932
.933
.478
OL3
100
1.96
.994
2.032
.478
OL4
100
1.91
1.006
1.556
.478
OL5
100
2.07
1.018
.942
.478
OL6
100
2.09
.911
1.257
.478
OL7
100
2.10
.969
.638
.478
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OL8
100
2.02
.985
1.195
.478
OL9
100
2.13
.971
.599
.478
OK1
100
2.12
1.008
.111
.478
OK2
100
2.07
.977
.788
.478
OK3
100
2.16
.884
.481
.478
OK4
100
2.30
.990
.288
.478
OK5
100
2.14
.975
.406
.478
OK6
100
2.11
.920
1.522
.478
OK7
100
2.30
.990
.288
.478
OK8
100
2.15
1.019
1.781
.478
OK9
100
2.09
.975
-.033
.478
Ok10
100
2.16
.873
2.422
.478
HRD1
100
2.29
.924
.403
.478
HRD2
100
2.10
1.000
.268
.478
HRD3
100
2.17
.900
1.173
.478
HRD4
100
2.15
.957
1.725
.478
HRD5
100
2.00
1.035
1.719
.478
HRD6
100
2.03
.870
1.089
.478
Valid N (listwise)
100
Operational Definitions
Organization learning
Organizational learning is defined as the process by which knowledge about action outcome
relationships between the organization and the environment is developed.
Organization Knowledge Formation process
Organizational knowledge creation process is the process of making available and amplifying
knowledge created by individuals as well as crystallizing and connecting it with an organizations
knowledge system.
Human Recourse Development
Human resource development is a process of developing and/or unleashing expertise through
organization development (OD) and personnel training and development for the purpose of
improving performance.
Results and Discussions
Correlation matrix for Organization Learning, Knowledge Formation Process and Human
Resource Development are listed below. It shows reliability and validity of items. The relationship
among variables in Pearson Correlation Table 5 shows strong.
Table 3
Correlation matrix of variables (N=100)
Variables
I
II
III
OL
Pearson Correlation
.842**
.770**
I
Sig. (2-tailed)
.000
.000
OKF
Pearson Correlation
.842**
.792**
II
Sig. (2-tailed)
.000
.000
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Pearson Correlation
.770**
.792**
Sig. (2-tailed)
.000
.000
Regression is computed in table 2 & 3 to verify the positive effect of Organizational Learning and
Organization Knowledge Formation Process on Human Resource Development. In Table 2 the
value of R depicts that 1% change in independent variable Organizational Learning will cause
58.8% change in dependent variable HRD. (F=142.304, p<.002). The value of standard error is
0.071 which clearly shows that the results are closely scatters and so reliability of results increases.
Also the value of t in table 2 is 3.246 which are greater than the value of 2.7. So it also supports the
positive relationship between dependent and independent variables.
III
HRD
Table 4
Multiple Regression Analyses for Organization Learning on Human Resource Development with
the presence of Moderating effect of Knowledge Formation Process (N=100)
Model
Variable
B
SE
T
P
I
OL
.229
.071
.345
3.246
.001
R = .592, R = .588
F = 142.304, df (99)
Predictors: (Constant), OL
Dependent Variable: HRD
We can similarly observe from table 3 that R =65.6% which means that 1% change in
moderating variable Organization Knowledge Formation process will cause 65.6% change in
dependent variable HRD (F=1487.272, p<.001). Also t value is 4.522 which depict a strong
positive relationship between these variables. Standard error in these results is also less than 1 so it
also supports our hypothesis. The significance is the probability of rejecting the hypothesis when it
is true and it simply means the chances of error. The significance level is 0.000 and we can say that
the confidence level is 100%.
Table 5
Multiple Regression Analyses for knowledge formation process on HRD (N=100)
Model
Variable
B
SE
T
P
I
OKF
.314
.069
.493
4.522
.000
R = .663, R = .656
F = 95.495, df (99)
a) Predictors: (Constant), OL
b) Dependent Variable: HRD
Discussion
This research studies the relationship among the three variables. Organization Learning was
selected an independent variable and Human Resource development was selected as dependent
variable while Organization Knowledge Formation was impacting its role as a moderating
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variable. Independent variable was observed by its two dimensions Adoptive and Generative
Learning. It is hypothesized that higher the degree of these two dimensions in the presence of
moderating variable dimensions MIS and User Involvements higher will be the degree of HRD. As
correlation among these variables is a new research area and no previous empirical work has been
done on that. So after analyzing the data through SPSS software the hypothesis according to some
statistical standards is accepted. It was observed that some organization do their more focus on
conducting workshops and seminars but they dont focus on learning of their employees from
their surroundings and each other as well and have no well established information sharing
network so their human resource is not properly developed. Meanwhile those business
organizations that are in great competitions are doing their more focus on their individual employ
learning and strong information collecting and sharing network with some HRD practices. And
their employees are well developed and more creative. MIS produce a moderating role and covert
the tacit knowledge which you learn in an organization as an individual or in a group to explicit
knowledge which is easily accessible and helps the employees in their grooming and enhancing
their technical skills. It goes without saying that firm should consistently provide opportunity to
learn their employees through strong organizational learning process for their better development.
That result also implies that HRD practices in an organization would not only be sufficient for
their good performance until they adopt the employees learning procedures
Conclusion and Suggestions
In all the above discussion it is shown that human resource development is dependent on
organization learning and organization knowledge formation process positively impact to make
that relation stronger. If the organizations try to increase the development of their human resource
it has to enhance the learning ability of their employees. During this research study and data
gathering it was found out that factors of organization knowledge formation not only enhance the
affect of organization learning on HRD but also have its own positive impact with HRD.
As this research is mostly captured the business organization only so it is suggested to new
researchers to do their work in a wide gap of non business organization in Pakistan like Govt.
Educational and Health institutions.
Limitations of the Study:
Major limitation of the study was short time period allocated for completing this study. Lack of
time effected many factors and many elements remained untouched due to limited time. Sample
selected for study was limited only to major organizations in Islamabad. Another limitation of the
study was that only those people could be selected as samples that were easily approachable and
non probability convenience sampling was used. Also, we just considered two dimensions of
organizational learning and other proprietary assets were not taken into consideration due to lack
of time.
Acknowledgement
The authors are highly thankful to Prof DR. Mujahid Kamran (Vice Chancellor, University of the
Punjab, Lahore, Pakistan), Prof. DR. Liaqat Ali (Principal, Hailey College of Commerce,
University of the Punjab, Lahore, Pakistan), Prof DR. M Masoom Yasinzai (Vice
Chancellor,Quaid-e-Azam University, Islamabad, Pakistan) for their support in publishing this
research and authors are also thankful to Beenish Jawaid, Ahsan Ullah, Hafiz Wasim Aqeel, Fateh
Muhammad Ghumru (students Department of administrative sciences, Quaid-e-Azam University,
Islamabad, Pakistan) for their untied work and support in completing this research.
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Impact of organizational Structure and time on efficiency: Evidence

from Pakistan
Hassan Mobeen Alam
Assistant Professor
Hailey College of Commerce, University of the Punjab, Lahore - Pakistan
Abstract
This study provides a scientific approach to different organizations for calculating their efficiency
either they are production based or services oriented organizations. In centralized organizations
time factors which are also the dimensions of work norms like scheduling, synchronizing and time
allocations are considered very rigid while in decentralization they are flexible and beneficial for
organizational performance. This study focuses on centralization so its finding will justify that
whether above stated two hypothesis have any theoretical background or not. This study will help
organizations to decide about their structure in order to achieve their desired performance.
Keywords: Impact , Organizational Structure, Time , Efficiency, Evidence ,Pakistan
1. Introduction:
The success of any strategy depends heavily on its fit with organizational structure; the strategic
planner must recognize that a firms organizational structure with associated work norms
influences firm performances. This piece of research has a special focus on centralization, work
norms of time and efficiency as dimensions of organizational structure, work norms and
organizational performance respectively and it will further exploit scientifically the relationship of
centralized organizational structure with time the dimension of work norms to achieve the efficient
organizational performance which will further help the employers and many business firms to
measure the efficiency by adopting the specific organizational structure with specific work norms.
Organizational structure plays an important role in planning, decision making, and execution of
those decisions in a firm. Its role has not been studied on the work norms to achieve organizational
performance. In their work time dimensions of work: relationship with perceived organizational
performance Lim and Seers (1993) used time as dimension of work norm and studied its impact
on performance. But this paper was left with major limitation that it ignored the relationship of
specific organizational structure i.e. centralized organizational structure with time dimension of
work norm. The researchers have used this gap as a theoretical background to study the
relationship among centralization, time and organizational performance.
Time is the one of the dimension of work norms which having further dimensions which are
synchronization, scheduling, allocation of time, autonomy of time use, orientation towards future.
These are the basic ground for our further research that how the centralized organizational
structure integrates different time dimensions of work norms for achieving the efficient
organizational performance.
2. Problem Statement:
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How time as a work norm plays an intervening role in achieving efficiency in a centralized
organizational structure ?
3. Detail of Study:
The purpose of this study is hypothesis testing. The causal relationships of independent variable
(organizational structure), moderating variable (work norms) and dependent variable
(performance) are investigated in this study. So the hypotheses are developed to test the
relationship between these variables. In social science researches like this research, typical units of
analysis include individuals, dyads, groups, social organizations, social artifacts and cultures.
Data collection is done through the use of questionnaires and sometimes interviews from
individuals, groups or social organizations. The extent of researcher interference is at moderate
level because at this level the researcher will be testing cause and effect relationship. In this study,
the cause and effect relationship is tested between the three variables; organizational structure,
work norms and performance. This research is conducted in, non-contrived settings using the same
natural environment in which employees normally function, called field studies.
4. Literature Review:
4.1.
Organizational Structure:
This concept of organizational structure has been discussed by Jusuf Sehanovic & Miroslav Zuga
(1990) as an enterprise which represents the totality of links and relationships between and within
its factors at all levels of the organization in precisely defined quantities. These elements are:
organization of production means and rational design of environment; organization of the working
community (personnel); division of the task to every detail; organization of interior relations; and
determination of time sequence of tasks. They also considered the factor of IT that it, together with
the other factors, influences the development of organizational structure. Their application
influences the efficiency of handling the business of the enterprise, with notable business
improvements, particularly since personal computers and computer networks have been used.
Steven Lysonski, Michael Levas & Noel L. (1995) viewed it in the context of marketing that an
effective marketing organizational structure can be viewed as a control mechanism that compares
the marketing effort to the environment of the firm. The major dimensions that characterize an
organizations structure are its degree of centralization of decision making, the formalization of
rules and procedures, and structural differentiation. Theodore P. Stank, Patricia J Daugherty &
Craig M.Gustin (1994) assert that organizational structure influences the flow of information and
the context and nature of human interactions and it impacts collaborations internally and with
external channel members as well as influencing method of coordination, allocation of power and
responsibility and levels of formality and complexity. They studied the dimensions of
organizational structure as well and stated that they have great deal of impact on firm performance.
These dimensions are centralization, formalization and specialization. Centralization refers to the
location of decision making authority and control within organization. Formalization is the degree
to which decision and working relationships are governed by formal rules and standard procedures
and policies. Specialization refers to the division of tasks and activities across positions within the
system.
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Jacky Hong (2002) viewed centralization and decentralization as a prospect of future research that
should measures these concepts to allow further assessment of the constructs and improve research
validity and reliability. Future research should address other performance attributes associated with
centralization and decentralization e.g. differential customer service levels, efficiencies associated
with centralized firms is needed and also to examine that other performance attributes such as
market focus, speed and flexibility are more likely to be associated with centralization than
decentralization.
5. Methodology:
A list of questions has been formed to be asked from the respondents. The questions are printed in
a document called a questionnaire. The questions are stated in such a way that they collect true
data from respondents to get a true picture of the responses from the target sample of people. Each
question is given a scale. The scale has been defined according to the 5 point Likerts scale.
The scale which is have used is:
1
2
3
4
5
Strongly disagree Disagree
Neutral
Agree
Strongly Agree
The sample of 30 is taken for the purpose of pilot study. This sample is made by non-probability
sampling technique, because in this sampling the elements do not have a known or predetermined
chance of being selected as subjects. In the non-probability sampling, the judgmental sampling is
used for the purpose. The sample has been chosen from different organizations like high schools,
travelling agencies, construction companies. Due to time limitations the location was limited to the
capital city Islamabad only. Unit of analysis is individual in our case. After the conducting of pilot
studies, we chose a sample of size 100, to proceed further in our research. We used the same
method of sampling technique as in the pilot studies of sample size 30.i.e, non-probability
judgmental sampling.
6. Data analysis
6.1.
Hypothesis
H1: There is a positive and significant association between centralization and efficiency
H2: There is a positive and significant association between time and efficiency
Table 1
Reliability of the instrument:
RELAIBILITY ITEMS
Eefficiency
Ccentralization
Time
All variables
CRONBACHS ALPHA
VALUE
.64
.62
.76
.70
Table 1 shows that reliability of the questioner i.e. Alpha value of efficiency, Centralization, time
and overall are .64, .62, .76 and .70 respectively
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Table 2 Correlation
Correlations
Centralization
Centralization
Efficiency
.371**
.000
.000
100
100
100
**
.483**
Pearson Correlation
Sig. (2-tailed)
N
Effeciency
Time
Pearson Correlation
Time
**
.635
.635
Sig. (2-tailed)
.000
100
100
100
**
**
Pearson Correlation
.371
.000
.483
Sig. (2-tailed)
.000
.000
100
100
100
**. Correlation is significant at the 0.01 level (2-tailed).
There is positive and strong relationship between efficient and centralization and time i.e. .635 and
.483 with sig values .000 and .000 respectively which shows that efficiency highly depend on
centralization and less on time but both the dependencies are statistically significant.
6.2.
Regression Analysis
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7. Findings and conclusion

Standard errors of both the models i.e. 2.76 and 2.61 shows the reliability of the model with Rsquare i.e. .40 and .47 respectively which shows that more than 40% efficiency depends upon the
centralization and time which was the main concern of the study. Correlation also shows the same
results. Over all sig value i.e. 0.000 and 0.000 which is less than 0.01 shows the goodness of the
model i.e. there are one or more variable in the study which has positive and significant impact on
dependant variable i.e. efficiency. Details of the model i.e. beta coefficients also supports the
results i.e. beta value of centralization alone is 1.181 with significant value 0.000 which is
statistically significant at 1% LOS. But if centralization come with time and combined effect of
both the variables are seen on efficiency then their beta values are .98 and .26 with sig value less
than 0.01 so both the said variables are also statistically significant at 1% LOS. Here one thing
must be note that centralization alone effect more on efficiency if we eliminate time but it does
mean that centralization with time have negative impact as supported by above findings. Time
domain also has positive and significant impact on efficiency. On the basis of above analysis we
can accept our both hypothesis which are main domain of our study i.e. efficiency more depend
upon centralization alone and less with time.
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SMS Advertising: Youth attitude towards perceived
informativeness, irritation and credibility.
MAY 2011
VOL 3, NO 1
Faria Muzaffar
MBA Student, Department of Business Administration,
Fatima Jinnah Women University, Rawalpindi, Pakistan.
Sohail Kamran (Corresponding Author)
Assistant Professor, Department of Business Administration,
Fatima Jinnah Women University, Rawalpindi, Pakistan.
Abstract
SMS advertising is rapidly becoming one of the most popular direct marketing tools for different
businesses across the world. Consequently, businesses need to understand the factors which
influence the customers positive response towards SMS marketing. The purpose of this study was
to investigate the youth attitude towards SMS advertising. Data was gathered through a
questionnaire from 152 undergraduate students aged 18-23, studying in different universities of
twin cities of Rawalpindi and Islamabad, Pakistan. Regression and correlation analysis was used to
find out the relationship between the dependent variable of attitude towards SMS advertising and
independent variables of perceived ad informativeness, ad irritation and ad credibility. Firstly,
study findings revealed that ad informativeness has a positive linkage with youth attitude towards
sms advertising. Secondly, Irritation does not affect the youth attitude towards sms advertisements
significantly. And lastly, results demonstrated that credibility strongly affect youth attitude towards
sms advertising. Managerial implications are that the information provided in the advertisements
via mobile devices must be authentic, easily understandable and informative for customers.
Furthermore, adoption of permission based marketing and use of Urdu language in SMS ads may
lead to increased customer acceptance and more positive response towards SMS advertising in
Pakistan.
Keywords: SMS marketing, Youth response to SMS Ads
1. Introduction
Mobile advertising has become one of the trendiest applications in mobile commerce,
predominantly in the form of SMS advertising (Drossos et al, 2007). Mobile advertising includes
the activities that deliver advertisements to mobile devices using wireless network for creating
brand awareness and promoting the products to the prospective customers (Yunos & Gao, 2004).
SMS advertising delivers personal marketing messages to the prospective and existing customers,
consequently, it is considered more effective as compared to the conventional media (Leppniemi
& Karjaluoto, 2008). Kavassalis research findings reported better effectiveness of mobile
marketing over traditional media (Kavassalis et al. 2003). It is expected that mobile marketing will
develop itself as an incomparable targeted medium among all advertising media (Leppniemi &
Karjaluoto, 2005). According to Mobile Marketing Association (MMA, 2009) different mobile
devices and options may be used for mobile marketing such as, different mobile applications and
software, mobile web sites, Mobile video and TV, Multimedia Messaging Service (MMS), Short
Message Service (SMS) (MMA, 2009). However, this paper only focuses on the youth response
towards SMS advertising.
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Contemporary businesses have taken advantage of mobile marketing in creating strong relationship
with its customers. It helps in conveying business message to consumers and provides interested
consumers with the relevant information (Frolick and Chen, 2004). Some of the benefits of SMS
advertising include low cost SMS advertising campaigns (Michael & Salter, 2006), possibility of
quick response to SMS ads from consumers end (Yaniv, 2008), high Response rate for the
correctly targeted SMS advertising campaigns as compared to traditional medium, (Rettie et al.
2005) high brand recall among customers (Kavassalis et al. 2003), messages delivery at anytime
and location (Nysveen et al. 2005) and groups within the mobile marketing system such as
consumers, companies, advertising agencies, and marketers can interact with each other in more
innovative and stylish way than past (Hanley and Becker, 2008).
In year 2008 $4.2 billion and in 2009, $6.4 billion were spent on SMS advertising worldwide. The
worldwide SMS advertising expenditures are forecasted to cross the figure of $14 billion by 2012
(eMarketer, 2008). This indicates a drastic growth in the SMS advertising by different companies
worldwide. Pakistan is the seventh largest country of the world in terms of mobile phones users
with total number of subscriptions crossing the figure of 100 million in October, 2010 and more
than 60% of population are having a mobile phone (Telecom indicators, 2010). Mobile marketing
remains a relatively new phenomenon in the developing countries such as Pakistan. However,
there is an immense growth potential in the SMS marketing activities across the world including
the developing nations like Pakistan.
SMS marketing facilitates to generate brand awareness, customer loyalty, and in making sales
(Bragge et al. 2005, Sutinen & Tirri 2005).Therefore, mobile marketers need to recognize and
understand important variables which influence consumers response to mobile marketing
campaigns (Stewart & Pavlou 2002).
Modern consumers have accepted the mobile marketing applications across the world rapidly.
Therefore, marketers should focus on looking for the factors that drives customers approval to
these mobile marketing strategies (Becker, 2005). Nonetheless, there is a shortage of empirical
researches that study the importance of the factors such as, consumer response that determine SMS
marketing effectiveness (Becker, 2005, Drossos et al. 2007). Similarly, there is not published
research on consumers response to SMS advertising in Pakistan. So, this research intends to
investigate the youth consumers response towards perceived informativeness, irritation and
credibility in Pakistan.
2. Literature Review and Development of Hypothesis

2.1 Attitude towards SMS advertising
Consumers attitudes are basically their inclination toward products and services. An Individual
attitude demonstrates that he or she likes any product or service or not Consumers attitudes have
three main elements; emotional, cognitive, and behavioral. Emotional element comprises of people
liking or feelings regarding any thing. The cognitive element includes beliefs concerning an object,
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and the behavioral part refers to the actions people take about an object (Severin & Tankard,
2001).
Studies conducted by various researchers have established that the consumers attitude towards
conventional advertising in general terms is found to be negative (Alwitt and Prabhaker, 1994).
However, previous studies demonstrate diverse attitude towards mobile marketing. Mobile
advertising is more innovative. Therefore, the attitude towards mobile advertising is continually
changing. The attitude towards mobile advertising is dependent on the attitude the consumers have
about the broad advertising perspective (Bauer et al. 2005). According to Barutcu (2007) people
from different age groups and occupations vary widely in terms of their attitude towards mobile
marketing. Youth demonstrated positive attitude towards mobile entertainment whereas old
consumers reported a negative attitude towards mobile shopping. Most important customers for
mobile advertisers are the young people living on high income, do not use internet services, and
work as officials in public organizations (Barutcu, 2007).
According to Ravald and Gronroos (1996) consumers background, values, requirements, liking
and financial resources might be different from one consumer to another. Therefore, they possibly
react in a different way to the different services (Ravald and Gronroos, 1996). Age is considered
as one of the most important demographic variable in order to describe the acceptance of
technology between two or more groups of consumers (Morris and venkatesh, 2000). However,
Dickinger et al. (2004) proposed that advertisements via wireless medium have become popular
among all age groups in the modern societies (Dickinger et al, 2004). Young consumers have
different lifestyle than the old people which may cause significant differences in their intention and
perception towards mobile services (Kumar and lim, 2008).
2.2 SMS ad in formativeness
Customers generally more easily understand and accept those SMS ads, which are relevant to their
interests (Nasco and Bruner, 2008). Consumers acceptance of SMS advertisements is dependent
upon perceived utility of SMS ads and information contained in them (Bauer et al. 2005).
Similarly, consumers do accept SMS ads which are linked with their interests and requirements.
(Carrol et al, 2005, Siau and Shen, 2003). Consumer will react positively, if the information
delivered through SMS is accurate, timely and useful. These features hold great importance as far
as ads information effectiveness is concerned (Siau and Shen, 2003). According to Okozaki (2004)
attitudes toward SMS ads have two different backgrounds. Firstly, perceived informativeness that
positively influence attitude towards wireless advertising. Secondly, perceived irritation which
negatively influence consumers attitude toward SMS ads
According to Blanco et al. (2010) mobile advertising plays a vital role in creating a positive effect
on the consumers attitude and behavior. The purpose of the study was to investigate two important
aspects namely informativeness and entertainment affect the consumers attitude. The results
indicated that entertainment and informativeness do affect the consumers attitude and there is also
an impact of the general belief of the consumers about mobile advertising. However, the marketers
must concentrate on improving these two aspects. Study results also showed that majority of the
respondents consider SMS advertising as uninteresting communication medium and it is less
entertaining than other mediums. They also think that mobile advertising is unable to provide
relevant information. (Blanco et al. 2010).
H1: Youth have a positive attitude towards the perceived SMS ad informativeness.
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2.3 Irritation
Consumers mostly have no control over receiving undesired advertisements information. This
unwanted information delivery might create resentment among consumers about the business
delivering those marketing messages (Milne and Rohm, 2004). Most researchers focus more on the
acceptance of mobile marketing and ignore the privacy issues associated with it. (Bruner and
Kumar, 2007, Drossos et al., 2007, Ferris, 2007; Leek and Christodoulides, 2009).Dickinger et al.
(2005) However, sending messages without prior permission and invading consumers privacy have
the strongest negative influence on the consumers attitude towards SMS advertising. This
potentially causes anger and irritation among consuemrs (Dickinger et al., 2005). Rettie and Burm
(2001) reported that 90% of the study participants would disapprove to receive SMS ad from an
unfamiliar company (Rettie et al., 2005). Consumer will read and pay more attention to those
companies SMS ads for which they have already subscribed. Because opting to receive company
advertisements potentially depicts consumers interest in their products and services. Contrary to
this consumers ignore unknown companies SMS advertisements (Godin, 1999).
Al-alak and A.M. Alnawas (2010) have empirically assessed the impact of trust, privacy concern
and consumer attitude on intention to purchase. The results showed some interesting facts. The
consumers who were exposed to extensive advertising had a negative attitude towards mobile
marketing. They were less likely to participate in permission based advertising programs. People
who believed the sms advertising messages that were useful for them expressed a positive attitude
towards such programs. They were convinced to buy the advertised products. However, the study
also indicates negative relationship between individual usage and past experience of the
consumers. Consumers were less liable to receive wireless advertising messages especially those
who had a negative attitude towards direct advertising. Furthermore, the consumers who were of
the view that the mobile device is for personal use were disinclined to purchase the advertised
products. It is often suggested that the mobile operators and advertising agencies must concentrate
on making efforts to resolve such negative issues by developing a close relationship between the
consumers and delivering the relevant data to its customers (Al-alak and Alnawas, 2010).
Bamba and Barnes (2007) have found that the consumers perception of SMS ads is usually
negative. The ads that are unwanted annoy the consumers the most. The purpose of their study was
to understand the occurrence of consumers willingness to give permission to receive text
messages advertisements. The results showed that the consumers did not permit the delivery of
sms ads that were irrelevant and accepted ads that were relevant even if the brand name was not
familiar. The marketers have to make a lot of effort to convince the customers to buy their
products and services through mobile marketing. It is sometimes disturbing for the customers to
receive SMS ads while traveling or working. If the marketers wish to make their ads more
accepted and attractive, they need to study what the customers actually want (Bamba and Barnes,
2007).
Another study conducted by Tsang et al. (2004) revealed negative customers attitude toward SMS
advertisements sent without prior permission to the customers. Study respondents view these SMS
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ads as annoying and irritating. But, consumers attitude will become positive if SMS advertisements
are sent with prior permission by the companies (Tsang et al. 2004).
H2: Irritation negatively effects youth attitude towards SMS advertising.
2.4 Ad Credibility
Consumers receive a large number of marketing information everyday; so they focus on and
involve themselves in ad information in a highly selective way. Generally consumers pay more
attention to the advertisements of more familiar brands (Kent and Allen 1994).
Mackenzie et al. (1989) maintains that corporate credibility positively influences attitude toward
the advertiser, which is a vital predictor of consumers attitude toward the advertisement
(Mackenzie et al.1989).
Successful relationship marketing involves effective commitment of the service provider. This also
calls for tailoring the marketing offerings according to the specific customers needs. This will
create a positive influence on customers and more loyalty towards the services offered. The
important point is to provide the customers with value maximizing services and increasing the
consumers acceptance in order to create trust and customer retention. Developing relationship
based on trust and interactivity could definitely make the customers more enthusiastic towards the
company (Fullerton, 2005).
Consumers prefer to receive sms ads from known companies as they worry about spam ads
(Vatanparast, 2007). Customers trust in SMS advertising companies will have a positive effect on
perceived value of SMS ads and accepting it as a valuable service. (Vatanparast, 2007, Merisavo,
et al., 2007). However, According to Nielsen global online consumer survey, SMS ads are the least
trusted among all other major advertising mediums. July, 2009 figures show that In India and
Venezuela 43%, Brazil, 36%, Vietnam 42% and Pakistan 35% customers trust the SMS ads, which
is very low trust as compared to the other advertising channels (AC Nielsen, 2009).
Okozaki et al., (2007) maintain that trustworthiness in mobile advertising positively affects
consumers attitudes toward SMS advertising. They maintain that customers trust affects the
attitudes toward mobile advertising in both significantly and strong manner.
H3: credibility positively effects youth attitude towards SMS advertising.
3. Methodology
The present study investigated young consumers response towards sms ads by identifying attitude
towards the advertisement as dependent variable and ad credibility, ad informativeness, and
irritation as independent variables. Quantitative technique was used to determine the relationship
between dependent and independent variables.
3.1 Location and Sample of Research
Current study was carried out in the twin cities of Rawalpindi and Islamabad, Pakistan. Simple
random sampling approach was used to collect the data from the respondents. 250 questionnaires
were distributed randomly among the undergraduate students of four private universities of the
twin cities. However, only 152 questionnaires were completely filled and returned by the
respondents. So, the response rate remained only 61%. Respondents belonged to the age group of
18-23 years with the mean age of M=20.45 year and S.D =1.80. Gender divide of the respondents
was a little uneven with (64, 42%) of the respondents were female and (88, 58%) were the male
undergraduate students.
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3.2 Questionnaire Development

Questionnaire was designed based on the previous literature with regard to SMS marketing and
consumer attitude towards sms advertising (Al-alak and Alnawas, 2010; Blanco et al, 2010; Kumar
and Lim, 2008). The survey questionnaire studied three different aspects of SMS advertising
namely ad informativeness, irritation and credibility on the consumers attitude towards sms ads.
Questionnaire included fourteen items in aggregate. Attitude towards ad included three items, ad
informativeness included four items, irritation included three items and SMS ad credibility
included four items. Present research used two different scales to gather data from respondents.
Nominal scale was used to ask the respondents age, gender and education. Five point Likert scale
questionnaire ranging from 1= strongly disagree to 5= strongly agree was used to measure the
response of dimensions of attitude towards SMS advertising. The questionnaires were
administered by personal delivery.
3.3 Pilot Testing of Questionnaire
A sample of 46 undergraduate students was used in the pilot testing to validate the designed
questionnaire. Pilot testing results showed adequacy as Cronbach alpha ranged from 0.71 to 0.83
for different variables. Pilot testing findings indicated Cronbach alpha for individual variable of ad
informativeness =0.79, ad credibility=0.71, ad irritation =0.83, attitude towards sms ad= 0.74 and
lastly, the entire questionnaire Cronbach alpha value was found 0.77. Cronbach alpha ranges for all
variables are larger than 0.6, which indicates a valid questionnaire.
3.4 Data analysis
Statistical package for social sciences (SPSS) version 16 was used for computing and analysis of
the data. The statistical tests were applied to check the normality and reliability of data, correlation
analysis, and regression analysis.
4. Data Results and Analysis
4.1 Reliability analysis
Insert table 4.1 here
Reliability analysis was conducted to find out the reliability of the questionnaire. Cronbach alpha
value of (Ad informativeness=0.71), (Attitude towards ad=0.68), (irritation towards ad =0.73) and,
(credibility of ad= 0.77) and finally for the whole questionnaire, it was 0.754. All variables alpha
values are well above the acceptable range of 0.6, which indicates a reliable questionnaire. Alpha
value of the entire questionnaire is close to the alpha value of research conducted by Barutcu,
2007, which was 0.8 (Table 4.1).
4.2 Normality analysis
Skewness and kurtosis statistics was used to check the normality of the data. The values of both
these descriptive statistics must be between +1 and -1. The skewness of the ads information is .936
and kurtosis was observed to be -.238. The skewness and kurtosis of the dependent variable,
attitude towards the ad is .029 and -.322. The skewness of the other two independent variables
irritation towards the ad and credibility of the ad is observed to be .364 and -.9. The kurtosis of
these two variables is -.2 and -1 respectively. The above mentioned Skewness and kurtosis values
demonstrate that the data is normally distributed (Table 4.2).
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4.3 Correlation Analysis

Pearson correlation matrix shows four variables and their relationship to each other in table 4.3.
Correlation value of ad information and attitude towards the ad is estimated to be 0.235 and the
significant value is 0.004. This implies that both the variables, ad information and attitude towards
ad, has a positively weak significant relationship. The relationship indicates that the ad information
would not strongly affect attitude towards the ads. However, it does not mean that ad information
does not have anything to do with the attitude. It affects the response of the consumers but with
the low degree.
The correlation value of ad information and irritation towards ad is 0.138 and the significant value
is .090. This means that the two variables have a non significant positively weak relationship. The
relationship signifies that the two variables are not affected by each other.
The Pearson value of attitude towards ad and irritation towards ad is estimated .063 and the
significant value is .442. This portrays that both the variables, attitude towards ad and irritation,
has a non significant relationship. The results indicate that the attitude towards ad is not affected
by the respondents irritation or annoyance. Therefore, the attitude towards the ad is not affected.
This is probably because of fact that general attitude of the youth remains same in some situations.
As, this study targeted age group of 18 to 23, it is observed that youth segment is not affected by
the sms ads to a great degree. They have a high resistance towards sms marketing.
The correlation value of attitude towards ad and credibility of the ad is 0.350 at significance value
of 0.000. This represents a positively moderate significant relationship between the two variables.
The values indicate that the higher the credibility of the ad the more the favorable reaction of the
consumers towards the advertisement. The credibility evaluates the reliability and the efficiency of
the source. If the consumers believe that the source is highly credible, they will have a positive
response towards the ad. The results depict a moderate significant relationship. This means that
the variables are affecting each other in a reasonable manner. However, there are other variables
that strongly influence the attitude.
The value of Pearson correlation of ad credibility and ad information is 0.402 at significance level
of 0.000. This also constitutes a perfectly positive significant relationship between the two
variables. This strong relationship signifies the importance of ad information from the consumers
view point. The information contained in the ad has a strong influence on building credibility. If
the consumers perceive that the ad contains relevant information, the credibility will eventually
increase.
Similarly, the correlation analysis of credibility towards the ad and the irritation towards the ad
shows .066 and the significant value is .416. These findings reveal that both the variables have a
non significant relationship (please see Table 4.3).
Adjusted r square was found 0.117, which entails that the independent variables namely
credibility, ad information and irritation can cause 11.7 percent variation in the dependent variable.
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4.4 Coefficients
Insert table 4. 4 here
Table 4.5 shows the value of beta and significant value of the independent variables. The first
variable, ad information has a significant value of .199 and the beta value is .109. From the values
we found that the ad information has a non significant relationship with the dependent variable.
The results are consistent with the results of research conducted by Blanco et al. 2010. The
significant value of informativeness was calculated to be .38 and the current research has a value
of .199. Both show the non significant relationship.
The second variable has a significant value of .722 and beta value is estimated to be .028. Irritation
towards the advertisements is said to have a non significant relationship with the dependent
variable.
The third variable, credibility of the ad shows some positive results. The significant value is .000
and beta value is .305. This result shows that the independent variable, credibility of the ad, has a
significant relationship with the dependent variable (table 4.4).
The F statistics value was found to be 7.6% and the significant value was .000. The significant
value signifies that the data fits the model well.
4.5 Hypothesis Results and Discussion
Based on the correlation values of ad informativeness relationship with the dependent variable
attitude towards ad, H1 is accepted. Therefore, it can be concluded that the youth have a positive
response towards the perceived ad informativeness.
Study results predict that informativeness has a positive association with the consumers response
via mobile devices. Study findings show a positive but weak relationship with the dependent
variable. This is what the respondents perceive about the informativeness factor. A research
conducted by siau et al. (2003), quality of information must be given high importance.
Appropriate time management is crucial in delivering the messages to the customers. The
necessary part is to create the advertising messages according to the customers requirements. So,
delivering comprehensible marketing messages on youth mobile devices will increase the business
credibility and fulfill the recipients informativeness need.
The results of the current research are consistent with the previous research conducted by Barutcu,
(2007). The previous research analyzed the consumers attitude towards mobile marketing and the
results showed a positive attitude of consumers towards mobile marketing. The results of the
current research also signify a positive attitude of the consumers towards sms marketing. Both the
researches focused their study on younger generation, and have undergraduate or professional
degrees.
Irritation has no significant impact on the consumer attitude towards sms advertisements. The
results indicate that the irritation has a negative effect on the value of mobile marketing. A low
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correlation coefficient indicates that influence of irritation is not as strong as the power of the
variables such as ad credibility and ad informativeness. As, the study findings do not support the
notion that SMS ads do irritate the customers. So, H2 is rejected on the basis of study findings.
Although, previous studies such as Tsang et al. (2004), Bamba and Barness (2007) and Dickinger
et al., (2005) mentioned that sending SMS ads without prior permission could cause anger and
irritation among the ad respondents. However, the present study results revealed that SMS ads do
not irritate and annoy the young customers to great deal. This may be because of the fact that youth
interaction with the technological products such as mobile phone is quite different as compared to
the old people. So, they are least bothered about these unwanted SMS ads.
This might be the main cause of disagreement of present study findings from previous studies of
Tsang et al. (2004), Bamba and Barness, (2007) and Dickinger et al., (2005). Results might have
been different, if the sample of the study was old people. However, adaptation of permission
marketing concept could increase the acceptance and positive response towards SMS ads among
all the age segments of the society, as it aims to eliminate the resentment and irritation among the
ad receivers.
On the basis of study findings H3 was accepted. As, the results signify a positive relationship
between ad credibility and consumers attitude towards ad. So, it can be concluded that higher ad
credibility could result in to more favorable response from the consumers. The present study
findings show congruence with the findings of Okozaki et al., (2007), Vatanparast, (2007,
Merisavo, et al., (2007), as their research findings also portrayed a positive effect of
trustworthiness and credibility on the consumers response towards SMS advertising.
5. Conclusion
SMS marketing is becoming a useful direct marketing tool and contemporary businesses across the
world are widely using the technology to reach the target market. Likewise, many companies in
Pakistan are also using SMS advertising to deliver marketing messages to both prospective and
existing customers. However, this is vital to be familiarized with the aspects of SMS advertising,
which actually affect the consumers attitude towards the technology. SMS advertising is still in the
introductory phase and a lot need to be understood by the marketing practitioners about customers
attitude for making it a highly successful direct marketing tool.
This research identified the factors affecting the young consumers response towards sms
marketing. Study findings suggest that young consumers attitude towards the sms advertisements
is rather positive in Pakistan. The basic concern is the relevance of the information provided to the
consumers through the SMS. If the content of the advertisements are relevant and informative the
consumers have high credibility towards the source. Study results also revealed that young mobile
users are not irritated to great extent from sms advertising.
In order to market products and services successfully via mobile devices, marketers must
understand the users attitudes, perceptions, demographics and behavioral patterns. The results of
the research indicated a positive attitude towards the emerging sms advertising in Pakistan.
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Therefore, it is important to gather sufficient amount of information regarding the user and then
formulate effective advertising messages.
The findings of the study lead to some managerial implications. Firstly, Different companies in
Pakistan send marketing messages to different people anonymously or without prospecting on their
mobile phones. The major reason of this practice is an enormously low cost of sending an SMS
within the country. This raises some ethical issues such as, violation of consumers privacy rights
and in some events probably irritate them as well. The consumers might not have wanted to
receive the messages and might be annoyed with undesirable messages, as consumers have not
permitted in advance to business for sending marketing messages. If companies continue to send
marketing messages anonymously on people mobile devices then Pakistani consumers behavior
might be converted from positive to negative towards sms advertising. Sending sms advertisements
without prior permission might also harm the companys reputation among the public to a great
extent. Usually individuals do have a larger social circle in the collectivistic societies like Pakistan.
So, negative word of mouth might be disseminated quickly and easily to the extended social circles
of people in the event of annoyance with SMS message. The best possible way to avoid customers
resentment and to increase the chances of SMS advertisement acceptance among customers is the
adoption of permission based marketing concept by the marketers.
Secondly, Most of the SMS advertisements are delivered in English language, which is Pakistans
official language, but a significant amount of population do not understand English language.
Therefore, to increase the informativeness and credibility associated with the SMS advertising
messages companies should send most of the messages in Urdu, which is widely understood as a
national language of Pakistan.
Some limitations in this study were also identified. The data was gathered from the undergraduate
students of twin cities of Rawalpindi and Islamabad. This might restrict the generalization of the
study results across the youth segment in Pakistan. So, the same study could be conducted with the
youth from across the country belonging to different walks of life such as employed, students,
unemployed less literate and illiterate youth. This will increase the chances of generalization of the
study findings. Secondly, the one more future research direction could be to study the attitude of
old aged people towards the SMS advertising in Pakistan or in any other country.
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Appendix
Table 4.1 Reliability analysis
Variable
Cronbach alpha
Ad in formativeness
Attitude towards ad
Irritation towards ad
Credibility of ad
Table 4.2 Normality analysis
Variable
Ad in formativeness
Attitude towards ad
Irritation towards ad
Credibility of ad
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No. of items
0.71
0.68
0.73
0.77
3
3
4
Skewness Statistic
MAY 2011
Kurtosis Statistic
.936
.029
.364
-.900
-.238
-.322
-.270
-1.0
Table 4.3 Correlation Analysis

Variable
Ad in formativeness Pearson correlation

Sig. (2-tailed)
N
Attitude towards ad Pearson correlation
Sig. (2-tailed)
N
Irritation towards ad Pearson correlation
Sig. (2-tailed)
N
Credibility of ad
Pearson correlation
Sig. (2-tailed)
N
Ad in
formati
veness
Attitude
towards
ad
Irritation
towards
ad
Credibility
of ad
.235
.004
152
1
.138
.090
152
.063
.442
152
1
.402
.000
152
.350
.000
152
.066
.416
152
1
152
.235
.004
152
.138
.090
152
.402
.000
152
152
.063
.442
152
.350
.000
152
152
.066
.416
152
152
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Table 4.4 Coefficients

Model
Unstandardized
coefficients
B
Standardized
Coefficients
Std
Sig
Beta
error
constant
2.182
.480
in
formativeness
.111
.086
Irritation
.046
.128
Credibility
.169
4.545
.000
.109
1.289
.199
.028
.357
.722
.305
3.650
.000
.046
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Organizational Strategic Life Cycle with System Dynamics Perspective

Bahman Hajipour
Assistant professor chamran university of Ahvaz, Iran.
Mohammadreza Zolfagharian
MA in industrial management, Imam Sadiq University, Iran.
Maysam Chegin
MA in industrial management, Imam Sadiq University, Iran
Abstract
The purpose of this conceptual paper is to develop a model for explaining the relationship between
stages of organizational life cycle and proper strategy school for strategy making. We consider
three stages for organizational life cycles, namely commercialization, growth and stability; and for
strategy schools we use strategy classification introduced by Mintzberg & colleagues. Using
system dynamics methodology, we linked stages of OLC with strategy school characteristics. We
have found out that in the stages of commercialization, growth, and stability, the mainstream
schools respectively are entrepreneurship, power and planning. Dynamic relation between OLC
and strategy schools is a subject that did not surveyed clearly in other studies and can be a
precedence stage for strategic planning.
Keywords: organizational life cycles (OLC), strategy schools, system dynamics.
1.Introduction
"The greatest constant of modern times is change" (sterman, 2000:3). Accelerating changes in all
aspects of organizational activities have provided dynamic behavior, which cannot be scanned and
controlled without flexible and holistic methods. In this changing environment, all concepts of
organization would be changed from static and mechanistic to dynamic and organistic
perspectives. One of these key concepts of organization is strategy. Strategy, against planning, is
defined as decision making in a dynamic environment. Farjoun (2002) introduces two concerns for
mainstream strategy research:
1) To explain what determines business performance
2) To identify what affects business strategy
Although there is a considerable amount of research on frameworks explaining differing
competitive success for firms in special times, explaining dynamic processes, which lead to this
position, is far less developed (porter,1991,p1& Cockburn et al.,2000,p1123). At this position, we
need some methodologies, which visualize these dynamic processes and provide useful platform
for challenging mental models of managers to reach an agreement.
System dynamics methodology could play this role efficiently. As David Norton wrote:" Bob
Kaplan and I have long believed that Dynamic Systems Simulation would be the ultimate process
of an organization's strategy and the perfect foundation for a Balanced Scorecard" (2000).System
dynamics is founded by John D.Forrester in 1968 at Massachusset institute of technology. SD with
two functions of explanation and conditional prediction through causal loop along with stock &
flow diagrams can greatly help in recognizing dynamic processes in complex world. Recognizing
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nonlinear relationships of endogenous variables is the biggest claim of this approach that resulted
in intersubjectivity activities.8
One of the important areas which SD can help strategists is depicting the dynamic processes,
which lead to strategic, schools change in organizations. In this article, using system dynamics
methodology, we want to model organizational strategic life cycle in organizations across
changing endogenous variables. Therefore, we first review the literature of organizational life
cycle and strategic schools and then propose our organizational strategic life cycle model.
2. The organizational life cycle (OLC) concept
The status of the organizational life cycle (OLC) concept has grown among researchers studying
different management sides. Revising a diversity of management aspects at different life-cycle
stages also provides a dominant change management tool based on changes in management
practices and the internal logic of organizational development. (Shirokova, 2009)
The life-cycle concept has been rising in two guidelines creating normative models and
developing empiric ones. Currently, the most popular normative models are those proposed by L.
Greiner (Greiner 1972) and I.Adizes (Adizes 1999). Each life-cycle stage is supposed to consist of
a distinctive pattern of variables linked to the organizations inside environmental characteristics
(Flynn 2001; Lester et al. 2003). If an organization grows during a cycle of stages, a variety of life
cycle periods can be established to express certain behaviors and sets of characteristics aligned
with the organizational context and structure. (Mulford 2004; Hoy 2006)
Organization and management study uses the life-cycle concept to make clear changes finally
occurring within organizations. The majority of these changes caused by company growth and
management performance are becoming more complicated. For several years, management
theorists have been dedicating time and energy to clarify the organizational life process. (Chandler
1962; Greiner 1972; Torbert 1974; Galbraith 1982; Churchil/Lewis 1983; Quinn/Cameron 1983;
Miller/Friesen 1984; Smith et al. 1985; Scott/Bruce 1987; Kazanijan 1988; Hanks 1990;
Dodge/Robbins 1992; Hanks et al. 1993; Adizes 1999; Flynn 2001; Lester et al. 2003; Mulford
2004; Hoy 2006).
Though researchers seriously disagree in their attitudes on the number of stages and characteristics
to explain them, a number of authors present generalized models, which assist in explaining and
making relative study of diverse approaches.
When integrating many models of the organizational life cycle, there are commonly four certain
outlines of organizational life cycle stages: conception and development (courtship),
commercialization, growth, and stability (Kazanjian, 1988: Kazanjian and Drazin, 1990).
2.1.Conception and development (courtship) Stage
A novel firm is described as youthful, small sized, and dominated by the founder. Entrepreneurs
require rotating their dreams into actuality by rising business ideas, building prototype products or
services, and selling their thoughts and ideas to financial supporters (Kazanjian and Drazin, 1990).
The firm faces high ambiguity, both internally and externally. The main hub of the conception and
8
With these descriptions, system dynamics and strategy could be seen as synergetic pair. SD models offer an effective
tools for supporting business strategy and an opportunity for considering all stakeholders of organization as customers,
competitors, etc. Furthermore, it lends holistic and causal-nonlinear thinking in understanding dynamic processes
which make performance differentiation with means for communication and consensus building within a management
team. In return, strategy with its rich multidisciplinary essence brings an accumulated wealth of concepts, evidence,
methods and perspectives on which SD scholars can use (Gary and et al,2008 & lyneis,1999).
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development (courtship) stage is the foundation of the idea for a new business. Small
organizations have a flat structure and an organic, free flowing management style that encourages
entrepreneurship and innovation. (Daft, 2007)
A critical difficulty in the conception and development (courtship) stage is securing financial
resources. Moreover, the main stress in the conception and development (courtship) stage is on
short-term survival, since short-term growth will bring further investment from incumbent and
venture capitalists (Milliman, Von Glinow, & Nathan, 1991). It was determined that a start-up
alliance with a prominent partner brings a quicker preliminary public offering than does an alliance
with a less prominent partner. Prominent incumbents make higher the reputation and legitimacy of
a start-up firm. Since an entrepreneurial firm is unknown to the corporate community, it may be
evaluated by other companies based on the social standings of the business associations it has
made (Stuart et al., 1999).
At the conception and development (courtship) stage, firms focus on R&D actions to get
innovative opportunities. In order to establish significant revenue flows, they call for strong
development technology at the beginning. Discovering alliances involve finding out new ideas,
innovating, and keeping on fundamental research while creation new capabilities and investments
in the firms absorptive capacity (Koza & Lewin, 1998).
2.2.Commercialization Stage
In the commercialization stage, the firm focuses on emphasizing sales, and achieving consumer
reception in the market. As firms mature, entrepreneurs spend further time formalizing managerial
processes and routines (Walsh & Dewar, 1987). For example, firms often require formalizing their
manufacturing processes during commercialization. In this stage, functional organizational
structures are created and more authority is delegated. Yet after gaining financial support from
established institutions-venture capital firms, investment banks, and so on- firms products or
services require to gain customer reception. (Van Batenburg, 2003)
Firms at the commercialization stage have not built up their marketing and distribution channels.
For instance, although firms in the biotechnology industry will possibly have a model product,
they require attaining convinced complementary capabilities such as manufacturing, distribution,
and marketing skills. Several growing biotech firms try to find partners that can supply
downstream activities to the value chain (Rothaermel, 2001). Firms at the commercialization stage
must then cautiously assess their functional strengths and weaknesses to find out reasonable
resource growth objectives. For example, shaping alliances with recognized firms can let growing
firms contribute to stable distribution channels and customer bases. Consequently, the majority of
the alliances at the commercialization stage are in the divisions of manufacturing, marketing, and
explaining primary engineering troubles. (Shirokova, 2009)
2.3.Growth Stage
As a firm goes into the growth stage, its size and dimension becomes bigger. In addition,
efficiency and productivity get better due to the accumulation of knowledge and skills. Therefore,
the formal structure of the organization is established. At the same time, when the organization
accomplishes stable growth, the main troubles at this stage consist of manufacturing in volume,
manufacturing efficiently and with high quality and establishing market share. (Van Batenburg,
2003)
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When a firm goes into the growth stage, the main internal focus is about problems of how to
produce, sell and distribute the products in volume even as achieving profitability. Increasing
changes involve utilizing accessible manufacturing techniques, using the same distribution
channels, and marketing similar groups of customers (Shulman, Stalkamp, 2003).As experiential
learning characterizes, formerly a firm has allocated itself to a definite technology area to
accomplish economies of scale. The relevance of each partners fundamental knowledge will be
positively linked with efficiency building. Here, fundamental knowledge refers to a general
understanding of the technology upon which a company is based. Therefore, firms at the growth
stage initiate to discover alliance partners with productive equipment, market knowledge, and
product development that involve particular assets (Lane & Lubatkin, 1998).
2.4.Stability Stage
The organization goes into the stability stage when growth rate slows. Its managers should make a
decision whether to spread out or keep the firm stable by sustaining or demanding the
improvement of the current level of growth. The majority of firms plan the beginning of a secondgeneration product in order to enhance growth rate (Kazanjian and Drazin, 1990). However, at this
stage, an organizations inflexible structures and resistance to change make it hard to change.
As the growth rate of stable firms slows, they initiate to investigate innovative areas, which need
new knowledge and skills. Therefore, stable firms look for alliance partners from which they know
how to learn latest skills and access new resources. In an effort to attain long-term survivability, an
incumbent might attempt to expand its enterprise into distinct areas. (Fletcher, Taplin, 2000). If
stable firms anticipate being unsuccessful because of the innovative destruction process, they
exploit their financial and managerial resources to adjust to technological changes that threatens
their dominance. Therefore, firms at the stability stage attempt to achieve new technology
throughout forming new strategic alliance with partners of different strategic scope that is able to
contribute to developing the essential new technologies. (Shulman, Stalkamp, 2003). Generally,
nearly all mature firms are in need of complementary resources that can achieve the partners
technological convergence.
3. The 10 schools of strategic planning
Some of the mainly interesting questions in business management centre on issues of strategy.
Should a company expand or stick to its knitting? Should it try to achieve market share, or center
on return on capital? Is there a right time to adopt a specific strategy? Why do some strategies
succeed while others fail?
Considering the scope of the subject, it is no wonder that strategic management has spawned a vast
literature. The problem, however, is that management strategists tend to see strategy in the same
way the six blind men saw the elephant-one looked at the tusk and thought the elephant was like a
spear, another grabbed the trunk and thought it was like a snake, another touched the ear and
thought the animal was like a fan, and so on.
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3.1.The Design School

The new view sees strategy formation as attaining the vital fit between internal strengths and
weaknesses and external threats and opportunities (Learned et al, 1965). Senior management
formulates obvious and simple strategies in a deliberate process of conscious thought - which is
neither formally analytical nor informally intuitive - and communicates them to the staff so that
everybody can put into practice the strategies. This was the dominant sight of the strategy process
at least into the 1970s given its implied influence on most teaching and practice. (Mintzberg,
Ahlstrand and Lampel, 2008)
3.2.The Planning School
This school started in parallel with the design school. However, the planning school predominated
by the mid-1970and while it faltered in the 1980's it continues to be a significant influence
nowadays. The planning school mirrors the majority of the design school's hypotheses except a
rather significant one: that the process was not just intellectual but formal, decomposable into
separate steps, described by checklists, and supported by techniques (mainly with regard to
objectives, budgets, programs, and operating plans) ( Malmlow, 1972). This intended that staff
planners changed senior managers, as the key players in the process. Now, numerous companies
obtain slight value from their annual strategic-planning process. To meet the new challenges, this
process should be redesigned to support real-time strategy making and to support 'creative
accidents'. (Mintzberg, Ahlstrand and Lampel, 2008)
3.3. The Positioning School
This prescriptive school was the main view of strategy formulation in the 1980's. It was given
impetus particularly by Harvard professor Michael Porter in 1980, subsequent previous work on
strategic positioning in academe and in consulting, all preceded by a extensive literature on
military strategy, dating back to 500 BC and that of Sun Tzu, author of The Art of War. In this
view, strategy reduces to common positions selected throughout formalized study of industry
conditions (Porter, 1980). Thus, planners became analysts. This demonstrated particularly
productive to consultants and academics alike, who could sink their teeth into hard data and so
promote their "scientific truths" to companies and journals alike (Porter, 1985). This literature
developed in all guidelines to contain strategic groups, value chains, game theories, and other ideas
- but forever with this analytical bent. (Mintzberg, Ahlstrand and Lampel, 2008)
3.4. The Entrepreneurial School
Much similar to the design school, the entrepreneurial school centered the process on the chief
executive, but unlike the design school, and in difference to the planning school, it embedded that
process in the mysteries of intuition (Pelling, 2004). That shifted the strategies from precise
designs, plans, or positions to unclear visions, or perspectives, usually to be seen through
metaphor. The idea was applied to particular contexts start-ups, niche players, confidentially
owned companies and "turnaround" conditions, even if the case was surely put forward that each
organization requests the discernment of a visionary leader. (Mintzberg, Ahlstrand and Lampel,
2008)
3.5. The Cognitive School
On the academic border, there was concentration in the foundation of strategies. If strategies
developed in people's mind as frames, models, or maps, what could be understood about those
mental processes? Mostly in the 1980's, and continuing at present, investigation has developed
progressively on cognitive biases in strategy making and on cognition as information processing
(Laurendeau, 1990). Meanwhile, another, newer branch of this school adopted a more subjective
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interpretative or constructivist view of the strategy process: that cognition is used to construct
strategies as creative interpretations, rather than merely to map truth in some more or less objective
way. (Mintzberg, Ahlstrand and Lampel, 2008)
3.6. The Learning School
Of all the described schools, the learning school became an absolute wave and challenged the
universal prescriptive schools. Dating back to early work on "incrementalism", as well as
conceptions like "venturing", "emerging strategy" (or the growing out of individual decisions
rather than being immaculately conceived) and "retrospective sense making", (that we act in order
to think as much as we think in order to act) a model of strategy making known as learning school
was developed that different from the earlier schools (Mintzberg, 1989). In this view, strategies are
emergent, strategists can be found throughout the organization, and so-called formulation and
implementation intertwine. (Mintzberg, Ahlstrand and Lampel, 2008)
3.7.The Power School
This relatively small, but different school has focused on strategy making rooted in power, in two
senses (Pelling, 2004). Micro power sees the development of strategies inside the organization as
political, a process involving bargaining, persuasion, and conflict among inside actors. Macro
power takes the organization as an entity that uses its power over others and among its partners in
alliances, joint ventures, and other network relationships to negotiate "collective" strategies in its
interests. (Mintzberg, Ahlstrand and Lampel, 2008)
3.8. The Cultural School
As contradictory to the power school that focuses on self-interest and fragmentation, the cultural
school focuses on general interest and integration. Strategy formation is viewed as a social process
rooted in culture (Eagleton, 1991). The theory focuses on the power of culture in disappointing
important strategic change (Kogut, Zander, 1996). Culture became a big subject in the United
States and Europe after the shock of Japanese management (see Kaizen and Competitive
Advantage: US versus Japan) was completely realized in the 1980's and it became obvious that
strategic benefit can be the product of exclusive and difficult-to-imitate cultural factors.
(Mintzberg, Ahlstrand and Lampel, 2008)
3.9. The Environmental School
It maybe not be a rigorously strategic management but if one takes that expression as concerned
with how organizations apply their degrees of autonomy to make strategy, the environmental
school nonetheless, deserves attention due to the light it throws on the demands of the environment
(Haberburg, 2000) (Hannan, Freeman, 1977). Among its most perceptible theories is the
"contingency theory", that considers what reactions are expected of organizations that face
particular environmental situations, and "population ecology", writings that claim severe limits to
strategic choice. (Mintzberg, Ahlstrand and Lampel, 2008)
3.10.The Configuration School
This school enjoys the most extensive and integrative literature and practice at present. One side of
this school, more academic and descriptive, sees organization as configuration-coherent clusters of
characteristics and behaviors - and so serves as one way to combine the claims of the other
schools: every configuration, has effect in its own place, for example in planning, in machine-type
organizations under conditions of relative stability, entrepreneurship under more dynamic
configurations of start-up and turnaround (Fort, 1932). However, if organizations can be described
by such states, then change must be described as rather dramatic transformation - the leap from one
state to another. Therefore, a literature and practice of transformation - more prescriptive and
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practitioner oriented (and consultant promoted) developed as the other side of the coin. These
two very different literatures and practices nevertheless complement one another and so belong to
the same school. (Mintzberg, Ahlstrand and Lampel, 2008)
4.New Business Systems Approach to Strategy Formulation
Returning to the blind men and the elephant metaphor, "scholars and consultants should
undoubtedly persist to probe the significant aspects of each school", say Mintzberg, Ahlstrand and
Lampel. "But more importantly, we must shift further than the restriction of each school. In
addition to probing its parts, we must pay more attention to the integral beast of strategy
formulation. We shall never find it, never really see the whole. But we can surely see it better."
Think of growing your business as growing a perfect human being, Clearly, narrow strategies
aimed at perfecting different functions of this person would not create a perfect man. The same is
also correct for the business strategy development in the new era of systemic innovation where
good in parts is no good at all. The old linear and static approaches might work well for the old era
of slow, linear and incremental change. The emerging era of rapid, systemic and radical change
requires more flexible, systemic and dynamic approaches to strategy formulation.
Certain positive moves have been seen recently. Some of the more recent approaches to strategy
formulation take a wider perspective and cut across the above ten schools in eclectic and
interesting ways, for example Learning and Design in the "Dynamic Capabilities" approach, or the
"Dynamic Strategy" one based on knowledge working.
4.1. Organizational strategic life cycle model
Aging chains is one of the SD's structures that are widely used to capture the demographic
structure of a population. Using this, we model the Organizational strategic life cycle, which start
from courtship phase in Adizes organizational life cycle. Causal relationships derived from
characteristics of this phase can lead organizations to two fates. The First is moving to select
entrepreneurship strategy or death. This trend will repeat for organizations with entrepreneurship,
power and planning strategy (as you see briefly in figure 1). The final stage, decline, can lead to
several points. Some firms after the stability stage anticipate being unsuccessful, so they exploit
their resources to innovations. If they were successful to form new strategic alliance with partners,
we can hope they will not direct to decline. At the other hand, some firms unsuccessfully appoint
death. Other firms may follow other strategies to rescue from death .
Figure1: Organizational strategic life cycle using aging structure
courtship rate
organizations in
courtship phase
decline rate
entrepreneurship
rate
organizations with
entreprenurship strategy
growth rate
decline rate2
organizations with
power strategy
planning rate
decline rate3
organizations with
planning strategy
decline rate4
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However, the decline stage is a multi-strategy phase that intensely depends on firm situations.
Therefore, we leave studying this stage to other researchers, because it needs separable studies to
clarify its dimensions. This model with its details (that come later) could be used for explanation
and even conditional predictions in special industrial or business clusters. In the following section,
we will explain model completely.
1. Building blocks of organizations is based on courtship phase. This phase belongs to the
founders aspirations and dedicated to decide upon participating in a close contest with relentless
competitors (See figure 1).
R1 LOOP: As soon as aggregating organizations in this phase, the founders, authority rise,
because they are the only ones who play in the ring. This space will improve their creativity and
so, their capacity in solving problems, which organizations face every moment. This potential will
lead to enhancing organizational performance that brings revenue for organizations. With growing
revenue, organizations will eager more to select entrepreneurship schools as their strategy.
R2 LOOP: After increasing founders authority in organizations, another scenario may happen.
Authority brings commitment and this will provide willingness for keeping on the way, they
started. Survival sense, and even development, makes founders as risk takers who are thirsty of
investment. This leads to more production (It is necessary to mention that organizations in this
phase produce just single product). The more production, the more sales and revenue will increase.
This loop again makes founders enthusiastic to choose entrepreneurship schools as their strategy.
R3 LOOP: As we mentioned, investment of organizations through producing more products
brings more sales that increase revenue for organizations.
B4 section: One of dangerous threats in the courtship phase is exclusive focus on making money.
These results from sweetness brought to founders by the coming of the first bills to the
organizations. Exclusive focus on making money restricts paying attention to quality that decreases
customer satisfaction. Customer satisfaction relative to production identifies inventory of
organization. By increasing inventory, it's cost rises and by subtracting this from sales, revenue of
organization will be defined. If revenue decreases dramatically, it can be the death of organizations
and its discontinuation in the way of development. Rate of exiting organizations from development
road is defined as decline rate in figure2.
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Figure 2: Transiting organizations from courtship phase

+
willingness for
contiueing
+ risk taking
R2
organizational
performances
+
founders
commitment
+
investment
founder capability in
solving problems
+
+
revenue
-+
R3
R1
creativity of
management
+
sales
founders
authority
+
production of single
product
+
inventory cost
+
+
courtship rate
organzations in
courtship phase
entrepreneurship rate
+
-
inventory
B4
decline rate
+
Exclusive focus on
making money
customer
satisfaction
-
pay attention to
quality
2. After exiting from courtship phase, organizations usually select entrepreneurship school as their
strategy. The aim of this school is the survival and solving primary problems of employees. In
figure 3, we show the dynamic processes which will happen after selecting entrepreneurship
school.
R1 LOOP: The more organizations with entrepreneurship strategy, the more willingness for
marketing. This will lead to developing the scope of actions that put more pressures on founders.
In this situation, founders will subtract their pressure by delegating some tasks to their
subordinates. Delegation would bring formalization for organizations because founders are
frightened from decreasing the quality of decision-making. This will force founders to use formal
controls, which drive organizations to the next level, organizations with power strategy.
R2 LOOP: by increasing delegations in organizations, employee authority will raise which flow
innovation in the veins of departments. Innovation provides capabilities for employees in solving
problems, which increases organizational performance. Revenue will be the souvenir of high
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performance that induces founder's investment on producing more multi-product. This production
brings more sales, which increase transformation rate from entrepreneurship strategy to power
strategy.
B3 LOOP: Increasing willingness for marketing may have another effect. This may causes
founders not to take enough care about the aim and the process of action (this can result from
developing the scope of action directly). employees' knowledge Decrease about the philosophy of
process leads to their frustration that worsens product fitness. This will raise cost of production,
which may decline revenue dramatically and therefore will exclude organizations from their
developing road.
Figure 3: Transitting organizations from entrepreneurship strategy
+
formalization
organizations capability
in solving problems
+
R1
+
organizatonal
performance
employees
innovation
+
delegation
investment
+
+ employees
authority
+
R2
knowing the aim and

process of action
product fitness
willingness for
marketing +
+
formal control
sales
frustration of
employee
organizations in courtship phase
revenue
+-
founders blind
arrogance
+
developing the
scope of action
+
+
production of multi
product
founder pressure
cost
B3
entrepreneurship
rate
organizations with
entrepreneurship strategy
growth rate
+
organizations with power strategy
decline rate1
-
<revenue>
3. Increasing growth rate drives organizations to select power strategy. The main goal of this
strategic school is growth, which will be earned from the dynamic interactions occur after selecting
this school. (See figure 4)
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R1 LOOP: As soon as, organizations select power school as strategy, their focus on efficiency
increases. This concentration on efficiency leads to intense control, which brings formalization and
bureaucracy to organizations. By increasing bureaucracy in organizations, managers think about
prevalence of flexibility. This may occur with social control & self-discipline. By this idea,
extending control between units stops and innovation rises. The more innovation, the more
development projects start that create production of more new products and therefore, cover more
clients. Growing clients will bring more sales and this increases planning rate, which transforms
organizations strategy from power to planning school.
R2 LOOP: Growing clients have another effect. With increasing sales and revenue in these
organizations, R&D budget grows and this leads to more development projects and this loop will
continue as you see in figure 3.
R3 LOOP: Selecting power strategy induces willingness of organizations for acquiring popularity
that complies with production of more new products and other effects happen, as we mentioned
before.
B4 LOOP: Increasing bureaucracy in organizations decreases flexibility that exacerbates
managers capability in solving problems. This will worsen organization's performance and decline
revenue and therefore, sales decrease too. Decreasing sales will trigger organizational disposal
rate, which impedes organizations from moving forward.
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Figure 4: Transiting from power strategy

+
social control & self

discipline
extending
control
between units
organizations willingness
to increase flexibility
+
production of more
+
new products
innovation between
units
bureacracy
+
R1
willingness for
acuiring popularity
+
+
+
clients
R2
formalization
+
more development
projects
+
+
R3
R&D budget
sales
intense control
+
flexibility
+
focus on
efficiecy +
revenue
+
organizations with
power strategy 0
growth rate
+
planning rate
decline rate2-
B4
organizations
+ performance
+
organizations capability
in solving problems
5. Conclusion
The aim of this article was explaining the relationship between OLC and type of strategy. By using
system dynamics methodology, we discovered the following results. By considering the courtship
stage as foundation of analysis, we achieve to three stages of organizational strategy life cycle,
namely: commercialization, growth, stability.
In the stage of commercialization, the entrepreneurship school is the mainstream strategy of
organization. After the entrance of main factors in SD models, we found that this claim is true.
Therefore, we can conclude that managers should follow the principle of entrepreneurship.
The result of this research shows that in the stages of growth, the suitable school for strategy
managing in the organizations is power school, following the causal effects of main factors. In this
stage, managers are directed to the principles of power strategy.
Finally, in the stage of stability, managers should pay attention to the principles of planning
strategy. This claim is supported by using system dynamics modeling which showed in the
stability stage, planning is a good method for achieving organizational performance.
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Development of Islamic Banking in Pakistan

Hassan Mobeen Alam
Muhammad Arslan, Muhammad Saleem, Hassan Raziq & Abdul Aleem
M.Com Scholars (Session 2009-11)
Hailey College of Commerce
University of the Punjab, Lahore - Pakistan
Abstarct
The purpose of this study is to analyses the development of Islamic banking and the role of the
central bank in the development of Islamic banking in Pakistan. The study will help the higher
management to make policies which in turn will help the Islamic banking to grow and develop in
low income developing country like Pakistan. Islamic banking is growing and developing
worldwide especially in Islamic countries. The development of Islamic banking in Pakistan is
admirable. Central bank of Pakistan is playing an important role in the development of Islamic
banking. The goal of central bank of Pakistan is to make Islamic banking as the first priority in the
banking system. Islamic banking is a parallel banking system against conventional banking. There
is generally an increasing trend in the total assets, total deposits, total financing, total investments,
total number of branches, profits, earnings per shares, share holder equity and other financial
indicators which shows the financial growth and development of the Islamic financial institutions.
Islamic banking is developing and growing due to the increasing population and prosperity of the
Muslims. Islamic banking is providing a wide variety of the products which are competitive to the
conventional banking system. Islamic banking is widely accepted by the Muslims as they feel a
need of Islamic economic system. Secondary data obtained from the research articles and from the
official websites of the various departments in order to support our opinion. In this article, we have
discussed the world wide history of Islamic banking and international scope of Islamic banking as
well as focused on history of Islamic banking in Pakistan and the role of central bank of Pakistan
in development of Islamic banking.
Key words: Islamic banking, State Bank of Pakistan, Pakistan, Riba.
1. Introduction
According to Islamic point of view, interest based financing is illegitimate (Anwar, 2003). In
Quran, Allah gradually Prohibited riba in four revelations. In Makkah, first revelation is in Chapter
al-Rum (39). In Madina, second revelation is in Al-Nisa` (160-161). In Chapter Al `Imran: O you
who believe! Do not devour riba multiplying it over, and keep your duty to Allah that you may
prosper (3:130). In Madina, the last revelation for the prohibition of riba in Chapter al-Baqarah
(275-281). The Holy Prophet Muhammad (S.A.W.W) said in his speech regarding interest: Allah
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has forbidden you to take interest; therefore all interest obligations shall henceforth be forego.
Your capital is yours to keep. You will neither inflict nor suffer any inequity. Allah has judged that
there shall be no interest (Ahmad & Hassan). Shariah regulates the Islamic banking and economic
system, which firmly prohibits interest (riba) charges on loans (Roy, 1991). Under the Islamic laws
Islamic banks are restricted to give and take interest (Aggarwal & Yousef, 2000). Shariah manage
the Islamic banking, source of shariah is Quran and the Sunnah, according to the Islamic rules
interest base transactions are not allowed and it is the major characteristic of the Islamic banking.
The primary sources of Shariah rules are the Quran, Sunnah, jurists and explainer of Islamic law
(Blominvest bank, 2009). Islamic banking system is a banking system which is established on
the basis of the philosophy of Islamic laws (called shariah) and directed by Islamic economics.
Two fundamental Islamic rules of Islamic banking are the profit and loss sharing, notably, the
restriction of the receiving and payment of interest.
Historical Prospective of Islamic Banking
When we view in historical background, the principles of Islamic banking seem to be proved
practical. Back to 7th century AD, Arabian Peninsula constituted of dispersed groups of states
trading over far distances in the unfriendly environment. The economic restriction was low
liquidity and scarcity, as a result of that usury and hoarding cultivated. High interest rates have
exploited the poor peoples, that could either lower down the trade volume or could raise the
suppliers cost. Islamic principles controlled economic inconsistency, helped trade to grow and
liberalized the trade volume by lowering financial burdens. Giving pensions to the deserving
peoples was the first step taken by the Bait al Mal and act as a State Bank' of the Muslim
community (Roy, 1991). The actual Islamic financial institutions were initially established in
Pakistan at the end of 1950 and starting local banks in village areas. The Islamic Banks secondly
were established in the Mit Ghamr, a city of Egypt in the Nile delta from continuously 1963 to
1967(Zainol, Shaari & Ali, 2008). Islamic Banking system was started when Mit Ghambr bank
established in Egypt in 1963 and this bank had to close due to the threat by its administration in
1971 (Memon, 2007).
In the late 1950s, countryside of Pakistan was a region where the first modern Islamic banking
scheme had started. Deposits were made without taking interest by a few persons; the facility of
credit was given to poor who had land for agriculture purpose. A minimum fee of administration
was charged by them in order to cover costs for banking operations. There were many borrowers,
but depositors gave their payments to the organization as a one-time commitment. As a result of
that, this project had come out with shortage of funds. In 1963, a similar experiment was started as
a Bank saving scheme by Mit-Ghamr, in the Nile delta (Roy, 1991). Ahmen El Najjar opened up
his efforts to establish profit and loss sharing based saving banks in Mit Ghamr, a town of Egypt
during 1963 (Ariff, 1988). Starting of modern Islamic banking dates back to 1963 with the
foundation of Mit ghamr saving association, started in Egypt, supported by Tabung Haji in
Malaysia in the time of early sixties(Blominvest bank, 2009).
A meeting was held in the early era of 1970s in which foreign ministers of Islamic states
participated to talk about interest free Islamic banking. In 1972, a meeting of Islamic countries
foreign ministers was arranged again in which they formed a committee to established agreement
for Islamic banking and upcoming years of 1973-1974, this committee authorized the articles of
inter-governmental financial agency and formed the Islamic Development Bank abbreviated as
IDB. Dubai Islamic bank revolutionized the Islamic banking when it was formed in 1975. In Cairo,
during 1977, Faisal Islamic banks were established (Roy, 1991). Many Islamic Banks were
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established in Middle East such as in 1975, Dubai Islamic Bank, in 1977, the Faisal Islamic Bank
of Egypt and the Faisal Islamic Bank of Sudan and in 1979 the Bahrain Islamic Bank (Ariff, 1988)
In August 1983, Iran established a complete Islamic banking system and made the banking system
interest free. Comprehensive laws regarding Islamic finance were passed in Malaysia in 1983
(Blominvest bank, 2009). Bank Islam Malaysia Berhad, was the first Malaysian Islamic bank
formed in 1983 under the Banking Act 1983 (Bank Negara, 2008). Sudan introduced the Islamic
banking system in 1984. In 1991 a body named Accounting and Auditing Organization for Islamic
Financial Institution (AAOIFI) was introduced to make the banking system completely Islamic
(Blominvest bank, 2009).
International Scope of Islamic Banking
Islamic finance industry has made prominent improvements at global level in the last thirty years.
Especially, during the last ten years the Islamic Financial Sector (IFS) has made a healthy growth
(between 15 to 20 percent per annum); (Islamic banking sector review 2003 to 2007). Current
figures recommend that Islamic banking assets are increased by 29 percent (The Economist,
2009b). Over the last twenty years and onward, a complete Islamic banking system has developed
and is still increasing at a remarkable rate of 15 percent to 20 percent. It shows that the rate of
growth is doubling after each five years. This can be proved by the fact that in 75 countries, there
are 475 Islamic financial institutions. (World Takaful Report 2010 - Ernest & Young). In 2009
total assets of Islamic banking were $822 billion and it is expected that the volume of these assets
reach to $1.00 trillion by the end of 2010 (Ernest & Young, 2010).
Now a days, more than 390 Islamic banks and institutions are working in 75 countries, which are
estimated to grow at 10%-15% during 2009. Across the global banking industry, Islamic banking
has one of the fastest-growing zones. While the claims about the size of the industry differ, the
IMF puts the total assets of Islamic banking at USD 250 bin, expected to reach USD 1 trillion by
2016 (Blominvest bank, 2009). Islamic Finance (IF) is growing significantly all over the world.
Internationally all the Islamic Financial Institutions (IFIs) are likely to be now a one trillion dollars
industry (Islamic Banking sector review 2003 to 2007).
The modern banking system has got
the attention of all the people in the world in the 1970s. An estimation shows that almost US$ 700
billion amounting assets have achieved with annual growth exceeding 10.0 percent during the last
ten years (S&P, 2009) - and estimations are that it will grow up to US$ 1.6 trillion by 2012.
Islamic Banks has getting the 75 percent growth regarding shares (Wyman, 2009).
There are considerably diverge results regarding the various estimates of Islamic banking
industrys size as it is today. Recent McKinsey study which is titled as; The World Banking
Competitiveness Report 2007/08: Islamic banking has got the Trillion Dollar Opportunity, the
value of assets in Islamic banking and assets under administration is anticipated to reach USD 1
trillion by 2010. Whereas, the Euro money Finance Review for 2007/08 has stated that the
financial size of markets are ranked between USD 700 to 750 billion, and with an annual growth
rate of 15%. According to Financial Insights, finance has been growing at 20-30% per year over
the last ten years, while Ernst & Young is expecting that financial assets will get a USD 2 trillion
in 2010. This positive growth has been catalyzed by rolling demand for products of Shariahcompliant, not only from financiers in the Middle East and other Muslim countries, but also by
different investors worldwide. Apart from its vast geological stretch, Islamic banking is making
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frequently expansion across the complete range of financial activities including insurance and
capital market investments and retail banking (Blominvest bank, 2009).
With respect to the to the Institute of Islamic Banking and Insurance, presently there are more than
300 Islamic financial
Institutions are working in the following countries of the world:
Albania
Algeria
Australia
British
Virgin
Islands
Brunei
Canada
Egypt
Indonesia
Kazakhstan
Morocco
Pakistan
Senegal
Trinida
France
Gambia
Iran
Iraq
Kuwait
Lebanon
Netherlands
Niger
Palestine
Qatar
Sri Lanka
Switzerland
Tobago
United
Arab
Emirat
es
United
Kingdo
m
United
States
Yemen
Bahamas
Islands
Cayman
Germany
Italy
Luxembourg
Nigeria
Russia
Sudan
Bahrain
Cyprus
Guinea
Malaysia
Oman
Djibouti
India
Mauritania
Philippines
Saudi
Arabia
South
Africa
Turkey
Bangladesh
Ivory
Coast
Jordan
Tunisia
(Memon, 2007)
2. History and Development of Islamic Banking in Pakistan

In Pakistan, the purpose of many laws and principles was to remove the riba. Quaid-e-Azam
revealed his interest for the formation of interest free banking in Pakistan, when he inaugurated the
central bank of Pakistan (State Bank of Pakistan). Before 1970, Islamic banking was almost
unknown, in early years of twenty first century Islamic banking has become a reality that cannot be
ignored and by the end of 2004 the size of Islamic banking industry reached to a billion. The total
value of shariah compliant accounts worldwide is almost USD 500 billion and is growing at an
average rate of 10-15 % (Zainol, Shaari & Ali, 2008).
Interest free economic system is very important for both economical and religious level. Efforts for
interest free banking were begun during 1970s and practical implementation was taken during
1980s. It is honorable that Pakistan was one of those countries which introduced Islamic banking
system at regional and national level.
(Roy, 1991). Pakistan has introduced banking system in 1980s when State Bank of Pakistan made
some changes in the rules and regulations of banking ordinance (Khattak & Rehman, 2010).
During 1970 efforts had started for eradication of interest but the most prominent steps were taken
in early 1980s. It was a very courageous and bold decision. At that time, Pakistan was considered
as third country in the world who was trying to put into practice interest free banking at national
level (Banking sector review 2003 to 2007).
After many years of study, Council of Islamic Ideology (CII) appointed by the government of
Pakistan began the process for the implementation of Islamic banking in February 1979 and made
three credit institutions Mutual Funds Investment Corporation of Pakistan, National Investment
Trust, and the House Building Corporation were asked to remove interest immediately. (Kennedy,
1990). In Pakistan, NIT (National investment trust) and ICP (Investment corporation of Pakistan),
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two Government-owned mutual funds, started to abolish interest from their financial operations by
avoiding investing their funds in interest holding securities. A new system was introduced on
substitution of old scheme by ICP in October 1, 1980, which is based on profit and loss sharing
deals. The implementation of Islamic banking in Pakistan was a gradual process which began in
February 1979.This implementation was a result of yearly study and preparation of Council of
Islamic Ideology (CII), which was a government-appointed council. When the President declared
that Interest should be removed within 3 years, then after that 3 credit institutions were compelled
to eradicate the interest from their operations. These three institutions were National Investment
Trust, House Building Corporation and Mutual Funds related to Investment Corporation. (CII,
1980)
The functions of ICP were to enhance the private sector equity base, make efforts for the
development of capital markets, and changing the assets and liabilities into profit and loss sharing
(PLS) modes in 1980. After that all of the financial institutions have changed their modes to PLS
modes. The CII did not proposed any changes in the framework of the banking system, which once
had given thorough instructions for the procedures. The major plan was that the central bank, the
commercial banks, and other specialized financial credit institutions would remain working intact;
but their financing operations will depend on an un-defined rate of return, rather than interestbased transactions. The prediction of that report was that the Islamization process will be
implemented in different phases that allows them a watchful move on the part of the persons who
make policies and bankers toward complete Islamization (Khan & Mirakhor, 1990)
Separate Interest-free accounts had been started in all the commercial banks of Pakistan, on
January 1, 1981, and a foreign bank (Bank of Oman) had also started to drum up deposits on profit
and Loss sharing account. Bankers were given instructions for financial help to Govt. products
operations, which was based on sale on deferred payment (Banking sector review 2003 to 2007).
Inland bills and financing of import and then Rice Export Corporation of Pakistan was initiated in
March, 1981, mark-up basis was imposed on Trading Corporation and Cotton Export Corporation
of Pakistan. At the same time, important changes were made in the concerned rules and laws
authorizing the State Bank to give finance on Participation Term Certificates. Moreover, advances
on promissory notes, prop up by Mudaraba Certificates and Participation Term Certificates were
enhanced from July 1, 1982, in order to meet the working capital requirements of industry and
trade on a careful basis. Under the practice of Musharaka, banks were allowed to provide finance
in a selective basis. In June 1984, the government made restrictions on dual window functions of
the banks, also stated that these functions should be terminated within 12 months. On July 1, 1985,
all the financial and banking system based on fixed interest were converted under the forms of
Islamic finance which do not involves interest factors, except deposits of foreign currency that
keep on going to earn interest (Khan & Mirakhor, 1990).
In Pakistan, Meezan bank was the premier Islamic bank that introduced certificates. By the end of
2007, there are six operational Islamic banks present in Pakistan. It includes the Meezan Bank of
Pakistan, Dawood Bank of Pakistan , Dubai Islamic Bank of Pakistan ,Albarka Bank of Pakistan
and the Global Emirate Bank of Pakistan. (Khattak & Rehman, 2010). In 2003, only one Islamic
bank and three conventional banks start their Islamic banking operations and opened up their
branches. Presently the Government has issued Islamic banking licenses to six Islamic banks and
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12 conventional banks and allowed them to run their Islamic banking branches (Banking sector
review 2003 to 2007). The full fledged 6 Islamic Banking and 13 conventianal banks started
Islamic Banking system with more than 200 branches in over all Pakistan (Memon, 2007). Six
full fledge Islamic banks and thirteen conventional banks partially practicing Islamic banking, are
operating in many cities of Pakistan (Ahmed, Rehman & Saif, 2010). Today, banking services are
provided by all five major banks of the Pakistan. Total Islamic banking assets as on June 2008
were 225 billions which obtained the 4.5% market share of the all banking sector assets. Islamic
Banking sector has captured the 4.2% of the total deposits of the banking sector of Pakistan.
Islamic Banking sector has a branch network of all most 330 branches with existence in more than
fifty cities and towns which covers all the provinces of the country including AJK (Banking sector
review 2003 to 2007).
It is also essential to make a comparison between the progress of Islamic banking sector in
Pakistan and the rest of world for the purpose of defining a way for the Islamic banking sector of
the Pakistan .In 1983, first Islamic bank of the Malaysia starts its operations and the share in the
market of the banking sector of the Malaysia presently stands at 13% approximately. Official
target set by the Malaysia by 2010 was to achieve 20% market share (Bank Negara Malaysias
website). Islamic Banking system of Bahrain has obtained 8 percent share over the 30 years.
Likewise Indonesian Islamic banking system was set up in mid of 90s last century (Bank
Indonesia, 2007).
Performance of the Pakistani Islamic banking sector is much better than the performance of the
rest of world Islamic banking sectors. The progress of the industry, from 2003 to 2007 , in terms of
increase in number of organizations, branches, total assets, total deposits, total financing and
investment along is admirable. From 2003 to 2007 the total assets of the Islamic banks increased
by 193 billions. Year by year growth in total assets of the Islamic banks are shown in the table
given below
(SBP, 2007)
Year
Total assets(billion)
Marginal
increase in
assets (billion)
2003
13
2004
44
31
2005
71
27
2006
119
48
2007
206
87
(SBP, Annual Accounts for Years Ending Dec. 2003 to 2007)
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Year by year Percentage of Islamic banking total assets in the total banking industry of the
Pakistan are given below in the table.
Growth in the deposits of the Islamic banking sector in Pakistan is remarkable from 2003 to 2007.
Total deposits of the Islamic banks increased by 139 billion during 2003 to 2007. Year by year
growth in the deposits of the Islamic banks are shown in the table presented below:
Year
% of IB assets in total banking sector assets
2003
0.5
2004
1.5
2005
2.0
2006
2.8
2007
4.0
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Year
Total deposits
(Billion)
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Marginal increase
in deposits
(Billions)
2003
08
2004
30
22
2005
50
20
2006
84
34
2007
147
63
Year after year Percentage of the total Islamic banking deposits in the total deposits of the banking sector of
the Pakistan is given below
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Year
% of total IB deposits in total banking sector deposit
2003
0.4
2004
1.3
2005
1.8
2006
2.6
2007
3.8
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Growth in the financing and investment of Islamic banking sector has increased from 10 billions to 138 billions during
the era of 2003 to 2007. Increase in financing and investment from 2003-2007 is given below in the table
Total financing and
Marginal increase in finance and
investment(billion)
investment(billion)
2003
10
2004
30
20
2005
48
18
2006
73
25
2007
138
65
Year
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Year after year Percentage of the total banking financing and investment in the total financing and investment of the
banking sector of the Pakistan is given below in the chart
Year
% of total IB financing and investment in total

banking sector financing and investment
2003
0.5
2004
1.3
2005
1.7
2006
2.3
2007
3.5
(SBP,Annual Accounts for Years Ending Dec. 2003 to 2007)
Branches of the banks are increased by 176 from 2003 to 2007. Table showing the year after year development in the
number of branches is provided below.
Marginal increase in
Year
Total branches
2003
10
2004
23
13
2005
37
14
2006
93
56
2007
186
93
branches
(Annual Accounts for Years Ending Dec. 2003 to 2007)
(Banking department, state bank of Pakistan)
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CREDIT RATINGS OF ISLAMIC BANKS
1
2
3
Bank Islamic Pakistan

Limited
Dawood Bank Limited
Dubai Bank (Pakistan)
Limited
June, 2010
A1
PACRA
June, 2010
BBB+
A-3
JCR-VIS
June, 2010
A-1
JCR-VIS
Emirates Global Bank
June, 2010
A-
A2
PACRA
Meezan Bank Limited
May, 2010
AA -
A-1
JCR-VIS
Rating Outlook - Negative
Placed on Rating Watch Rating

Outlook - Negative
(SBP) (Akbar, 2010)
Islamic Banking progress and shares in market in Pakistan

Description
Dec-06
Dec-07
Dec-08
Dec-09
Dec-10
Total Assets
118
206
276
366
424
2.9%
4%
4.9%
5.6%
6.4%
Growth (YOY )
65.3%
73.1%
34%
32.7%
31.2%
Deposits
83
147
202
283
338
2.8%
3.8%
4.8%
5.9%
6.7%
Growth (YOY )
68%
75%
37.4%
39.9%
38.2%
Financing. & Invest.
72
138
186
226
233
2.4%
3.5%
4.3%
4.5%
4.6%
Growth (YOY )
52%
89%
34.8%
21.3%
17.7%
Total no. of IB institution
16
18
18
19
19
No. of Branches*
150
289
515
651
684
%age of Islamic Banking

Industry in total banking industry


Source: Annual Accounts except for September 2010 Accounts

*number includes sub-branches
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Sources: (SBP bulletin 2006-10)
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3. Role of Central Bank in The Development of Islamic Banking in Pakistan

State bank of Pakistan is acting efficiently and effectively in the development of Islamic Banking
in Pakistan. To push up the banks in the development of the country, the Central bank of Pakistan
has opened up a full Separate department named Islamic Banking Department. The objective of
the Islamic Banking Department of the Central bank of Pakistan is to enable the Islamic banking
that users and suppliers prioritize as their 1st choice of banking. In order to develop Islamic
Banking industry, Shariah Compliance transparency is very important according to its best
international practices (State bank of Pakistan). To change the interest based financial system into
the interest free Islamic financial system, many efforts were made since 1979. Initially, State Bank
of Pakistan introduced 12 modes of Islamic financing to replace the financial system. In 1980, The
Council of Islamic Ideology advised to State Bank of Pakistan to change the discount rate in
money market by introducing profit and loss sharing system (Memon, 2007). State Bank of
Pakistan took first step in 1980 for the implementation of Islamic banking system changing the
rules and regulations in Banking Ordinance. Each and every commercial bank became interest
free after adopting profit and loss sharing system on 1st July 1985 (Khattak & Rehman, 2010).
State Bank of Pakistan started Islamic Banking system in year 2000 and registered Meezan Bank
in 2002 as full fledge Islamic bank. The entry of Islamic Banking in Pakistani banking market
brings a great competition with already exist conventional banks as there is a difference of
products, service and operations (Ahmed, Rehman & Saif, 2010). On 15th September, 2003,
Islamic Banking Department was formed with the objective of developing and promoting the
Shariah Compliant Banking as a well-suited banking system in the region. Islamic Banking is one
of the growing fields in worldwide financial market, having a wonderful potential and growing at a
very fast pace globally. By the grace of Allah, Islamic Banking in Pakistan has also been making
progress during the last Five years. At this time there are 6 licensed full fledged Islamic Banks and
12 conventional banks with Islamic Banking windows with the total network of 336 branches
operating in more than 50 cities of all over the country as on 17.07.2008 and few more players
have also send their application which are under consideration. The high priority area for State
Bank of Pakistan is the Islamic banking. Different steps are being taken for banking industry in
Pakistan in order to make them vigorous enough so that they can offer a workable alternative to
conventional banking (State bank of Pakistan). Islamic Banks are mostly required Interest-free
liquidity management. Five per cent Cash Reserve Requirement (CRR) and eight per cent
Statutory Liquidity Requirements (SLR) for both Islamic banks and conventional banks are the
requirement of the State Bank of Pakistan (SBP) (Memon, 2007). The Mission statement of State
Bank of Pakistan is to develop a sound Islamic banking system that is aligned and compatible with
the worldwide financial sector that should provide unique Shariah compliant products and services
to its clients in order to achieve equitable economic growth in Pakistan. (State bank of Pakistan).
4. Conclusions and Policy Implications
Islamic Banking sector is growing and developing all over the world especially in Muslim
countries. Base of the banking is the laws called Shariah. In Pakistan, Islamic banking is growing
at very fast rate as compared to the other countries of the world. The reason for this fast
development in Islamic banking sector in Pakistan is the active role of the central bank of the
Pakistan. State bank of Pakistan is supporting the Islamic banking to make it as the first choice of
the banking for this purpose state bank has established a separate Islamic Banking Department.
Because Islamic banks have captured a reasonable share of the market, therefore many commercial
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banks has also started their Islamic banking operations to get their share in the market.
Islamic Banking is very innovative because they introduced a wide range of products and modes of
financing. All major and big banks of Pakistan are providing Islamic banking services. Islamic
Banking is a parallel banking system against conventional banking.
There is generally an increasing trend in the total assets, total deposits, total financing, total
investments, total number of branches, profits, earnings per shares, share holder equity and other
financial indicators which shows the financial growth and development of the financial
institutions. Credit rating of the Islamic banks is normally satisfactory. Islamic banks are
performing their operations in Pakistan successfully. Acceptance of Islamic banking system in the
country shows that people are very satisfied with the practices of Islamic banking. Presently six
full fledge and 12 dual window banks are performing there operations in Pakistan. Oliver Wyman,(
April 2009 ),The Next Chapter in Finance - Higher Rewards but Higher Risks, by 2012 it is
expected that Islamic banking sector will successfully get a market share of 12 percent.
No doubt, many efforts were taken to explore the Islamic economic system to improve the banking
system. As Islamic banking is still a new concept and people know little about it so there is a need
to educate the people about what Islamic banking is. To develop Islamic banking system there is a
need of trained human resource whose specialization will be in Islamic economic system not in the
interest base economic system. To develop Islamic banking, it is mandatory to create harmony in
the opinion of different sects. Central bank should bring improvement in interest free banking
infrastructure. Banks should extend the interest free financial services towards low level income
community. The regulatory bodies of banking system should make rules and regulations regarding
the Islamic banking and make it sure that there is proper implementation of corporate governance
in interest free banking system. Introduction of dual capacity efforts interest free financing also
help the Islamic banking to grow. Promotion and improvement of interest free banking system in
Pakistan can only be done by creating a communication channels with developed economy as well
as local and abroad money and funds provider and investors. Introduction of liquidity and
monetary policies and management is now basic necessity for the promotion of Islamic banking
system. Interest free bank should also introduce new products and services to capture the
maximum portion of the banking sector.
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References
Abu Umar Faruq Ahmad & M. Kabir Hassan. Riba and Islamic Banking. Journal of Islamic
Economics, Banking and Finance.
Ashfaq Ahmad, Kashif-ur-Rehman & Muhammad Iqbal Saif . (2010). Islamic Banking Experience
of Pakistan: Comparison between Islamic and Conventional Banks. International Journal of
Business and Management, Vol. 5 (2).
Muhammad Anwar (2003), Islamicity of Banking and Modes of Banking, Arab Law Quarterly,
Vol. 18(1) , 62-80
Muhammad Ariff (1988), Islamic Banking, University of Malaya, Asian-Pacific
Economic Literature, Vol. 2(2), 46-62
Charles H-kennedy. (1990). Islamization and legal reforms in Pakistan. Pacific affairs, 36(1), 6277
Delwin A.Roy.(1991). Islamic Banking, Middle Eastren study, 27(3), 427-456
Mohsin S. Khan & Abbas Mirakhor. (1990). Islamic Banking Experiences in the Islamic Republic
of Iran and in Pakistan. Economic Development and Culture change.38 (2), 353-375
Naveed Azeem Khattak & Kashif-Ur-Rehman,(2010). Customer satisfaction and awareness of
Islamic banking system in Pakistan. African Journal of Business Management, Vol. 4(5), 662-671,
Noor Ahmed Memon. (2007). Islamic Banking: Present and Future Challenges. Journal of
Management and Social Sciences, Vol. 3(1), 01-10.
Oliver Wyman,( April 2009 ),the Next Chapter in Finance - Higher Rewards but Higher Risks,
Rajesh K. Aggarwal and Tarik Yousef, (Feb., 2000), Banks and Investment Financing: Journal of
Money, Credit and Banking, Vol. 32(1), 93-120
Muhammad Shaukat Malik, Ali Malik and Waqas Mustafa, (2011)Controversies that make
banking controversial: An analysis of issues and challenges. American journal of social and
management sciences, vol (1), 41-46
The Funds & Investments Report (2010), by Earnest & Young, available at
http://www.ey.com/Publication/vwLUAssets/_Financial_Investment_Report/$FILE/IFIR%202010
%20finalv3.pdf
World Takaful Report (2010), by Earnest & Young,
Available
athttp://www.ey.com/Publication/vwLUAssets/EY_WTR_2010/$FILE/EY_WTR_2010.pdf
Zairian Zainol, Rohaya Shaari and Hafizi Muhammad Ali (2008), A comparative analysis of
bankers perceptions on Islamic banking, International Journal of Business and management,
Vol.3(4), 157-168
Retrieved from http://www.sbp.org.pk
275
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Strategic plan for banking industry in Pakistan (State Bank of Pakistan)

(Council of Ideology, 1980).
Islamic banking bulletin, vol-4&10,(SBP),(2006-2010)
Retrieved from (www.investorpedia.com).
Pakistans Banking Sector Review 2003 to 2007(state bank of Pakistan)
Finance Outlook 2009, Standard & Poors, and February 2009.
Bank Negara Malaysias website
(Economic Research Department, blominvest bank, 2009).
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Entrepreneurial Skills Enhance the Achievement Level

of School Leaders
Asst. Professor. Farah Naz
MPhil Education Management (on final thesis of PhD)
University of Management & Technology,
Lahore, Pakistan
Farhat Munir
DHA School, Lahore, Pakistan
Abida Khalid
Asst. Professor , University of Education, Lahore, Pakistan
Ijaz Ahmed
PhD Scholar, University of Management & Technology,
Lahore, Pakistan
Abstract
Educational systems of almost every country of the world are facing the challenges of new
dimensions. To manage with such fast growing challenges it has to coordinate with the global
demands. Education being an industry has to work under the same patterns as any business
organizations do. It is widely agreed that the intention of Conservative education policies is that
the schools are to become business with a primary focus on profit and loss account (Ball, 1990,
p68). In business sector business entrepreneurs are going to be encouraged. So it is the high time
to realize the worth of educational entrepreneurs to make it successful as business and strengthen
the countrys economy. The objective of this article is to analyze the results of a survey carried out
among school leaders at different schools in Lahore. The aim of this study was to investigate
entrepreneurial skills in school leaders.The research involves analysis of data gathered from school
leaders serving in different schools at Lahore Pakistan.Education has become the back bone of
every countrys economy. So it has become very necessary to develop the educational on the same
patterns as any business organizations do. For this the role of school leaders should become
significant and functional. They should become forward to lead the educational systems as
business. They should be more focused to quality and profit to up lift the countrys economy. The
research has the implications for the school leaders and policy makers in term of identifying the
importance of entrepreneurial skills for school heads in order to refine and up lift the educational
system to strengthen the countrys economy. The research will be valuable in terms of training of
school heads. It will also provide the policy makers an insight about its importance in global
perspectives.
Key words School leader, Entrepreneurial education, Entrepreneurial skills
Introduction
Entrepreneur is not a new term in business organization. It was first used as a technical economic
term in 18th century by Richard Cantillon.
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According to Long (1983), the definition of entrepreneurship can be traced back more than 800
years ago to the French word entreprendre which means to do something Then in 1730,
Cantilion used the term describe a self employed person who has risk taking tolerance ,a
characteristic which is believed to be vital in providing for ones own wellbeing( Outcalt, 2000)
Entrepreneurship consists in doing things that are not generally done in ordinary course of
business routine (Schumpeter, 1951, pp. 255).
Entrepreneurship is a dynamic and social process where individuals, alone or in collaboration,
identify opportunities for innovation and act upon these by transforming ideas into practical and
targeted activities, whether in a social, cultural or economic context. This definition indicates the
objective of entrepreneurship in education that includes development both of personal qualities and
attitudes and of formal knowledge and skill
Entrepreneurship as a term will not be associated to education. However the term has a long
history connected to the content of education and qualification. Since the middle of 1700
entrepreneurship has been a research theme within the disciplines of economics and social
sciences. Today Entrepreneurship in education has a broad definition, which includes economic,
social and cultural factors.
Interest in entrepreneurship has been intense in many parts of the world. This prolonged and
heightened interest in entrepreneurship is promoted by several factors. First for the developed
economies, entrepreneur activity is a mean of revitalizing their economy and a way of coping with
unemployment problems. Moreover, it has been accepted as a potential catalyst and incubator for
technological progress, product and market innovation (Mueller and Thomas, 2000; Jack and
Andrson, 1999).
Change is the challenge for almost every country of the world. The more a country is equipped to
deal with this challenge the more it is considered successful and developed. Like all the
departments of life education is also facing the same challenge. Since education has become an
industry and it is contributing a lot in the economy of the country it has become very important for
it to meet the global demands effectively. Almost every country of the world is allocating its
maximum budget on education and the developed countries are on the top. Researches are
introducing different areas and new terms to deal with this change effectively.
The term entrepreneurship is not new in education. It has been frequently used in the economics of
education. As education has become one of the major sources of economic development for every
country of the world. So it has become very important to see the educational development in global
perspectives.
It widely agreed that the intention of Conservative education policies is that schools are to become
business, run and managed like businesses with a primary focus on the profit and loss account
( Ball, 1990, p.68)
It is not enough to have new ideas, they must lead to the successful production, assimilation and
exploitation of novelty in society through innovation ( European Union, 1996,pp.9) May authors
consider that entrepreneurship and innovation are closely linked ( Drucker 1985; Fulop,1991;
Kanter, 1989; Schumper, 1951).
Entrepreneurship is initiating and building an enterprise rather than watching one. It is the
knack of sensing the opportunities where others see chaos , contradiction and confusion. It is the
ability to build a founding team and control resources Finally it is the willingness to take
risks(Cromie 2000)
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Entrepreneur
Entrepreneur is defined as A person who is self motivated, always love challenges, can function
without guidance and usually can visualize what is needed to be done in as a heart beat.
In general, it is important to understand that entrepreneurs have a vision for a better way of doing
things, thinking beyond the constraints of current rules and resources. Perhaps more importantly,
they have the passion and sense of urgency that literally compels them to take the risks necessary
to realize that vision.
Entrepreneurship is most commonly thought of in term of business. However, entrepreneurship
may be related to all dimensions of life. In the broadest sense of the term entrepreneurship can be
the means to stimulate the creativity and innovation necessary to create a better community, a
better nation and a better world. To achieve this goal, government policies should focus on the
educational aspects of the vast human potential for entrepreneurship which exist in every society.
The country like Pakistan is one of the developing countries of the world facing a lot many
challenges of economy and employment. The most precious asset of a country is people who have
the potential to spark and do business to strengthen the economic growth. These are called the
entrepreneurs. So developing countries should focus on their people resources to support their
economy.
Abraham Maslow indicated that The most valuable 100 people to bring into a deteriorating
society would not be economists, or politicians, or engineers, but rather 100 entrepreneurs
In addition it has a more critical role for economies of developing countries since entrepreneurship
is seen as an engine of economic progress, job creation and social adjustment.
The fast growing world of change has made the role of entrepreneur very important and functional.
It also has increased the need of entrepreneurial education because this is the best way to improve
the economy of educational organization. Although many researches support that entrepreneurial
skills can be developed through education and training but there are theories which support that
personality and family role model is very important in this regard.( McClelland, 1971; Dunn and
Holtz Eakin,2000).
Education is the only tool through which we can deal with the challenge of the change. Now it has
become the current demand of education to provide a balance between the needs of the students in
light of changing global demands. Entrepreneurial competency is considered to be one of the major
factors in increasing prosperity in increasing prosperity in globalizing society. This has become
the major concern of the governments to foster entrepreneurial culture and skill in students.
Educators including universities have an obligation to meet students expectations with regard to
preparation for the economy in which they will operate (Galloway, 2005b) Authors, for example
Gibb(1996), Chell and Allman (2003) and Kirby (2004) have raised issues about the provision of
entrepreneurship education and the pedagogical and delivery developments required to meet
appropriately the needs of an entrepreneurial society.
The successful implementation of the government projects for education depends on its ability to
secure the compliance of teachers. The management of the service is inseparable from the
management of the workforce. One key role of the management at school level therefore is the
management of teachers. Ball observes that the control is to be exerted over teachers work by the
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use of techniques of management. The task of schooling is increasingly subject to the logics of
industrial production and market competition (Ball, 1988, pp. 292).
Hellawell suggests that the head is going to be under considerable pressure to ensure that
workforce is operating in a cost effective fashion. Under such circumstances I would anticipate a
greater degree of convergence between the managerial methods of head teachers and those of
managers in other spheres (Hellewell,1990,p,408).
Methodology
The hypothesis of the current research is that the entrepreneurial skills enhance the achievement
level of leaders at school level in Lahore. To investigate this study a survey research design has
been adopted.
Sample
The sample used in this study was comprised of 86 men and 108 women aged between 20 to 40
years and above (n=200) serving as school leaders in different schools in Lahore. The demographic
details are shown in table 1.
A total of 200 school leaders were contacted during this study and all of them willingly
participated in the survey. The sample size, response rate and the demographic mix were
considered sufficient to perform meaningful statistical analysis
Variable
Sex
Age
Marital Status
Qualification
Professional
Qualification
Experience
male
female
20-29
30-39
40-and
above
married
unmarried
BA/BSc
MA/MSc
any other
PTC
CT
BEd
MEd
any other
less than3
yrs
3-9
10 -above
Frequency
86
108
36
86
Percent
43
54
18
43
77
38.5
167
26
43
135
8
83.5
13
21.5
67.5
4
2.5
6
82
20
52
3
41
10
26
17
8.5
41
131
20.5
65.5
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Monthly Income
less than
ten th
10-15 th
15-20 th
20-25 th
25-30 th
above 30 th
200
35
38
77
20
25
100
17.5
19
38.5
10
12.5
100
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Total
Instrument
I adopted the questionnaire developed by Paul Lain Waight (March,2006).
It was comprised of 30 items.
Variable
name
Component
Scale Item
1
1
I get a sense of pride when I do a good job on my school projects
I have always worked hard in order to be among the best is my filed
I do every job as thoroughly as possible.
I usually perform very well on my part of any school project. I am involved with.
6
7
I believe it is important to make a good first impression.

I get my biggest thrills when my work is among the best there is.
I feel good when I have worked hard to improve my school.
my knack for dealing with people has enabled me to create many of my school
opportunities.
10
I believe that any organization can become more effective by employing

competent people.
11
I get a thrill out of doing new, unusual things in my school affairs.
12
I often approach school tasks in unique ways.
13
I get excited when I am able to approach school opportunities in unique ways.
14
I believe it is important to approach business opportunities in unique ways.
15
I enjoy being the catalyst for change in school affairs.
16
I always feel good when I make the organizations I belong to function better.
I believe that to be successful head teacher must spend time planning the future
of his/her school.
I will spend a considerable amount of time analyzing my future school needs
before I allocate any resources.
18
19
20
I spend a lot of time planning my school activities.

I believe it is important to analyse your own weaknesses in school dealings.
21
I believe it is important to continually look for new ways to do things in school.
22
I make a conscientious effort to get the most out of my school resources.
23
To be successful I believe it is important to use your time wisely.
24
I feel very good because I am ultimately responsible for my own school success.
17
I feel uncomfortable when I'm unsure of what my school associates think of me.
25
I feel self-conscious when I am with very successful head teachers.
26
27
I feel very self-conscious when making school proposals.

I seem to spend a lot of time looking for someone who can tell me how to solve
all my school problems.
28
I feel inferior to most people I work with.
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29
I feel like a total failure when my business plans don't turn out the way I think they
should.
30
I often put on a show to impress the people I wok with.
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Procedure
The questionnaire was administered on a small scale (n=200) among school leaders in different
schools at Lahore. A total of 200 questionnaires were distributed and all were returned giving a
100% response rate.
Analysis
Data was analyzed using the exploratory factor analysis using extraction, rotation and verimax
methods.
Exploratory Factor analysis for entrepreneurial skills
All the data collected for entrepreneurial skills were analyzed using rotation and extraction
methods. Then it was analyzed that whether the factors satisfied the Kaiser criterion (eigen value
1). Then we applied the factor loading criteria. Only one item has to be removed for not loading
on any factor.
Table 3 Factor analysis Self satisfaction (S_score)
Eigen Value
Variance explained
Mean
Std. Deviation
I often put on a show to impress the people i work with
I feel inferior to most people i work with
I seem to spend a lot of time looking for someone who can tell me how to solve all
my problems
I feel like a total failure when my business plans don't turn out the way i think they
should
I feel very self conscious when making school proposals
I feel self concious when i am with very successful head
qs1R
I feel uncomfortable when i am unsure of what my school associates think of me
KMO
Barllet
Cronbech alpha
3.29
41.20
22.29
5.89
0.84
0.72
0.70
0.68
0.62
0.53
0.47
0.43
.72
502.10
.792
Table 3 shows the factor 1 characterized by complacency. An example of this is I feel very selfconscious when making school proposals. This factor was termed as Self- satisfaction.
Factor 1 had an eigen value 3.29 and % of variance 41.20. It had loading on 7 items. KMO is .72
and reliability on Cronbach alpha is .792
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Table 4 Factor analysis Instigation (I_score)

Eagen Value
Variance explained
Mean
Std. Deviation
I have always worked hard in order to be among the best in my field
I often approach school task in unique way.
I do every job as thoroughly as possible
my knack for dealing with people has enabled me to create many of my school
oppertunities
I believe it is important to approach business oppertinities in unique ways
I get a sense of pride when i do good job on my school projects
KMO
Barllet
Cronbech alpha
2.18
36.32
24.74
2.97
0.69
0.68
0.57
0.55
0.55
0.52
.629
163.68
.649
Table 4 shows the factor 2 characterized by initiation. An example of this is I often approach school
task in unique way. This factor was termed as instigation.
Table 5 Factor analysis Excitement (E_score)
Eigen Value
Variance explained
Mean
Std. Deviation
I get a thrill out of doing new,unsual things in my school affairs
I get excited when i am able to approach school opportunities in unique way
I believe that any organization can become more affective by employing complete
people
I enjoy being the catalyst for change in school affairs
KMO
Barllet
Cronbech alpha
2.15
53.86
16.92
2.55
0.82
0.78
0.70
0.59
.716
153.7
.696
Table 5 shows the factor 3 characterized by enthusiasm. An example of this is I get excited when
I am able to approach school opportunities in unique way. This factor was termed as instigation.
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Table 6 Factor analysis Accomplishment (A_score)

Eigen Value
Variance explained
Mean
Std. Deviation
I feel very good because i am ultimately responsible for my own school success.
I will spend a considerable amount of time analyzing my future school needs before I
allocate any resources
I believe it is important to make a good first impression
I always feel good when i make the organizations i belong to function better
I believe it is important to analyze your own weaknesses in school dealings
I spend a lot of time planning my school activities
I make a conscientious efforts to get the most out my school resources
KMO
Bartllet
Cronbech alpha
2.37
33.88
29.82
3.57
0.63
0.63
0.60
0.56
0.55
0.54
0.53
.657
201.7
.674
Table 6 shows the factor 4 characterized by completion. An example of this is I believe it is

important to make a good first impression. This factor was termed as Accomplishment.
Table 7 Factor analysis Drive (D_score)
Eigen Value
Variance explained
Mean
Std. Deviation
I get my biggest thrils when my work is among best there is
To be successful i believe it is important to use your time wisely
I feel good when i have worked hard to improve my school
I usually perform very well on my part of any school project i am involved with
KMO
Barllet
Cronbech alpha
1.86
46.55
17.55
2.36
0.715
0.688
0.683
0.641
.652
89.624
.616
Table 7 shows the factor characterized by force. An example of this is To be successful I believe
it is important to use your time wisely. This factor was termed as Accomplishment.
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Table 8 ANOVA S-score, I-score, E-score, A-score,D-score by age

S_Score
I_Score
E_Score
A_Score
D_Score
Between Groups
Within Groups
Total
Between Groups
Within Groups
Total
Between Groups
Within Groups
Total
Between Groups
Within Groups
Total
Between Groups
Within Groups
Total
Sum of
Squares
535.67
6310.66
6846.34
106.78
1651.14
1757.93
7.5
1289.51
1297.01
41.23
df
Mean Square
Sig.
5
192
197
5
193
198
5
193
198
5
107.13
32.86
3.26
0.008***
21.35
8.55
2.49
0.032**
1.5
6.68
0.22
0.952
8.24
0.63
0.672
2498.29
193
12.94
2539.52
134.04
972.72
1106.77
198
5
192
197
26.8
5.06
5.29
000*
** *** significant at .5 level
Table 9 ANOVA: S-score, I-score, E-score, A-score, D-score by marital Status
S_Score
I_Score
E_Score
A_Score
D_Score
Between Groups
Within Groups
Total
Between Groups
Within Groups
Total
Between Groups
Within Groups
Total
Between Groups
Within Groups
Total
Between Groups
Within Groups
Total
Sum of
Squares
171.53
6707.56
6879.09
37.49
1720.98
1758.48
44.33
1253.54
1297.87
242.67
2300.2
2542.87
31.26
1077.92
1109.19
df
Mean Square
Sig.
3
195
198
3
196
199
3
196
199
3
196
199
3
195
198
57.17
34.39
1.662
0.176****
12.49
8.78
1.423
0.237***
14.77
6.39
2.31
0.078
80.89
11.73
6.893
000*
10.42
5.52
1.885
0.133**
* ** *** **** Mean difference is significant at .5 level

.
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Table 10 ANOVA: S-score, I-score, E-score, A-score,D-score by Professional Qualification

S_Score
I_Score
E_Score
A_Score
D_Score
Between Groups
Within Groups
Total
Between Groups
Within Groups
Total
Between Groups
Within Groups
Total
Between Groups
Within Groups
Total
Between Groups
Within Groups
Total
Sum of
Squares
171.53
6707.56
6879.09
37.49
1720.98
1758.48
44.33
1253.54
1297.87
242.67
2300.2
2542.87
31.26
1077.92
1109.19
df
Mean Square
Sig.
3
195
198
3
196
199
3
196
199
3
196
199
3
195
198
57.17
34.39
1.662
0.176***
12.49
8.78
1.423
0.237
14.77
6.39
2.31
0.078****
80.89
11.73
6.893
000*
10.42
5.52
1.885
0.133**
* ** *** ****significant at .5 level

Table 11 ANOVA: S-score, I-score, E-score, A-score, D-score by Experience
S_Score
I_Score
E_Score
A_Score
D_Score
Between Groups
Within Groups
Total
Between Groups
Within Groups
Total
Between Groups
Within Groups
Total
Between Groups
Within Groups
Total
Between Groups
Within Groups
Total
Sum of
Squares
182.59
5718.65
5901.24
18.05
1440.39
1458.44
2.45
922.25
924.7
85.76
2064.5
2150.26
39.75
812.27
852.03
df
Mean Square
Sig.
4
160
164
4
160
164
4
160
164
4
160
164
4
160
164
45.64
35.74
1.277
0.281***
4.51
9
0.501
0.735
0.61
5.76
0.106
0.98
21.44
12.9
1.662
0.161**
9.94
5.07
1.958
0.103*
* ** *** significant at .5 level
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Table 12 ANOVA: S-score, I-score, E-score, A-score,D-score by Monthly Income
S_Score
I_Score
E_Score
A_Score
D_Score
Between Groups
Within Groups
Total
Between Groups
Within Groups
Total
Between Groups
Within Groups
Total
Between Groups
Within Groups
Total
Between Groups
Within Groups
Total
Sum of
Squares
586.34
6196.86
6783.2
41.81
1668.06
1709.87
35.11
1164.86
1199.98
75.9
2418.66
2494.56
66.29
1024.28
1090.57
df
Mean Square
Sig.
5
190
195
5
191
196
5
191
196
5
191
196
5
191
196
117.26
32.61
3.596
0.004*
8.36
8.73
0.958
0.445
7.02
6.09
1.152
0.335
15.18
12.66
1.199
0.311
13.25
5.36
2.472
0.034***
* ** significant at .5 level
Results
Factor s of drive ( D_score) and achievement ( A_ score) are found significant by age, marital
status , monthly income and professional qualifications. Factors of self satisfaction ( S_ score) are
found significant by age and monthly income. Factors of excitement ( E_score), instigation(I_
score) are found less significant at .5 level. This shows that the research hypothesis is accepted at
.5 significant level.
Findings/Discussion
The study has shown that the entrepreneurial skills positively affect the achievement level of
school leaders with the high level of significance. Other variables like age, marital status,
experience, professional qualifications and monthly income were also checked against factors of
self-satisfaction, instigation, excitement, derive and was found that drive effects the
entrepreneurial skill but less than achievement level and it has the high significance on
entrepreneurial skills but less than achievement. The fast growing economic crisis has changed the
economic scenario of almost every country of the world and as education has become the basic
weapon to fight against such economic challenges so it has become the need of hour to develop a
team of educational entrepreneurs to strengthen the countrys economy.
Conclusions
This study has supported the research hypothesis. Further research should be conducted to explores
the barriers and factors effecting entrepreneur skills of school leaders.
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References
Barrow, M. V., Jr. (2000). The Specimen Dealer: Entrepreneurial Natural History in America's
Gilded Age. Journal of the History of Biology, 33(3), 493-534.
Hannafey, F. T. (2003). Entrepreneurship and Ethics: A Literature Review. Journal of Business
Ethics, 46(2), 99-110.
Kent, C. A. (1989). The Treatment of Entrepreneurship in Principles of Economics Textbooks. The
Journal of Economic Education, 20(2), 153-164.
Shane, S. (2000). Prior Knowledge and the Discovery of Entrepreneurial Opportunities.
Organization Science, 11(4), 448-469.
Stevenson, H. H., & Jarillo, J. C. (1990). A Paradigm of Entrepreneurship: Entrepreneurial
Management. Strategic Management Journal, 11, 17-27.
Thornton, P. H. (1999). The Sociology of Entrepreneurship. Annual Review of Sociology, 25, 1946.
Tripathi, D. (1985). An Integrated View of Entrepreneurship. Economic and Political Weekly,
20(48), M163-M168.
ASST. PROF. FARAH NAZ

Ms. Farah Naz is an educationist with a vast experience of over 23 years in teaching, management
and educational quality assurance. She has served in almost all the provinces on various
appointments including Azad Jammu & Kashmir. She had been heading the quality assurance
department of The Educators a project of BSS. She is M.Phil in Education Leadership &
Management. Presently she is serving as Assistant Professor in University of Management &
Technology. She is also Deputy Director Education in Bahria Foundation (Pakistan Navy). She is
on her final thesis of PhD. She is a member of visiting faculty at University of Education Punjab.
She is author of various international research articles.
Farhat Munir
Farhat Munir is a Ph.D scholar at the University of Management and Technology Lahore Pakistan.
She has eight years teaching and administrative experience. she is working as Controller
Examination in DHA School System
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Empirical Analysis of Determinants of Dividend Payout:

Profitability and Liquidity
Ch. Muhammad Adil
Shaheed Zulfiqar Ali Bhutto Institute of Science and Technology, Islamabad.
Nousheen Zafar
PhD Scholar , Mohammad Ali Jinnah University, Islamabad.
Noman Yaseen
Shaheed Zulfiqar Ali Bhutto Institute of Science and Technology, Islamabad.
Abstract
This study aims at the re-evaluation of the incremental information content of profitability and
liquidity for dividend payout. This study proxy the operating cash flows as measure of liquidity
and earnings per share, dividend per share, size and return on equity as measure of profitability of
firm. Sample of 100 firms are randomly selected from KSE 100 Index. These companies represent
88% of total capitalization of KSE. Common effect model has been applied to the panel data
analysis revealed that there is a strong relationship between dividend payout with EPS (Earnings
per Share) ROE (Return on Equity) CFOP (Cash Flow operating) and the results for these
variables are significant but the variable S (Size) shows the results insignificant. The study implies
that profitability is the stronger factor that affects dividend payment decision but the liquidity of a
firm is also important for dividend payments.
Key Words: Dividend pay out, Liquidity, Profitability, EPS, ROE, Operating Cash flow
Introduction
Dividend policy is considered to be one of the most important financial decisions that corporate
managers encounter. Because dividend policy forms the basis upon which other theories of
finance, such as asset pricing, capital structure and capital budgeting, rely (Allen and Michaely,
1997; Baker and Powell, 1999; Barker, 1999a). Dividend decisions may increase the market value
of the company but on the other hand it may mean less availability of internal funds and more
reliance on external sources and expansion purposes. Dividend policy decision is affected by many
factors. These factors may considerably vary from country to country. Dividend decision being an
important financing decision of a company has engrossed academicians and researchers in both
developed as well as developing countries.
By dividend policy, we mean the payout policy that managers follow in deciding the size
and pattern of profit distribution to shareholders over time. Furthermore, while determining
dividend payment, a careful management strikes a balance between shareholder's expectation and
firm's long term interest. The basic objective of the corporate managers is to maximize share
holders wealth and for this they seek to maximize shareholder wealth by making efficient
investment strategies, financed by an optimal capital structure. if these decisions are handled
efficiently, this is expected to be reflected in value of firms.
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While current cash flow data appears to explain future cash flows better than do current
earnings, the grouping of cash flow and accruals data generates the greatest illustrative power (AlAttar and Hussain, 2004). Even if accruals and cash flows are equally valuable in measuring firm
performance, cash flows should be more useful than accruals in predicting dividend changes since
cash flows are a more direct liquidity measure.
In order to discover the factors contributing towards dividend payout, liquidity as well as
profitability of a firm matters a lot. This study is an attempt to find out profitability and liquidity
relationship, specifically in context of dividend payout, by indicating the ability of cash flows as a
measure of liquidity and earnings per share and return on equity as a measure of profitability of a
firm.
Over the time, number of factors identified in the literature as being important to be
considered in making dividend decisions increased significantly. Thus, extensive studies were
done to find out various factors affecting dividend payout ratio of a firm.
Previous empirical studies have emphasized mainly on developed economies. The
undertaken study examines the relationship between determinants of dividend payout from the
perspective of a developing country like Pakistan. Focus of this paper will be mainly on the critical
evaluation of Miller and Modiglianis analysis of dividends that suggested that dividend changes
depend on managements expectation of future earnings and cash flows. While the Lintners
previous work recognized the relationship between earnings and dividend changes. Through the
observation of Pakistani data we will see how the relationship between profitability and liquidity
effects dividend payments.
Problem Statement
Determinants of dividends payout is still a puzzle even after a long financial discussion. In
context of Pakistan it is once again an unresolved issue.
Objectives of the Study

Being an effort to find out the effect of profitability and liquidity of a firm on its dividend payout
decision, main objectives of this study are:
1. To discover the relationship between firms profitability and liquidity and its decision to pay
out dividends.
2. To institute the fact that operating cash flows, earning per share and return on equity is good
predictor of dividend changes.
3. To present dividend payout as an indicator of financial health of the firm.
Literature Review
Dividend payment modeling works starts from Lintners (1956) inventive study which
argued that the main determinants of changes in dividend are current earnings and preceding year
dividend level. Researchers have proposed many different theories about the factors that weight a
firms dividend. A number of factors have been identified in previous empirical studies to
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influence the dividend policy decisions of the firm. To, itemize few profitability, risk, cash flows,
agency cost, growth, taxes, price earnings ratio etc.
Determinants of Dividend Policy
There are so many characteristics that have been found to be related to dividend policy
such as the firms, profitability, liquidity, size, Financial Leverage, Growth Opportunities,
investment opportunities, Information Asymmetry, Agency Costs, Ownership Structure, Stock
Exchange Status etc. Among all factors profitability and liquidity are very important determinants
of dividend payment. Cash flow which mainly determines the liquidity of the firm has also been
argued to be able to assess firms' performance, although the results are questionable throughout
countries and time.
Corporate Profitability
Profits have long been regarded as the primary indicator of the firms capacity to pay
dividends. Linter (1956) conducted a classic study on how U.S. managers make dividend
decisions. He developed a compact mathematical model based on survey of 28 well established
industrial U.S. firms which is considered to be a finance classic. According to him the dividend
payment pattern of a firm is inclined by the current year earnings and previous year dividends.
Farrelly, Baker and Edelman (1986) surveyed 318 New York stock exchange firms and
concluded that the major determinants of dividend payments are projected level of future earnings
and pattern of past dividends. Pruitt and Gitman (1991) asked financial managers of the 1000
largest U.S. and reported that, current and past year profits are important factors influencing
dividend payments. Baker and Powell (2000) conclude from their survey of NYSE-listed firms that
dividend determinants are industry specific and anticipated level of future earnings is the major
determinant.
Fama and Babiak (1968) and Fama (1974) results support Lintner's view that managers
prefer a stable dividend policy, and are reluctant to increase dividends to a level that cannot be
sustained. Therefore, these researchers concluded that changes in per share dividends are mostly a
function of a target dividend payout based on earnings and the last period's dividend payout.
Murray (1981) by using non-capital market data to test the theoretical implication that dividend
payout is negatively correlated with earning uncertainty. Murray concluded that earning
uncertainty is a determinant of the dividend policy.
Aivazian, and Booth (2003) find that for both U.S. firms and promising market firms,
profitability affects dividend payments, higher debt ratios correspond to lower dividend payments,
and market-to-book ratio has a positive effect on dividend payments. Naceur et al (2006) examined
the dividend policy of 48 firms listed on the Tunisian Stock Exchange during 1996-2002. Results
indicate that highly profitable firms with more stable earnings can afford larger free cash flows and
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thus pay out larger dividends, and fast-growing firms dispense larger dividends so as to appeal to
investors.
Omar (2009) describes that factors influencing cash dividend change in companies listed in
Bahrain Stock Exchange. A sample of thirty five Bahraini companies was tested. Descriptive and
statistical tests were used to estimate the data of the study. Cash dividend change in Bahraini
companies is tested with regard to four specific characteristics, namely: previous year dividends;
financial leverage, profitability; and size of firm. The regression model results explain that cash
dividends policy is significantly associated to profitability change in previous year dividends, and
size of Bahraini companies listed in Bahrain Stock Exchange, but not to financial leverage.
Liquidity:
Cash flows are the proxy for liquidity. Indeed, the importance of cash flow data for
assessing a corporations liquidity and solvency is reiterated in the UK standard FRS1 (para.1b).
Future cash flows are, of course, a potentially important input for share valuation models and a
matter of concern for corporate creditors.
The dividend policy is not only used to signal the probable level of earnings but also the
volatility of earnings. For a Given level of cash flow, firms with more volatile earnings promise a
lower dividend. Here an important insight is that dividends vary with the total volatility of future
cash flows and only by the market related risks. (Bradley, Capozza, Seguin, 1998)
Since dividends must be paid in cash, firms with insufficient cash may be enforced to
reduce their dividends. Thus it is expected that firms will reduce dividends in years of insufficient
liquidity. Further research indicates that: (a) higher dividend payout ratios corresponds to higher
cash flows and (b) firms that persistently generate more operating cash flow than earnings are
likely to have more dividend payout ratios(Ingram and Lee,1997; Andreas Charitou,2000)
Barker (1999) find that the use of price-earnings ratios and price-cash flow ratios is
widespread within the investment community. Cash flow data are also employed in discounted
cash flow valuation models, but these are less popular among analysts. While much of the debate
regarding the relative usefulness of cash flows versus earnings revolves around share valuation, it
must not be forgotten that future corporate cash flows are of concern to company creditors too.
Size
Bodnaruk (2007) examine that there is a negative relationship between the size of the
firms shareholder base and its cost of capital. Consistent with this, He find that firms with smaller
shareholder bases payout less of their net income, have higher cash holdings and lower capital
expenditures.
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Amidu (2007) evaluates that managers consider a large firm to be more impressive and
they expect to earn more return than they would in a small firm. This is obviously not in the
interest of the existing shareholders. The results seem to suggest that, for listed firms on GSE, size
and leverage do not necessarily influence their return on assets. Surprisingly, the negative
association of firms size and return on assets indicates that, increasing size is associated with
decrease in profitability.
Olatundun (2003) describes that small firms are less liquid when compared with large
firms; therefore their dividend decision depends more on the availability of cash flow. So,
according to him dividend pay-out policy is dependent on cash availability and a firms ability to
increase or decrease dividend partly mirrors its liquidity position.
Hypothesis
H1:
H2:
H3:
H4:
Earning per share and dividend payout is positive and significant relations.
Return on equity and dividend payout is positive and insignificant relations.
Operating cash flow and dividend payout is positive and significant relations.
Size and dividend payout is positive and insignificant relations.
Methodology
Sample
In order to find out the determinants of dividend payout, specifically focusing on liquidity
and profitability of a firm, 100 firms are randomly selected from KSE 100 Index. KSE 100 index
represents 88% of total capitalization of KSE stock exchange. We excluded the firms (i) whose
data of dividend payout (DPO), earnings per share (EPS), return on equity (ROE), cash flow per
share (CFPS) and size (S) was not available (ii) the firms that belongs to financial sector.
Data
Panal data for dividend per share, Earnings per share, Return on equity, and Cash flow per
share pertaining to the year 2005-2009 has been collected for 100 firms. The information on DPO
is the total cash dividend (interim and final) paid by the firm for each number of shares
outstanding. EPS is net income per share, ROE is net income per each rupee invested by the
shareholders, and CFPS measure the operating cash earnings per share of the company. EPS and
ROE are proxies for profitability while CFPS is the proxy for liquidity.
Variables of the Study
Dependent Variable:
Dividend payout (DPO): A value calculated by dividing a dividend per share by the earning per
share. (Mohamed, 2007)
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Independent Variable:
Return on Equity (ROE): The amount of net income returned as a percentage of shareholders
equity. Return on equity measures a corporation's profitability by revealing how much profit a
company generates with the money shareholders have invested. (Mohamed, 2007)
Earnings per Share (EPS): The portion of a company's profit allocated to each outstanding share
of common stock. It is calculated by dividing Net income with average outstanding
shares. Earnings per share serve as an indicator of a company's profitability. (Mohamed, 2007)
Cash Flow per Share (CFPS): A value calculated by dividing a firm's cash flow by the average
number of shares of capital stock that are outstanding. This measure signals a company's ability to
pay debt, pay dividends, buy back stock and facilitate the growth of business i-e a measure of
financial flexibility. (Mohamed, 2007)
Size (s): Size of the firm can be determining through the natural log of total assets of the firm.
(Olatundun, 2003)
Statistical Model
The association between dividend per share and earnings per share, return on equity, cash
flow per share and size has been tested by applying Regression to Panal data for our sample for the
period 2005-2009. Following model applies to the data.
DPOit = 0it + 2EPSit+ 3ROEit + 4CFPSit + 5Sit+ it
Where:
DPO= Dividend Pay Out
EPS= Earnings per Share
ROE= Return on Equity
CFPS= Cash Flow per share
S = Size
= Coefficients for variables
= Error term
Empirical Analysis
Correlation
Correlation is a measure of relationship between two or more variables. Correlation
Coefficients can range from -1.0 to +1.0. The value of -1.0 represents a perfect negative correlation
while a value of +1.0 represents a perfect positive correlation. A value of 0 shows there is no
correlation. The most widely used type of correlation is Pearson (r), it also called linear
correlation. Pearson Correlation considers that two variables are measured on at least interval scale
and it determines the extent to which values of two variables are proportional to each other.
Coefficient of determination r square will represent common variation in the two variables, the
strength and magnitude of the relationship.
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Table 1

* Correlation is significant at the 0.05 level (2-tailed).
The table is showing correlation between dependent and independent variables that are
dividend per share, earning per share, return on equity, operating cash flow and size and dependent
variable dividend payout.
The correlation between earning per share and dividend payout is significant. Correlation
value .000 is significant at .01 levels. Earnings per share value are .71. So it shows there is a strong
positive correlation. Also It reflects a linear positive relationship between earning per share and
dividend payout.
The correlation between return on equity and dividend payout is insignificant. Correlation
value .603 is insignificant at .05 levels. Return on equity value is .05. It shows there is little
positive correlation. Also it reflects a little but positive relationship between return on equity and
dividend payout.
The correlation between operating cash flow and dividend payout is insignificant.
Correlation value .687 is insignificant at .05 levels. Amidu (2007) describes that increasing in
liquidity reduce the dividends. Operating cash value is -.041. It shows there is some negative
correlation. Also it reflects a little but negative relationship between operating cash flow and
dividend payout.
Correlation value .052 is insignificant at .05 levels. The correlation between size and
dividend payout is insignificant. According to Kania (2005) results there is positive correlation
between firm size and dividend payout. Size is .195. It shows there is some positive correlation.
Also it reflects a little but positive relationship between size and dividend payout.
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Regression
The research study uses multiple regression models in order to analyze relationship
between dependent and independent variables. The multiple regression models are characterized
by one dependent variable and multiple independent variables. The multiple independent variables
explain variations in the dependent variable. The multiple regression models are as under:
Y = 0+1X1+2X2+3X3+ nXn
(1)
Where Y is dividend payout (dependent variable)
X is other factors affecting dividend per share is the regression coefficient which may be
positively or negatively affect dependent and independent variables.
Y D = 0+1 X eps+ 2 X roe + 3 X cfop + 4 XS . (2)
Y D = -.737+.725 X + -.847 X roe + -.790 X + .104 XS . (2)
Where Y = Dividend Payout (dependent variable) 1X1 = Earnings per Share, 2X2=
Return on Equity, 3X3 = cash flow operating, 4X4 =Size, (independent variables). The coefficient
of determination is represented by (R2) which measures the proportion of variability in the value of
the dependent variable.
Table 2
a Predictors: (Constant), S, ROE, EPS, CFOP
The coefficient of determination R2 = 0.619 which show that 61.9% of variation in

dividend payout is explained by earning per share, return on equity, operating cash flow and size.
Table 3
a Predictors: (Constant), S, ROE, EPS, CFOP

b Dependent Variable: D
The F-test value is 38.514 and is significant because the significance level is = .000 which
is less than 0.05. This also implies that the correlation between dependent variable and
independent variables is statistical significant and the regression model is valid. The valid
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regression model implies that independent variables return on equity, earning per share and
operating cash flows are explaining that there is significant relationship with dividend payout
(dependent variable).
Table 4
a Dependent Variable: D
The regression coefficient for earning per share (1) = .725 which implies that one percent
increase in earnings per share increase 72% percent in dividend payout if other variables are kept
controlled. The T-test value is 11.855 which are significant at .000 because significance level is
less than .05. It implies that the relationship between earning per share and dividend payout is
positive and significant and overall regression model is valid. Kania (2005) concludes in his paper
that a higher EPS growth allows a greater capacity for the firm to increase dividends. To reject the
alternative hypothesis the benchmark of the value is P <0.05. So therefore the null hypothesis will
accept and alterative hypothesis will be reject that is:
H1:
Earning per share and dividend payout is positive and significant relations.
The regression coefficient for return on equity (2) =-.847 which implies that one percent
increase in return on equity decrease 84.7% percent in dividend payout if other variables are kept
controlled. The T-test value is -1.068 which is insignificant at .288 because significance level is
less than .05. It implies that the relationship between return on equity and dividend payout is
negative and insignificant and overall regression model is valid. Amidu (2007) find out that
surprisingly the negative association of firms size and return on assets indicates that, increasing
size is associated with decrease in profitability.
The results show that there is a negative relationship between dividend increases and
subsequent declines in profitability (Grullon, 2002). To reject the alternative hypothesis the
benchmark of the value is P <.05. So therefore the null hypothesis will accept and alterative
hypothesis will be reject that is:
H2:
Return on equity and dividend payout is positive and insignificant relations.
The regression coefficient for operating cash flow (3) = -.790 which implies that one
percent increase in operating cash flow decrease 79% percent in dividend payout if other variables
are kept controlled. The T-test value is -5.027 which significant at .000 because significance level
is less than .05. It implies that the relationship between operating cash flow and dividend payout is
negative and significant and overall regression model is valid. Olatundun (2003) describes that
coefficient of operating cash flow is significant for small firms and not significantly for average
and large sized firms. To reject the alternative hypothesis the benchmark of the value is P <0.05.
So therefore the null hypothesis will accept and alterative hypothesis will be reject that is:
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H3:
Operating cash flow and dividend payout is positive and significant relations.
The regression coefficient for size (4) = .104 which implies that one percent increase in
size increase 10.4% percent in dividend payout if other variables are kept controlled. The T-test
value is 1.312 which insignificant at .193 because significance level is less than .05. It implies that
the relationship between size and dividend payout is positive and insignificant and overall
regression model is valid. To reject the alternative hypothesis the benchmark of the value is P
<0.05. So therefore the null hypothesis will accept and alterative hypothesis will be reject that is:
H4:
Size and dividend payout is positive and insignificant relations.
Conclusion
This study shows that there is a strong relationship between dividend payout with EPS
(Earnings per Share) ROE (Return on Equity) CFOP (Cash Flow operating) and the results for
these variables are significant but the variable S (Size) shows the results insignificant. It implies
that if the liquidity of the firm is available then the firm would pay dividend and earnings per share
(EPS) and dividend per share (DPS) also indicates that the firm would pay dividend. Another
factor is very important which is ROE (return on equity).it affects a lot upon firms dividend
payment decision as per study conducted by Olatundun (2003) coefficient of operating cash flow is
significant for small firms and not significant for average and large sized firms. This shows that in
case of large firms the return on equity of the firm would decrease and liquidity would also
decrease and resultantly it would have a negative relationship with dividend payouts. In this study
we have taken large companies that could be the reason that ROE and CFOP has a negative
relationship. However the results might improve in future research by increasing the sample size of
the companies and also we can include financial sector into our sample.
Limitations
o Financial sectors may be included in the sample size.
o During 2005-09 the economic instability prevails in the country so thats the reason
that dividend payout results are not supporting the theories
o For improved results the sample size has to increase.
o Some companies show their strength for that purpose
o Window dressing
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makers, Akron Business and Economic review, Vol. 17:4 (Winter), pp. 62-74
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American Statistical Association, Vol. 63, pp. 1132-1161.
Fama, E. F, (1974), "The Empirical Relationship between the Dividend and Investment Decisions
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Lintner, J. (1956), Distribution of incomes of corporations among dividends, retained earnings,

and taxes, American Economic Review, Vol. 61, pp. 97-113.
Mohamed, N., Hui, S.W., Omar, H. N. and etl. (2007), Empirical Analysis Of Determinants of
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A Paradigm Shift in Social Work in Pakistan
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VOL 3, NO 1
Zahid Javed
PhD ,Associate Professor/Chairman, Department of Social Work,
University of the Punjab, Lahore Pakistan.
Muhammad Arshad
Lecturer, Department of Social Work, University of the Punjab, Lahore Pakistan.
Aliya Khalid
Assistant Professor, Department of Social Work, University of the Punjab, Lahore Pakistan.
Abstract
This paper has been prepared to study the phenomenon of paradigm shift in Social Work in
Pakistan. In the context of Social Welfare there is a visible change from residual to mainstreaming
approach of Social Work Practice. Residual approach addresses marginalized groups of the
society. However, mainstreaming approach refers to the process of creating such conditions in
social setups and structures for enabling people to contribute productively as an individual as well
as members of the society. Because merely working for marginalized groups are inadequate to
meet the diversified societal challenges and social problems. It is an attempt to see the implications
resulted by this paradigm shift in its historical perspective which need to be studied. The study will
provide opportunities of creating research based knowledge and preparing the Social Workers for
delivery of Social Welfare Services effectively and efficiently. The impact of charities as well as
donations on developing countries, globalization and role of corporate sector are other significant
aspects which also need to be addressed by the academicians and professional social workers for
meeting the challenges and performing their role more productively in globalize world.
Keywords: Paradigm Shift , Social Work , Pakistan
Introduction
Social Work Practice is undergoing a paradigm shift globally. Since inception, it has been
practiced with a residual approach. Now, there is a visible change from residual to mainstreaming
approach of Social Work Practice. Residual approach based on the idea that governments should
play only a limited role in the distribution of social welfare. The assumption is that the majority of
the population will be able to locate their own sources of assistance, whether through the market
mechanism of work, or from family and perhaps church or charity. The state should only step in
when the normal sources of support fail and the individual is unable to help themselves
(Leighninger, 2008). However, mainstreaming approach refers to the process of creating such
conditions in social setups and structures for enabling people to contribute productively as an
individual as well as members of the society.
Social Work as a profession grew chiefly out of the development of social welfare policies and
programs in the United Slates, Europe, and Muslim countries. Judeo-Christian and Muslim
practices and beliefs underlie many of the early attempts to provide help to the poor, the sick,
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widows, orphans, the "insane" (Leighninger, 2008). However, feeling of belongingness, provision
of mutual assistance and protection is as old as human beings. Dating from this early phase of
human development mutual assistance and protection can be called one of the fundamental drives
which compensates for destroying or enslaving fellow men (Lander, 1961).
By over viewing the concept of Social Welfare in Europe, USA and Sub-continent generally and in
Pakistan particularly reflects that almsgiving and charity for poor, orphans, widows, blinds and
lames were appreciable and source of salvation. However, thousands years ago the tribal and the
religious leadership has been providing protection to helpless, needy and vulnerable. Two
thousand years before the birth of Christ, a ruler of Babylonia, Hammurabi made the protection of
widows and orphans an essential part of his code (Leighninger, 2008). The presence of the
Xenodochia (guest houses) in Greece and Egyptian temples shows that it is an ancient tradition.
Later on The Jews developed many social welfare practices. These included the education of
orphans, burial of the dead, consolation of the bereaved, visitation of the ill and infirm, and the
care of widows, divorcees, and the aged. Provision for the poor was made primarily through
various agricultural practices, which included gleanings, or the practice of leaving grain dropped
during the harvest which could be picked up by the hungry (Leighninger, 2008).
Following Judaism, Christianity carried on the charitable tradition, adding a particular emphasis
on love and compassion. Since the founders of the Christian Church were Jews, it is not surprising
that many parts of New Testament focused on charity. The basic principle underlying early
Christian approaches to social welfare was similar to the Hebraic idea that poverty was not a
crime. Even though discretion should be observed in giving aid, and rules set up for discriminating
between the various classes of poor people, evidence of need was still the paramount factor in
offering help. It was assumed that need came about as a result of misfortune for which society
should take responsibility (Leighninger, 2008).
The early Christians helped one another, facing poverty and persecution. However, as pointed out
earlier that later on they followed the Greek tradition of xenodochia (guest houses) because
Christianity in medieval period became state religion and church entrusted the administration of
charity to the bishop, the local priest and the deacons. During this period begging was considered
socially respected, as an easy way of living and shared with missionaries, monks as well as
university students. Institutions for the poor were established for the monasteries, serving as
orphanages, as home for the old, the sick and the handicapped and as refuge for the homeless
(Lander, 1961).
Islam also contributed to charitable traditions which emphasizes on social reforms. Islam promotes
the welfare of disadvantaged through its compulsory contribution in the form of Zakat. It is not
considered as a charity but obligatory for all Muslims who are financially able to contribute 2.5%
of their net wealth annually which is spent to support the needy. It is an act of social justice
through the redistribution of wealth. In addition to this, other contributions are also made which
are called Sadqa, Khiraat, Usher and Khumas (Syed, 1975; Shaghil, 1989; Sardar, 1979)
In Sub-continent, a centuries old tradition of charity (dan, pun) existed, aimed to provide welfare
services to widows, orphans, poor and disabled. The presence of ashram (widow home and
orphanages), Janj ghar (community centers for Hindu marriages) and Buddhists monasteries have
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been providing services to disadvantage, monks and students. Khanqah (shrines of Muslim saints)
and masjid (mosque, place for Muslims to offer prayers), have also been used for provision of food
and stay for occasional travelers.
In Christianity, almsgiving and charity was praised by the church. However, the state responded it
otherwise. During this course of history, a conflict developed between the clergy and the state by
growing influence of the church. It threatened the secular authorities. The begging was
discouraged and in 800, they ordered to fine those citizens who would give alms to able-bodied
beggars. Monasteries, abbeys, and convents were partly replaced and hospitals (hotels de Dieu)
were instituted where old, sick persons, orphans, abandoned children and pregnant women were
looked after. The conflict existed until the middle Ages (Lander, 1961).
However, this conflict became more violent in 16th century during the period of Reformation.
During this period Martin Luther (1520) appealed Christian nobility and the German nation, to the
princess to forbid begging and to organize the Common Chest in all parishes for the receipt of
money and clothes to assist the needy. Similar programs of poor relief were carried out in Zurich,
Switzerland in 1525. France, Austria and the Scandinavian countries developed programs which
resembled with the concept of Luther (Lander, 1961).
In England, until the fourteenth century, the king and Parliament were not concerned with the
charity of the Church and the guilds. However, by the gradual disappearance of feudalism in
England, the King and nobles faced the problem of maintaining the order among the laborers and
prevent vagrancy.
The Elizabethan Poor Law of 1601
The law distinguished the three classes of the poor: The Able-bodied-Poor, the Impotent Poor and
Dependent Children. Able-bodied Poor were forced to work in the houses of Corrections or
work houses and citizens were forbidden to give them alms. The Impotent Poor were the sick,
the old, the blind, the deaf, the lame and mothers with young children. They were unable to work
and placed in alms houses. However, Dependent Children were the orphans, and children who had
been destroyed by their parents or their parents were so poor that they could not support them.
They were to be apprenticed, the boys until they were 24 years old and the girls until they were 21
or married (Fink, Wilson & Conver, 1960).
In Great Britain, The Poor Law of 1601 set the pattern of public relief under governmental
responsibility for three hundred years and later reforms made the legislation more focused on
provision of protective services. Labor Reforms of 1802, Poor Law Reforms of 1834 and
enactment of Factory Act 1847 improved the conditions of children of factory workers as well as
prisoners. However, during the 19th century three main factors influenced the philosophy of poor
relief in England, which were categorized as the role of social reform movements, the Charity
Organization Societies and the social research (Lander, 1961). This turning point in the field of
Welfare in England was an outcome of the efforts of Sir William Beveridge.
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Beveridge Report.
During World War II, Sir William Beveridge was appointed for surveying the structure and the
efficiency of the British Social Services and to make the recommendations for necessary reforms.
The report presented by him recommended a comprehensive plan of social security. The Beveridge
Report became the foundation of the modern Social Welfare Legislation of Great Britain and
model for other countries.
The United States of America (USA) followed English Poor Law because majority of colonists
came from England. They brought with them English ideas, customs, English common laws and
English institutions. Church as well as Charity Organizations Society Movement also made
contributions for improving conditions of poor in USA (Fink, Wilson & Conver, 1960). America
followed the same pattern of Social Services i.e. from alms houses to Social Security. Institutions
were built to provide caring services for marginalized segments of the society. However, later on a
new school of thought appeared, advocating deinstitutionalization of disabled, psychiatric as well
as other sicks. The concept of Community Care emerged in USA. Foster Care and Half Way
Homes were introduced and developmental aspect of Social Work became more prominent and
significant in USA.
Social Welfare is a wider umbrella for provision of social serviceseducation, health, portable
water and sanitation etc. According to Friedlander Social Welfare is the organized system of
social services and institutions designed to aid individuals and groups to attain satisfying standards
of life and health, and personal and social relationships which permit them to develop their full
capacities and to promote their well being in harmony with the need of their families and the
community (Lander, 1961). For the delivery of Social Welfare services, Social Work emerged as
a profession based on scientific methods in modern era. Primarily Organized work intended to
advance the social conditions of a community, and especially of the disadvantaged, by providing
psychological counseling, guidance, and assistance, especially in the form of social services.
(Answer.Com, 2011)
)
It was considered that Social Work seeks to enhance the social functioning of individuals, singly
and in groups, by activities focused upon their social relationships which constitute the interaction
between man and his environment. These activities can be grouped into three functions: restoration
of impaired capacity, provision of individual and social resources, and prevention of social
dysfunction (Skidmore, Thackeray & Farley, 1997).
As explained above the earlier approach of social work was residual in nature, addressing
marginalized groups of society, by practicing their methods of Case Work, Group Work,
Community Development, Social Welfare Administration and Social Action (Lander, 1976). These
methods have proven their adequacy and efficacy to help directly as well as indirectly to
individuals, groups and communities in problematic situations.
In present era, human life and social structures are under serious threats. Societies are striving
against socio economic, political and cultural oppressions and pressures. Social Workers realize
that merely working for marginalized groups is inadequate to meet the diversified societal
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challenges and social problems. Now there is a shift over from residual approach to
mainstreaming, focusing the developmental aspects. The role of Social Work is viewed as The
social work profession promotes social change, problem solving in human relationships and the
empowerment and liberation of people to enhance well-being (Answer.Com, 2011).
In the developed countries, Social Work practices are leading from traditional approach to
developmental approach. Now Social Work is focusing on empowerment and liberation, equity
and social justice. Some new concepts have been introduced for development of the communities
of developing countries. Networking has been increasingly recognized as an important aspect of
Community Work. Apparently it is also a new concept for the welfare of communities, whereas
social workers have been practicing it as one of the primary methods of Social WorkCommunity
Development, since emergence of the Profession. According to Bureau of Social Affairs, United
Nations (1955) Community development is a process designed to create conditions of economic
and social progress for the whole community with its active participation and fullest possible
reliance upon the community initiatives (1955).
The UK framework for national occupation standards for community development work gives the
following definition: Community development is a long term value based process which aims to
address imbalances in power and bring about change founded on social justice, equality and
inclusion (Gilchrist, 2009). Community Development ensures the participation of the community
in development process, relying on its resources. It ultimately aims for sustainable development by
creating a just and humane society. It is based on time tested principles and processes, ensuring
active participation of people in development process. A new term has been coined as
Participatory Development, denoting a change in welfare approach.
Participatory Development is a community-based action for transformative change. Participation
is transformative concept. It is a way of life, a way of seeing the world, a way of being in the
world. We say this to emphasize that it is not simply an approach of working in community; it has
far reaching implications for practice. Its philosophy is founded on principles of peace, justice,
equality and profound belief in the work of everyone and the sanctity of natural world (Ledwith
& Springett, 2010).
Within the term Participatory Development we embrace a diversity of roles, but we locate
community development at the heart of the process. The key purpose of community development
is collective action for social change, principled on social justice and a sustainable world
(Ledwith & springett, 2009).
In present era, because of socio-economic and other political compulsions, it is becoming difficult
for developing countries to invest more and more on delivery of services education, health,
sanitation and employment etc for their citizens. In view of the changing scenario, an International
donor agency, Multi Nationals and Corporate Sector is playing its role in developing countries to
alleviate poverty and infrastructure growth for delivery of basic necessities of life. The programs
and services of these organizations have far reaching impact on the life and society. It need to be
viewed as a phenomenon of paradigm shift in the context of globalization for restructuring of
Social Work profession to provide social welfare services in more effective and efficient manner.
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Moreover collaborating the efforts of Multinationals, NPOs and Corporate Sector to enhance the
role of social work and getting its recognition in the developing countries like Pakistan.
In Pakistan, being a Muslim country its religious institutions-Zakat, Sadqa, Khiraat and Usher are
functioning which is administered by the Ministry of Social Welfare, Zakat and Bait Ul Mal.
However, some new initiatives have been taken by the Government like Pakistan Poverty
Alleviation Fund (PPAF), Poverty Reduction Strategy Papers (PRSP) and Benazir Income Support
Programme (BISP) have been introduced which enable people to minimize and mitigate their
problems. These programs are aimed to lead them to independence and self-reliance. Although
most of the efforts are translated into actions by public sector programmes and policies. In addition
to these efforts public provides assistance to poor and needy persons through cash and kinds as
well as sadqa and khiraat. However, the changing socio political scenario in the globalize world
has created such conditions for the communities, as well as corporate sector to build those
mechanisms to collaborate their efforts for public welfare and development.
Discussion
Social Welfare is not a new idea; it is as old as human beings. During primitive as well as early
periods of history, tribal and religious leadership has been providing social services to needy. The
Jews and the Christians helped one another facing poverty. But later on they followed the Greek
tradition of Xenodochia which continued till medieval period in Europe. This welfare approach
manifested in Social Legislation of Great Britain. Pakistan inherited the same pattern of Social
Welfare which was characterized by residual approach, focusing on provision of social services &
Institutional care.
The following table summarizes changes which took place for the welfare of needy and deserving
people during different periods of history.
Table No.1
Sr. No.
Name of Institution
Functions
1.
Tribal/ Religious Leadership
Tribal and religious leadership has been providing social services to needy.
2.
Xenodochia (guest houses)
- Serving as orphanages, homes for the old, the sick, and the handicapped and as
refuge for the homeless.
3.
Jewish
- social welfare practices

- education of orphans
- burial of the dead
- visitation of the ill and infirm
- care of widows, divorcees and aged
- Provision for the poor through various agricultural practices including
gleanings, of the practice of leaving grain dropped during the harvest
which could be picked up by the hungry.
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4.
Church
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The tradition of Xenodochia (guest house) was followed by the Christianity.
5.
Mideval Europe
- Begging was considered as an easy way of living

- Shared with missionaries, monks as well as university students.
- Socially respected
6.
Post Industrial Europe
- Monasteries, abbeys, and convents were partly
replaced
- Hospitals (hotels de Dieu) were instituted

- Old, sick persons, orphans, abondand children and pregnant women were
looked after by Institutions.
7.
Modren Europe
- Legislation was enacted for poor relief ( Poor laws and Elizasthan Poor Law
1601)
- Legislation for the protection of child labour.
- Factory legislation
- Prison Reforms.
- Comprehensive plan of social security in the light of
8.
United State of America
- The pattern of social services in America was:
(USA)
From alms houses to social security.
Beveridge Report.
- Institution building for provision of services for marginalized segments of the

society.
- Deinstitutionalization of disables, psychiatric as well as for other destitute.
- Emergence of concept of Community Care.
- Foster Care and Halfway Homes.
- Prominence of developmental aspects of social work in recent years.
9.
Indian sub-continent before
- Old tradition of charity (dan, pun) existed
colonization.
- Services for widows

- Orphans, poor, disabled.
- Ashram (widow home and orphanages).
- Janj Ghar (community centers for Hindu marriages)
- Monasteries of Buddhists
- Khanqah (shrines of Muslim saints)
- Masjid (used for provision of food and stay for occasional travelers).
10.
Institutional care for
- Adoption of same British welfare approach and legislation and concept of
marginalized groups in
Institutional care. The following is the detail of Institutions for underprivileged
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Punjab, Pakistan *
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segments of the society.

- Ghewara: For care of illegitimate and abundant babies
- Nigheban: Rescue and rehabilitation services for run away, lost and kidnapped
children.
- Chaman: Education and training services for mentally retarded children
- Nashemen: Skill training and rehabilitation services for disable children.
- Kashana: Rehabilitation services for destitute girls.
- Dar-ul-Aman: Psycho-Socio and legal support for destitute women.
- Aafiat (old home): Welfare of infirm and aged people.
- Orphanages & Model
Children Homes: Care, protection and development of orphan children.
- Child Protection Institutions (CPI): Provision of protective services to the
vulnerable children.
11.
Donor Agencies and some
International donor agencies, Multi Nationals and Corporate Sector is playing
newly emerged actors
its role in developing countries for: alleviation of poverty.

Infrastructure growth for delivery of basic necessities of life - education, health,
food, portable water, and sanitation etc.
Civil Society Organizations (CSOs) and Non Profit Organizations (NPOs).
* Source: www.punjab.gov.pk/departments
Conclusion
Before 1947, Pakistan as a part of India was ruled by the British. The British influence remained
prominent and significant on colonized Sub-continent. Besides other areas, Social Welfare
Practices were also influenced by the English philosophy of social welfare which was based on
welfare of its citizens by legislation and implementation through its institutions. This approach was
residual in nature. It continued even after the lapse of more than sixty years in Pakistan. Now in
Europe, USA and other developed countries, the nature of provision of social services has been
changed qualitatively, focusing on the developmental aspects referring the mainstreaming
approach of Social Work. During this process, several new actorscivil society organizations
(CSOs), Non Profit Organizations (NPOs), Donor Agencies and Corporate Sector have shown
their visible presence in social sector which were not considered a stakeholders previously.
These newly emerged actors are playing a vital role in social development of these countries. In
Pakistan, Corporate Sector, NPOs and CSOs have also become an important stakeholder in
development sector. However, unlike developed countries, the profession of Social Work is
legging behind in Pakistan as less effort have been made to identify the potential collaborative role
of social work for engaging these newly emerged stakeholders of social sector.
This article is an effort to offer the professional social workers and researchers to make their
contributions for fill this gap which will help for collaborating the efforts of newly emerged actors
of development and channelize their resources for the welfare and development of community and
society at large.
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References
Abid, S.Q. & Abid, M.(2009)History & Civilization of the Muslim World, Lahore:Research
Society of Pakistan, University of the Punjab.
Answers. (n.d.). Retrieved May 08, 2011, from Scial Work: http://www.answers.com
Departments. (n.d.). Retrieved

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May
03,
2011,
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of
the
Punjab:
Encyclopedia of Social Work. (1977). Encyclopedia of Social Work , II (17) .New York, USA: National
Association of Social Workers.
Fink, A.E., Wilson, E.E. & Conver, M.B. (1960)The fields of Social Work, New York: Holt,
Rinchart and Winston.
Gilchrist, A. (2009) The well connected communities, Bristol: The Policy Press.
Lander, W. F. (1961). Introduction to Social Welfare (2nd ed.). London, England: Prentice-Hall,
INC.
Lander, W.A. (1976) Concepts and Methods of Social Work (2nd ed.), New Jersey: Prentice-Hall,
Inc.
Ledwith, M. & Springett, J. (2009) Participatory Practice: Community-based action for
transformative change, Bristol: The Policy Press.
Leighninger, L.(2008). The History of Social Work & Social Wefare In: Comprehensive Book of Social
Work & Social Welfare. Comprehensive Book of Social Work & Social Welfare , I . Hoboken, New
Jursey, USA: JOHN WILEY & SONS, INC.
Lurie, H. L. (Ed.). (1965). Encyclopedia of Social Work. Encyclopedia of Social Work (15) . New York,
USA: National Association of Social Workers.
Sardar, Z. (1979). The future of Muslim Civilization. Lodon.

Shaghil, M. (1989). Islamic Economics: Aglobal Perspective. New Delhi: Ashish Publishing
House.
Skidmore, R.A., Thackeray, G.M. and Farley, W.O. (1971) Introduction to Social Work (2nd ed.),
Boston: Allyna Bocom, Prentice Hall.
Social Work Review. (1982). Social Work Review , Lahore: Department of Social Work, University of the
Punjab
Syed, A. A. (1975). Islam the Religion. Karachi: Syed Publication.
(1955). Social Progress Through Community Development. New York: Bureau of Social Affairs,
United Nations.
Rehmatullah, S.(2002)Social Welfare in Pakistan:Karachi: Oxford University Press
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Financial Factors in Capital Structure Decisions: Panel Data Analysis of

Pakistans Major Manufacturing Sectors
Farah Riaz
(Corresponding Author)
Lecturer, Department of Management Sciences,
COMSATS, Institute of Information Technology, Quaid Avenue, The Mall, Wah Cantt Pakistan
Dr. Muhammad Afzal
(Co-Author)
Chairman, Department of Management sciences
COMSATS Institute of Information Technology
Park Road Chak Shahzad, Islamabad -Pakistan
Abstract
Capital structure is one of the important areas of firms strategic and financial decision making as
it enables managers to finance a firms overall operations with different sources of funds. Several
financial and business factors play a fundamental role in an effective decision making of firms
choices of capital structure. The aim of this study is an attempt to investigate the role of firms
financial factors that might determine the capital structure and influence the strategic financial
decisions of the firms. The study is based on a theoretical model, termed as Leverage Model in a
pooled cross-sectional framework. Panel data analysis technique is applied to individual firms
from textile, engineering, sugar, chemical and cement sectors, listed at Karachi Stock Exchange
(KSE) during the study period 2001 to 2008. Empirical findings reveal that firms profitability and
growth in assets are found to have significant negative association with debt ratios whereas, mixed
results are observed for tangibility and size of the firm. Other factors like sales growth rate and
dividend pay-out ratio are found to be less significantly related when firms from Pakistans largescale manufacturing sectors are taken into account.
Keywords: Capital structure, financial factors, leverage model, panel data analysis
1. Introduction
Capital structure is one of the most significant and complex areas of corporate strategy and
financial decision making. Capital structure is the mix proportion of a firms long-term debt, shortterm debt, common equity, preferred equity and other sources of funds that a firm needs to finance
its operations. Capital structure is a way through which a firm finances its assets and overall
operations besides some combination of equity, debt, or a combination of securities. Debt
financing includes bond issues or long-term notes payable, while equity is classified as a common
stock, preferred stock and retained earnings. Short-term debt such as working capital requirements
is also considered a source of funding in determining the capital structure. A company's proportion
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of short-term and long-term debt must be analyzed well while considering the capital structure. In
finance, capital structure of a firm is measured in terms of leverage (firms lever up their
profitability by raising their level of debt). Leverage of the firm is the use of fixed cost by the firm
in order to raise its profitability.
Pakistans manufacturing sector is comprised of two groups; large-scale manufacturing and small
& medium scale manufacturing.1 Manufacturing sector is one of the most important sectors due to
its remarkable contribution to countrys GDP.2 Large-scale manufacturing sector is a growing
sector in Pakistan and there are a large number of sub-sectors in the sector. Unfortunately, several
firms from Pakistans manufacturing sector have been facing a slump in their levels of productivity
and profitability due to certain disorders and irregularities among economic factors like increasing
energy and power crises, rising cost of doing business, growing demands within the country while
depressing demand in exports, worsening law and order situation and sudden targeted terrorist
attacks in the country which have contributed to the decelerated growth of the manufacturing
sector.3
To make a realistic analysis based on the availability of relevant data, we have selected five sectors
which are considered the backbone of Pakistans manufacturing sector. These are: textile,
engineering, sugar, chemical and cement. The growth of manufacturing sector depends on several
economic and business factors. Our objective is to empirically analyze the capital structure of the
listed manufacturing firms and its determinants that are most likely to influence the firms
financial decisions. We refer to these factors as firm-specific factors (sales growth rate, return on
assets, tangibility, dividend pay-out ratio, growth in assets and size of the firm). A few studies
(Mazhar and Nasr 2010, Shah and Hijazi 2004, Mahmud 2003) have been done which have
empirically examined the determinants of capital structure among Pakistans manufacturing firms.
Investigating the role of firm-specific factors in determining the capital structure (leverage ratios)
among five major manufacturing sectors of Pakistan and to examine the sector-wise variations in
capital structure determination based on the firm-specific factors are the principal objectives of this
paper. The remaining paper is organised as follows: section 2 carries the review of studies. Section
3 discusses the methodology and data sources. Empirical results and conclusions have been given
in sections 4 and 5 respectively.
2. Review of Literature
Several studies have been done on diverse aspects of the firms' choice of capital structure in
Pakistan as well as abroad. Modigliani and Miller (1958, 1963) argue that under the conditions of
perfect capital markets and without transaction or bankruptcy costs, the financial leverage of the
firm is unrelated to its value. Further research has shown that Modigliani and Millers assumptions
are unlikely to be valid as the conditions of perfect capital markets do not prevail in real life.
Researchers have identified several firm-specific factors, based on three most accepted theoretical
models of capital structure: the static trade-off theory, the agency theory and the pecking-order
theory. Myers and Majluf (1984) put forward Pecking Order theory, arguing that equity is a less
preferred means to raise capital because investors may believe that by offering new equity,
managers may take the advantage of over-valuation. Frank and Goyal (2005) showed that how
much debt and equity financing should be used by the firms in order to equalize the costs and
benefits generated from debt and equity financing. Trade-off theory allows the bankruptcy cost to
exist and states that firms get advantage to finance with debt and there is a cost of financing of
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debt. Empirically, this theory may explain the differences in debt-to-equity ratios between
industries, but it doesn't explain differences within the same industry. Harris and Raviv (1991)
reviewed the capital structure theories based on four different models: agency costs, asymmetric
information, product/input market interactions, and corporate control considerations (excluding
tax-based theories).
Rajan and Zingales (1995) investigated the determinants of capital structure in USA. They argued
that larger firms tend to be more diversified and fail less often and size may be an inverse proxy
for the probability of bankruptcy. Therefore one can suggest that firms with large size survive with
higher gearing ratios as compared to the small size firms. Other studies (Jensen and Mekling 1976,
Scott 1977, Stiglitz and Weiss 1981, Harris and Raviv 1990) measured tangibility or the fixed asset
ratio as a proxy for collateral value. According to these authors collateral may help moderate the
risks of adverse selection and moral hazards faced by lenders. Bevan and Danbolt (2001) analyzed
that tangibility was positively correlated with the level of long-term debt and
negatively
correlated with short term debt significantly. Barclay et al. (1995) found no significant size effect
and Titman and Wessels (1988) found large companies to have significantly lower gearing ratios
than smaller firms. Bauer (2004), Hall et al. (2004), Danbolt et al. (2000), Bevan and Danbolt
(2001) analyzed the capital structure of European firms with a wide range of firm-specific
variables. Other researchers like Ramlall (2009), Abor (2008), Eldomiaty (2007) among others
also analyzed the capital structure in the African firms.
Mahmud (2003) investigated the relationship between economic growth and capital structure
decisions of firms in three Asian countries: Japan, Malaysia and Pakistan taking several firms
factors (growth, size, and fixed asset ratio, profitability, operating leverage and dividend policy).
Findings show that Japanese and Pakistani firms have high leverage ratios compared to Malaysian
firms. In another study, Bas et al. (2009) comprehensively examined the determinants of capital
structure. Their results demonstrate that large and listed companies in developing countries are
able to finance their operations through an additional debt financing as debt is easily available to
them. Jong et al. (2006) examined the capital structure of several firms from 42 countries,
confirming that the conventional firm-specific factors explain corporate leverage relatively well in
both developed and developing countries. Booth et al. (2001) looked at the corporate leverage in
developing countries including Pakistan and reported that capital structure decisions of firms in
these countries were affected by the same firm-specific factors as in developed countries. Kim et
al. (2006) developed a model of dynamic capital structure and analyzed the effects of determinants
of capital structure of listed Korean manufacturing companies, showing that the firms leverage
may also be affected by size, profitability and growth opportunity.
In context of Pakistan, Mazhar and Nasr (2010) examined the capital structure decisions among the
firms registered on Islamabad Stock Exchange and concluded that all determinants: tangibility,
size, growth rate, tax provision, and profitability are significantly related with the leverage whether
positively or negatively. Moreover, government owned and private companies of Pakistan use
different patterns of financing, and that government owned companies employ higher levels of
debt as compared to private companies. Furthermore, Shah and Khan (2007), Shah and Hijazi
(2004) and Javaid and Iqbal (2007) studied several factors that determine the firms choices of
external financing.
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3. Methodology and Data

To analyze the impact of firm-specific factors on firms' capital structure, we use leverage model
that consists of three dependent variables (total debt-to-equity ratio, total debt-to-assets ratio and
total capitalization ratio) and six explanatory variables (sales growth rate, tangibility of assets,
profitability, dividend pay-out ratio, annual growth in assets and size of the firm). We formulate
three sub-models namely: Model-I, Model-II and Model-III taking three dependent variables. Total
debt-to-equity ratio describes the level of firms financing with a proportion of debt and equity
provided by its creditors and shareholders. It also indicates the creditworthiness and financial risk
of the firm. It is measured by dividing total debt of the firm by its shareholders equity. Total debtto-total assets ratio highlights the relative importance of debt financing to the firm by showing the
percentage of firms assets supported by debt financing. It is measured by dividing total debt of the
firm by its total assets. Total capitalization ratio is measured by dividing total fixed liabilities by
firms total capital.
Several studies have shed light on the specific characteristics of firms and industries that determine
leverage ratios. Following literature, we selected six firm-specific variables, discussed below:
1) Sales growth rate represents the percentage change in the sales of a company in a given year
with respect to the previous year sales. It tells whether the companys sales increase or
decrease during a specific year and also tells the magnitude of change. Previous studies
reported a positive relationship (Abor 2008 and Titman and Wessels 1988).
2) Tangibility refers to fixed assets ratio.4 Firms with high ratio of fixed assets can afford higher
debt due to the higher collateral value of their assets. Consequently a positive relationship is to
be expected.5 Tangible assets can be used as collateral and thus can lower the risk of a creditor
and increases the value of the assets in case of bankruptcy. The more tangible the firms
assets, the greater is its ability to issue secured debt.6 Therefore a positive relationship is
expected (Bevan and Danbolt 2000, Harris and Raviv1990, Rajan and Zingales 1995).
3) Return on assets measures the profitability of the firm, i.e. how efficiently and effectively a
firm can generate its profits by utilizing its total assets. Studies showed that when firms
profitability rises, they prefer to invest internally generated funds instead of external
borrowings. The pecking-order theory also supports the same argument. For that reason, a
negative relationship would be found (Abor 2008, Eldomiaty 2007, Bauer 2004, Booth et al.
2001, Bevan and Danbolt 2000, Rajan and Zingales 1995, and Titman and Wessels 1988).
Contrary to this, profitable firms prefer debt over equity owing to their tax deductibility of
interest payments. Therefore, they can easily obtain loans from the bank due to their ability of
covering interest charges. Same findings are suggested by trade-off theory. Hence, a positive
relationship might be expected (Modigliani and Miller 1963, Danbolt 2000). Return on assets
(profitability ratio) can be calculated by dividing earnings (income) before interest and taxes
over the book value of total assets. The expected sign could be negative or positive.
4) Dividend pay-out ratio is a measure of percentage of earnings, a firm has allocated/distributed
in the form of dividends. Since dividends are included in cash outflow category, firm needs
cash in order to pay-off dividends to its shareholders. A positive relationship is expected
between dividend pay-out ratio and leverage ratios if a firm prefers debt over equity (Mahmud
2003). However sometimes firms have to pay high dividends simply because there are less or
no growth opportunities and it seems to be difficult for a firm to raise its level of long-term
debt. Therefore in order to retain their shareholders, firms have to raise their dividends,
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providing a non-positive relationship with the firms leverage (Abor 2008). Literature shows
that in most of the Asian countries where industries are at growing stages, a positive
relationship is predicted as these firms prefer debt over equity in order to meet their financial
requirements. Dividend pay-out ratio is measured by dividing annual cash dividends by its total
earnings available for shareholders.
5) Growth in assets is the percentage change in the book value of total assets in a given year with
respect to the previous year assets. Firms having more opportunities to grow tend to raise their
equity financing instead of debt financing.7 High growth in firms assets may prefer additional
debt financing instead of issuing new equity. Moreover, firms with higher leverage would
obtain less funding from their shareholders to invest in projects. Therefore, firms with highly
profitable projects prefer equity financing rather than debt. In this case, firms growth rates will
be positively associated with short-term debt ratios.8 Studies show that Pakistani firms avail
growing opportunities by reinvesting their internally generated funds and then by raising their
equity funds (Shah and Hijazi, 2004). This also supports the pecking-order theory hypothesis,
yet it contradicts the extended version of pecking-order theory which suggests that firms
internally generated funds are not enough to fulfil the needs of their growing firms, so they
need to raise their funds through external financing.
6) Size of the firm is another important determinant of capital structure. Size can be measured by
the natural logarithm of the book value of total assets or natural logarithm of total sales. The
general perception about size is that large firms can afford heavy debts due to high assets base.
Hence the previous studies found a positive relationship (Abor 2008, Rajan and Zingales
1995). Other studies found a negative relationship, arguing that large-sized firms with large
asset base utilize their internally generated funds instead of raising their debt level (Mahmud
2003). Following literature we also take natural logarithm of total sales as a measure of firm
size besides we also use natural logarithm of total assets as a proxy to measure the size of the
firm.9
Now we mathematically specify the models below:
Model-I
TDERit = 0 + 1 SGR it + 2 TANit + 3 ROAit + 4 DPRit + 5 GASit + 6 SIZEit + 1t ..
(1)
Model-II
TDARit = 0 + 1 SGR it + 2 TANit + 3 ROAit + 4 DPRit + 5 GASit + 6 SIZEit + 2t .
(2)
Model-III
TCPRit = 0 + 1 SGR it + 2 TANit + 3 ROAit + 4 DPRit + 5 GASit + 6 SIZEit + 3t ....
(3)
Where
i = ith firm from the textile, engineering, sugar, chemical or cement sector
t = time period (2001-2008)
TDER = total debt to equity ratio
TDAR = total debt to total assets ratio
TCPR = total capitalization ratio
SGR = sales growth rate
TAN = tangibility of assets (fixed asset ratio)
ROA = return on asset (profitability of the firm)
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DPR = dividend payout ratio

GAS = annual growth in asset
SIZE = size of the assets (natural log of total assets)
1t, 2t, 3t = the error terms that satisfy the classical regression assumptions
The study sample for the analysis comprises of five sectors from Pakistans large-scale
manufacturing. The study sample has been taken from the balance sheet analysis of the joint stock
companies listed at KSE over the time period 2001 to 2008 (Table 1).
Table 1: Study Sample for Analysis
A panel regression model is applied10 for the purpose of estimation and empirical analysis based
on a balanced panel of all the firms from five sectors for which the data and information was
available in every year. All the observations in the data set are pooled together. Using ordinary
least squares (OLS) approach, Panel Data Analysis technique is applied.11 Panel data analysis is a
comprehensive technique that provides more informative data in a combine set of cross-section
and time-series data set. Panel data is also helpful in minimizing the errors or biases in the data set.
The empirical analysis section includes both descriptive and quantitative analysis. Descriptive
statistics analyze the average values, range and dispersion of values of the underlying variables.
Quantitative analysis includes correlation analysis that will determine the degree of association
between the pairs of explanatory variables whereas regression analysis is done to examine the
relationship between explanatory variables and leverage measures.
4. Empirical Analysis
Except total debt to equity ratio (TDER) and size of the firms (SIZE), arithmetic mean of the other
factors do not differ noticeably implying that the former factors suggest a conspicuous difference
among firms. Since standard deviation is also high degree of variation among the firms.
Table-2 presents the summary of descriptive statistics of dependent and explanatory variables. The
mean values of variables demonstrate the average value attained by each variable within the
manufacturing sectors included in the sample during a year. Total debt-to-equity ratio (TDER)
shows the highest average value in the manufacturing sector as compared to total debt-to-total
assets ratio (TDAR) and total capitalization ratio (TCPR), showing that manufacturing sector in
Pakistan is financed with debt more than three times than equity. Standard deviation among
variables represents the extent of dispersion in the data from the mean value. Similarly, total debtto-equity ratio (TDER) is showing the maximum variations in the data set among other leverage
ratios while sales growth rate (SGR) only shows the maximum extent of variation in the
manufacturing sector as compared to other firm-specific variables. The values of range shows the
difference between the lowest and highest value in the observation a variable attained in the
sample data whereas CV represents the coefficient of variation among the values in the
observations.
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4.2 Correlation Analysis

In order to examine the possible degree of multi-collinearity among the independent variables, a
correlation test has been performed over all the sectors included in this study.
Table 3: Correlation Matrix Firm-specific Factors
Table-3 presents the results of correlation analysis, taking a combined sample of all the firms from
five sectors chosen for the study. The results from the table demonstrate that only tangibility shows
a weak negative and significant association with all variables except sales growth rate (p<0.01 &
p<0.05). Return on assets relates positively with dividend pay-out ratio while negatively with
tangibility (p<0.01). Growth in assets remained insignificant in relation with all other variable
except for the negative association with tangibility (p<0.01) whereas, size of the firm associates
positively with assets growth rate (p<0.01) and negatively with tangibility (p<0.05). The findings
also confirm the nonexistence of multi-collinearity among the explanatory variables.
4.3 Regression Analysis of Leverage Model
Regression analysis technique is utilized for modelling and analyzing the leverage ratios along
with firm-specific factors. Ordinary Least Squares (OLS) Method is applied to formulate the
Leverage Model and is further divided into three sub-models. A regression analysis has been
performed individually on these sub-models. Panel Data Analysis is implied in order to test these
models separately, taking relevant data of the firms from five manufacturing sectors (textile,
engineering, sugar & allied, chemical and cement) listed in Karachi Stock Exchange. The
regression results are shown in Table 4:
Table 4: Regression Results of Model I
Table-4 presents the regression results of Leverage Model I. Sales growth rate (SGR) remained
insignificant while tangibility of assets (TAN) showed a significant positive association in sugar
chemical sectors but negatively related with debt ratio in Cement sector. Return on assets (ROA)
found to be negatively related in some sectors, confirming that more profitable firms prefer to
reinvest their internally generated funds (Booth et al. 2001, Titman and Wessels 1988, Kester
1986, and Rajan and Zingales 1995 etc). Growth in assets (GAS) found to be negatively related in
case of Textile and Sugar sector only, arguing that many Asian firms prefer new equity over debt
so high growth may not be associated with high debt ratio. Dividend pay-out ratio (DPR) and size
of the firm (SIZE) coefficients remained insignificant with the leverage ratio across all the sectors.
The value of F-statistics demonstrates that Model I is significant in Textile, Chemical and Cement
sectors only (p<0.01 & p<0.10).
Table 5: Regression Results of Model II
Table-5 presents the regression results of Leverage Model II. Sales growth rate (SGR) coefficient
is significant and positive in case of Sugar and Cement sectors only while tangibility (TAN) is also
positively related with leverage in case of Textile, Sugar and Chemical sectors. Return on assets
(ROA) coefficient displays similar results as in case of Model I. Dividend pay-out ratio (DPR) and
growth in assets (GAS) related negatively with the leverage ratio only in Textile sector but
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remained insignificant across all the sectors. Size of the firm (SIZE) coefficients is negatively
related in Textile and Sugar sectors (Mahmud 2003) while positively related with leverage in
Chemical sector. The value of F-statistics demonstrates that Model II is found to be statistically
significant in all sectors (p<0.01).
Table 6: Regression Results of Model III
Table-6 presents the regression results of Model III. Sales growth rate (SGR) and dividend pay-out
ratio (DPR) proved to be insignificant across all sectors. Tangibility of assets (TAN) is found to be
positively related with leverage among all sectors except in cement sector in which its relationship
is negative. Growth in assets (GAS) relates negatively while size of the firm (SIZE) relates
positively with leverage in Textile sector whereas remained insignificant among other sectors. The
F-statistics demonstrate that Model III is significant statistically in Textile, Engineering and Sugar
sectors only (p<0.01).
Table 7: Regression Analysis of Leverage Models
Table-7 presents an overall analysis of three leverage models, taking a combined sample of all the
firms from Textile, Engineering, Sugar & Allied, Chemical and Cement sectors. The findings are
somehow encouraging and also consistent with the previous researchers findings. Overall analysis
of all the firms shows that the leverage model with total debt-to-total assets ratio (TDAR) found to
be the most significant amongst all three models. This is one of the important ratio is and many
researchers have utilized this ratio as proxy to measure firms leverage [Eldomiaty (2007),
Mahmud (2003), Danbolt et al. (2000) etc]. Empirical findings show that when all 236 firms are
taken together, all explanatory variables (except SGR) show significant association in case of
Model II (TDAR), with the significance of the model (F=31.8; p<0.01). Model I is also found to be
significant while Model III remains insignificant as none of the explanatory variable is
contributing in TCPR, except TAN.
The empirical findings of all three leverage models are encouraging and also consistent with our
predicted relations of firm-specific variables with the leverage measures, except in case of size of
the firm in which we expected to have a positive relationship on the basis of previous literature but
our findings advocate its significant negative relationship with leverage. Analysis shows that
firms profitability is found to be significant negatively related with leverage measures, revealing
that more profitable firms usually reinvest their additional earnings instead of additional debt
financing, as already discussed in the pecking order theory. Growth in assets, in most cases, also
shows negative relationship with leverage.
Firms whenever raise their funds through debt financing usually invest into tangible assets. Higher
tangibility is also consistent with higher values of collaterals, hence related positively (Jong et al.
2006, Booth et al. 2001, Bevan & Danbolt 2000, Rajan & Zingales 1995 etc.) except for cement
sector where it shows negative association with leverage ratios (Mamud 2003).
Large size Pakistani firms are able to survive with higher leverage ratios as compared to smaller
firms (Shah and Hijazi 2004). Size of the firm (SIZE) coefficient in Textile sector showed different
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signs in analysis. It shows negative relationship with debt-to-total assets ratio whereas, positive
relationship is analyzed with total capitalization ratio, confirming that long-term debt ratio varies
directly with long-term debt financing in Textile sector. Opposing to this, the ratio of debt to total
assets varies inversely with the increasing firms size in Textile and Sugar sectors, consisting with
the previous findings (Mahmud 2003).
Sales growth rate (SGR) coefficient relates positively with debt-to-total assets ratio only in Sugar
and Cement sectors, contrasting with the negative behavior in case of Pakistani firms (Mahmud,
2003). Dividend pay-out ratio (DPR) found to be insignificant in most of the cases.
5. Conclusions
This study is conducted to examine Pakistans competitive performance in five sectors from
Pakistans large-scale manufacturing; i.e. Textile, Engineering, Sugar, Chemical and Cement. A
comprehensive review of existing literature in this context has been conducted, in which their
methodologies and empirical findings are critically analyzed. To analyze the firms capital
structure, we formulated Leverage Model using Ordinary Least Square (OLS) Regression.
Pooled cross-sectional (Panel Data) analysis is applied separately on data samples among different
sectors during 2001 to 2008 inclusive. The main objective of the study is to test whether the
chosen firm-specific factors are the significant determinants of a corporate choice of capital
structure among five sectors. Analysis reveals that variations in capital structure exist not only
among various sectors but it also exists among the individual firms within these sectors. The
leverage ratios also vary across every sector as well as in individual firms.
Empirical analysis of firm-specific factors exhibit that return on assets (ROA) is negatively
associated with debt ratios because that more profitable firms usually reinvest their additional
earnings instead of additional debt financing. Growth in assets (GAS) is also significant and
negatively associated. Tangibility of assets (TAN) as well as Size of the firm (SIZE) displays
mixes results with debt ratios due to variations in firms assets and operations. In case of Dividend
pay-out ratio (DPR), high dividend payments may suggest that firms have to finance its operations
growth from internal resources. However, such results cannot explain to us any clear relationship
and overall we conclude that this factor is found to be less significantly related with debt ratios.
Sales growth rate (SGR) also behaved in similar manner. These findings also show an association
with the previous researchers findings.
Our study also encompasses with some limitations. The study is based on secondary database that
is available online at State bank of Pakistans website. The study sample is restricted to eight years
only; 2001-2008 due to the unavailability of past data. Moreover, only major non-financial sectors
are selected due to the differences in the financial setup of the firms from Pakistans financial
sector. There are several other economic and institutional factors in the economy that might have
an influence on the growth, performance and capital structure decisions of the firms. The prospects
for future research on the analysis of capital structure and influential behavior of several financial
and institutional variables seems to be very encouraging. In our point of view, research-based
capital structure models are very comprehensive in a sense that more valuable and extensive
research can be carried out on them with a wide range of explanatory variables.
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End Notes
Note 1: In this study, large-scale manufacturing is taken into account as our study is based on the analysis of firms
from major listed manufacturing sectors in Pakistan.
Note 2: Large-scale manufacturing contributed to 23% in GDP growth rate during 2009-10 (Government of Pakistan
(GOP), 2009-10).
Note 3: Economists are of the view that Pakistans manufacturing sector faced the most difficult period of its recent
history with a negative growth of 8.2 percent during July-March 2008-09 as compared to the 4.1 percent positive
growth during the last year, 2007-08.
Note 4: Rajan and Zingales, (1995) termed this ratio as tangibility.
Note 5: Mahmud (2003), p.731.
Note 6: See Booth et al., (2001) for their analysis of firm-specific variables in developing countries.
Note 7: As suggested by Rajan & Zingales (1995).
Note 8: As Titman and Wessels, (1988) already analyzed that in case of growing firms, short-term debt ratios are
more likely to relate positively with firms growth rates.
Note 9: Abor (2008), Mahmud (2003), Bauer (2004), Danbolt et al. (2000), Rajan and Zingales (1995).
Note 10: Panel data analysis is a modern technique that involves pooling of all observations on a cross-section of units
over several time periods. It also increases the degrees of freedom by reducing the collinearity among explanatory
variables.
Note 11: A balanced panel data is a set of data that contains equal number of observations in cross-sectional as well
time series units. For further details, see Gujarati and Sangeeta, (2007, p. 654).
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Annexure
Table 1: Study Sample for Analysis
Period of study: 2001-2008
Sector
Sample Data
Total Observations
121 firms
35 firms
32 firms
31 firms
17 firms
236 firms
968 firm-years
280 firm-years
256 firm-years
248 firm-years
136 firm-years
1888 firm-years
Textile
Engineering
Sugar & Allied
Chemical
Cement
Total

Variable
Mean
Median
Std. Dev
CV
Range
MANUFACTURING SECTORS (N=1888)

TDER
TDAR
TCPR
SGR
ROA
DPR
TAN
GAS
SIZE
3.234
0.692
0.486
0.183
0.526
0.024
0.197
0.165
7.137
1.673
0.662
0.260
0.109
0.532
0.026
0.000
0.092
7.008
11.629
0.365
5.395
5.060
0.208
0.365
0.528
0.314
2.261
3.596
0.527
11.10
27.650
0.395
15.21
2.680
1.903
0.317
340.2
4.126
233.2
274.7
1.006
13.10
12.83
4.134
84.75
Table 3: Correlation Matrix Firm-specific Factors

Major Manufacturing Sectors (N=1888)
Variable
SGR
TAN
ROA
DPR
SGR
TAN
ROA
DPR
GAS
SIZE
1.000
-0.006
(0.805)
-0.001
(0.955)
-0.006
(0.805)
1.000
-0.180**
(0.000)
-0.157**
(0.000)
1.000
0.073**
(0.001)
1.000
0.020
-0.081**
0.039
-0.001
1.000
(0.396)
(0.000)
(0.089)
(0.962)
-0.011
-0.058*
0.042
0.028
0.122**
SIZE
(0.647)
(0.012)
(0.066)
(0.220)
(0.000)
Note-1: * and ** Correlation is significant at 5 percent and 1 percent level respectively.
Note-2: Explanatory variables: Sales growth (SGR), Tangibility (TAN), Return on assets (ROA),
Dividend pay-out ratio (DPR), Growth in assets (GAS), Size of the firm (SIZE)
GAS
1.000
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Table 4: Regression Results of Model I

Model I: TDERit = 0 + 1 SGR it + 2 TANit + 3 ROAit + 4 DPRit + 5 GASit + 6 SIZEit + 1t
Textile
Engineering
Sugar
Chemical
Cement
Constant
4.353
(2.501)
[1.74]*
1.886
(2.253)
[0.837]**
-7.345
(15.11)
[-0.486]
1.882
(0.412)
[4.571]***
12.98
(4.952)
[2.622]***
SGR
-0.006
(0.049)
[-0.121]
-0.002
(0.114)
[-0.013]
-1.239
(2.928)
[-0.423]
-0.061
(0.126)
[-0.487]
-1.143
(0.938)
[-1.219]
TAN
2.457
(2.004)
[1.226]
5.430
(3.836)
[1.416]
12.94
(8.431)
[1.534]*
0.443
(0.416)
[1.064]*
-7.584
(3.775)
[-2.009]**
ROA
-0.127
(0.646)
[-0.197]
-3.676
(5.209)
[-0.705]
-16.02
(13.75)
[-1.166]
-5.739
(0.741)
[-7.743]***
-16.79
(5.062)
[-3.317]***
DPR
-0.965
(0.715)
[-1.35]*
-1.050
(2.036)
[-0.516]
-0.668
(6.213)
[-0.107]
-0.253
(0.228)
[-1.109]
-0.338
(0.453)
[-0.745]
GAS
-2.143
(1.090)
[-1.965]**
-1.948
(1.549)
[-1.257]
10.98
(5.718)
[1.919]*
-0.120
(0.418)
[-0.288]
-0.864
(1.533)
[-0.564]
SIZE
-0.254
(0.289)
[-0.877]
-0.007
(0.126)
[-0.055]
0.4784
(1.9797)
[0.242]
0.038
(0.055)
[0.676]
-0.451
(0.655)
[-0.689]
Obs.
N=968
N=280
N=256
N=248
N=136
R
0.241
0.129
0.176
0.387
0.228
D-W Stat
1.890
1.747
1.999
0.841
1.906
SE
9.719
10.520
21.901
1.412
6.762
F-Stat
1.839*
1.378
1.617
16.195***
3.011***
Note-1: *, ** and *** Significant at 10 percent, 5 percent and 1 percent level respectively.
Note-2: Regression Coefficients in bold, Standard Errors in parenthesis & t-statistic in brackets
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Table 5: Regression Results of Model II

Model II: TDARit = 0 + 1 SGR it + 2 TANit + 3 ROAit + 4 DPRit + 5 GASit + 6 SIZEit + 2t
Textile
Engineering
Sugar
Chemical
Cement
0.732
(0.060)
[12.3]***
0.854
(0.060)
[14.32]***
2.711
(0.376)
[7.206]***
0.502
(0.042)
[11.91]***
1.246
(0.162)
[7.704]***
SGR
-0.001
(0.001)
[-0.398]
-0.0004
(0.003)
[-0.121]
0.237
(0.073)
[3.249]***
-0.007
(0.013)
[-0.539]
0.166
(0.031)
[5.411]***
TAN
0.168
(0.048)
[3.511]***
0.032
(0.102)
[0.314]
0.756
(0.210)
[3.602]***
0.080
(0.043)
[1.878]*
-0.154
(0.123)
[-1.249]
ROA
-0.023
(0.015)
[-1.495]
-1.465
(0.054)
[-10.65]***
-2.391
(0.342)
[-6.99]***
-0.883
(0.076)
[-11.64]***
-0.968
(0.165)
[-5.852]***
DPR
-0.052
(0.017)
[-3.052]***
-0.111
(0.054)
[-2.064]
-0.171
(0.155)
[-1.107]
-0.020
(0.023)
[-0.868]
-0.014
(0.015)
[-0.929]
GAS
-0.121
(0.026)
[-4.653]***
-0.029
(0.041)
[-0.696]
0.079
(0.142)
[0.552]
0.003
(0.043)
[0.071]
0.007
(0.050)
[0.143]
SIZE
-0.015
(0.007)
[-2.15]**
-0.003
(0.003)
[-0.874]
-0.328
(0.049)
[-6.647]***
0.013
(0.006)
[2.236]**
-0.062
(0.021)
[-2.892]
Obs.
N=968
N=280
N=256
N=248
N=136
Constant
R
0.269
0.392
0.403
0.457
0.413
D-W Stat
0.621
0.686
0.700
0.616
0.956
SE
0.231
0.277
0.545
0.145
0.221
F-Stat
11.85***
29.31***
27.86***
33.86***
15.11***
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Table 6: Regression Results of Model III

Model III: TCPRit = 0 + 1 SGR it + 2 TANit + 3 ROAit + 4 DPRit + 5 GASit + 6 SIZEit + 3t
Textile
Engineering
Sugar
Chemical
Cement
Constant
-0.261
(0.157)
[-1.66]*
0.144
(0.126)
[1.147]
-0.818
(0.677)
[-1.208]
-2.253
(4.314)
[-0.522]
0.057
(0.430)
[0.132]
SGR
-0.001
(0.003)
[-0.283]
0.002
(0.006)
[0.302]
0.040
(0.131)
[0.306]
-0.234
(1.316)
[-0.178]
-0.025
(0.081)
[-0.303]
TAN
0.726
(0.126)
[5.77]***
0.719
(0.290)
[3.365]***
1.552
(0.378)
[4.109]***
7.688
(4.359)
[1.764]*
-0.953
(0.329)
[2.91]***
ROA
-0.041
(0.041)
[-1.01]
-0.967
(0.290)
[-3.33]***
-1.487
(0.616)
[-2.415]**
7.176
(7.764)
[0.924]
0.289
(0.440)
[0.658]
DPR
-0.048
(0.045)
[-1.071]
-0.085
(0.114)
[-0.75]
-0.038
(0.278)
[-0.138]
3.406
(2.391)
[1.425]
-0.001
(0.039)
[-0.026]
GAS
-0.128
(0.069)
[-1.872]*
-0.099
(0.086)
[-1.152]
-0.021
(0.256)
[-0.083]
-3.413
(4.374)
[-0.78]
0.003
(0.133)
[0.026]
SIZE
0.041
(0.018)
[2.238]**
-0.002
(0.007)
[-0.337]
0.060
(0.089)
[0.674]
-0.174
(0.581)
[-0.299]
-0.042
(0.057)
[-0.74]
Obs.
N=968
N=280
N=256
N=248
N=136
R
0.441
0.366
0.416
0.124
0.167
D- W Stat
1.661
1.527
1.378
2.063
1.957
SE
0.611
0.586
0.981
14.787
0.587
F-Stat
7.380***
9.054***
5.396***
1.001
1.535
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Table 7: Regression Analysis of Leverage Models

Model I: Total debt-toequity ratio (TDER)
Model II: Total debt-toassets ratio (TDAR)
Model III: Total

capitalization ratio (TCPR)
Constant
2.157
(1.169)
[1.846]*
0.650
(0.035)
[18.53]***
-0.396
(0.544)
[-0.727]
SGR
-0.007
(0.053)
[-0.141]
0.001
(0.002)
[0.516]
0.00005
(0.025)
[0.004]
TAN
3.738
(1.326)
[2.819]***
0.326
(0.040)
[8.193]***
1.461
(0.617)
[2.368]**
ROA
-0.706
(0.746)
[-0.947]*
-0.100
(0.022)
[-4.465]***
0.131
(0.347)
[0.378]
DPR
-0.879
(0.513)
[-1.714]*
-0.073
(0.015)
[-4.740]***
0.308
(0.239)
[1.293]
GAS
-0.734
(0.861)
[-0.853]
-0.097
(0.026)
[-3.766]***
-0.330
(0.400)
[-0.825]
SIZE
-0.081
(0.119)
[-0.679]
-0.014
(0.004)
[-3.795]***
0.014
(0.055)
[0.260]
N
1888
1888
1888
R
0.351
0.492
0.144
D-W Stat
1.905
1.497
2.004
SE
11.597
0.348
5.395
F-Stat
2.910***
31.798***
1.256
326
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Comparison of the multiple intelligences of the students
whose mothers are illiterate and graduate
MAY 2011
VOL 3, NO 1
Gulap Shahzada (Corresponding & Principal author)

Institute of Education and Research
University of Science and Technology, Bannu, Pakistan
Dr. Safdar Rehman Ghazi
Habib Nawaz
Institute of Management Sciences
Fayyaz Khan
SaifUllah
Abstract
The paper aimed at to investigate the difference between the students whose mothers are illiterate
and graduate. Central tendency, mean score was used in order to measure students self-perceived
multiple intelligences and independent-t test was used for mean comparison of the multiple
intelligences of the students. Results of the study revealed that there is a significant difference
between multiple intelligences (verbal/linguistic, logical/mathematical, visual/spatial, musical,
bodily/kinesthetic, interpersonal, intrapersonal, naturalistic intelligence) of the students whose
mothers are illiterate and graduate. The researcher recommended that the government and all
stakeholders in education sector should make effort to implement its policy on basic education for
all and thus create an enlighten society in which mothers would be educated enough to have a
positive influence on their children intelligence.
Key words. Mother, Illiterate, Graduate, Multiple intelligences
1. Introduction
The theory of multiple intelligences was created after the pull in the early 1900s to better
understand human intelligence. This was the time in which the IQ tests were familiar. However,
these IQ tests only tested a very narrow group of skills, similar to standardized tests, and Howard
Gardner decided that intelligence should not be regarded in such an abbreviated way. Instead
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intelligence had more to do with solving problems and fashioning products in a context-rich and
naturalistic setting (Armstrong, 1994).
This was the point when Gardner (19983) identified eight different intelligences that were
useful in mapping out a broad range of abilities. The eight intelligences are as listed below:
(1)
Linguistic intelligence: The ability to use word most effectively either orally or in writing.
(2)
Logical/Mathematical Intelligence: The capacity to use numbers effectively and reason
well.
(3)
Spatial intelligence: The capacity to understand the visual-spatial world accurately and
perform transformations on those perceptions.
(4)
Bodily/Kinesthetic intelligence: Expertise in using ones whole body to express ideas
and feelings and facility in using ones hand to produce or transform things.
(5)
Musical intelligence: The ability to perceive, discriminate, transform, and express
musical forms.
(6)
Interpersonal intelligence: The capacity to perceive and make distinctions in the moods,
intentions, motivations, and feelings of other people.
(7)
Intrapersonal intelligence: Self-knowledge and the ability to act adaptively on the basis of
that knowledge.
(8)
Naturalist Intelligence: Expertise in the recognition and classification of the numerous
specialsthe flora and faunaof an individuals environment. (Armstrong 1999)
To what extent does an increase in maternal education improve childrens academic
performance? That is, if a program could somehow increase mothers schooling, how much benefit
would we expect to see in their childrens cognitive development? Would these benefits be found
if the mother obtained non-traditional forms of education such as Adult Basic Education or
vocational training? Positive correlations between mothers educational attainment and childrens
well being, and particularly school outcomes and cognitive development, are among the most
replicated results from developmental studies (Bee et al., 1982; Haveman & Wolfe, 1995). The
processes by which maternal education affects childrens development may be both direct and
indirect. Direct effects may consist of enrichments to the childs home learning environment and
mother-child interactions (Bee et al., 1982; Richman, Miller & Levine, 1992). Maternal education
may also benefit children indirectly by increasing maternal earnings and family income.
Nevertheless, surprisingly little is known about the causal nature of this relationship. Most studies
estimating associations between maternal education and child outcomes are correlation and
therefore likely biased by the omission of many spurious factors (e.g., maternal personal
endowments such as verbal ability) that could be driving the maternal education-child development
association.
Belsky (1984) pioneered theories of the processes of competent parental functioning. His
model focused on factors affecting parental behaviour and how such factors affect child-rearing,
which in turn influences child development. The model presumes that parenting is directly
influenced by forces emanating from within the individual parent (personality), within the
individual child (child characteristics of individuality), and from the broader social context in
which the parent-child relationship is embedded. Specifically, marital relations, social networks,
and jobs influence individual personality and general psychological well-being of parents and,
thereby, parental functioning and, in turn, child development.
Through an intensive literature search, (Belsky 1984) drew the following conclusions regarding the
determinants of parenting.
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Parenting is multiply determined by characteristics of the parent, of the child, and of

contextual subsystems of social support; These three determinants are not equally influential
in supporting or undermining parenting; and Developmental history and personality shape
parenting indirectly, by first influencing the broader context in which parent-child relations
exist (i.e., marital relations, social networks, occupational experience).
There is evidence that parents' education will affect students' academic achievement in
Mathematics. According to Grissmer (2003), parents' level of education is the most important
factor affecting students' academic achievement. Taiwo (1993) submits that parents' educational
background influence the academic achievement of students. Musgrave (2000) states that a child
that comes from an educated home would like to follow the steps of his/her family and by this,
work actively in his/her studies. Onocha (1985) concludes that a child from a well educated family
with high socio-economic status is more likely to perform better than a child from an illiterate
family. Similar results were found by Teese (2004), in his analysis of the students' performance
where he found clear and consistent trends for children from lower socio-economic background.
Coleman (1998) state that the relationship between socio-economic disadvantage and learning
outcomes has been accepted almost as an article of faith by educators.
A further consideration is how parental attitudes influence the-child cognitive development,
although models of family patterns typically address this relationship, few empirical
prospective longitudinal studies have
been conducted. A study by Engel and Keane
illustrates the influence which maternal attitudes may have on a child's intelligence. In their study
a group of 44 black males were followed from birth to 66 months, with assessment of intellectual
development at 1 4 , 18, 22, and 66 months: Mothers were rated for "psychological mindedness,"
the extent to which one perceives others to have psychological, as well 'as physical, needs. The
'
mothers' psychological mindedness when the boys were 14 months was found to profit the
boys' intellectual development, as measured by the Bayley Mental Scale, at 22 months (r `4 6 , 2
<.001) and at 66 months, as measured by the WPPSI (r - .48,.Q <.05). These findings suggest that
intervention aimed at raising a mother's psychological mindedness may in turn positively
influence her child's intelligence.
Maternal education has been deemed by some of the single best predictor of childrens
later intellectual functioning because of its ability to consistently predict childrens cognitive and
academic outcomes across different measures and populations (Bee et al., 1983; Smith et al.,
1997). Duncan and Brooks-Gunn (1997) coordinated analyses among 12 groups of researchers
working with different developmental datasets. Eight of the datasets included measures of both
maternal education and childrens academic or cognitive outcomes at various points in
childhood and adolescence. Analyses conducted with all of these datasets indicated that maternal
education was positively and significantly associated with childrens cognitive and educational
outcomes (Duncan & Brooks-Gunn, 1997). For example, Smith, Brooks-Gunn and Klebanov
(1997) conducted analyses with two samples of young children from different datasets. They
found that maternal education was positively associated with measures of childrens intelligence
at 2-, 3-, and 5- years of age in the Infant Health and Development Study sample, and childrens
verbal ability at 3- and 4- years of age, as well as math and reading achievement at 5- and 8years of age in a sample drawn from the National Longitudinal Survey of Youth.
Maternal education is associated not only with childrens academic achievement, but also
their academic difficulties such as grade retention and special education placement. Both grade
retention and special education placement in elementary school are an indication of severe
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academic problems (Dauber, Alexander, & Entwisle, 1993). Holloman, Dobbins and Scott (1998)
found that maternal education was negatively associated with special education placement by 10
years of age, particularly for a learning disability. Children of mothers with less than a high
school diploma were twice as likely to be in special education as children of mothers with a high
school diploma. Byrd and Weitzman (1994) found that children of mothers who did not graduate
from high school were 1.4 times more likely to repeat kindergarten or first grade compared to
children of mothers who had graduated from high school. Despite being used as tools for
remediation, grade retention and special education placement do not seem to improve, and may
even harm, a students subsequent educational achievement (Reynolds & Wolfe, 2000; McCoy &
Reynolds, 1999).
Statement of the problem
The problem under study was to find out the differences between multiple intelligences of
the students whose mothers are illiterate and graduate.
Significance of the study
Understanding of multiple intelligences and the influence of mother education on
students multiple intelligence may provide us with opportunities to look differently at the
students. Parents can make efforts to provide encouraging environment for their children
intelligences rather than to impose their own wishes or decision on them. Children can lead
towards self actualization if parents care for their individual potentialities. Education
stakeholder will know the role and importance of mother education and government of Pakistan
may think seriously regarding female education as female literacy rate is alarmingly low.
Objectives of the study
i.
To investigate the differences between multiple intelligences of the students whose
mothers are illiterate and graduate?
ii.
To give recommendations and suggestions in the light of the findings of the study.
Research question
i.
Is there any difference between the multiple intelligences of the students whose
mothers are illiterate and graduate?
Population
Students enrolled in 1st year, in all government degree colleges, session 2010, in district
Bannu constituted population of the study.
Sample
A Multistage sampling method following proportion allocation technique 379 male
students and 335 girls students total 714 students were randomly selected as a sample of the study
form ten government degree colleges of district Bannu.
Multiple intelligence inventory based on Howard Gardner multiple intelligences theory,
developed by Armstrong (1994) was used to measure students multiple intelligences. This
inventory contains 40 items five statement for measuring each intelligence.
For the reliability and validity and to remove language ambiguity the multiple intelligence
inventory was personally distributed among 50 subjects as a pilot run. The subjects were part of
the population but were not included in the selected sample of the study. The reliability of forty
items at Cronbachs alpha obtained was .784 which is commendable.
3. Data Analysis
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The collected data was entered in SPSS-16 and was analyzed using appropriate statistical
tests. The central tendency and variability of the multiple intelligences of the sampled students was
measured using Mean and SD respectively. Independent Samples t- test was used to compare the
mean scores of multiple intelligences of the students whose mothers were illiterate and gradate.
4. Findings of the study
Mean scores of verbal/linguistic intelligence of the students whose mothers are illiterate
and graduate are 3.17, 335 and SD .72, .73 with p and t value .02, -2.22 whish show that there is
significant difference between the linguistic intelligence of the students whose mothers are
illiterate and graduate. This difference is in favour of the later students.
Mean score of the students logical/mathematical intelligence whose mothers are illiterate
and graduate are 2.90, 3.20 and SD .87, .87 with p and t value .01, -2.40 which show that there is a
significant difference between the logical/mathematical intelligence of the students whose mothers
are illiterate and graduate. This difference is in favour of the later students.
Mean scores of the students visual/spatial intelligence whose mothers are illiterate and
graduate are 3.13, 3.04 and SD .71, .62 with p and t value .26, 1.11 which show that there is
significant difference between visual/spatial intelligence of the students whose mothers are
illiterate and graduate.
Mean scores of the students musical intelligence whose mothers are illiterate and graduate
are 2.03, 2.26 and SD .73, .75 with p and t value .00, -2.74 which show that that there is significant
difference between musical intelligence of the students whose mothers are illiterate and graduate.
This difference is in favour of later students.
Mean scores of the students bodily/kinesthetic intelligence are 3.58, 3.71 and SD .72, .69
with p and t value .12, -1.51 which show that there is significant difference between the
bodily/kinesthetic intelligence of the students whose mothers are illiterate and graduate. This
difference is in favour of the later students.
Mean scores of the students interpersonal intelligence whose mothers are illiterate and
graduate are 3.35, 3.58 and SD .69, .61 with p and t value .00, -3.00 which show that there is a
significant difference between interpersonal intelligence of the students whose mothers are
illiterate and graduate. This difference is in favour of the later students.
Mean scores of the intrapersonal intelligence of the students whose mothers are illiterate
and graduate are 3.37, 3.57 and SD .61, .55 with p and t value .00, -3.00 which show that there is
significant difference between the students intrapersonal intelligence whose mothers are illiterate
and graduate. This difference is in favour of the later students.
Mean scores of naturalistic intelligence of the students whose mothers are illiterate and
graduate are 3.23, 3.58 and SD .67, .75 with p and t value .06, 1.82 which show that there is a
significant difference between the naturalistic intelligence of the students whose mothers are
illiterate and graduate. This difference is in favour of later students.
5. Conclusions
There is a significant difference between the multiple intelligences (verbal/linguistic,
logical/mathematical, visual/spatial, musical, bodily/kinesthetic, interpersonal, intrapersonal, and
naturalistic) of the students whose mothers are illiterate and graduate.
6. Recommendations
The government and all stakeholders in education sector should make effort to implement
its policy on basic education for all and thus create an enlighten society in which mothers would be
educated enough to have a positive influence on their children intelligence.
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References
Armstrong, T. (1994). Multiple Intelligences in the Classroom. Alexandria, VA: Association for
Supervision and Curriculum Development.
Armstrong, T. (1994). Multiple Intelligences: Seven ways to approach curriculum. Educational
Leadership.
52(3).
Retrieved
on
May,
12,
2001,
from:
http://www.ascd.org/readingroom/edlead/9411/armstrong.html
Bee, H. L., Barnard, K. E., Eyres, S. J., Gray, C. A., Hammond, M. A., Spietz, A. L., Snyder, C., & Clark,
B. (1982). Prediction of IQ and language skill from perinatal status, child performance, family
characteristics, and mother-infant interaction. Child Development, 53, 1134-1156.
Dauber, S. L., Alexander, K. L., & Entwisle, D. R. (1993). Characteristics of retainees and early precursors
of retention in grade: Who is held back? Merrill-Palmer Quarterly, 39, 326-343.
Duncan & J. Brooks-Gunn (Eds.), The consequences of growing up poor (pp. 133-189). New York: Russell
Sage.
Duncan, G. & Brooks-Gunn (Eds). (1997). The consequences of growing up poor. New York, Russell Sage
Foundation.
Gardner, H. 1983. Frames of Mmind: A Theory of Multiple Intelligences. London: Fontana Press.
Gardner, H. 1999. Intelligence Reframed. New York: Basic Books
Grissmer, R. H. 2003. Beyond Helping with Homework: Parents and Children Doing Mathematics at
Home. Teaching Children Mathematics, 14, 120 - 131.
Haveman, R., & Wolfe, B. (1995). The determinants of childrens attainments: A review of methods and
findings. Journal of Economic Literature, 23, 1829-1878.
Hollomon, H. A., Dobbins, D. R., & Scott, K. G. (1998). The effects of biological and social risk factors on
special education placement: Birth weight and maternal education as an example. Research in
Developmental disabilities, 19, 281-294.
McCoy, A. R., Reynolds, A. J. (1999). Grade retention and school performance: An extended investigation.
Journal of School Psychology, 37, 273-298.
Onocha, C.O. 1985. Pattern of Relationship between Home and School Factors and Pupils' Learning
Outcomes in Bendel Primary Science Project. Journal of Science Teachers Association of Nigeria
(STAN). 23(1), 56-63.
Reynolds, A. J., & Wolfe, B. (1999). Special education and school achievement: An exploratory analysis
with a central-city sample. Educational Evaluation and Policy Analysis, 21, 249-269.
Richman, A. L., Miller, P. M., & LeVine, R. A. (1992). Cultural and educational responsiveness in maternal
responsiveness. Developmental Psychology, 4, 614-621.
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Smith, J. R., Brooks-Gunn, J., & Klebanov, P. K. (1997). Consequences of living in poverty for young
childrens cognitive and verbal ability and early school achievement. . In G.
Taiwo, H. G. 1993. Family Environment and Educational Attainment of Some School Children in Western
Nigeria. Journal of the Science Teachers Association of Nigeria, 46 (2), 107-116.
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Annexure
Intelligence
Mothers
education
Mean
SD
P
value
T
value
Verbal/linguistic
Illiterate
Graduate
535
93
3.17
3.35
.72
.73
.02
-2.22
Logical/mathematical
Illiterate
Graduate
535
93
2.90
3.20
.87
.87
.01
-2.40
Visual/spatial
Illiterate
Graduate
535
93
3.13
3.04
.71
.62
.26
1.11
Musical
Illiterate
Graduate
535
93
2.03
2.26
.73
.75
.00
-2.74
Bodily/kinesthetic
Illiterate
Graduate
535
93
3.58
3.71
.72
.69
.12
-1.51
Interpersonal
Illiterate
Graduate
535
93
3.35
3.58
.69
.61
.00
-3.00
Intrapersonal
Illiterate
Graduate
535
93
3.37
3.57
.61
.55
.00
-2.97
Naturalistic
Illiterate
Graduate
535
93
3.23
3.58
.67
.75
.06
-1.82
S.
No
Multiple intelligences of the students whose mothers illiterate and graduate (N=714)
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Impact of Corporate Governance on Financial Performance: Evidence from textile

industry of Pakistan.
Dr. Mubbsher Munawar Khan, Zia-ur-Rehman,
M. Khyzer Bin Dost, Mubashra Mumtaz
Abstract
This study is an effort to explore link between corporate governance practices and financial
performance of listed Textiles companies of Pakistan. For this paper Financial Performance is
selected as dependent variable measured with its three dimensions .i.e. Return on equity, Price
earnings ratio and Earning per share. Corporate Governance is taken as independent variable
measured with its following dimensions (Risk Management, Internal Audit, Accountability,
Ownership structure, Directors remuneration, Dividend Policy and Sustainability). Five- point
Lickert Scale questionnaire was employed to collect data for imploring feedback showing
reliability above 70%. Afterwards quantitative techniques were used for data analysis to scrutinize
impact of variables. In this way connection among corporate governance practices and financial
performance is measured. Eight companies sample of was selected. Conclusion divulged that
dynamics of ownership structure, internal audit, accountability and sustainability are directly
related with financial performance, whereas directors remuneration, risk management and
dividend policy are inversely related with financial performance of selected companies.
Keywords: Return on equity, Price Earnings ratio and Earning per share, Corporate Governance,
Risk Management, Internal Audit, Accountability, Ownership structure, Directors remuneration,
Dividend Policy and Sustainability.
Since 1980 companies are directed and controlled with a new paradigm Corporate
Governance (Cadbury, 1992). Governance and stewardship has become an important scenario and
standing issue between shareholders and stakeholders. In recent years from the moment when
management of firm and its ownership being separated it becomes crucial for the shareholders to
establish and accomplish a system that scrutinize the managerial activities. A competent system of
governance helps to balance the rights of both managers and owners and induce the management
to make investment in the projects and schemes which are beneficial for overall business (Vishny
& Shleifer, 1997). Corporate Governance is a construct much used in economics literature. It is
used to secure/motivate management by exercising enticement mechanisms, such as contracts,
organizational designs and legislation (Mathiesen, 2002).
Ownership structure
Ownership structure is a vital element impacting financial performance in cram of
corporate governance and has obtained substantial significance since (Means & Berle, 1932)
recognizing the importance of classification of control and ownership of 200 big companies in US.
The ownership configuration diverges from country to country and is affected by capacity of
company, instability of the operational settings of corporation, stricture and different departments
particular behaviors (Demsetz & Lehn 1985). The investor rights protections power and
imposition of the privileges establish the model of ownership concentration (Glavic, P. 2005).
Ownership structures play an important role for tenacity of the agency problem and shaping the
errands and function of board of directors (John & subnet, 1998). Internal and external
mechanisms of corporate board of directors play vital role in resolving complications and conflicts
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arising in the areas of financial reporting between the of shareholders and managers mangers
exercise their powers for their own well being at the expenditure of investors and involve in many
immoral activities such as manipulation of accounts, unethical financial reporting etc (Ridley, J. &
Chambers, A, 1998). Board of directors performs two imperative roles in an organization one
monitoring management on behalf of shareholders and other making the availability of resources
(Tsui & Gull, 2000). Board Capital is directly associated with both functions of board, it consists
of experience, level of skills and strategically wisdom (Hillman & Dalziel, 2003). There is direct
linkage between board capital and performance of organization. Implication of corporate
governance practices improves the performance of board of directors and ultimately the graph of
firms progress moves upward (Shaheen & Nishat, 2004).
(Payne, et al. 2009) scrutinizes the connection between board effectiveness and firms
financial performance and recommended five characteristics of a team: power, knowledge
opportunity, information, and incentives, and squabble that these elements lead to board
effectiveness and promote financial performance of organization.
Accountability
(Luo, 2005) propounded that there exists orderly relationship between corporate
accountability and firms performance as accountability principally consists of disclosure and
transparency of financial reporting and strategic decisions. Further accountability reduces the
monitoring cost, resolve agency problem and improve market functions. (Ridley.J, 1993) argues
that accountability is the key mainstay of corporate governance and crucial for fair financial and
economic growth. The terms of Accountability and transparency were intimately used to
strengthen of corporate governance perception. At present these are coupled with provisions like
disclosure, competence, financial system, efficiency and competence. These ideas primarily
inclined executive and administrative practice and afterward created unrestricted policy argument,
eventually turned into fundamental concept of corporate regulations intended to put managers
under strong control of shareholders (Miller. L, 1999). Corporate enticement for unethical
activities will be more when irregularity of the information about firms earning is high.
Accountability therefore provides persistent guide to information symmetry, ethical reporting, and
presents firms crystal clear picture of earning (Kim & Joe, 2008).
Directors Remuneration
Remuneration is the financial and/or monetary complement of a job carried out by an individual,
divided into direct and indirect compensation (Dutra, 2002). Talha, et al. (2009) declared that there
exists direct relationship between remuneration committee and corporate governance committee.
These committees play a vital role in fixing the directors remuneration. So, corporate governance
practices can be referred as best source to resolve to the problem regarding remuneration of
directors. Fair and true policy of remuneration plays a remarkable role in progressive financial
performance. In epistemology directors remuneration as factor has extensively been discussed
being an integral part of corporate governance with more attention on the pay for performance as
compare to other manage-able factors (Gibbons & Murphy 1990). There is a direct affiliation
among remuneration of executives and financial performance. They present this relationship by
taking into consideration the manufacturing companies (Krauter & Sousa, 2009).
Risk Management
There is logical relation between corporate governance, risk and accounting management.
Managerial accounting and risk management are an integral part of decision making and firms
action plans. It is becoming essential to reinforce and improve the decision making process by
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implementing corporate governance practices (Seal, 2006). Risk is a chance of making profit as
well as possibility of loss. Entire business cycle budges around this leeway of occurrence. So risk
becomes an indispensable constituent of any business and administration risk happens to be main
job and art of management (Winkle, 2005). (Knight, 1921) is considered as a founder of presenting
the concept of risk; he identified the distinguishing characteristics between quantifiable or
assessable elements and subjective elements. Assessable elements referred as risk while subjective
elements are considered as a source of uncertainty. Risk as an exposure to a proposition of which
one is uncertain and step by step process of managing risk is called Risk management (Holton,
2004). To manage risk properly, a comprehensive framework of risk management is presented as
Type of risks including political, economic, financial and operational. Impact on business firm
including, reduce investor confidence, increase uncertainty, regulation and cost. Managerial
response to risk impacts: policy toward corruption, financial instrument, shareholders vs.
stakeholders interest, lobbying and intelligence and mode of entry. Framework can be altered
according to country and firms environmental conditions (Wyk, et al, 2004)
Internal Audit
Audit is a system which defends the investors concern by solving the agency impasse and
it is an element of corporate governance that controls the divergence of interest between managers
and investors (Paul A. Griffen et al., 2008). Internal audit plays an important task in recognizing
the potential risks and opportunity. It appraises the firm financial and operational performance
through accounting data. It identifies the areas not conforming to rules, regulations and dynamics
which create hurdles in way of achieving strategic business aims (Toshiyuki sue yoshi et al.,
2008). Internal audit is important for external audit, as internal audit has more information about
firms operations, financial position, processes, internal control system. Reports prepared by the
internal audit department are a major source of assistance for external auditors (Sandra Ho et al.,
2010). The independence of audit department is indispensable because independence of internal
audit results in enhanced monitoring of financial as well as operating performance of organization.
Independence of audit department is interlinked with better corporate governance (Scott N.
Bronson et al., 2009).
Dividend Policy
Dividend policy is product of compliance with practices of corporate governance. This
policy adheres a critical role in building reputation of firm and represents a true picture of its
financial position. (Lintner, 1956) conduct a research and he developed a model consisting of six
variables for dividend policy: financial consistency, type of ownership, size of the firm,
expenditures resulting from usage of equipment and plant, intention to take the help from external
finance resources and utilize the stock dividend.
Dividend policy is a mechanism which is used to resolve agency problem as there exist a
disagreement of interest between large and small shareholders especially at event of deciding
dividend payout ratio. Large shareholders reduce the dividend payout ratio towards small holding
shareholders, the mechanisms of paying dividend is different in different ownership structures. So
compliance with corporate governance regulations regarding dividend policy and rights of
stakeholders help us to get rid of such type of conflicting situation (Klaus Gugler et al., 2002). A
negative relationship is seen between governance of a firm and dividend payout policy.
Governance structure facilitates to diminish agency problem and ensure that equity holders have
absolute legal safety. Profit of the company will be allocated in schemes or proposals that will
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generate profit for company as whole not only form managers. So profit of company should be
endowed in projects rather than paying out dividends (Todd Mitton, 2004).
Sustainability
Company policies and actions adopted to congregate requirements of venture and its stakeholders,
to protect, sustain and enhance the human and natural resources (Deloitte & Touche (1992).
Corporate sustainability is a valued tool for an organization in to cut down its cost, identifying and
mitigating risks, produce innovative products and adjust mechanism of organizational structure
according to changing requirements of business (Azapagic, 2003), Sustainability reporting has two
important functions: It evaluates the current situation of firms social, economic and environmental
dimensions and communicates sustainability progress to firms stakeholders (Hamman, 2003). In
building sustainability task of social responsibility is considerable. Development of sustainability
does not consist only on corporate social responsibility and economic competence rather it requires
active contribution of government, society and other regulatory agencies. Malovics et al. (2008).
Research methodology of the project is described below in the figure1.
Fig 1. RESEARCH METHODOLOGY
Research model
Ownership
Structure
Accountability
Corporate
Governance
Director's
Remuneration
Return on Equity
Financial
Performance
Risk
Management
Price/Earning
ratio
Earning per
share
Internal Audit
Dividend
Policy
Sustainability
ANALYSIS AND INTERPRETATION OF DATA
The data was collected to investigate that whether Code of Corporate Governance affect the
pecuniary performance of selected organization or not. Analysis and interpretation of data is based
on following independent variable i.e. ownership structure, accountability, directors remuneration,
internal audit, risk management, dividend policy, sustainability and three dependent variable
(return on equity, price earning ratio and earning per share ). The data was collected through
personally administered questionnaire of 32 statements by the researcher. Questionnaires were
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distributed in 8 companies by the researcher which was filled by the respondents. The statements
of questionnaire were scored using five-point Likert type rating scale. The data so collected by the
researcher was entered into the statistical software SPSS and was analyzed with the help of this
software. The analysis of data was presented in the form of tables and diagrams. Regression
analysis was conducted to find out whether Corporate Governance affects the firms performance
or not. One Sample Test was also used to see up to what extend the provision of Code is
implemented in target population.
Empirical Results:
Table 4.1.1 shows that the dependence of Price earning Ratio 2007 (dependent variable) on
directors remuneration and overall corporate governance (independent variable. Highest R value
of .90 shows the goodness of the model. Regression analysis shows that 81% change in dependent
variable is due to the independent variable, while remaining 19% is unexplained variability.
Table 4.1.1 represents Regression coefficients i.e. Beta () of overall corporate governance with
Price earning Ratio 2007 is 21.24 with significant value .09 which shows positive and significant
relationship between overall CG and Price earning Ratio 2007. Regression coefficients i.e. Beta ()
of directors remuneration with Price earning Ratio 2007 is -38.59 with significant value .01 which
shows negative and significant relationship between directors remuneration and Price earning
Ratio 2007.
Table 4.1.1
Coefficients
Model
Unstandardized Coefficients
(Constant)
overall
corporate
governance
director's
remuneration
Standardized
Coefficients
Sig.
1.866
.121
Std. Error
79.581
42.654
Beta
21.244
10.258
.412
2.071
.093
-38.588
10.676
-.719
-3.614
.015
Table 4.2.1 shows Regression coefficients i.e. Beta () of ownership structure with price earning
ratio 2007 is 43.69 with significant value .015 which shows positive and significant relationship
between ownership structure and price earning ratio2007. Regression coefficients i.e. Beta () of
directors remuneration with price earning ratio is -38.26 with significant value .004 which shows
negative and significant relationship between directors remuneration and price earning
Table 4.2.1
Coefficients
Model
(Constant)
ownership
structure
director's
remuneration
Standardized
Coefficients
Sig.
.593
.579
Std. Error
23.251
39.232
Beta
43.697
12.104
.513
3.610
.015
-38.264
7.618
-.713
-5.023
.004
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Table 4.3.3 shows Regression coefficients i.e. Beta () of internal audit with return on equity 2006
is .62 with significant value .19 which shows positive and insignificant relationship between
internal audit and return on equity 2006. Regression coefficients i.e. Beta () of risk management
with return on equity 2006 is -.085 with significant value .56 which shows negative and
insignificant relationship between risk management and return on equity 2006.
Table4 3.3
Coefficients
Model
B
(Constant)
internal audit
Risk
Management
Std. Error
Standardized
Coefficients
Sig.
Beta
-1.518
.622
.523
.183
.866
-2.905
3.400
.034
.019
-.085
.136
-.159
-.626
.559
Table 4.4.3 shows Regression coefficients i.e. Beta () of overall corporate governance with return
on equity 2005 is .88 with significant value .07 which shows positive and insignificant relationship
between overall corporate governance and return on equity 2005. Regression coefficients i.e. Beta
() of risk management with return on equity 2005 is .11with significant value .76 which shows
positive and insignificant relationship between risk management and return on equity 2005.
Table4.4.3
Coefficients
Model
(Constant)
overall
corporate
governance
Risk
Management
Standardized
Coefficients
Sig.
-2.395
.062
Std. Error
Beta
-1.774
.741
.884
.385
.755
2.297
.070
.110
.364
.099
.301
.775
Table4. 5.3 shows Regression coefficients i.e. Beta () of overall corporate governance with return
on equity 2005 is .92 with significant value .04 which shows positive and significant relationship
() of sustainability with return on equity 2005 is .11significant value .83 which shows positive
and insignificant relationship between sustainability and return on equity 2005.
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Table 4.5.3
Coefficients
Model
(Constant)
overall
corporate
governance
Sustainability
Standardized
Coefficients
Sig.
-1.686
.153
Std. Error
Beta
-1.864
1.105
.926
.334
.790
2.770
.039
.111
.513
.062
.217
.837
Table4 6.3 shows Regression coefficients i.e. Beta () of overall corporate governance with return
on equity 2005 is .93 with significant value .025 which shows positive and significant relationship
() of accountability with return on equity 2005 is .24with significant value .68 which shows
positive and insignificant relationship between accountability and return on equity 2005.
Table4 6.3
Coefficients
Model
(Constant)
overall
corporate
governance
Accountability
Standardized
Coefficients
Sig.
B
-2.337
Std. Error
1.632
Beta
-1.433
.211
.952
.296
.812
3.212
.024
.247
.554
.113
.445
.675
Table 4.7.3 shows Regression coefficients i.e. Beta () of risk management with earning per share
2006 is 2.7 with significant value .17 which shows positive and insignificant relationship between
of risk management and earning per share 2006. Regression coefficients i.e. Beta () of dividend
policy with earning per share 2006 is -4.67 with significant value .027 which shows negative and
significant relationship between dividend policy and earning per share 2006.
Table4 7.3
Coefficients
Model
(Constant)
Risk
Management
Dividend Policy
Standardized
Coefficients
Sig.
1.853
.123
Std. Error
Beta
8.580
4.631
2.692
1.692
.473
1.591
.172
-4.664
1.504
-.922
-3.101
.027
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FINDINGS AND CONCLUSION

To discover the impact of the independent variables Corporate governance (ownership structure,
accountability, directors remuneration, dividend policy, risk management, internal audit and
sustainability), Regression analysis was applied Governance on the reliant variable - financial
performance (return on equity, price earnings ratio and earnings per share). Results indicated that:
Effect of overall corporate governance and directors remuneration on price earnings ratio (2007)
was analyzed. Overall corporate governance has positive and significant impact on price earning
ratio (2007), whereas directors remuneration has negative and significant impact on price earning
ratio.
The effect of ownership structure and directors remuneration was analyzed on price earning ratio
(2007). The findings represented that ownership structure has positive and significant impact on
price earning ratio (2007), whereas directors remuneration has negative and significant impact on
price earning ratio (2007).
We analyzed the effect of internal audit and risk management on return on equity (2006). The
results showed that internal audit has positive and significant impact on return on equity (2006),
whereas risk management has negative and insignificant impact on return on equity (2006).
We analyzed the effect of overall corporate governance and risk management on return on equity
(2005). The results showed that overall corporate governance has positive and significant impact
on return on equity (2005), whereas risk management has positive but insignificant impact on
return on equity (2005).
The effect of overall corporate governance and sustainability was analyzed on return on equity
(2005). The findings represented that overall corporate governance has positive and significant
impact on return on equity (2005), whereas sustainability has positive but insignificant impact on
The effect of overall corporate governance and accountability was analyzed on return on equity
(2005). The findings represented that overall corporate governance has positive and significant
impact on return on equity (2005), whereas accountability has positive but insignificant impact on
We analyzed the effect of risk management and dividend policy on earning per share (2006). The
results showed that overall corporate governance has positive but insignificant impact on earning
per share (2006), whereas dividend policy has negative and significant impact on earning per share
(2006).
Conclusion
The present research study investigated the relationship of practices of corporate governance on
financial performance of textile sector of Pakistan. Three financial ratios i.e. return on equity,
price earnings ratio and earnings per share were used to analyze the effect of corporate governance
on financial performance. As prior discussion stated that Code of Corporate Governance establish
power-sharing relation between shareholders and management of company. Analysis discovered
that although provisions of Code of Corporate Governance are being executed in selected
organization but people have fewer knowledge that these provisions are termed as Corporate
Governance, as proved in One Sample Test overall corporate governance as (t=.57, sig.10) The
reason behind this dilemma is that Code was introduced in Pakistan in the 2001 and new ideas
always take time to be fully accepted by the people. Study observed that circumstances are
encouraging for the execution of Corporate Governance Practices and it is anticipated that future
will bring lots of development in corporate structure of Pakistan It is anticipated that this
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introduction and overview of current situation of Corporate Governance in Pakistan will provide a
basic framework for future research and debates regarding improvement of financial and operating
performance by applying relevant rules and regulations.
Limitations
The barrier in the way of implementation of Code of Corporate Governance is that current Code is
Anglo-American based which comprised on Dispersed ownership structure whereas our ownership
structure is Concentrated -family based.
Company ordinance 1984 and Code do not recognize the minority shareholders (the shareholders
who represent less than 10% of companys shares). So there is no such provision that exist in the
code to deal such shareholders. The minimum condition for shareholder to file a case in Court
against coercion is that the complaint is initiated by 20% of the shareholders. Shareholders
representing less than 20% but at least 10% of companys share have right to ask SECP to assign
an examiner to inspect the affairs of corporation.
Companies do not prefer in Pakistan equity culture and there is lack of penal provisions which
results in unsuccessful execution of corporate governance. So it is believed that code of good
corporate governance will prove more effective with the addition of penal provision.
Financial press of Pakistan is not playing its mandatory role in endorsement of corporate
governance practices. It is not paying suitable consideration to the efforts essential for good
corporate governance.
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Rationale and Proclivity of Sales Promotion influencing the Impulsive Buying
Behavior of the customers: An experimental study on cellular service providers
in Pakistan
Dr. Mubbsher Khan, Zia-ur-Rehman Khizer Bin Dost
Abstract
This endeavor is to explore the relationship between sales promotion and impulse buying behavior
of the customers in Pakistan. In this study Impulse buying behavior is taken as dependent variable
measured with its three dimensions .i.e. income level, tendency to spend and worth of product.
Whereas sales promotion is taken as independent variable measured with dimensions of offered
period and return policies. Five- point Lickert Scale model questionnaire was employed to collect
the data and for imploring the feedback from the customers. Then quantitative techniques were
used for data analysis through SPSS 16 to scrutinize the impact of the variables recommended in
the questionnaire to investigate in the consumers, regarding relationship between sales promotion
and Impulse buying behavior. The sample of 60 customers was collected from the various major
shopping areas of Lahore Liberty market demeanor this study. The conclusion divulge through
Regression analysis that dynamics of sales promotion and Impulse buying behavior has an
insignificant positive relation between dependant and independent.
Keywords: Sales promotion, Incentives, Offer Period, Return Policies, consumer impulse
buying behavior, income level, tendency to spend and worth of product.
Literature Review
Consumers customarily countenance the decision of what product to acquire and in what number.
The decision making process many a time happens to be intricate and complex by momentary
price cutback for assorted products (Gupta, A. 1993). A consumers decision on product and
purchase capacity depends on extent of price decline and time until next price reduction. Retailers
too want to identify how premeditated verdicts such as the product assortment presented in their
stores, and how these intended decisions such as price promotions and particular displays influence
the probability of consumers adding impulse behavior to their sales (Brandweek, 1994).
Triumphant retailers construct most advantageous utilization of space available in the store and in
warehouse. Strategic approach is used to make the best use of available space which is quite
costly. Key factors in the proper use of space include location of merchandise on floor patterns,
appropriate displays and inventory levels (Hausman.A, 2000).
This stratum emphasizes the taxonomy of consumer products is divided into impulse and
non-impulse items. The major imperfection of this line of research is bewildering impulse buying
and unplanned buying. Dynamic may sway this impulse behavior. Moreover consumers frame of
mind or poignant state, time and money available would all affect impulse buying behavior
(spring, 1991).
Impulsive buying tendency is an individuals attribute which diverges among people and
influences their extent of real impulse buying behavior. It is consumers, not products, which
experience consuming impulses. Important most market stimulus in consumer behavior and retain
a decisive influence in impulse buying are products. Music clothing and extremely personalized
products are highly declared as impulse goods; where as practical goods are graded among those
bought on least impulse.
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Premeditated buying activities take more time to collect information and to reach lucid decision
making. Unplanned buying requires purchasing without pre- planning and embrace impulse
buying (Rook, D.W, 1995). The most important and unique factor between planned and impulse
purchases is the comparative velocity with which buying decisions are made (Joseph, 2009). In an
attempt to eradicate the problems caused by the imprecise conceptualization of impulse buying and
eliminate the inconsistencies in the literature. (Hodge, 2004, p. 11) states that impulse purchases
are unplanned, decided on the spot. It shoots from reaction to a stimulus and involve a cognitive
reaction, an emotional reaction, or both. Impulse buying is connected with the diverse features of
marketing for example, quality of the product or services, advertisement, pricing acceptability of
the product, bundling and promotional frames were influencing the perceived value of the product,
variety seeking and corroboration behavior that resulted in purchase intention (Munger & Dhruv,
2003). Impetuous buying predisposition as an individuals attribute diverges among groups and
influences their extent of real impulse buying behavior because of different income levels
(Shoham.A, 2003). It is consumers, not products, which experience consuming impulses. The most
important and unique factors between planned and impulse purchases is the comparative velocity
and tendency to spend with which buying decisions are made through routine response behavior
which results into low cost purchases decision effort (Joseph, 2009). (Hodge, 2004, p. 11) states
that impulse purchases are unplanned, decided on the spot. It shoots from reaction to a stimulus
and involves a cognitive reaction, an emotional reaction, or both. Impulse buying is connected
with the diverse features of marketing for example, quality of the product or services,
advertisement, pricing acceptability of the product, bundling and promotional frames were
influencing the perceived value of the product, variety seeking and corroboration behavior that
resulted in purchase intention. (Rook, 1987) propounds that impulse buying is powerful and
persistent urge to buy something immediately from consumer abrupt incident; it is an immediate
and sudden purchasing intentions without pre-planned shopping of any specific product. Such
behavior impetuous after experiencing an urge to buy without any planned reflection. Impulse
buying in retail environments has been seen dramatically increasing because of a rampant
consumer behavior due to increase in personal disposable incomes and availability of credit facility
(Ferrell, 1998). Impulse buying behavior is unexpected and compelling habitually based income
levels that play an important role while determining the consumer impulse buying behavior as it
helps the consumer to decide about the purchase of the product (Bayley & Nancarrow 1998).
Impulse purchasing is not considered as erroneous by consumers rather, consumers expressively
declare it as a positive evaluation of their conduct ( Friese, 1996). Impulse buying as an
individuals different expectation that influences decision making across situations like tendency
of spending money illogically (Beatty, 1998). Impulse buying behavior is a sensible unplanned
behavior keeping in view the value and importance of product which consumer perceives based on
objective evaluation and emotional preferences Ko (1993).
Sales Promotion
The American Marketing Association (AMA) defines sales promotion as a marketing pressure
created through non-media and media activities to augment consumer demand for a limited and
predetermined time period. Different Techniques of sales promotions are viewed in literature as:
Cash Rebates i.e. price decrease is given to buyers making timely payments. Cash reimbursement
and refund offers by manufacturers. Price packs, given as percentage discounts offered on the
products. Seasonal offers price reduction to buyer who purchases merchandises out of season
(Manohar. U, 1992). Financial implications of offering a discount to retail customers to encourage
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cash payment rather than credit card payment to increase buying behavior (Charles & Michael,
1982). Different sales promotion techniques differ considerably from country to country.
Promotions aggravate two reactions in people firstly it increases consumption as more quantity of
a product is obtained, secondly tendency of consumers for buying products for future use. Most of
the time, it is seen that consumers get fascinated by the sales promotion and buy products although
they do not want to buy. People who change brand due to a promotion are observed to change back
to their preferred brand later on(Gupta, 1993). Sales promotions encourage brand and product
purchase as well as consumption (Brandweek, 1994). Consumer sometimes thinks that he or she
has been involved in unwanted situation of paying just to augment the position of product. This
situation results into negative effect and customers stops further purchasing brands (Simonson,
1989). Consumers can be characterized based on their brand purchasing prototype within a product
class (Morrison, 1966). Consumers' purchasing behavior can be distinguish as emphasizing, i.e., a
tendency to repurchase the last brand bought (Morrison, 1966). Purchase behavior can be
characterized as habit of looking for varied products (Kalwani, 1992). If consumer feels being
influence by retailer, can retaliate by stop purchasing the brand to penalize (Simonson, 1989).
Several models of consumer response to promotions suggest that a current decision on brand and
purchase quantity depends on the expected time until the next price reduction and the expected size
of future reduction return policies, money back guarantee or replacement of the products given by
the retailer to increase the confidence of the consumer (Casielles. 2005). (Sen, 1978) states that a
purchase strategy as a general buying pattern which incorporates dimensions of buying behavior
such as brand loyalty.
RESEARCH MODEL
RELATIONSHIP BETWEEN DEPENDENT AND INDEPENDENT VARIABLES
S
A
L
E
S
P
R
O
M
T
I
O
N
INCOME
LEVEL
INCENTIVES
RETURN
POLICIES
OFFER
PERIOD
CONSUMER
IMPULSE
BUYING
BEHAVIOR
TENDENCY
TO
SPEND
WORTH
OF
PRODUCT
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Research hypotheses
It is necessary to consider while carrying out the study of the brand choice the literature
that dynamics of price, losses and gains, reference price, immediate price reductions and loyalty
are promotion actions which retailers frequently use for promotions and these have considerable
impact on the brand and consumer buying behavior (Gomez, 1997), coupons, rebates or games,
celebration of anniversaries or special dates (Suri et al., 2000). Keeping in view this facet into
account, it is intended to distinguish the following hypotheses founded on the analysis of previous
studies and research works that acknowledge the need to introduce sales promotions into the brand
choice models by ( Lam et al., 2001).
.
H1: There is a positive relationship between Sales Promotion and Consumer Impulse Buying
Behavior.
H0: There is no positive relationship between Sales Promotion and Consumer Impulse Buying
Behavior
Methodologies
The design of the study consists of a small interface of experiment with the consumer. The
survey aimed to reveal consumer attitudes towards cellular service providers. Since the list of the
target population was difficult to get, a non-probability sampling technique was applied. In this
study, convenience sampling procedure was used to collect the data on the perception of the
customers.
The survey was designed to take approximately 10 minutes for the respondents to
complete. It primarily consisted of multi-choice or check box answers instead of open ended or
fill-in answers. Our research was based on 61 respondents. The data then was analyzed by SPSS
16.0. To interpret the data, frequency and percentage were used in the first phase. To test some
hypotheses, correlation matrix, regression, cronebach Alpha test were used as statistical tool.
The purpose of this study is hypothesis testing. Research exploration is co-relational
because in this study we are involved in demarcating the significant variables connected with the
predicament. This study has been conducted in the natural environment of the organization with
least amount of intrusion by the researcher with the normal flow of work so it has minimal
interference where work proceeds normally so it is a non-contrived study setting. The unit of
analysis of this research is individuals and time horizon of this research is cross-sectional.
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Results Analysis
Demographic profile of respondents

Statistics
Gender
N
Valid
Missing
age
income
61
61
61
Table 1: Demographic data for genders

GENDER
Gender
Cumulative
Frequency
Valid
Percent
Valid Percent
Percent
Male
27
44.3
44.3
44.3
Female
34
55.7
55.7
100.0
Total
61
100.0
100.0
The graph below inferences that most of the female genders are the one who go for impulse buying
decision.i.e. 55.7% are male respondents in our research while male comprises of only 44% of the
total respondents.
AGE
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Table 2: Demographic data considering different age groups
Age
Cumulative
Frequency
Valid
Percent
Valid Percent
Percent
20-25
21
34.4
34.4
34.4
26-30
26
42.6
42.6
77.0
31-35
8.2
8.2
85.2
36-40
9.8
9.8
95.1
40+
4.9
4.9
100.0
Total
61
100.0
100.0
From the table its easily visible that the age group 26-30 are the one who go maximum times for
impulse buying while 40+ are the one who go minimum times for impulse buying since this is the
age group when they are most active having some power of purchasing too.
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INCOME
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Table 3: Demographic data considering their income level

Income
Cumulative
Frequency
Valid
Percent
Valid Percent
Percent
< 15000
17
27.9
27.9
27.9
15001-25000
13
21.3
21.3
49.2
25001-35000
24
39.3
39.3
88.5
11.5
11.5
100.0
61
100.0
100.0
35001+
Total
From the table and graphical presentation it is clear that most of the impulse buying is being done
by the person whose income level lies in the range of 25001-35000 which comprises of 39% of
total 61 respondents.
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Consumer impulse buying behavior

Case Processing Summary
N
Cases
Valid
%
61
100.0
.0
61
100.0
Excluded
Total
a. Listwise deletion based on all variables in the procedure.

ANOVA
Impulse purchase
Sum of
Squares
43.250
Mean Square
10.812
Within Groups
823.963
56
14.714
Total
867.213
60
Between Groups
Post hoc test
df
F
.735
Sig.
.572
Multiple Comparisons
Dependent Variable: impulse purchase

Tukey HSD
(I) age
20-25
(J) age
26-30
31-35
36-40
31-35
40+
Sig.
.855
.966
Lower Bound
-4.2948
-6.6182
Upper Bound
2.0494
4.1420
-.07143
1.77565
1.000
-5.0763
4.9335
2.36753
.561
-10.2446
3.1018
20-25
1.12271
1.12541
.855
-2.0494
4.2948
31-35
36-40
40+
-.11538
1.05128
-2.44872
1.87314
1.73729
2.33890
1.000
.974
.832
-5.3951
-3.8455
-9.0412
5.1643
5.9481
4.1438
20-25
1.23810
1.90876
.966
-4.1420
6.6182
26-30
.11538
1.87314
1.000
-5.1643
5.3951
36-40
1.16667
2.32271
.987
-5.3802
7.7136
20-25
26-30
-2.33333
.07143
-1.05128
2.80130
1.77565
1.73729
.919
1.000
.974
-10.2292
-4.9335
-5.9481
5.5625
5.0763
3.8455
31-35
-1.16667
2.32271
.987
-7.7136
5.3802
40+
-3.50000
2.71235
.698
-11.1451
4.1451
20-25
3.57143
2.36753
.561
-3.1018
10.2446
26-30
2.44872
2.33333
3.50000
2.33890
2.80130
2.71235
.832
.919
.698
-4.1438
-5.5625
-4.1451
9.0412
10.2292
11.1451
40+
36-40
Std. Error
1.12541
1.90876
-3.57143
40+
26-30
95% Confidence Interval
Mean
Difference
(I-J)
-1.12271
-1.23810
31-35
36-40
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ANOVA
impulse_purchase
Sum of
Squares
37.800
Mean Square
12.600
Within Groups
829.413
57
14.551
Total
867.213
60
Between Groups
df
F
.866
Sig.
.464
POST HOC TEST

Multiple Comparisons
Dependent Variable: impulse purchase
Tukey HSD
(I) income
< 15000
15001-25000
25001-35000
Std. Error
1.40544
1.20923
Sig.
.471
.973
Lower Bound
-1.6742
-2.6806
Upper Bound
5.7647
3.7198
35001+
1.63866
1.71309
.774
-2.8950
6.1723
< 15000
-2.04525
1.40544
.471
-5.7647
1.6742
25001-35000
-1.52564
-.40659
-.51961
1.31363
1.78831
1.20923
.653
.996
.973
-5.0021
-5.1393
-3.7198
1.9508
4.3261
2.6806
(J) income
15001-25000
25001-35000
35001+
< 15000
15001-25000
35001+
Mean
Difference
(I-J)
2.04525
.51961
1.52564
1.31363
.653
-1.9508
5.0021
35001+
1.11905
1.63861
.903
-3.2175
5.4556
< 15000
-1.63866
.40659
-1.11905
1.71309
1.78831
1.63861
.774
.996
.903
-6.1723
-4.3261
-5.4556
2.8950
5.1393
3.2175
15001-25000
25001-35000
Reliability Analysis
All questionnaires were valid for analysis as missing values were converted 3 (neither agree nor
disagree). For a reliability check, the Cronbach's Alpha of each scale above 0.60 found , as shown
in the following table.
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Table 4:
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Consumer impulse buying behavior

Reliability Statistics
Cronbach's
Alpha
N of Items
.645
Measurement scale for impulse buying behavior is 64.5% reliable.
Table 6: Sales promotion

Cronbach's Alpha
N of Items
.519
Measurement scale for impulse sales promotion is 51.9% reliable.
Correlation Analysis
Table 9: Correlation between dependent variable and independent variable
Sales promotion and impulse purchase

Correlations
sales_pro
sales_pro
Pearson Correlation
Sig. (2-tailed)
Impulse_purchase
impulse_purchase
.230
.075
61
61
Pearson Correlation
.230
Sig. (2-tailed)
.075
61
61
Correlation is significant at the 0.075 level (2-tailed).

The upper table shows the significant relationship of .230 between sales promotion and
purchases
impulse
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REGRESSION ANALYSIS
Table 7: Sale promotion vs. impulse purchase
Model Summary
Model
R Square
.230a
Adjusted R
Std. Error of the
Square
Estimate
.053
.037
3.73114
a. Predictors: (Constant), sales_promotion
The value of R square is .053.
Unstandardized
Coefficients
Model
(Constant)
sales_pro
Standardized
Coefficients
B
10.497
Std. Error
2.811
.124
.068
3.734
.000

for B
Upper
Lower Bound
Bound
4.872 16.122
1.815
.075
-.013
Sig.
Beta
.230
.261
7. Discussion
Rook (1987), in his seminal article, emphasizes the need for a theoretical framework to
guide empirical research on impulse buying (Rook, 1987, p. 191). He also calls for work on the
effects of personality traits and the social environment on impulse purchasing (Rook, 1987,
p. 196). Furthermore, another under-researched area that remains is consumers cognitive
processes or impulse buying motivations for new products (Bagozzi, 1999; Waarts et al.,
2002).
From table 4 it can be interpret that measurement scale of sales promotion is 51.9% reliable
and consumer impulse buying behavior is 64.5% reliable and visual merchandising is 51.9%
reliable. Hence, it can be interpreted that the hypothesis is untrue and there is an insignificant
positive relationship among the variables and level of significance is .075 for two tails and
confidence interval is 99.925%. From table 7, it is interpreted that Value of adjusted R2 (.053)
shows the effect independent variable on dependent variable, remaining effect will be caused by
other variables which are not the part of this study. Table represents ANOVA summary also from
this analysis significance is found .005. From table 6 the coefficient of independent variable sales
promotion =0.334 have positive effect on dependent variable consumer impulse buying behavior.
8. Conclusions
The study focuses on understanding the relationship sales promotion to consumer impulse
buying behavior. Charles and Michael (1982) proved in their research that cash discount can
increase the customer buying behavior. Similarly Givon(1984) and Kalwani (1992) proved their
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research of increasing sales through variety seeking behaviors, Morrison (1966) developed the
relationship of buying behavior with consumer status ,and Blattberg (1978) same developed
relationship with buying behavior but with brand loyalty, Schneider and Imran (1990) have found
promotions to be associated with brand switching. So we got area to find significant relationship
between sales promotion, visual merchandising and consumer impulse bung behavior.
The people with whom you are going for shopping are the main factors for impulse buying
behavior which broadly defines about the Emotional appeal of advertisements includes Price of
product, your income status, and Standard of living, which clearly defines the individual
purchasing power. Discount offers during festival seasons attract customers for their impulse
buying behavior. The answer to the research study concerning the relative strength of the retail
environment in impulse purchases is deep this is not to say that if a retailer puts items on special
display they will not generate impulsive purchases, they will. The study makes a useful
contribution to retailers understanding of impulsive buying behavior among consumers.
9. Limitations
The data comes from a small panel and from a very small area where researchers gather
data in forms of thousands. Secondly, while we have included the major gap that exists between
variables to influence impulse buying behavior, there is the possibility that other unmeasured
factors (e.g. time of day) also influence purchase decisions. Thirdly, Shortage of time was another
limitation in this study. Due to which data collected was limited to very small area. Lastly, the
respondents were very non-serious many questioners were found on which pattern of filling
questionnaires found.
10. Future Implication
The results of this study can be helpful for retailers. One of the major implications of this
research is that retailers can increase sales by offering the right promotional tools to encourage
product sale. So decision should carefully be planned. Promotions that emphasize in-store display,
cash rebates, and price packs are likely to be more effective than coupons.
Another fruitful area that a retailer must keep in mind that the promotion pattern should be
regular or long lasting so that consumer perception can be improved .Giving short term incentives
for temporary periods can cause low quality perception in consumer s which can effect impulse
purchase
To increase impulse purchase at store a wide range of competitors products can be helpful
to encourage impulse purchase since consumer compare price level and a deep discount is
attractive to them. A haphazard approach to store layout generates less than desired results.
The unplanned purchases customers make on a shopping trip. Items with high impulse
success get great locations in the store. The cash desk area is a prime location for these products.
Marketers have to go a long way to understand the impulse buying behavior as it is a very
subjective and its depends on multiple factors, but marketers can take advantage for this behavior
and in almost every product category impulse buying witness. The research study is comprised to
pilot study there is a great potential in this area so further study can be helpful to solve many
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problem areas of retailers related to sales promotions, visual merchandising, and impulse psyche
of consumer.
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References
Alice Hanley and Mari S.Wilhelm (1992).Compulsive buying: An exploration into self-esteem and
money attitudes. Journal of economic Psychology 135-18.
Anja Schaefer & Andrew Crane (June 2005).Addressing Sustainability and Consumption.
Journal of macro marketing .Vol 25, No.1, 76-92.
Ann Elizabeth Ericson, (2001) University of Iowa Antecedents of older adolescents
credit card enhanced spending attitude and self reported financing behaviour.
Aradhna Krishna, Imran S. Currim, Robert W. Shoemaker (Apr., 1991), Consumer Perceptions
of Promotional Activity Source: The Journal of Marketing, Vol. 55, No. 2 pp. 4-16
Published by: American Marketing Association
Aviv Shoham and Maja Makovec Brencic (2003).Compulsive buying behaviour. Journal
of consumer marketing, Vol 20, No.2.
Begona Alvarez Alvarez and Rodolfo Vazquez Casielles 2005 Consumer evaluations of sales
promotion: the effect on brand choice European Journal of MarketingVol. 39 No. 1/2, pp.
54-70.
Barbara E. Kahn and Jagmohan S. Raju (1991),Effects of Price Promotions on Variety-Seeking
and Reinforcement Behavior Source: Marketing Science, Vol. 10, No. 4 (Autumn, 1991),
pp. 316-337 Published by: INFORMS
Brandweek (1994), Promotional influences spur buyers to try something new, Marketing
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Celia ray Hayhoe, Lauren Leach, & Pamela R.Turner (1999). Discriminating the number of credit
cards held by college students using credit and money attitudes. Journal of Economic
Psychology 20,643-656.
Charles A. Ingene and Michael Levy Spring, 1982 Cash Discounts to Retail Customers: An
Alternative to Credit Card Sales Source: The Journal of Marketing, Vol. 46, No. 2 , pp.
92-103 Published by: American Marketing Association.
Dittmar, H., Beattie, J. and Friese, S. (1996), Object, decision and considerations and self image
in mens and womens impulse purchases, International Journal of Psychonomics, Vol. 93
Nos 1-3, pp. 87-206.
Donald R. Lichtenstein, Nancy M. Ridgway, Richard G. Netemeyer May, 1993 Price
Perceptions and Consumer Shopping Behavior: A Field Study Source: Journal of
Marketing Research, Vol. 30, No. 2 (), pp. 234-245
Gordon C.Winston (1987).A new approach to economic behaviour.
behaviour and organization, 8,567-585.
Journal of Economic
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Hausman, A. (2000), A multi-method investigation of consumer motivations in impulse buying

behavior, Journal of Consumer Marketing, Vol. 17 No. 15, pp. 403-19.
Imran S. Currim and Linda G. Schneider (Spring, 1991), A Taxonomy of Consumer Purchase
Strategies in a Promotion Intensive Environment Source: Marketing Science, Vol. 10, No.
2 pp. 91-110
Jeanne Lauren Munger, Dhruv Grewal (2003)The effects of alternative price promotional
methods on consumers' product evaluations and purchase intentions vol. no:3 ,2003,
pp.185-197.
Joseph W. Alba, Carl F. Mela, Terence A. Shimp, Joel E. Urbany (Sep., 1999), The Effect of
Discount Frequency and Depth on Consumer Price Judgments Source: The Journal of
Consumer Research, Vol. 26, No. 2 pp. 99-114 Published by: The University of Chicago
Press.
Gupta, A. (1993), Reflections on Impact of sales promotions on when, what and how much to
buy, Journal of Marketing Research, Vol. 30, pp. 522-4.
Manohar U. Kalwani and Chi Kin Yim, (1992)Consumer Price and Promotion Expectations: An
Experimental Study Source: Journal of Marketing Research, Vol. 29, No. 1 (Feb., 1992),
pp. 90-100 Published by: American Marketing Association
Nukhet Harmancioglu R. Zachary Finney Mathew Joseph 2009 Impulse purchases of new
products: anempirical analysis Journal of Product & Brand Management Volume 18
Number 1 pp. 2737
Peter S. Fader and Leonard M. Lodish A Cross-Category Analysis of Category Structure and
Promotional Activity for Grocery Products Source: The Journal of Marketing, Vol. 54,
No. 4 (Oct., 1990), pp. 52-65
Rook, D.W. and Hoch, S.J. Consuming impulses, Advances in Consumer Research (12), 1985,
pp. 23-7.
Rook, D.W. and Fisher, R.J. Trait and normative aspects of impulsive buying behavior, Journal
of Consumer Research (22:3), 1995, pp.305-13.
Simonson, I. (1989), Choice based on reason: the case of atraction and compromise
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Zeithaml, Valarie A. (1982), "Consumer Response to In-Store Price Information Environments,"

Journal of Consumer Re-search, 8 (March), 357-69.
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ANNEXURE
Questionnaire
This questionnaire is the measurement of research work being conducted as an important necessity
of the subject Marketing Research at Department of Administrative Sciences (DAS) Quaid-iAzam University Islamabad (QAU). The rationale of this study is to recognize the Impact of Sales
Promotions and Visual Merchandising on Consumer Impulse Buying Behavior. This
questionnaire is purely for research and all the information given will be kept confidential. You are
gently requested to present information as absolute as possible.
20-25 years
Age:
Gender:
Income:
MALE
Under Rs. 15,000
Rs. 35,000 +
26-30 years
31-35years
FEMALE
Rs. 15,000 25,000
Rs. 25,000 35,000
According to you, which of these factors affect your impulse buying behavior?
SA: Strongly Agree A: Agree NA/NDA: Neither Agree nor Disagree
DA: Disagree SDA: Strongly Disagree
1
2
SALES PROMOTION
i.
ii.
iii.
iv.
v.
vi.
vii.
SA
NA/
NDA
4
DA
5
SDA
Attractivepriceofproductaffectsmyimpulsebuying
behavior
Discountoffersregardingproductattractsme
Variousschemeslike(buy1get1free)affectmy
buyingbehaviorpositively.
Availabilityofdiscountedproductsmotivatesmeto
buy.
Promotions can save me a lot of money.
When I take advantage of a buy-one-get-one-free
offer, I feel good.
Mostly products that offer money back guarantee have
good quality as compared to those who did not offer.
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viii.
x.
xi.
xii.
xiii.
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SometimesI'mabitoutofcontrolabout what I buy.
ix.
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If a product that I usually buy is being promoted, I will

rush for my purchases.
When I use coupons, I feel that I am getting a good
deal.
I have favorite brands but if I see any price pack I buy
in large size because of limited offer period.
Ifeelcomfortabletobuythosepromotedgoodswhich
havereplacementfacility.
The promoted brands have limited offer period.
VISUAL MERCHANDISING
xiv.
Displayofproductinstoreattractsmyattention.
xv.
Packagingofproductattractsmetobytheproducts.
xvi.
Placingofproductinstoregainsmyattentiontowards
it.
Compatibilityofanotherproductwiththeproductyou
arebuying.
Complementaryproductsplacementinnearbyshelves
attractsmetobuybothproducts.
xvii.
xviii.
CONSUMER IMPULSE BUYING BEHAVIOR

xix.
xx.
IdonotfeelIcanaffordtomakeanyunplanned
purchaseswhileshopping.
IfeelthatIhaveenoughextramoneyonshoppingtrip
sothatIcanexceedalittleifIfindsomethingIreally
like.
xxi.
Itisfunformetobuyspontaneously.
xxii.
SometimesI'mabitoutofcontrolaboutwhatIbuy.
xxiii.
I have often bought a product that I did not need, while

knowing that I have very little money left.
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Tracing Consumer Animosity Literature for Predicting Negative

Consumer Response
Dr. Mubbsher Munawar Khan
University of the Punjab, Lahore
Abstract
Companies need to understand probable negative reactions of the customers. This negative
reaction sometimes have no direct relation with the product or service company offers, rather it has
some socio psychological reasoning. This paper spots lights on consumer animosity, one of the
socio psychological construct which explains probable negative reaction of the consumers. Tracing
the consumer animosity literature, this paper highlights its peculiar features and emphasizes
importance for theory and practice. It also indicates the gaps in the literature reflecting direction
for future research.
Keywords: Interreligious, Multicultural, Animosity, Socio Psychological
Introduction
Marketing strategy focuses on the marketing mix of the product. This includes product features;
distribution structure; pricing strategy and communication program. These components of the
marketing plan relate to the internal environment of the company and are controllable to a great
extent. On the other hand when we look at the external environment of the company, sometimes
there are certain socio psychological situations which negatively impact the consumer behavior
despite an appropriate marketing plan. Though these are uncontrollable but are important enough
to be comprehended in order to draw a strategy to reduce negative impact of these situations.
A few constructs had been introduced in the marketing literature to capture probable negative
response of the consumers. This includes ethnocentrism; consumer racism, market alienation,
differentiation. In this paper I am focusing on a comparatively new marketing construct i.e.,
consumer animosity, to identify and measure the negative consumer response. Consumer
animosity is used in the marketing literature to gauge the probable negative response of consumers
towards foreign goods.
Initially, the animosity construct was introduced by Klein et al. (1998) in the context of Chinese
consumers attitudes toward Japanese products. This pioneer study was conducted in Nanjing
province of China where Japan had committed massacre of Chinese during Second World War.
Klein et al. (1998, p. 90) define consumer animosity as the remnants of antipathy related to
previous or ongoing military, political or economic events.
Although the concept of consumer animosity is comparatively new in the international
marketing literature, still we can find many studies conducted in different regions of the world
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based on different sets of inter-country relations. A brief review of existing literature in a

chronological order is given below.
Klein and Ettenson (1998) have focused on the Chinese animosity towards Japan due to
war and indicated that though Chinese consumers knew high quality of Japanese products but still
they are not willing to buy. Klein and Ettenson (1999) have focused on American consumers
animosity towards Japan because of economic reasons. This study also compares the impact of
ethnocentrism with consumer animosity on consumers mind. Shin (2001) has studied Korean
consumers animosity towards Japan on the basis of war and economic reasons. Jung, Ang, Leong
and et al. (2002) have based their study of consumer animosity in Thailand, Indonesia, Korea,
Malaysia and Singapore against USA and Japan due to the economic crisis. Nijssen and Douglas
(2004) have researched consumer animosity of Dutch customers towards Germany based on war,
occupation and economic reasons. This study is conducted in Netherlands, which has a high level
of foreign trade and consumers do not have much choice of local alternatives.
Shimp, Dunn and Klein (2004) have talked about consumer animosity between regions of
the same country. They studied animosity between North America and South America. This
research introduces regional animosity. Regional animosity reflects personal preference for own
geographic region and admits some animosity toward people from a different region. The study is
based on historical divide between the northern and southern regions of the United States. Hinck
(2004) has coined the term, domestic animosity and studied animosity prevalent in East Germany
towards West Germany on economic reasons. Hinck et al. (2004) have studied animosity of West
German customers towards East Germany based on economic reasons. He suggests that specific
choice and preference constructs previously applied in international research could also explain
domestic phenomena.
Kesic, Pirirajh and Vlasic (2005) have studied animosity in Croatian customers towards
Bosnia-Herzegovina, Serbia, USA and Western Europe due to civil war. Cicic et al. (2005) have
studied interethnic animosities in Bosnia-Herzegovina. Similarly Ettenson and Klein (2005) have
measured animosity in Australia towards France due to diplomatic reasons. They have provided a
strategic analysis of consumer protest which has managerial implications. They have employed an
animosity model regarding consumer purchase behavior in two longitudinal studies in order to
analyze Australian consumers' boycott of French products.
Shoham et al.(2006) have studied inter-ethnic animosity between Jewish Israelis vs. Arab Israelis
due to armed disputes. They have studied Jewish Israelis' reactions to Arab Israelis purchase
reactions to Arab Israeliss products and services. They have examined animosity, its antecedents,
and its impact on purchases of a large Jewish majority in Israel. Edwards, Gut and Mavondo
(2007) have studied consumer animosity in context of business to business purchases in Australia
towards France due to diplomatic reason. They have investigated the comparative impact of
animosity between firms in the B2B sector and firms in in B2C markets. Their results show that
consumer animosity was less prominent in B2 than in B2C. Riefler & Diamantopoulos (2007)
have reflected possible problems related with the measuring of consumer animosity and also
suggested an alternate model to capture animosity.
Looking in detail to various contributions on consumer animosity, animosity appears to be
an important indicator of consumers unwillingness to buy foreign commodities (Klein &
Ettenson, 1999). All the studies discussed above have also consistently found animosity of ingroups to be negatively linked towards purchase intent of products associated with out-groups.
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Literature also identifies certain other peculiar features of consumer animosity which are discussed
in the following.
Objectivity of Evaluation
Consumers harboring animosity can objectively evaluate the conflicting countrys goods
but are reluctant to buy these goods. Respondents do not under evaluate the quality of the product
but still deny buying them. These findings are supported by almost all studies with different
product categories conducted in different regions of the world. Only one study reflects that
animosity in some extreme contexts (e.g., tension between Arab Israelis and Jewish Israelis)
affects the products judgments (Shoham, et al., 2006).
Stability of Animosity
Literature reflects that consumer animosity could remain for the short lived as well as for a longer
period. Consumer animosity can be situational as well as stable in character as far as the
consequences are concerned (Riefler & Diamantopoulos, 2007). For example, on the one hand,
Klein et al. (1998) found out that, sixty years after the massacre of Nanjing, anger toward Japan
was so intense that consumers in Nanjing were still forgoing Japanese goods. On the other hand,
consumer anger which previously did not exist was generated suddenly by Frances nuclear tests
that could affect product purchase, even if only temporarily (Edwards & Moss, 2000).
Inter Country Animosity

Most of the previous animosity studies have focused on one or more countries as the target
of animosity and investigated its impact on consumers buying behavior. While a few studies have
focused on inter regional animosity within the country, only certain recent studies have looked at
the animosity between the ethnic groups within the country.
The factors that influence animosity between countries may also be valid within a given country.
For example, Tibetans may have remnants of antipathy towards the Chinese because of prior
military events. Latino Americans may exhibit remnants of antipathy toward white Americans
because of current perceived exclusion from well-paying professional positions. Algerian
immigrants to France may not have forgiven the French for the ill-treatment of civilians during
French-Algerian war of the 1950s (Ouellet, 2007).
Types of Animosity
Human history is cluttered with disputes, tensions and wars among nations. Consequently,
many nations still harbor feelings of antipathy and hate for each other. Many ongoing and
historical issues have also caused tension among the nations: Pakistan and India over the Kashmir
valley; Palestine and Israel over the Gaza region; Iran and United States over Irans nuclear
program to name but a few. Certain recent events have also divided world opinion and caused
animosity among the nations. For instance the attacks in United States on 11th September 2001 and
United States invasion of Iraq and Afghanistan in presumed retaliation. France also had to face
consequences of animosity because of nuclear tests on Mururoa Atoll in South Pacific.
Various economic reasons like supporting the home industry and saving domestic
employment could sometimes also be responsible for harboring disliking towards certain countrys
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products. Another shape of animosity is social-cultural animosity. Consumers have such feelings
when they believe that their own cultures are threatened by brands associated with other cultures.
Social-cultural animosity also includes religious animosity, which occurs when members of
one religious group feel animosity towards another religious group (Rice & Wongtada, 2007).
Religion related events also breed animosity, agitation of Islamic countries against Denmark
following the publication of blasphemous caricatures of Prophet Muhammad (Peace be upon him)
in a Danish newspaper. Many Islamic countries boycotted imports from Denmark as a protest.
Some religious extremist burned a Christian priest alive along with his family in India. Similar
religious riots in Gujarat, India in the year 2002 are also the manifestation of religious animosity
prevalent within the country. Result of referendum regarding mosques minarets in Switzerland,
ban on publicly wearing burqa (Islamic dress for females) in France and agitation against
constructing Islamic-Centre in New York are most recent manifestation of increasing religious
intolerance and antagonism.
Research Gap
Animosity appears to be based in a dominated groups antipathy towards the dominating
group, potentially because of the latters efforts to impose its cultural domination (Ouellet, 2007).
However, within-country boundaries, similar animosity of ethnic subgroups towards each other
and the possible impact on their attitudes and consumer behavior did not attract much attention.
Keeping in view that many countries pride themselves of cultural diversity (Aggestam & Hill,
2008; Chavan, 2005; Leibold & Hugo-Burrows, 1997; Roberts & Hart, 1997) and taken account of
the increase in ethno marketing (Pires, Stanton, & Cheek, 2003), this represents a substantial gap
in the marketing literature.
A few exceptions include Ouellet (2007) who have investigated cross-ethnic product
purchases and introduced the consumer racism construct in an attempt to explain attitudes of a
countrys majority towards minority-owned businesses. This study provides empirical evidence of
the effects of consumer racism on domestic cross-ethnic product purchase in three countries. His
model suggests that consumer racism affects ethnic majorities' judgments of and willingness to
buy products from each country's dominant ethnic minority.
In the similar manner, Shimp et al. (2004) had expanded the concept of animosity to
regional animosity between northern and southern regions of the United States and relate it to
preferences for their own (in-group) geographic region compared to people from an out-group
region. Hink (2004) has also studied consumer animosity between East Germany and West
Germany. His findings suggest that regional animosity within country borders follows the same
pattern as external animosity in that it lowers the willingness to purchase products from the
opposed region. Only Shoham et al. (2006) have studied consumer animosity between two
religious communities. Specifically, they analyzed the response of Jewish majority consumers
towards Arab minoritys products in Israel.
Although these studies though also include the development of consumer racism construct
focus on minority business ownership and on regional animosity respectively, they provide
important insights into the relationship between different subgroups within one country. Moreover,
these works demonstrate that constructs commonly associated with cross-country attitudes and
purchase behavior such as consumer racism and animosity, are equally relevant in within-country
settings.
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In the extant literature on consumer animosity, intergroup animosity within the country
could not get much attention of the researchers. Future researches on consumer animosity could be
focused on this direction. In this context study of inter-religious animosity between communities
and its impact on purchase behavior could be quite interesting.
A recent exploratory study in Austria identifies the top three countries which are the target
of Austrians animosity. Number one is USA, number two is Germany and at number three is
Turkey (Riefler & Diamantopoulos, 2007). The main cause of Austrians animosity towards
Turkey is mentality, the second is the role of woman and third reason for animosity towards
Turkey is due to the Muslim religion not agreed or liked by Austrians, who are majority Christians.
The origins of animosity are not only war and economy related but can include other causes
like mentality and religious differences (Riefler & Diamantopoulos, 2007). Moreover, such causes
can be both temporary or permanent as well as both of macro and micro-level of nature (Jung, et
al., 2002).
Conclusion
World is fraught with disputes, hatred, dislike, intolerance, antipathy and antagonism
among the nations. Eventually all these feelings could converge into consumer animosity which
results in the rejection of the products of the country who is the target of such animosity. These
feelings are prevalent not only in inter country context but also within the country context.
Consumer animosity is a useful construct being successfully employed to capture potential
negative impact. It has massive managerial consequences. If a company is aware of prevalent
animosity, it can adopt damage control strategies. For example a famous European retail chain
works with a different name in some Islamic countries in order to avoid possible anti-western
feelings.
This paper stresses the need to understand within country animosity and adopt strategies to
tackle the consequences. Studying the impact of interreligious animosity on buying behavior in the
multicultural societies is suggested as a useful direction for future researches. Such studies could
have not only theoretical contribution by extending the extant literature but also sufficient
managerial implications.
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Aggestam, L., & Hill, C. (2008). The Challenge of Multiculturalism in European Foreign Policy.
International Affairs, 84(1), 97-114.
Chavan, M. (2005). Diversity Makes Good Business. Equal Opportunities International, 24(7/8),
38-58.
Cicic, M., Brick, N., Husic, M., & Agic, E. (2005). The Influence of Animosity, Xenophilia and
Ethnocentric Tendencies on Consumers' Willingness to Buy Foreign Products - the Case of
Croatia. Paper presented at the 34th European Marketing Conference (May 24-27), Milan.,
Edwards, R., Gut, A.-M., & Mavondo, F. (2007). Buyer Animosity in Business to Business
Markets: Evidence from the French Nuclear Tests. Industrial Marketing Management,
36(4), 483-492.
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Nuclear Tests. International Journal of Business Studies, 8(1), 23-36.
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A Longitudinal Study of Consumer Boycotts. International Marketing Review, 22(2), 199224.
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Jung, K., Ang, S. H., & Leong, S. M. (2002). A Typology of Animosity and its Cross-National
Validation. Journal of Cross-Cultural Psychology, 33(6), 529-539.
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Pires, G., Stanton, J., & Cheek, B. (2003). Identifying and Reaching an Ethnic Market:
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Shin, M. (2001). The Animosity Model of Foreign Product Purchase Revisited: Does it Work in
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VOL 3, NO 1
Website Quality of Higher Education Websites: Young Users Perception

Dr. Sayyid Salman Rizavi
Assistant Professor, Hailey College of Commerce,
University of the Punjab, Lahore, Pakistan
Dr Mubbsher Munawar Khan
Assistant Professor, Hailey College of Commerce,
University of the Punjab, Lahore, Pakistan
Sayyid Haider Mustafa Rizavi
Credit Manager, Askari Bank Limited, Lahore, Pakistan
Abstract
Higher Education Websites are an important interface between the students and the higher
education institutions. The nature of interaction between students and the institution has evolved a
lot after the dramatic increase in the use of internet. It is, thus, imperative to study and analyze the
quality issues of websites developed for the higher education institutions. As a very large
proportion of users of such site are young people so, in this paper, we focus on the youngsters of
age 18 to 25 years with some respondents above 25. We try to understand the perception of them
about such websites. In order to do that the authors conducted a small survey of 234 young
students who are presently enrolled in a higher educational institution or have been enrolled in the
past 5 years. The respondents belong to the Lahore regions which is the second largest city of
Pakistan. We use Principal component analysis using varimax rotation with Kaiser Normalization.
The WEBQUAL slightly modified according to our needs was used for the survey.
Keywords: Higher Education, Website Quality, Factor Analysis, Young Population
Introduction
Human interaction has evolved a lot after the advent of the internet. The method of interaction has
changed dramatically. One of the principal medium of interaction is the dynamic websites. The
educational institutions are relying more and more on the internet to secure admissions, remain
connected to the students and provide help and support to them. The principal users of such
websites are naturally youngsters. The major part of the students is youngsters who use the internet
more than their seniors few years back did. In the region in which our survey is conducted, the
emergence of private institutions along with increased number of public sector institutions has
given rise of lot of competition. This has given rise to heavy marketing campaigns that include the
use of good websites. In order to attract students and retain them and to provide better image of the
institution, the websites quality of such institutions is improving a lot. The culture of student-
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institution interaction is different in different parts of the world and hence the perception of a good
website quality. Thus it is necessary to gauge the perception of users of these websites in different
cultures and regions in a comparable way. For this purpose we used a standard questionnaire
covering the common dimensions of a good quality website to know about are the user
requirements. If the website is according to the perception of a good quality site then the users will
rate is as good quality and will feel comfortable in using it.
Website Quality Issues: A brief review of literature
Online service quality has some unique features not found in traditional service quality. Initially
instruments were created for measuring the perception regarding service quality in general. Later
instruments specific to online service quality and measurement of consumer perception evolved.
The first significant contribution to measuring the online service quality was by Parasuraman,
Zeithaml & Berry (1988). They think of customer perception about online service quality as a
comparison between different dimensions of a website with the substitutes of that website. This
model is applied in many studies but also been criticized. (Buttle, 1995). Yang, Jun & Peterson
(2004) conclude that SERVQUAL model is not fully applicable to online services as it does not
take into account different special features of online services. It fails to use previous research in
social sciences. (Andersson, 1992). Also expectations may be influenced by a bias created by
trying to conform to social norms. (Babakus & Inhofe, 1991).
The website design has been thought to be the most important feature of online services. Speed and
convenience comes after that. A third such specific feature is given by (Park & Baek, 2007) which
he called system interface.
Due to the abovementioned facts, E-Qual was developed to gauge the user perception of the
quality of e-commerce websites by (Barnes & Vidgen, 2001). They established WEBQUAL for
online service quality creating seven quality dimensions. SITEQUAL was also created by Yoo &
Donthu (2001). All the above three can be used to develop good instruments for website service
quality.
Methodology
We base our questionnaire on WebQual (Loiacono et al., 2000) where some new questions were
added according to our needs. The question cover dimensions of website quality and also some of
the aspects of websites for educational institutions. There are 26 questions which are stated for the
user to agree or disagree which is recorded on a Likert-Scale. Some optional personal information
was asked. The respondents were young existing or previous students of any public or private
higher educational institution. In total 300 questionnaire were distributed out of which we got back
238, the response rate being 79 percent.
The objective was to know the user-perception about a good website quality of higher educational
institutions. This will enable us to know the properties of a good quality website in order to launch
a site for the needs of a particular region; Lahore in this case. The point to keep in mind here is that
the student enrollment is highly concentrated where most of the students in the higher educational
institution of the Lahore region come from Lahore and the small cities near Lahore. Principal
component factor analysis was used with varimax rotation. We used SPSS 16.0 for analysis. The
correlation matrix lets us know if the variables are correlated normally i.e. not very low or very
high correlation. The determinant of the correlation matrix will let us know about the possibility of
multicollinearity. Eigenvalues greater than unity are considered. Varimax rotation is used to
maximize the loading of variables on the relevant factor. Answers determining multiple factors
will be excluded.
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The questionnaire contains question on different dimensions of website quality. Quality of

information is related to the main display of the website and first impression that the user gets
depends on this quality. This dimension is found to be important by authors like (Liu & Arnett,
2000). The higher education or university website should be easy to use. The user-site interaction
should be clear. This is an essential part of any website quality. Website Quality surveys like, for
example (Cao, Seydel, & Zhang, 2005), usually include such dimensions. The content of the
website is what makes it specific. The educational websites must contain good information not
only about the administrative procedures of the institutions but also good educational information
like course material and help and guidance to the students. Studies like (Longwell, 1999) and (Bell
& Tang, 1998) have discussed content and design of the websites. User-site interaction is an
integral part of any dynamic website. Studies like (Cao, Seydel, & Zhang, 2005) etc. include such
dimensions. One unique feature of educational websites is the educational content that should be
treated as different form normal information related to any website. Studies like (Tarigan, 2008)
and (Barnes & Vidgen, 2001) include the elements of trust. The user should feel safe in all
respects. For example, the potential student should feel safe and secure while entering personal
information to secure admission in a higher education institution.
Results
The questionnaire we used contained 26 questions. The questions were reduced to seven different
dimensions confirming the relevance of the WEBQUAL The dataset includes 234 respondents.
Table 1 related to descriptive statistics provides an insight to the data set.
The descriptive statistics indicate that a 45 percent of the respondents were female. Majority have
an educational background of intermediate or graduation.
Table 1: Descriptive Statistics of respondents background
Frequency
Percentage
Male
129
55
Gender
Female
105
45
Total
234
18-20
82
35
Age
21-25
112
48
25 and above
40
17
Total
234
Intermediate
53
17
Education
Graduation
135
23
Masters or above
46
47
Total
234
Principal component factor analysis with varimax rotation is used. The absolute value of Spearman
correlations for variables ranged between 0.35 and 0.6, mostly significant at 5% level of
significance.
SPSS 16.0 is used for our analysis. The coefficients less than 0.4 are suppressed. As a result, the
questions were reduced to six different factors. The determinant of the correlation matrix was
0.001. This shows that multicollinearity may not be of much problem. The Bartlett test of
sphericity is found to be significant at one percent. The Kaiser-Meyer-Olkin measure of sampling
adequacy is found to be appropriate (KMO= 0.81) hence confirmatory factor analysis could be
used. Table 2 provides these results at a glance.
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Table 2: Diagnostic Test for factor analysis

KMO and Bartlett's Test
Kaiser-Meyer-Olkin Measure of Sampling
Adequacy.
Bartlett's Test of
Sphericity
Approx. Chi-Square
.811
1703.049
df
276
Sig.
.001
Test for Multicollinearity

Determinant of Correlation Matrix
0.001
Table 3 provides the Rotated Component Matrix using varimax rotation with Kaiser
Normalization. Six components are extracted. The factors explain a good percentage of variation.
Most of the factors reconcile with WEBUAL.
Table 3: Rotated Component Matrixa
Label
q4
q6
q11
q7
q10
q9
q8
q17
q15
q18
q25
1
2
Usability Educationa
(Content +
l
Ease of information
use)
Component
3
4
Trust
Informatio
Interaction n Quality Language
.755
.681
.631
.694
.683
.565
.523
.502
.552
.536
.516
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q19
.513
q26
.505
q13
.692
q21
.633
q5
.617
q22
.681
q12
.644
q16
.622
q20
.611
q14
.562
q1
.751
q3
.683
q2
.612
q23
.714
q24
.723
Extraction Method: Principal Component Analysis.
Rotation Method: Varimax with Kaiser Normalization.
a. Rotation converged in 6 iterations. Values less than 0.4 are not displayed.
The first factor is usability and the second is educational information. The rest are trust,
information, interaction and language. All the six factors are explained by several questions and
uniquely identify the factors. Five factors are identical to WEBQUAL but one of them, educational
information, is new. It seems that educational information becomes important when we are
specifically looking at higher education websites. This is obvious as it is the main objective of the
website. Usability contains six different questions and educational information contains 5 different
questions. The rest contain four or less. The questions are connected and fall into different factors
according to expectations.
Conclusion
Educational websites are special in the sense that they have some special features not required in
other websites. It is imperative to consider this difference and organize surveys taking into account
the special features of higher education websites. In the present study we find six different factors,
mostly reconcilable with WEBQUAL, which include a special feature on educational help and
information provided on the higher education websites particularly universities. The results show
the importance of the usability. Educational information comes as a second important factor. The
higher education websites, hence, shall be designed and modified according to the factors found
important. The same can be used to rank the higher educational websites.
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References
Andersson, T. D. (1992). Another model of service quality: a model of causes and effects of
service. In P. Kunst, & J. Lemmink, Quality Management in Service.
Babakus, E., & Inhofe, M. (1991). The role of expectations and attribute importance in the
measurement of service quality. Summer Educators Conference. American Marketing
Association.
Barnes, S. J., & Vidgen, R. (2001). An evaluation of cyber bookshops: the webqual method.
International Journal of Electronic Commerce , 6 (1), 11-30.
Bell, H., & Tang, N. (1998). The effectiveness of commercial Internet web sites: a user's
perspective. Internet Research , 8 (3), 219-228.
Buttle, F. (1995). SERVQUAL: Review, Critique, search agenda. European Journal of Marketing ,
30 (1).
Cao, M., Seydel, J., & Zhang, Q. (2005). B2C e-commerce web site quality: an empirical
examination. ndustrial Management & Data Systems , 105 (5), 645 - 661.
Liu, C., & Arnett, K. P. (2000). Exploring the factors associated with website success in the
context of electronic commerce. Information and Management , 38 (1), 23-34.
Longwell, F. (1999). Effective websites can facilitate work site sales. Natinal Underwriter , 103
(49), 27.
Parasuraman, A., Zeithaml, V., & Berry, L. (1988). SERVQUAL: A multiple item scale for
measuring consumer perceptions of service quality.Journal of Retailing ,64(1), 12-40.
Park, H., & Baek, S. (2007). Measuring Service quality of online bookstores with WebQual.
HCI'07 Proceedings of the 12th international conference on Human-computer interaction:
applications and services.
Tarigan, J. (2008). JURNAL AKUNTANSI DAN KEUANGAN , 10 (1), 34-47.
Yang, Z., Jun, M., & Perterson, R. T. (2004). Measuring customer perceived online service quality.
International Journal of Operations & Production Management , 24 (11),
Yoo, B., & Donthu, N. (2001). Developing a scale to measure perceived quality of an internet
shopping site (SITEQUAL). Quarterly Journal of Electronic Commerce , 2 (1), 31-46.
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Appendix
Questionnaire
Quality of Higher Education Sites
This questionnaire is meant for research on the quality of higher education websites. Please fill in the questionnaire if
you have been enrolled in a higher educational institution during the last five years. All information will remain will
be kept confidential and used only for research.
Part I (Please mark the relevant option by putting a cross x)
Name: (optional):
Age in years
Education
Marital Status
18-20
Intermediate
Married
21-25
Graduation
Unmarried
25 and
Masters
Other
above
Part II
Please read the following statements and let us know about how much you agree or disagree with the statement by
encircling a choice. Choices are 1=strongly disagree, 2=disagree, 3=Neutral, 4=agree, 5=strongly agree.
1
2
3
4
Strongly Disagree
disagree
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
The information on the website should be in accordance to its purpose

The website should provide correct and relevant information
The site should provide information on proper time
The information provided should be easy to understand
I should be able to keep information private
The site should have attractive appearance
The site should create an overall positive experience
The site should convey a sense of community
The site should be easy to learn to operate
The site should be easy to navigate
The content should be easy to read
The site interacts clearly and understandably
All personal information should be kept secure
It should be easy to communicate with the site
The site should have a good reputation
The site creates a sense of personalization
The site provides and educational environment
The site should provide information on courses with material
The site should provide online learning opportunities
The site should be interactive
I should feel safe to upload my personal information
The site should not share my information with other organizations
The site should not allow unethical content
The site should be displayed in both English and local language
We may be able to download educational information
The site should provide access to libraries and journal databases
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
Neutral
Agree
Strongly
Agree
3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
5
5
5
5
5
5
5
5
5
5
5
5
5
5
5
5
5
5
5
5
5
5
5
5
5
5
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Effectiveness of Foreign Aid in the Light of Millennium Development

Goal on the Education Sector: A case study of Pakistan
Muhammad Khalid Rashid
Ph.D Scholar
Department of Economics National College of Business Administration and Economics,
40-E/1, Gulberg III, Lahore, Pakistan
Mumtaz Anwar
Assistant Professor
Department of Economics
University of the Punjab, Lahore, Pakistan.
Abstract
Aid recipient developing countries have remained stagnant and they are becoming more aid
dependent after receiving large amount of aid from developed countries. This reality provokes
vigorous debate on the effectiveness of aid. This study analyzes the effectiveness of aid in the
education sector of Pakistan during the period 1973-2008. This study focuses on the second
Millennium Development goal, which attributes to achieve universal primary education. We
estimate econometric model to test the short run and long run relationship between foreign aid and
gross primary enrollment in the education sector of Pakistan. For this purpose, Augumented
Dickey Fuller test, Johansen Likelihood Ratio test and Vector Error Correction Methods are used.
The results show that foreign aid has significantly increased primary school enrollment in
Pakistan. The results proved the short run as well as long run relationship between foreign aid and
primary school enrollment.
Key Words: Universal Primary Education, Millennium Development Goal, Foreign Aid
JEL Classification: F35, I21, O12, O19
1. INTRODUCTION
Most of the developing countries are dependent on foreign aid to expand the productive capacity of
their economies due to the lack of internal resources. The international community has put a lot of
effort and financial support into upgrading the social sectors of developing countries during the
last few decades. World Bank is the major external financer of education sector in developing
countries with accumulative spending of 3.4 billion dollars in fiscal year 2009 i. Moreover, with
the adoption of the Millennium Development Goals (MDGs) ii, one must expect the priority
accorded to the social sectors to be upheld.
This paper used Official Development Assistance (ODA) that is a subcategory of foreign
aid and account for all official aid in different sectors. According to the World Bank, ODA
comprises flows that meet the Development Assistance Committees (DAC) definition of ODA
and are made to countries on the DAC list of aid recipients. Usually, this aid is specified to
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promote the economic growth or to combat natural disasters. This study focuses on the
effectiveness of foreign aid in the education sector of Pakistan.
The provision and financing of education, especially at primary level around the world is the
responsibility of the public sector because of the difference between social and private returns.
According to the article 37(b) of the constitution of Pakistan, The state shall remove illiteracy and
provide free and compulsory secondary education within minimum possible period. Despite such
commitments, Pakistan spends less on education than developed countries. Even Government
spending on education in Pakistan has declined from 2.5 percent of GNP in 1996 to 1.4 percent of
GNP in 2008 iii. Pakistan is among the signatories of the Millennium Development Goals as well
as the Dakar Framework of Action (2000). In this context, policies like National Plans of Action
for Education For All (EFA) has been initiated to achieve these goals. There are eight bilateral
donors providing aid to the education sector of Pakistan. Among these, World Bank is the largest
donor followed by United States Agency for International Development and Asian Development
Bank. The World Bank assists the education sector in four different phases. In the first phase,
during the 1970s, they helped to promote the vocational and higher education projects. In the
second phase, during the late 70s, they shifted their concentration towards different projects of
primary education because of high social rate of return in this sector. In 1985, during the third
phase, emphasis was increased on provincial based projects especially in the province of the
Punjab. Moving towards the fourth phase in 1990s, the World Bank shifted their support to
province based sector programs.
The gross primary enrollment in Pakistan in 2007 was 84 percent of the relevant age group
while during the same year; this ratio was 108 in South Asia and 105 in the World on average. The
above data shows that the condition of the education sector in Pakistan is very poor as compared to
the World and other countries in the region. While examining the effectiveness of foreign aid in
the education sector of Pakistan, the question arises; Does foreign aid effect primary school
enrollment in Pakistan?
The education sector is selected for this study because it is generally believed that this sector
influences the human development. It is commonly held that an educated population is a
prerequisite for a well-functioning economy. Through foreign aid the Government may be able to
increase spending in this sector and may influence the human development. Consequently, an
educated labor force contributes to overcome the economic problems like poverty; hunger etc and
can play an effective role in economic development.
This paper comprises five parts. Section II reviews the literature. Section III elaborates the
specification of the model and econometric methodology. The results about the long run and short
run relationship among variables are discussed in section IV. Section V concludes the findings of
the study and policy implications emerging from the study.
2. REVIEW OF LITERATURE
Most of the studies on foreign aid concentrate on its effectiveness on economic growth. These
studies focus on international cross sectional analysis rather than individual country. This study
emphasizes on aid data disaggregated by sector. Aid for social sector, like education, affects
economic growth through many ways such as increase in productivity and diffusion of knowledge.
(Nelson and Phelps 1966; Lucas 1988; Romer 1990; Mankiw, Fomer and Weil 1992; Appiah and
McMahon 2002). Importance of aid in this sector may be justified because it provides resources
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for building schools, free textbooks and training of the teaching staff etc. It can be helpful to
improve the quality of services in this sector.
Asiedu and Nandwa (2007) analyzed the effect of foreign aid on education. They found a
significant effect of foreign aid on growth. They took in to account both heterogeneous nature of
aid and heterogeneity of aid recipient country. They disaggregated the data in different segment of
education and run separate regressions for each country with respect to the level of incomes. They
found that the effect of aid varies by level of income and level of aid.
Wolf (2007) examined the effectiveness of aid on education, health and water & sanitation.
The study also included some social sectors like freedom of press and decentralization. This study
concluded that aid for health and education sectors had a significant positive impact on the
outcomes but the effect of total aid was found negatively associated.
Thiele et al (2006) discussed the aid portfolio of various donors. They argued that donors
were different in terms of their generosity and their aid allocated to achieve different goals of
MDGs. They concluded that targeting of aid have to improve to increase the effectiveness of aid
in aid recipient countries. So they ultimately blamed the insufficient targeting of aid.
Pettersson (2006) used sectoral data and proved a significant relation between government
spending and DAC aid for education sector. He considered aid for education as exogenous variable
because this study examined the real effect of fungiblity of aid.
Michaelowa and Weber (2006) revealed a positive relation between aid for education and
primary school enrollment. According to this study, the political and institutional background of
the aid recipient country also matters. The study concluded that if bad governance was observed,
the aid would be no more effective and even in case of some countries, the impact of aid turned to
be negative.
Dreher et al. (2006) examined the effectiveness of aid on education. This study analyzed
the relationship between aid for education and educational attainment. They analyzed that
educational attainment is a function of multiple factors like educational expenditure of aid
recipient country, quality of institutions etc. they concluded that there is a positive and significant
relation between aid and primary school enrollment.
Filmer and Pritchett (1999) analyzed cross-country patterns in school enrollment and
educational attainment by household wealth in 35 developing countries. They concluded that in
most countries the deficit of universal primary education comes from the poor, however, the
achievement of higher level of enrollment for this group is due to social inclusion, reaching out
and bringing the poorest in to what is already the norm for the rich and for those in the middle with
respect to wealth status.
It seems that multiple factors are responsible for primary school enrollment. As no
comprehensive study is available which shows the long run as well as short run relationship
between foreign aid and MDG in the education sector of Pakistan so this study will contribute in
an important way that it will observe the short run and the long run behaviour of foreign aid in this
sector.
3. THE EMPIRICAL MODEL AND DATA
The main factors that are identified for education sector are foreign aid for education, population
ages 0-14 and public spending on education etc. For the purpose of selection of variables, this
study followed Dreher et al. (2006), Michaelowa & Weber (2006), Pettersson (2006) and Wolf
(2007). However, in addition to that, some other variables like number of primary schools and
number of teachers in primary schools are also included in this study by assuming that these
variables have significant role in this sector.
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The study covers the period from 1973 to 2008. The choice of the period is based on
availability of data. Data for social indicators has been taken from various issues of Pakistan
Economic Survey and World Development Indicators and the data on foreign aid for health and
education sectors are taken form OECDs Creditor Reporting System (CRS) that contains
information on the sectoral allocation of aid iv. This study used the amount of aid commitments at
current prices in million US Dollar. Although the data based on disbursement should be preferred
but information on disbursement by sector is available only from 1990 onward so due to
unavailability of data, aid commitment is used in this study.
The Model
In regression equation, we have employed Gross Primary Enrollment (GPE) as a dependent
variable. It is because, according to the MDG, it is one of the indicators used to assess progress
towards achieving Universal Primary Education. The functional form of the model is written as
follows:
GPE = f ( FAE, POP,PS,PSE,TPS)

Or
Yt = f ( X1t ,X 2t , X3t ,X 4t ,X5t )
And the econometric model is written as:
Yt = 0 + 1X1t , 2 X 2t , 3X 3t , 4 X 4t , 5X 5t + e1t
Where:
Yt GPE = Gross Primary Enrollment
X1t FAE = Foreign Aid for Education

X 2t POP = Population ages 0-14
X 3t PS = Number of Primary Schools
X 4t PSE = Public Spending on Education
X 5t TPS = Number of Teachers in Primary Schools
e1t Error Term
t 1,2,3
Econometric Methodology
For the estimation purposes, three steps methodology has been employed i.e. checking the
stationarity of the data, estimating the long run function and estimating the parsimonious error
correction model along with the stability and other diagnostic tests. First, we have applied
Augumented Dickey Fuller (1979, 1981) tests to each of the variables and determine the
stationarity property in their level as well as in their differences and all the variables found to be
integrated of the same order. In order to find the long run relationship among variables, Maximum
Eigenvalue test and Trace Statistic are used. Finally, parsimonious Vector Error Correction Model
(VECM) is used to determine the short run relationship between these variables.
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4. EMPIRICAL RESULTS
The model is estimated by using annual time series data for the period 1973 to 2008. It
provides a framework to clarify mainly the role of foreign aid in the determination of primary
school enrollment in Pakistan that is the objective of the study. The estimated function asserts the
long run as well as short run relationship between these variables.
Testing of Unit Root
To test for stationarity in these variables, we used Augmented Dickey Fuller (ADF) test. In
ADF Test, lagged differences are included to remove possible serial correlation in the error
terms. This test confirms the order of integration of the individual series. ADF test statistics
corresponds to the t-value of parameter for the individual series.
The results presented in table 1 show that null hypothesis of unit root (=0) cannot be rejected
for any variable in the level form. However, the null hypothesis of unit root is rejected for all
variables in the first differenced form at 5% level. Thus our test results show that all variables
are I(1). The results obtained in this part provide basis to move to the co-integration technique.
The Long-run Function: A Co-integration Analysis

One of the objectives of the study is to analyze the long run relationship between Gross
Primary Enrollment and foreign aid in Pakistan. Here the existence of cointegrating relationship
amongst Gross Primary Enrollment and its determinants are estimated. Before we run
cointegration test we need to specify the lag structure. For this purpose, we employed Akaike
Information Criterion (AIC) and Schwarz Bayesian Criterion (SBC), as suggested by Enders
(1995) and Davidson (1998) to investigate the optimal lag length. It is important because an
appropriate lag structure may over parameterize and it can reduce the power of cointegration test.
The appropriate lag length of the VAR is two. To find the long run relationship, Johansen
cointegration procedure is used. The results from the Johansen cointegrated test (both Trace test
and Max Eigen value test) are presented in tables 2 and 3. All the variables included for the test
have the same order of integration.
The empirical results in tables 2 & 3 show that there exists a long run relationship between
Gross Primary Enrollment and its determinants. Significance of the variables confirms their
validity in the model. The results of estimated function are presented in the following equation.
Yt = 10574.57 + 6.62 * X1t + 390.69 * X 2t + 84.81* X 3t + 3978.66 * X 4t + 7.34 * X 5t

[T-Value]
[4.927]
[3.163]
[5.512]
[11.734]
[1.561]
The estimated coefficients have expected signs and are significant except TPS (X 5t ) . The
estimated equation indicates that the FAE, POP, PS and PSE determine GPE. Although the impact
of Teachers in Primary School is not significant, however, t-value is greater than one; therefore,
this variable is not redundant. The cointegration analysis indicates that the estimated coefficient of
foreign aid for education (X1t ) is 6.624 (t = 4.927) that is positive and significant, implying that
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in the long run it has positive and significant effect on Gross Primary Enrollment. It shows that
with the one million dollar increase in foreign aid, the gross primary enrollment will increase by
6624 units. The analysis indicates that there is positive long run relationship between GPE and
Population ages 0-14. The estimated coefficient of POP (X 2 t) is 390.697 (t = 3.163), which is
positive and significant. It implies the importance of population ages 0-14 in determining the GPE
in Pakistan. The analysis also shows that there is positive and significant long run relationship
between GPE and number of primary schools in Pakistan. The estimated coefficient of PS (X 3 t) is
84.818 (t = 5.512), which is positive and significant. It indicates that it also plays an important role
in determining the Gross Primary Enrollment in Pakistan. The analysis also indicates that there is
positive long run relationship between GPE and Public Spending on Education. The estimated
coefficient of PSE (X 4 t) is 3978.660 (t = 11.734), which is positive and significant. It implies the
importance of Public Spending on Education in determining the GPE in Pakistan. The estimated
co-efficient of number of TPS (X 5 t) is 7.345(t = 1.561) that is positive. The t-value shows that this
variable is significant at about 8 percent (not 5 percent) level of significance.
The Short-Run Dynamic Model: The Error Correction Approach
To determine the short run relationship between variables, we used VECM followed by
Hendrys approach known as general to specific. we include different lags of explanatory
variables from top to low and first lag of Error Correction Term (ECT). The following Error
Correction Model (ECM) is established using the two lags structure as suggested by AIC and SBC.
Yt = 0 + 1Yt 1 + 2Yt 2 + 3X1t + 4X1t 1 + 5X1t 2 + 6X 2t + 7X 2t 1

+8X2t 2 + 9X3t + 10X3t 1 + 11X3t 2 + 12X4t + 13X4t 1 + 14X4t 2
+15X 5t + 16 X 5t 1 + 17 X 5t 2 + 1ECTt 1 + e1t
After estimating the above model, we gradually eliminate the insignificant variables using the
general to specific approach in order to get a parsimonious model. The results of the preferred
model are presented in table 4.
The error correction coefficient is estimated as -0.50 with t =-2.89 enters into the short run
dynamic equation at highly significant. The estimated coefficient of ECT indicates that
approximately 50 percent of the dis-equilibrium in the determination of Gross Primary Enrollment
is corrected within the one year which shows a high speed of convergence to equilibrium if there
appears a dis-equilibrating shock.
In the above estimated model, the coefficients of lagged changes in foreign aid for
education are positive and significant which shows that the changes in previous period of foreign
aid for education has positively affected the short-term changes in gross primary enrollment. The
results of the analysis suggested that the impact of changes of foreign aid for education on the
determination of the gross primary enrollment works through transmission lags. This finding may
reflect the situation that primary school enrollment may increase due to increase in foreign aid for
education.
Diagnostic Tests
The validity of the estimated model is tested using the standard diagnostic tests. The high
probability values of all the diagnostic tests show that the model specification is appropriate and
parameters of the model are stable. Moreover, the high probability value of different tests for
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heteroskedasticity and serial correlation prove that these problems do not exist in the model.
Similarly, CUSUM and CUSUM of square tests show that there is no instability in the model. v
5. CONCLUSION AND POLICY IMPLICATIONS
This study has been analyzed the effectiveness of foreign aid on the education sector of Pakistan.
In this regard, one of the MDG; enhancing gross primary enrollment is analyzed. For this purpose,
the study covers an extensive review of literature on the subject. Considering the theoretical
developments and empirical evidence, an econometric model was developed containing the wide
range of determinants in these sectors. In the end, the dynamic function was specified to analyze
the short run and the long run behaviour of the determinants in the education sectors in Pakistan.
After confirming the order of integration of each variable by using ADF test, Johansen
cointegration and ECM tests are used to determine a long run and short run relationship among
variables. These econometric models were estimated over the period 1973-2008 using annual data.
The cointegration analysis in the education sector indicates that the estimated relationship of
foreign aid with gross primary enrollment is positive and significant, implying that in the long run
there is an increase in gross primary enrollment due to increase in foreign aid. So, we can say that
there is a positive relationship between them. In error correction model, short run relationship has
been proved and the error correction coefficient is highly significant with theoretically correct
sign, which show that the economy will converge to its equilibrium within one year if there
appears a dis-equilibrating situation.
In view of commitments to the achievement of MDG, the Government of Pakistan has
developed a National Plan of Action on Education For All for the period 2001-2015. The gap in
financial resources required to implement this plan is enormous and will have to be met from
external assistance. As the results of this study indicate that with one million dollar increase in
foreign aid, the gross primary enrollment will increase by 6624 students. As foreign aid has a
significant role in the education sector thus it is recommended that efforts should be made to
obtain the required assistance through grants and loans and its effective use. The data shows that
public spending in this sector is very low and it is further decreasing with the passage of time. It is,
therefore, suggested that all efforts should be made to enhance the budgetary allocation in these
sectors otherwise it would not be possible to achieve the MDGs by 2015.
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References
Appiah, E.N., & McMahon, W.W. (2002). The Social Outcomes of Education and Feedbacks on
Growth in Africa. Journal of Development Studies, 38(4), 27-68.
Asiedu, E. & Nandwa, B. (2007). The Impact of Foreign Aid in Education Growth, UNU-WIDER
Research Paper 2007/60
Dickey, D.A., and William, A.F., (1979). Distribution of the estimators for Auto Regressive time
series with unit root, Journal of the American Statistical Association, 74:366, 427-431
Dickey, D.A., and William, A.F. (1981). Likelihood Ratio Statistics for Autoregressive time
series with a unit root Econometrica 49: 4, 1057-1072
Dreher, A., Nunnenkamp, P., & Thiele, R. (2006). Does Aid for Education Educate Children?
Evidence from Panel Data. Kiel Working Paper 1290. Kiel Institute for the World
Economy.
Enders, W., (1995). Applied Econometric Time Series, John Wiley and sons Inc. New York
Engle, R.F and William, J. G., (1987). Co-integration and error correction: Representation,
Estimations and Testing, Econometrica, Vol. 55, No. 2.
Filmer, D., & Pritchett, L. (1999). The Effect of Household Wealth on Educational Attainment:
Evidence from 35 Countries. Population and Development Review 25(1): 85-120
Johansen, J., (1984). Econometric Methods, (Third Edition) Mc Graw. Hill Book Company.
Johansen, S., and Juselius, K., (1990). Maximum Likelihood estimation and inference on cointegration with application to the demand for money, Oxford Bulletin of Economics and
Stastics, vol. 52, No. 2.
Lucas, R. E. (1988). On the Mechanics of Economic Development. Journal of Monetary
Economics 22(1): 3-42.
MacMahon, W. (1998). Education and Growth in East Asia. Economics of Education Review,
17(2): 159-72
Malik, R. (2007) Aid Effectiveness and the Role of Donor Intervention in the Education Sector in
Pakistan: A Review of Issues and Literature. RECOUP Working Paper No.6 Mehbub Ul
Haq Human Development Centre.
Mankiw, N. G., Romer, D., & Weil, D. N. (1992). A Contribution to the Empirics of Economic
Growth. Quarterly Journal of Economics, 107(2): 407-37
Michaelowa, K., & Weber, A. (2006). Aid Effectiveness Reconsidered. A Panel Data Evidence for
the Education Sector. HWWA Discussion Paper 264, revised.
Nelson, R.R., & Phelps, E.S. (1966). Investment in Humans, Technological Diffusion and
Economic Growth. American Economic Review 56 (2): 69-75.
OECD (2009). International Development Statistics, Online: Databases on Aid and Other Resource
Flows. http//www.oecd.org/dataoecd/50/17/5037721.htm
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Pakistan, Government of, (various issues). Economic Survey, Islamabad, Ministry of Finance,
Economic Advisory Wing.
Pakistan, Government of (2008). Donors Directory, Ministry of Education: Islamabad.
Pakistan, Government of, (2003). Financing Education In pakistan: An Estimation of Required
and Available Resources to Achieve EFA Goals. Islamabad: Ministry of Education.
Pettersson, J. (2006). Foreign Sectoral Aid Fungibility, Growth and Poverty Reduction. Paper
presented at the WIDER Conference On Aid: Principles, Policies and Performance, 16-17
June 2006.
Pritchett, L. (2001). Where Has All the Education Gone? World Bank Economic Review.
15(3):367-391.
Romer, P.M. (1990). Endogenous Technological Change. Journal of Political Economy 98 (5): 71102.
Thiele, R., Nunnenkamp P., & Dreher, A. (2006). Sectoral Aid Priorities: Are Donors Really
Doing Their Best to Achieve the Millennium Development Goals? Kiel Working Paper
1266. Kiel Institute for the World Economy.
Wolf, S. (2006). Aid and Public Expenditure in Africa: Does Aid Increase the Efficiency of Public
Service Delivery? Paper presented at the WIDER Conference On Aid: Principles, Policies
and Performance, 16-17 June 2006.
World Bank, (2009). World Development Indicators CD-ROM. Washington, D.C.
World Bank, (2009). Reshaping Economic Geoghraphy.World Development Report. The World
Bank, Washigton, D.C.
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Annexure
Table 1: Augmented Dickey-Fuller Test Results for Unit Root
With Trend
With Trend
Variables
Variables
At Level
At First Difference
ADF-Statistics
ADF-Statistics
GPE
-2.748
-4.958*
GPE
FAE
-2.660
-9.939*
FAE
POP
0.682
-5.052*
POP
PS
-0.890
-5.322*
PS
PSE
0.336
-4.370*
PSE
TPS
-1.006
-4.521*
TPS
Note:
1. * Denote significant at 5 percent
2. I(1) indicates stationarity of the data after first differencing
Results
I(1)
I(1)
I(1)
I(1)
I(1)
I(1)
Table 2: Johansen Cointegration Test (Trace Test)

Alternative
Trace Statistic
5% critical values
Hypothesis
r=0
R1
206.3739*
95.75366
R2
r1
132.1868*
69.81889
R3
r2
75.10228*
47.85613
r4
r3
39.80338*
29.79707
r5
r4
15.44589
15.49471
r6
r5
3.327057
3.841466
Note: 1. * Indicates significant at the 5 percent level.
2. Authors calculations
Null Hypothesis
Table 3: Johansen Cointegration Test (Maximum Eigen Value Test)

Null Hypothesis
Alternative
Max-Eigen Statistic 5% critical values
Hypothesis
r=0
R=1
74.18710*
40.07757
R
=
2
r1
57.08456*
33.87687
R=3
r2
35.29891*
27.58434
R=4
r3
24.35748*
21.13162
R=5
r4
12.11884
14.26460
R=6
r5
3.327057
3.841466
Note: 1. * Indicates significant at the 5 percent level.
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Table 4: Results of Short Run Dynamic Model for Education

Dependent Variable Y t
Variable
Coefficient
t-Statistic
Prob.
C
-133.4952
-0.940778
0.3566
3.547107
2.738292
0.0117
X 1 t 1 ***
4.807205
3.287175
0.0032
X 1 t 2 ***
6023.557
1.566573
0.1309
X 2t
16008.91
2.237870
0.0352
X 2 t-1 **
9828.704
2.694920
0.0129
X 2 t-2 ***
15.92774
1.183818
0.2486
X 3t
6.923816
1.323121
0.1988
X 5t
19.88502
3.307439
0.0031
X 5 t-1 ***
ECT t-1***
-0.501922
-2.894569
0.0082
R2
0.73
Adjusted R2
0.62
F-statistics
6.74
Prob (F-Statistics)
0.000105
Note: ** and *** shows rejection of the Null Hypothesis of insignificance
at .05 and .01 level respectively.
Appendix-I
Variable
Gross Primary Enrollment
(total, in thousand)
Foreign Aid for Education
(at current prices, million US$)
Population ages 0-14
(% of total)
Total number of Primary Schools
Public Spending on Education
(% of GNP)
Teachers in Primary School
List of Variables and data sources

Source
Pakistan Economic Survey 97-98, 08-09
OECD, CRS, online
WDI, 2008
Pakistan Economic Survey (various issues)
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Appendix-II
Millennium Development Goals and Targets
Goal 1: Eradicate extreme poverty and hunger
Target 1: Halve, between 1990 and 2015, the proportion of people whose income is less than one dollar a
day.
Target 2: Halve, between 1990 and 2015, the proportion of people who suffer from hunger.
Goal 2: Achieve universal primary education
Target 3: Ensure that by 2015, children everywhere, boys and girls alike, will be able to complete a full
course of primary schooling.
Goal 3: Promote gender equality and empower women
Target 4: Eliminate gender disparity in primary and secondary education, preferably by 2015, and in all
levels of education not later than 2015.
Goal 4: Reduce child mortality
Target 5: Reduce by two-thirds, between 1990 and 2015, the under-five mortality rate.
Goal 5: Improve maternal health
Target 6: Reduce by three-quarters, between 1990 and 2015, the maternal mortality ratio.
Goal 6: Combat HIV/AIDS, malaria and other diseases
Target 7: Have halted by 2015 and begun to reverse the spread of HIV/AIDS
Target 8: Have halted by 2015 and begun to reverse the incidence of malaria and other major diseases.
Goal 7: Ensure environmental sustainability
Target 9: Integrate the principles of sustainable development into country policies and programmes and
reverse the loss of environmental resources
Target 10: Halve, by 2015, the proportion of people without sustainable access to safe drinking water and
basic sanitation.
Target 11: By 2020, to have a achieved a significant improvement in the lives of at least 100 million slum
dwellers.
Goal 8: Develop a global partnership for development
Target 12: Develop further an open, rule-based, predictable, non-discriminatory trading and financial
system.
Target 13: Address the special needs of the least developed countries.
Target 14: Address the special needs of land locked developing countries and small Island developing
states.
Target 15: Deal comprehensively with the debt problems of developing countries through national and
international measures in order to make debt sustainable in the long term.
Target 16: In cooperation with developing countries, develop and implement strategies for decent and
productive work for youth.
Target 17: In cooperation with pharmaceutical companies, provide access to affordable essential drugs in
developing countries.
Target 18: In cooperation with the private sector, make available the benefits of new techniques, especially
information and communications.
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Appendix-III
Diagnostic Tests for Education Sector
0.062
0.093
Probability
0.804
0.759
Jerque-Bera Statistics 0.5005
0.778
F-Statistics
2-Statistics
F-Statistics
2-Statistics
F-Statistics
2-Statistics
F-Statistics
2-Statistics
F-Statistics
2-Statistics
F-Statistics
2-Statistics
F-Statistics
2-Statistics
F-Statistics
2-Statistics
F-Statistics
2-Statistics
0.236
0.252
0.652
0.640
0.902
0.893
0.943
0.933
0.868
0.839
0.360
0.262
0.356
0.213
0.549
0.357
0.503
0.279
F-Statistics
Log likelihood Ratio
Model Specification Test

(Ramsey RESET Test)
Normality Test
(Jarque-Bera Statistics)
Heteroskedasticity Test (The
White Test)
First Order
Second
Order
ARCH Test
(Autoregressive Conditional
Hetroskedasticity Test)
Third Order
Fourth
Order
First Order
Second
Order
Serial Correlation
(Breusch-Godfrey LM Test)
Third Order
Fourth
Order
1.465
21.556
0.206
0.218
0.102
0.225
0.126
0.432
0.310
1.4246
0.871
1.257
1.084
3.088
0.724
3.233
0.864
5.079
Source: Authors Calculation

CUSUM and CUSUM of Squares Test of Stability
1 5
1 0
5
0
- 5
- 1 0
- 1 5
8 6
8 8
9 0
9 2
C
9 4
U S
9 6
U M
9 8
5 %
0 0
S
0 2
0 4
0 6
0 8
ig n ific a n c e
1 .6
1 .2
0 .8
0 .4
0 .0
-0 .4
8 6
8 8
9 0
9 2
C U S U M
9 4
9 6
o f S q u a re s
9 8
0 0
5 %
0 2
0 4
0 6
0 8
S ig n ific a n c e
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BIS: Automated information system for knitting in textile

M. Shakeel Faridi 1, Zahid Javed 2, Fahad Jaan3, Tasleem Mustafa 4, Chaudhry. Muhammad Nadeem Fasial 5
1-4
Department of Computer Science, University of Agriculture

Faisalabad, Pakistan
Department of Management Studies, the University of Faisalabad

Faisalabad, Pakistan
Abstract
The production of top quality materials / products at high speed with less time is only possible
through and efficient information systems. Technologies that carries the flow of work has been
widely applied in the various industries, such as OA (Office Automation), manufacturing, banking,
security, education and research institutions, financial services, telecommucation industy and so
on. The basic objective to adopt such technologies is to improve the business processes through
automation using information system. In this research work the authors would like to presents the
flow of information in an automated manner for knitting of yarn in textile industry, where it is
implemented in Masood textile. This automation in information system developed efficiently inhouse ERP (Enterprise Information System).; it not only helps nut also support the management to
manage the business processes.
Keywords: Enterprise information system, Information system, Automation, Business processes
integration, Knitting, automated information management system.
Introduction
Why is Automation very important? During development and manufacturing quick information turn around,
that is required to hit the target and also to sustain the speed of process. Process automation has become
very much common in industry [1, 2]. Every company that is involved especially the production oriented
business use the automation information system for better management and to track the business processes /
operational activities [10]. Nowadays automated information system based applications are very much
capable in collecting and measuring the required details for manufacturing or manufacturing related
processes because process could be complex and the information required is huge [11].
The systems are based on automation is very simple thought which the information is forward to
accomplish the business functions. These systems work on pre-defined procedure and required less humans
interaction and maintenance as compare to traditional information system. These AI based applications
fetch the information and send it for further operations. The automated system works for government,
private and especially in business context e.g. customer satisfaction, sales department and operational
tracking. [13, 14]
Automation in business functions provides enterprise integration by passing the information
amongst the systems and processes [3]. The integration in business functions enables the systems for both
data and flow of work; because to integrate the flow of work operational and functions integration is
required. The reason is that information is swap between the applications, systems at different locations in
ERP.
The production of top quality materials / products at high speed with less time is only possible through
information systems. The ERP system in MTM (Masood Textile Mills) is consists of different applications
as per their requirement for manufacturing, tracking and also to manage the resources. Each application has
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a distinct task and can be adapted separately to specific processes and requirements. An overlook of the
system architecture for knitting is shown in figure 2. The objective of this research work is to define the
processes for knitting and role of information system to make them fast, automated and efficient for
tracking and monitoring during production.
i.
AUTOMATION
Computer and related technologies are very much efficient and capable of carry out the functions that
acquire humans efforts. While the execution of such function through machine or automation is just
because, the humans do not wish to perfrom the same function again and again and also can not perform
them consistently, accurately and reliably. Mass production is the major cause for the development of such
automated system because the humans can not perform the jobs fastly as machine or automated system can
[4, 5].
The automation also offer the economicle benefits at enterprise level is the major cause of
attentions towards, the capabilities of automation system [6, 7, 8 ]. Atutomation is simply defined as
atomatic control of manufacturing throught number of successive stages or the use of automative control to
replace or reduce the humans efforts[4].
Process automation is described using the dedicated ` moulding and appropriate drawing tools for
work flow. While in transformation, set of rules are defined for the movement of information in the system.
Where the data is read and receive from the sources agent and proceed for further operation in an
understand format and this level of movement is responsible between the different connected components.
The benefits of Business process automation include the work flow, data integration, and reduction of hand
written form, human errors and better process flow and also to allow the new services to the customers for
real time monitoring in business processes. [9]
Start
Transitions 1
State
1
Transitions 2
State
2
Transitions 3
State
N
Transitions 4
Fig.1 Representing States and State Transitions Using a State Diagram in an automated system
ii.
AUTOMATED INFORMATION IMPLICATION IN TEXTILE INDUSTRY
Information management systems are broad level systems, these systems incorporates huge amounts of data
across an organization. Data is entered into systems thought-out the organization. Where it is the
responsibility of data management system is to pull these data elements into unified systems. Organizations
collect the massive data depends on the nature and size of the organization, and system consist on different
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software applications with single platform. In order to access and to utilize the information, they need a
well-planned and mature information management system.
The given model for automation in information system shown in Figure2 is practically
implemented in Masood textile mills. It shows the flow of working and information during knitting process
to fabric. As knitting process consists of different processes, different departments play their contribution
during manufacturing process. The automated information system divides these processes in different
states. Each state has number of transaction. That starts from purchase order originate by the customers and
the role of each department till the job completion or final state. Each state is directly or indirectly
communicates with the other to describe the flow of process along with information.
MTM (Masood textile mills) have their complete and fully developed ERP system. It almost
contain all important applications that provide the vie solutions for textile operation and management.
Where the knitting processes is totally based on automation. The AIS (Automated information system)
includes different agents works together in knitting e.g., customer, PPC (production and planning
department), Head office, vendors, store, knitting department, third parties manufacturing units.
In (state1) customer originate the PO (purchase order) and system forward it to PPC department
(production & planning control department) to check the availability of vacant slot for execution or
availability of resources, if not then PO return back to customer with PO status either successful or not.
If resources are available the PO (purchase order) forward towards head office for YD (Yarn
Demand). Head office in (state2) generates the inquiries to yarn vendors for YO (Yarn order) and also give
the feedback or status of Yarn to the PPC department. Yarn store (state3) receives the yarn as per
requirement from vendor or Yarn supplier.
If yarn (State4) does not meet the requirement the store department reject the order and update the
status back to head office. Accepted yarn issues to the knitting department knitting for fabrication. In case
(state5) if knitting department reject transaction due to excessive load. The store issues the yarn to third
knitting parties or for fabrication.
After the (State6) completion of order job or fabrication the knitting department or third party
knitting vendor / manufacturer issue the knitted fabric to the Grey Fabric store for delivery.
In case of any discrepancy related to job order or problem in production the system back to the
knitting department or to the third party. Finally the product delivers to the customer and closed the job
successfully.
During the manufacturing and execution, an intelligent system clearly defines the steps for
production and also provides the support in an efficient manner which is not possible traditionally. In order
to access and to utilize the information, they need a well-planned and mature information management
system. The role of information system toward automation and order tracking and monitoring support the
organizations for batter management and also to serve their customer efficiently.
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Figure 2 : Automation in knitting & flow of information

CONCLUSION
During manufacturing and execution for manufacturing, intelligent system clearly defines the steps for
production, planning and also provides the support in efficient manners, which is not possible traditionally.
In order to access and to utilize the information, they need a well-planned and mature information system.
Where it serve for automation and monitoring and tracking that support the organizations towards the better
management and also to serve their customer efficiently and timely?
ACKNOWLEDGMENT
Lastly, we offer our regards and blessings to the Management team of Masood textile mills who supported us in any
respect during the completion of the project.
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References
[l] K. Snnivasan. The Evolving Role of Automation in Intel Microprocessor Development and
Manufacfuring. Intel Technical Journal, May 2001.
[2] JOSEPH A. REINE, JR.t, The Operational Information System and Automation of Sterlington Steam
Electric Station, ire transactions on industrial electronics
[3]U. Singh and D. Caceres - KEMA Inc, An Integrated Approach for Implementing a Distribution
Automation System, 2004 IEEUPES Transmission 8 Distribution Conference & Exposition: Latin America
[4] E. L. Wiener and R. E. Curry, Flight-deck automation: Promises and problems, Ergonomics, vol. 23,
pp. 9951011, 1980.
[5] R. Parasuraman and V. A. Riley, Humans and automation: Use, misuse, disuse, abuse, Human
Factors, vol. 39, pp. 230253.
[6] D. D. Woods, Decomposing automation: Apparent simplicity, real complexity, in Automation and
Human Performance: Theory and Applications, R. Parasuraman and M. Mouloua, Eds. Mahwah, NJ:
Erlbaum, 1996, pp. 116.
[7] C. E. Billings, Aviation Automation: The Search for a Human-Centered Approach. Mahwah, NJ:
Erlbaum, 1997.
[8] C. D.Wickens, A. Mavor, R. Parasuraman, and J. McGee, The Future of Air Traffic Control: Human
Operators and Automation. Washington, DC: National Academy Press, 1998
[9] U. Singh and D. Caceres - KEMA Inc, An Integrated Approach for Implementing a Distribution
Automation System, 2004 IEEUPES Transmission 8 Distribution Conference & Exposition: Latin America
[10] Rowan D.A.; 1989; On-line expert systems in process industries; AI Expert, august 1989, pp. 30-38.
[11] hitch R.; 1992; Artificial intelligence in control: some myths, some fears but plenty of prospects;
Comp. & Control Eng. J., July 1992, pp. 153-163.
[12] Chaudhry Muhammad Nadeem Faisal, Muhammad Sheraz Arshad Malik Usability evaluation of
Software as Service from Individuals perspective Vol. II No. 7 (March 2011). ISSN: 1697-9613 (print) 1887-3022 (online). www.eminds.uniovi.es
[12]http://www.wisegeek.com/what-is-an-information-management-system.htm
[13]http://prtl.uhcl.edu/portal/page/portal/HR/HANDBOOKS/Automated_Information_Systems
[14]http://www.wisegeek.com/what-is-an-information-management-system.htm
`
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th
Analyzing development in Iran Industrial Productivity during 4

development Plan by numerical taxonomy
Mohsen Fathi Almas
Higher Education Institute of Jahad Daneshgahi Yazd
Taranoosh Jafari
Higher Education Institute of Jahad Daneshgahi Yazd
Abstract
Productivity of production factors is one of the main ways to find about capability of an industrial
activity for achieving relative advantages in internal and external levels. Through improving
productivity of production agents, reduction of production costs and competition advantages in
market for producer is achievable. On the other hand, investors make their decisions based on
productivity level along with value added index. Although, maximum productivity rates are
feasible in production section, it seems that this section is still far from its designated objectives
and as a result, production factors currently are blamed for negative contribution in national
economic development. This may be rooted in the fact that generally national development
programs take all sections of the industries as the same group to put forward a general plan for all
of them, failing to take into account differences between fields of industries. In this regard, this
work tries to introduce a guideline for decision makers through recognizing main indexes affecting
industrial development to achieve a more accurate policymaking tool for industries in national
level. The study takes into account 5 different indexes including inputs, outputs, value added,
number of employees, and investment in two-digit ISIC coding frame, generated by Iran statistics
center for the 4th development Plan (2004-2008). Results introduce Oil Refinery industries- Coke
industries, etc. (code 23) as the fields with highest development rate while tanning and processing
leather, bag/suitcase production, etc. (code 19) ranked at the lowest rate of development.
Keywords: Analyzing development , Iran Industrial , Productivity , Development Plan , Numerical
taxonomy
Introduction
Nowadays, the ways toward fast economic development centered around industrial section, which
is recently happened in some countries and regions all around the worlds, have received significant
attentions from many researches. In developing countries, some Intl economic bodies and
academic establishments, since 1970s several studies have been commissioned focusing on
industrial development. Cleary, these works are mainly aimed to provide more reliable guidelines
for economic policy makers. This is while, faster economic development of modern age put more
emphasize on accuracy, reliability and compatibility of the policies along with successful
experiments; so that failing to adopt proper policies will led to irrevocable consequences.
On the other hand, productivity of economic production is one of the main indexes to measure
ability of an industrial activity for achieving relative advantages both in national or international
level. To put it in another way, since more productivity leads to less production costs and higher
profit margin, competitive advantages of industries and its survival is mainly rooted in productivity
growth. Such growth triggers significant increase in demands, and more importantly competitive
advantages for domestic products in intl markets, which leads to optimum resource utilization and
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production development. As a result, more capacity for new investments is developed followed by
more and better of innovations and creativity. The fact that developing countries fail to use their
resources in an optimum way is due to low productivity rate. By this assumption, it is possible to
improve performance and production rate of different sections of industry through higher
productivity level (Sobhani & Mohammadlo, 2008)
Whereas productivity is the main factor toward permanent economic development, so realization
of intrinsic, permanent economic development and productivity growth from one hand, and
deemphasize of access to cheap workforce and raw materials as relative advantage from the other
hand, clarify necessity for academic and comprehensive recognition of the factors affecting on
productivity.
In addition, through time and development of different theories and patterns regarding economic
development, new variables are now considered as engine, which receive attentions from many
economists. In this regard, due to ever increasing complexity and variability of investment and
related processes, the role and position occupied by investment and capital in development and
growth patterns is permanently under revision and survey (Mahdavi 2004). An increase in capital
utilization has changed worlds economy dramatically. One clue for such change is replacement of
capital mobility instead of goods mobility. It is reasonable to say that relative advantages of
investment may be considered as a tool for underdeveloped countries toward economic
development. To facilitate macro industrial decision making, the study is aimed categorize
different national industrial fields based on two-digit ISIC codes into three category through
analyzing several indexes effective on industrial development including productivity, investment
and value added.
Theoretical framework
Nowadays, developing countries are desperately looking for permanent economic development,
though it is not feasible unless through achieving higher indexes of productivity of production
factors. The higher productivity rate, the less production costs and consequently more competitive
advantages in intl market. Many researches currently are in hand in many developed and
developing countries, this fact leads to consider productivity rate meaningfully/positively effective
on industrial products export (Roberts & james, 1997). On the other hand, technology transfer and
better utilization of interest gauges is only facilitated through growth of industrial products export,
which fosters learning by exporting. It is expected, therefore, that it may empower and foster
production and export development through a cyclic and progressive process (Aghion & Howitt,
1998). Speaking about Iran, due to ineffective management of resources in national economy, and
lack of enough experiences and skills regarding exports among industries managers, not taking
into account Oil industry, direct foreign investment in other industries will led to technology
transfer and more educational and training chances regarding successful export. Nowadays,
improving productivity of organization is one of the main headaches among executive managers
and decision makers, so that many countries have placed their development programmed toward
improving productivity. As a result, during last 15 years, the world economy has experienced
about 45% productivity growth (Faraji, 2006). Moreover, productivity is a way for better living
condition through employing labor, intellectual power and tool in better way. To put in another
way, any decision made based on sound mind and observation, surely leads to an activity with
better results. On this regard, higher productivity comes with better living condition (Amini &
Hejazi, 2007). In this way, work force productivity is one of the main presumptions of
organization productivity, and any quest and effort toward improving organization productivity
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without employees productivity is doomed to fail. In addition, work force is the main factor of
developing and productivity improve, this is while, workforce productivity rate in Iran is less than
average rate among Asian countries (Nejhadhaji and Irani, 1996). Thus, due to its close relation
with underdevelopment of nations, human resources productivity is among factors which are under
intense attention of researchers and scholars for many years. At national scale, the higher human
resources productivity level, the higher GDP rate or production to capital and work force rate.
Moreover, human resources productivity is highly effective on competitive advantage of domestic
products in Intl markets (Tabatabie, 2000). Many researches, in this filed have been conducted
focusing on productivity. What follows is a brief look on these works.
In one of the multidimensional researches in this field, researchers focused on productivity process
in Indian Andraperadesh Producing Industries between 1976-86. The study used Translog
Production function and Divisia index for calculating four industries (cotton fabrics, tobacco,
carbonated drinks and foods, paper and paper products). Descriptive variables in this regard
include capital deposit, work force, and consumed fuel, while time variable is considered as an
input for assessing technical advance in production equation and GDP is considered as dependent
variable. By calculating total productivity rate using Divisia index, researchers conclude that total
productivity of the effective factors move in descending trend except for cotton fabric industries.
In addition, total productivity of cotton fabric industries face with mild oscillations (Seshaiah &
Reddy, 1993).
In another research about growth of productivity in Turkish producing industries based on private
and public sections, researchers concluded that reduction of industries productivity is rooted in
commercial limitations. The results illustrate that while total productivity growth in private and
public sections is the same, public companies significantly utilize more resources and production
factors in comparison with private section industries (Krueger & Tancer, 2001).
There are no researches with similar nature conducted in Iran regarding small industries in
comparison with large industries (due to lack of statistics in this field). However, a research is
currently in hand for calculating productivity of large industries. What follows are the main
findings:
Azerbaijani conducted a study on states large industries between 1967-8. The study applied KabDoglas production function with fix replacement function equal to 1 and Kendrick productivity
and Solo production function as two indexes applied for estimating total productivity of production
factors. Results show that, machineries, tools, fabricated products, metal and chemical industries
enjoy highest productivity of production factors. Afterward the study concludes that these
industries have relative advantages and highest capacity for investment, production (productivity)
and creating value added in comparison with other industries, and with access to rare resources, the
industries can trigger a dynamic and productive national economy in a short period of time
(Azerbaijan, 1989, Molaie, 1999).
In another study, researchers tried to calculate productivity in Iranian large industries, and to this
end, Solos different explicit and tacit models were applied for adopting the optimum production
function for stating relation between employment, capital rate and production. Moreover,
exponential function utilized to take into account capital deposit. Results showed that, although
none of the functions is meaningful for all industrial activities, logarithmic functions are still
meaningful for some activities. The study concludes that changes in Irans total industrial
production is not owned to growth of productivity in industries, and only state investment policies
and supports are the one to blame for producing activities especially in large industries section
(Hashemian Sfehani et, al.1998).
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Another research about productivity indexes divided the indexes into two groups: micro indexes
and macro indexes. Work force and capital productivity in the later group is illustrated based on
production to contributions ratio and in the former group, production growth in relation to a set of
production factors is illustrated using Solo and Divisia primary indexes. Moreover, exponential
function applied for estimating capital deposit. Productivity indexes showed that micro
productivity of workforce totally experiences 48.9% growth while capital productivity undergoes
negative growth equal to 13% during the period under consideration. Surveys on micro
productivity based on industrial activities classification showed that workforce productivity is on
ascending trend in all industries except for food, and paper industries. However, capital
productivity showed increase only in mineral non-metal and main metals industries while in other
industries it goes through descending trend. (Tavakoli et. al. 2000)
Surveying Method
The study uses descriptive-analytical method and the case study is comprised of domestic
industries (23 industries)- due to small portion in GDP, tobacco and recycling industries are
omitted. This work first started with library studies to determine industries productivity
improvement indexes followed by field studies to gather required data from national statistic
annual report.
There are several methods for determining development indexes (Feiz Pour 2004), and the study
applied Numerical Taxonomy Method (NTM) (Eghbali, 2007, pp.128-136; Azadeh, 2007).
Introduced by M. Adenson in 1763, and revised and developed by a group of mathematicians, the
method is one of highly reliable methods for classifying regions based on development rate and
how the regions have access to facilities (Ziary 2008, pp. 145& Azar 2002, pp. 36). This technique
employs variety of indexes through a 9-step process to classify industries from development
viewpoint. What follows is a brief introduction to the steps:
Step one: Determining regions under consideration and development indexes:
Step two: Organizing data into matrixes
Step three: Normalizing the matrixes applying following relation:
(1) Z ij =
X ij X i
Where
Xi: average of indexes or each column in the matrix
i : Standard deviation of each column in the matrix
Step four: Determining combined distance between the regions based on following
relation:
(2)
Dab =
(Zaj Zbj )2
j =1
Where
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a & b imply for two regions under consideration. The operation is a type of couple calculation
between the two regions. Relation (2) leads to:
1. Distance between region a and b equals to b to a.
2. Each regions distance to itself is equal to zero.
Step five: Determining shortest distance
Step six: homogenizing
(3)
Upper limit Or(+) = dr + 2 dr
Lower limit Or (-) = dr -2 dr
Step seven: Determining patterns
This step tries to define difference between ideal and current condition for each regions (as
determined in step 4) as follows: little differences means developed and wider differences means
under developed regions.
(5)
Cio =
(Zij Zbj )
j =1
Step eight: Ranking development rate

This step ranks development rate of the regions. Development rate of a region (Fi) is calculated by
applying following relation:
(6)
Fi=Cio/Co
Where
Fi: development rate of region
Cio: development pattern of each region
Co: upper limit of development
Placing average and standard deviation of Cio in the following relation yields Co:
(7)
Cio Co= Cio+ 2
Step nine: Analyzing results and determining quality of development
Calculated Fi for each regions are analyzed in this step. Taxonomy model place Fi between 0 and 1
( 0 Fi 1 ), and defines three classifications as follows:
Having access to facilities (high quality of development)
Having access to limited facilities (average quality of development)
Having no access to facilities (low quality of development)
Having Fi, and based on the model, regions with their Fi between 0 and 0.775 (0 Fi 0.775) are
at first classification, region with their Fi beween 0.775 and 0.884(0.775 Fi 0.884) are at second
classification and regions with their Fi between 0.855 and 1 (0.885 Fi 1) are at the third
classification. It is noticeable that, Taxonomy models reliability is ascertained by many
researchers how have applied the model.
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Following are indexes applied by the study for measuring domestic industries development rate:
Index 1: value of input/value of output
Index 2: value of output/number of employees
Index 3: value added/number of employees
Index 4: value of investment/ number of employees
Findings
Before starting calculating developing rate of domestic industries between 2004 and 2008, we need
to have a look at price rate of each industry during the years under consideration. Following table
lists the industries under consideration along with their prices during the years.
Table 1: Industrial goods index
Code
15
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
Industries
Food and Drinks
Fabrics
Garment-processing, painting- fur
Tanning, processing, bag and suitcase
Wood production and stopper
Paper and related products
Publication and recorded media
Coal, refinery and etc.
Raw and chemical materials
Robber and plastic
Non-metal mineral products
Main metals
Fabric metal products
Machineries and unclassified equipment
Office machineries, calculators
Power plant machineries and power transmit
Broadcasting and related equipment and
systems
Medical, optical and precise machines
Car industries, trailer, half-trailer
Transportation equipment
Furniture and unclassified products
2004
188.6
172.5
146.7
178.8
124.4
170.3
155.7
139.9
265.1
169.4
190
182.4
168.7
183
158.2
144
168.5
2005
198
166.7
145.4
186.1
139.3
191.9
159.7
139.6
295.1
175.5
200.8
205.1
169.9
187.6
165.3
129.8
179.1
2006
231.5
195.3
140.1
190.5
141.5
208
159.8
155.2
376.2
185.5
201.4
229.2
185.4
204.2
174.2
128.1
185
2007
257.6
211
159.5
201.3
147.1
236.2
167.7
174.9
457.2
203
207.1
277.3
220.5
225.9
185.2
128.7
197.4
2008
288
215
194.1
235.8
155.5
276
182
196.5
510.2
234.1
243.6
332.5
320
287.3
202.7
128.9
232.6
152.5
197.8
153.1
145.7
146.8
213
148.9
147.3
121.7
221.9
155.3
149
131.1
240.5
161.7
151.9
124.2
254.7
168.7
153.2
Following table lists the results from adjusting development indexes of domestic industries
productivity based on price index.
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Table 2: Development indexes of domestic industries productivity based on price index of each industry
Code
2004
2005
2006
Index 1 Index 2 Index 3 Index 4 Index 1 Index 2 Index 3 Index 4 Index 1
1.47
95.27
30.44
4.02
1.47
97.74
31.14
3.62
1.60
15
1.56
44.97
16.11
2.11
1.59
49.52
18.31
2.49
1.62
17
1.62
36.11
13.83
0.70
1.75
42.78
18.36
1.70
2.37
18
1.51
38.84
13.16
0.93
1.53
50.22
17.50
1.29
1.66
19
1.86
64.04
29.53
3.38
1.81
62.19
27.79
1.65
2.03
20
1.58
115.89
42.31
6.44
1.58
87.84
32.22
5.86
1.56
21
2.13
55.15
29.28
4.91
2.00
61.15
30.63
4.95
1.76
22
1.87
648.64
301.72
9.42
1.95
735.21
358.09
6.59
1.89
23
2.47
136.88
81.43
10.99
2.47
126.37
75.27
2.29
2.39
24
1.59
90.67
33.74
4.55
1.52
95.21
32.57
11.44
1.67
25
2.23
51.54
28.38
5.37
2.29
56.98
32.09
3.72
2.14
26
1.75
192.35
82.35
5.03
1.58
185.07
67.95
9.24
1.65
27
1.81
68.63
30.72
4.60
20.5
87.09
44.70
3.84
1.77
28
1.70
70.83
29.06
3.38
1.69
72.18
29050
3.27
1.73
29
1.83
116.63
52.75
1.22
1.92
117.27
56.17
0.76
1.70
30
1.57
112.14
40.70
4.18
1.70
146.34
60.36
4.86
1.68
31
1.58
164.77
60.35
5.28
1.44
164.52
50.32
6.08
1.47
32
1.66
59.61
23.75
2.66
1.80
70.58
31.41
5.59
1.81
33
1.52
223.61
76.28
7.44
1.60
267.58
100.47
6.33
1.38
34
1.57
90.85
33.14
3.62
1.64
124.99
48.87
6.35
1.63
35
1.79
47.93
21.16
5.91
1.74
67.61
28.69
4.26
1.88
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Index 2
49.06
40.24
26.58
40.10
36.46
67.54
71.28
737.84
113.03
84.94
56.29
166.66
42.09
60.54
98.17
125.06
167.78
68.06
244.22
126.44
39.32
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Code
15
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
2004
Index 1
18.47
15.42
15.37
15.92
17.50
24.31
30.73
348.16
65.69
34.03
30.04
65.61
18.35
25.56
40.57
50.82
53.91
30.48
67.88
48.88
18.45
Index 2
2.36
2.20
0.38
0.66
0.74
2.74
3.48
18.44
4.27
4.51
3.59
4.00
1.26
2.41
7.74
4.13
4.87
3.00
13.63
1.65
1.14
2005
Index 3
1.42
1.53
1.78
1.43
1.93
1.53
1.85
1.98
1.88
1.52
2.33
1.76
1.70
1.62
1.48
1.51
1.41
1.78
1.38
2.10
1.75
Index 4
107.92
64.46
51.15
94.26
85.56
100.94
76.52
1071.73
122.05
107.60
82.16
210.98
86.96
89.30
91.42
219.76
205.52
106.77
353.74
208.98
86.99
Index 1
31.91
22.45
22.42
28.45
41.25
35.17
35.27
529.78
57.08
36.71
46.95
90.84
35.73
34.21
29.84
74.27
59.42
46.94
97.62
109.65
37.18
Index 2
4.65
5.33
1.00
1.98
3.21
6.43
3.48
10.58
14.92
5.01
5.56
15.43
2.78
3.20
3.16
10.00
4.62
4.24
7.72
5.67
2.67
2006
Index 3
1.39
1.49
1.74
1.53
1.87
1.53
1.64
1.98
1.93
1.48
2.30
1.84
1.53
1.60
1.78
1.46
1.75
1.92
1.29
1.74
1.73
Index 4
113.65
80.62
54.62
83.32
97.93
107.65
81.90
1188.42
157.05
129.84
86.28
278.29
77.42
89.11
121.68
281.31
189.86
137.63
412.31
290.06
106.20
Index 1
31.81
26.35
23.27
28.88
45.64
37.29
32.09
589.62
75.75
41.89
48.79
127.04
26.84
33.41
53.28
89.13
81.54
66.08
91.67
123.79
44.84
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Index 2
7.36
4.45
0.88
2.14
1.10
6.16
2.58
13.99
5.83
7.15
8.43
13.00
2.94
3.90
5.16
13.81
4.94
8.59
16.35
13.13
3.01
Inserting numerical value of productivity development indexes yields domestic industries development rate.
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Table 3: Domestic industries development rate during 2000 to 2004
Year
2004
2005
2006
Development
Rank Code Rank Rank
Code Rank Rank
Code
quality
1
23
0.255
1
23
0.29
1
23
Access to facilities
2
24
0.55
2
34
0.65
2
34
3
27
0.64
3
27
0.69
3
24
4
34
0.65
4
24
0.71
4
27
5
32
0.71
5
31
0.73
5
30
6
26
0.71
6
35
0.74
7
26
7
23
0.72
7
28
0.74
7
26
8
21
0.73
8
26
0.75
8
32
9
28
0.75
9
22
0.76
9
25
10
36
0.76
10
25
0.76
10
22
11
30
0.76
11
33
0.77
11
33
12
20
0.76
12
32
0.77
12
35
13
31
0.77
14
25
0.77
15
29
0.79
13
21
0.79
13
Access to limited
facilities
16
35
0.79
14
30
0.79
14
17
15
0.80
15
34
0.80
15
19
17
0.85
17
20
0.83
17
20
18
0.87
18
15
0.84
18
19
18
0.86
19
20
17
0.86
20
21
21
19
0.89
21
19
0.89
No access to
facilities
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Rank
0.19
0.66
0.66
0.71
0.71
0.73
0.73
0.74
0.75
0.76
0.76
0.76
0.78
0.79
0.79
0.80
0.81
0.81
0.82
0.83
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Year
Development
quality
Access to limited
facilities
No access to
facilities
Rank
2007
Code
Rank
1
2
3
4
5
6
7
8
9
10
11
12
23
27
35
24
34
31
26
33
20
22
32
21
0.19
0.63
0.46
0.67
.69
0.70
0.71
0.75
0.75
0.79
0.77
0.77
13
14
15
16
17
18
19
20
21
36
25
28
29
17
15
18
30
19
0.78
0.79
0.79
0.79
0.80
0.81
0.82
0.82
0.84
Rank
2008
Code
Rank
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
23
27
35
33
26
24
31
34
32
30
36
20
25
21
29
22
15
18
17
28
19
0.15
0.60
0.61
.068
0.68
0.69
0.69
0.70
0.70
0.73
0.76
0.76
0.77
0.78
0.79
0.79
0.80
0.81
0.81
0.81
0.82
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As it is clear looking at results of analysis on productivity development of domestic industries that

coke, refinery, etc. (code 23) enjoy highest rate of development while tanning and leather
processing, bags and suitcase industries (code 19) ranked at the bottom of development scale.
Following table lists summary of results regarding productivity development rate of domestic
industries.
Table 4: number and percentage of domestic industries based on type and quality of development
Year
Development
2004 2005 2006 2007 2008
quality
Number
14
12
12
12
23
%
66.7
57.1
57.1
57.1
61.9
Number
6
8
9
9
8
Access to limited facilities
%
28.5
38.1
42.9
42.9
38.1
Number
1
1
No access to facilities
%
4.8
4.8
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70%
60%
50%
40%
30%
20%
10%
0%
Diagram 1: Domestic industries percentage based on type and quality of development
Discussion and conclusion

Despite commonly accepted necessity of productivity and the fact that it is highly emphasized in
development programs and also 20-year development perspective charter, difference between
realized and ideal national development level hints necessity for conducting researchers about
productivity and the key factors in this regard. Productivity at commercial agencies level can be
defined as output of an agency (value of produced goods, value added and similar items) to total
input rate; this definition encompasses all production factors such workforce, capital, energy, etc..
Productivity is a index therefore, pointing out order of combination and utilization of productive
input toward objective of the agency, so that maximum performance is realized by minimum cost.
This work is aimed to survey several indexes effective on developing industries through
determining development rate of each ISIC code groups during 4th development program. As it is
clear from the results, development rate is not the same among different industries, this implies
difference in access to facilities between different industries. For instance, industries code 19
(tanning, leather processing and bags/suitcase production, etc.) as one of traditional industries
classified as under developed industries during first 2 years under consideration, though they
improved during next years. Other field of industries, desperately in need for more attention of
decision makers, is industries in code group 15 (Food and drinking industries). As this field of
industries is taken into account as a ground for national independency by authorities, and Iran has
no limitation in access to raw materials, it is reasonable to say that the industries have high
potential for development upon proper planning by authorities. On the other hands, industries in
code group 17 (fabrics industries ), previously known as one of the main pillars of national expert,
recently has been disregard by authorities as they have found oil industries more profitable and
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know ranked in semi-developed group. Experts of the field believe that failing to access modern
technologies is the main cause for bankruptcies in the industries leading to lose of many jobs.
Generally, Iranian industries are at acceptable condition, and virtually none of them is at under
developed class. A positive point is small gap between industries in semi-developed class and
developed class, which implies for good condition of domestic industries in comparison to other
countries.
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Ahmad Morakkabati, Human as the main factor for organizational productivity. Article introduced
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productivity factors in Iranian industries group, 2000; Tehran, Program and Budget Org.
Ali Nejad Haji, Farhad Irani, human force productivity, Tadbir, No. 64; 1996/
Alireza Amini and Zohreh Hejazi Azad, analyzing role of health and hygiene on improving
workforce productivity in Irans economy, Iran Economic Researches Quarterly, No. 30, 2007,
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Amir Hedayat Tabatabie, Fast assessment of productivity, Manshour Bahrevari Press, 2000.
Azadeh, A,.Ghaderi, S.F, Ebrahimipour, V, (2007). An integrated PCA DEA framework for
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Azizollah Farhadi, Alireza Bastani, surveying relation between open door economic policies and
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Bernard, A and Jenson, J. B, Exceptional exporters performance: cause, effect or both? Journal of
International Economics, Vol. 47, 1999, pp. 1-25.
Borensztein, E., Gregorio, J. D and Lee, J. W, How does foreign direct investment affect economic
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Classsens, S, Alternative forms of external finance, World Bank Research Observation, 1993.
Eghbali, Ali Reza (2007). The Ranking Irans Banks by Taxonomy Numerical Analysis. Journal of
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Esmaiel Abonori and Arash Khoskar, role of income distribution increase on workforce
productivity growth, Articles introduced in first national conference of productivity and
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Hassan Sobhani and Hamid Aziz Mohammadlou, comparing productivity factors in production in
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Hossein Faraji, Human Resources Productivity in Organization, Iran National Productivity
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Indra De Soysa, Foreign direct investment, democracy and development: assessing contours,
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Karim Azaerbaijani, Measuring and analyzing domestic industries productivity, Esfahan,

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Role of Emotional Intelligence on the Relationship among Leadership Styles, Decision

Making Styles and Organizational Performance: A Review
Rana Rashid Rehman
M.Phil Scholar, Quaid-i-Azam School of Management Sciences (QASMS),
Quaid-i-Azam University, Islamabad, Pakistan.
Abstract
This paper constructs a conceptual model to study the impact of emotional intelligence on the relationship
among leadership styles, decision making styles and organizational performance. Study also give the brief
review of emotional intelligence, leadership styles and the relationship among leadership styles, emotional
intelligence and other studied variables. The paper has conceptual based theoretical evidences to support the
model. Research findings of the previous literature supports the idea that emotional intelligence moderates
the relationship among leadership styles and decision making styles as emotional intelligence strongly
associated with leadership styles and decision making styles. Emotional intelligence also moderates the
relationship between leadership styles and organizational performance. Study further founds that decision
making styles have an effect on organizational performance.
Keywords: Emotional Intelligence, Leadership styles, Decision making styles, Organizational performance.
1. Introduction
Leader is a personality who has the capability to influence others and the leadership is what leaders do to
influence group to achieve some defined goals. To successfully perform the activities, leaders have to make
decisions at every step to achieve the desired results. Thus, effective decision making is one of the attribute
of an efficient leader (Tatum, Eberlin, & Kottraba, 2003). The fortune of every business relies upon the
decision making capacity of business leadership. Every decision by the management of a business
influences the overall business performance. Therefore, decision making process can be considered as think
tank of any business. Past researchers found that emotional intelligent is an essential part of an effective
leadership and have a strong association with decision making and organizational performance. One of the
study by Abraham (2000) determines that an emotionally intelligent person have high organization
commitment, and use positive emotions to boost their decision making competence. Holt and Jones (2005)
found that emotional intelligence influences organizational performance. Based on the these findings, the
present study propose the conceptual model by defining the relationship among emotional intelligence,
leadership styles, decision making styles and organizational performance based on theoretical evidences
from the previous research findings.
The paper consists of four sections which deal in turn with introduction of the study, literature review and
methodology. The paper rounds off by discussing and concluding the major findings of the study supported
by literature.
2.1 Emotional Intelligence

The definition of emotions and its measurement changes with the passage of time. Salovey and Meyer
(1990) define emotions as an organized response which crosses the many psychological subsystems such as
psychological, experimental, cognitive and motivational subsystems. At earlier stages, intelligence
researcher measures emotions with respect to various subsystems such as occasionally emotions and social
emotions (Gardner, 1983), and consider emotional intelligence as a part of social intelligence (Salovey &
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Meyer, 1990). Salovay and Meyer (1990) are the first who uses term emotional intelligence and define it
as the ability to monitor ones own and others feelings and emotions to discriminate among them and to
use this information to guide ones thinking and actions. Author further elaborate the concept of emotional
intelligence by explaining it through three dimensions of adaptive abilities; appraisal and expressing the
emotions, utilizing and regulating the emotions in solving problems. Later on, Goleman (1995) expanded
the construct of emotional intelligence by adding specific social and communication skills which influence
by understanding and expression of emotions. Salovey and Mayer (1997) give the revised model of
emotional intelligence by focusing more on the cognitive components of emotional intelligence. The
revised model composed of four categories of emotional intelligence: perception appraisal and expression
of emotions; employing and analyzing emotional information; emotional facilitation of thoughts and
regulation of emotions for further emotional growth. Later on many researcher defines and measures
emotional intelligence according to the scope of their studies such as GENOS EI Inventory which is
specifically designed for workplace emotional intelligence, Bar-On emotional quotient inventory which
deeply measures the emotional intelligence construct (Bar-On, 1996) and Bernet (1996) developed the
Perception of Affect scale based on the premise that being able to attend rapidly, appropriately and
effortlessly to feelings is the cornerstone of emotional intelligence. However, Saloney and Meyer
(1990) definition of emotional intelligence provides the foundation of this conceptual model.
2.2 Leadership Styles
Transformational and transactional leadership are the most widely studied leadership styles in behavioral
sciences. The evolution of transformational leadership can be traced from the developing theory of
transformational leadership in 1978 and concept enriched with different aspect with the passage of time.
Burns theory of transformational leadership argued that transformational leader has high moral qualities
and leader prefer group interest over his own interest (Burns, 1978). Tichy and Devanna (1986) determine
the characteristics of transformational leadership which includes courage, values, openness, visionary and
showing off learning behavior on the part of transformational leaders. Bass and Avolio (2000) explain
transformational leadership style by five aspects that is (1) Idealized Influence (Attributed) attributed by
communicating and imparting the sense of mission in the followers. (2) Idealized Influence (Behavior) the
leader act as a role model towards the followers. (3) Inspirational motivation The leader simplify the paths
for the followers by eliminating problems. (4) Intellectual Simulation leader encourage rational reasoning,
creativity and encourage the followers to solve traditional problems in a new way. (5) Individualized
Consideration leader considers individuals needs of the followers and truly affiliate with them and give
them care and respect.
Krishnan (2004) argues that transformational leader is the leaders ability to motivate followers in achieving
more than they planned. .Many researchers (Bass and Riggio, 2006; Baldoni, 2005) agree that
transformational leadership has four elements including idealized influence, inspirational motivation,
intellectual stimulation and individualized consideration. Simic (1998) argue transformational leadership
qualities is an important determinant for management success. Burns (1978), a pioneer of transactional
leadership defines transactional leadership as development of relationship between leader and followers.
The main focus of the transactional leadership is to know about the needs of the followers and clarifies role
for them to meet organizational goals. Bass (1985) defines transactional leadership as one who builds
leader-member exchange relationship, fulfills their needs in exchange of followers performance and has
ability to build confidence in subordinates. Bass and Stogdills (1990); and Avolio et al. (2004) describe the
qualities of the transactional leadership in two ways; contingent rewards and management by exception.
Hellriegel and Slocum (2006) define transactional leadership by dividing management by exception in two
facets; active and passive management by exception and by contingent rewards. Author define active
management by exception as leader monitor the follower performance and guide them to achieve the goal
while passive management by exception includes leaders involvement when followers give unexpected
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performance. Transactional leader provides rewards for the achievement of goals while no penalties for the
failure in achieving the goals.
3. Methodology
The aim of this paper is to provide the conceptual understanding of the proposed model through literature
reviews. The core concept of the study is to determine the relationship among emotional intelligence,
leadership styles, decision making styles and organizational performance. After defining the main variables
of this study; the following part of the study explains the relationship among studied variables and provides
theoretical evidences that emotional intelligence moderates the relationship between leadership styles,
decision making styles and organizational performance. Paper also provides link between decision making
styles and organizational performance from the literature.
3.1 Leadership styles and decision making Styles
Decision making is one of the most important aspects of the leadership. Scott and Bruce (1995) define that
an individual can involve in decision making process by adopting any of the five decision making styles
(DMS). (1) Rational DMS. (2) Intuitive DMS. (3) Dependent DMS. (4) Avoidant DMS. and (5)
Spontaneous DMS. Based on the leadership styles it is logical to ask whether these leadership styles have
different decision making styles or not? Drive and Brousseau (1990) determine that people have different
decision making styles and these decision making styles differ with respect to number of alternatives used,
amount of information and the extent they coordinate different resources of input. Kedia and Nordtvedt
(2002) founds that there is a relation exist between leadership styles and decision making styles and argue
that transformational leaders use more comprehensive style (high number of alternatives used, large amount
of information and high coordination of different resources of input) of decision making while transactional
leaders use less comprehensive styles as compared to transformational leadership. Researchers further
found that transformational leaders are the rational decision makers (Tambe & krishan, 2000) and dont
avoid decisions (Steplen & Roberts, 2004).Spice and Sadler (2005) conclude that rational decision cannot
be taken in haste and require time which determine that transformational leaders are unrelated to
spontaneous decision making style. Based on this review of literature, we can say that leadership styles
have an impact on decision making styles.
3.2 Leadership Styles and Organizational Performance
Leadership styles have been studies against numerous variables such as organization commitment,
perceived performance and satisfaction. Many researchers reported a relationship between transformational
leadership and higher levels of follower effort, satisfaction with the job and leader, and perceived
performance which ultimately affect organizational performance. (Bass, 1985; Bass, 1990; Yammarino &
Bass, 1990; Yukl, 1994). In organizations, transformational leadership is considered a more effective
leadership style and is constantly found to promote organizational performance (Lowe and Kroeck, 1996).
Compelling vision of the future, defining and communicating high level of performance expectations,
acting as role model, and displaying a sense of confidence in followers ability to meet expected goals,
transformational leaders have been found to positively influence performance of the followers and
consequently, the organizational performance (Shea, 1999; Waldman & Yammarino, 1999). Elenkov (2002)
founds that transformational leadership directly and positively predicted organizational performance.
Author further argues that managers who displayed more transactional-leadership behaviors also made a
positive contribution to the achievement of organizational goals. Researcher founds that contingent reward
leadership (a part of transactional leadership) was positively related to follower performance and job
satisfaction which ultimately effect organizational performance (Podsakoff, Todor, Grover & Huber, 1984).
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On the basis of these research findings, we found that leadership styles have an impact on organizational
performance.
3.3 Emotional Intelligence, Leadership Styles and Decision Making
Barling et al. (2000) studied the relationship between the transformational/transactional leadership and
emotional intelligence. Authors argue that emotional intelligence prompt leaders to use transformational
behaviors. Barling et al. (2000) founds that emotional intelligence is positively related to the
transformational leadership and contingent reward (a component of transactional leadership). Later on,
Palmer et al. (2001) concludes that emotional intelligence is strongly correlated with transformational
leadership style. Abraham (2000) founds that an emotionally intelligent individuals have high organization
commitment, high success rate (Miller, 1999), and use positive emotions to enhance their decision making
capability. George (as cited in Gardner and Stough, 2001) argues that emotional intelligence enhances
leaders ability to get solutions for the problems and to tackle issues and opportunities facing by them and
by their organizations as well. Leaders within this context, are able to enhance decision making capability
through their knowledge and management of emotions, and the leaders who are able to correctly recognize
emotions are more able to decide whether the emotion is attached to opportunities or problems and
therefore use those emotions in the procedure of decision making. Based on these literature findings, we can
say that emotional intelligence has an impact on the relationship between leadership styles and decision
making styles.
3.4 Emotional Intelligence, Organizational performance and Decision Making
Holt and Jones (2005) concluded that emotional intelligence has an impact on organizational performance.
Druskut, Sala, & Mount (2006) studied the various ways through which emotional intelligence affects
organizational performance. Authors concluded that emotional intelligence have an impact on performance,
helps in developing international business capabilities, and affects many business outcomes. Melita, Ceasar,
Gerald, Anthony and Ronald (2003) founds that emotional intelligence training is an evolutionary means of
organizational performance. Jordan & Troth (2002) founds that emotional intelligence influence the
employee preferred style of conflict resolution which contributes towards the understanding of
organizational performance and its determinants.
In relation to the decision making and organizational performance; Allen, Amason, David & Schweiger
(1994) founds that strategic decision making influence organizational performance. Amason (1996) founds
that top management teams make decisions which influence the organizational performance. Irene, Abdul
and Rasheed (1997) further found that rational decision making have a positive association with
organizational performance.On the basis of this literature review we can say that emotional intelligence
have an impact on the relationship between leadership styles and organizational performance and decision
making styles affects organizational performance.
In nutshell, based on the above literature reviews and research findings, we can conclude that
1) Emotional intelligence will moderate the relationship between leadership styles and decision
making styles.
2) Emotional intelligence will moderate the relationship between leadership styles and organizational
performance.
3) Decision making styles influence the organizational performance.
[Insert Figure 1]
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In this proposed model as depicted in Figure 1, transformational and transactional leadership styles are
taken as independent variables while decision making styles and organizational performance act as
dependant variables. Emotional intelligence is taken as moderating variable which influence (moderates)
the relationship among independent and dependant variables.
4. Discussion and Conclusion
The present study examines the relationship among emotional intelligence, leadership styles, decision
making styles and organizational performance. Efficiency of the organization depends on the leadership
styles and decision making behavior prevailing in the organization through proper communication of the
policies and plans, rules and regulations, allowing incentives, co-operation and build effective work
environment which encourage the employees in a positive way. This can only be done through effective
leadership and by adopting rational decision making processes. A study by George (as cited in Gardner and
Stough, 2001) argues that emotional intelligence enhances leaders ability to solve problems and to address
issues and opportunities facing them and by their organizations. Leaders within this context are able to
enhance decision making capability through their knowledge and management of emotions, and use those
emotions in the procedure of decision making. The present study found that emotional intelligence
moderates the relationship between leadership styles and decision making styles. Many researchers
(Melitaet al., 2003; Holt & Jones, 2005; Druskut et al., 2006) found that emotional intelligence have a
positive influence on organizational performance. This study found that emotional intelligence moderates
the relationship between leadership styles and organizational performance and decision making styles have
an impact on organizational performance (Schweiger, 1994; Amason, 1996).
5. Limitations and Recommendation for Future Research
The present study is based on the theoretical evidences from the literature to supports the conceptual model
while not on the qualitative or quantitative evidences. The validity and accuracy of the conceptual model is
restricted to the variables defined in the conceptual model. The future studies can be conducted to
empirically test the proposed relationships in the conceptual model.
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Avolio, B. J., Zhu, W., Koh, W. L., & Bhatia, P. (2004). Transformational leadership and organizational
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Annexure
Figure 1: Proposed Conceptual Model
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Are Equity markets Efficient? Evidence from Emerging Economy

Syed Kashif Saeed(Corresponding Author), Shahid Mehmood Sargana, Usman Ayub
COMSATS Institute of Information Technology, Islamabad, Pakistan.
Abstract
This study investigates that whether Karachi Stock Exchange is efficient or otherwise over the
period from July 1997 to April 2010. To examine the efficiency, various stock market anomalies
(i.e. Days of week Effect, With-in month Effect, Turn of Month Effect) have been estimated.
Results show no evidence for presence of Days of week Effect whereas the presence of other two
effects cannot be rejected.
JEL Code:
C10, G12, G15
Keywords: Efficient Market Hypothesis, Stock Market Anomalies, day of the week (DoW)
effect, Within Month (WiM) effect, turn of the month (ToM) effect.
Introduction
A market anomaly (or inefficiency) is a price or return distortion in a financial markets which can
be caused by lack of stock market transparency or due to other reasons, so these anomalies are in
contradiction of common belief in finance that financial markets are efficient. This important
belief in financial markets that security prices reflect, fully and quickly, all available information is
known as Efficient market Hypothesis (EMH). Initially, the concept of EMH was applied to the
stock market only whereas later on it was taken as a general notion to all financial assets (Fama
1970; Fama 1991). So when market uses all available information prudently and nothing is ignored
provided the avoidance of systematic errors, the results that prices are always at the levels
corroborating with its fundamentals. Although, theoretically very well received but when tested
empirically then various deviation from EMH were found known as market Anomalies. Some
famous anomalies are Monday effect, weekend effect, January effect etc. Mehdian and Perry
(2001) argue that once identified anomalies began to wipe out. This study intends to analyze
whether these market anomalies exist in equity markets of Pakistan in one way or another. We
have done so first by taking the whole sample and then by breaking the sample into various sub
periods in order to examine the time varying impact also.
Literature Review
When various market anomalies were identified then researchers tried to provide the
theoretical justification for these. For example, as EMH assumes the availability of full
information free of cost therefore if information was not costless then financial incentive exists for
obtaining it. But again if the information was already fully reflected in security prices then
financial incentive became impossible to obtain (Grossman and Stiglitz 1980). Jensen (1978)
argued that prices reflect information up to the point where the expected profits to be made by
acting on the information do not exceed the marginal costs of obtaining it. It is also observed that
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anomalies began to disappear once they are identified (Mehdian and Perry, 2001). In this section,
we will look at various types of empirically founded market anomalies.
The January effect is generally defined as that the expected returns of stocks will be
relatively higher in first month of the year in comparison of the rest of the month. This effect was
initially registered by Rozeff and Kinney (1976). Later on it is also documented, in same US
markets, that this January Effect is restricted to first few days of month of January only (Keim,
1983).
Gultekin and Gultekin (1983) investigate the 17 countries (including Australia, Belgium,
Germany, Japan, Norway, Spain, and Switzerland etc) for January effect. They argue that
significance of January effect cannot be rejected in these countries. The January Effect, i.e.
higher mean daily return in the month of January, is also found significant in Singapore market by
various researchers9.
The day-of-the-week effect allows average stock returns to be different across various days
of the week. One specific variant of DoW effect is Monday Effect according to which, the mean
return on Monday is negative and generally the lowest while the mean return on Friday is positive
and generally the highest. Cross (1973) and Board and Sutcliffe (1988) identified these effect and
later on various researcher10 augmented the research in other markets as well.
Extensive research have been conducted to investigate the presence of the DoW effect
across the globe [French (1980), Gibbons and Hess (1981), Keim and Stambaugh (1984), Wong
and Ho (1986), Condoyanni et al (1987), Lakonishok and Smidt (1988), Aggarwal and Rivoli
(1989), Wong et al (1992), Abraham and Ikenberry (1994), Wang et al (1997) and Mehdian and
Perry (2001)]. This extensive research also concludes that in near past various anomalies11 has
significantly declined. (Mehdian and Perry, 2001; Wong et al, 2006)
Another phenomenon that the average stock return is higher on the trading day
immediately before holiday in comparison with rest of trading days is referred as Holiday Effect
in financial literature. Pettengill (1989) and Ariel (1990) are among those who initially
investigated Holiday Effect in US markets and found significant, i.e. the average stock returns are
significantly higher on holidays than the remaining trading days. Kim and Park (1994) later on
corroborated their research findings and argue that null hypothesis for Holiday Effect cannot be
accepted. In contrast to US markets, results for Holiday Effects are mixed across other stock
markets of the world, for example Holiday Effect cannot be documented in France, Italy,
Switzerland, UK and West Germany but cannot be rejected in Australia, Canada, Hong Kong,
Japan, Singapore market (Cadsby and Ratner, 1992; Tan and Wong, 1996).
Within month effect (WiM) or Time of Month (ToM) Effect refers to change in average
return as month progresses. Ariel (1987) documented that average returns are relatively higher in
the start of month whereas lower for rest of the month. Later on various researchers have identified
the start and remains of month in literature in different ways (e.g. Peterson, 1990, Kohers and
9
See Agarwal and Rivoli (1989); Wong and Ho (1986); Lee (1992) and Chan et al (1996)
See Chang et al. 1993, Coutts and Hayes, 1999, Al-Loughani and Chappell, 2001)
11
Monday Effect and January Effects etc
10
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Patel, 1999). Some divide the month into two parts, distinguishing between the first half and
second half of the month (Ariel, 1987) whereas some researchers distribute month into three equal
parts that is each third of the month (Kohers and Patel, 1999). Chandra (2009) argues in favor of
presence of Within month effect in Indian stock markets.
Another variant of WiM Effect is the ToM effect. ToM effect refers to the phenomenon
that at the turn of the month, unusual higher stock returns are evidenced. In literature, ToM effect
is defined as the period from the last trading day of the previous month to the first three trading
days of the current month.
The empirical evidences regarding the presence of ToM effect are not conclusive among
various markets across the world. Lakonishok and Smidt (1988) investigate and find significant
ToM effect, using the Dow Jones index for the period of 1897-1986. Cadsby and Ratner (1992)
argue that null hypothesis for the turn-of-the-month effects cannot be rejected in France, Hong
Kong, Italy or Japan but can be rejected in Australia, Canada, UK and West Germany. Tan and
Wong (1996) investigate and find a significant turn-of-the-month effect in Singapore markets over
the period 1975-1994. Chandra (2009) argues that Turn-of-the-Month effect cannot be rejected in
Indian stock markets.
Data:
The purpose of the present study was to investigate the presence of various stock market anomalies
in Karachi stock exchange. Our sample period consist of July 01, 1997 to April 30, 2010. The price
has been taken from index of Karachi stock exchange called KSE-100. As time period is relatively
long, therefore we have decided to further divide the sample into sub sample of almost three years
each. The division of sample period into further sub periods will help in enhancing understanding
regarding the evolution process in stock market, if any.
Whole sample period:
Sub- sample period:
First period
Second period
Third period
Fourth period
July 01, 1997 to April 30, 2010

July 01, 1997 to June 30, 2000
July 01, 2000 to June 30, 2003
July 01, 2003 to June 30, 2006
July 01, 2006 to April 30, 2010
Methodology
In order to test various market anomalies, daily return of stock prices i.e. continuously
compounded rate of change is calculated using the following formula:
Rt = ln(
Pt
Pt 1
) *100
Where Pt and Pt-1 are the prices index of Karachi Stock Exchange at time t and at t-1
respectively.
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The basic regression equation for week day effect is as follows:

Rt = 1 D1 + 2 D2 + 3 D4 + 4 D4 + 5 D5 +
(1)
We have not included here intercept to avoid dummy variable trap. We can avoid that by not
including intercept or by reducing one dummy e.g. D3 for Wednesday.
One problem indicated by econometricians that the error term of above regression can have
autocorrelation problem. To avoid this problem we have added the lagged value of returns as well.
n
Rt = 1 D1 + 2 D2 + 3 D4 + 4 D4 + 5 D5 + Rt i +
(2)
i =1
Where:
D1 = 1 if there is Monday; 0 otherwise.
D2 = 1 if there is Tuesday; 0 otherwise.
D3 = 1 if there is Wednesday; 0 otherwise.
D4 = 1 if there is Thursday; 0 otherwise.
D5 = 1 if there is FRIDAY; 0 otherwise.
Rt-i = Lagged values of returns
For analyzing Within Month Effect, following regression equation will be estimated:
Rt = 7 D7 + 8 D8 + 9 D9 +
(3)
Where:
D7= 1 if the trading days are from 1st to 10th of the month; 0 otherwise.
D8 = 1 if the trading days are from 11th to 20th of the month; 0 otherwise.
D9 = 1 if the trading days are from 21st to end of the month; 0 otherwise.
For analyzing Turn of the Month (ToM) Effect, Hansel and Ziemba (1996) has suggested
the event window of five days i.e. last two trading days of month and first three trading days of
following month (-2, +3). So according to same intuition following regression equation will be
estimated:
Rt = + 0TOM +
(4)
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Where:
TOM= 1 if trading days are last two trading days and first three trading days adjacent months; 0
otherwise.
Findings
Table 1 shows the descriptive statistics of the daily returns of the Karachi stock Exchange
index 100 for the entire period from July 1997 to April 2010. The first column reports statistics for
the entire sample period. The average (mean) daily return was negative at 0.06 percent (almost
21.6% annualized). The null hypothesis for normality is rejected at 1% level of significance, as
shown by majority of the studies that financial time series are not normal.
The second column reports statistics for the sub-sample period from July 1997 to June
2000. The average (mean) daily return was at 0.03 percent (almost 10.8% annualized). Here also,
the null hypothesis for normality is rejected at 1% level of significance, as shown by majority of
the studies that financial time series are not normal. The third column reports statistics for the subsample period from July 2000 to June 2003. The average (mean) daily return was negative at 0.10
percent (almost 30.7% annualized). The fourth column reports statistics for the sub-sample period
from July 2003 to June 2006. The fifth column reports statistics for the sub-sample period from
July 2006 to April 2009.
Table 1:
Mean
Median
Maximum
Minimum
Std. Dev.
Skewness
Kurtosis
Descriptive Statistics of the daily returns of the Karachi Stock Exchange Index
(KSE100)
Full Sample
Sub-Sample Sub-Sample
Sub-Sample
Sub-Sample
1997-2010
1997-2000
2000-2003
2003-2006
2006-2010
-0.000557
0.000225
-0.001038
-0.001771
0.000161
-0.000095
0.000000
-0.001500
-0.001571
0.000000
0.132133
0.052784
0.060418
0.077414
0.132133
-0.127622
-0.082547
-0.057967
-0.085071
-0.127622
0.017139
0.015468
0.015427
0.014866
0.020869
0.364332
0.217971
0.477042
0.118838
0.370527
8.408492
5.600692
4.705473
7.200085
8.893271
Jarque-Bera
Probability
4154.692
0.000000
226.8626
0.000000
124.2738
0.000000
578.1086
0.000000
1469.992
0.000000
Observations
3348
783
781
784
1000
Table 2, 3, 4, 5 and 6 shows the results of regression model in equation 2 for estimating Days of
Week (DoW) effect. Table 2 consists of regression results for the entire sample i.e. from 1997 to
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2010. The coefficients of all dummy variables are insignificant that we cannot reject null
hypothesis for days-of-week effects.
Table 2:
Regression Model (2); July 1997 to April 2010
Sample (adjusted): 7/03/1997 4/30/2010
Coefficien
Variable
t
Std. Error t-Statistic Prob.
0.000486 0.000661
Mon
-0.735597 0.4620
Tue
0.001001 0.000660
-1.516555 0.1295
Wed
0.000596 0.000660
-0.903807 0.3662
Thu
0.000391 0.000660
-0.592412 0.5536
Fri
0.000058 0.000660
-0.087895 0.9300
RPKP(-1)
0.091187 0.017228
5.292810
0.0000
The non-presence of days-of-week effects can be the indication of informationally
efficiency of markets. It can also be said that participants in this market are aware of various
anomalies documented by researchers around the globe which is being taken away through the
process of arbitrage. Table 3, 4, 5 and 6 consists of regression results for the sub-sample from 1997
to 2000, 2000-2003, 2003-2006 and 2006-2010 respectively. The above regression model was
estimated for sub sample for robustness of results and also to see that whether this effect has been
time varying across sample period. Largely, leaving 2000-2003 periods, result for days-of-week
effects are same. Therefore we can safely accept the null hypothesis for absence of days-of-week
effects.
Table 3:
Regression Model (2); July 1997 to June 2000
Sample (adjusted): 7/03/1997 6/30/2000
Coefficien
Variable
t
Mon
-0.000387 0.001209
-0.320251 0.7489
Tue
-0.000468 0.001206
-0.387961 0.6982
Wed
0.001411 0.001206
1.169856
0.2424
Thu
-0.001755 0.001211
-1.448756 0.1478
Fri
0.002055 0.001209
1.699626
0.0896
RPKP(-1)
0.220555 0.035012
6.299345
0.0000
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Table 4:
Sample: 7/03/2000 6/30/2003
Coefficien
Variable
t
Mon
-0.002239 0.001228
-1.822859 0.0687
Tue
-0.001793 0.001231
-1.456064 0.1458
Wed
-0.001353 0.001231
-1.098926 0.2721
Thu
-0.001008 0.001231
-0.818153 0.4135
Fri
0.001632 0.001233
1.323439
0.1861
RPKP(-1)
0.081662 0.035801
2.280972
0.0228
Table 5:
Sample: 7/01/2003 6/30/2006
Variable
Coefficient Std. Error t-Statistic Prob.
Mon
0.000238 0.001193
0.199485
0.8419
Tue
-0.002360 0.001192
-1.979653 0.0481
Wed
-0.003329 0.001189
-2.800258 0.0052
Thu
-0.002250 0.001187
-1.895489 0.0584
Fri
-0.001235 0.001186
-1.041293 0.2981
RPKP(-1)
-0.010506 0.035850
-0.293058 0.7696
Table 6:
Sample: 7/03/2006 4/30/2010
Coefficien
Variable
t
Mon
0.000071 0.001472
0.047845
0.9618
Tue
-0.000115 0.001472
-0.078246 0.9376
Wed
0.000534 0.001473
0.362330
0.7172
Thu
0.002303 0.001473
1.563603
0.1182
Fri
-0.002053 0.001472
-1.395186 0.1633
RPKP(-1)
0.079871 0.031617
2.526216
0.0117
Table 7, 8, 9, 10, and 11 shows the results of regression model in equation 3 for estimating Within-month effect. Table 7 consists of regression results for the entire sample i.e. from 1997 to 2010.
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Table 7:
Sample (adjusted): 7/02/1997 4/30/2010
Coefficien
Variable
t
D7
-0.001924 0.000515
-3.734197 0.0002
D8
-0.000877 0.000543
-1.614151 0.1066
D9
0.000897 0.000483
1.858290
0.0632
Table 8, 9, 10, and 11 consists of regression results for the sub-sample from 1997 to 2000, 20002003, 2003-2006 and 2006-2010 respectively. The above regression model was estimated for sub
sample for robustness of results and also to see that whether this effect has been time varying
across sample period.
Table 8:
Sample (adjusted): 7/02/1997 6/30/2000
Coefficien
Variable
t
D7
-0.002134 0.000958
-2.226906 0.0262
D8
0.000660 0.001008
0.654211
0.5132
D9
0.001961 0.000901
2.177742
0.0297
The results for with-in-month Effect largely reject the null hypothesis of market anomaly. Leaving
sub sample of 2006-2010, the coefficients for D7 (first 10 days of month) are significant for entire
sample period and also for sub sample periods, whereas both D7 (first 10 days of month) and D9
(last 10 days of month) are significant at 1% for full sample period.
Table 9:
Sample: 7/03/2000 6/30/2003
Coefficien
Variable
t
D7
-0.002550 0.000960
-2.655051 0.0081
D8
-0.001269 0.001017
-1.247742 0.2125
D9
0.000457 0.000896
0.510267
0.6100
Table 10:
Sample: 7/01/2003 6/30/2006
Coefficien
Variable
t
D7
-0.002685 0.000929
-2.888911 0.0040
D8
-0.001398 0.000972
-1.438209 0.1508
D9
-0.001273 0.000867
-1.467352 0.1427
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Table 11:
Sample: 7/03/2006 4/30/2010
Variable
D7
-0.000686 0.001145
-0.598661 0.5495
D8
-0.001372 0.001213
-1.131486 0.2581
D9
0.002119 0.001077
1.966818
0.0495
Table 12, 13, 14, 15, and 16 shows the results of regression model in equation 4 for estimating turn
of month (TOM effect. Table 12 consists of regression results for the entire sample i.e. from 1997
to 2010 whereas Table 13, 14, 15, and 16 consists of regression results for the sub-sample from
1997 to 2000, 2000-2003, 2003-2006 and 2006-2010 respectively.
The TOM effect is significant when tested for entire sample period at 5% level of significance.
When same effect is tested for each sub sample, the coefficients of TOM is not significance in all,
except in 2000-2003, sub sample period.
Table 12:
Sample (adjusted): 7/02/1997 4/30/2010
Variable
C
-0.000207
0.000337
-0.613178 0.5398
TOM
-0.001522
0.000704
-2.163079 0.0306
Table 13:
Sample (adjusted): 7/02/1997 6/30/2000
Variable
C
0.000489 0.000629
0.777162
0.4373
TOM
-0.001157 0.001317
-0.878984 0.3797
Table 14:
Sample: 7/03/2000 6/30/2003
Variable
C
-0.000555
0.000628
-0.884358 0.3768
TOM
-0.002107
0.001112
-1.894787 0.0907
Table 15:
Sample: 7/01/2003 6/30/2006
Coefficien
Variable
t
C
-0.001465 0.000605
-2.420302 0.0157
TOM
-0.001326 0.001260
-1.052740 0.2928
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Table 16:
Sample: 7/03/2006 4/30/2010
Variable
C
0.000505 0.000752
0.671702
0.5019
TOM
-0.001498 0.001568
-0.955229 0.3397
Conclusion:
This paper provides a detailed examination of the daily stock returns of the KSE100 index in
Pakistan. KSE 100 index is an index based on Market capitalization of 100 companies in Karachi
stock exchange in Pakistan, which make it a good representative of the equity market in Pakistan.
According to my review, this is the first paper to examine, Days of week Effect, Within Month
effect, Turn of Month Effect in on paper for Karachi stock Exchange. We have used data for the
period July 1997 to April 2010, and further divide the sample period into four sub sample to
analyze any effect which may be time varying as well.
To our surprise, in majority of sample period, except for July 2000 to June 2003, we find no
evidence for Days of week effect. This result is in line with Mehdian and Perry (2001) and Wong
et al (2006) arguing that anomalies began to disappear once identified. The results for WiM Effect
show significant difference for the trading days in three parts of the month, suggesting the
presence of WiM Effect.
Whereas the results for Turn-of-Month (TOM) effect show significant return when month ends and
new month start, suggesting the presence of TOM Effect. It is important to note that that TOM
effect is very much evident in full sample but when estimated for sub sample than TOM effect is
not present, may be due to short of data in sub sample.
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ORGANIZATIONAL CLIMATE: STIMULATING CREATIVITY AND IDEA

GENERATION FOR DISCOVERY OF INNOVATIVE SOLUTIONS
Jahanzeb Shah (Corresponding author)
Shaheed Zulfiqar Ali Bhutto Institute of Science & Technology (SZABIST),
Islamabad, Pakistan.
Dr. Bakhtiar Ali
Assistant Professor, Faculty of Management Sciences,
Shaheed Zulfiqar Ali Bhutto Institute of Science & Technology (SZABIST),
Islamabad, Pakistan.
Abstract
This paper investigates an important aspect of supplementing idea generation within the middle
management teams in mobile phone industry in Pakistan. Prior research has not been conducted to
find out the association between organizational climate dimensions and idea generation within the
same context. It is declared that eight organizational climate dimensions in Pakistani context were
found to be the main contributor in augmenting idea generation that may increase creativity. In this
study, it has been found that, tough and rigid climate characterized by rigid rules and regulations is
prevailing in mobile telecom industry as workers execute their activities in predefined way and
have no autonomy to alter or redefine their assignments. It is suggested that excessive use of
unwarranted power structures negatively impact creativity within the mobile phone industry firms.
Managerial Implications for research and practice are measured.
Keywords: Idea generation and creativity (IGC), Organizational Climate (OC), Mobile
Telecommunication Industry, Challenge, Freedom, Trust/openness, Idea Time, Idea Support,
Debate, Risk Taking, Playfulness/Humor
1. Introduction
For the past few decades, Government of Pakistan is trying its level best to make the corporate
sector attractive for investment and overall uplift of economy because organizations from different
industries are playing a significant role in the economic development of Pakistan e.g.
Telecommunication, Banking, Oil & Gas sector etc. For this continual process towards
development, HR Management Practices in a business concern must be taken in to consideration
for un-exhaustive operations and enhanced organizational performance.
1.1 An Overview of Pakistani Telecom Industry
In todays era of rapid globalization, the telecom and mobile technology is playing its pivotal role
in making the life patterns of its customers easier day by day. Now, the mobile Industry of
Pakistan is quite vibrant and still growing in a highly dynamic, sophisticated and competitive
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market environment.
The history of cellular mobile telecommunication services can be traced back to early nineties and
now Pakistan is having substantial standing in telecom sector by providing its subscriber with the
cheapest calling rates in South Asian region. Telecom Industry of Pakistan is currently providing
its subscribers with the modern and latest facilities like DSL ( Digital Subscriber Line), Local
Loop, LDI (Long distance and International), WLL (Wireless Local Loop) and ISP (Internet
Service Provider) and certain more advanced technological milestone of cellular industry are yet to
arrive in Pakistan like WiMax and 3G cellular systems.
Although, due to deteriorating law and order situation in the Pakistan and financial crunch in the
whole world, the cellular industry pace has also been slowed down but still it is growing at a fast
pace. As per Pakistan Telecom Authority (Industry Analysis Report, 2008), Mobilink has 35.3%
market share and currently leading the market, chased by Ufone (20.8%), Telenor (20.5%), Warid
(17.8%), Zong (5.4%) and Instaphone (0.4%) and overall cellular subscriber base in Pakistan has
reached up to 9.2 million in Sep 2008.
A study (Rafiq and Gao, 2008) revealed certain important aspects about the market dynamics of
mobile telecommunications industry in Pakistan. It highlighted that a complex system of humans
and technology is operational in mobile telecom industry in Pakistan. The report also elaborated
about robust growth of mobile telecommunication industry in Pakistan as some indicators of
favorable conditions for the same have been identified in this study. They further contended that a
current competitive environment for mobile telecommunications is backed by fair regulations and
policies devised by Pakistan Telecommunication Authority (PTA). The study also illustrated that
this healthy competition among mobile operators is affecting the working patterns of mobile phone
companies and they are delivering qualitative value-added services at highly compatible rates to
their consumers. Due to this tough competition, some companies did not survived in this field and
only those are survivors who are responsive to the market dynamics and customer need of this
industry.
Therefore, the organizational climate for the current survivors operators in the mobile telecom
industry is of greater importance and there is need to empirically measure the impact upon idea
generation and creativity in these mobile operator companies.
This will make certain that mobile phone operators will introduce new novel ideas and creative
packages as per their customers needs and wants, if and only if, the organizational climate with in
these companies are conducive for idea generation and creativity.
1.2 Problem Statement
The purpose of this paper is to empirically measure and identify the impact of organizational
climate (OC) on the idea generation and creativity (IGC) for innovation with specific focus on
mobile phone industry in Pakistan.
The statement of the problem is given as follows:
Do organizational climate factors foster idea generation and creativity for innovation in mobile
phone industry of Pakistan?
In other words, to determine the organization climate dimensions that significantly affect idea
generation and creativity in mobile phone industry of Pakistan.
1.3 Objective of the Study
Every organization is to capture much more customers by getting open ideas and introducing
creativity and innovations through creative thinking and continuous improvements in their
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products and services and as the economy is becoming more and more service, based industry
organizations in particular must be open to their changing customer needs and demands. Therefore,
the main objective of this paper is to identify the critical factors, which may be having a significant
impact on idea generation and creativity of individuals and groups within mobile phone industry
organization. Having empirical results based on quantitative data collection along with statistical
analysis and interpretation, we may have an opportunity to properly conclude about the problem
statement and offer some recommendation.
Skimming through the literature on creativity studies, an exhaustive list of studies are available
that highlight importance of organizational climate. However, let us have a look why to study and
explore organizational climate with respect to idea generation/creativity.
2.1 Why to study and explore Organizational Climate?
The simple rationale for conducting a study on organizational climate in contrast to study based on
organizational culture can be logically justified. Thomson (1998:240) asserted this by saying that
Changing the culture of an organization by tackling it head on as a single facet of organizational
life is really, really tough. To go deep into cultural change, you have to be talking about beliefs and
values, and these go to the very soul of the organization and its people. It is much easier to change
the climate and language of the business.
Moreover, studies on effects of Organizational Climate in Pakistani corporate sector not reported
yet. The reason for this is a high level of hierarchical structures having aristocracy, centralized
authority and power at top level in Pakistans corporate and public sectors (Islam, 2004).
In line with review of literature related to organizational climate, it needs to clearly differentiate
organizational climate from organizational culture. There is a significant difference between
organizational culture and climate. However, the study of organizational climate is often closely
related to organizational culture.
Climate portrays organizational environments as being inherent in the organization's value system,
but tends to present these social environments in relatively persistent terms and unfolding them in
terms of a preset dimensions (Dennison, 1996). Therefore, climate is generally categorized as
temporary affair when having a candid control and only limited to those characteristics of the
social environment, which are deliberately perceived by organizational members.
On the other hand, it was argued that culture is the phenomena that is shared by majority of the
organizational members, can pass on from older members of group to younger members and
clearly outlines the way of looking towards the world (Isaksen and Ekvall, 2007).
Moreover, a clear distinction between organizational culture and climate has been made and
established that culture is based on the values, beliefs, history, traditions, etc., portraying the
intimate details of the organization. While, climate is a persistent patterns of behavior, attitudes,
and mannerism that portray life in the organization. Culture, generally, is what the organization
values and what the true ideology is, on the other hand, climate is what organizational members
experience and go through in performing their activities (Isaksen and Ekvall, 2007).
The climate or working environment is a strong factor influencing idea generation and creativity
and can have an extremely strong impact if altered. Therefore, most organizations find it easier to
generate novel ideas than to successfully implement them. For example, a climate that discourages
employee risk-taking is always a major barrier to innovation because people are often demotivated by the fear of failure, ultimately making the experimentation extremely difficult, if not
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impossible. Therefore, a need is there to have an organizational climate conducive for idea
generation and creativity for better organizational performance.
2.2 Idea generation and creativity: A way towards continuous success
Today, organizations are striving for a competitive advantage, which could be achieved through
special focus on improvement of some systems and processes, which makes one organization
entirely different from other organizations, that, is also providing same type of goods and services.
Idea generation, or the function of generating workable ideas, is considered as a move focused
towards creative problem solving (Titus, 2000).
On the other hand, creativity is a process that fosters an organization systems and processes that
leads to a competitive advantage (Cook, 1998).
Even though, creativity cannot be empirically measured, it is considered a critical part of research
in a various field of studies (Hocevar, 1981).
Similarly, creativity is a significant feature of life that we perform in daily routine. It spans from a
situations at work that become enjoyment, an imaginative descriptions that becomes a hi-tech
innovation (Bonnardel, 1999).
Moreover, it is also argued that though the terms creativity and innovation are often used
interchangeably, they should not be treated the same thing. Creativity is a much broader concept
whereas innovation is the more restricted process of turning an idea into a product or service
(Couger, 2005).
In addition, creativity and innovation are two key ingredients for any organization to achieve and
maintain a sustainable competitive advantage. Organizations therefore continually have to
improve, adapt, innovate, create and develop. As employees creative ability makes a significant
contribution to organizational innovation, effectiveness and survival, there is a need for
organizations to create an organizational context or climate that is supportive to the idea generation
and creative thinking. The driving force behind this approach is to achieve (a) increase in
efficiency, (b) quality, (c) foster innovation and creativity and (d) responsiveness to customers
(Politis, 2005).
3. Theoretical Framework and Hypothesized Model

Based on the relevant literature review and the resulting theoretical framework, it has been
established that the significant dimensions of the organizational climate are influencing the ability
of employees to foster/obstruct idea generation and creativity. The framework of the study
includes a hypothesized model based on nine dimensions of organizational climate (independent
variables) that are assumed to have a significant impact on idea generation and creativity
(dependent variable).
A study (Isaksen et al., 2001) suggested nine dimensions of creative climate having an impact on
organizational creativity. The operational definitions of the above-mentioned dimensions are as
follows:
3.1 Challenge/ Involvement
The extent to which organizational members are concerned in operations and achievement
of goals and objectives of organization. The employees motivation working in a highly
challenging climate is an intrinsic one and they are very much concerned towards the growth and
achievements of their organization. They feel joy and take keen interest in their job. In contrast, a
climate having no challenges and concerns for work and job having no zeal, commitment and
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devotion gives rise to stress, frustration and dissatisfaction. The lack of interest steers the
employees behavior to perceive their job as only a routine activity.
3.2 Freedom
It means that how much employees are free and autonomous to shape and regulate their behavior
in the organization. A climate having higher level of freedom, employees purposely do their job in
such a manner they like but candid control is exerted for alignment. There is discretion in their
daily routine activities. Initiatives and information sharing are open to all so that to plan and
decide about the job activities. Contrary, tough and rigid climate is characterized by rigid rules
and regulations. Workers execute their activities in predefined way and have no autonomy to alter
or redefine their assignments.
3.3 Trust/openness
The trust and safety in working relationships is the core value of favorable climate. Having high
level of trust among organizational members, there may be a climate of openness and mutual
agreement among them. A state of respect, support and assistance ship would be there. When there
is lack of trust among sides, suspicion and confusions may arise and therefore, people remains at a
safe distance and do not share their ideas. Therefore, there is a communication barrier between the
organizational members.
3.4 Idea Time
The extent of time up to which new ideas are initiated, explored and explained. High idea-time
situation, discussions and recommendations are welcomed. Sufficient and flexibility in time is
given to explore and develop new avenues, alternatives and ideas.
On other hand, time is constraint for idea generation and creativity. The time constraint hinders
creativity.
3.4 Playfulness/Humor
The workplace having enlightened moods and congenial climate is conducive for creativity.
Having light fun and decent jokes at work will build an atmosphere of easiness and will enlighten
peoples mood. The climate having too much seriousness and formalities lead to cumbersome
behaviors. Decent Jokes and light words exchange are considered undesired.
3.5 Conflict
It is existence of negative personal and emotional disagreements among the organizational
members. A climate having high conflict situations, individuals and teams do not have empathy
toward each other. Lobbying, leg pulling, power, authority and territory struggles are few
examples of conflicting organizational climate. Contrary, maturity is given importance and
everyone is accepting right to disagree. Diversity in organizations is dealt with great care.
3.6 Idea Support
It means that the how new novel ideas are dealt. The climate of support and assistance ship is
always open, candid and honest and all organizational members contribute, receive and process
ideas and suggestions in logical fashion and professional way. In this atmosphere, new ideas are
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initiated and encouraged. However, when idea support is missing, there is a deadlock in minds of
members for creativity.
3.7 Debate
The positive cross talk among organizational members on certain viewpoints and ideas because of
difference in experiences and knowledge. In the debating organization, everyone has the right to
be heard. While, missing climate of debates lead to stubborn attitudes and self-centered behaviors
among members.
3.8 Risk taking
The extent to which an organization bears uncertainty in their work patterns. By high risk-taking
climate, bold decisions and initiatives are taken without having known outcomes. Members take
calculated risk on their ideas and suggestions based on the premise that if clicked they will the first
explorer of the same novel idea. People have a firm belief that no risk means no gain and high
risk, high gains. In a risk-shunning climate, members are too much vigilant, hesitant and preoccupied. There is always a run for a safe side and take cove for making any decisions.
4. Proposed Hypothesized Model of Idea Generation and Creativity

The JS model of idea generation and creativity as presented in Fig.1 includes nine independent
variables including Challenge/Involvement, Freedom, Trust/Openness, Idea Time,
Playfulness/Humor, Conflict, Idea Support, Debate and Risk taking. Idea generation and creativity
(IGC) is the dependent variable in this hypothesized model. As depicted in the figure,
organizational climate is comprised of many factors within the organizational settings and it
ultimately influences various organizational procedures and psychological processes. The variables
as given in the hypothesized model have considered to be having a direct impact on the idea
generation and creativity of individuals, working groups and the organization as a whole. The
hypothesized model sketch out few significant climatic factors that affect IGC, which in turn,
influence the productivity and effectiveness of the organization.
4.1 Hypotheses of the Study
Based on proposed JS model shown in Fig. 1 and review of related literature, few hypotheses for
this study have been developed to testify the research in question.
The hypotheses are as follows:Challenge/ Involvement being an organizational climate dimension positively augment idea
H1
generation and creativity.
H2
Freedom being an organizational climate dimension positively augments idea generation
and creativity.
H3
Trust/Openness being an organizational climate dimension positively augments idea
Idea Time being an organizational climate dimension positively augments idea generation
H4
and creativity.
H5
Humor being an organizational climate dimension positively augments idea generation and
creativity.
H6
Conflict being an organizational climate dimension is negatively related with idea
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H7
Idea Support being an organizational climate dimension positively augments idea
Debate on ideas being an organizational climate dimension positively augments idea
H8
Risk taking being an organizational climate dimension positively augments idea generation
H9
and creativity.
5. Methodology
5.1 Sample
By using convenience sampling procedure and a self-administered questionnaire, 150 respondents
from entry, middle and senior level management were chosen as sample from 05 mobile telecom
operators/organizations operating in the Pakistan. The respondents were assured of the
confidentiality of their responses. It was also clearly spelled out that the data collected will be used
only for academic research purposes. They were also persuaded to give their answers about the
construct what they really feel applicable in their work environment. Nevertheless, 104
questionnaires were collected back, which represents a response rate of 69.3 %. 06 questionnaires
having certain ambiguities in responses being less suitable for analysis were discarded. A total of
98 questionnaires filled in all respect were included in the data analysis, which was conducted
using the Statistical Package for Social Sciences (SPSS) software.
5.2 Measures
5.2.1 Career and Demographic variables
Respondents name was made optional in the instrument/measure. Moreover, age, gender, post
field/cadre, education level, job tenure, organizational name/sector, and organizational size were
asked. The responses were measured using eight different scales developed by the researcher,
which has different ranges between two-points (e.g. gender) to four-point (educational level).
5.2.2 Organizational climate measure
The researcher developed this instrument based on a study (Isaksen and Ekvall, 2007) conducted.
The developed instrument includes 09 dimensions derived from Creative Climate Questionnaire
(CCQ) (Ekvall, Arvonen and Waldenstrom-Lindblad, 1983) which was further refined, after
extensive research work done, as Situational Outlook Questionnaire (SOQ) containing dimensions
such as Challenge/ involvement, Freedom, Trust/ Openness, Idea Time, Playfulness/Humor,
Conflict, Support for ideas, Debate and Risk taking.
As far as the content validity of the measure is concerned, it is asserted that these items of SOQ
(version 6), finally refined in 1995, are the most valid and reliable tool to measure organizational
climate in perspective of creativity (Isaksen and Ekvall, 2007). The original SOQ questionnaire
contains 53 items but the questionnaire adopted for this study contains 45 closed ended
items/questions. Moreover, a 06 items scale for idea generation and creativity were developed
from few studies based on organizational climate and creativity (Eisenberger and Aselage, 2008;
Eisenberger and Rhoades, 2001; McNeely and Meglino, 1994)
The responses for 45 items, after pilot testing and exploratory factor analysis, were calculated on 4
points Likert-type scale, which ranges from 0-3 i.e. Not applicable at all to Applicable to a
higher degree.
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The responses on the items per dimension were averaged in order to obtain the result per
dimension. The total scores for each dimension for a complete work environment are calculated by
taking the cumulative averages of the individuals results for a single respondent.
5.2.3 Reliability and Validity
Reliability and validity analysis on for the measure to be used in empirical research is pivotal for
various reasons. Initially, it may lead to a conviction that the results or finding concisely is
reflecting the proposed hypotheses. Secondly, an empirically validated instrument may be utilized
in other field of studies for research purposes in diverse populations samples and longitudinal
studies (Flynn, Schroeder and Sakakibara, 1994).
Reliability refers to an instruments ability to present coherent results if used repeatedly
(Gatewood and Field, 1990). Coefficient (Cronbachs) alpha is the basic measure for reliability
(George and Mallery, 2000). Essentially, for this study, the items of instrument in each variable or
factor were clubbed together, and coefficient alpha was calculated for each dimension.
It is recommended that in order to conduct an exploratory study, alpha value of 0.6 is acceptable
one. The overall alpha value found (0.84) for this measure pointed out that this instrument is
profoundly a reliable one (Nunnally and Bernstein, 1994).
The questionnaire developed for this study was initially pilot tested by the researcher and based on
high factor loading and reliability statistics of 0.84, a 45 items scale was finally selected for
collecting the data for 09 dimensions of Organizational Climate.
6. Analysis of Data and Results

The data analysis was conducted keeping in view the objective of research and hypotheses
developed. The analysis conducted was of two major types, the one was the simple descriptive
statistics regarding the career and demographic variables of respondents, the other was the
principal axis factor analysis along with correlation, regression, ANOVA, and model fit statistic
test. Prior to the analysis of data and testing the proposed model, a KMO Test for Sampling
Adequacy and Bartletts Test of Sphericity was also computed. This was to establish that the
sample chosen for the study was representative one.
The Kaiser-Mayer-Olkin (KMO) measure of sampling adequacy was performed in order to check
the adequacy of the sample for factors extraction. The KMO value of 0.68 is generally believed to
be an acceptable one (Kim and Mueller, 1978).
Bartletts test of sphericity was applied to check the multivariate normality of the data distribution.
This procedure also validates that whether the correlation matrix is an identity matrix (factor
analysis would be futile exercise if a correlation is an identify matrix) A significance p-value <0.05
specified that the data has not generated an identity matrix (George and Mallery, 2000).
Table 1 to 7 represents descriptive statistics of sample under consideration, which include
demographic characteristics such as age, post field/cadre, gender, education level, job tenure,
organizational name/sector, and organizational size.
6.2 Proposed Hypotheses Testing
As discussed earlier, factor analysis was used to identify the vital and significant factors for this
study. Therefore, an exploratory factor analysis was carried out on the independent variables items
that make up the proposed climate dimension to conclude the number of essential factors among
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09 variables under study.

It is suggested (Podsakoff et al., 2003) that an exploratory factor analysis may be conducted on all
items in order to evaluate the possibility of common method bias. Therefore, factor analysis based
on Kaisers Criterion was conducted and the unrotated factor solution for all 09 independent
variables was calculated. Factors having highest factor loading were identified and redundant
factors were discarded.
Foregoing in view, the first independent variable among 09 variables named as Challenge/
Involvement from the proposed model, containing 05 items indicated the presence of two factors,
which explained 42.2 % and 21 % of the variance respectively. Likewise, for second independent
variable named as Freedom from the proposed model having 06 items, a factor solution also
indicated the presence of 02 factors that explained 44.4 % and 18.8% of the variance respectively.
In addition, factor analysis of remaining 07 independent variables named as Trust/Openness, Idea
Time, Playfulness/Humor, Conflict, Idea Support, Debate and Risk taking have showed presence
of 02 factors for Trust/Openness having 38.3 % and 18.2 % variance explained.
A single factor for Idea Time having 43.1% of variance explained, single factor for
Playfulness/Humor having 62 % of variance explained, single factor for Conflict having 47 %
of variance explained, 02 factors for Idea Support having 37.2 % and 28.3 % of variance, 02
factors for Debate which accounted for 40.2 % and 26.6 % of the variance and single factor for
Risk taking which account for 55 % of the variance in the factor solution.
As mentioned earlier, the subject factors were iterated based on Kaiser's criterion i.e. (Eigen
values>1.0), which clearly indicates that few pressing factors needs to be retained for the analysis
and redundant factors may be discarded.
Table 8, 9 and 10 explains KMO & Bartletts statistics for nine variables under study. Moreover, in
line to ascertain the validity of the study conducted, correlations between the variables were
calculated as shown in Table 11.
No correlation exceeded, generally, from a recognized limits (0.90 or greater), indicating no
apparent evidence of tribulations with validity of data. A proposed JS model as shown in Fig.1 was
constructed relating nine dimensions of Organizational Climate with Idea generation and
Creativity (IGC) and to ascertain its influence upon IGC, being considered a dependent variable in
this proposed model. This model has been validated and model fit statistics is clearly illustrating a
statistically significant positive relationship (p<0.01) for 08 independent variables named as
Challenge/ involvement Trust/Openness, Idea Time, Playfulness/Humor, Conflict, Idea Support,
Debate and Risk taking on dependent variable i.e. Idea generation and Creativity. No negative
relationship was reported in this model fit statistics. The t-values for each of them were found
significant at it ranges between -2 to 2 and F value for the tested model was 12.15, so the results
have been significantly proved and strong enough for validating few of the proposed hypotheses in
this case.
The proposed JS model is strongly validated by having clear and tangible quantitative
outcome/results on the respective hypothesis tests. Testing the respective hypothesis, the first
hypothesis (H1), which hypothesized that Challenge/ Involvement being an organizational climate
dimension positively augment and enhances idea generation and creativity, was confirmed by the
data as the path coefficient = 0.190 and t-value calculated is 2.87. The level of significance for this
variable computed as 0.005 (p<0.01).
However, the second hypothesis (H2) hypothesized that Freedom being an organizational climate
dimension positively augments idea generation and creativity. Interestingly, this hypothesis was
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found insignificant at p<0.01 with a path coefficient = 0.113 and t-value calculated is 1.60. The
level of significance for this variable computed as 0.113 (p>0.01).
On the other hand, the Third hypothesis, (H3), hypothesized that Trust/Openness being an
organizational climate dimension positively augments idea generation and creativity. This
hypothesis again was found significant at p<0.01 with a path coefficient = 0.185 and t-value
calculated is 2.545. The level of significance for this variable computed as 0.013 (p<0.01).
Table 12 illustrates the results of regression for the respective hypothesis test. Similarly, (H4), (H5),
(H6), (H7), (H8) and (H9) have also been validated as depicted in the Table 12. Additionally, Table
13 shows the one-way ANOVA statistics clearly depicting a high regression sum of squares in
comparison to the residual sum of squares, which indicates that the 08 independent variables explain
most of variation in dependent variable i.e. Idea Generation and Creativity (IGC) with a significant Fvalue.
Moreover, a highest significant level value i.e. p<0.01 is ascertaining that the model is a fit and is
empirically validated in this case so; we may conclude that the 08 proposed hypotheses were
practically supported by results/data computed.
6.3 Proposed Model Analysis
The hypothesis tests are clearly validated as discussed earlier. However, to test the complete model
for its overall impact and significance, the data was loaded and regression was again calculated for
complete model fit.
Table 14 shows the whole model test statistics for clear representation.
The regression analysis for complete model has been conducted and is clearly illustrating a
statistically significant positive relationship (p<0.001 and p<0.01) for 02 independent variables
named as challenge/ involvement and debate on dependent variable i.e. Idea generation and
creativity. The t-values of two of these variables were found significant at it ranges between -2 to 2
and portrays that these two independent variables have considerable impact in the whole proposed
model.
7. Discussion and Conclusion

This paper underscores the impact of organizational climates dimensions and its degree of
importance upon Idea Generation and Creativity (IGC). The organizational climate dimensions
play a decisive role in motivating the workforce to think creatively and augment organizational
performance by having radical product innovations. HR and marketing practitioners are required to
be proactive in order to discover the pressing factors that are more crucial and of significant
importance for enhancing idea generation and creativity of the workforce and gaining better
organizational performance and goals.
The most notable finding of the study is that a high level of importance and value that has been
calculated for Challenge/Involvement and Debate i.e. two important variables of organizational
climate. It is concluded that least concern was reported about Freedom, Trust/Openness, Idea
Time, Playfulness/Humor, Conflict, Idea Support, required when we test all independent variables
in a complete model upon idea generation and creativity.
However, the sample of study have clearly acknowledged the hypotheses tests conducted one by
one and eight organizational climate dimension such as Challenge/ Involvement, Trust/Openness,
Idea Time, Playfulness/Humor, Conflict, Idea Support, Debate and Risk taking, as a better
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motivating instrument, and they are least concerned with Freedom at workplace in their
organizational climate, for idea generation and creativity.
When one by one test of hypothesis is conducted, No Freedom essential at workplace is totally in
contrast to the recommendations given (Isaksen et al., 2001) as they advocated that Freedom mean
how much employees are free and autonomous to shape and regulate their behavior in the
organization. A climate having higher level of freedom, employees purposely do their job in such a
manner they like but candid control is there for alignment. In this study, it has been found that,
tough and rigid climate characterized by rigid rules and regulations is prevailing in mobile telecom
industry. Workers execute their activities in predefined way and have no autonomy to alter or
redefine their assignments.
The Management at Mobile Telecom Industry of Pakistan has a strong predisposition to safeguard
the established customs, and as a result, upfront rules and standing operating procedure (SOPs) are
in practice for the employees to keep the employees on track and under proper control. It has been
contended by (Adams, 1986, p. 149) Although no manager wanted his or her own freedom on
initiative reduced, it was an unusual manager who did no attempt to routinise the areas under his or
her control.
Based on the results and discussion made above, it is concluded that an approach to enhance and
boost up idea generation, creativity for the purpose of innovation with the help of better
organizational climate is a useful technique of the significance importance and has pivotal role for
better and enhanced organizational effectiveness, performance and productivity.
This study is an empirical investigation based on the sample taken from mobile phone industry in
Pakistan and derived from the results computed, the objective of the current study, i.e.
organizational climate factors foster idea generation and creativity for innovation in mobile phone
industry of Pakistan, has been achieved.
It is recommended that the strategic management of mobile phone industry must focus upon
further improvements of their organizational climate as the climate dimensions play a pivotal role
in the performance and productivity of any individual, group or organizations.
8. Recommendations And Research Implications

This paper has offered understanding regarding the impact of key factors associated with
organizational climate. Taking into account the finding of this study, senior management may
further introduce the challenging assignments and project for which employees may be provoked
and encouraged to react accordingly.
However, in Mobile Telecom Industry of Pakistan, Freedom is being considered a low motivator
for IGC but it must also be given to the employees as Freedom and autonomy will give them a
sense of cohesion and dare to personally initiate action to achieve their goals in the way they feel
easy and comfortable.
Trust and openness will encourage the long-term loyalty and devotion within individual, among
groups and other organizational tiers. The time to generate idea may also will be helpful for
solution of various problems in order to reach at a logical conclusion. In addition, Playfulness and
Humor is the oxygen for the healthy environment in organizations. Management must maintain
and cheer up friendly and congenial environment.
Conflict is negatively related to the idea generation and creativity in our case and we can clearly
declare that disagreement and arguments on new and novel ideas may be useful, as it will serve as
a trigger to further improve and filter out the novel ideas.
Idea can only become a reality if it is properly supported and fueled so supporting a new idea by
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management may encourage the employee to further enhance his creativity and he would try his
level best to utilize his full potential.
Debate, normally, is considered as wastage of time but in presenting valuable ideas for creativity
and innovation, management must welcome such forums and platforms where ideas can openly be
discussed.
Finally, support for risk-taking attitude, based on the premise that learning and new ideas could be
the outcome of risk taking, must be provided by management to make the employee feel at higher
satisfaction level. In fact, the employees behavior can be altered in such way when they will make
mistakes and handle them. This will determine whether employee feel liberated to act creatively
and innovatively or not.
Moreover, mistakes can be discounted, censored, used to punish someone or considered as a
learning opportunity. Acceptance of mistakes is an important component that encourages and
elevates creativity and innovation (Brodtrick, 1997).
The HR and Marketing experts may alter and improve their organizational climate and its working
in order to augment organizational performance in a better way. Therefore, this study offers
empirical findings and results that may be helpful for the strategic decision makers such as Toplevel HR and marketing managers in organizations as the results have clearly showed the
considerable relationships and links between organizational climate and idea generation and
creativity.
This study contributed to the literature by discovering certain key facts regarding the insight of
employees of Mobile Telecom Industry of Pakistan about their various organizational climate
dimensions and its impact on idea generation and creativity for sound performance which were not
empirically investigated up till now.
9. Research Limitations
Although, a sample chosen for this study was very limited in number/size, however, based on
statistical significance of sample chosen, the response rate to our survey was good enough and it is
confidently believed that the non-response bias has not unsubstantiated the results of this study.
Moreover, due to limited time and financial constraints, the study was restricted to a sample
chosen from mobile Telecom industry of Pakistan.
10. Future Research Opportunities
This study was carried out in Pakistan so generalizing the results to other Asian Countries may be
not wise idea as the economic and political situations are very different among the third world
countries. The future research may focus on the impact of Organizational Climate dimensions in
public sector telecommunication industry organizations not limited to Mobile Telecom Industry of
Pakistan as conducted in this study so that to have a clear assessment among private and public
sector companies working in Telecommunication Industry in Pakistan.
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Annexure
Table 01: Gender

Gender
Frequency
Percent
Male
85
86.7
Female
13
13.3
Total
98
100
Table 02: Employees Age

Age
Frequency
Percent
20 to 30 yrs
73
74.5
30 to 40 yrs
15
15.3
40 to 50 yrs
8.2
Above 50 yrs
Total
98
100
Table 03: Post-Field Cadre in Org.

Cadre
Frequency
Percent
Marketing
18
18.4
Sales
26
26.5
IT
18
18.4
HR
13
13.3
Finance
23
23.5
Total
98
100
Table 04: Education Level

Education Level
Frequency
Percent
Ph.D
10
10.2
MS
27
27.6
Master Degree
22
22.4
Bachelor Degree
24
24.5
Others
15
15.3
Total
98
100
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Table 05: Job Tenure
Years
Frequency
VOL 3, NO 1
Percent
1-3 yrs
31
31.6
4-7 yrs
23
23.5
8-10 yrs
29
29.6
Above 10 yrs
15
15.3
Total
98
100
Table 06: Name of Organizations

Name of Organization
Frequency
Percent
Mobilink
23
23.5
Telenor
17
18.3
Warid
38
38.8
Ufone
10
10.2
Zong
10
10.2
Total
98
100
Table 07: Size of Organizations

No. of Employees
Frequency
Percent
0-1000 employees
33.3
1000-5000 employees
33.3
Above 5000 employees
33.3
Total
100
Table 08: KMO and Bartlett's Test for first three independent variables.
Challenge/
Involvement
Freedom
Trust/
Openness
.692
.70
.617
Approx. Chi-Square
67.076
136.134
94.982
df
10
15
15
Sig.
.000
.000
.000
Kaiser-Meyer-Olkin Measure of Sampling

Adequacy.
Bartlett's Test of Sphericity
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Table 09: KMO and Bartlett's Test for next three independent variables.
Idea Time
Playfulness/
Humor
Conflict
.631
.618
.665
Approx. Chi-Square
32.178
54.239
49.327
df
Sig.
.000
.000
.000
Kaiser-Meyer-Olkin Measure of Sampling Adequacy.

Table 10: KMO and Bartlett's Test for last three independent variables.
Idea Support
Debate
Risk taking
.507
.513
.501
Approx. Chi-Square
26.504
38.715
50.986
df
Sig.
.000
.000
.000

Note: If KMO value > 0.5, the sample is adequate for factor analysis.
Bartletts Test significance (p value<0.01)
Table 11: Correlations

Challenge/ Freedom
Involvement
Trust/Openness
Trust/
Openness
Idea Time Playfulness/ Conflict Idea Debate Risk

Humor
Support
Taking
.452(**)
Idea Time
.306(**)
Playfulness/
Humor
.198(*)
.454(**)
.392(**)
.466(**)
.504(**)
Conflict
-.197(*)
Idea Support
.178(*)
.283(**)
.151
.407(**)
.639(**) .423(**)
Debate
-.222(*)
.301(**)
.325(**)
.430(**)
.342(**) .405(**) .297(**)
.181(*)
.268(**)
.421(**)
.365(**) .520(**) .249(**) .641(**)
Risk Taking
Note:
** p< 0.01 level (1-tailed), * p< 0.05 level (1-tailed).
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Table12: Results of Regression

Unstandardized
Coefficients
Model
Sig.
Std. Error
(Constant)
.661
.192
3.450
.001
Challenge / Involvement
.190
.066
2.870
.005*
Freedom
.113
.071
1.600
.113
Trust/Openness
.185
.073
2.545
.013*
Idea Time
.252
.067
3.740
.000*
Playfulness/ Humor
.177
.064
2.755
.007*
Conflict
.167
.073
2.300
.024*
Idea support
.175
.092
1.908
.059*
Debate
.537
.056
9.559
.000*
Risk Taking
.456
.086
5.277
.000*
Dependent Variable: Idea Generation and Creativity (IGC)

Note: * p<0.01
Table 13: Analysis of Variance

Model
Sum of Squares
1
df
Mean Square
Regression
11.148
1.239
Residual
8.969
88
.102
Total
20.117
97
Sig.
12.153 .000

Table 14: Complete Model Results of Regression
Model
Sig.
Std. Error
(Constant)
.661
.192
3.450
.001
Challenge/ Involvement
.190
.066
2.870
.005*
Freedom
-.093
.063
-1.475
.144
Trust/Openness
.080
.066
1.224
.224
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Idea Time
.040
.063
.627
.533
Playfulness/ Humor
.030
.067
.491
.625
Conflict
-.072
.075
-.955
.342
Idea support
-.068
.095
-.714
.477
Debate
.585
.080
7.309
.000**
Risk Taking
.010
.099
.199
.843
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Note: ** p<0.001, *p<0.01

Fig. 1:
Proposed Research Model
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Triangular relationship among poverty, income inequality and growth
in Pakistan: 1973-2006
Muhammad Usman
Graduate Student in B.SC(Hons)
Department of Economics, Government College University, Lahore, Pakistan
Saima Sarwar(Corresponding Author)
Lecturer

Bilal Mehmood
Lecturer, Department of Economics, Government College University, Lahore, Pakistan

Abstract
In this study we have tested a relationship among three important macroeconomic variables i.e.
poverty, income inequality and GDP in Pakistan using a time series data from 1973-2006. The
results showed that there exists a causal relationship among poverty ,income inequality and GDP
while the income inequality has been a more significant variable affecting poverty. Which proves
that income inequality is one of the major variable to tackle with the poverty. To see whether there
exists a long run relationship among these variables or not, Johansen test has been applied which
confirmed that these variables are cointegrated which means that there exists a long run
relationship among them. On the other side from the double log model showed that the poverty
elasticity with respect to income inequality is more elastic as compared to poverty elasticity with
respect to GDP which means that relative small reduction in income inequality can bring a large
reduction in the poverty.
Keywords: Poverty, Income Inequality, Johansen Test, Growth, Elasticity, Distributional policy,
Causality, Double Log Model.
1.Introduction
Poverty has been one of the major area of analysis in development studies. For many years
economists focused only on growth to tackle with poverty, but now the income distribution is also
being considered to be as much important as growth in order to reduce the poverty. This view has
now changed the perspective to deal with poverty. Now rather giving full attention to achieve
higher growth, government introduces different policy measure to control the income distribution
imbalances so that the gap between rich and poor can be minimized. World bank (2005) estimates
also supported the argument that the effects of inequality to reduce poverty is seem to be larger
than the effects of economic growth, as measured by the inequality and growth elasticitys of
poverty.
Growth and development is needed to increase the income of the people while the distribution
policy keep an eye on whether poor class are getting their share from the growth or not. Growth is
good for poor but it is not necessary that the growth will always reduce the Poverty. There is no
doubt that economic growth can help to reduce poverty by increasing the income of poor people.
But various studies found that economic growth alone is insufficient for reduction in the poverty
(Kakwani (1993); Kakwani and Pernia (2002); Osmani (2002)}. The pattern and sources of
growth, as well as the level of income inequality play a major role to tackle with poverty. So the
development strategy with targeting the growth and income inequality will provide the optimum
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result in case of poverty reduction. Poverty has been a serious issue for Pakistan throughout the
history .We have population of 158.17 million and the poverty head count is 22.3% which means
around 35 million people is still below poverty line. But the nature and intensity of the poverty is
not same throughout the region.
2.Literature Review
The literature on the triangular relationship among poverty, income inequality and growth has been
divided into three separate sections.
Growth and poverty
Income inequality and poverty
Growth and income inequality
2.1 Growth and Poverty
There is broad consensus that there is significant relationship between the growth of GDP and
poverty. And from many years growth is considered to the dominant variable of poverty reduction.
Because GDP growth and poverty is linked through real wage rate and employment opportunities
with the rise of GDP growth or National income (NI) more jobs will be created which will reduce
the poverty from the economy. On the same ground most of the economists believe that higher
growth rate of GDP is considered to be helpful to reduced the poverty. The same view is supported
by the World Bank report according to which on average a 1% increase in GDP per capita leads to
a 1.7% reduction in poverty in 14 countries during the 1990s.(World Bank et al 2005). Fafchamps,
Teal and Toye (2001) also that growth has the potential to shift the population above the poverty
line and hence reduce the poverty.
But the significance between poverty and growth lies in the concept of elasticity of poverty and
growth of GDP. The higher growth poverty elasticity means the small increase in the GDP growth
will lead to relative large reduction in poverty and when the growth poverty elasticity in low or it
is less then one it means the large increase in the growth of income will lead to relative small
reduction in poverty
Ravallion and chen (1997) used the data of 41 developing country including Pakistan to measure
the growth poverty elasticity. He used the poverty headcount to measure the people that live below
the poverty line .By using the double log model he estimated that in the developing countries on
average the growth elasticity of poverty as measured by the individual below the conventional 1
$day threshold was around 3%. This means that 1% increase in the growth leads to 3% reduction
in the proportion of the people live below poverty line.
Dollar and kraay (2001) found by using the sample of 92 countries spanning the last four decade
and explored that growth is good for poor people. And when the average income of the countries
rise the average income of the poor fifth people also rises and it holds across regions, periods,
income levels, and growth rates. Hence the growth in the GDP or NI will certainly reduce the
absolute poverty as it rise the income of the poor people. But they were failed to explore the
different factors that accounts for the variations in the share of poorest fifth people of the society
across countries and across time.
Adams (2003) examined the data of 50 developing countries tosee the impact of economic
growth on poverty and inequality. He found that growth is a dominant factor to reduce poverty
in the developing world. He explored tht either the growth is measured by per capita GDP or
survey mean income (consumption), there is a strong statistical link between growth and
poverty reduction. He also observed that the elasticity of poverty with respect to growth is -2.59
when growth is measured by survey mean income (consumption). Which means , on average,
a 1 percentage increase in economic growth (measured by survey mean income) will produce
2.59 percent reduction in the proportion of people living in poverty ($1 a person a day).
Pasha et.al (2003) assembled the available data on Asian countries and then analyzed the
relationship between growth and poverty reduction in a long-term perspective. They further
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analyzed the impact of different variables on the intensity of this relationship. The results indicated
that there exists a strong positive relationship between growth and poverty, but this relationship
was highly variable across countries and time periods. In order to identify the nature and intensity
economic growth and poverty, they computed the growth elasticity of poverty, which indicates the
percentage change in the incidence of poverty with a 1% increase in per capita income. They found
the growth poverty elasticity 0.9 for the region as a whole. According to their research the gain
from the growth will be limited unless we achieve the pro poor growth.
Kalwij and Verschoor (2007) examined the growth poverty and income inequality relationship by
using the panel data of 58 developing countries from 1980-88. The result of this study shows that
there exist significant negative relationship between growth and poverty. They found that the
income elasticity of poverty was -1.31 in the mid-1990s on average and it ranges from 0.71 for
Sub-Saharan Africa to 2.27 for the Middle East and North Africa. This implies that the one
percent increase in growth will reduce the poverty by .71 percent in sub Saharan Africa and 2.27
percent in Middle East.
2.2. Income inequality and poverty
From the last few years Income inequality becomes the one of major key variable in the discussion
between growth and poverty reduction strategy. And if we some how control over this variable
then the fruits of growth will be trickle down to whole society and growth will have a more
significant effect on poverty reduction. Hence the poverty will reduce more in countries where
income inequality is low then in countries with high income inequalities (world bank report 2005).
Ravallion (1997) used cross-country regressions to estimate the poverty elasticity with respect to
growth with different levels of initial inequality. He found that at a higher initial income inequality
poverty with respect to growth, is lower. The result of this study suggest that a country with a Gini
coefficient of 0.25 have a poverty elasticity of 3.3, which implies that 1 percent increase in the
growth rate will reduce the incidence of poverty by 3.3 percent. While the country with Gini
coefficient of 0.6 has a poverty reduction of 1.8 percent with 1% increase in the growth rate.
Ravallion (2004) examined that how the pro poor growth effects the poverty reduction and how
income inequality offset the affects of growth on the poverty. This research deals with the analysis
of two countries only one is India and second one is the China. By using the data of poverty
income inequality he found that the more equally distribution incomes are the more poverty
reduction in average income. Because with the help of equal distribution all the people will be
benefit from the growth of GDP as the growth in GDP will higher the income of poor people as
well.
Haroon Jamal (2006) proved the relationship among poverty, growth and inequality in the context
of Pakistan. Time series data form 1979 to 2002 are used for this purpose. The major source of this
data was Pakistan economic survey and household income expenditure survey. As there is not a
proper times data on poverty and income inequality in case of Pakistan so consistent poverty and
inequality measures are interpolated to estimate the poverty elasticity with respect to growth
and inequality in a multivariate regression analysis. The study explored that poverty elasticity
with respect to inequality is 8.3 which confirm the importance of inequality in poverty reducing
effort.
Kalwij and Verschoor (2007) examined the growth poverty and income inequality relationship by
using the panel data of 58 developing countries from 1980-88.They further analyzed that how the
change in income inequality effects the growth poverty elasticity. The result of this study shows
that high income inequality can offset the effect of growth to reduce the poverty. They found that
the Gini coefficient elasticity of poverty was calculated 0.80 on average and it ranges from 0.01 in
South Asia to 1.73 in Latin America. Which implies that 1% reduction in Gini coefficient will
reduce the poverty by 0.01% in South Asia and 1.73% reduction in poverty in Latin America.
2.3. Growth and inequality:
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The link between the growth and inequality is usually explained with the help of KUZNETS
HYPOTHESIS. According to this hypothesis the income inequality increases initially with the
rise of GDP growth then it reaches at maximum point and afterward it start reducing and becomes
stable at a lower specific point. Although several studies found support for Kuznets hypothesis
like Pauker (1973) Ahluwalia (1976) while few of the later researches fails to find any support of
this hypothesis like Anand and Kanbur (1993),Ravallion (1995) and Deininger and Squire (1998).
Alesina and Rodrick (1994) analyzed the relationship between distribution polices and
economic growth in a simple model of endogenous growth. They used the cross country data of
more then 50 countries for their analysis of 1960-85. The result suggested that the greater the
income inequality the lower will be growth. They further explored that there exist the positive
relation between the rate of taxation and income inequality.
Deininger and Squire (1998) used new cross-country data on income and asset (land) distribution
to analyze that whether there exists a negative relationship between initial inequality in the asset
distribution and long-term growth and whether inequality reduces income growth for the poor. The
result of this study suggested that there exist strong negative relationship between the initial
income inequality and growth and income and land inequality can also reduce the growth of poor
income. But they found little support for the Kuznets hypothesis.
Almad heshmasti (2004) examined the causal relationship between inequality and growth by using
the cross country data of 146 countries (including Pakistan).He further included openness, wages,
and liberalization as a variable in the regression analysis. He explored that there exists significant
relation between the Inequality and growth and Kuznets hypothesis represents a global U-shape
relationship between inequality and growth.
Mauro Caselli (2005) explored the consequences of income inequality on economic growth in
developing countries. He used the data of 40 countries including Pakistan for regression analysis
from 1965-94. The findings of this paper showed that higher initial income and land inequalities
have a growth-reducing impact in the long run.
Hafeez et.al (2008) attempted to analyze the factors responsible for income inequality among the
different groups of countries at different stages of economic growth and tested the Kuznets
hypothesis by breaking panel of countries into four sub-panels; low income, lower middle income,
upper income and higher income countries. For this purpose they used that data of 51 countries.
The results of the study find the evidence of the existence of inverted U-shaped hypothesis for
income growth. Which mean with the starting phase of the development the income inequality
increase then it reaches at maximum after then it will become stable at a lower level.
3. Research Objectives
The objective of this research is to analyze whether there exists significant causal relationship
among absolute poverty, income inequality and growth in Pakistan. And if there exists then it has
been seen that whether poverty has long run relationship with the GDP and income inequality or
not.
4. Hypotheses
H1 : There is significant relationship among poverty, income inequality and GDP.
H2:There is causal relationship among poverty, income inequality and GDP.
H3:There is long run relationship among poverty, income inequality and GDP
5. Research Methodology
5.1. Variables and Data Sources
5.1.1. Poverty
This research uses the income approach to define the poverty in country. The poverty headcount
ratio is used to capture the effect of poverty in the economy. Where poverty headcount ratio shows
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the proportion of the national population whose incomes are below the official threshold. Data has
been taken from HIES published by federal Bureau of Statistics.
5.1.2. Income inequality
Income inequality shows the disparity in levels of income among individuals in the economy. The
well known tool to measure the income inequality in the economy is the Gini coefficient, which
can be measured with the help of Lorenz curve .Its value lies between 0 to 1, the more it will closer
to zero the more faire will be the income distribution of the economy. This study also uses Gini
coefficient for measuring inequality. Again data for income inequality has been collected from the
various issues of Household Income and Expenditure Surveys (HIES) published by the Federal
Bureau of Statistics (FBS), Pakistan social and living standard measurement survey (PSLM) and
economic survey of Pakistan.
5.1.3. GDP growth
GDP shows the market value of all final good and services produced within the boundary of a
country in a given years. While GDP growth shows the annual percentage increase in the final
good and services produce with in the boundary of the country in a given year. A rise in the GDP
growth certainly has a significant impact on the absolute by raising the income of the poor. Data
has been used from World Development Indicators.
5.2. The model
This research dose not base upon single alone model rather it is based upon three specific models
which are used for some specific purpose. First of all granger causality model is used to find out
whether there lies causal relationship among poverty, income inequality and growth. Second the
cointegration test is used to find out whether there exist long run relationship among poverty,
income inequality and growth. Third one is the double log model which is used to find out the
overall elasticity of income inequality and GDP with respect to poverty.
5.2.1. Granger causality test
The null hypothesis (Ho) of this test is that Xt dose not granger causes Yt. The causality between
GDP and poverty is tested through Granger causality test where as equation 4.1 is used to check
whether poverty dose granger cause GDP and equation 4.2 is used to check whether GDP does not
granger cause the poverty.
Poverty
GDP
= 1 +
i =1
i =1
i GDP
i GDP
ti
i =1
ti
j Poverty
j Poverty
i =1
t j
t j
+ 1t
4.1
4.2
+ 2t
Similarly to test the granger causality between poverty and Gini coefficient equation 4.3 and 4.4 is
regressed and to test whether the GDP and Gini coefficient has a casual relationship or not
equation 4.5 and 4.6 is regressed.
Poverty
GINI
GDP
i =1
i =1
i =1
i GINI
ti
i GINI
ti
i GINI
ti
i =1
i =1
i =1
j Poverty
j Poverty
t j
j GDP
t j
t j
+ 1t
4.3
4.4
2t
2t
4.5
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GINI
= + GINI
+ GDP
+
4.6
m
i =1
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ti
i =1
t j
2t
5.2.2. Cointegration Tests

Granger causality test doesnt tell us whether the causal relationship between the variables exist in
the long run or not, so in order to find out whether there exist long run relation among poverty
,income inequality and growth cointegration test is used . Different cointegration tests are used to
find out whether there exists the long run relationship between the variables or not. i.e Eangle
granger ,cointegrated regression Durbin Watson test (CRDW) and johansen cointegration test.
Both Eangle granger and johansen cointegrated tests are more reliable and realistic as compare to
CRDW therefore these two test are used to test whether the variables are cointegrated or not.
5.2.2.1. Engle-Granger test for Cointegration
This test is used to identify whether there exists long run relationship between two variables or not.
The first step of this test is to run an OLS regression (eq-4.7), saving the residuals and then regress
the Ut on Ut-1 (eq-4.8).
(4.7) y t
= 0 + 1 xt + u t
Ut = U(t1) +Vt
(4.8)
The variables Yt and Xt has a long run relation if the coefficient of Ut-1 is negative and statistically significant.
For the given analysis we will run this equation.
Poverty
= + GDP
(4.9)
Poverty = + Gini +
(4.10)
After regressing the equation 4.9 and 4.10 the error term of each regression estimate will be saved
and the difference of error term will be regressed on its previous lag value. The poverty has a long
run relationship between the GDP and GINI if the coefficient of Ut-1 is negative and statistically
significant .
5.2.2.2. Johansen cointegrated test
Engle granger test is useful to find out whether the two variables are co integrated or not but the
johansen methodology is more advance and reliable in nature to test whether the variables are
cointegrated or not. On the other side johansen test can be used even when there are more then two
variables. Johansen methodology takes its starting point from Vector auto regression (VAR).
5.2.3. Double log model
Double log model is used to identify the average elasticity of GDP and Gini coefficient with
respect to poverty, so that we can know that which variable (Gini coefficient or GDP) is more
responsive to reduce the poverty. This will certainly help us to make useful policy to tackle with
the poverty in the economy.
ln Pt= + ln GDPt+ ln GINIt +
(4.11)
Where Pt= Poverty

GDPt= Growth
GINIt= Income Inequality
Equation 4.11 shows the double log model where the and will provide the elasticity of poverty with respect to
growth and income inequality respectively.
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6. Estimation and result
6.1 Granger causality test

Before going to apply the Granger causality test it has been first checked out whether the variables
are stationary at level or not for this purpose ADF and KPSS test is used. After estimating the ADF
and KPSS test result it has been found that the variables are stationary at level . Table 1 shows the
final result of granger causality test between poverty and GDP and it is found that there exist
unidirectional causality between the poverty and GDP and GDP does granger cause the poverty as
p-value <alpha (2.E-15 < 0.05) which means we will reject Ho .On the other side poverty does not
granger cause the GDP as p-value >alpha (0.5353> 0.05) which means we will not reject Ho.
(Table 1 here)
Table 2 shows the final result of granger causality test between poverty and Gini coefficient and it
is found that there exists bilateral causality between the poverty and Gini. This means both
variable granger causes each other. Gini does granger cause the poverty as p-value <alpha (2.E104 < 0.05) which means we will reject Ho. On the other side poverty does granger cause the Gini
as p-value <alpha (2.E-72< 0.05) which means we will reject Ho.
(Table 2 here)
Table 3 shows the causality between the Gini and GDP and it has been found that there exists
undirectional causality between the GDP and Gini. GDP does granger cause the Gini as p-value
<alpha (1.E-11 < 0.05) which means we will reject Ho. On the other side Gini does not granger
cause the GDP as p-value >alpha (0.9515> 0.05) which means we will reject Ho.
(Table 3 here)
6.2 Cointegration test
Engle granger and johansen methodology is used to test whether there exists a long run
relationship among poverty, income inequality and GDP. Under this heading the estimates of these
result will be interpret.
6.2.1. Engle granger test on poverty and GDP
The results table 4 show the output of equation. 4.4
(Table 4 here)
After estimating the eq. 4.4, the difference of this regression line error term (VT= Ut-Ut-1) is regress
on previous lag value of error (Ut-1) which is shown in table 5.
(Table 5 here)
From the above output we can see that:
VT = -0.203 ut-1 + et
Tau value =t = (-7.5)
As the coefficient of Ut-1 is negative (-0.203115) and it is statistically significant (as p-value <
alpha (0.00<0.05) which means the coefficient -0.203115 is statistically significant. Therefore we
can conclude there exist long run relationship between the poverty and GDP. On the other side, if
we compare the t-stats values (tau value) to the critical table value of dickey fuller then still we
found that GDP and poverty is co integrated. As the tau value < dickey fuller table value (-7.5 < 2.6) at alpha=0.05.
6.2.2. Engle granger test on poverty and Gini coefficient
(Table 6 here)
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After estimating this, the difference of this regression line error term (VT= Ut-Ut-1) is regress on previous lag value of
error (Ut-1) which is shown is table 7.
(Table 7 here)
VT = -0.0434 ut-1 + et
Tau value =t= -1.08
The coefficient of Ut-1 is negative (-0.04345) but it is not statistically significant (as p-value >
alpha (0.288>0.05) which means the coefficient -0.0434 is statistically insignificant) therefore we
can conclude there exist no long run relationship between the poverty and Gini coefficient at alpha
= 0.05. On the other side, if we compare the tau value to the critical table value of dickey fuller
then still we found that Gini and poverty is not co integrated. As the tau value < dickey fuller table
value (-1.8 > -2.6) at alpha=0.05.
6.2.3. Johansen test
Before going to apply the johansen test, the VAR lag order selection criteria is used to take a
decision about the number of lag terms. Final prediction error, Schwarz information criterion and
Hannan-Quinn information criterion shows the number of lag should be three (appendix number
5). The table 8 shows the trace and maximum eigen value statistics in 2nd and 4th column
respectively while 3rd and 5th column shows the critical value of trace test and maximum eigen
value respectively. Null hypothesis r = 0 in the table is used to test the hypothesis that the variables
are not cointegrated against the alternative that at least one or more cointegrated vector ( r > 0)
exists.
(Table 8 here)
Since Jtrace >C.V (43.25 > 29.79) and Jmax > C.V ( 24.14>21.13) therefore we will reject Ho this
means that there exits at least one or more cointegrated vectors. In order to test whether there exist
at most one cointegrated vector ( r 1) against the alternative that there exist two or more
cointegrating vector Jtrace and Jmax of r 1 is used. As Jtrace >C.V (19.10 > 15.49) and Jmax > C.V (
14.43>14.26) at r 1 therefore we will reject the Ho. The rejection of the null hypothesis indicates
that there exist at least one cointegrated vector. The last row of the table 5.8 tests the hypothesis
that there exists at least two cointegrated vector against the alternative that there exist more then
two cointegrated vectors. The calculated statistics of both the test is again greater then there
respective critical values therefore we will again reject the Ho. This means these variables are
cointegrated or having a long run relationship.
6.3. Double log model

In order to have more reliable result it has been tested whether there exist the problem of
multicolinearity , Heteroskedasticity and auto correlation in the above regression analysis or not. In
order to check whether there exist the problem of multicolinearity in the data correlation matrix is
computed which is given below table 9.
(Table 9 here)
Form the result of correlation matrix we can see that the correlation between the log GDP and log
Gini is -0.5 which means there doesnt exist severe problem of co linearity in the data. In order t
check whether the variables are normally distributed or not Jarque-Bera test is used and it shows
that all the variables are normally distributed.
In order to remove the auto correlation from the regression analysis the lag of poverty (dependent
variable) is introduced in the model. First of all it has been found that how many lag term should
include in the model for this purpose serial correlation LM test is used and it is found that only
AR(1) and AR(3) is significant among different AR lag values. So AR(1) and AR(3) is included in
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the model to remove the auto correlation. The result of double log model with the inclusion of
AR(1) and AR(3) is given in the table 10.
(Table 10 here)
The result from the model shows that d=2.07 which shows no auto correlation in model. On the
other side the coefficient of log GDP become insignificant as p-value of it > than the alpha
(0.59>.05). While all the remaining coefficient is significant as p-value of all the remaining
coefficient is less then the alpha (0<0.05). The < 1 shows that growth poverty elasticity is
inelastic which means that relative large increase in GDP will relative create a small reduction in
poverty. And >1 shows that the poverty elasticity with respect to income inequality is elastic
which means that relative small increase in the income inequality will bring a relative large
increase in the poverty.
The coefficients of variables shows elasticity estimates in the model. From here we see that
growth poverty elasticity is inelastic and poverty elasticity with respect to income inequality is
elastic. This means that income inequality is more important variable to reduce the poverty rather
then the GDP. On the other side if we analyze the historical trend of GDP and poverty we will find
that in some decade the GDP growth has a positive relation with poverty and in some decade it as a
negative relation with poverty. Because of which it may possible that the coefficient of log GDP
become insignificant in the model on the same time the result of double log model shows that the
GDP has a little impact to reduce poverty ( 1 unit rise in log GDP will reduce the poverty by
0.0019 unit).
So the result of double log model shows there exists significant relationship between poverty and
inequality while the relationship between the poverty and GDP is insignificant. While the result of
granger causality test shows that poverty, income inequality and GDP has a causal relationship
(either is bilateral or unidirectional). While the Johansen test also proves that there exists a long
run relationship among poverty ,income inequality and GDP.
7. Conclusions
In this research the data from 1973-2006 has been used to test whether there exists a significant
relationship among poverty, income inequality and GDP in Pakistan. The expected result was that
both the variables (GDP and income inequality) have a significant impact to reduce the poverty.
As GDP and income distribution policies can really help to rise the income of the poor. On the
same time it has also been tested that whether the poverty, income inequality and GDP granger
causes each other or not. The results of this research shows that there exists granger causal
relationship among poverty ,income inequality and GDP while the income inequality has a
significant relation with poverty. This proves that income inequality is one of the major variable to
tackle with the poverty. It is also tested in this research whether the poverty ,income inequality and
GDP are cointegrated or not. The result of Johansen test shows that these variable are cointegrated
which means that there exists a long run relationship among these variable. On the other side from
the double log model it can be seen that the poverty elasticity with respect to income inequality is
elastic which means that relative small reduction in income inequality can bring a large reduction
in the poverty. On the other side the poverty elasticity with respect to GDP is inelastic and
insignificant. Unfortunately in past we achieved higher GDP growth rates most of the time but the
nature of that growth was anti pro poor because of which it could not help to reduce the poverty.
So in order to tackle with the poverty, the combination of two policies should be used. From the
one side the policies targeting the pro poor growth should be introduced on the other side different
policy measure should be taken to improve the income distribution. So, by targeting the pro poor
growth and income distribution policies the poverty can be reduced at a faster rate.
7.Policy Recommendations.
The following study suggests pro- poor growth policy which can reduce poverty, income
inequality and unemployment. In order to reduce the poverty ,income inequality and
unemployment the focus should be on that sector which employed the largest poor population of
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the country. This shows the significance of the agriculture sector in Pakistan, as agriculture sector
employed the largest labor force of our economy. It means that the development of the agriculture
sector or in other words rural development, will make the biggest contribution to reduce the
poverty. Secondly we must ensure fair income distribution through providing job opportunity
coupled with higher wage rates certainly effects the distribution of income. For the fair income
distribution the target should be to rely mostly on the direct taxes through which we can reduce the
burden from the poor class. But unfortunately in case of Pakistan, most of the tax revenue is
generated through the indirect tax. Currently 60% of the tax revenue is collected through indirect
taxes (Economic survey 2008-09). Such a high dependence on the indirect taxes will certainly
create a more burden on the poor class of the economy. And it also worsens the income
distribution of the economy. Moreover such programs which directly target the poor people i.e.
micro-finance facility; streamlining programs such as Emergency Relief Assistance, Benazir
income support program, Susti Roti scheme should be focused. Program like Micro Finance
enables the poorer sections of the society to develop their assets and bring out from the vicious
circle of poverty. Rural sector development strategy should be adopted.
Acknowledgment
Authors are very thankful to Prof. Dr. Ikram-ul-Haq, Vice Chancellor, GC University, Lahore,
Pakistan for appreciation and encouragement in research activities.
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Annexure
TABLES:
Table 1 Granger causality test on GDP and poverty
Null Hypothesis:
F-Stats
Prob.
Decision
GDP does not Granger Cause POVERTY
150.72
2.00E-15
Reject Ho
POVERTY does not Granger Cause GDP
0.6397
0.5353
Accept Ho
Table 2 Granger causality test on Gini efficient and poverty

Null Hypothesis:
F-Statistic
Prob.
Decision
GINI does not Granger Cause POVERTY
6.6E+08
2E-104
Reject Ho
POVERTY does not Granger Cause GINI
2743568
2.E-72
Reject Ho
Null Hypothesis:
F-Statistic
Prob.
Decision
GINI does not Granger Cause GDP
0.0497
0.9515
Accept Ho
GDP does not Granger Cause GINI
74.293
1.E-11
Reject Ho
Table 3 Granger causality test on Gini efficient and GDP
Table 4 Regression line taking poverty as a dependent variable

Variable
Coefficient
Std. Error
t-Statistic
Prob.
32.29754
2.182479
14.79855
GDP
-1.20E-12
1.08E-12
-1.11356
0.274
Table 5 Regressing VT on Ut-1

Variable
Coefficient
Std. Error
tStatistic
Prob.
-1.095604
0.275310
-3.97953
0.0004
UT(-1)
-0.203155
0.027007
-7.52226
0.0000
Table 6 Regressing poverty on Gini coefficient

Variable
Coefficient
Std. Error
tStatistic
Prob.
-55.45780
14.50238
-3.82404
0.0006
GINI
229.5471
38.41193
5.97593
0.0000
Variable
Coefficient
Std. Error
tStatistic
Prob.
-0.072162
0.272159
-0.26514
0.7927
UT(-1)
-0.043459
0.040204
-1.08096
0.2881
Table 7 Regressing VT on Ut-1
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Table 8 Trace test and Maximum Eigen test statistics

Ho
Jtrace
critical value
Jmax
critical value
Decision
r=
0
43.25406
29.79707
24.14893
21.13162
Reject Ho
r
1
19.10513
15.49471
14.43048
14.26460
Reject Ho
r
2
4.674647
3.841466
4.674647
3.841466
Reject Ho
Table 9 Correlation matrix

LNG
LNGDP
LNP
LNG
-0.5
0.66
LNGDP
-0.5
-0.51
LNP
0.66
-0.51
Table 10 Double log model after removing the auto correlation

Dependent Variable: Poverty
Variable
Coefficient
Std. Error
tStatistic
Prob.
4.457301
0.175853
25.34677
0.0000
lnGini
1.069511
0.135245
7.907971
0.0000
lnGDP
-0.001949
0.003587
-0.54352
0.5914
AR(1)
1.363538
0.027615
49.37700
0.0000
AR(3)
-0.420431
0.021681
-19.3918
0.0000
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Empirical Relationship between corruption and poverty:

A case study of Pakistan
Muhammad Gulzaib Chaudhary
Graduate Student in B.SC (Hons)

Saima Sarwar(Corresponding Author)
Lecturer
Abstract
This is a study to see the relationship between corruption and poverty in case of Pakistan. Time
period of the study is from 1995-2009 due to the non-availability of data for corruption before
1995. Double log model has been applied to see the relationship among different variables with
respect to poverty. And the results showed that corruption has a positive impact on poverty. While
government expenditure has negative impact on it. It means that it can be used as a best policy tool
for the eradication of poverty. But the relationship between GDP and poverty has been also found
positive which may be due to the the structural imbalances in the society which restrict the poor to
take full benefits from overall growth and concentration of wealth remains in few hands of upper
class.
Key Words: Corruption, Poverty, Growth, inflation, LM test, Elasticity, Income distribution,
Investment.
1.Introduction
Corruption is considered a major cause for all evils around the world, at all levels of society from
governments, civil society, judiciary functions, military and other services, and so on. The impact
of corruption in poor countries on the poorer members of those societies is even more tragic.
Corruption and poor governance have been the major causes of regimes failures in the subcontinent. In Pakistan, currently more than 40% people are living below the poverty line
according to the recent survey of 2010. People in the rural areas are poorer than in the urban.
Corruption also emerged as a core poverty issue as a result of the participatory poverty
assessments carried out within the framework of World Bank's Voices of the Poor initiative that
brought together the experiences of over 60,000 poor men and women around the world. Poor
people engaged in that study reported hundreds of incidents of corruption as they attempted to seek
health care, educate their children, claim social assistance, get paid, and attempt to access justice or
police protection, and seek to enter the marketplace.
Attitudes towards corruption and its impact vary substantially. Based on the results of the 2003
Global Corruption Barometer, corruption hits the poor hardest. According to Global Corruption
Barometer, 2003, two out of five respondents on a low income believe that corruption has a very
significant effect on their personal and family life. The same answer came from only one in four
respondents on a high income. So, 41% of respondents on low income felt their lives were "very
significantly" affected by corruption, as opposed to 27.5% of those on medium income and 25.4%
of those on high income.
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Pakistan is also facing poverty issue from its independence. If we try to summarize the main
reasons for this problem then it can be said that the first reason for poverty can be the rapidly
growing population of the country. Population-wise Pakistan is the 6th largest country in the world
and its population growth rate is 1.8%, which is the highest in the region. Pakistans GDP growth
rate is less than 3%. So, there is a shortage of goods and services like food, clothing, housing
facilities, education and health etc all these things are inadequate to meet the necessities of a
growing population. One earning hand has to feed a large number of family members. Due to the
high level of demand and less production, there is general poverty. The second reason can be
considered the engagement of the large share of its population with agriculture sector. Nearly 66%
of the population belongs to rural areas and they have less money to fulfill their basic needs like
food, health, education and housing etc, thats why the poverty level is growing day by day. The
third reason for poverty is the unfair distribution of income among people. The poor are becoming
poorer and the rich becoming richer. In Ayubs era there were 22 families, who had control of the
majority of the national income. In the present, the situation is the same with a slight difference.
Such unequal distribution of income is creating restlessness among the less income class. And
lastly for poverty is inflation, which is a king of regressive tax on the fixed income class. Due to
inflation, the salaried and fixed income group is more affected than the business class. The
employees salaries are not increased by the government in proportion to inflation, but their
expenditures are increasing, day by day, due to dearness. Indirect taxes like general sales tax,
customs duty, excise duty etc, affect the investment climate and poor consumers greatly.
Ultimately there will be poverty. Black marketing, hoarding, smuggling, profiteering, nepotism,
corruption of a specific community is exploiting the poor people of Pakistan, making them more
poor (Ahmad, 2009).
2. Nature Of The Relationship Between Corruption And Poverty

Poverty is a complex phenomenon. It is multidimensional, including low income, low levels of
education, vulnerability, powerlessness, and caloric intake. Very few studies have examined or
established a direct relationship between corruption and poverty. Corruption, by itself, does not
produce poverty. Rather, corruption has direct consequences on economic and governance factors,
intermediaries that in turn produced poverty. Relationship examined by researchers is an indirect
one.
In an Economic Model corruption affects poverty by first impacting economic growth factors,
which in turn, impact poverty levels. Increased corruption reduces economic investment, distorts
markets, hinders competition, and increases income inequalities. By undermining these key
economic factors, poverty is exacerbate. Countries with higher corruption experience less
economic growth. Corruption affects through impacting investment, entrepreneurship, distorting
market, undermining productivity, income inequality and is associated with slower growth. If the
rate of economic growth increases, the number of people above the poverty line tends to rise as
well.
Corruption also impedes economic growth. Economic theory supports the notion that corruption
hinders economic growth in the following ways: corruption discourages foreign and domestic
investment, taxes entrepreneurship, lowers the quality of public infrastructure, diverts talent into
rent seeking and distorts the composition of public expenditure. These theoretical propositions
demonstrate that high levels of investment and low levels of aggregate economic growth. So there
is an inverse relationship between corruption and economic growth.
Corruption discourages domestic investment. It hurts entrepreneurship especially among small
businesses and decreases revenue from taxes and fees. Corruption exacerbates income inequality.
Several studies have demonstrated a relationship between corruption and income inequality. The
theoretical foundations for this relationship are derived from rent theory and draw on the ideas of
Rose-Ackerman (1978) and Kruger (1974), among others. Propositions include, corruption may
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create permanent distortions from which some groups or individuals can benefit more than others.
The distributional consequences of corruption are likely to be more severe the more persistent the
corruption. The impact of corruption on income distribution is in part a function of government
involvement in allocating and financing scarce goods and services (Gupta, Davoodi, and AlonsoTerme, 1988).
The Gupta et al. study examined these propositions through an inequality model using a Gini
coefficient to measure inequality. The model specified the personal distribution of income in terms
of factor endowments, distribution of factors of production and government spending on social
programs. The statistically significant results include: Higher corruption is associated with higher
income inequality such that a worsening of a countrys corruption index by 2.5 points on a scale of
10 corresponds to an increase in the Gini coefficient corresponds to an increase in the Gini
coefficient (Worsening inequality) of about 4 points. Even controlling for stage of economic
development, corruption appears to be harmful to income inequality. Corruption tends to increase
the inequality of factor ownership.
In Pakistan, Corruption creates irresistible economic pressure, social and economic injustice and it
makes a wide gulf between rich and poor. The main causes of corruption are temptation of wealth,
lust of power and luxuries of life. Religious, social, linguist and regional diversities and differences
also breed conflict and confrontation, bias and hatred among the people. Secondly, feudalism,
capitalism and uneven distribution of wealth and opportune, non-availability of fundamental rights
and liberties are also spread by corruption. Thirdly, the non-availability of basic necessities and
facilities like education, health care and job also paves the way to spread corruption in a society
or state. External factors like the agent or agencies of hostile neighboring states like India also play
a vital role in spreading corruption in Pak-land, in order to destabilize, disintegrate the state and
demoralize the people. Feudal lords influence the public policy. They control politics. They make
decisions in their own interest and favor. Rent seeking attitude greatly influence public policies
and it is a part of their politics. Rent seeking attitude leads to corruption.
Politics is all linked with money. They are the elites, moneyed people contest elections, the
concept of private property has given birth to elitism. In Pakistan, private property is a source of
elitism that land and it determines the extent of power. The National Assembly is dominant by
feudals. So these feudals have strong hold over public policy which is then exploited by their
hands for attaining their personal objectives. Rather Public policy should have objectives and goals
which can take into account welfare of the whole society. e.g. population growth should be
brought down from 1.5 to 1.2 or government of Pakistan has to follow millennium development
goals which they aim to achieve by 2015 or reducing poverty from 32%.
3.Literature Review
Dwivedi (1967) elaborated that in Pakistan the major cause of sustainable corruption is not only
the poverty but also the environment and the supporting conditions during its evolving stage which
nurtures the dishonest actions by mishandling, rather ignore the circumstances and the
consequences of the situation. According to his findings that corruption is the end product of a
process of administration and is preceded by mal administration.
Zaidi(1997) highlighted that social instability causes both corruption and poverty. In Pakistan the
lack of inter person, inter city and inter provincial collaborations, coupled with misunderstandings
among the decision makers makes the policy making and extremely complex and fruitless act
which wastes all the time, energy, resources and most importantly the time, the precious asset of
invaluable financial potential if its utilized in right direction with harmony, efficiency and mutual
understanding towards the economic development and sustainable growth of Pakistan. He believes
that political violence, ethnic differences, isolation and lack of unity among the administrating
bodies are the major sources of corruption., and hence all; this ultimately leads to poverty which
cannot be eradicated from its grass roots unless a strong and firm action is taken to reduce
corruption, if complete elimination is not possible.
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Gupta et al. (1998) conducted cross-national regression analysis of up to 56 countries to examine

the ways that corruption could negatively impact income distribution and poverty. The study
described that income inequality has been shown to be harmful to growth, bias in tax systems that
can reduce the tax base and progressively of the tax system, increasing income inequality and poor
targeting of social program.
The Kenya Urban Bribery Index results indicated that those with low-income are more vulnerable
to corruption than those with higher income levels. Those on the lowest income reported a 74.4%
incidence of bribery encountered and those on the highest income reported a 61.9% incidence.
Similar comparisons exist for other social-economic categories, such as, for example, education
and employment. The findings indicate that those likely to be poor (i.e. unemployed, those with
low education, etc.) are more vulnerable to corruption than the better off socio-economic groups.
Respondents with primary education and below encounter bribery in 75% of their interactions with
public organizations, as compared to 67% for those with secondary school education and 63% for
those with tertiary education. The unemployed encounter bribery the most (in 71% of their
interactions), self- or family employees 68% of the time, the business and non-profit sector 61% of
the time, and the public sector employees report encountering bribery in just over half (52%) of
their interactions, significantly lower than all the other groups (Kenya Urban Bribery Index).
Shag-Jin (1999) found that corruption is a major obstacle to economic development. Corruption
hinders economic development by reducing domestic investment, discouraging foreign direct
investment, encouraging overspending in government, and distorting the composition of
government spending (away from education, health, and infrastructure maintenance toward less
efficient but more manipulable public projects). Economic consequences of corruption include low
labour productivity, reduced investment, and consequently lower growth. Corruption results in
reduced domestic investment, reduced foreign direct investment, overblown government
expenditure, distorted composition of government expenditure away from education, health, and
the maintenance of infrastructure, toward less efficient but more manipulatable public projects.
Stephan & Dearden (2000) examined that corruption negatively impacts upon investment climate.
It has been found in various cases across the regions that the corruption significantly slows down
foreign direct investment. In addition, corruption also impacts on the flow of foreign aid. If
corruption reduces domestic investment and reduces foreign investment, one would think that it
would also reduce the economic growth rate. Corruption also negatively impacts governments
public finance.
Adams (2003) examined the data of 50 developing countries to analyze the impact of economic
growth on poverty and inequality. He found that growth is a dominant factor to reduce poverty
in the developing world. He also observed that the elasticity of poverty with respect to growth
is -2.59 which means , on average, a 1 percentage increase in economic growth (measured by
survey mean income) will produce 2.59 percent reduction in the proportion of people living
in poverty ($1 a person a day).
Pasha et.al (2003) also worked on Asian countries and found that there is a long run relationship
between growth and poverty. They further analyzed the impact of different variables on the
intensity of this relationship. The results indicated that there exists a strong positive relationship
between growth and poverty, but this relationship was highly variable across countries and time
periods. In order to identify the nature and intensity economic growth and poverty, they computed
the growth elasticity of poverty, which indicated that the growth poverty elasticity is 0.9 for the
region as a whole. According to their research the gain from the growth will be limited unless we
achieve the pro poor growth.
Soomro examined that high and rising corruption increases income inequality and poverty. As
evidence suggests corruption worsens the relative, and sometimes absolute poverty: corruption
lowers economic growth, biases the tax system to favour the rich and well-connected, reduces the
effectiveness of social programs, biases government policies towards favouring inequality in asset
ownership, lowers social spending, reduces access to education by the poor, and increases the risk
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of investment by the poor. It certainly results in increase in poverty inequality and poverty which
leads to corruption. Poor cannot have equal access to the public goods as well as labour market.
Hollister and Palmer assessed the effects of inflation on poor by taking into account three aspects.
i.e. expenditure, income and wealth aspects. When he examined the poor price index relative to
CPI, they found that expenditure effects of price rise hurt the poor less than the non poor segment
of the society.
Powers examined the relationship among poverty, inflation and unemployment. The findings
suggested that effects of unemployment were robust for poverty but the effects of inflation are
more serious on poverty. He concluded that inflation is associated with uncertainity and
consumption poverty. Hence inflation can decrease permanent income leading to decrease in
consumption.
4. Objective of the Study
Corruption is a major problem all over the world. Corruption hinders economic development by
reducing domestic investment, discouraging foreign direct investment and encouraging
overspending in government. Due to corruption deserving people cannot obtain proper medical
care, employment, education etc. so the main objective of this study is to see the role of corruption
in poverty. Many other variables have also been included to make a comprehensive analysis on the
determinants of poverty in case of Pakistan. Therefore the hypothesis of this study is:
4.1. Hypothesis
H1: Corruption is the major factor contributing to poverty in Pakistan.
5. Methodology
This study presents the analysis of Corruption and Poverty in Pakistan. Its a time series analysis
including the time period 1995-2009. The variables used in this analysis are: Poverty, Corruption,
Government expenditure and GDP and inflation.
5.1. Variables and Sources of Variables
5.1.1.Poverty
The dependent variable used in this study is poverty. The measurement of the poverty is based on
Head count index and Gini co-efficient. The data on poverty used in this study has been taken from
HIES and Economic surveys.
5.1.2.Corruption
One of the independent variable used in this study is corruption. The measurement of corruption is
based upon Target-group perception. The data in corruption used in this study is constructed by
Transparency International in terms of the degree to which corruption is perceived to exist among
public officials and politicians. The main advantage of this index is that it fulfills the requirement
of definition used in this study for corruption (the misuse of public office for private gain). The
index score range is in 0 (totally corrupt) and 10 (clean).
5.1.3. Government expenditure
Another independent variable used in this study is government expenditure. Data on this variable
has been taken from World Development Indicators (WDI) CD.It is defined as spending by the
government of any sort, at any level, ie. central government, local government, defence, etc.
5.1.4. GDP
GDP is one of the most important determinants for economic development. It is defined as an
approximation of the value of goods produced in the country during a year. Data on this variable
has been taken from World Development Indicators (WDI) CD.
5.1.5. Inflation.
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Consumer Price Index has been used for measuring inflation. Data has been taken from World
Development Indicators(WDI).
5.2. Model
The model to be used in this study is as follows:
Poverty = f (COR, GEXP, GDP, INF)
The Regression equation becomes:
lnY= 0 + 1ln X1 + 2 lnX2 + 3lnX3 + 4lnX4
Where,
Y= Poverty
X1=Corruption (COR)
X2= Government expenditure (GEXP)
X3= GDP (GDP)
X4= Inflation(INF)
The estimated Regression equation becomes:
Y=37.80 + 1.2255X1 1.308278 X2 + 0.00047X3 + 0.0698X4
There are very few studies which examined or established a direct relationship between corruption
and poverty. Corruption, by itself, does not produce poverty. Rather, corruption has direct
consequences on economic and governance factors, intermediaries that in turn produced poverty.
Relationship examined by researchers is an indirect one. Increased corruption reduces economic
investment, distorts markets, hinders competition, and increases income inequalities. By
undermining these key economic factors, poverty is exacerbated. Nation with higher corruption
experiences less economic growth. Corruption affects through impacting investment,
entrepreneurship, distorting market, undermining productivity, income inequality and is associated
with slower growth. If the rate of economic growth increases, the number of people above the
poverty line tends to rise as well.
6. Estimation Results
This study is based on Double-Log model, this model is linear in parameters 0, 1, 2, 3, 4 linear
in the logarithms of the variables Y and X1, X2, X3, X4 and can be estimated by OLS regression.
Because of this linearity, such models are called Log-Linear Model as well. The OLS estimators
obtained will be best linear unbiased estimators of 0, 1, 2, and 3 respectively. Before applying
model stationarity of all variables have been checked by using Augmented Dickey Fuller (ADF)
test. All variables are stationary at level. Estimation results of model have been presented below in
table 1.The variables used in the analysis are: Poverty, Corruption, Government Expenditure, and
GDP.
(Insert table 1 here)
From this model the results are showing the same trend. All variables are having the same sign as
expected. But only corruption, inflation and govt. expenditure variable is significant. Overall
model performance is satisfactory which can be viewed with the help of un weighted statistics of
the model given below in table 2:
From these result, this can see according to the model about 78% of the variation in the dependent
variable is due to the variables included in the analysis. Which means that these variable contribute
about 78% to overall poverty in Pakistan.
It can also be observed that in case of Pakistan corruption is having positive effect on poverty.
There are many reason of it. And one of the most important is the political corruption or instability
in the Pakistan. Government expenditure is having negative effect on poverty. GDP is having
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positive effect on dependent variable. And inflation is showing positive relationship with poverty
which means that if inflation is high then more will be poverty.
Now as we have used double log model which not only tell us about the nature of relationship
among variables but also give us their elasticity estimates. Therefore the regression results show
that the elasticity of poverty with respect to the Government expenditure, GDP, inflation and
corruption. The coefficient of govt. expenditure not only tell us that if the govt. increases its
expenditure on developmental projects then employment opportunities are generated. This will
ultimately help the poor to increase their income. So the coefficient tells us that if government
expenditure goes up by 1 percent, on average, the poverty goes down by about 1.30 percent.
Similarly if there is 1% increase in inflation, it will lead to 0.06% increase in poverty. Estimates
show that corruption is going to affect with high magnitude to poverty as compared to other
variables. And change in govt. expenditure has a tremendous effect on poverty level in case of
Pakistan.
To see whether our model is a best fit, different diagnostic tests have been applied to check it. For
example LM test been applied to check hetroscadasticity. The result are shown below in table 3.
The null hypothesis of this test is there is no auto correlation among variables in model. And it is
rejected when probability approaches to zero and accepted when it deviates from zero. So here we
accept the null hypothesis that there is no serial correlation in model overall.
Moreover Model specification test has been used to check whether this model was correctly
specified or not. For this purpose RESET test was applied. Results are given below in table 4. Its
null hypothesis is that model is correctly specified. And we reject it when probability of F-test
becomes zero. But here we see that it is not zero so it means that we accept null hypothesis and
conclude that our model is appropriately specified.
7. Conclusions
This study tried to find out the relationship of poverty with different macroeconomic variables
specially with corruption. Because Pakistan is facing both of these problems at its maximum level.
Most of the time the relationship between these two variables have proved to be bidirectional. And
in case of Pakistan same phenomenon has been observed. To measure all this we have taken data
of 15 years from 1995-2009. The reason behind the selection of this time period is the non
availability of data on corruption before 1995. We all know that corruption is a curse that destroys
the economy of a country and creates problems for the population. It hurts the confidence of
people and they take less interest in the different economic activities. Therefore corruption is a
major cause of poverty because it discourages wealthy people to invest in the country and domestic
investors do not invest their amount in the country and want to establish their business in other
countries where they feel more secure. Not only this, the foreign investors also do not invest their
amounts in such countries where the corruption is more common.
The results of the model showed that there exists a positive and significant relationship between
corruption and poverty. Other variables that have been included in this study are Government
expenditure, GDP and inflation. These also show their nature of relationship with respect to
poverty as expected except GDP. Government expenditure has negative relationship with the
poverty while GDP has a positive relationship with the poverty in case of Pakistan. This may be
due to the concentration of wealth in few hands of the nation. And due to the fact that trickle down
effect of growth has not been observed in case of Pakistan at any regime of high growth rate. Poor
are getting poorer and richer are getting richer. The top 20 % of population enjoys fruits of
growing economy implies that there is prevailing the phenomenon of Growth without
development. Moreover inflation has also shown a positive relationship with poverty which is
also justifiable. Because these rising prices make their real purchasing power very low and leave
them unable to fulfill their basic needs with in their budget constraints. This forces them to involve
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in corrupt activities to come out of their vulnerable condition. So on the basis of these results we
can reject our null hypothesis and accept that corruption is one of the major contributors to poverty
in Pakistan.
8. Recommendations
Pro poor growth Strategy is the major solution for removing all types of evils from the society.
Rising prices, unemployment , proportional tax system are the major characteristics of our society.
Which lead to corruption as well and all these factors collectively pave way for the emergence of
poverty. So the strategy should be made in such a way that poor class could also go hand in hand
with the other segment of the society in nation building process. Employment opportunities must
be provided on merit. It will restrict corruption and ultimately income of that class will also start
rising. Government must initiate the policies and Programmes for poverty alleviation. Govt.
expenditure on development purposes can be a helping tool for reducing in poverty. Benazir
Income Support Program (BISP) can be seen as an example in this case because it helps needy
people to fulfill their needs as government provides financial support to them. Such programs are
very helpful in elimination of poverty. Public Sector Development Program (PSDP) also plays a
key role in development. There must be a check and balance in the economy so that fruits of high
GDP growth could be trickled down to the lower strata of society or state. System of Direct taxes
must be there, So that everybody has to bound to pay the tax. Due to increasing corruption level in
Pakistan foreign investors do not want to investment in Pakistan and domestic investors also like to
establish their business in other countries. This is also one of the cause of lower income generation
for a country. Government should take necessary action to eradicate the corruption from the
country to make all departments efficient. Corruption reduces the government revenues and its bad
effects are seen on the country development. Educating the people to play an active role in the
fight against corruption at all levels, and creating awareness of ill effects of corruption is very
important because in this way we can mobilize public support in the fight against corruption. Head
of the institutions and other leaders should be selected on the basis of merit and honesty and they
should also be equally held accountable like anyone else. Mass media can be used as an effective
tool to fight against corruption.
Acknowledgment
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References
[1] Amjad, R., & Kemal, A. R.(1997). 'Macro Economic Policies and Their Impact on Poverty
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[3] Dollar, D. and Kraay, A. (2001), Growth is good for poor, world bank policy research paper 2587,(1)
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245-253.
[5] Elizabeth, T. P. Inflation, Unemployment, and Poverty Revisited, Federal Reserve Bank of
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[6] Global Corruption Barometer 2003, Published by Transparency International.
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[10] Krueger, A. O. (1974), The Political Economy of the Rent-Seeking Society. American Economic
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[11] Johnston, M. (1998). Fighting Systemic Corruption: Social Foundations for Institutional Reform,
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[12] Pasha, H. A., & Palanivel, T. (2003). Pro-poor Growth and Policies: The Asian Experience.,
Pakistan Development Review 42 (4), 313348.
[13] Robinson, G., Hollister & John, L. P. (1968). The impact of inflation on the poor., The Institute
for Research on Poverty, University of Wisconsin.
[14] Rose-Ackerman, S. (1978) Corruption: A Study of Political Economy. New York Academic Press.
[15] Shag-Jin, W. (1999). Corruption in Economic Development: Beneficial Grease, Minor Annoyance, or
Major Obstacle?World Bank Policy Research Working Paper No. 2048.
[16] Soomro,M.M. Corruption and Economic Development.
[17] Stephen J., & Dearden, H. (2000). Corruption and Economic Development, Manchester
Metropolitan University,Department of Economics.
[18] Tanzi, V. and Davoodi. H (1997). Corruption, Public Investment, and Growth. IMF Working Paper.
Washington, D.C.: International Monetary Fund. 1997.
[19] World Bank (2005), Economic Growth in the 1990s: Learning from a Decade of Reform, Washington,
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[20] Noi, H., & Nam, V. (1999). Voices of the Poor Programme, World Bank.
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[22] Zaidi, A. (1999). Issues in Pakistan's Economy, Oxford University Press, Karachi.
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Annexure
TABLES:
Table 1:
Dependent Variable: Poverty
Variables
Co-efficients
Intercept
37.80063
(7.160564)
lnCPI
1.225586
(1.999997)
lnGovernment
expenditure
-1.308278
lnGDP
0.000447
(-3.289949)
(1.264257)
lnINF
0.069867
(1.932461)
Table 2: Overall model fitness

R-squared
0.789041
F-statistics
9.350643
Durbin-Watson
1.715701
Table 3: Breusch-Godfrey Serial Correlation LM Test:

F-statistic
0.181140
Prob. F(2,8)
0.8376
Obs*Rsquared
0.649848
Prob. Chi-Square(2)
0.7226
Table 4: Heteroskedasticity Test: ARCH

F-statistic
1.876614
Obs*Rsquared
1.893301
Prob. F(1,12)
Prob. Chi-Square(1)
0.1958
0.1688
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IMPACT OF MACRO-ECONOMIC FACTORS ON STOCK PRICES
Aima khan
MS Scholar, Faculty of Management Sciences, International Islamic University Islamabad
Hira Ahmad
MS Scholar, M.S, Faculty of Management Sciences, International Islamic University Islamabad
Zaheer Abbas
Assistant Professor, Faculty of Management Sciences, International Islamic University Islamabad

Abstract
This research is conducted to investigate the impact of macro-economic variables on stock returns.
Time frame of data is monthly taken from June 2004 to December 2009. Independent variables are
exchange rate, inflation, T-Bill rate, Money supply and Interest rate and dependent variable is
Stock returns. In order to check the stationarity of time-series data Augmented Dickey Fuller test
(Dickey and Fuller, 1981), Phillips-Perron test (Phillips and Perron, 1988) unit root test has been
applied. Co-integration, Vector Error Correction Model and variance decomposition has been
applied to check long and short term relationship between the variables. Whereas Ordinary least
square test has been applied to test the co linearity between the variables. Results indicate that all
variables except money supply have significant impact on stock returns in Pakistan.
Key words: Stock returns, Interest rate, Inflation, T-bill rate, macroeconomic variables, stock
markets.
1.Introduction
Macroeconomic factors are significant in predicting market returns. Thus it can be claimed that
stock returns variability is fundamentally linked to economic variables.
Most of the studies conducted on the relationship between macroeconomic factors are based on
developed countries. A very few researches are done on developing or less developed stock
markets. Emerging markets have become focus of investigation in last decade, because before this
decade, international investment were very low so a very little was known about these markets.
Emerging markets have such characteristics that truly distinguish them from other markets. As
emerging markets go through many phases of emergence so it will be wrong to consider them
statistic. (A. Hooker 2004)
We have conducted our research on impact of macroeconomic factors on stock returns. Among all
macroeconomic factors we studied the impact of factors that include exchange rate, inflation,
treasury bill rate, money supply and interest rate. In this research we have seen that how all these
factors affect stock returns in Pakistan. Macroeconomic factors are the factors that affect the
economy. In other words these factors provide a framework of a countrys economy.
Economic indicators are best defined by the independent variables we have chosen, those are
explained as follows. Exchange rate is the worth of one currency in terms of the other. It can also
be explained as the value of foreign currency in terms of host currency. CPI is a
measure that examines the weighted average of prices of a basket of consumer goods and services,
such as medical facilities, transport and food. T-bills are the debatable debt obligations issued by
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the government and supported by its non-risky characteristic with maturity of one or less than one
year. Money supply is the total amount of money in circulation in a given economy at a given
time. An interest rate is the cost a borrower pays for borrowing money from a lender and the return
a lender receives by lending it to the borrower. Interest rates are typically calculated on an annual
basis, known as the annual percentage rate (APR).
Stock returns are the return of a market as a whole and stock market is not a cause of economic
growth but a reflector. The KSE-100 Index was introduced in November 1999 having base value
of 1,000 points. The Index consists of 100 companies. These companies were selected on the basis
of each sector representation and highest market capitalization, which captures over 80% of the
total market capitalization of the companies listed on the Stock Exchange. Among the 35 sectors,
34 companies are selected excluding Open-End mutual funds. These companies are selected on the
basis of largest capitalization among the sectors and other 66 companies are selected in descending
order on the basis of largest market capitalization. Total return index include dividend, bonus and
rights which are adjusted.
KSE-100 index is actually used to compare stock price performance over a period of time.
Actually KSE-100 index indicate the performance of equity market in Pakistan. Thus KSE-100
index can be considered as an economic indicator which is designed to track economic activity of
the country.
KSE-100 Index =
Sum of Shares Outstanding x Current Price
x 1000
Base Period Value
Or
Market Capitalization
x 1000
Base Divisor
[www.kse.com.pk/information/doc/BrochureKSE100_Idx.pdf]
As we know that the economy of Pakistan has gone through a great extent of volatility so there is a
need to examine that how this large volatility in economy has affected the stock market returns.
We have collected monthly data from June 2004 to December 2009. We have analyzed the data by
using simple linear regression technique. From our research we have concluded that exchange rate
and interest rate have significant and negative relationship whereas, inflation and T-bill rate have
significant and positive impact on stock returns. However, money supply showed an insignificant
and positive relationship. After considering all the factors and analyzing our results we have
concluded that macroeconomic factors have a very significant impact on economy.
2. LITERATURE REVIEW
In previous literature, much work has been done on impact of macroeconomic variables stock
returns. For example, Flannery and Protopapadakis (2001) surveyed the impact of macroeconomic
variables on stock market. They studied stock returns as dependent variable and trade balance,
spending on constructions, inflation, employment and unemployment, new home, housing starts,
consumer credit, industrial production, money supply, personal consumption and income, producer
price index, Real GNP and GDP and Retail sales as independent variables. According to them,
macroeconomic variables excellently measure market risk, because major changes influence
position and cash flows of organizations and may leave an impact on the interest rate. In this study
GARCH model is extended and fixed co-efficient model have been used to find the impact of the
macro variables on returns of stock. Research is conducted on the time frame of 1980 to 1996.
Stock returns are calculated on the daily basis and the opening and closing value of are taken and
their mean and standard deviation are calculated to find daily value. Identifying macro-economic
determinants that affect accumulated returns on equity as explained by the authors has various
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benefits. First, it may imply blocking opportunities for investors, so they can secure risk. Second,
if investors are risk averse to fluctuations in these variables, these variables may constitute priced
factors.
The same relation has been studied by Maysami, Howe and Hamzah (2004).Differently from
literature the authors have used composite indices instead of only stock market. They have taken
different indices like stock market .property, finance and hotel index. They have taken the indices
of Singapore. Macroeconomic variables include interest rate, price levels, industrial production,
exchange rate and money supply. The impacts of macro economic variables on stock returns have
been examined by applying dividend discount model. The authors have measured the co
integration of composite indices through Johansens (1990) VECM. Significant relationship
between stock market and property catalogue and an insignificant relationship among hotel and
finance catalogue was found in Singapore. Authors have found a negative relationship among
interest rate inflation and CPI.
Four major stock markets Brazil, Russia, India and China stock markets have been investigated by
Gay Jr (2008). The factors effecting stock markets surveyed by authors are oil prices and exchange
rates. The author finds no alliance among macroeconomic indicators and stock returns of BRIC.
To determine the result he used Box-Jenkins Autoregressive Integrated Moving Average
(ARIMA).
Wongbanpo and Sharma (Aug. 2001) used a hypothesized model to study the relationship of stock
returns and macroeconomic variables. Hypothesis of these model have been checked through
Granger, causality, unit root PP and ADF tests. Variables include Gross national product, money
supply, interest rate, CPI, and exchange rate. These variables have been taken from securities
markets, goods market, and money market. The Asian economies which have been studied include
five countries: Singapore, Indonesia, Thailand, Malaysia and Philippines. Data for chosen factors
has been attained from 1985 to 1996 from stock exchanges of these countries. Results of these tests
reveal alliance between market returns and these indicators in long and short run. These indicators
influence and are influenced by market. Moreover, GNP and CPI have positive relation with stock
returns. The relationship of interest rate to stock returns varies according to country. In the same
way, money supply yields different effects according to economy.
Li (2002) conducted a research on macroeconomic determinants and the Correlation between
Stock and Bond Returns among G-7countries.Variables are inflation, interest rate, industrial
production and GDP. Monthly data of indices has been taken from 1958 to 2001.whereas daily
data ranges form 1980 to 2001. Affine model measures the co movement of indices.
Macroeconomic variables showed an impact on major trends instead of monthly trends.
Specifically the expected inflation has a significant impact on the co integration of indices whereas
unexpected inflation and interest rate have comparatively less significant impact on this co
movement. Also that forecasting of relation among indices helps investors in taking decisions for
efficient allocation of assets.
Gjereand and Saettem (1998) examined whether relationship of major economic variables and
market returns in advanced economies stands true for a narrow and exposed economy like Norway
using vector auto regression. Norwegian economy is rich in natural resources and therefore is open
to foreign effects. Domestic variables include Inflation, stock returns and interest rate. Real
activity variables include industrial production, and consumption. Where as, international
indicators include OECD industrial production, oil prices and FOREX. Moreover, Interest rate was
found to have the most significant effect. Oil prices were also having impact due to Norway's
natural resources. Inflation was found having less impact. Real activity was not indicated as a
significant determinant. Some indicators were in contrast with European economies' results. A
theory about developed economies stock returns affectedness by macroeconomic variables was
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also found true for small emerging economies.
Brahmasrene and Jinanvakul (2007) used Unit root, Granger causality and integration tests to
survey the impact of macroeconomic variables on stock returns. The data on Industrial production,
money provision, FOREX, CPI and interest rates have been taken from Jan.1992 to Dec.2003 has
been used. The authors have tested data after liberalization and after crisis. The authors have found
that in after liberalization period industrial production was the most significant variable having
negative relationship with stock returns. Moreover, oil price was also significant variable after
liberalization. In after crisis period, results indicate that causality exist between stock returns,
money provision, nominal exchange rate and discount rate in unidirection. Money supply affected
stock returns after in after crisis period. But in both periods co integration was found between
market returns and other major economic indicators.
Bilson, Brailsford and Hooper examined emerging markets by using Principal component analysis
and multifactor models which include integration and correlation. The paper addresses the question
whether emerging stock markets are influenced more by their own macroeconomic variables than
world market returns and whether these variables explain the difference in returns in emerging
markets, which would imply that emerging markets are different from developed economies. The
data for 20 emerging economies has been taken. These include Latin American economies:
Argentina, Venezuela, Colombia, Brazil, and Mexico. Asian economies include Pakistan, India,
Indonesia, Philippines, Thailand, South Korea and Taiwan. European economies are: Greece,
Portugal, and Turkey. Middle East economy is Jordan and African are Nigeria and Zimbabwe.
Monthly data from Jan. 1985 to Dec. 1997 has been tested for four variables Money supply, real
activity, goods prices and exchange rates. The study indicates that these emerging economies are
not affected by world market returns but their returns yield impact on world market returns. As far
as local macroeconomic variables are concerned, their explanatory power for returns is also not
high although they explain to some extent. Exchange rate was found to be the most significant
factor. Money supply was found relatively more significant than goods prices or real activity.
Commonality in impacting factors is found most on regional level.
NORLI ALI (2001) investigated the impact of variation in macroeconomic determinants on
performance of the stock prices of Malaysian economy using Arbitrage Pricing Theory and Error
Correction Model. The sample data is divided into pre and post crisis period. Six macroeconomic
variables inflation, interest rate, exchange rate, money supply, industrial production and market
return. Data has been taken on monthly basis from Jan 1987 to Dec1999 and Jan 1987 to Dec
1996.Market performance showed a significant impact. Whereas in pre-crisis period a significant
impact of interest rate, market return and money supply has been found on portfolio returns. High
impact of macroeconomic determinants including exchange rate, interest rate and money supply
has been found on Malaysian stock market.
Abugri (2006) surveyed the impact of local macroeconomic variables on stock returns and global
variables' impact on returns of emerging markets using Vector Auto Regression on six variables
.Domestic variables include Money supply, exchange rates, industrial production and interest rates.
Global variables are MSCI world index and US treasury bills for three months. Countries are
Chile, Argentina, Mexico and Brazil. The results of the study indicate that impact of local
macroeconomic variables on returns of stocks varies significantly according to country. So
investors should first know about the country they are investing. The impact of global
macroeconomic factors was found very significant.
Chancharat, Valadkhani, Harvie (2007)examined the impact of international linkages and domestic
macroeconomic variables on the Thai stock market returns before and after 1997 using GARCH
model. Their dependent variable is Thai stock market returns and their independent variables are
international stock markets and macroeconomic variables. Singapore is the only country who has
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positive effect on Thai market. Indonesia and Malaysia are the two countries who affect the Thai
market before 1997 and Philippines and Korea after 1997. In macroeconomic variables only oil
price changes affect the Thai stock returns. Overall international linkages do have an impact on
Thai stock market returns but macroeconomic variables have no impact on the stock market return.
Basher and Sadorsky (2006) examined the impact of change in oil prices on stock returns of
emerging economies. The authors have used Multifactor model, which is related to Capital Asset
Pricing Model (CAPM) and Equity Pricing Model. The authors have also taken into account other
risks like market risks, skewness, total risks etc. The 21 emerging markets selected by the author
include Indonesia, Mexico, Philippines , India, Chile, Brazil, Israel, Venezuela, Jordan, South
Africa, Malaysia, Peru ,Argentina, Pakistan, Turkey , Colombia, Poland , Korea , Srilanka, Taiwan
, and Thailand. Developed economies include Australia, Belgium, Hong Kong, Germany, France,
Italy, Netherland, Norway, UK, Canada, Denmark, Spain, Switzerland and USA. The data for
stock prices has been taken from 1992 to 2005 on daily basis in US dollar terms. According to
results the risk of oil prices has a strong impact on stock returns but the significance of the results
depends on frequency of data. However, the conditional risk shows asymmetrical results.
Odusami studied the impact of oil shocks on stock returns of USA using GARCH model. He took
stock market returns as the dependent variable and unexpected oil price shocks as independent
variable. The author finds two things in this article, 1- The unexpected oil price shocks have
negative effect on the stock market returns of USA. It means that there is a significant non-linear
relationship between crude oil price and US stock market returns. 2- The author also tries to find
out that if there is any link of the information which is given at the end of the OPEC ministers
meeting on the US stock market return and he finds that there is no significant impact of
Organization of Petroleum Exporting Countries (OPEC) ministers meetings information on US
stock market return. He applied this model to the time series of the daily excess returns on the
value-weighted NYSE/AMEX/NASDAQ index and daily return on one month West Texas
Intermediate (WTI).
Chang (2009) studied the impact of macroeconomic factors on US stock returns through Markov
regime Switching Model. For this purpose author has considered three variables: interest rate,
default premium and dividend yield. The author has used in-sample and out-of-sample
performances. Impact has been examined by using GJR-GARCH models. Dynamics of stock
returns have been divided in to three dimensions including conditional volatility, conditional mean
and transition probabilities. The author has also examined the influence of theses regime models
on performance of asset allocation. Among all three macroeconomic determinants default premium
and dividend yield reflects economic conditions of a country and hence show positive relation to
return, whereas interest rate reflects tight monetary policies and hence is negatively related to stock
returns. Results have shown an impact of macroeconomic determinants on stock returns and
volatility but this degree of impact changes with variation in circumstances of stock market. This
paper also confirmed that this model is more predictive for out-of-sample data than other models.
Ayub Mehar (2000) studied the consequences on stock market due to macro economic
determinants. This study is conducted in Pakistan to see the impact of macroeconomic factors on
stock returns. According to him when considering the long term price changes it is due to the
major policies of country rather than just news or rumors. Funds investment has direct correlation
with GDP, higher the GDP higher will be the market capitalization.
Samarakoon in his study investigated the relationship of inflation and stock market return in Sri
Lanka. Fisher hypothesis has been used to find out the inflation using different data. Developing
countries has a negative relationship on stock returns.
Nelson found negative relationship among inflation and stock return in his studies conducted on
the data of 1953-1974 in US. He used expected and unexpected inflation as a measure. Jaffe and
Mandelker & Fama and Schwert results were similar.
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Gulketin conducted this research for 18 countries and got the same result. Data in this study is
collected from All share index (ASI) and Sensitive Price index (SPI) which included 15 blue chip
stocks. The study is carried out for the period Jan 1985- August 1996.Inflation is measured by
CCPI (Columbo Consumer Price Index).ARIMA model have been devised for estimation of three
types of inflation. Among the types of expected inflation contemporaneous inflation showed no
strong relationship among inflation and stock returns. Lagged inflation do not have significant
impact on returns in long-term but they sometimes do have effect. Unexpected inflation was found
to be negatively related with stock returns.
Lucey and Nijadmalayeri (2000) used a GRAPH model of returns of stock market used by
Flannery and his companion Protopapadakis. They studied influences of changes in US economys
macro indicators on developed countries economies such as United Kingdom, Canada, Germany,
Japan, France, Singapore, Hong Kong and Italy. Three variables arnYield on Government bond of
one year maturity, difference between one year and ten year maturities of Government bonds, and
change in percentage terms in exchange rate with respect to Dollars. Moreover, dummy variables
for calendar time have also been checked. The results indicate that because of strong position of
US economy, its changes impact stock returns of developed economies due to global integration.
But intensity of these returns varies according to economies and market sizes.
Gunasinghe(2005)examined the behavior of stock markets in South Asia to find relationships
among the govt. related policies and stock market returns. Dependant variable is stock market
behavior in terms of integration and volatility transmission while Independent variable:
liberalization policies early 1990s Harmonization of government policies, Revolution in
information technology, Establishment of growth oriented institutions. Model used in this study
are correlation analysis, a multivaried co-integration test and generalized impulse response(GIR).
Data is collected from Monthly stock indices of Bangladesh India and Pakistan, the study is
conducted in the time period from 1992 2002. Results of this study showed a marginal growth of
integration for india-srilanka and india-pak combinations for the period of 1197-2002 compared to
1992-1996, there is no efficient relation between the 3 national stock prices and the variety of
channels, Effective functions of these channels have been adversely affected by the presence of
capital controls in each country. These markets are not totally independent of each other, Shocks
originating from Indian stock market may marginally transmitted to other markets.
Marie- Claude Beaulieu, Jean-Claude Cosset, Naceur Essaddam. examined the relation of
political uncertainty and the common stock returns of Quebec firms in 1995. Their dependent
variable is common stock market returns and their independent variable is political uncertainty.
The result of the article is that there is a relation between political uncertainty and the common
stock returns. And the referendum has the positive effect on the common stock returns of the
Quebec firms. They took data for stock returns from DataStream. The data used to measure growth
options is taken from Stock Guide. They estimate abnormal return in multivariate linear regression
(MLR). To assess the robustness of their result to the changeability of the portfolio returns they use
GARCH model.
Liow, Ibrahim and Huang studied Macroeconomic risk influences on the property stock market
using three step estimation strategy. Variables are risk premia in property stocks and major
macroeconomic factors. Four major markets, namely, Singapore, Hong Kong, Japan and the UK
have been studied. Macroeconomic risk is measured by the conditional volatility of
macroeconomic variables. Results shows that the expected risk premia and the conditional
volatilities of the risk premia on property stocks are time-varying and dynamically linked to the
conditional volatilities of the macroeconomic risk factors.
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3.Data and methodology

In our study we are considering the impact of macroeconomic factors on stock returns. There are
many macroeconomic factors but we have confined our studies to FOREX, inflation 3 monthT-bill
rate,money supply and interest rate and these are our independent variables. The dependant
variable in our study is stock returns that can be defined as the return of market in our case it is
KSE-100 Index. We have taken data of market return from kse-100 index from June 2004December 2009. Data is taken on monthly basis. This period was selected because it was the
maximum data available on IMF site. The data of KSE-100 index was taken from business
recorder and for macroeconomic factors from International Financial Statistics.
KSE-100 = c + 1 (ER) + 2 (INF) + 3 (T-bill) + 4 (MS) + 5 (INT) + t.(1)
In equation (1) we have taken log of all independent variables except T-bill rate.ER represents Log
of exchange rate INF represents Log of inflation, T-bill represents 3-month Treasury bill rate, MS
represents Log of money supply and INT represents Log of interest rate. Where c is the constant,
where the regression line intercepts the y-axis, representing the amount the dependent y i.e. KSE
returns will be when all the independent variables are 0.
3.1.Stationarity:
In this paper, we are investigating the co-integration of macroeconomic variables and stock return.
For this reason, we need to check whether variables are stationary or non-.stationary. Stationarity
of variables means that there is no trend i.e; no autocorrelation exist among the variables.
If variables are non-stationary, it means there is trend i.e. autocorrelation exist. In order to teat
stationarity of variables Augmented Dickey Fuller test (Dickey and Fuller, 1981), Phillips-Perron
test (Phillips and Perron, 1988) unit root test can be applied.
3.2. Co-integration test and VECM:
Co-integration test explains long-term relationship between dependant and independent variables.
If long-run equilibrium relationship is found ,it means, variables are co-integrated, johansen and
juselius method follow most of complications related to Engle and Granger method such as if there
exist more than two variables than there can be long-term relationship in this approach we have to
follow the integration pattern and finally it is based on two step approach. This method provides
foundation to cointegration test with reference to Vector Auto Regression (VAR) model. Johansen
method was used.
(2)
In equation (2) xt represents (n 1) vector of non stationary I(1)variables, A0 represents (n 1)
vector of constants, k represents the number of lags, Aj represents (n n) matrix of coefficients and
t is supposed to be (n 1) vector of Gaussian error terms. The above vector autoregressive
method was altered into a vector error correction model (VECM) as to use it as Johansen and
Juselius test. Where represents the difference operator and I represents an (n n) identity matrix.
The Trace and the Maximum Eigen Value test was applied in order to check the quantity of
characteristics roots that were different from unity insignificantly.
3.3. Variance Decomposition:

Vector Auto Regression (VAR) was applied in order to check short-term connection between
macroeconomics determinants and stock returns. To explain the applications of macroeconomic
factors and stock returns, variance decomposition was applied. Where s represent stochastic error
terms, known as innovations or shock as in VAR.
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3.4. Ordinary least square method (OLS):

OLS was used to find the unknown parameters in a linear regression. The objective of OLS is to
closely adjust a function along the data. It performs so by minimizing the sum of squared errors
from the data. Ordinary Least Square method can be explained as follow:
..(3)
In equation (3) represents a (p1) vector of unknown parameters; is are errors which account
for the discrepancy between the actually observed responses yi and the predicted outcomes xi;
and denotes matrix transfer, so that x is the dot product between the vectors x and . This model
can also be written in matrix form as equation(4):
(4)
Where y and represents (n1) vectors, and X is an np matrix of regressors, which is also
sometimes known as the design matrix.
3.5. MODEL:
In order to examine long-term relation between macroeconomic indicators and Karachi Stock Price
Index following model has been used.
KSE 100 = c + 1 (ER) + 2 (INF) + 3 (T-bill) + 4 (MS) + 5 (INT) + t(5)
4. RESULTS
4.1. Unit root test:
It is necessary to test the stationarity of variables before testing the relationship between them. In
this study two tests have been used to check the stationarity of all dependant and independent
variables. The first one is Augmented Dickey Fuller (ADF) test and the other is Phillips-Perron
(PP) test to investigate unit root test for tie series. According to the results of these tests all the
given variables were non-stationary at level and became stationary at first difference. Thus both
tests revealed that all variables were integrated at first difference as shown in the table 4.1 in
appendix.
Results show that all the variables became stationary at the same level which is at first difference,
variables are I(1) series. As all variables are stationary at the same level, we expect cointegration
might exist. we check them for integration. Johanson co integration test has been used.
4.2. Johanson Co-integration test:
Co integration has been applied to test the long-run equilibrium relationship of the variables.
Results of the coinegration show two equations are found significant.
Results indicate that only KSE and Exchange rates likelihood ratio exceeds the critical value at
5% level. It means that co integration exists. However, likelihood ratio of inflation, T-bill rate, M2
and interest rate does not exceed the critical value. Therefore, there are two cointegrating equations
at 5% level.
4.3. VECM:
Further, Vector error correction model has been used to test further long-run relationship among
variables. In this test, we have checked to test the predictive power of variables. On the basis of 2
cointegrating equations, this test has been applied. Results mean that if some disturbance occurs in
long-run equilibrium relationship, it takes this much time to be back to equilibrium.
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Results of the first equation show that it takes one and half months to be back to equilibrium after
some fluctuations. The other one also shows the same results. It means on average, it takes one and
a half months to be back to equilibrium after fluctuations.
4.4. Variance decomposition:

Variance decomposition has been applied to see how much variation in one variable is caused by
the other variable. Results reveal that variation in KSE is described most by inflation.Then interest
rate effects and then M2 causes variation in KSE.In the end we apply linear regression
model.Results are given in the table below.
4.5. Linear regression:
According to the results exchange rate has significant but negative impact on stock returns. This is
because when price of local currency falls relative to dollar, foreign investors withdraw funds as a
result stock returns decline. This finding supports the traditional approach on relation between
currency and capital markets. The effect of change in exchange rate on the economy will be highly
dependent on the level of international trade and the trade balance. Inflation is found to have
significant and positive effect on stock returns although theory says that increases in the price level
reduce the real level of the stock price index. This is because increase in inflation rate leads to
tightening of economic policies which in turn rises the discount rate by increasing the nominal risk
free rate resulting in decline in stock returns. When T-bill increases, investors prefer to invest in Tbills instead of stock markets. As a result, demand for stock decreases, resultantly stock market
returns go down. Interest rate is having significant and negative impact on stock returns. This is
because when interest rate rises, risk and required rate of return of investments also increase
resulting profits of firms to decrease and in the same way stock value also fall.
5.CONCLUSION
This study examines the impact of macroeconomic variables on stock returns. The macroeconomic
variables include exchange rate, inflation, t-bill rate, money supply and interest rate. The results
showed that all the variables were non-stationary at level but stationary at first difference. There
were two long-run relationships between macroeconomic factors and KSE returns. OLS has shown
that exchange rate and interest rate have negative while inflation and t-bill have positive impact on
returns. Whereas only supply has a positive but insignificant impact on stock returns. According to
VECM, these variables take almost one and a half month to get back to equilibrium after short
term fluctuations. Whereas, impact of inflation is more on KSE returns than any other
macroeconomic factor.
According to the results, the paper proposed that increasing exchange rate and interest rate
influence the returns in a negative manner. Thus controlling these rates, stock returns can be
enhanced. Inflation and T-bill are showing positive relationship. It might be because of varying
circumstances in Pakistan economy. With the change in Government, monetary policies keep on
changing due to which there is no impact of money supply on stock returns.
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References
Robert D. Gay, Jr., Nova.(2008) Effect Of Macroeconomic Variables On Stock Market Returns
For Four Emerging Economies: Brazil, Russia, India, And China
Mark J. Flannery and Aris A. Protopapadakis(2001) Macroeconomic Factors Do Influence
Aggregate Stock Returns by
Abeyratna Gunasekarage, Anirut Pisedtasalasai and David M.Power.Macroeconomic Influence on
the Stock Market Evidence from an Emerging Market in South Asia by
Kim Hiang Liow, Muhammad Faishal Ibrahim and Qiong Huang .Macroeconomic risk influences
on the property stock market by Department of Real Estate, National University of
Singapore, Singapore.
Lalith P. Samarakoon Stock market returns and inflation
Babatunde Olatunji Odusami Behavior of stock markets in south Asian econometric investigation
Crude oil shocks and Stock Market Returns
Marie- Claude Beaulieu, Jean-Claude Cosset, Naceur Essaddam.Political Uncertainty and
Stock Market Returns: Evidence from the 1995 Quebec Referendum
S. Chancharat, A. Valadkhani, C. HarvieThe Influence of International Stock Market and
Macroeconomic Variables on the Thai Stock Market.
Ayub Mehar Stock market consequences of macro economic fundamentals
Maysami, Howe and Hamzah (2004) The relationship between macroeconomic variables and stock
market indices.
Wongbanpo and Sharma (Aug. 2001)stock market and macroeconomic fundamental interactions:
Asian 5 countries
Gjereand and Saettem (1998)Causal relations among stock returns and macroeconomic variables in
a small open economy
Brahmasrene and Jinanvakul (2007)Co integration and causality between stock index and
macroeconomic variables in an emerging market
Abugri(2006)Empirical relationship between macroeconomic volatility and stock returns :
Evidence from Latin American Markets.
Chancharat, Valadkhani, Harvie (2007)The Influence of International Stock Market and
Macroeconomic Variables on the Thai Stock Market.
Lucey and Nijadmalayeri (2000) impact of US macroeconomic surprises on stock market returns
in developed economies
www.finance.yahoo.com
www.zhvsec.com
www.brecorder.com
www.kse.com.pk
www.imf.org
www.wikipedia.com
www.emeraldinsight.com
www.j-store.com
www.ssrn.com
www.springerjournal.com
www.google.com, www.google.com/finance, www.investopedia.com, www.sciencedirect.com
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Appendix:
Augmented DickeyFuller test statistic
Phillips-Perron Test
Statistics
Null Hypothesis:
Variable is Nonstationary
Null Hypothesis:
Variable is Nonstationary
VARIABLES
LEVEL
1st
DIFFERENCE
LEVEL
1st difference
KSE 100
-2.110378
-4.633414
-2.001686
-6.430827
ER
-0.231114
-2.992609
0.636810
-5.135226
INF
0.578931
-2.742614
0.915960
-5.576555
T-bill
-2.409600
-4.045989
-2.388378
-7.001979
MS
-1.321070
-4.842596
-0.854638
-9.750497
INT
-1.213826
-3.992983
-1.118426
-8.283548
Test critical values (MacKinnon, 1996)

1% level
-3.5345
-3.5312
1% first difference
-3.5362
-3.5328
Suggest that coefficient is significant at probability level of 1% at first difference.

Unit root test: Table.4.1
Included observations: 64
Test assumption: Linear deterministic trend in the data
Series: KSE ER INF TBILL M2 INT
Lags interval: 1 to 2
Likelihood
5 Percent
1 Percent
Hypothesized
Ratio
Critical Value Critical Value No. of CE(s)
108.6866
68.94639
43.04700
22.95829
9.308759
1.872978
94.15
68.52
47.21
29.68
15.41
3.76
103.18
76.07
54.46
35.65
20.04
6.65
None **
At most 1 *
At most 2
At most 3
At most 4
At most 5
*(**) represents rejection of the hypothesis at 5%(1%) significance level.

Likelihood test showed 2 cointegrating equations at 5% significance level.
Johanson co integration test: Table 4.2
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Error Correction:
D(KSE)
D(ER)
D(INF)
D(TBILL)
D(M2)
D(INT)
Co-iEq1
-0.638532
(0.16822)
(-3.79589)
-0.013047
(0.02788)
(-0.46802)
-0.016799
(0.02143)
(-0.78385)
0.002433
(0.00928)
(0.26206)
-0.023447
(0.03919)
(-0.59823)
-0.133353
(0.08759)
(-1.52244)
Co-iEq2
-0.650934
(0.64662)
(-1.00667)
-0.269531
(0.10716)
(-2.51529)
-0.178065
(0.08238)
(-2.16149)
0.116457
(0.03569)
(3.26311)
-0.032894
(0.15066)
(-0.21833)
-0.218328
(0.33670)
(-0.64844)
Vector error correction: Table 4.3

VAR of KSE:
1
0.063873
100.0000
0.000000
0.000000
0.000000
0.000000
0.000000
0.099839
82.41360
5.371807
1.374826
0.233494
4.244912
6.361363
0.124300
70.82455
3.610544
4.455617
0.215390
9.272056
11.62184
0.141052
61.81053
7.255997
6.450202
0.380406
10.61124
13.49162
0.155617
54.97805
12.03680
8.113036
0.748434
10.72842
13.39525
0.169148
50.55516
14.40112
10.09699
1.142224
10.78098
13.02351
0.182199
47.70011
14.86216
12.27346
1.413478
10.93495
12.81585
0.194313
45.83147
14.53889
14.22785
1.554419
11.05631
12.79107
0.204848
44.65686
14.00989
15.76349
1.611346
11.08908
12.86934
10
0.213578
43.96981
13.46414
16.90207
1.620841
11.05617
12.98697
Variance Decomposition:
Table 4.4
KSE-100
ER
INF
T-BILL
MS
INT
-4.274774
3.279924
8.548309
0.469463
-1.817297
S.E
0.640082
0.937997
1.482944
0.456732
0.280088
t value
-6.678482
3.496730
5.764419
1.027874
-6.488308
Linear regression model:

Table 4.5
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FRUITS OF STATES FINANCIAL LIBERALIZATION IN JAPAN AND KOREA,

LESSONS FOR PAKISTAN.
Dr. Nasir Karim
Associate Professor, CECOS University, Peshawar
Syed Muhammad Taqi
Director IMIS , CECOS University Peshawar
Dr. Ayaz Khan
Associate Professor, Commerece College Peshawar
Abstract
At the time of the industrial take off of the country in the years 1945-55, Government of Japan
took initiative by directly controlling credit and its allocation to various sectors. As a result during
the next two decades high macroeconomic growth and industrial development was recorded.
Japanese financial system during 1945-1973 was characterized by (a) excessive role of indirect
finance (b) reliance of large city banks on the bank of Japan (c) high leverage of industrial
companies and (d) tight control on interest rates which government ensured to sustain at low
levels. Close relation was maintained between banks and industrial firms. The natural offshoot of
decisive role of government regulations in the financial sector emerged in the shape of industrial
elevation. The same pattern was adopted by the Koreans and they seized the opportunity of making
industrial growth by leaps and bounds through financial liberalization for import and export sectors
of the economy.
Key words: Financial Repression, Financial Liberalization, Interest Ceiling, Financial Savings,
Investment, Credit policy , Industrial Growth,
Introduction
Financial liberalization means deregulating domestic financial market and liberalization of capital
account. McKinnon-Shaw, in his hypothesis, presented the argument that financial repression
distorting incentives of savers and investors in an economy is the outcome of suppressive
regulations in the financial markets. The kind of regulations such as interest rate ceiling of
deposits, minimum/maximum lending rates and quantity restrictions on lending cause real interest
rates to be negative and fluctuating particularly
in the highly inflation ridden economy.
Regulation does lead to negative impact on the amount of domestic savings and thus capital
formation, which retards economic growth and development. Therefore, McKinnon-Shaw
hypothesis presented the prescription of (McKinnon, 1989; Shaw, 1973) financial liberalization
with special emphasis laid on deregulation of interest rate restrictions.
However, there a still few ardent advocates of financial control policy and they express
their lamentation on the demise of financial repression. The fate of financial repression was sealed
in most of the countries in the after math of growing cognizance of costly distortions caused by it,
along with its negative ramifications emerging in the shape of below market interest ceilings.
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Financial repression has got a chequered history where governments have resorted to long
term intervention in the financial sector to protect financial stability and to safeguard the public
from unexpected losses. But on the parallel side, its manifestations were concentration of wealth
and monopoly power, to generate fiscal resources and to benefit the favored groups through
channeling through the financial system instead of transparent of public finances.
In wake of the exemplary results achieved by some fast developing countries of the would
owing to the support of their governments in liberalizing their small enterprises and national
industries, Pakistan needs to start following their pattern for the rapid growth and strength of small
enterprises, national industries and export sectors of the economy. The two fast developing
countries of the East Asia i.e. Japan and South Korea are the two examples where financial
interests of small enterprises and national industries are fully safeguarded by the state.
Essentially it is the market forces which control the loaning and investment in a country. The type
of financial liberation that has been introduced in Pakistan under the financial sector adjustment
loan programme is dependent on securities-based financial system where deposit banks are
allowing short term funding and conventional commercial banking services are provided. In
Pakistan securities markets are narrow, debt-equity ratio of the corporate sector is high and at the
same time many financial institutions are in favor of adopting universal banking approach. For
rapid development of real sector close relationship between banks and industrial firms is a must.
The arrangement that financial development encourages economic growth to facilitates the
movement of funds to the best possible user (Golsmith 1960, Page 400) hold true when the
financial regime is strictly regulated by the government and at the same time networking between
the banks and firms is closely maintained. Development can be accelerated if the policies of the
state are directed to make the finances available to the best user without any hindrances.
Normally migration of funds to the best user cannot be fully controlled by the state ( Fry (1989)
(Lee 1991) World Bank (1989) but in case of Japan and Korea it has proved otherwise (Vitas And
Wang 1992).
Objectives of research study.
1.
The core objective of the study is to analyze the impact of financial liberalization policy
Japan and South Korea and its role in boosting the industrial growth and development
of these countries with special reference to petrochemical, steel, automobile and
aircraft.
2.
To find as to how the financial liberalization can be applied in Pakistans fragile and
declining industrial sector with a view to reverse this order and to fully utilize the
potentials of business community in elevating the industrial growth in the country on
the lines of Japan and Korea.
3.
To find the ways and means to curb the spiral of back breaking galloping inflationary
spells and unemployment monster in the country through the tools of financial
liberalization.
4.
To analyze the role of financial liberalization in reducing the debt servicing burden of
the country through revival and enhancement of industrial growth in textile, energy and
automobile industries and agriculture sector.
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Japans Model:
Government of Japan took initiative by directly controlling credit and its allocation to various
sectors at the time of the industrial take off of the country in the years 1945-55. The period 195573 earmarked the era of high macroeconomic and industrial growth in Japan.
Japanese financial system during 1945-1973 was characterized by (a) excessive role of indirect
finance (b) reliance of large city banks on the bank of Japan (c) high leverage of industrial
companies and (d) tight control on interest rates which government ensured to sustain at low levels
(Suzuki 1980). Close relation was maintained between banks and industrial firms. Such
contracting banks were also very wide-spread and the big companies, especially general trading
companies, played pivotal role in channeling funds to small firms which were associated with
major enterprise groups, (Horiuchi (1988), Corbett (1987).
The establishment of various heavy industries, such as petrochemicals, steel, automobiles and
aircraft, in which Japan never had a competitive advantage till 1950s and 1960s, was the natural
offshoot of decisive role of government regulations in the financial sector. Strict controls were
placed on foreign investments and acquisition of technology. Only selected National Champion
firms and Leading edge industries were allowed financial aid. To rebuff the possibility of wrong
investment and production decisions by the beneficiary firms, the government facilitated these
firms with managerial leadership and control measures.
On the other hand elite firms in engineering, shipbuilding, steel and motor vehicles sector were
given state support and aid on a large scale as a matter of state policy (Eccleston 1986 p. 62).
These sectors were protected from the damages of competition by import tariffs and were sheltered
from cyclical depression by state organized cartels. This is further endorsed by Magaziner and
Hont 1980 in a research study undertaken to analyze Japanese governments policy and
intervention in the steel, shipbuilding, motor cars, industrial machinery and information electronics
industries. The study does not give specific details about the extent of financial support provided to
different industries rather it only signifies a thorough debate on different official actions taken by
the government which often go much beyond the provision of finance.
Industry was offered financial support both directly and indirectly. By the general regulations, cost
of funds to industry was kept low by regulating deposits and lending interest rates and to some
particular sectors preferential credit facilities were made available. In post war Japan, and
particularly after 1955, the level of interest rates was kept low by the government in order to
increase investment and decrease the cost of manufactured exports. The bank of Japan got more
effective control in order to fully implement the artificially low rate policy of the Japanese
financial system and also to stimulate financing of high growth industries (Royama 1984).
Credit Policy
The separation of Japanese financial system into various parts greatly helped the operation of
credit policy. In big cities, the large banks which benefitted from the regulations of deposits rate
were financing the large firms. However, the bank of Japan used to encourage banks to lend to
some sectors or to discourage lending to some others through persuation and administrative
guidance. There were private financial institutions that were allowed to raise funds through issuing
medium term debentures. The private financial institutions were catering to the long term financial
requirement of the industries. These long term credit banks played a very important part and
mostly provided finances on complimentary rates as compared to the commercial banks.
In case of firms and projects which could not approach the big cities for their financial needs, they
were provided the opportunity to avail this facility from (i) small regional and local commercial
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banks (ii) mutual institutions that specialized in offering financial services to small firms, farmers
and workers and (iii) government financial institutions that specialized in lending to high priority
sectors such as small business and housing, agriculture and exports investment projects.
In Japan government financial institutions were mostly funded from The Trust Fund Bureau which
managed the resources collected by the postal saving bank, the postal insurance service and the
social security system.
As a matter of financial policy, Japan had discouraged provision of loan for the housing finance as
well as for consumer credit. Resultantly it affected the level of household consumption and
savings.
Eceleston has criticized the dualistic nature of Japanese industry. The small member of large
corporations and group of big firms were usually protected during economic recession. But the
large number independent small firms were given no support when they were in trouble.
Government regulations:
Without proper regulation by the government in the financial market of Japans industrial and
export profile, their rapid up-gradation was a mere fantasy. During the high growth period,
government sought to maintain a highly segmented financial structure owing to which the
authorities were in a position to influence the pattern of credit allocation. The growth of
speculative and non-productive investment and also the emergence of a black economy were
prevented by this policy. In financial market, the government provided incentives to the national
champion firms and at the same time losing firms in the declining sectors were phased out in a
much better way. The maintenance of balance between these two objectives was the target of
national financial policy instead of cheapening credit (Patrick 1986).
Although maintaining a segmented structure and subsidized credit schemes was costlier but still its
benefits outweighed the costs. Owning to this government policy, dependence of large firms in
Japan on subsidized credit flows has declined where as financial support to declining industries
remained intact for longer periods.
In order to minimize dislocations in labor market and regional economics, it has been objective of
the policy to soften out the adjustment process and reduce capacity in a desirable manner. The
same view is further supported by Vitas 1990 who contends that the total resources of the trust
fund bureau increased over time as compared to total assets of financial system and GNP, as a
result of postal savings bank in mobilizing household deposits (vitas 1990). The amount of subsidy
allowed to preferential credit is generally below the markets rates to the extent of 1 to 2 percent
points.
To finance governmental financial institutions greater generosity was shown in allowing the
subsidy. In case of small firms the difference between the rates of finances, availed from informal
sources and money markets, were covered by interest rate subsidy.
Koreas regulation:
In 1960s and 1970s government of Korea introduced greater regulations in the financial markets
which were adopted in three phased strategy for the implementation of operational credit policy.
During the first phase i.e., 1950s and 1960s credit policy was directed towards selected activities,
mainly exports and industrial investment. Export promotion measures that included the use of
multiple exchange rates, direct cash payments and permission to borrow in foreign currencies and
to import restricted commodities under the export-import link which really strengthened the credit
policy of the government. In heavily protected domestic market this link allowed exporters to
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benefit from scarcity rents. However in 1960s this policy was replaced by the government and
instead incentives in the field of export by allowing tariff exemptions for imports to exports
products of the country was allowed. These export oriented policies were supplemented by the
subsidized credit scheme. Various measures adopted by the government like use of trade
promotion meetings, company specific exports targets, close monitoring of exports and special
awards for export achievements, played a significant role in the performance of export sector.
In 1970 the government brought some changes in the credit policy in the development of heavy
and chemical industries were placed on the top of the preferential list. This was the second phase
of the Korean government credit policy. During this period the government was fully in control of
entire credit system and credit on preferential rates was made available to the strategic industries
i.e. development of heavy and chemical industries. Under this policy between 43 and 50 percent
was preferential finance out of the total lending. In 1983 export of heavy and chemical industries
touched 56 percent of total exports.
In the third phase of the government credit policy approach of the government was changed in
1980s in the light of the achievements and the problem of the heavy chemical industries. How the
government directly interfered in industrial and financial restructuring of industries and companies
which were in trouble. Now the credit policy was aimed at picking winners and also phasing
out losers. The government now started lending to small and medium- size firms so that a more
balanced industrial sector is produced instead of enjoying hegemony by a few business giants
(World Bank1987) .
In most of the late industrialist countries, the state interferes with subsidies to distort
relative prices in order to stimulate industrialization and economic activity (Amsden 1989). But, he
opines that in Korea the government had strict control on the subsidy recipients & their
performance standards were thoroughly monitored. The aim of the industrial policy to boost up
industrial exports in high value added sectors was achieved as a result of import protection, export
promotion, industrial licensing to large business magnets and also the availability of cheap debt
finance.
Some critics of Korean credit policy as a result of which typical enterprises was highly
leveraged and especially vulnerable to reduction or withdrawal of credit (Kuznets 1685). The
Korean policies were violating laissez-faire approach (Dombusch and Parik 1987). A sheltered
market was credit for the development of infomt industries by using Tariff and licensing &
subsidies. Thus through the credit system preferred sectors were favored with subsidized rates.
Bank deposits rapidly increased in the mid 1960s when real deposit rates were increased by the
government, Role of the government in credit allocation was increased in order to allow greater
subsidies to preferential industrial sectors.
Loans to unproductive sector such services and leisures and consumer loans were totally
discouraged (cho 1989).
It was observed that credit policy was fully controlled by the deep interference of the government.
New comers with minimum equity stakes were encouraged in this way competition in the market
was stimulated (|World Bank).
However this situation ultimately leads to selected future industry leaders on the survival of
fastest growing basis. Not only additional credit was stopped but also the existing loans were
recalled from the firm that could not meet the performance standards and boost up their exports.
On the other hand the successful firms were facilitated with more preferential finances. This
discipline exercised by the government played a very important role in achieving the targets fixed
by the government of Korea (Amsden1989).
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In case of Japan only access to credit facilities was encouraged instead of large subsidies, where as
in Korea interest rate subsidies were quite large and attractive. The interest rate subsidies were
occasionally quite large. Export and investment finance were made available that were lower than
market rates by 5 to 24 percentage points during 1960 and 1970 (Cole and Park (1987) Page 83,
(World Bank 1987) Page 83). In some other reports between 1970 and 1976 subsidies between 7
and 28 percent of gross capital stock of manufacturing sector were allowed (Cold and Park 1983
Page 191). Availability of credit, especially by direct and indirect exporters, was more important
than the cost subsidy (Rhee 1990). In contrast to this Korean policy, Japans credit policy was not
directed to allow large subsidies and only credit facilities were made available to priority
borrowers.
In order to increase the country, the exporters were given a number of incentives i.e. exemption
from import duties of intermediate goods that were used as inputs for export products, reduction of
corporate taxes for exporters, and also financial facilities on preferential rates. However
international comparative advantage patron was adopted soon as the industrial incentive system
could not produce the desired results (koo 1984).
In 1970 the intervention of the government in credit management brought fruitful result despite the
high cost. Production capacity was so rapidly expanded by the preferred sectors that the firms did
not have sufficient time to gain experience and also adopt new technologies. As a result of this
situation quality of the products deteriorated leading to decline in exports. Moreover many of the
firms suffered from low quality products, excess capacity and high production costs. This dual
nature of the credit system created a major unbalance in the industrial structure of the country as
the sectors which was not supported by the government was compelled to borrow from the
informal market at a very high rate. High inflation and low saving was the outcome of the selective
low cost interest policy of the government leading to deterioration of the external balance of the
country. Subsequently in 1980s government was in a portion to reduce intervention in financial
market when the subsidized firms gradually became competitive and less dependent on credit
subsidization (Rhee 1990). This is understood by west Phal (1990) who has noted that the Korean
governments industrial policies have been used with the context of a consistent strategy of
industrialization. The objective of the strategy has been to build comparative advantage in new
industries or the rebuild it in old ones. According to westphal the selective intervention of
government of Korea remarkably contributed to the rapid industrial development of the country.
He was also of the opinion that the government should strictly intervene in the priority sectors,
through credit rationing, import protection and other measures, to achieve the desired results
(pp53-56).
The government intervention in credit markets was accompanied by rapid growth and structural
change in the financial sector. The M3/GNP ratio which measures the relative size of the financial
section increased from about 0.03 in 1962 to 1.26 in 1989. The financial intermediation ratio
outstanding domestic financial assets, the ratio of financial assets to nominal GDP, almost tripled
over this period. The financial interrelation ratio divided by GNP at current prices also increased
sharply. The institutions and assets were rapidly diversified. Koreas financial sector now includes
well organized and fast growing money and capital market for individuals and institutions in the
form of fixed deposits to cash management, investment banking and asset management.
The rapid growth of credit extended by non-bank financial intermediaries such as investment and
finance companies and merchant banking firms and direct financing through capital market have
been the most significant developments in the financial system of Korea. The share of the nonbank financial intermediaries in total financing of the non financial sector went to 30.3 percent
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during the 1985-89 period from 12.3 percent during the 1970-74 period. The share of funds raised
through the money and capital markets almost doubled between the two sub-periods. Deposit
money banks have maintained their share at around 25% after a period of relative decline. The
decline of the foreign financing and informal borrowing from the unregulated credit markets
resulted in the large gain of the non-bank financial intermediaries and direct financing.
Lessons for Pakistan in the Japanese and Korean Experiences.
Since the creation of Pakistan in 1947 as a result of partition of sub-continent, the country
experienced persistent uneven development. Pakistans economic growth has excessively been
dependent on agriculture sector, which is considered as the back bone of the economy. However,
political instability, military regime takeovers, Pakistan alliance with USA in the Afghan War
against the former Soviet Union, waves of terrorism, corrupt political setups and gross financial
mismanagement in the shape of writing off of billions of domestic loans on political basis, large
scale illegal smuggling across the boarders has, in fact, derailed the economic growth of the
country and the fate of economic breathing was left at the mercy of seeking loans from IMF,
World Bank and other agencies at higher interest rates and unfavorable terms and conditionalities.
Above all, Post 9/11 events and Pakistan opting to become US ally in the Afghan War, and the
resultant waves of terrorists activities in the country for the last ten years, has struck deadly blow
to the industrial growth and economic health of the country, which in turn has arrested the socioeconomic growth in the society.
To turn the tide and put the country back on the way leading to economic growth and prosperity, it
is imperative that viable financial liberalization policies must be implemented, in letter and spirit,
on the pattern of Japan and Korea which will bring enormous dividends in the shape of large scale
savings, capital accumulation, soft credit to industrial sector, investment and industrial revival
leading to economic uplift in the country.
To cope with such challenge, in Pakistan a sustainable mechanism is needed through which the
requirements of real investors are properly met with. Such policy must be strengthened and
improved. To achieve this purpose, emphasis should be laid on the continued credit planning and
its effective implementation. Regardless of the fact that market based policy investments should
receive due recognition and encouragement, but the role of government in determining the market
trends should be delineated and must be clearly visible. Therefore, the state should guide the
market and not simply follow the market. Albeit money and capital markets at domestic and
international level are controlled by the monopolists coupled with heavy indebtedness of Pakistan,
the significance of state intervention cannot be ruled out. The enormous ramifications of black
marketing on the economy makes the financial system prone to unpredictable shocks which, in
turn, presents a highly precarious fiscal picture from every facet of the economy. The perceived
benefits of following the policy of financial liberalization under these circumstances may not
materialize and its costs may outweigh the dividends, leading to various forms of complications.
With a view to linchpin the accelerated growth of government debts, the budget deficit should not
be curbed to offset the imbalance caused by piling debts. The reform in financial sector adjustment
loan has contributed to a remarkable extent towards a very rapid increase in the cost of public
borrowing.
The financial sector liberalization reduces the capacity of the government to select and support
winners and phase out the losers. This becomes important when we realize the need to direct
our policies towards macroeconomic strategy to strengthen the micro foundation of the economy.
Therefore, following the example of Japan and South Korea, there is a need for clearly announcing
and implementing a dualistic macroeconomic strategy, one segment of which aims at encouraging
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a small group of national champion firms to materialize the countrys full economic potential
and rapidly upgrade technological and organizational capabilities. The prevailing fiscal policies in
place are bereft of fetching the said objectives. To accomplish this goal, dynamic investment and
financing strategies become inevitable which can guarantee comparative advantage in the
respective domains. In Germany, Japan, South Korea, China, Taiwan and Sweden the government
has played a key role in encouraging firms to focus on dynamic comparative advantages. On the
other hand, the market has a short-term orientation, and investment funds in a laissez-faire regime
normally concentrate in activities which yield highest short-term profitability. The behavior of the
domestic and foreign firms is somewhat different in this respect. Hence during 1960-89 South
Korea maintained strict restrictions on foreign companies and on aggregate foreign investment
(Singer and Ansari 1988). At present rapid economic and financial development is possible by
more effective monitoring and supervision of subsidized financial units, greater operational
flexibility, better coordination of public and private sector policies, and more prompt response to
national and international challenges and opportunities.
Long term and short term financial, credit and economic policies need to be formulated followed
by its implementation vigorously pursued by well trained and experienced professionals. The
market short term approach should be replaced by the government long term policies followed in
the wake of extending full fledged support and guidance to the national champions. Moreover,
better opportunities and well trained manpower be made available to new comers. To be more
competitive in international market and also to meet the future challenges, more attention should
be given to research and technology.
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Washington.
Zaman, R. M. (11 June, 1993), The News Karachi.
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E-Procurement in the organizational performance: Business case of export
based textile industry
Salman Khalid (Corresponding Author)
School of Management Studies
The University of Faisalabad, Faisalabad-37610, Pakistan
Shahbaz Ahmad
Department of Computer Sciences, National Textile University,
Sheikhupura Road, Faisalabad-37610, Pakistan
Muhammad Zohaib Irshad
Department of Business Administration
The Government College University Faisalabad, Faisalabad-37610, Pakistan
Abstract
Purpose: The Purpose of this paper is to examine the factors influencing e-procurement adoption
in export based textile firms located within Faisalabad, Pakistan.
Design/Methodology/Approach: The paper reports on an extended multi-method case study and
examines two industrial firms through in-depth interviews with managers involved in the eprocurement projects. Both cases were presented and explored individually, for identification of
relevant drivers and problematic factors.
Findings: The research identifies seven drivers which can form the basis of a business case for eprocurement project, and eight problem factors are identified which have the potential to militate
the original business case. The findings also revealed that e-procurement is being used in the
export based textile sector for transactions of routine, non-strategic purchases.
Research Limitations/Implications: The research focuses on the export based textile firms of
Faisalabad, Pakistan, yet could have implications for other complex systems of organizations such
as public sector, or other multinational companies considering implementing e-procurement in
developing countries.
Originality/Value: Much research on e-procurement has been conducted in the service sector and
this paper contributes to the small but growing number of studies of e-procurement in the context
of the manufacturing firms by studying e-procurement in the textile industry (Pakistan). The paper
provides managers with empirical evidence of the drivers and of the problems encountered in
implementation of e-procurement.
Keywords: E-procurement, textile industry, supplier relationship, supply chain performance and
integration, drivers and barriers
Paper type: Research paper
Introduction
In the emerging global economy, e-procurement has increasingly become a necessary
component of business strategy, provided organizations with vast opportunities to operate their
businesses beyond their traditional physical boundaries (MacGregor and Vrazalic, 2005). More
specifically e-procurement has provided manufacturing firms with more effective solutions to
drive value into their existing business (Neef, 2000).
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The competition of todays global marketplace is driving organizations to reshape their

supply chain to increase efficiencies and to reduce overall cost. Procurement is the key point of
contact with most supply chain stakeholders. The decisions taken by procurement professionals
can have great impact on the overall supply chain and production processes of firm. Therefore,
many organizations are attempting to redesign and rationalize their procurement process.
Procurement is considered as a strategic activity in the value chain as it usually represents
one of the largest expense items in a firms cost structure. According to Hawking et al. (2004), the
purchase of goods and services represents the single largest cost item for any firm since each dollar
a company earns on its sale, it spends about $0.50-60 on goods and services ( Aboelmaged, 2009).
Huge capital is spent on the purchase of (raw) materials and services to support the businesss
operations than on all other expense item combined (Hawking et al., 2004). The purchasing
expenditure in relation to cost of goods sold averages 50 percent and may be as high as 80 percent
(Van Weele, 2005), therefore reduction in cost of bought- in- goods and service has been major
focus in much of manufacturers.
The Aberdeen Group (2001) conducted a study on spending analysis practices of 157 firms,
revealed that only a few firms truly know and understand how much they spend on products and
with which supplier. Further, Turban et al., (2006) indicated that purchasing officers in
(traditional) manual or even slow systematic procurement transactions tend to waste time on nonvalue-added activities such as data entry, expending delivery, costing and invoicing, which is
considered time consuming and costly to trace, and handling of errors in ordering.
Traditionally, procurement has involved variety of communication mediums including the
use of phone, fax, mail, other electronic data interchange, and more recently e-mail and the internet
to facilitate procurement process between the various parties. The distinctive features of the
internet and related web-based technologies can potentially support and improve the activities of
procurement process through transforming traditional paper-based processes to e-procurement
(Gebauer et al., 1998).
Although, there are many definitions of term e-Procurement and confusion exits in defining
the term (Vaidya et al., 2004; World Bank, 2003; Murrray, 2001). E-procurement includes
sourcing, negotiation with suppliers, and research and development (R&D) co-ordination,
established by using Internet and other technological tool (Yen and Ng, 2003). While Presutti
(2003), defined e-procurement as all technologies used to facilitate buying using the Internet. Eprocurement is considered to be part of broader concept called information technology (IT), which
the American Heritage Dictionary (2005) defined as the development, installation, and
implementation of computer systems and applications. Rai et. al. (2006) presented four groups of
e-procurement innovations, which based on the major procurement process: electronic reverse
actions, electronic catalogue management, electronic order fulfillment and electronic payment and
settlement innovations. There is a large variety of e-procurement classifications, but common all is
the fact that e-procurement is composed of different applications (Knudsen, 2003).
Literature Review
The literature on e-procurement has been growing since the late 1990s when papers began
to appear on the impact of internet and e-commerce on supply chain management (SCM)
(Aboelmaged, 2009).The literature advances a large array of benefits driving e-procurement
adoption (Tomorrowfirst, 2000). There have been extensive studies available on benefits and
disadvantages of e-procurement in literature. Generally advantages cited include lower purchasing
cost, improved communication, achieving compliance to contract, reduction in transaction cost,
enhanced planning, improved in procurement personnel efficiency and faster cycle times (Tatsis et
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al., 2006; Puschmann and Alt, 2005). Similarly, there has been a never ending discussion of the
disadvantages or barriers in implementing e-procurement in existing system, which include
problems in implementing and managing change, technology immaturity, conflict with suppliers,
organizational size to materialize savings, and cost of implementing e-procurement systems and
applications (Tanner et al., 2008; Shakir et al., 2007). Angeles and Nath (2007) explored the
challenges to e-procurement and identify three important issues, which include lack of system
integration and standardization, immaturity of e-procurement market services and buying difficult
of integrating e-commerce with other systems.
As literature gets rich, there has been little evaluation specifically of the business case for
e-procurement (Smart, 2009). It may be argued that the benefits identified from existing literature
on e-procurement, can help to create a basis for business case, but this has to be balanced with the
evidence of risks, adoption or implementation of problem, and barriers. The evidence of above
problem areas is now emerging from more recent studies. Croom (2005), states that there has been
poor validation for many e-business projects, due to survey results indicating that the justification
from adopters is based on reducing costs. Another survey based study of Tanner et al. (2008)
revealed that the potential and benefits of new information Technology (IT) investments such as eprocurement are difficult to appraise. Similarly, the study of Rajkumar (2001) suggested that
benefits may prove difficult to measure as there are less visible costs in such implementation
including consultants, catalogue development and staff training programs and integration. Abery
and Glindemann (2004) suggest that alleged process cost reductions are a myth and a case based
upon process improvement alone will not justify the investment in e-procurement systems and
application. Min and Galle (2001) study smaller firms, observed that smaller organizations may
lack e-commerce capability and so reap fewer rewards, like technologies, cost of entry may be
high and benefits would be much lesser extensive.
Methodology
The study has employed a cross-sectional case study method and examines two textile
firms through in-depth interviews with managers involved in e-procurement project. The firms
select for research are multinationals involved in buying and trading in international marketplaces.
The firms are situated in varying textile sectors (manufacturer units, and chemicals). They all
possess some common characteristics such as similar operations size and scope, being similar at
stages of usage of e-procurement systems and applications. For this research tow key research
questions were articulates:
Research question 1: What were the main drivers for e-procurement project adoption?
Research question 2: What key issues faced firm during and post implementation of eprocurement project?
Once the firm showed its consent to participate, considerable time was spent indentifying
the appropriate respondent. To get valid responses, manager who owned projects or manager close
enough to the e-procurement project were selected for interview, i.e. those who involved in initial,
set up, ongoing phases, as well as senior executives of firm were interviewed. The senior
purchasing executives of firm were interviewed initially in order to establish the understanding of
the background, to projects and corporate level drivers. Middle and lower level managers were
then interviewed with same two questions. Unsurprisingly, the lower level managers were able to
provide more insight as they had usually struggled with day-to-day issues of implementation of
new projects and changes.
A minimum of five respondents was used in each firm and interviews took place over a
number of weeks during October 2010 to February 2011. The interviews were recorded and coded
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for further analysis. Techniques used in coding and interpreting interviewed data were based on
Mile and Huberman (1994). Approach. i.e., conduct within- case analysis, tabulating of responses
in the key areas, then to perform cross-case analysis to compare and contrast the results.
Cases
Company A
Company A started out in 1992, not only the largest socks manufacturer in South Asia, has
it also delivered the highest quality products to the global markets under various brand names.
Operates under two unites, one in Pakistan other is in Bangladesh. The central procurement team
of company A determines overall strategy is located in the Pakistan (Faisalabad) head office,
supported by the local and regional procurements group.
At the time of this case research being undertaken, the company had been involved in it eprocurement project for eight years, and had successful implemented a range of solutions at
different points. Reverse actions have been used on a limited occasions for leverage, and some
routine products as well. RFX tools such as suppliers research, comparable quotations through
price and non-price criteria, and tendering, are deployed across a range of segments, to assist the
relevant departments in the contract award process. Similarly, the company A has deployed an
online buying tool based on Systems, Application and Products in Data Processing (SAP) which
automates the RTP cycle of e-procurement.
The initial push behind these technological advance projects was a global program devised
to manage the indirect spend which had been under local (Faisalabads unit) control. The firms set
a target of saving approximately 12 percent of its global indirect spend of PKR 700 million.
However, this figure was an estimation based on the existing systems and reporting was unable to
produce reliable figure. It was also identified that some e-procurement tools had been adopted
locally without any strategic co-ordination. The central (Faisalabad) procurement team recognized
the need to establish a common global process and database to manage this savings program,
found e-procurement as the means to achieve the desired targets.
Looking at the roots of the projects, these drives were clear for managers, who were
interviewed; they were honest in admitting that the e-procurement case was less well articulated.
The drivers discussed are all based on the certain assumptions of what e-procurement would
produce, i.e. improved process, improved data, transparency, and common standards, etc. The
main driver was the lack of information regarding indirect spend was major problem before
implementation of e-procurement applications and systems. The e-procurement system did not
provide the expected results, as full spend visibility is not yet available. The respondent
(managers) honestly admitted that they had not really understood what the technology would
deliver required results in this regard. The issue of visibility had been future complicated by the
differing accounting and reporting regulations in various parts of the world. The respondents of the
concerning authorities revealed that the firms had engaged an additional software company to do a
more detailed analysis of its global spend data to jump to the required results. In response to the
question of how many business cases were put forward prior to starting any e- procurement
project, three managers stated:
A future problem was recognized at change in peoples job function, due to technological
advancement in routine operations which the firm had underestimated. The managers of firm were
realistic in starting e-procurement project but they had poor at dealing with the change to roles and
task of employees. Similarly, the changes in roles at both central and regional locations were
unclear, leading to confusion over responsibilities, once new application and systems were being
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introduced. The firm can only achieve their learning point from moving transactional to strategic
activities, which will result in achieving the results of saving program.
Company B
Company B was incorporated in 1981 is a manufacturer of chemical used in industrial and
established agricultural chemical in 2003, serving primarily to the United Arab Emirates and
European markets. Procurement exists as a Head Office (HO) function situated at Faisalabad with
some centralized personnel, although many of the procurement specialists are attached to
individuals business units located within markets.
The firm had undertaken its e-procurement project over a period of three to four years and
had adopted a number of successful solutions to address specific issues. Initially, the focus of eprocurement project was on automation of the buying process and web-based system (SAP) was
implemented to manage the RTP cycle. Option of reverse auctions were adopted in only a limited
way and other tools to support marketing intelligence and sourcing were introduced once the basic
buying application functional. To ensure the reliable implementation of e-procurement practices, a
pilot project was undertaken, before implement to business units.
A key issue for which firm consider e-procurement project, was that due to poor
management information system firm had unreliable data and it incurred PKR 700 to 850 million
as total global spend. The driving forces for e-procurement program related to these global spent
and other key issues as shown here. Firstly, compliance contract and suppliers was major concern
for firm. Although the Head Office (HO) team has established prescribed central contracts and
bound regional businesses would order against these agreements, customized agreements were
available for privilege customers, and record keeping was very poor. Allied to compliance is the
key issue of existing management information which an e-procurement system was expected to
deliver, sometimes suppliers often to asked managers how firm was performing against contracts.
Secondly, vendors price reductions were considered as a major driver; however, until
transparency in reporting was not established it would be difficult to monitor the level of savings
firm being achieved. On other hand firm was equally concerned with transaction efficiency,
namely reducing the purchase order cost transactions. Finally, the firm identified the need to
improve on time payment to suppliers where performance was not up to mark. This results in poor
relations with suppliers and affects the negotiations.
In effect, the approach was that e-procurement should support a wider transformation
program within the procurement function. The Head Office (HO) central team would be reduced
by 45 percent, with transactional buying being de-centralized and central team focusing on
strategic activities rather than transactional. This customizes approach of e-procurement led to the
presentation of a financial business case, which had to be drafted in accordance with nominal
capital expenditure rules. Full detail of the business case cannot be revealed here, however, total
cost in the implementation of e-procurement were established at PKR 500 million, including
systems, both application and system software purchases, consultancy and training support,
redundancy and concerning staff re-deployment. Initially reduction in vendor price and benefits
from business case were established at 15 million, which represents an estimated 3 percent of
global spend in all categories. This figure, produced by the e-procurement project team, and
recognized as fairly speculative, given the poor legacy data. Interesting, during interview one of
the e-procurement manager, added that this project was not just about the savings, leadership
wanted to use this technology to further as a public relations exercise.
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Discussion
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In this section author present some thematic findings from the individual organizational
cases. Here it should be clarified that this paper reports selectively on some findings in this project
through specific research questions. The information collected during interviews was supported by
various company information sources, which allow us to draw useful conclusions on the issues the
companies faced during phases of developing a case and ongoing use of the electronic
applications.
From the interviews with respondents the e-procurement drivers were identified which
applied on both cases and these are presented in Table I. It was evident that the projects were
initially driven by issues such as poor data visibility of spend, targets to improve existing
processes, aim of raising levels of productivity, and need to improve compliance with in
procurement operations. In reality, appropriate data were not available in firms to calculate
accurate savings targets and then to measure the benefits once projects were started. Both cases
revealed that the firms had difficulties in achieving expected results, adoption and integration. This
demonstrates as during interview one respondent stated, a misunderstanding or confusion exits
among what the technology could actually deliver. One can also perceive from this that the early
publicity and some of the literature on e-procurement have simplified the functionality and
deliverables (Smart, 2009). It emerged that procurement professionals are tempted to see eprocurement as a solution for their problems and to set unattainable targets.
Table I: Summarize the drivers for e-procurement in both cases.
Drivers
Company A
Company B
Intent to establish common processes
Move procurement executives from transactional to strategic level
Regulatory compliance
To get visibility of global spent
Supplier qualification and selection
Improve payment and invoice system
Reduction in numbers of suppliers
The change management issues have been identified in both cases, and considered as key
success factors in an Information Technology (IT) project, firms have to understand the
importance of this requirement. Respondents in all two firms reported that their failure to
implement change effectively put e-procurement project at risk as savings and benefits postponed
or fail to become visible. Both cases reveal that the delivery of e-procurement is more problematic
than they had expected. In reality, business cases put forward can be based on false assumptions,
what will be achieved through such projects. The full range of issues and problems encountered
both firms in the implementation and usage phase of e-procurement summarized in Table II.
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Table II: Summarize the problem factors affected e-procurement implementation and development
Problematic factors
Company A
Company B
Lack of knowledge regarding original business case
Poor legacy of data and system
Inappropriate training requirement
Change management
Re-defined jobs (Tasks and Roles of employees)
Unclear about what the technology could deliver
Unachievable targets set initially

Different standards (Accounting/Auditing/ Reporting)
Unsurprisingly, it became clear from the interviews with respondents that the various eprocurement applications are used for Varity of different purposes and inherent drivers. In both
cases, the firms developed a high budget for investment in e-procurement, based on overall savings
more than cost outlays. No formal evaluation was conducted on how much each application
individually could contribute to targets savings. Therefore, it derives that firms need a clearer
understanding of what individual components of e-procurement application can contribute, within
an overall business case context. This would allow managers for more accurate measuring
benefits, and to compare the contribution or value of alternative software. The mechanisms
address different business issues and it is necessary to understand which issues in purchasing
management each is designed to improve process.
Conclusion
This paper has examined the issues faced in developing a business case and factors during
implementation of and usage of e-procurement project, through real world case examples from
textile industry. It is clear from the above cases that even large firms with significant resources are
struggling to achieve the full amount of the benefits which e-procurement offers. Both cases
suggest that due to lack of empirical data of the success factors in achieving e-procurement, firms
have taken a tentative approach to initiate this technology. However, it is not to suggest that these
projects have been a failure, both firms have gone some considerable way towards achieving the
targets they established.
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References
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Abery, J. and Glindemann, C. (2004), The 10 nuggets of e-wisdom, Supply

Management, Vol. 9, No. 12, pp. 12-14.
Aboelmaged, G.M., (2009). Predicting e-procurement adoption in a developing country:
An empirical integration of technology acceptance model and theory of planned
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Knudsen, D. (2003). Aligning corporate strategy, procurement strategy and e-procurement
tools. International Journal of Physical Distribution and Logistics Management,
33(8), pp. 720-734.
MacGregor, R.C. and Vrazalic, L. (2005), The effects of strategic alliance membership on
the disadvantages of electronic-commerce adoption: a comparative study of Swedish
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Miles, M. and Huberman, A. (1994). Qualitative Data Analysis: An Expanded

Sourcebook, Sage, Thousand Oaks, CA.
Min, H. and Galle, W. (2001), Electronic commerce-based purchasing: a survey on the
perceptual differences between large and small organizations, International Journal of
Logistics: Research and Applications, Vol. 4, No. 1, pp. 79-95.
Murray, G., (2001). e-Procurement: Targets, Myths, Legends and Reality, IPF.
Retrieved: 1 October 2003
Neef, D. (2001), e-Procurement from Strategy to Implementation, Financial Times Prentice
Hall, Harlow.
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Balanced Scorecard
Presutti, W.D. (2003). Supply management and e-procurement: creating value added in
the supply chain. Industrial Marketing Management, 32(3), pp. 219-226.
Puschmann, T. and Alt, R. (2005), Successful use of e-procurement in supply chains,
Supply Chain Management: An International Journal, Vol. 10/2, pp. 122-33.
Rai, A., Tang, X., Brown, P. and Keil, M. (2006). Assimilation patterns in the use of
electronic procurement innovations: a cluster analysis. Information & Management,
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Shakir, M., Smith, G. and Gulee, E. (2007), E-procurement: reaching out to small and
medium businesses, MIS Quarterly Executive, Vol. 6 No. 4, pp. 225-38.
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CONTROL MECHANISMS IN NON-FINANCIAL CORPORATIONS

Shama Sadaqat
Hailey College of Commerce, University of The Punjab, Lahore, Pakistan
Nadeem Ayub Bhutta
Assistant Professor, University of Central Punjab, Lahore, Pakistan
Farah Adnan
Hailey College of Banking and Finance, University of The Punjab, Lahore, Pakistan
Muhammad Farhan Akhtar
Khizer Ali
Abstract
In this modern era of globalization without the development of business activities, no country can
be sure of its progress and prosperity. Likewise, survival in cutthroat competition, growth and
success of a business organization depends upon the effectiveness of its internal and external
mechanisms. According to the categorization, organizations are divided into: sole proprietorship,
partnership and corporation (Joint Stock Company). The corporation can be either public or
private. Publicly owned corporations enlisted on the Stock Exchanges. The listed corporations can
be (a) Financial or (b) Non-Financial. This paper relates to the third type of business organization
i.e. corporation, in a transitional economies like Pakistan, with an attempt for studying the internal
and external mechanisms engaged for the control of non-financial corporations. Generally three
hypothetical perspectives are leading the corporate literature, to recognize and comprehend the
mechanisms in use for the control of non-financial listed corporations. (1) Inter-corporate
Alliances. (2) Managerialism; and (3) Agency Theory. These hypothetical approaches applied to
illustrate the findings of hypotheses developed for the present study.
Keywords: Control systems; Control mechanisms; Corporate Governance; Performance
monitoring; Non-Financial Corporations
1.0 INTRODUCTION
In the present era, Corporation has opened new doors of the economic development for countries
suffering from economic stagnation. By establishing corporations in Public and Private sector,
transitional countries can improve overall performance of their economies. Despite the fact,
Pakistan has sufficiently expanded its Corporate sector is still lagging behind when compared with
the other transitional economies of the world. This may be because corporation seems to be as one
of the most powerful engine or the business, commercial and economic growth.
Debate of the control of corporation and its governance is not new but under debate from the day
when the first artificial being (Corporation) was came in to existence. This is not an issue of
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commerce and business administration alone, but also frequently addressed in the disciplines like
Financial and Development Economics, Political Science, Law, Ethics, Environmental Studies,
Sociology, etc, etc.
The issue of the control of the corporation and its governance is critical in case of listed
corporations. Common stockholders have little or no influence in the conduct of corporations
affairs and they have to be dependent upon the CEO and management to manage the firm in good
faith of the owners. If the standard of the control of corporation and its governance is poor, the
public will have less confidence in investing in that particular firm and will diminish the efficiency
of the stock market as a source of long-term und for corporation. A good corporate control and
governance system is, hence, beneficial particularly for listed and generally for the economy as a
whole. The investing public has become more conscious of their rights as stockholders. They have
high expectations from the CEOs. Increasing participation by institutional investors has also raised
the standard of the control of corporation and its governance o listed firms. As institutional
investors have larger stockholdings in listed firms, they can exert stronger influence on the
management and BOD of these firms, for better financial disclosures and higher standard of
business conduct.
It is the era of dispersed corporate ownership and passivity of stockholders. As pointed out by
Pound, a new model of governed corporation is emerging. Under this model a corporation
controlled and governed, rather than managed, by its three critical constituencies Stockholders,
Directors and managers. The result is, improved decision making for mutually desired outcome of
improved performance by a corporation, that is, Healthier, more self-renewing and more flexible
(1995:89,94,98).
Internationally, norms are changing, as BoD and stockholders are encouraged to make corporate
management more accountable for their performance. All over the international forums, the topic
of the corporate control and its governance is on the top agenda. The World Bank, international
monetary fund, Asian Development Bank, Islamic Development Bank, Organization of Economic
Corporation for Development (OECD), Group Eight, Commonwealth, WTO, all is concerned
about the corporate affairs. Concerns about the control of corporation and its governance have
rapidly risen especially after the series of corporate failures and collapses o the BCCI, the Daiwa
bank, the Maxwell, the Parwaja, Enron, WorldCom, etc.
Why ought to care about the control and governance of corporation? There are many reasons: as
appalling corporate governance can damage national economic and eventually global financial
stability. The financial crises in Asia, Russia, Argentina and elsewhere have demonstrated this.
Though circumstances differed, what all countries had in common was obscure control of
corporation and its governance structure that led to inefficient economic decision making.
In many transitional economies, poor control of the corporation and its governance has blamed for
the delay in restructuring after privatization. It means privatization succeeded in transferring
ownership of firms from public to private sector, ambiguous property rights, inadequate regulatory
and institutional framework resulted in unchecked internal and external mechanisms and concrete
ownership, employed for the control of corporation and its structure of governance. In many cases,
the rights of minority stockholders not protected indeed. It is also significance to note that the
challenge to advance the control of corporation and its governance is not restricted to budding
economies of the globe. Even the most highly developed economies are questioning and headed
for the better practices for the control of corporation and its governance. In United States, the
separation of Chairman and CEO- preferred by many investors is unusual. In addition, more
transparency in mergers & acquisitions, better treatment of minority shareholders is being called in
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European countries. In Japan, efforts are exerted for improvements in areas such as disclosure of
information and practices of BoDs. In UK, France, Australia, Germany and Sweden important
long-term efforts have undertaken in the area of the corporate law and the regulation of takeovers.
In transitional economies, knowledge of the de facto elements of the control of corporation and its
governance are essential. First, it enables each corporate player to fulfill his/her role in the internal
and external mechanisms. Second, because these mechanisms as a whole are in a developmental
stage, their knowledge may enable corporate players to identify deficiencies and advocate for
appropriate improvements to these mechanisms.
2.0 LITERATURE REVIEW
The purpose of this section is to review the existing corporate literature. An agreement exists in
literature that the control of corporation is the power to determine the broad policies for guidance
of the corporation (Goldsmith & Parmelee, 1940). The control of corporation refers not day-to-day
decision- making or the operational management of the corporation but rather to concept of the
control on the policy (Juran & Louden, 1966 and Bunting & Mizruchi, 1982) and overall strategic
control of the corporation (Scott, 1979).
In the literature on the BoD there appears to be a consensus that the primary constituency, to which
the BoD is accountable, is the stockholders of the corporation. The BoD as steward and legal
trustee of the stockholders is responsible for the rights, interests and security of the corporation.
The BoD, thus, is the permanent group responsible for the actions, activities, performance, results
and future of the corporation (Loudan, 1982 and Bilimoria, 1990).
However, due to globalization, the governance role of BoD broadened than the profitability,
maintenance and betterment of stockholders wealth of financial, economic, social, ethical,
environmental and legal concerns.
Therefore, the BoD performs three interrelated governance functions: Legitimizing (fulfilling the
legal requirements); Directing (determining the mission, direction and broad strategies and policies
of the corporation); and, Auditing (overseeing).
An overview of the extensive body of corporate literature suggests three hypothetical perspectives
on the control of corporation mechanisms employed and corporate governance, relevant to the
evaluation of the board of directors and effectiveness with regard to the overall performance of the
corporation.
1. Agency Theory: Agency theory analyses the managerial incentive problems that are persuaded by
the severance of corporate ownership and corporate decision-making (Alchian & Demsetz, 1972;
Fama & Jenses, 1983). The theory defines the relationship between stockholders and managers as a
contract between principals (stockholders) and agents (managers), in which agents behavior is
conditioned by the incentive structures that are implicitly or explicitly incorporated in the contract.
Agency problems arise in corporations because the managers stop bearing the full wealth effects of
their own decisions, if they do not own a substantial part of the corporations equity. Under such
circumstances, the agents are possible engage in behavior that promotes their private wealth or
power but that is jumbled and disorganized from the stockholders point of view. (Jensen &
meckling, 1976). Examples of such disorganized management actions are the unnecessary use of
corporate resources for managerial perquisites, which may vary from free lunches to private jets
(Jenses & Meckiln, 1976). Studies propose that agency problems can be solved in the course of (1)
optimizing risk-bearing characteristics of principals and agents, (2) escalating incentive association
between principals and agents (3) effectual principal monitoring of agents ( bestty & Zaja, 1994,
Zahra, 1996; Zahra & Pearee, 1989 and Zajae & Westphal, 1994).
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2. Managerialism: It claims that stockholders of corporation are becoming less influential in the
control of corporation and its governing affairs. This results that the Management superseded the
function of overall corporate governance by the ownership (Nicholas, 1969). This separation of
ownership and control divided the corporate elite into two distinct camps of owners and
managers (Useem, 1980). Crosland has even gone forward by arguing that the stockholders have
no desire to govern and control the corporation, since the majority is ignorant of business 40%
stockholders are women and the reminder too busy with their full-time jobs elsewhere (1956). The
separation of ownership and control of corporation led to the raise of bureaucratic form of
corporations (Berle & Means, 1932; chandler, 1977). A main recognizing attribute of corporate
bureaucracies is the extent of formalization or the dependence on formal rules by which social
positions and practices are defined autonomously of the individual personality and values of
corporate contributors. Managerial perspective on the board of directors hold that boards are largely
irrelevant for corporate policy and decision making, which is performed by managers. The role of
non-executive directors (outside members) is to add prestige to the board of directors and provide
occasional counsel to the CEO. Management who retains control of the director selection process
and the director information apparatus dominate BoDs. This rubber stamp nature of BoDs (Herman,
1981) is further compounded by directors lack of ownership interest in the corporation.
3. Inter-corporate Alliances: The hypothetical perspective of the power elite holds that the corporate
governance and control is applied through the association of relationships among firms. Mills saw
the social structure of America as a single power pyramid. At the top is a small group of economic
military elite, second level of professional managers including politicians and rest is of an
undistinguished mass of immobilized citizens. A devise for further concentrating economic power
and social contacts among corporate elite is the interlocking directorate. Mizruchi (1982) has
identified three models for interlocking directorates: coordination, cooperation and control. The
nature of dependence relations between firms differentiates these models. The coordination model
refers to interlocking directorates as a means for ensuring mutually beneficial corporate policy
through reciprocity and cooperation between firms that are in an essentially non-hierarchical
relationship. The cooperation model refers to director interlocks as a mechanism for gaining
support and cooperation of external agencies on which the corporation is dependent. The control
model refers to interlocking directorates as the means for corporations to dictate the policy of other
firms that are dependent upon it.
Mechanisms for the control of corporation: concentration of corporate ownership, by concentration

of corporate ownership we mean that the ownership of large-block stockholdings in a firm by few
individuals, families, groups and institutions. The greater the percentage of stock owned, greater
the power to obtain representation on the BoD, Exercise influence over the management team and
overall control of the corporation. Various ratios, measuring the extent to which the ownership in a
corporation is concentrated, have been proposes and used in empirical analysis. Such measures
have also considerable importance, for example, ownership concentration indices plays a vital role
in the implementation of anti-trust laws in the unites States (Smyth, Boyes & Pesean, 1975).
3.0 THEORETICAL FRAMEWORK
The three perspectives on the control of corporation, as already discussed in the chapter of
literature review, have implications for the internal as well as external mechanisms employed for
the control of corporation in the non-financial firms.
1. Inter-corporate Alliances: This approach suggests that a privileged inner group, consisting of
large block holders, top managers and outside directors, who collectively sit on multiple BoDs
control the corporation through the structure of inter corporate ties. Further, the inter-corporate
alliances approach suggests that although interests of the inner circle are similar to those of the
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capitalist class of owners. The elite group will act in concern to maximize its own returns and to
perpetuate its own power and exclusiveness.
2. Managerialism: This theory suggests that managers control the corporation through their strategic
positions and seek to perpetuate their own existence and power regardless of the performance of
owners. Further it suggests that outside members of the BoDs (non-executive directors) can do little
to prevent this state of affairs. Thus, managerialism suggests that the owner-oriented criteria will
tend to be discounted in managerial evaluation decisions by the BoDs of firms that exhibit a high
degree of managerial control of the corporation.
3. Agency Theory: Agency theory suggests that the controversy of who controls the corporation is
not an issue. External market mechanisms, such as internal mechanisms, managerial labor market
or devices like the BoD, serve to align the interests of owners and managers. Agency theory points
to the dominance of the market in ensuring that managerial behaviors match the interests of owners.
Thus the theoretical frameworks on the internal and external mechanisms for the control of
corporation have different implications for the governing performance of the BoD. That is, for the
control of corporation, internal and external mechanisms employed in non-financial listed firms
will vary according to the control perspective adopted by a particular organization.
4.0 RESEARCH METHODOLOGY
Objective of the Present Study is to focus attention on one of the most important field of
management: the control of corporation and its internal and external mechanisms employed in the
non-financial listed firms.
Research Method considered, for the present study was Case Study Method. The case study
method, place, more emphasis on a full contextual analysis of fewer events or conditions and their
interrelations (Cooper & Emory, 1995). The Universe (population), the corporate sector of
Pakistan consists of 42,348 corporations. Of these 39,444 corporations are in private sector 2,212
non-listed public corporations, and 768 listed corporations (Dawn, 2005).
This study is relating to the non-financial listed corporations, listed on KSE (Karachi Stock
Exchange, Karachi). More than 200 listed corporations are financial corporations. From the
remaining non-financial listed firms 531 corporations constitutes the sample for the present study.
(Data was not available for all 531 corporations)
4.1 Data Sources
All the data was collected from the secondary published sources.
4.2 Explanation of Variables:
Measures: Managerial Control of the Corporation, was conceptualized and indicated by the two
observed variables: the dispersion of the corporations stock, (this measure was calculated as 100
minus the percentage of total common stock held by the firms 5%owners. Several previous studies
have indicated that less than even a 5% ownership of common stock is sufficient to exercise
significant control in listed firms.) and Top Executives Strategic Position (role and status in the
organization, this measure was the percentage of stock not held by the insiders or 100 minus the
percentage of the corporations stock held by corporate insiders).
Size of Firm, the measured employed to operational size of the firm was sales of the corporation.
Accounting Performance, of the firm was measured in terms of firms return on equity.
Market Performance, for the purpose of this study, market performance of the firm was measured
as the market or stockholders rate of return, defines as:
Pt + DPSt
Where,
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Pt = closing stock price

DPSt = dividends per share paid in fiscal year, adjusted for stock dividends &
Splits ( Murphy, 1985). Data for this measure were collected from Balance Sheet Analysis.
Corporate Miscoduct, in the broad usage of the term, corporate misconduct is any violation of
administrative, civil or criminal law committed by corporations ( Clinard and Yeager, 1980;
Clinard, 1983). Two measures of this variable were employed in this study: (1) the total number of
legal fillings or investigations against the corporation in each year, and (2) the total number of
cases lost or settled by the corporation during each year.
Technological Competitiveness, the measure for investment in technological competitiveness was

Research & development expenditure (R & D). The total amount of this variable in terms of sales,
obtained from annual reports was employed.
Industry Performance was operational as the total return to investors. Industry total returns to
investors in the stocks of firms of an industry that includes both price appreciation and dividend
yield. Returns were adjusted for stock splits, stock dividends, re-capitalization and corporate
reorganizations as they occurred. Data for this variable was collected Balance Sheet Analysis.
H0: There is no significant effect of type of control and type of performance indicators on internal
and external mechanisms employed in non-financial firms for the control of corporation.
H1: There is significant effect of type of control and type of performance indicators on internal and
external mechanisms employed in non-financial firms for the control of corporation.
Inter-corporate Alliances, suggest that as greater power accrues to the decisions of
corporation, owners and managers (from the collective possession of multiple linkages
advantageous to the corporation), BoD will seek to enhance its power and position as the inner
circle by positively rewarding the top executives of the corporation. Top executives, who are
important members of this dominant stratum, rewarded with greater compensation and enhanced
endurance in the corporation.
Thus, the inter corporate alliances perspective suggests that there will be a positive relationship
between network control of the corporation and level of internal mechanism, a positive association
between network control and changes in the internal mechanism and a negative relationship
between network control and the external mechanism employed for the control of corporation.
Managerialism, this theory of management control of corporation suggests, direct control of the
corporation by managers influences the level of, changes in, and components weightings of
internal mechanism, as well as external mechanism. Level of internal mechanism, the top
executives have an interest in increasing and perpetuating their own power and prestige, and in
employing corporations resources in the service of their own objectives, hence the theory of
managerialism suggests that direct control of corporation will be positively associated with the
internal mechanism. That is, managerialism suggests that high degree of direct control by
managers will be associated with higher level of internal mechanisms, since the BoDs of firms
controlled by managers will be unable to prevent the uneconomic employment of the corporations
resources in the favor of managers. For the same reasons, the theory of managerialism suggests the
direct control of the corporation will positively influence changes in the internal mechanism. The
theory of managerialism suggests, there will be a positive association between direct control and
the proportion of short-term components for the following reasons:
Since future in uncertain and a variety of factors outside the control of management may encroach
their intended results, managers will prefer that the bulk of their compensation be not deferred to
some future point. Further, the period for which compensation committees evaluate executives is
usually short (an annual evaluation) executives will attempt to maximize short run profitability at
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the expense of long run gains. In this event managers will prefer to be rewarded for the current,
rather than future performance of firm. In this regard, managerialistic approach suggests that direct
control of the corporation will be positively related to the proportion of short-term compensation
components. Finally as regards the incidence of executive turnover, managerial theory suggests
that there will be a negative relationship, between the direct control and the incidence of executive
turnover, since managers who control the corporation will seek to ensure their own perpetuation
and power. In other words, this perspective suggests that higher degree of managerial control of
the corporation will be associated with a lower likelihood of executive turnover. As regards the
direct impact of various performance criteria available to evaluate managers, the theory of
managerialism suggests that managers, performances for firm size and accounting criteria will
dominate (since these are stable and controllable factores), and that diffuse ownership and a
powerless BoD will be unable to enforce the use of market criteria ( factors that are variable and
possibly outside managers control) to evaluate managers. Thus the theory points to the likely nonsignificant effects of the firms market performance on executive compensation and turnover
decisions. Further the managerialistic view suggests that there will be positive relationships
between firm size and level of compensation, between firm size and the proportion of short run
components of the compensation package, since size represents a performance criteria preferred by
managers on account of its stable controllable nature. Additionally, the theory suggests that
managers will attempt to ensure the employment of accounting performance criteria since
accounting data are highly vulnerable to manipulation by managers towards their own ends
(Solomen & smith, 1979) for this reason, the managerialistic approach points to the likely positive
relationship between accounting performance of the firm and the level of changes in, and the
proportion of short term compensation, and the likely negative relationship between accounting
and executive turnover.
As regards the criteria of performance relevant to the general public, the theory suggests that
corporate misconduct will be positively associated with the level of executive compensation, with
changes in compensation, and with the proportion of short run (current) components of the
compensation package, and negatively associated with the incidence of executive turnover since
such behaviors are likely to inflate both short run profitability and firm size, ends for which
managers controlling the corporation will seek to be rewarded. In other words, the managerialistic
perspective suggests that powerful managers will seek to discourage their BoDs from penalizing
them for corporate illegal activities. Hence, managerialism suggests that instead of being employed
as a disciplining criterion for the evaluation of managerial compensation and turnover, corporate
misconduct will instead be employed to favor managers short term and firm expansion quests.
With regard to the criterion of technological competitiveness also of general concern to the public,
since such expenditures may have attached to them considerable downside risks and reduced short
run profitability, managers will seek to ensure that their compensation is disassociated from this
criterion. Thus, the theory of managerialism suggests that this criterion will be non-significantly
(or, at best, negatively) associated with the level end changes in executive compensation, and nonsignificantly (or, at best, positively) associated with the incidence of executive turnover.
Agency Theory, suggests that financial market and labor market mechanisms (like threat of the
corporate takeover, or the threat of replacement by other executives) together with the internal
monitoring and aligning structures (like the presence of an audit committee on the BoD or the
award of stock options to top executives) will discipline management to reduce its opportunities
inclinations regardless of who controls the corporation. Hence, agency theory suggests that there
will be no relationship between the control of corporation and the level of, changes in, or
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composition of executive compensation, or between type of control and the incidence of executive
turnover. Further, Agency theory points to the centrality of the market as the locus of control, to
the requirements of which the internal mechanisms of the control of corporation are adjusted.
Hence agency theory suggests that the existing external mechanisms reflect the markets
evaluation of the firms current and future performance. To this extend, the agency theory says that
the level of internal mechanism, and external mechanisms, is associated with market information
regarding the firms performance. Following the logic, agency theory suggests that stock market
performance of the firm will be positively associated with the level of internal mechanisms, with
changes in external mechanisms, and with the proportion of long-term components of the
performance of the firm, and negatively associated with the control of corporation.
5.0 DATA ANALYSIS
Since, the data used in this study have meaningful ratio scales, all analysis based on the covariance
between variables rather than their correlations. In the case of analyses employing the BoD change
variables, the SPSS software used to construct the input matrices.
Table 1: Covariance Matrix for Type of Control, Type of Performance Indicators and
Internal Mechanisms12
1
2
3
4
5
6
7
8
9
10
.097
1 DISP
.016
2 INVINSTK .019
.011
.001
.035
3 INTLK
.031
.034
.001 .242
4 AROR
.091
.050
.009 .021 .021
5 MROR
.020
-.001
.022
.064
.009
.978
6 NOFIL
.040
-.001
.027
.068
.009
.428
.892
7 NOJAF
.024
.005
.025
.010
.005
.165
.132
.169
8 RD
.025
.003
.017
.019
.089
.079
.165
.132
.063
9 SALES
.023
.001
.021
.026
.049
.105
.037
.129
.066
.527
10 INDRT
Chi-square:
Degree of freedom:
Root mean square residual:
19.78
24
0.010
Adj: Goodness of fit:

Value of P:
0.941
0.707
The covariance matrix and results of this model reported in Table 1. The general fit statistics of the
model suggests that the model fits satisfactorily. The chi-square statistics was 19.78 with 24 degree
of freedom, the adjusted goodness of fit was 941 and root mean square residual was .010. The
12
N=531
For this and other tables
DISP = %age of stock not held by the powerful owners (5%)
INVINSTK = %age of stock not held by insiders
INTLK = No. of interlocking directorates
AROR = Accounting rate of return
MROR = Marketing rat of return
NOFIL = No. of filings/ investigating
NOJAF = No. of judgments against the firm
RD = Research & development expenditures
SALES = Total sales
INDRT = Industry total return to investors
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standardized estimates show that the estimated loadings of the observed variables on the constructs
of direct control and corporate misconduct are significant.
Table 2: Covariance matrix for the type of control, type of performance indicators and
external mechanisms
1
2
3
4
5
6
7
8
9
10
.012
1 DISP
2 INVINSTK .019 .016
.002 .332
.066
3 INTLK
.621 .032
.081 .892
4 AROR
.123 .050
.909 .081 .521
5 MROR
.028 -.051
.022 .041 ,119
.982
6 NOFIL
NOJAF
.256
-.001
.027
.069
-.009
.429 .832
.
7
.064 .025
.025 .019 .005
.165 .152 .969
8 RD
.023 .003
.917 .014 .084
.073 .168 .132 .033
9 SALES
.003 .001
.031 .026 .049
.155 .637 .729 .036 .427
10 INDRT
Chi-square:
Degree of freedom:
Root mean square residual:
24.15
24
0.008
Adj: Goodness of fit:

Value of P:
0.939
0.456
The covariance matrix, results of the analysis employing changes in the BoD compositions
reported as the dependent variable of interests in table 2. The model achieved a chi-square
statistics of 24.15, which was significant with 24 degree of freedom. The adjusted goodness of fit
index was .939 and root mean square residual was .008. These general fir indices indicate that the
model fits satisfactorily.
6.0 RESULTS & CONCLUSIONS
To evaluate the influence of Direct Control and performance indices of market rate of return,
accounting rate of return, firm size, corporate misconduct and technological competitiveness,
structural equations models developed. With level of the structures and compositions of BoDs,
internal and external mechanisms employed for the control of non-financial listed firms, as the
independent variable of interest. These models also tested the effects of direct control on the firms
performance.
The findings of the analysis presented above capitulate diverse insights in to the context of the
control of corporation by broadening current appreciative of the idea of the control of corporation
to incorporate explanations based on inter corporate alliances approach (the network control),
managerialism (on the strategic position) and on agency theory (market evaluation).
Specifically, results of the analysis employed tests of the direct effects of type of control
established well-built support for the significance of the measure of market performance of the
corporation in the internal & external mechanisms used for the control in non-financial listed firms
of Pakistan. In this perspective, the proposal of inter corporate alliances approach received
dependable and vigorous support from the data. On the other hand, managerialism and agency
theory both for the control of corporation had momentous direct belongings, despite the fact that
they were rather less consistent. It suggests that a kind indulgent of the nature and consequences of
the control of corporation cannot markdown persuades of the associations of the network control,
or managerialism in shaping the corporate policy.
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The hypothesis rising from theories of inter corporate alliances were sustained with a consideration
to the intensity of internal mechanisms, transformation in external mechanisms and stockholder
rate of return on the level of internal mechanisms and external mechanisms. Hypotheses emerging
from the managerialist perspective received some support with endorsement obtained for the direct
effects of managerial (direct) control on the accounting performance of the firm, on the level of
internal and external mechanisms and on changes in the internal and external mechanisms.
Further the general lack of significance of coefficient involving the interaction of direct control
and stockholder rate of return (DIRRET) or support of these coefficients in a direction opposite to
that predicted. It further suggests endorsement of the noting that BoDs of firms dominated by
powerful managers fail to serve owners interests. However, the hefty number of consequences
are not in agreement with the hypothesis specified by the theory of managerialism proposes that
even in firms, subjugated by managers, BoDs appraisals of top executives taken into deliberation
at least to mere amount, the interests of the corporations owners. Findings are as the degree of
managerial control increased, firm size and the levels of and changes in the compensations of
CEOs were negatively associated, may be interpreted that the preference of managers are not
always continued at the disbursement of owners, even in the firms having exceedingly
authoritative managers. Market performance as an important criterion for the evaluation of top
managers was not ever-present. For instance, in neither the CEO compensation nor turnover
decision in firms restricted by commanding managers, or the firms managed by corporate elite,
market performance indicate that in firms characterized by a high degree of managerial control,
market performance often tends to either delinked with the reward and turnover of the CEO or be
otherwise employed in ways contrary to the preferences of the corporation.
Additionally the analysis described earlier also examined the influence of firm size and industry
performance on the nature of corporate control and the performance indicators. It indicates that, as
expected, firm size influenced direct control. Also as expected, effects on industry performance
and significant effects on the accounting and market performance of the firm.
The present study examined the propositions of differing perspectives regarding the control of
corporation for the governing performance of the BoD in the non-financial listed firms. In
particular, the performance of the BoD examined with respect to its ability to maintain owners
interests in the face of different control situations. This study contributes the extent knowledge in
three ways. First, the present study tries to implement a broader understanding of the construct of
the control of corporation. Second, this study examined the associations connecting the internal
and external mechanisms and firm performance gauge in non-financial firms. Third study engaged
SEM (structural equation modeling) techniques at the same time testing the illuminating power of
the viewpoint of inter-corporate alliances, managerialism and agency theory for the determination
of the internal and external mechanisms employed for the corporate control.
The findings of the present research proposed further examination on the areas of the control of
corporation. Further research should more richly examine the temperament of the rewards to
managers for appealing in long-term investment decisions and corporate illegal behaviors, both of
which may have outcomes to managers diverse from those preferred by the owner of the
corporation.
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MONEY SUPPLY & STOCK MARKET PRICES: A STUDY ON KARACHI STOCK EXCHANGE
Qurat-Ul-Ain Zafar
MS Scholar, Faculty of Management Sciences, International Islamic University Islamabad, Pakistan
Mahira Rafique
MS Scholar, Faculty of Management Sciences, International Islamic University Islamabad, Pakistan
Dr. Zaheer Abbas

Assistant Professor, Faculty of Management Sciences, International Islamic University Islamabad, Pakistan
Abstract
This paper aims at investigating the relationship between money supply and stock returns with
reference to Pakistan economy. Monthly data of stock returns and money supply is taken from
June 2004 to Dec 2009. The techniques applied on the data are ADF, Johansen Co-integration and
Pair wise Granger Causality Tests. It was empirically found that, money supply does not impact
the returns of stock (KSE100 Index) but stock returns do have impact on the money supply.
Keywords: Money supply, Stock returns.
1.
INTRODUCTION & LITERATURE REVIEW
The relationship between money supply and stock returns has been a keen topic of discussion
among economists for some time now. According to some, the relationship exists but the direction
(as to being unidirectional or bidirectional) still invites debate. Whereas, others argue that if the
stock market is efficient, its returns should already depict any changes in the macroeconomic
variables and henceforth they negate existence of causal relationship between money supply and
stock returns.
Money supply is the total amount of money available in an economy at a particular time period.
The standard measure usually used to define money includes currency in circulation and demand
deposits. Money supply in any country is controlled by central bank. Whereas, stock returns is the
money gained or lost on stock prices. It is usually represented as rate of return. Money supply can
impact on the stock returns individually, and along with other macroeconomic variables as well.
Diverse literature is available on determining the relationship between money supply and stock
returns.
Sprinkels work (1964) is considered as pioneering step in this regard. In his work, he studied the
relationship between money supply and stock price in the United States. He used the data from
1918 to 1960 and found a strong relationship between money supply and stock prices. His
conclusions although were primarily based upon graphical analysis. Portfolio Theory also explains
relation between money supply and stock returns. According to this theory, investors will shift
their portfolio choices to financial assets (including equity) rather than holding on to non-interest
bearing money as a result of an increase in money supply. Jakkaphong Janrattanagul (2009) used
multiple linear regression model to analyze the relationship between money supply and Thailand
stock market returns. He used monthly data from 1990 to 2008. His study showed a positive effect
of money supply on stock market movement in Thailand. Shiblee (2009) used Pearson Correlation
Coefficients to check the relationship between money supply and stock price. Data from industrial
sector of NYSE was taken for a period of 1990 to 2007. She found Linear Relationship between
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Money Supply (M1) and Stock Prices and it was concluded that money supply showed the
strongest relation with respect to stock prices and can be used to predict stock prices.
Habibullah and Baharumshah (1996) studied whether output and money supply can be used to
predict stock prices by using a two-step tri-variate co-integration approach. They took monthly
data on these variables and found no co-integration between money supply, output and stock
markets in Malaysian economy. However, Habibullah (1998) in his later study found causality
between stock returns and money supply in Malaysian economy. V. Rasiah (2010) in his study
compared several macroeconomic variables with Malaysian stock market for a period of 1980 to
2006. Among the four variables studied, money supply was an important one. Using Vector ErrorCorrection Model and calculating variance decompositions from unrestricted VAR, it was
concluded that stock returns are co-integrated with the variables under observation including
money supply. Thus Malaysian capital market provides ample evidence that the macroeconomic
variables do affect stock market returns.
Tarun Chordia, Asani Sarkar, and Avanidhar Subrahmanyam studied common determinants of
trading volume and daily bid-ask spreads for the stock and bond markets. They used weekly data
from 1991-1998. VAR model was used and results showed that stock and bond spreads and
volume are predictable. Their study show causative relationship between financial market liquidity
and monetary policy. Liquidity of one market strongly predicts the liquidity of other market.
Lawrence S. Davidson and Richard T. Froyen (1982) discussed the relationship between stock
returns and monetary policy changes as measured by federal fund rate. They used Tobins
theoretical model and Rozeffs predictive monetary portfolio model. The results showed that
market quickly utilizes most recently available information on monetary aggregates. They found
that increase in federal fund rate tends to decrease the stock returns over 6 9 month period.
Bouakez, Essid, Normandin (2010) in their paper, have addressed these three questions
empirically: (i) Do stock returns respond to monetary policy shocks? (ii) Do stock returns alter
the transmission mechanism of monetary policy? and (iii) Does monetary policy systematically
react to stock returns? Structural Vector Auto Regression on U.S data was applied and the
surprising results found for all three questions were in negation, thus contradicting other research
conclusions.
In Pakistan, Husain and Mahmood (1999) check a causal relationship between money supply and
stock prices. In this regard, three different models were used, namely: 1) Augment Dickey Fuller
Test 2) Durbin Watson Statistic 3) Error Correction Model. M1 and M2 were taken as variables
representing Money Supply whereas stock price indices for 1991 to 1999, were taken for six
sectors (including five sectoral and one general). They conclude that money supply and prices of
stock are non efficient with respect to each other vis-a-vis Pakistan.
Sulaiman D. Mohammad, Adnan Hussain & Adnan Ali (2009) in there paper, check relationship
among M2, Gross Fixed Capital Formation, Whole Sale Price Index, Industrial Production Index,
Call money Rate, Foreign Exchange Reserve and Foreign Exchange Rate. Quarterly data was
taken for a period of 1986 to 2008. Econometrical study using descriptive statistics, unit root and
auto regressive integrated moving average (ARIMA) model were used besides augmented dickey
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fuller (ADF) test. Of the selected variables, Empirical study showed that M2 is a significant
measure of stock prices and affected them negatively.
Thus these contradictory results, urged us to conduct a fresh study to explore the relationship
between stock returns and money supply in Pakistan.
2. DATA SOURCES
In this paper, the sample covers monthly data from June 2004 to Dec 2009. We have used M2 as
proxy of money supply, where:
M2 = M1 + saving deposits + time deposits + Money Market Mutual Funds (Non-Institutional)
Where:
M1 = Currency Notes + Coins + Checkable Deposits + Traveler Cheques
While KSE 100 Index has been taken as proxy for stock returns.
Monthly data of M2 has been retrieved from the published data of IMF. Whereas KSE 100 Index
Data has been taken from published data of Stock Exchange Securities, available at authentic
sources like Business Recorder.
3. METHODOLOGY
In this paper, the main purpose of our study is to check the nature and direction of relationship
between money supply and stock returns. This topic has already been explored: [Husain and
Mahmood (1999)] in Pakistan but the paper under readers consideration provides a fresh insight
into the subject and takes into account fresh time series data. In this paper, the sample covers
monthly data from June 2004 to Dec 2009. We have used M2 as proxy of money supply, where:
M2 = M1 + saving deposits + time deposits + Money Market Mutual Funds (Non-Institutional)
Whereas KSE100 Index has been taken as proxy for Stock Returns. For the purpose of calculation,
firstly the natural log of M2 has been taken while stock returns have been calculated by taking first
difference of natural log KSE100 Index. Numerically represented as:
Rt = LN KSE100 t LN KSE100 t-1
Firstly, economic variables need to be tested for stationarity. Stationarity means that variables
shouldnt show any trend. That is, no autocorrelation should exist. To check for stationarity among
variables, Augmented Dickey Fuller (ADF) test was applied in this context. The test uses three
models:
Model 1 (without any intercept and trend)
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Model 2 (with intercept but no trend)
Model 3 (with both intercept and trend)
Of these three models, only model 2 & model 3 were estimated in our calculations. The test was
performed for the complete natural log series of both; Money Supply (M2) and Stock Index (KSE
100 Index). The series were not found to be stationary at level (original series). Thus, there was a
need to run the series in order of integration by taking difference of series. When ADFs calculated
value exceeds critical value, Ho (series is unit root/ non stationary) is rejected and series is
deemed to be stationary, thus depicting no auto correlation.
Once the variables are estimated to be stationary, the long term relationship between them is
checked through co-integration. Two or more series are said to be co-integrated, if they share a
particular behavior with reference to long term fluctuations although they may be otherwise
unrelated. In this regard, Johansen Co-Integration Test with Eigen value was run. Johansens
methodology is typically used in a setting where all the variables are I(1).
Granger Causality Test (given by Clive Granger) was then run to ascertain if one time-series is
useful in forecasting the other one. That is, whether a particular lagged series of values of one
variable (X) is helpful in providing significant information about the lagged series of values of
another variable (Y) and vice versa. Henceforth, it tells about Lead-Lag relationship between the
two series of variables.
The Null Hypothesis for Granger Causality Test is:
H0: no causality
If P value < 0.1, we reject H0 the results would be deemed significant and causality would be
present.
If P value > 0.1, then H0 would be accepted. Hence, there would be no causality and the results
would be insignificant.
Lag of X is causing Y:
--------Eq(1)
Where H0: i = 0
That is, X does not cause Y
Lag of Y is causing X:
--------Eq(2)
Where H0: i = 0
That is, Y does not cause X
If no co-integration is found, then granger causality test is run at first difference.
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4. RESULTS:
First we check the stationarity of the data by applying unit root test. To apply unit root test we first
take the natural log of M2 and KSE100 index. In unit root we apply ADF test. We apply ADF at
level and at first difference. The results of ADF are reported in table 1.
4.1 Augmented Dickey-Fuller Unit Root Test:

We only apply 2nd and 3rd model of ADF. The results shows that acceptance of the presence of
unit roots at level indicates that none of the series is stationary at level in both models. And the
series become stationary at first difference in both models. This suggests that both series are
integrated at same order. As both series are integrated at same order, there is a possibility of cointegration among the series.
4.2 Johansen Co-integration Test:
Next, co-integration regression is applied and Johansen co-integration test is used and results are
reported in table 2.
The tables shows that as likelihood ratio of M2 and KSE does not exceed the critical value at either
5% or 1% significance level, so we accept the null hypothesis (Ho = no co-integration between
series exist). Thus there is no co-integration among both series which indicates absence of a long
term relationship between the two.
4.3 Pair wise Granger Causality Test:
Finally, we run Granger Causality Test to check Lead-Lag relationship between the two series of
variables. As there is no co-integration among both series, so we run Granger Causality Test at
first difference. The results are reported in table 3.
The results indicate that as probability of M2 does not Granger Cause KSE is greater than 0.1, so
we accept Ho that M2 does not Granger Cause KSE and there exists no causality. Whereas the
probability of 2nd null hypothesis is less than 0.1, so we accept Ho that KSE does Granger Cause
M2. Thus, there exists a unidirectional relationship between KSE and M2. This means that
KSE returns drive monetary policy makers to influence monetary policy.
5. SUMMARY AND CONCLUSIONS:
The purpose of this paper is to study the relationship between money supply and stock returns in
the context of Pakistan. For money supply, M2 is used and for stock return, KSE100 index is used.
The monthly data of M2 and KSE100 Index from June 2004 to Dec 2009 was taken. ADF,
Johansen Co-integration and Pair wise Granger Causality Tests are used on data.
Firstly, the stationarity of data has been checked by applying ADF test and found data stationary at
1st difference. 2nd and 3rd models of ADF were used and both variables became stationary at same
level. Secondly, Johansen Co-integration was applied to check the co-integration among M2 and
KSE100 Index, and it was found that no co-integration existed between both series. Lastly, Pair
wise Granger Causality Test was used to check the causal relationship between both series and
results show KSE 100 Index does Granger Cause M2. Thus, the KSE returns drive monetary
policy makers to influence monetary policies and not conversely. Thus, monetary policy designers
ought to keep a keen look on the stock market indices as they play a driving role in formulating the
final monetary policy. The ups and downs in the stock market should be reflected in the monetary
policy as per the findings of this study. Hence, monetary policy can be forecasted on the basis of
KSE Returns.
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REFERENCES
Bouakez H., Essid B. O., & Normandin M. (2010, September 10). Stock Returns and Monetary
Policy: Are There Any Ties? Working Paper 10-26.
Chordia T., Sarkar A., & Subrahmayam A. (2001, December 11). Common Determinants of Bond
and Stock Market Liquidity: The Impact of Financial Crises, Monetary Policy, and Mutual
Fund Flows.
Davidson L. S., & Froyen R. T. (March 1982). Monetary Policy and Stock Returns: Are Stock
Markets Efficient.
Engle, R., & C. Granger. (1987). Cointegration and Error Correction: Representation, Estimation,
and Testing. Econometrica 251-276.
Husain F., & Mahmood T. (Winter 1999). Monetary Expansion and Stock Returns in Pakistan.
The Pakistan Development Review 38 : 4 Part II, 769776.
Mohammad S. D., Hussain A., & Ali A. (2009). Impact of Macroeconomics Variables on Stock
Prices: Empirical Evidence in case of KSE. European Journal of Scientific Research 38
No.1, 96-103.
Rasiah R. R. V. (2010). Macroeconomic Activity and The Malaysian Stock Market: Empirival
Evidence of Dynamic Relations. The International Journal of Business and Finance
Research, 4.
Shiblee L. (2009, December 29). The Impact of Inflation, GDP, Unemployment, and Money Supply
on Stock Prices.
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Annexure
AT FIRST DIFFERENCE
AT LEVEL
Intercept
&Trend
Intercept
Intercept
& Trend
Model 3
Model 2
Model 3
-2.11
-1.84
-4.64
-4.84
-1.32
-1.82
-4.84
-5.01
-3.53
-4.1
-3.54
-4.11
-2.91
-3.48
Intercept
Model 2
KSE
M2
Critical
Value@1%
-2.91
-3.48
Critical
Value@5%
Augmented Dickey-Fuller Unit Root Test:
Table 1
Included observations: 64
Test assumption: Linear deterministic trend in the data
Series: KSE M2
Lags interval: 1 to 2
Eigenvalue
0.078492
0.006566
Likelihood
Ratio
5.653239
0.421625
5 Percent
Critical Value
15.41
3.76
1 Percent
Critical Value
20.04
6.65
Hypothesized
No. of CE(s)
None
At most 1
*(**) denotes rejection of the hypothesis at 5%(1%) significant level

L.R. rejects any co-integration at 5% significance level.
Table 2 : Johansen Co-integration Test:
Sample: 1 67
Lags: 2
Null Hypothesis:
DM2 does not Granger Cause DKSE
DKSE does not Granger Cause DM2
Table 3: Pair wise Granger Causality Test
Obs
64
Probability
0.33571
0.04311
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Trade Flow Factors & Capital Account:
A study of Economic Growth in SAARC Countries
MAY 2011
VOL 3, NO 1
Ms. Nishwa iqbal

PhD Scholar of International Islamic University Islamabad, Department of Management
Sciences, Pakistan
Ms. Shazia Iqbal Khalid
PhD Scholar of International Islamic University Islamabad, Department of
Management Sciences, Pakistan
Mohammad Nisar
MS Scholar Faculty of Management Sciences, International Islamic university Islamabad
Dr. Zaheer Abbas
Assistant Professor of International Islamic University Islamabad, Department of
Management Sciences, Pakistan
Abstract
Main purpose behind this study is to explore the ultimate impact of Trade flow factors and Capital
Account on the Economic and Financial Growth of SAARC countries. Where SARRC includes
Pakistan, Nepal, Bhutan, Maldives, Sirilanka, India & Bangladesh established on 8th December,
1985. After becoming members these countries agreed to share trade agreements with each other.
In order to find the relation data have been collected from international monetary fund for the
period of 20 years from 1990-2009. Where AFD and Co-Integration Test were applied, in addition
to these OLS test was also applied to find out growth is affected by trade flow factors and capital.
Findings show that exchange rate has a positive significant impact on the growth level in SAARC
countries. While trade restrictions have insignificant relation with growth, inflation has negative
insignificant relation with financial growth in SAARC countries. Capital Account impact on the
growth has also been checked where insignificant relationship have been found during the
investigation period.
Key Words: Growth, Capital Account, Exchange Rate, Trade Restriction, Inflation
1. Introduction
Firms initially work at their home level and earn profit which affects the growth of the economy.
Gradually it is suggested by the experts to expand the business across the borders of its country so
firms start operations around the world and become international firm. While working across the
borders earnings of firm involve exchange rate, any favorable changes in currency also changes the
economic growth. Afterwards at some stage when it is considered suitable for the firms they open
their subsidiaries in foreign countries controlled by their home countys main firm they are called
multinational firms. In this case firms directly invest in fixed assets of the foreign countries. At the
end of the period after earnings are transferred back to home country, this shift of profits boost the
economic growth of home country.
In previous decades the flow of capital across the boarders was not easy because of the trade
restrictions imposed by the Governments. This hurdles the expansion of many economies and their
growth altimately. But since the 19th century the rising concept of borderless organization counties
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open the borders for foreign companies and investors. This results financial dealings around the
globe for investment in order to fulfill the need and demand of customers. Such openness of
economic transactions give rise industrialized economies. The elimination of borders among
countries brings exchange of money, people, products, services, skills etc. many researchers have
worked on the elimination of borders and opening of new doors of trade including DFI, Portfolio
Investment & Capital Investment (Capital Account).
Studies have been conducted on the trends of foreign direct investment and capital flows in
various countries. Research findings elaborate the observations regarding the impact of capital
mobility on economic growth. Few discussions have been made regarding the economic
integration of the markets in the past. Taylor, 1986 found elaborates that mobility of capital shows
a decreasing trend in the era of inter-war while a rising trend in the movement of capital across the
countries can be observed during the period of 19th century. The main reason behind this upward
trend was openness of borders for each other and origination of the concept of borderless
organizations (Taylor, 1996).
In connection with the business operations across the country borders there are some
trade factors which affect the growth of economy i.e. Inflation, Trade Restrictions & Exchange
Rate. Inflation rate reduce the purchasing power of consumers as goods and services prices rise. In
order to control the higher inflationary affect central bank play an important role so that economy
can grow fastly and level of prices remain at some level between inflation and deflation(Web
source).
Trade restrictions on the other hand are the barriers on the flow of capital from one
country to another country Imposed by Governments in order to save local business. In some cases
governments imposed quotas on the imports or exports of products or services which hurdles or
restricts the free movement of capital across the borders and the trade growth ultimately. Another
trade factor which is very important from economic growth perspective i.e. Exchange rate is the
rate of exchange of one currency in terms of another countrys currency. A strong currency few
amount will be used in exchange to receive more amount of a weak currency. Higher rate affect
the economy growth as it shows the increased demand of countrys currency and ultimately its
products and services.
All above discussed are various changing the trends of economic growth of various
countries; which is explained by GDP or Gross Domestic Product. A high level of GDP shows
growth of the countrys economy i.e. economy is moving towards prosperity and healthy
conditions by using all resources at its maximum level (web source). This Paper will focus study of
factors which affects the level economic growth in SAARC countries.
Where SAARC stands for South Asian Association for Regional Cooperation . It was
established after government leaders of states of Pakistan, Bhutan, Bangladesh, Maldives, Nepal,
Sirilanka & India accepted on 8th December, 1985 the charter of this cooperation (Web source).
Through the platform provided by SAARC members countries get together in a friendly
environment to resolve various issues and make different economic dealings beneficial for each
other. While working together and opening the borders for trade purposes there are different forces
that have changed the tendency of economic growth of these member countries in recent years. It
has been still under discussion that what are those forces and how they have changed the level
growth. In this regard all SAARC member countries have been targeted to find out how growth in
these countries is affected by trade factors and capital account movements.
The research study made has been designed as follows: Literature and historical
discussions have been made about these counties where trade factors and capital account are
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discussed in detail. Review part of the paper have been followed by theoretical framework where
a model have been proposed suggesting the possible impact on the growth, this part have been
followed by the methodology portion where details about data collection .and testing have been
given. Conclusion part has been added to the knowledge after the results and discussions where
test results are discussed and also their possible affects on the proposed model. Paper add to the
knowledge how trade restrictions, inflationary situations, exchange rate fluctuations & capital
account movements affect the growth of SAARC countries, it further bring into readers dictionary
that how it vary among these countries
This portion reviews the work done by previous researchers on the economic growth and the
possible factors that have changed the trends of growth. After discussing the growth factors in
general sense, studies related to SAARC countries have been also focused.
Countries deal with each other in financial terms in order to get benefits from cross border
economies. Openness of borders gave birth to the welcoming behavior of people from different
regions; it further lessens the investors hesitation to invest across the boundaries of their countries.
Globalization has changed the way people think about the trade and investment. Investors from all
around the globe are integrated on the same plate form to invest their funds and take benefits from
the potential of business out of their countries. In addition to this people expands their businesses
and open new lines of their business.
This expansion of business gives rise to the mobilization of capital from one country
to another and also creates new markets. Jho, (2003), in his study support and elaborate the idea
that among many other factors globalization affect the capital and also the industries (Jho,
2003).The new markets developed have high potential to absorb the funds from around the globe.
With the global integration and openness among the whole world, globalization gives rise to the
firms becoming MNCS and Transnational firms. Multinational firms also play their major role in
elimination of borders as they start manufacturing their products around the globe by opening their
subsidiaries in other counties duly controlled by headquarter located in home country, at the end
when profits are returned back to home it plays a vital role in economic growth of the country. In
this way movement of money and return back with profit changes the level and trends of growth in
various countries.To support the above a few findings by previous researchers are as follows:
2.1 Capital Account & Economic Growth:
Capital Account is very important from investment and growth point of view. It
comprises of Direct Foreign Investment, Portfolio Investments & Capital Investment. Capital
account has played its role in the development of economies; many authors have worked on the
issue and found that there exist a relationship between capital account and growth. Works done by
Kim.et.al (2004) elaborates that emergence of new markets begins due to openness of borders for
capital account. Researchers further argue that this liberalization of capital reduce the possible
impact of current account on the capital flows .It further reduces the impact of flow of capital on
factors a macro level. Work done by scholars also adds to the knowledge that rising trends of
investment as well as expenditures are linked with liberalization of capital account (Kim.et al.
2004).
Discussions have been made by previous researchers on the liberalization of flow of
capital where findings suggest that it has significant impact on the growth of countrys economy.
They further found that this openness of FDI and other different structures of capital have not only
affected the development of a single country but it also changes the track of growth mechanism of
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whole globe (Garcia & Santana, 2004). Henry, (2007) supports the theory by adding that financial
growth also depends upon the free movement of investments around the globe (Henry, 2007). In
addition to the cause and effect relationship various authors have also worked to find out how
growth is related with capital movements and flows across the borders of a country. Saidi & Aloui,
(2010), found that there exist a direct link between both i.e. country growth and flow of capital
(Saidi & Aloui, 2010).
2.2 Trade Flow Factors & Economic Growth

Trade flow factors are also very important from growth point of view; where inflation is a
very crucial factor changing the shape of economy. Various research works have been done by
previous scholars to find out how inflation affects the economic position of a country and also the
world after the liberalization of trade. Study made shows that if inflation increases beyond some
level it spoil the economic position of a country (Arai.et al. 2002). In addition to inflation there is
another factor very important from growth point of view i.e. trade restriction which also hurdles
the economic growth and advancement in financial sector. Ideas have been explored by various
researchers and various theories and concepts are also suggested by them. Kreickemeier & Moller,
2006 movement of capital by decreasing trade restrictions lay its role for the welfare of people of
country and also in growth of the country (Kreickemeier & Moller, 2006).
In addition to the factors discussed above exchange rate also act as important variable that
transform the economies into new dimensions of growth or failures. Scholars have worked by
using the historical data of exchange rate and growth various countries where results show that
exchange rate fluctuations are very crucial for the accomplishment of the countrys financial
position. Where studies made on Nigerian economic growth demonstrates that increasing exchange
rate push the economy situation toward prosperity and development (Aliyu, 2009). Taking into
account the above discussion study targets determination of growth of SAARC countries; by using
values for capital account and trade factors.
3. Theoretical Framework
Capital
Account
Economic
Growth
Factors affecting Trade Flows

Inflation
Exchange Rate Govt
Restriction
National Income
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4. Methodology
4.1 Data
This paper divides study work into two categories of research work. First category
comprises of exploration of possible impact of capital account on growth of SAARC countries.
Second category focus on impact of trade factors on Economic Growth. For this purpose SAARC
countries have been focused to find the results. Data was collected from the source of International
Monetary Fund for the period of twenty years from 1990-2009. For data Collection SAARC
countries focused includes Pakistan, Bangladesh and Nepal, India, Sri Lanka, Maldives & Bhutan.
In order to reach the findings ADF and OLS test have been applied. In addition to this to find out
long term relationship Co integration test was also applied among capital account and trade flow
factors.
4.2 Equation
(Equation No.1)
4.3 Variable Measurement
Gross Domestic Product shows total Gross Domestic earnings during the year by adding
manufacturing and service sector output.
Exchange Rate shows exchange rate of countrys currency.
Inflation is measured by taking Consumer Price Index Values.
Trade Restriction calculated by GDP/(Imports+ Exports)
Capital Account is the value of Capital Account given during the period.
4.3.6 Expected Parameterization
Coefficient
Expected Sign
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5.
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VOL 3, NO 1
Results & Discussion
After completion of data collection Unit Root Test ADF have been applied to find out how much data are
integrated and how it fluctuates over the time period. Results shown in Table 1 depicts that data values comes
stationary at first difference and rejected the null hypothesis except one variable i.e. GDP where data comes stationary
at level and rejected the null hypothesis. So it can be said that exchange rate, capital account, inflation, trade
restrictions are stationary at first difference i.e. CA(1), EXCH(1), INF(1), TR(1) but not at CA(0), EXCH(0), INF(0),
TR(0). Table 1 explains ADF values for all variables where the critical value is also given which can be compared to
the values of 1st difference. For GDP results of ADF shows that GDP is stationary at level which can be shown as
GDP (0).
After applying ADF and verifying the data stationarity Long-term relationship among Exchange Rate,
Inflation , GDP, Trade Restrictions & capital Account have been find out by applying Co Integration test. Table 2 give
the view of the findings achieved for the test. Results show that all these variables have long-term relationship for
these countries where value of maximum likelihood is greater than critical value i.e. 96.55118>68.52 from at most 1 to
at most 5. This significance have shown that after the creation of SAARC trade barriers have been reduced between
these countries which provides economic growth and trade factors a chance flourish and prosper.
The last part of data analysis add to knowledge about the Ordinary Least Square method applied to find out
the impact of Exchange Rate, Inflation, Trade Restrictions & capital Account on economic growth in the SAARC
countries. Table 3 shows results for OLS method applied where CA t. statistic value is equal to 0.007188<2, this
depicts that there is positive insignificant relationship between the variables and capital account does not cause any
significant changes in growth of the economy in SAARC countries. The main reason may be that elements of current
account dominate the influence of capital account elements (FDI, Portfolio Investment, and Capital Investment) in
these countries, as import and export transactions among these countries are higher than the capital intensive
investments. After capital account another very important variable Exchange rate has also been added to the model.
Results shows that it has a positive significant impact on the financial growth of SAARC countries i.e. t. statistic value
8.102536>2.00, which is highly significant value. Trade restrictions impact have also been checked which shows has t
statistic value 1.378579<2.00. Results findings suggest that it is not significantly affecting the growth during the
period of 1990-2009 so the relationship between the variables is positive insignificant for SAARC countries. The main
reason behind it may be that during this period although these restrictions were eliminated but flow of trade was
distributed among the member countries so the share of trade was not at increased level to any single party which can
significantly bring changes in the growth. The last factor under discussion is inflation where t .statistic value 0.178151<2.00. This shows that it has negative insignificant impact on the growth of the SAARC countries.
Regression results for cross country Dummy has also be achieved with the help f OLS test where Pakistan is
kept as base country dummy. DBANG is dummy for Bangladesh and it has a t.value of 4.262368, findings suggests
that it is highly significant with respect to base country i.e. Pakistan. DBHUTAN is dummy for Bhutan and it has t
value of 4.833814 showing it is significantly different from base country. Given below in the Table 3 there are dummy
DIND, DNEP, DSIRI for India, Nepal & Sirilanka respectively. Regression values for these three dummy are
2.399600, 4.252872 & 12.56504 which shows that these entire three dummy are significantly different with respect to
base country. Whereas DMALD is dummy for Maldives with a regression value of 0.951996, this value explains that
dummy is insignificantly different from base country. R.Square value is also given in Regression Table.no.3 which is
0.710553. This value shows that more than 70 percent of the movements in natural log of GDP are explained by the
6.
Conclusion
The research work put forward the relationship between GDP and other factors including trade flow factors
and capital account. Previous studies done by other reviewers and researchers suggests that trade flow factors have
significant impact on the development of economic position of SAARC countries. Reducing the barriers and
welcoming trade from other countries leads to huge capital movements across the borders which extend to the transfer
of human capital and skills as well. People of these countries get job opportunities and higher education across the
border.
Results analysis and discussion made above supports the theory that exchange rate has a positive significant
impact on the growth level in SAARC countries. While few other factors have insignificant relationship with the
economic growth. Results suggests that trade restrictions have insignificant relation with growth and inflation has
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negative insignificant relation with financial growth in SAARC countries. In addition to the variables brought under
discussion Capital Account impact on the growth has also been checked which shows insignificant relationship for
SAARC during the investigation period. Debate has been made on the issue that its affect may be eliminated by
current account elements in these countries.
Work done can help the policy makers to focus on the capital intensive trades as well in addition to the other modes of
trade. Study made can be extended to other regions as by targeting other corporations or association in various areas.
References
Taylor, A.M. (1996), International Capital Mobility in History: The Saving-Investment, Working Paper 5743
National Bureau Of Economic Research.
Inflation, Retrieved on 15 December, 2010 from http://www.investopedia.com/terms/i/inflation.asp.
Gross Domestic Product, Retrieved on 15 December, 2010 from http://www.thinkplaninvest.com/2009/04/what-isgdp/.
South Asian Association for Regional Cooperation, Retrieved on 15 December, 2010 from http://www.saarc.org/.
Kim.S., Kim,S.H.,& Wang.Y.(2004), Macroeconomic Effects of Capital Account Liberalization: the Case of Korea,
Review of Development Economics ,Vol. 8 No.4,Page. 624639.
Garcia,F., & Santana,J.R. (2004) New evidence of the impact of capital account liberalization on economic growth,
Working paper series, Retrieved on 15 December, 2010 from http://ideas.repec.org/p/ecm/latm04/86.html.
Saidi,H., & Aloui, C. (2010). Capital Account Liberalization and Economic Growth: GMM System Analysis,
International Journal of Economics and Finance, Vol. 2, No. 5.
Henry, P.B. (2007), Capital Account Liberalization: Theory, Evidence, and Speculation, Journal of Economic
Literature, Vol. XLV, pp. 887935.
Hahn. E, (2007), The Impact of Exchange Rate Shocks On Sectoral Activity and Prices in the Euro Area, Working
Paper Series No 796.
Aliyu, S.U.R. (2009), Impact of Oil Price Shock and Exchange Rate Volatility on Economic Growth in Nigeria: An
Empirical Investigation, Research Journal of International Studies - Issue 11.
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Annexure
Variables
CA
level
-3.23164
1st diff
-7.06584
EXCHA
-2.24312
-5.13608
GDP
3.915119
1.988118
INF
-4.23275
-7.43778
TR
-1.9616
-5.02047
1%
5%
10%
1%
5%
10%
1%
5%
10%
1%
5%
10%
1%
5%
10%
Critical Value
-3.48
-2.883
-2.5781
-3.48
-2.883
-2.5781
-3.48
-2.883
-2.5781
-3.48
-2.883
-2.5781
-3.48
-2.883
-2.5781
Table 1: Unit Root test
Eigenvalue
LHRatio
5% cv
1% cv
Result
0.306703
96.55118
68.52
76.07
None **
0.140628
47.10111
47.21
54.46
At most 1
0.123788
26.64143
29.68
35.65
At most 2
0.045701
8.801541
15.41
20.04
At most 3
0.01825
2.486462
3.76
6.65
At most 4
Table 2: Co integration
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R-squared
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Variable
Coefficient
t-Statistic
Prob.
-1506413.
-6.870516
0.0000
CA
0.034727
0.007188
0.9943
DBANG
682370.2
4.262368
0.0000
DBHUTAN
854905.9
4.833814
0.0000
DIND
666546.9
2.399600
0.0178
DMALD
554798.7
0.951996
0.3429
DNEP
732312.7
4.252872
0.0000
DSIRI
1851159.
12.56504
0.0000
EXCHA
10972.32
8.102536
0.0000
INF
-107142.8
-0.178151
0.8589
TR
50104.89
1.378579
0.1704
0.710553
Table 3: OLS Results for Variables & Cross country Dummy
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Business Processes Reengineering in The Islamic Republic of Iran Customs Administration

(A Case Study in Zahedan Customs Organization )
Dr. Badrodin Orei Yazdani
Faculty of Management and Accounting, University of Sistan and Baluchestan, Iran
Dr. Habibollah Salarzehi
Faculty of Management and Accounting, University of Sistan and Baluchestan, Iran
Mohsen Shahbeigi
Master of Industrial Engineering, Iran, zahedan
Abstract
The economic-social evolutions in recent decades at the world have forced the customs as general
reconsidering their own situations, functions and traditional roles, they obtain the required
preparation to accept the new responsibilities. Concentrating to the determining roles and effects of
business particularly external trade in achieving of a permanent and all-directions development at
the our country, the important function that the customs are accountable in providing of necessary
fields in order to access development, is understandable. On the other hand, it seems that the
affairs relative to business specially formalities of the goods release through customs of our
country especially Zahedan customs follows long and complicated rules and administrative
bureaucracy so that about ten percent of the total sum exchanged at the international business, is
the costs to supply of the documents and formalities relative to them. The main objective of
present study is the analyze of the goods release process through Zahedan customs by
reengineering approach. In this direction the present customs formalities in order to the goods
release through Zahedan customs has been investigated and the most important presumable
obstacles on the way of efficient getting the goods through were indentified and analyzed, and
finally two process es were evaluated to make the original and mild changes that their main part is
possible using the abilities of information technology in order to improve processes, their
presentations and validities by distribution a questionnaire to customs experts and clients.
Keyword:Business process reengineering, The Goods release process , Information technology.
Introduction
During recent decades, by considering to the ascending developments in international commercials
and increasing in exports amounts between countries, customs and customs affairs have had key
roles in worlds and nowadays they are one of the most important factors in equation and
international commercial policies. Customs has devoted especial condition to itself in some
countries regarding to political and economical evolutions. Eliminating the rites and varying the
customs tariff are one of the issues that are posed in European unions for couple of years and / or
some countries to Gatt system has shown their tendency to be convergent and having the same
international commercial relationships and applying the commercial exchange facilities.
Nowadays, foreign business issues play a key role in the most important global evolutions and they
are in the head of all political, economical, cultural, social affairs. Diplomacy is the international
ritual typically based on foreign business and customs has the international position among them
and is responsible to form the commercial policies in foreign business field / aspect. Reengineering
of business is one of the novel managing approaches in order to creating variation and basic and
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wonderful evolutions to achieve the customer satisfactory organization attention to itself in order
to creating wonderful improvement in their various processes. Hence , we attempt to pass an
important and useful pace in order to create fundamental variations and achieve excellent goals of
Zahedan customs by selecting this research in M.Sc thesis format by title Analyzing goods
release in Zahedan customs by reengineering approach .
Literature Review
Reengineering of business processes is one of the recent innovations of industrial engineering and
management that attempts by emphasizing on the rate of basical / radical design of strategy,
process , policies and guidelines and also organizational structure in order to optimizing affair
processes (Rotabkhan , 2000). Reengineering of business is an expanding strategy of improving
business that is posed for the first time by Michael Hamer and James Champi and Theas,
Davenport and short since 1990s (Oneil , Terziovskia et al., 2003).
1990s were the summit point of reengineering approach. Since companies needed a novel method
regarding to develop in novel techniques in order to increase their competitive powers.
Reengineering has posed this method and after that / then several researches have done by
researchers and also important / prominent companies such as Oticket, Ford motor, America and
Italy bank, Progressive Insurance Company, Commercial relationships system services company
AT&T, Pasific soft company, Birmanghham mid shire building institute, International sign
company, Kingstone hospital, National Volkan insurance company, Ximence Tiksrorf computer
services company , that have achieved valuable / worthful results. Reengineering is one of the
novel approach in company and organization evolutions that is managed since 1990s and has
considered because of basic problems resulting of applying old organizing methods in novel era
and they could achieve competitive advantage and remarkable evolutions and have known that
evolutionary method appropriately and applied it by suitable methodology. Approaches and
different methodologies are proposed by researchers for reengineering that we can consider
different classification for them. The quality of emphasizing and focusing on factors such as
Information Technology(IT),strategy,quality management, process and labor. Another approach is
the quality of viewing methodologies in innovating essence of reengineering and its inner essence ;
as an example , Hammer and Champy believe that reengineering is much more dependent to
creativity, innovation and novel thinking than curing and past experiences, they believe that
organization should define reengineering, separately. By this sight, defining a structural approach
for reengineering is impossible. However, Davenport, Short, Harrison and furey believe that a
defined / determined frame and applying experiences, proposing schemes and work schedules by
training and motivating individuals are needed for running reengineering project. One of the main
unit of Electronic Government is Electronic Business that customs organization has one of the
most important role in this aspect normally.
Based on this structure and regarding to global evolutions, some procedures are running for
mechanization of affair in Iran customs. Establishing of commercial single window is one of the
procedures that can carry out in order to meet the needs, facilitating and decreasing the time of
goods / items release in customs.
Commercial single window is a system that helps businessmen offer information for passing legal
requests regarding to exports or imports in a body unit. In applicable sight, single window provides
a physical or electronical input for offering and maintaining all data. This input is managing by a
unit that after that this information will be transferred to all related units. The following factors are
the commercial single window advantages:
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1.Decreasing costs via decreasing delays

2. Accelerating endorsing and releasing the goods
3. Providing the possibility of explaining rules because of making requests predictable for imports
and exports
4. Allocating sources more efficiently
5. Increasing the income transparence / transparency
Research Importance:
The scientific and technological developments of twentieth century also include management and
we can probably say that the rate of developing managing techniques are more than many sciences
and techniques. Managing the expanding and developed new organizations is in need of applying
novel techniques and technologies that should be exerted by managers and the reengineering
techniques of organizations is one of the most efficient of them. Exerting appropriate management
without analyzing methods that means defining the organizational problems and offering their
solutions are not possible. Our country prominent developments in social and economical affairs
have resulted in ascending expansion in organizations and we can observe the expansion of
previous organizations and creating and establishing new institutes. Hence, employing novel
management techniques are accounted necessary for exploiting limited organizational facilities.
Research Objectives:
Regarding to research issue, we can summarize the most important objects of this research as
follows:
-investigating the current position of releasing goods / items in Zahedan customs
- priorship of reengineering aspects
- introducing scientific and performing approaches in the aspect of improving the goods / items
release regarding to foursome criteria of reengineering (quality, cost, speed, customser
satisfactory)
Research Assumptions:
Main Assumptions:
-The goods / items release process in Zahedan customs is not satisfactory in clerks sights
regarding to foursome engineering criteria
- The goods / items release process in Zahedan customs is not satisfactory in customer sights
regarding to foursome engineering criteria.
Secondary Assumption:
- The goods release process in Zahedan customs has not appropriate rate in clerks sights.
- The goods release process in Zahedan customs is not satisfactory considering to service quality in
clerks sights.
- The goods release process in Zahedan customs is not appropriate considering to expenditures in
clerks sights.
- The goods release process in Zahedan customs is not satisfactory in clerks sights.
- The goods release process in Zahedan customs has not appropriate rate in customers sights.
- The goods release process in Zahedan customs is not satisfactory considering to service quality in
customer sights.
- The goods release process in Zahedan customs is not appropriate considering to expenditures in
customer sights.
- The goods release process in Zahedan customs is not satisfactory in customer sights.
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Research method:
This research is descriptive-passable considering to type and scientific applicable considering to
object. The object of passable research is not creating variation by exact comparing various
features of factors in Ali Tile Aid in passable approach but also persue / follow a variation that has
occurred normally (Kochak Zadeh, Spring 86). In this research, a research inquiry is employed in
order to investigating current quality barriers such as process rate, service quality and its
expenditure. After depicting and describing current processes under investigation, the proposed
sample of processes is depicted in desired position. In this research, we employ reengineering
methodology of Davenport and Short.
Figure 1 demonstrates this methodology:
Sights
Identification
Understanding
Identification
Primary
Developing
Identifying
Understanding
Identifying
Sample
the
Designing
sights
and
the processes
the
business
and
that
processes
process objects
designing
need
current
and
measuring them
qualifications
and
investigating
the needs to
IT
Figure 1. Theoretical frame of research, Davenport and Short methodology (Davenport & Short , 1990).
Statistical Population:
In this paper, we employed two statistical population for collecting the primary needed
information:
-The statistical population of customer that includes all individuals under the title of factor, the
goods owner or the goods owners representative that refer to Zahedan customs.
- The statistical population of clerks that includes clerks and experts who are involved in processes
which are related to goods release in Zahedan customs. Inquiry, is the primary reference for
collecting information in this research. The inquiry of this research is comprised of four written
questions and twenty eight ones by five (aspects) scale of Lickert besides the questions related to
population identification variables. Interviewing by experts who are involved in goods release
process and some experienced factor and also employing library references are the other collecting
information resources / references in this research.
By considering to the fact that / regarding to the fact that more than 80% (eighty percent) of fourty
customers and fifteen experts are fixed involved in goods release process in Zahedan customs, all
of them are employing for collecting and analyzing by census method.
Analyzing the processes:
In this research, the related process to goods release and optimization are carried out in two stages:
depicting the diagram of processes and analyzing and optimizing in managers and clerk's sights in
release units. Analyzing the goods release process by the two methods: first, depicting the
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processes and second, analyzing the related processes to goods release in the main individuals
sights whom these procedures are advantageous for them.
The desired proposed position is depicted and investigated in two stages. In the primary / first
pace, the primary proposed model is designed under the title of mild reengineering. Customs
should achieve a mild variation during a five-year-old view. However, regarding to the fact that
many countries and less customs throughout the country are moving toward being electrical and
employing infra structures of information technology and electronic customs to facilitate
international business more and more, Zahedan customs is also forced to move toward
fundamental variation in the first stage of Iran membership in global commercial organization.
Investigating the assessment service process
Then, we imply the assessment service process in this paper as one of the most important processes
subject to / so that we employ the process diagrams in depicting this process. Diagram processes
are divided to some horizontal rows. The performing method in customs assessment service that
act under Asycuda Negar project can be defined as follows:
After allocating the registration number (Cotage number) of the statement by the identification unit
and document receivers, the statement will be referred to assessment service. The evaluator
determined by observing the concepts of performing rules of customs affairs, will visit the goods /
items, reflexes and signatures the assessment results according to desired information in statement
related place / location / position. After endorsement, the valuator should reflex the laboratory
results (if it is needed) in written form which is in the endorsement of the statement and the related
position, enquiry and then if the imported goods is according to the appendix statement documents
and after confirmation all stages, signature the statement in the fourth place (d) and refer it to the
related expert. The expert transfers the statement with the filled form of worth investigation for
investigating the worth of determined goods in valuating unit after complete observing the
conception existed in 115-117 performing rules of customs affairs and after confirming the
endorsed materials, recall the statement from computer system, investigate it with the printed
endorsement, catch the recalling number and put the mentioned number in place (b). Then, write
the name, family name and date in related place, (d), and endorse it.
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1.Recieving statement and related document from identification unit

2. Identifying the evaluator by the assessment responsible
3. Percent assessment by assessor and writing the personal point of views in endorsing the
statement
4. Do the goods transport by trucks?
5. Referring to transportation organization and paying the foreign trucks transportation fees
6. Receiving the certificate of paying transportation fees
7. Should the goods be tested?
8. Carrying out the standard test
9. Receiving the test result
10. Should the goods be test sanitarily?
11. Carrying out the sanitary test
13. The goods include 2% fees
14. Referring to office and paying the fees.
15. Receiving the certificate of paying
16. Do the goods need the permission of agricultural separation?
17. Carrying out the agricultural separation
18. Receiving the certificate of agricultural separation
19. Should the goods be tested atomic energy organization?
20. Carrying out the atomic energy test
22. Investigating by the expert of evaluating and endorsing service
23. Carrying out the process related to valuation unit
24. Receiving from the valuating unit and investigating the endorsement
25. Allocating the assessment number to statement / endorsement letter by the expert of assessment
service
26. Investigating and endorsing the statement by the boss of assessment service
27. The end.
Depicting the primary proposed sample for the desired position
After depicting the process diagram in current position, investigating and analyzing it, we depict
the primary desired sample of the investigated process according to figure 3.
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In this research, the other described infrastructures are also investigated and analyzed the same as
assessment service process in current position and the desired position. The summary of created
variations are according to table (a) after reengineering of any sub-process.
Table (a)
Changes
After
Before
Reengineering
Reengineering
Number
Number
Number
Number
Number
Number
Number
Number
Number
of
of
of
of
of
of
of
of
of
delays
actions
personel
delays
actions
personel
delays
actions
personels
17
15
entrance
information unit
11
identification unit
14
14
18
assessment service
11
valuation unit
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2
10
emission
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customs
permission unit
2
Storage unit
13
exit unit
Propositions in accordance with / according to fundamental and mild variations: Alongside the
fundamental variations, we can imply the Asycuda World software as a prominent technique in
electronic customs that systems such as web-based worth, electronic unit window are its subsets.
This software acts under web so that the merchant / businessman or factor can connect to customs
and the adjacent organizations such as bank, commercial organization, standard office, sanitation ,
from his / her work room or everywhere that is connected to internet and endorse his / her
goods electronically and release it finally. All the investigated process are carried out
electronically so that the process of entering information of statement is eliminated applicably. All
documents that are related to businessmen and factors and also the related information to debit rule
14 are in customs database and system controls their credit automatically. All needed permissions
for releasing goods are cought from related organizations connected to the system automatically.
In assessment service process, the goods assessment is carried out in three forms of documental
assessment, physical assessment or none of them. By employing the web-based worth system,
goods assessment is carried out complete electronically and systematically. Ultimately, by making
relationship between businessman and bank and paying salaries, entering his / her goods and
catching customs permission via system, the fund unit and emission customs permission is
eliminated applicably. After inquires and analyzing more investigated infrastructures, most
problems of goods releasing process in Zahedan customs and their solutions are identified based
on table (b).
Table (b):The problems of goods releasing process in Zahedan customs
Row
Process problem
Solution
1
Creating systematic profiles by the Typing the repeated information of

entrance information unit for anybody statements by the entrance information
who endorses so that some personal unit or any time stating of the goods that
information that are repeated by any wasted the time
statement of anybody who endorses
should
be
existed
and
maintained
previously in order to decrease typing

and entering statement information time
2
Establishing
the
card
reader
in Paying
customs
salaries,
entrance
emission/issuance customs permission, information expenditures and printing
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the
entrance
information
unit
of the
statement,
debit
rule
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14
and
statement, the identification unit and the decreasing the payment resulting of
exit unit for paying the mentioned weight differences and goods worth in
expenditures and removing the need of bank regarding to the almost large
referring to the bank
3
distance between bank and customs
Creating the intranet facilities for each Limiting the control of rule 14 to one
expert of identification unit and making person / an individual that has resulted in
documents according to factors in order extra movements and wasting time
to controlling debit of rule 14 issue of
customs rule about each statement which
is believed to them
Designing a software for intellectualizing Controlling the proportion of cooperation

the current system Asycuda in order to companies manually which is resulted in
automatic decreasing of the proportion of wasting time and energy and decreasing
cooperation companies after catching the the needed exactness
registration
number
(Cotage)
of
statement
5
Providing the increasing cooperative Loading and transporting exported goods

facilities of Zahedan customs with the of producing units around Zahedan to
producing industry in the form of customs which has resulted in increasing
evaluating goods in the location of expenditures and the goods releasing
exporting producing units
Establishing
the
time
representatives
of Discattering the adjacent organizations to
adjacent organizations to customs in the customs
such
as
standard
office,
form of commercial- physical single sanitation, that their large distances have
window in customs
resulted in increasing expenditures and

the goods releasing time
Eliminating
the
assessment
service In the Zahedan customs, the duty
expert in order to decreasing the stages /responsibility which is given to a service

of assessment service unit
expert and a assessment service boss is
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the same that has resulted in doing the

work again and wasting the time
8
Establishing one of the financial affair Referring the customer to the financial
unit personnel in evaluating service in affairs unit in order to receiving income
order to emit income bill in needed bill regarding to the distance between
cases.
units from technical units of Zahedan

customs.
Conclusions:
Customs is one of the organizations that has much relationship and cooperation with customers.
The heterogeneous official methods and the slow carrying out affairs has resulted in organization
irresponsibilities toward gradual approaches. Reengineering of processes in a radical approach that
has resulted in improving the processes, structure, managing systems and ultimately the efficiency
of organization. One one hard, the obtained results of analyzing inquires have shown the
individuals worries and delays in goods release process in Zahedan customs. Hence, we attempt to
improve and develop these processes in all aspects by proposing some suggestions / propositions
in order to improve and alter these processes and confirmation them by the manager of Zahedan
customs. The key role of information technology (IT) and its qualifications are completely
apparent / vivid in these propositions and authorities should inform that they must first provide the
needed infrastructures such as ones related to information technology before any actions for
running / performing the propositions and then carry out the needed actions.
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References
Aggarwal, sumer. (1998). "Re-engineering: a Breakthrough or Little New?" Socio-Econ. Plann.
Sci 32: 155-167.
Attaran, Mohsen. (2004). "Exploring the relationship between information technology and
business process reengineering." Information & Management 41: 585596.
Gunasekaran, A. and B. Nathb (1997). "The role of information technology in business process
reengineering." Int. J. Production Economics 50: 91-104.
Maris G Martinsons , P. S. H. (1998). "Chinese Business Process Re-engineering." International
Journal of Information Management 18: 393-407.
ONeill, Petters. and Amrik. S. Sohal (1999). "Business Process Reengineering
A review of recent literature " Technovation 19: 571-581.
Silvestroa, Rhian . and Charls. Westleyb (2002). "Challenging the paradigm of the process
enterprise :a case-study analysis of BPR implementation "Omega 30: 215 - 225.
Teng, James. TC., Kirk. D. Fiedler, et al. (1998). "An Exploratory Study of the Infuence of the IS
Function and Organizational Context on Business Process Reengineering Project
Initiatives." Omega, Int. J. Mgmt Sci 26: 679_698.
Teng, James. T C., Varun. Grover, et al. (1994). "Re-designing Business Processes Using
Information Technology." Long Range Planning 27( 1): 95_106.
Terziovskia, M., P. Fitzpatrickb, et al. (2003). "Successful predictors of business process
reengineering (BPR(in financial services." Int. J. Production Economics 84(1): 35-50.
Wu, Ing-Long. (2002). "A model for implementing BPR based on strategic perspectives:an
empirical study." Information & Management 39: 313-324.
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OBSCURITY and AMBIGUITY in IGBO ORAL TRADITION

Mrs Ekwutosi Onwukwe
Department of English Language & Literature Alvan Ikoku Federal College of Education
Owerri, Imo State
Abstract
In this paper I have tried to discuss the role of obscurity and ambiguity in artistic creation with
particular reference to Igbo Oral Tradition. This tradition was seen to have two main divisions
according to Emenanjos classification. The first division consisted of the major genres and the
second division of the minor genres. The genres discussed in this paper were selected from the two
main divisions. The writer then went on to examine and analyse the nature of our folktales,
masquerade songs, anecdotes, proverbs, and riddles (being the genres chosen) with obscurity and
ambiguity as parameters of judgement. It was seen that these two factors were the very substance
of creativity. The pleasure, excitement, intellectual relaxation, instruction that imaginative
literature give are as a result of the artists inventive mind and deliberate couching of ideas,
meanings, objects, in emotive and connotative language.
Keywords: Obscurity , Ambiguity in Igbo Oral Tradition
1. Introduction
Igbo Oral Tradition has had a considerable lot written about it by a comparatively small number of
people. Much of the effect so far has been to gather all there is in our oral tradition and to attempt
to categorise it into various genres. Different criteria have been used for this, some conflicting
while others compliment and adjust earlier efforts. The aim of this paper, however, is not to tread
the-oft-beaten path but to seek new pastures. This writer intends to focus attention on the obscure
and ambiguous nature of Igbo oral tradition.
This tradition can be said to be made up of the following according to Acholonu, quoting
Emenanjos classification:
The major genres:
(1) if or ir -- folktales
(2) egwuregwu dnala -- traditional drama
(3) ab dnala -- traditional poetry and verse
The minor genres:
(4) kbilu -- anecdotes
(5) ilu -- proverbs
(6) gwgw -- riddles
(7) okwu nth -- tongue twisters or tonal puns
The genres in the two major divisions are further divided into their various kinds. For instance,
under the folktales we have the
(a)
trickster tale (usually involving animals like the tortoise),
(b)
the why or aetiological tales, etc;
And under traditional poetry and verse we have
(c)
satirical songs, praise songs, the elegy, etc.
This paper in trying to account for or explain the factors of obscurity and ambiguity in Igbo
traditional literature will concentrate on the folktale, the anecdote, the masquerade song, proverbs
and riddles.
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2. Obscurity and Ambiguity Defined

The word obscure means something that is hidden, unknown, unclear; while ambiguity according
to Abrams (1981:8) points to the use of a word or expression
to signify two or more distinct references, or to express two or more diverse attitudes or feelings.
From the foregoing both words can be said to mean the same thing; that is, vague. However, the
obscure and the ambiguous can also refer to the distant past, something that is indistinct,
unintelligible and doubtful according to the dictionary.
The obscure and ambiguous are cherished elements of the creative artist, for through these he
expresses his unique experiences. Emenanjo
(1983:7) agreeing with the above says:
... in a literary medium the creative artist could communicate with himself only,
to the utter disregard of the world outside of him ... it does appear to me that for
the creative artist, language is regarded more as an agent of creativity than as a
medium of communication. Whatever communication is achieved by the resultant
poem, play, or story is purely secondary, and an afterthought ... I am sometimes
astonished when I read or hear of the different interpretations that have been
given to my poem k Nuju.
3.0 The Obscure and Ambiguous in Igbo Oral Tradition
The Igbo are a people that are said to be wise and who take a particular delight in knowledge and
wisdom. Like Socrates (in Iwuchukwu, 1993), the Igbo believe that knowledge is virtue. This
knowledge can be arrived at either through inductive or deductive reasoning; it is not a thing so
obvious. This explains the love for ambiguity and obscurity in Igbo oral tradition. This tradition is
a repository of the Igbo mans way of life his music, beliefs, sense of propriety and heroism,
religion etc are all embedded in it.
The Igbo traditional artist did not create solely with the intention to instruct. Just as his counterpart
all over the world he knew and knows that he is not a historian, nor a teacher but an artist. This
why he is called onye nk (an artist) and not onye nkuzi (a teacher). In Igbo land the word
nk connotes aesthetics and onye nk is a gifted person who can create novelty out of the
familiar, or couch the common phenomena of life in pithy sayings. This explains his ability to
generate interest amongst his audience even when he told stories that were familiar to them. In this
he was just like his Greek, Roman and English counterparts whose stories, dramas, and songs were
well-known to the audience. Emenanjo (1983:5) writes:
In the great Greek Dionysian festivals only a very thin line
separated the audience from the performer, for in moments of great
excitement and ecstasy knowledgeable members of the audience joined
the recitation, singing, dancing and acting.
However, if the folktales, songs and festival plays were well-known to the audience, genres like
anecdotes (kbilu), proverbs (ilu), riddles (gwgw), or tongue twisters or tonal puns (okwu
nth) in the Igbo oral tradition traded and still trade in obscurity and ambiguity.
I will now in what follows discuss some of the genres found in Igbo oral literature.
4.0 The Folktale
The folklorist tells his stories with a sense of mystery and with words pregnant with meanings to
the delight of his eager listeners. Stith Thompson (1977) in his book The Folklore writes the
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teller of stories has everywhere and always found eager listeners ... Why eager listeners?
Normally in a story-telling session, the narrator begins his tale by saying, not mgbe (once
upon a time), or noge gara aga (in days gone by). Various communities have various openings
(depending on their dialect), but all set the tale in a vague and distant past a time when men and
animals lived together and animals spoke just as men (the audience would be told in some cases).
This kind of distancing makes the tale immediately attractive because what is remote and
unfamiliar is usually loved. Thus the beginning of the tale immediately enraptures the listeners.
Then the narrator proceeds and adds not obodo w (in a certain town or country), or nala
mm (in the land of the spirits). The locale could even stretch from this world to the spirit
world, a never, never land (and where men intermarry with spirits and animals speak as men).
Thus, the physical setting is ambiguous and fluid. Communities have various ways of making the
opening of the folktale attractive. Where he sets the locale of the story in the abode of the spirits,
he uses his imagination to create a plausible land of spirits. Everything negative, or ugly or
fearsome must be obtainable in the spirit world. It is a place where the inhabitants communicate
through the sign language and enter into their houses with their backs. The colour of the skin could
be green or red and he could also portray them as speaking only three times a year and that through
their noses. The artist creates this bizarre world which his listeners are willing to believe because it
very much resembles the human world, only people do things the other way round and are a bit
different. Wit such remote and strange details, the artist is able to hold his audience in rapt
attention.
If the land of the folktale is an ambiguous land that encompasses the terrestrial and the
transcendental worlds, the artist, to sustain his narrative of wonder and marvels, draws his
characterisation from man, animals, spirits, and sometimes the natural phenomena like winds,
mountains, rivers and trees. These objects are given human attributes like the power of speech.
However, he realises that since he is talking to mortals, he has to be a little this-worldly so that the
pleasure his listeners will derive from his tales will be relevant to them. To achieve this he engages
his characters in events and incidents that demonstrate values of men like, evil does not pay, or
good will always triumph in the end. Stock characters of the folktale are usually jealous wives,
the wicked step-mother, the poor and maltreated orphan boy, the servant-turned king or made rich,
the wicked old woman (who sometimes is a spirit incarnate), the tortoise, the hare, the demon
lover; the stock events are the quest mission, the calabash forgotten in the farm, the putting away
or neglect of the hated wife and her child, the wrestling contest, the kind deed or wicked deed done
to an old woman, etc; the motif are the magic ring motif, the speaking flute motif, the old woman
who is a symbol of retributive justice, and the faithful dog motif. In a welter of interaction between
the characters and the motifs and the events, the deed is enacted and the moral drawn. The wicked
are normally punished and the good rewarded. The audience enjoys the story and identifies with
this ideal world where people receive their due reward. In this way, an artist is able to entertain his
audience through the skilful use of imaginative devices which take root from the obscure and
ambiguous. The following Igbo folktale will illustrate some of the above features.
Once upon a time, in a very far land, lived a man, his wife and their two children (a boy and a girl).
In time the wife died and this man married again. The second wife hated her step-children and
wanted to do away with them. She was so embittered by their presence that one day she suggested
to her husband that they lead these two children into the thick and evil forest. The man agreed to
her suggestion and they set off with the children. The little boy as they were going picked a
handful of pebbles which he dropped on the way as they went along. On arrival at the evil forest,
they were abandoned by their parents. However, they succeeded in retracing their way back back
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home by following the trail of the pebbles. Their step-mother was very disappointed and annoyed
when she saw them and together with her husband led them back again to the forest. This time the
boy dropped pieces of food as they went along. Because of this, they could not find their way back
because the birds of the air had eaten up the food. They wandered in the bush and eventually
stumbled upon an old womans hut. The old woman was said to be very wicked, and when she saw
these two kids, she was excited. She took them in and decided to retain the girl as her servant and
the boy she kept in a fattening room to be eaten up when the time came. The days and months
passed. One day she looked into the room where the boy was and noticed that he had grown fat.
She lit a mighty oven and after some time asked the girl to see if it was hot enough. The girl
refused upon which the old woman decided to do it herself. As she opened and peeped into the
oven, the girl quickly pushed her in and closed the door. The old hag was roasted inside and the
girl immediately made her way to where her brother was. They ran out of the hut and looking
around saw their faithful dog which led them back home. When they got home they discovered
that their step-mother had died while their father was very happy to receive them. The moral of
this story is that evil will always be punished. The old woman drowned in the pool she prepared
for some other person while the wicked step-mother was punished by death.
Obscurity and ambiguity do not only make for interest in Igbo oral tradition. Through them ideas
and meanings are communicated succinctly. As observed earlier, the Igbo pride themselves in
wisdom and they respect the wise and intelligent person. Among the Igbo it is believed that only a
fool opens his mouth wide to talk he is normally regarded as a person who does not bite his
words. On the other hand, the man who is spare in his use of words and is diplomatic is regarded
as wise. This attitude has cultivated a love of the obscure and the ambiguous among the Igbo. Thus
from childhood, people are tarined and train themselves vigorously in the use of wise and pithy
sayings and other rhetorical devices. The speech of the typical Igbo man is in obscure and
ambiguous language being interspersed with proverbs, anecdotes, and riddles; in fact one senses a
conscious clothing and concealment of ideas (Acholonu, 1985). Without trying to be dogmatic,
the Igbo mans speech could be described as poetic, and all over the world poetic language is
known to be more powerful and obscure than ordinary language. It is more effective in
communication (especially where the speaker does not want to be abrasive) because it is full of
depth, and the hearer as he meditates on it understands better what has been said. Thus, lasting
impressions are made when ideas are encapsulated in connotative and obscure language.
5.0 The Anecdote
The anecdotes which spice the daily speech of the traditional Igbo man or woman is, according to
Acholonu (1985) condensed folktales and expanded proverbs and to Egudu a brief story which
often embodies witticism or a ludicrous situation and which is used to embellish speech, reinforce
or illustrate an argument or convey moral lessons (quoted in Acholonu, 1985). It is usually
ambiguous in nature but it makes its point all the same. She continues sometimes when
discussing the ambiguity and paradox of language as a medium of expression the Igbo employ
anecdotes for illustration. A child was told to pound some foofoo in the mortar if he knew how to
pound, but if not, he should pound it on his thigh. This child did not understand the instruction and
turned round to ask for the meaning. In reply he was told that the money used to marry his mother
was wasted money. He is regarded as a fool for not understanding the simple instruction given him
at the beginning. The ambiguity of this anecdote illustrates the nature of Igbo speech and Igbo oral
tradition.
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6.0 The Masquerade

It serves to be ambiguous on certain occasions when being explicit would7land or get one into
trouble. In the village, masquerades and their choruses are sometimes used as instruments of
sanction against certain bad characters. In their songs they carefully avoid naming the culprit, but
their language is so carefully fashioned that those who know the offender will know that he is the
one being referred to. One such chorus goes like this:
gb nebu kk ltala
Agavu
gankw
O bute o rie
Obunike
m kleji lezien anya unu.
This chorus is alluding to a known rogue in the area. He is not mentioned by name but is referred
to as a hawk which carries away chickens (gb nebu kk), agavu (a snatcher), gankw (the
market hawk), o bute o rie (he carries away and eats), obunike (he takes by force). The names
given him are powerful metaphors that carry all that is repugnant in stealing and that ridicule the
offender. The last line warns students on holiday to be on the alert. This is done on purpose to
further expose the thief, for the students would want to know why the particular reference to them,
why they should be on the alert because of an ordinary hawk. With this kind of reaction they
would be given the full story. If the chorus was straightforward and plain, the students would not
have cared about the thief, but being couched the way it was, they inquired and got to know about
this. This is one of the big advantages that poetic language has over prose.
7.0 The Proverbs
The dictionary defines the proverb as a short, pithy, traditional saying in common use (Collins,
1975). The abundance of proverbs among the Igbo shows how much they value this figure of
speech. It is usually a mark of wisdom for the person who is adept in its use. It is known in literary
circles as the palm-nut with which words are eaten in Igbo land. Proverbs are so integral to
socio-linguistic communication among the Igbo, that to speak without proverbs is tantamount to
climbing a palm tree with bare hands (Acholonu, 1981). The proverb is a figure of speech, a
genre in our oral tradition, where a world of meaning is neatly and precisely compacted in a few
words (Onwukwe, 1984).
There are different kinds of proverbs for different occasions. Some proverbs serve to warn people
of the importance of taking prompt action on an issue. The following proverb is illustrative of this
kind ka a gp aka nw nofe mgbe na-aghbegh aka mmad (take away the monkeys
hand from the soup pot before it becomes a human hand); ka a ba, ka a ba mere kk adgh
any mamr (procrastination cost the chicken its ability to urinate). There are proverbs, too, that
seek to hush the talkative person or gossip; for example, jr g nkta nne g, mr l?
(who asked you the number of puppies your mothers dog bore?) Other proverbs fulfil different
functions and a number of proverbs could mean the same thing. What is necessary is that the user
be intelligent enough to use each proverb correctly, for a wrong use often exposed the user to
ridicule.
8.0 Riddles
The riddle is another form of our orature that seeks to equip people with a sharpened mind to
understand their environment in order to fit into the society. It creates in people, especially
children, the ability to make quick and sensible associations to quizzes thereby developing in the
child the desire to always perceive absolutely. The following are a few examples:
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Gwam, gwm, gwam, ihe ji nt tee onwe ya ma o nwegh aka? (Tell me, tell
me, tell me the thing that smeared itself with ash but has no hands?) This is the
fruited pumpkin.
Gwam, gwm, gwam, ihe nwere kw ma digh aga ije? (Tell me, tell me,
tell me what has legs but does not walk? This is the tree.
Acholonu (1985) says that riddles are figurative in the sense that they can be metaphoric but they
are more complex than ordinary metaphors. She then goes on
to make the following categorisations:
(1) The simplest group of riddles are those that make a direct comparison between the
riddle and its derived meaning. This means that the words that form the riddle are
derived from the characteristic of the object being referred to. This makes this
category of riddles very ambiguous because the thing referred to could share its
characteristic with other things. She cites as an example the following:
Gwam, gwm, gwam, chata - dar (Tell me what ripens by becoming lighter
in colour? -- dar (Acholonu, 1985). dar is not the only fruit that gets lighter
in colour when it ripens as she rightly remarks.
(2) Riddles that follow the pattern of sounds which may not even be related to the
object or ideas referred to. To my mind, riddles of this nature are metaphysical in
concept because they seek to reflect the effect of the riddle on the mind of
respondent. There is no connection, whatsoever, between the riddle and the object
referred to and there is no way one can guess the right answer. Again, I make use of
her example to illustrate this:
Tingr (sound, symbol) A tnye mkpr os nime mmiri,
ga-agta ya? (Can you pick a seed of pepper from the ocean?)
How on earth is the sound of pepper falling into the ocean related to the sound of the word
tingr? The comparison is obvious. The sound of tingr is lenghty just as it would take long
to find this pepper seed in an ocean.
From the foregoing, we can see that obscurity and ambiguity are the very substance of
artistic creation and of Igbo oral tradition in particular. Through them the artist is able to create
figures of speech and events that give pleasure and impart instruction. Perhaps the artist in the Igbo
society did not find this difficult because the life of his people was steeped in mystery. Thus, he
was able to create from the communal pool making it possible for our oral tradition to have this
obscure flavour.
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References
A Glossary of Literary Terms 4th Ed. Canada: Holt, Rinehart and
Abrams, M.H.
(1981)
Winston.
Western and Indigenous Traditions in
Modern Igbo Literature
Acholonu, C.O. (1985)
Druck U. Verarbeitung: Hundt Druck Gmblt. Printed in Germany.
Foreman, J.B.
(1975)
Collins English Gem Dictionary Great Britain: Collins ClearType Press.
Iwuchukwu, C.B. (1973) Philosophy of Education Nigeria: Luton Press Ltd.
Little, W. et al
(1973)
The Shorter Oxford English Dictionary New York: Oxford
University Press.
Acholonu, C.O. The Igbo Folktale as Imaginative Literature Published in A (No. 3), a
Magazine on Igbo Culture.
Acholonu, C.O.
(1981) Obscurity in Oral Tradition. Paper presented at the 6th Ibadan
Annual African Literature Conference.
Emenanjo, E.N. (1983)
What is Language? Its Role in Communication and Creativity.
Paper presented at the English Week, Alvan Ikoku College of Education, Owerri.
Onwukwe, E (1984) Folklore and Education Paper presented at the School of Arts Week,
Alvan Ikoku College of Education, Owerri.
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Affordable Housing Delivery In Nigeria Some Fundamental Challenges.

Arc. Ikechukwu Onyegiri
Department of Architecture, Evan Ewerem University Owerri.
Abstract
Our society is traditional, their elites are conservative and there is an understandable resistance to
imposed, universally applicable Western solutions to the problem of affordable housing delivery
in Nigeria. These are problems to which we must find their own solutions, but hopefully not
without the understanding and support of our governments and private sectors favorably disposed
towards sharing in a genuinely Nigeria route to development. Nigerians need to survive the
wounds of near-homelessness including good governance, increased access to land, credit,
affordable housing and environmentally sound and serviced human settlements. The aim of this
paper is to highlight the characteristics of some fundamental challenges confronting the delivery of
affordable housing in Nigeria. The paper begins by outlying the development context within
which housing (or shelter) programmes need to be seen in Nigeria.
Keywords: Affordable Housing delivery, Development Challenges, availability of land resources.
1.0 Introduction
All the states in Nigeria face formidable housing problems in one way or the other.
Almost without exception they have poorly developed housing institutions and markets, meager
stock which is in poor condition, a huge backlog of housing need and weak policy responses. It
then focuses on the seemingly intractable problems surrounding the availability of land and the
implications which poor and inefficient land supply practices have on urban development and the
tentative nature of the construction industry. The absence of affordable sources of institutional
housing finance is also a problem but, despite the difficulties, the paper concludes that there are
some possible positive developments that could emerge in this area.
2.0 Housing in the context of other development challenges
Nigeria is a country of Paradox. It has abundant human (about 120million people in 2003) and
natural resources (e.g. crude oil, tin, coal, etc), but has failed to release its development potentials.
The consequence of poor economic growth (GDP) growth rate averaged about 2% in the last
decade in the face of population growth rate of 2.83%) indicates poor human development. About
70% of Nigerians live below the poverty level of US$1 per day. With human development index
(HDI) of 0.463 in 2003, the UNPD Human Development Report for 2003 ranked Nigeria 58th out
of 88 forest countries in the world.
The severity of poverty is also reflected in the countries poor environmental conditions, all of
which can obstruct the nations attempt to achieve the Millennium Development Goals (MDGs), as
well as the important goal of the 2002 World Summit on Sustainable Development (WSSD) of
reducing by 50% the number of people lacking access to basic sanitation and descent housing.
Environment sustainability is a major pre-requisite for sustainable development. This makes the
need to incorporate housing affordability into poverty reduction efforts imperative. The problem
of providing adequate shelter needs to be seen into the context of these other, highly formidable
challenges. Policies for the provision of housing also need to be seen within the context of
urbanization and the nature of urban development. The level of urbanization in Nigeria is modest
by global standards, but because of this limited urban base, Nigerian cities are experiencing some
of the fastest rates of urbanization in the world (UNCHS, 1996a). The development of Nigerian
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cities is also distinctive. It is different to the juxtaposition of effluence and squalor which
characterizes many developing countries cities, or the very high population densities which are a
feature of our major cities.
The striking feature of most Nigeria cities is the extent of informal development. In many cities
the informal sector predominates, (UNCHS, 1996a). Global Coalition for Africa, the United
Nations Economic Commission for Africa and the World Bank, attributes this form of
development to incremental forms of housing investment where owners become self-developers
and rely on small crafts and trades to build their own units. Renaud(1999). He also adds that this
is why many such cities have the appearance of endless, almost permanent, construction sites.
The implications of these circumstances are that it is not only the income poor who are unable to
access housing of reasonable quality, but that there are many other households not necessarily on
low incomes who are also unable to secure decent housing.
In such circumstances,
UNCHS(Habital) has identified the concept of housing poverty. Why should households with
reasonable incomes experience housing poverty? This paper seeks to address this question and to
explain some of the causes for it in Nigeria.
3.0 Difficulties associated with land supply
One of the principal difficulties associated with the provision of housing is the problem of ensuring
land supply. This problem confined to Nigeria cities, is almost unique.
Traditional, or customary land ownership in many Nigeria cities is held on family or private
basis. Under these circumstances, decisions about the use of land are made according to the
requirements of land owners. Hence, decisions may be taken individually by family heads or
owners, they may be collectivized within a council of elders, but in any event they are rarely
recorded in writing and hence there is no evidential basis for use rights. The concept of any kind
of ownership may be entirely obstructive. With the colonization of Nigeria during the nineteenth
century, the circumstances surrounding the ownership and control of land became more
complicated.
In colonial Anglophone Africa, as McAuslan (2003) points out, the common law, the doctrines
of equity and statute of general application applying in England would apply in the particular
country in this case Nigeria. The application of colonial land law was essentially capitalist,
embodying the notion of exclusive private property ownership with proof of title exercised through
formal registration. What complicated matters, however, was that the colonial power imposed the
process of colonialism in the application of land law. They imposed their own laws alongside the
customary law of the indigenous tribes.
The result, according to Larbi (1995), was complex tenure system shaped by both customary land
laws and (the British conveyance system.
4.0 The 1996 Global Report on Human Settlement s(UNCHS Habitat, 19996b) defined the concept
of housing poverty in the following terms, individuals and households who lack safe, secure
and healthy shelter with basic infrastructure such as piped water and adequate provision for
sanitation, drainage and the removal of household waste. But, the growing complexity of land
law was not to rest there. What has happened since colonialization has further complicated the
application of land in Nigeria. According to McAuslan (2003), the post-war period since
independence has seen two broad phases in the development of land law. The first of these has
been a process of substitution in which the aim has been to record the customary rights and
interest in the land metamorphose them into equivalent rights and interests recognized by the
common law, register them and provide a frame work for the operation of a market in these newly
minted rights and interests. The second phase has seen attempts at integration, the basis for
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which is the rejection of any notion of a hierarchy of land laws there is just one land law
based one philosophy which can apply to all land people. As a consequence, there was attempt to
resolve the gulf between these very different systems of land use and control by the adoption of
different methods. In the 1970s Nigeria opted for state ownership of land since it was deemed to
be more closely identifiable with the extensive and traditional communal ownership of land
associated with African societies.
Both developments have been problematic. The country in seeking to nationalize development
rights, generally registered applications and issued Certificates of Occupancy for a limited period
such as 99 years. Mabogunje (2003) asserts that these kinds of reforms have not been successful.
Citing the Nigerian experience he claims,
Considerable difficulties have arisen over the
expeditiousness with which such
certificates are issued, the requirements that they must be
referred back to the governor when such land is being assigned or mortgage and the practice of
many State Governors to use such referrals to raise revenue by charging exorbitant fees for their
approval.
Land delivery has been impeded by inappropriate legislation and by limited capacity to deal with
land, the restrictions on the development of free market in land were amongst the most severe
constrains on the housing market in Nigeria.
5.0 National Sites and Services Programme
The National Sites and Services Programme was adopted by the Federal Government in 1986 as a
viable alternative for housing delivery through increased supply of serviced plots at affordable
costs. The aim of the programme was to create easy access to develop land, which had for long
hindered home ownership. The programme involves the provision of serviced land for housing
development and commercial activities in a well laid out and planned environment. Such services
include roads, drains, water supply, electricity and other municipal services.
Since the
commencement of the programme in 1986 only about 20,000 plots have been allocated in about 20
states of the federation in 2000, 14 years after.
6.0 Environmental Ecological Degradation
The ecological footprint of a city is the amount of land and national resources required in
sustaining its metabolism. If the footprint analysis of Lagos is taken for example: Lagos has an
estimated population of about 10 million, out of a total Nigerian population of about 120 million.
The total land area in Nigeria is 923,773sqkm (92.38 million hectares) and that of Lagos
3577sqkm(0.36 million hectares) According to Earth Council report, a biological reproductive
area of 1.7 hectares per capital is required for basic living. This means that sustaining the people
living in Lagos requires 17 million hectares. This leaves an ecological deficit, which has to be
made up from elsewhere. The area required for food production is 0.2 hectares per capital. For
Lagos population, that translates to two million hectares.
The area required for wood and other products is 0.11 hectares per person or 1.1million hectares
for Lagosians and for carbon sequestration (cleansing), 1.5 hectares per person o 15 million
hectares just for Lagos alone. Though footprint analysis is not an exact science, it however,
helps us to understand the magnitude of dependence of cities on outside resources and the effects
of urbanization.
It could be said that environmental degradation is caused by greed but reinforced by poverty. This
is as a result of social-economic and political synergies that interact with each other in ways that
can increase the state of lack in which poor people live. The struggle for short term profit,
encouraged by unregulated tree market has led to unacceptable human and environmental abuses
in the name of economic growth
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7.0 The implications of these constrains on the land market

The principal outcome of these constraints on the operation of the land market is that access to
formal land ownership in many Nigeria cities is effectively precluded to all but a minority of
affluent and influential people. The National Sites and Services programme adopted by the
Federal Government in 1986 as a viable alternative for housing delivery through increased supply
of serviced plots at affordable costs is a typical example.
The aim of the programme was to create easy access to develop Land, which had for long hindered
home ownership. The programme involves the provision of serviced land for housing
development and commercial activities in a well laid out and planned environment. Such services
include roads, drains, water supply, electricity and other municipal services. From the
commencement of the Programme in 1986 only about 20,000 plots was allocated in about 20 states
of the federation. These, of course where taken by the rich and the privileged. In turn, these
circumstances encourage the growth of an informal market in land amongst those who are
excluded from the formal market and a dual system emerges. Or, more accurately, a number of
informal systems arise. In many Nigerian cities, this type of informal land supply greatly exceeds
the formal provision and because land, and the various ordinances which govern its use, are
integral to the form of residential development which takes place these areas become developed as
unauthorized areas, they are constructed without reference to planning codes, they are invariable
without basic infrastructure and they sometimes represent health and fire hazards.
They range from areas of quite high standard, self-built housing permanent materials, to some of
the poorest areas of squatter settlements (such as those in Lagos, Onitsha, Aba, to mention but a
few). Without legal title, residents of such areas are also penalized in other ways, most notably in
their inability to access formal loan fianc and infrastructures. Hernando do Soto (2000) highlights
this problem I his book. The Mystery of Capital, . The poor inhabitants of these nations-the
overwhelming majority do have things, but they lack the process to represent their property and
create capital. They have houses but not titles ;crops but not deeds; businesses but not status of
incorporation. It is the unavailability of these essential representations that explains why people
who he adopted every other Western invention, have not been able to produce sufficient capital to
make their domestic capitalism work
The existence of these extensive areas of informal settlements has, however, been the focus of
attention of policy-makers for some time. The main policy response has been in terms of
upgrading the physical condition of some of the worst of these settlements by improving water
supplies and other forms of infrastructure. Over time, however, there has been an increasing
recognition that without conferring rights of ownership through land allocations to individuals and
corporate developers as well as provision of basic infrastructures, there will be no sustainable
improvements in living commitment through its millennium Declaration to improve the lives of
100 million slum dwellers by 2020. This is to be achieved through a global initiative entitled
Cities without slums and accompanied by a campaign advocating action plans to ensure the
extension, where possible, of security of tenure to the inhabitants of such areas,(Erguden,2002).
A second implication of these constraints on the operation of land markets is that they effectively
preclude the development of a house-building industry and all the backward and forward
economic linkages that this entails. An effective house building industry is essential to increase
the supply of hosing, reduce the overall housing shortage and seek to drive down costs. The
backward and forward linkages create employment and reduce the need for the expensive
import of materials. Within a capitalist economy a secure supply of land with good title is he lifeblood of the commercial house-builder. But a prospective developer in Nigeria currently will
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experience considerable difficulties in securing a reliable supply of land, especially with good
legal title. This means that those developers that do exist invariably service only the affluent end
of the market where legal land title can be secured, but at a considerable cost. There are very few
capable building contractors and even fewer developer who could supply housing ahead of demand
in Nigeria. The construction industry has no speculative elements; there is no Nigerian equivalent
of the British spec builder constructing large numbers of houses and selling them at or near
completion at prices which a household with median income can afford to buy.
7.0 Sources of housing finance and the availability of credit
The outcome of these previous consideration is that privatized housing markets, in terms of the
regular exchange of dwellings between willing buyers and seller, simply do not exist on any scale
in Nigerian cities. Housing finance by its very nature is a capital intensive venture which if it is to
e financed through personal financial resources will require slow and tedious accumulation of
savings. However, since housing provides benefits over many years, long-term credit financing is
a more logical option as it will spread the repayment burden. But this requires the availability of
long-term funding and for which must be institutional capacity, structure and mechanism that will
allow a convenient and effective linkage between the savers/investors and the consumers of such
funds. Without an effective financing system, no housing policy can be effectively implemented.
A financing framework which facilitates financial intermediation for activities. Indeed the
framework must effectively reconcile the affordability limitation housing finance consists of
institutions as well as their relationship and the processes involved. However, the emphasis in this
review will be on relevant institutions and their of households with viability requirement of
financial institutions.
Housing Corporations, and the Federal Mortgage Bank of Nigeria (FMBN):and now the In
Nigeria, housing is typically financed through a number of institutional sources: Budgetary
appropriations, Commercial/Merchant Bank, Insurance Companies, State newly established
Mortgage Institutions all these constitute the formal institutions. Informal institutions such as
thrift and credit societies, and money lenders who have contributed and are still contributing
substantially to the finance of housing construction also persists. The housing fianc institutions
servicing these limited markets are a further reminder of the colonial past in that building
societies have been the most prevalent institutions in Anglophone Africa.
Insurance companies have funds appropriate for financing housing construction. However, under
our current insurance decree, only up-to 25% of life and 10% of non-life policies can be invested
in real estate. Life premiums are not only long-term but relatively cheaper than deposits.
However, the investment emphasis of these institutions has been short-term due to the preferences
of these companies and to a lesser extent the legal restriction imposed. Indeed, while percentage
allocated to real estate declined since 1985 from 12.1% to 7.2% in 1986, that allocated to mortgage
loans declined steadily since 1984 from 7.1% to 4.8% in 1985, 3.90,10 in 1986, 3.6% in 1987.
The modest of scale of these institutions is not only a reflection of small markets but also because of
the poor macro-economic environment prevailing in Nigeria. During the 1980s and 1990s,
moreover, the financial institutions suffered as a result of Structural Adjustment Programmers
(SAPs), which removed government support and other special tax and regulatory privileges. Many
institutions of the kinds above have either been privatized or liquidated, (Lohse,2002). But with
very high interest rates and relatively short loan repayment periods, the ratio of repayments to
incomes is many times the affordability level of average households, hence, these institutions are
inappropriate or the vast majority. A variety of other sources of private sector housing finance exist
including savings and credit co-operatives and employee savings schemes as well as a whole range
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of traditional forms of rotator credit associations,(see Osondu and Middleton, 1994).These

invariably involve relatively small sums, but where the former have been linked to other sources of
funding, such as public subsidies or grant aid from donor agencies, they have been used successfully
to underpin modest house building programmes. These kinds of initiatives provides nowhere near
the scale of funding which is needed to address the backlog of housing need, however.
The new housing policy has established a two-tier housing finance structure with FMBN-as an apex
institution and a decentralized network of Primary Mortgage Market institutions such as building
societies, housing co-operatives, home savings and loans associations. This structure aims to
streamline processes and organizational relationships within the housing finance system and
encourage expansion in private initiative. In this regard, the legal framework for the organization
and implementation of the apex role of FMBN has been defined by the Mortgage Institutions Decree
No.53 of 1989.But, exciting developments in terms of micro-finance for shelter are taking place in
Nigeria and are being led by the development of coordinated savings schemes by National Housing
Fund. National Housing Fund (NHF) was established in 1992.
The concept of the National Housing Fund as proposed in the National Housing Policy is to ensure a
continuous flow of long-term funding for housing development and to provide affordable loans for
low income housing. The promulgation of the National Housing Fund Decree heralded the
emergence ad establishment of a battery of mortgage fianc institutions in Nigeria. Quite a number
of them had been I operation prior to that. Good as the intention of the scheme appear, the
technicalities and modalities of releasing the loan to the mortgage institutions to un lend to the
members of the public have not been worked out and as such most potential clients have been
frustrated by the high interest rate and cost of funding. Most of the mortgage institutions on their
own have been mobilizing funs by accepting deposits and savings at very high interest rate in a
highly competitive marketing environment. Most customers o the other hand are prepared to wait
for the National Housing Fund than take loans at high interest rate which is presently being dictated
by the money market condition.
Having assisted with the establishment of these financial arrangements in Nigeria, the NHF through
the apex mortgage bank is pushing ahead exploring the feasibility of extending this community
based funding approach to every part of Nigeria, especially the private sector. These developments
are welcome, but what is desperately needed now in Nigeria are other similarly effective initiatives
in mainstream housing finance to carter for the low income groups. But, without headway in
resolving the difficulties over land supply it is wishful thinking to assume that such developments
can take place in housing finance albeit affordable housing development in Nigeria.
8.0 The Use of Local Building Materials:
The use of local building materials and intermediate technology is absent, followed by lack of the
provision of other basic infrastructures like safe drinking water, roads electricity supply and other
social amenities that should be targeted towards improving the quality, livability and attractiveness
of low cost housing.
Presently houses are built and rely solely on cement. The nation needs about 8.5milliom metric
tons yearly. While our cement companies are only able produce about 2-3million metric tons.
This short fall has always accounted for the galloping cost of cement need year as shown in the
table below.
Over half of Nigerias cement need is imported. According to recent survey, Nigeria is the world
largest importer of cement with about 70.5% dependence on importation. The chances of the local
industry rising to the task remain very slim as only four (4No) out of the seven (7No) of the
cement companies in the country are still limping along at various levels of capacity utilization.
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Cost of Cement Per 50Kg Bag (EAGLE CEMENT) Price

Years
Amount
Year
Amount
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
32
2002
1000
40
85 180 410 430 500 550
600 650 1000
2003 2004 2005 2006

1100 1200 1250 1500
There is need to critically look at the use of cement blocks in housing construction especially the
low-income housing. Research has shown that a 22.5mm block wall plastered and painted on both
sides with emulsion paint cost N1,700/m2 while a similar solid brick wall plastered and painted on
one side with emulsion N1500/m2. A savings of N200/m2. A further savings, it has been
observed could be made with the use of compressed stabilized earth brick whose same action as
above will cost only N850/m2.
Thus achieving the construction of housing for income groups require creative framework through
Indigenous design and construction as opposed to imported design and conventional construction
methods.
Evolution of Simpler Form of Design: A need to do away with over designing and concentrate
more on function design. The local Architects have to take the lead in the regard. A more cost
effective design is highly desirable at this point in time if mass and cheap housing is to be assured.
9.0 Conclusion.
The paper has outline that shelter needs in Nigeria are but one of a number very pressing
development problems. It has argued, moreover, that one of the most difficult impediments to
reform in the housing sector has been over the issue of access and rights to land. The paper has
advocated that the ways forward in forward in addressing current problems of housing supply in
Nigeria involve a more widespread acceptance of market forces to liberalize land supply,
encourage the development of a construction sector oriented towards middle and low income
groups and supported by appropriate technology and sources of private finance. One would hasten
to add, however, that there are shortcomings in advocating unequivocal market force solutions to
the housing problems of lower income groups. It should also be acknowledge that the almost
unique problems which surround the issue of land supply have not risen by chance but as a result
of the conflict between the tradition values of our societies and those imposed by the former
colonial
Powers.
Recommendation
Review of land use Decree of 1976-Whereby all lands in government ownership is feed in order to
enhance intense private sector participation in the industry by making access to land very easy.
This would help in the empowerment of the real sector and thus an active and vibrant industry. A
situation such as witnessed in the real sector and thus an active and vibrant industry. A situation
such as witnessed in the recent Budgets for social housing would become a childs play if more
land is freed or ceded to the private sector.
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Government should therefore undertake steps by all appropriate means and to the fullest of funds
at his disposal to achieve progressively the tenets of adequate shelter for Nigerians especially the
vulnerable group. This must be done without discrimination as to status, sex, tribe and without
fear of favour. It is indeed hoped that the above framework which is indicative of bright prospect
for financing housing cost ruction will rapidly expand the quantum of finance available and
dampen the high cost of funding and construction. With the restructuring of the domestic
economy, it is my belief that there is a bright prospect for housing financing large scale in Nigeria
in this new millennium.
It is recommended that more emphasis be placed on providing low and medium income housing
units in Nigeria using earth blocks and intermediate technology. It is also expected that to avoid
the takeover of these houses by the high income group, national or state monitoring groups made
up of NGOs, government institutions and other public and private stakeholders be established to
monitor progress and make sure that target populations benefit. The use of this sample stabilized
earth blocks and combining this can be possibly done by giving long term loans with sustainable
interest rates and no collateral. Co-operative,
Communal and self build practices must be encouraged by the appropriate ministries and NGOs
to further help increase self reliance and help. Establishment of the construction Bank is a sinequo-non in this regard.
The national Road and Building Research Institute must be empowered to do a lot of research into
cheap and effective materials for both housing and road constructions. Efficient land markets and
sustainable land use polices are indispensable there is need to change the Land Use Decree to a
more housing friendly legislation.
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References
Antwi, A. (1998) The Property Rights Question: the economics of urban land management in SubSahara Africa, Our Common Estate, RICS, London.
Antwi, A, (200) Economic insights into land market constraints of low-income housing supply in
Accra, paper presented at the ENHR Conference on Housing and Urban Development for lowincome groups in Sub-Saharan Africa, Accra, Ghana, 3-Agbola Tunde (1998) The Housing of
Nigerian: A review of policy development and Implementiontation. Research Report No.14.
CBN(1990-1998) Annual Report and Statement of Accounts, Central Bank of Nigeria, Abuja.
CBN(1993-1997) Statistical Bulletin (Various issues) CBN; Abuja
Onibokun, Poju, Housing in Nigeria (A book of reading) NISER
Federal Office of Statistics (FOS) (1994) Social Statistics in Nigeria, FOS, Abuja 8-Federal Office
of Statistics (FOS) (1997) Social Statistics in Nigeria, FOS, Abuja, 9-Federal Office of
Statistics(FOS)(1999) Poverty profile for Nigeria (1980-1996)FOS;Abuja
Durand-Lasserve, A. & Royston, L. (eds) (2002) Holding their Ground: secure land tenure for the
urban poor in developing countries, Earth scan
Joseph S A (2001): Sustainable Housing Development in Nigeria The financial and
Infrastructures Implication.
International Conference on Spatial Information for Sustainable Development Nairobi, Kenya.
McAuslan, P(2000) Bringing the law back in: urban law in Africa and the Habitat
McLeod, R (2002) Research on bridging the finance gap in housing also infrastructure and the
development CLIFF-the Community Led Infrastructure Financing Facility, unpublished paper,
Homeless International, Coventry 14-Osondu, I.N. and Middleton, A. (1994) Infonnal Housing
Finance in Nigeria, paper presented to the ENHR Symposium entitled Housing for the Urban
Poor Birmingham
Payne, G,(1999) Making Common Ground: public-private partnerships in land for housing,
Intermediate Technology Publications.
Rakodi, C. and Leduka, C.(20003) Informal Land Delivery Processes in African Cities:Working
Paper 1,The University of Birmingham
Renaud, B. (1999) The Financing of Social Housing in Integrating Financial Markets:a view trom
developing countries, Urban Studies, vo/36No4pp 755-773
The World Bank, (2000) Can Africa claim the 21st Century? Washington DC Habitat International
Vol.22, No3,pp2S9-271
UNCHS(Habitat) (1996a) The Human Settlements Conditions of the Worlds Urban
Poor, Nairobi, Kenya
UNCHS(Habitat) (19996b) An Urbanizing World; Global Report on Human
Settlements Oxford University Press, Oxford
UNCHS(Habitat)(2001) Cities in a Globalize World: Global report on Human Settlements
Earthscan.
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Balance of Payments, Exchange Rate Regime and Monetary Policy

Dr. Saqib Gulzar
Department of Management Sciences
COMSATS Institute of Information & Technology, Pakistan
Khuram Shafi
Department of Management Sciences
COMSATS Institute of Information & Technology, Pakistan
Abstract
No country can effectively control its exchange rate variation without appropriate control over its
payment balances. If one country has a deficit in its balance of payments then how could its
currency be strong? Deficit in balance of payments always depreciates the local currency which
makes imports of goods and services more expensive and causes high inflation. Exchange rate
regime is distressed by a deficit in balance of payments and sovereignty of monetary policy is
agitated with a change in exchange rate regime. The main objective of this paper is to demonstrate
the relationship between these three elements and how deficit in balance of payments agitates the
exchange rate regime and monetary policy.
Keywords: Balance of payment, Exchange rate regime, Sovereignty, Monetary policy.
1.
Introduction:
Balance of payments, exchange rate regime and monetary policy are basic factors that play an
imperative role in the economic development of a country. It is very difficult for a country to
control the exchange rate variation without proper control over its balance of payments. High
payment balances lead to depreciation of the home currency that means an appreciation of foreign
exchange rates. This appreciation makes the imports of goods and assets more expensive and
exports cheap. As a result the demand for domestic products and services increases due to
expensive imports and cheap exports. If the local producers fail to fulfill this excessive demand
then imports increases and exports decrease and cause a deficit in balance of payments. It also
makes upward pressure on local market prices and causes high inflation. Deficit in balance of
payments induces authorities to fix the exchange rate by pegging the currency or adopting a
currency board. The rapid changes in the exchange rate regime disturb the monetary policy. Under
different exchange rate regimes the monetary authorities play different role for controlling the
foreign exchange rate. It has been observed that under the free floating exchange rate regime,
monetary authorities are more freely implement policies than any other type of regime. The deficit
in the balance of payments affects, including changes in exchange rates and in interest rates, affect
directly or indirectly all parts of the economy.
The main objective of this paper is to find out the keen relationship between balance of payments,
exchange rate regime and monetary policy; they are correlated with each other and effect the
economic growth of a country. We demonstrate the keen relationship in Figure 1. We find that
changes in the balance of payments (deficit or surplus) cause changes in the exchange rate regime
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and monetary policy. We find that a deficit in the balance of payments weakens the home
currency. Therefore, it is suggested that country must control its payment balances to strengthen
the home currency and enable free implementation of monetary policy.
Figure: 1
Deficit
Balance of
Payments
Surplus
Exchange
Rate Regime
Fixed
Loose
Monetary
Policy Control
Floating
Tight
2. Balance of Payments
The balance of payments is an account that systematically measures all economic transactions
between the home country and rest of world over a specific period of time. The transactions are
measures in term of receipts and payments. It covers the exchange of all goods and service. The
balance of payments is composed of three major accounts: current account, capital account and
reserve account. The current account consists of goods balance (imports - exports) and it accounts
for all tangible items. Services balance includes all intangible items like legal services, technical
services, consultancy etc and Income balance includes the interest earned from foreign
investments. The capital account consists of investment transactions It includes the result of both
the financial and non financial assets transactions. The net result obtained from the current account
and capital account must be financed by the official foreign reserve. The official foreign reserves
account consists of reserve assets in the of foreign currency, gold, securities investment, IMF loans
and the foreign exchange reserve of private banks with the central bank. A deficit in the balance of
payments means that the imports bill exceeds the exports bill. This deficit induces the authorities
to fix the exchange rate by main trading countrys currency or a basket of currency.
3. Exchange Rate
The exchange rate represents the relationship between one country and the rest of world. It
influences the price of goods and services and assets traded (imports and exports). Under the fixed
exchange rate the price of goods and assets are predictable. When the exchange rate is flexible, the
foreign exchange market determines these exchange rates based on demand for and supply of
currency.
3.1 Exchange Rate Regimes
There are three major types of exchange rate regimes: floating fixed and peg exchange rate regime.
Each exchange rate regime has specific characteristics and produce different results. Under the
floating exchange rate regime the monetary authorities are independent. They lay down a monetary
policy but no exchange rate determination policy. The exchange rate is determined by demand and
supply mechanism. Under the fixed exchange rate regime, a monetary authority determines or
fixes the exchange rate but there is no permanent monetary policy. Monetary policy changes as
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required by exchange rate fluctuation. In other words, we can say that monetary policy is based on
balance of payments. If foreign reserves increase then its monetary policy base increases.
3.2 Exchange Rate Inconsistency
The standard of exchange rate management is that currency is determined by market demand for
and supply of currency. When the market is disrupted by seasonal and asymmetrical factors the
central bank steps in and plays a vital role for controlling the market disruption. These unexpected
fluctuations in the exchange rate disturb the domestic economy. The countries that have fixed or
peg exchange rate regime dont have such a type of problem. They have fixed it and a currency
board controls and determines an inelastic exchange rate. But the countries having the floating
exchange rate regime, their central bank interfere in the foreign exchange market to a certain level.
History show that the cost of currency misalignment is greater under the peg exchange rate
because the exchange rate is fixed and the equilibrium level is not determined by demand for and
supply of currency. This is one of the reasons of a currency crisis. While fixing the exchange rate it
tries to control the free international trade of goods. But here the government fails to make any
adjustment in the exchange rate to compensate the balance of payment deficit. So the fiscal policy
cant make any adjustment in exchange rate to control the deficit in the current account.
4. Determination of Exchange Rate
Balance of payments is a collection of various economic factors that play a significant role in the
determination of the exchange rate. Change in the balance of payments accounts causes a change
in the exchange rate. The balance of payments plays a vital role in the determination of the
exchange rate under different regimes. We discuss here two regimes, floating and fixed exchange
rate regime.
4.1
Floating Exchange Rate Regime
When there is a floating exchange rate regime existing in the country, monetary authorities do not
interfere in the evaluation of the exchange rate. Under this situation the exchange rate is
determined by demand for and supply of currency. Surplus in the balance of payments account
appreciates the local currency which makes domestic products and assets more expensive in the
international market. That puts downward pressure on the balance of payments account. Surplus in
balance of payments also means the excessive demand of local goods and assets which leads to a
reduction in the foreign exchange rate and lower the prices of local products in the domestic
market. It also increases the foreign exchange reserve. But when there is a deficit in the balance of
payments account it will depreciate the local currency which means appreciation of the foreign
exchange rate. The depreciation of the home currency makes domestic products cheap in the
international market. So, their international demand increases which makes an upward pressure on
the balance of payment. If the domestic producers are not able to fulfill this excessive demand then
imports increase as compared with exports and in the result there is deficit in the balance of
payments.
4.2
Fixed Exchange Rate
Under the fixed exchange rate regime the monetary authorities interfere in exchange rate variation
and use the official foreign reserve to equilibrate the balance of payments. When the balance of
payments is in surplus it means there is excessive demand for local goods, assets and currency.
Under the fixed exchange rate regime the monetary authority plays its role and supplies the
excessive demand for currency by purchasing government securities from the domestic market. On
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the other hand the deficit in the balance of payments means less demand for local goods, assets and
currency which means the excessive supply of local currency in the domestic market or inflation is
prevailing in the country. If the fixed exchange rate regime is prevailing in the country the
monetary authority again plays its role and sells the government securities in the domestic market
to control the money supply in circulation. One thing here is important: if the government doesnt
have a sufficient amount of foreign reserve then they are bound to devalue the home currency.
5. Monetary Policy
Monetary policy is the process of controlling the national money supply in the local economy to
achieve some specific objectives like stabilizing price level, achieving reasonable economic
growth, employment opportunities, enhancing foreign investment, controlling the interest rate, and
many others depends upon the economic situation of a country. For achieving the said objectives,
the monetary authority takes various steps including buying and selling of local securities to
private banks and financial institutions, controlling interest rate, monitoring money in circulation,
meeting the reserve requirement and many others. We can divide the monetary policy in to two
categories under the different exchange rate regime, the loose monetary policy and tight monetary
policy.
5.1
Loose Monetary Policy
Under the fixed exchange rate regime the monetary policy looses its control and that leads to a
deficit in the balance of payments. When there is fixed exchange rate regime in a country the
government makes changes in the domestic currency supply on each working day to keep the
exchange rate at a certain desirable fixed level. Under this situation the government sells its own
currency in order to keep the exchange rate fixed. When the supply of money in circulation
increases, it lowers the interest rate as more money is available for loans as compared to demand
for it. Low interest rates encourages capital outflow because outside the country investors have a
healthy return which leads to a deficit in the balance of payments. At the same time, the high
supply of money increases the local income level which leads to an increase in imports as people
have more money to spend so they demand the foreign products. In the end it affects the current
accounts balance and imports increases as compared to exports so that there is a deficit in the
current account.
5.2
Tight Monetary Policy
When the exchange rate regime is freely floating, the monetary policy is independent. Tight
monetary policy causes an increase in the interest rate as the government controls the money in
circulation in local market. Healthy interest rates attract foreign investors and cause an increase
capital inflow which leads to a surplus in the balance of payments. Local currency is appreciated
due to surplus in the balance of payments which leads to an increase in the prices of domestic
products in the international market. If the countrys exports are based on inelastic products, then
the change in price level will cause an increase in revenue and a surplus in the current account.
6
Conclusion
The prime objective of monetary policy is the price stability. But under the deficit in the balance of
payments it seems to be difficult. Deficit in the balance of payments not only depreciates the local
currency against foreign currency but also increases the domestic price level. Rapid variation in the
exchange rate causes by the deficit in balance of payments induces the authorities to fix the foreign
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exchange rate at certain desired levels by adopting pegging exchange rate regime or a currency
board. Under both regimes monetary authorities loose their control. In the end, it is concluded that
the balance of payments has the major influence on exchange rate regime and monetary policy and
change in the balance of payments brings changes in the exchange rate and monetary policies. It is
strongly suggested that countries have a deficit in the balance of payments must take the following
steps to control the deficit. It will not only make the local currency strong but will also helpful in
achieving healthy economic growth.
i.
ii.
iii.
iv.
v.
vi.
vii.
Try to increase the official foreign reserves that may be in the form of foreign currency, gold
foreign reserve of private banks at the central bank and foreign securities investment. It will
help to finance the net result obtained from the current account and capital account.
Increase in foreign reserves also helps to enhance the confidence of lending authorities and
control the exchange rate variation.
Establish more domestic as well as international industries inside the country to increase
domestic production. This will not only help to fulfill the domestic demand but also increase
exports, provide employment and lead to healthy economic growth.
Try to convert raw materials into finished or semi-finished goods. This step will help to
increase the export value and reduce the trade balance of payment deficit.
Impose tariffs, import quotas and exchange rate control.
Try to increase the interest rate. It will help to increase the saving habits of residents of the
country and also attract foreign investments. This step will help to overcome the shortage of
capital investments.
Attract foreign direct investments by providing then extraordinary production facilities.
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References
Virginie Coudert & Marc Dubert, (2004-05), Does exchange rate regime explain differences
in economic results for Asian countries?, CEPII working Paper No. 2004-05 May
Akiko Terada-Hagiwara (January 2005), Foreign Exchange Reserves, Exchange Rate
Regimes, and Monetary Policy: Issues in Asia ERD working paper No. 61.
Mohammad Ishaq Javed and Dr. Shaikh Muhammad Ashfaq (2004), The problem of deficit in
balance of payments, Dawn the Internet edition, http://DAWN.com Monday 4th October 2004.
Robert A. Mundell, (1968), The Appropriate Use of Monetary and Fiscal Policy under Fixed
Exchange Rates International Economics, New York: Macmillan, 1968, pp. 233-239.
Liu Hongsheng, Hu Yunquan & Hui Xiao feng. (2003), Renminbi,s Exchange rate regime for
greater flexibility , Proceedings of 2003 International Conference on Management & Engineering,
Georgia, USA. 1494-1497.
Yuhai Su, (Aug 2004), Analysis on the option of RMB Exchange rate regime, Chinese
Business Review, Volume 3, No8 (serial No.14)
Jerry Mushin Exchange-Rate Policy and the Efficacy of Aggregate Demand Management The
Business Economist Volume 33 No 2
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VOL 3, NO 1
Cloud Computing: SMEs Issues and UGI based Integrated Collaborative

Information System to Support Pakistani Textile SMEs
Chaudhry Muhammad Nadeem Faisal13
Engr. Muhammad Khalil Azher14
Engr. Babar Ramzan15
Muhammad Sheraz Arshad Malik16
Faculty Members
The University of Faisalabad
Faisalabad-38850, Pakistan
ABSTRACT- Cloud computing is a style of computing where information technologies
enable business products, services and solutions as a service over the internet. It is a concept where
it is characterized into three main entities - Software, Hardware and Network. The collective
nature of all these entities is known as the Cloud computing. The concept of cloud computing is
currently in very early stages of development. There are a lot of researches being carried out in this
area. Authors focus to analyze the cloud computing and also to propose a concept based of
qualitative studies for business process integration and Industrial collaboration, in the context of
SMEs in Textile sector. Here the authors propose services oriented cloud based infrastructure as an
ideal for SMEs especially for those companies having their no information
system based
infrastructure and solution to the challenges that they are facing. The primary aim of their research
work is to integrate process not only within the organization but also with the partners and
customers. It also takes care of the IT investment of the enterprise having lack of resources.
KEYWORDS: SOFTWARE AS SERVICES (SAS), CLOUD COMPUTING, SMES, BUSINESS
PROCESS INTEGRATION, B2B COLLABORATION, (UGI) UNIFORM USER GRAPHIC
INTERFACE, VALUE ADDED PROCESS, E-GOVERNMENT
1. INTRODUCTION
Now a days most of the companies provide cloud base resources / services over the internet.
Today the cloud computing is rendering users with services to access hardware, software
services and data resources while using the internet [1]. In computer science the word
broadcast means computing at a remote location inside the cloud, either through your own
13
Chaudhry Muhammad Nadeem Faisal is currently working with the University of Faisalabad in the School of Management studies, School
of Textile Engineering, 38850, Faisalabad Pakistan.
Chaudhry Muhammad Nadeem Faisal is also with the Riphah International University as Visiting Faculty member, with FSD campus, Pakistan
14
Engr. Muhammad Khalil Azher is currently working with the University of Faisalabad in the School of Textile Engineering, 38850,
Faisalabad Pakistan.
Engr. Muhammad Khalil Azher is also working as Visiting Faculty with the GC University Faisalabad in the Department of Industrial
Management, 38000, Faisalabad Pakistan.
15
Engr. Babar Ramzan is currently working with the University of Faisalabad in the School of Textile Engineering, 38850, Faisalabad
Pakistan.
16
Muhammad Sheraz Arshad Malik is currently working with The University of Faisalabad in the Department Information technology as IT
Manager, 38850, Faisalabad Pakistan
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computer or with any other device through the web using an internet connection. "The cloud is
a smart, complex, powerful computing system in the sky that people can just plug into [2]."
The major contributions of this study is to make the structure, constant and smooth flow of
information with help of cloud based services in efficient manners to support SMEs in
textile sector. As in SMEs, the textile manufacturing process is divided into clusters e.g.
ginning, spinning, weaning, processing and made ups. Only few corporate level industries
possess their own complete units for manufacturing. SMEs sector majorly faces the
problem due to dis-integration and cluster based industry in different geographical
locations. As they have to support each other in value addition process of a product. This
purposed cloud based concept will provide and facilitate the SMEs in reducing operational
and inventory cost, improving delivery, revenue and market share.
1. BACKGROUND
In response to rapid environmental changes, diverse business development and continuous
improvement in their information systems, many organizations think to enhance their
business processes through integration and B2B (Business 2 Business) collaboration for
future. Pakistani entrepreneurs have been facing tremendous changes within economic,
commercial and technological environments. It is evolving an urgent problem for them
how to utilize information technology and to build an effective information system. The
poor performance of entrepreneurs in textile SMEs is only due to limited resources and
unawareness about the Information system capabilities, poor implementation, lack of
business processes integration and industrial collaboration.
Government should provide them such resources in order to serve better and to win
competitive advantage and for future growth. As entrepreneurs alone themselves, are not
in position to overcome these challenges due to lack of resources and poor information
based system. There are numerous issues currently facing by the Pakistani SMEs in textile
sector are as, excessive regulation, energy shortage, water shortage, difficulties in
marketing and selling the products, unawareness about the technology, lack of expertise in
information technologies, obsolete technology, limited R&D (Research and Development )
support, lack of capital and financial resources, low skill mix of the labor / work force,
limited productivity of works and rising competition due to imported products. [8]
In this paper, the authors contributions are not only to bring the SMEs issues in textile
sector but also to propose a premature graphical prototype of cloud based infrastructure
(Fig. 3). It helps to define the importance of integration in business processes and
(Business 2 Business) B2B collaboration between the textile industries specifically in
SMEs. The objectives of this SOA (Services Oriented architecture) based infrastructure is
to provide capabilities and enterprise solutions to those companies having limited
resources, expertise and are not capable to design and implement their own Information
system. Business processes integration not only to manage the resources, but also provides
an efficient way for the flow of information in reverse order to improve the flow of work
and material. The purpose of this research work is suggest the implementation of SOA
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(services oriented architecture) at government level to support the Medium and Small level
industries having lack of resources, expertise and human powers in textile industries.
OBJECTIVES
To indentify and analyze the SMEs Clusters.

Business process integration for SMEs and B2B collaboration in between the different
clusters.
Uniform user graphic Interface (UGI) based applications to increase the adoptability of
applications within the workers
1. TEXTILE SMEs IN PAKISTAN

SMEs sector have been serving as respirator for the economic development with its
contribution towards GDP value addition and export earning. As the developed countries
like USA, UK, Germany, Canada and Japan have focused on this sector which paying a
fruitful results in the economic development [7].
Definition of SMEs according to the Pakistan SMEs Policy, is given bellow in the Table.1
Table.1 Definition of SMEs in Pakistan
Enterprise Category
Small & Medium Enterprise
(SME)
Employment Size
(a)
Paid Up Capital
(b)
Annual Sales (c)
Up to 250
Up to Rs. 25
Million
Up to Rs. 250 Million
Small Medium Enterprise sector is the backbone of Pakistan economy, as it plays vital
role in the social and economical development of the Pakistan. According to the statistics
collected from SMEDA (Small Medium Enterprise Development Authority), there are
about 3.2 million business enterprises in Pakistan, (44% Rural & 56% Urban), where they
produce a wide range of goods and services, provide employment for a large number of
skilled and semi-skilled workers, account for a substantial proportion of manufacturing
output, and make a major contribution to the countrys balance of payments. [7]
Here author focus of attention on the textile manufacturing related SMEs is, specifically in
Faisalabad. As Faisalabad is the third largest city of Pakistan having 45932 SMEs
manufacturing units, from them 22378 related to business of textile sector.
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Manufacturing Unit =
Employment Size =
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26
790
Small & medium Manufacturing Unit =21842
Larges Units: 32
Employment Size = 400,000
Manufacturing Unit = 44
Employment Size = 20,000
Others Cluster Actors Cotton Ginner
22 units (in Faisalabad Region)
156 units (in Southern Punjab
region)
Manufacturing Unit =192

Employment Size = 12000
Small & medium manufacturing Unit = 274

Employment Size =
20,000
Large Units:
26
Total Number of Units
1200
Registered Number of Units
300
Employment Size =
250,000
Fig.1 Textile value chain & number of SMEs units with Employment size in Faisalabad
Table.2 Total Number of SMEs in Textile sector in Faisalabad

9 Ginning Units:
26
9 Spinning Units:
44
9 Weaving Units:
21842
192
9 Printing Units:
9 Apparel & Made Ups :
Small & Medium 274, Large Units 12000 registered 300
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Table.3 Textile SMEs Employments size in Faisalabad
9 Ginning Units:
9 Spinning Units:
9 Weaving Units:
9 Printing Units:
9 Apparel & Made Ups :
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790
200,00
400,000
12,000
250,000
Table.4 Survey results on SMEs

9 Entrepreneurs Education: Only 49% entrepreneur in SMEs sector having college or
graduate level qualification.
9 Technical Training: 70% entrepreneur in SMEs sector had not obtained any training.
9 Computer Usage: only 46% have computer. While from them 57% SMEs it for just
maintaining books of accounts while 43% for letter writing/email/internet.
9 Power Outages: 62% did not have their own power generation mechanism.
1. CLOUD COMPUTING IMPLECATIONS TO SUPPORT SMES

It is a style in which all the information technology related capabilities are providing
services and transferring technology, data and software applications from local systems
thought network into Clouds. According to the [3] the aims of the cloud computing is the
migration of users, data and processing from desktop PCs (client system) and corporate
servers to the cloud [3]. It is also defined by [4] why not just move all processing power to
the cloud and walk around with an Ultra-light input device with a screen? The Cloud
computing brought a lot of services i.e. database, storage, backup, data replication, data
protection and maintain the security of the services [4, 9]. Cloud computing in simple
words is the delivery of services or capabilities over the network and it is segregated into
three following entities.
a) Softwareasaservice(SaaS):Applicationsbasedservicesdeliveredoverthenetwork.
b) Platform as a service (PaaS): A software development framework / components all
deliveredonthenetworkondemand,theusershavetopay.
c) Infrastructure as a service (IaaS): An integrated environment of computing resources,
storageandnetworkfabricdeliveredtonetworkusershavetopayforusagemodel.
4.1. SOFTWARE AS A SERVICE

Software as a service is link to the concept of cloud computing a new paradigm e.g.,
Google applications [12]. The paradigm focuses on sharing data and computation over the
scalable network nodes. Nodes include the end user computer, data center and web
services and are essentially the rental of software. [9]
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Figure 2 Concepts and layers of Cloud Computing
Figure.2 showing the different layers of cloud computing. SAAS (software as a service)
term is used to provide software and application services to users as they need to access. It
is also defined by [10] Today, most of what we use the web, on a day-to-day basis are not
just web pages they are applications. It is increasingly prevailing distribution model based
on applications that are hosted by provider to customer through network. It is support web
based services and service oriented architecture (SOA) is mature and new development
approach. [9]
4.1.1. BENEFITS OF SOFTWARE AS SERVICES
Easier Management.
Automatic updates.
Compatibility.
Effective collaboration.
Global accessibility.
Different companies provide similar service oriented architecture, through web based
application in order to solve the enterprise problems and derive their perspective solutions.
The BScaler enterprise recourse Manager provides the Cloud based ERP (SAS) to the
Small medium level industries which include the B2B / SMEs [10]. SaaSplus, Inc is a
Cloud computing based SaaS ERP Company in USA also offering Web based ERP
applications that enable Customer Relationship Management (CRM), supply chain
integration, manufacturing resources planning (MRP) and B2B collaborations [11].
Software as a Service
Cloud based ERP / IS
Sales
Operations
Finance
Services
DASHBOARD FOR EXECUTIVE

Fig. 3 Flow of Information and Business Process Integration
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The purposed concept of computing is derived from the real world service model to give
out the processing time to SMEs in textile sector to mange their business processes
individually. So this requires the deployment of datacenter and storage which must be in
control of government and at a place where the uninterrupted power supplies i.e. electricity
or solar panel are available. SMEs can freely access the desired business applications
accordingly. Here the focus is on the cloud based services oriented infrastructure (SAAS
Based ERP) that will not only facilitate the SMEs to manage their business activities, but
also to develop fastest supply chain with smooth flow of information between different
cluster of SMEs where they exist demographically at different locations.
The division of this service oriented model for E-government into three levels figure.4
First part is to manage the business resources and transaction individually, in second to
make collaboration between business to business (B2B) in different cluster of SMEs. The
third phase to provide the service oriented architecture (SAAS Based ERP) with uniform
user graphic interface based applications (UGI) for better understanding, memorability and
adoptability as discuss later.
Fig.4 Cloud based services oriented architecture for textile SMEs
The cloud based infrastructure poses tremendous potential to meet the above mentioned
challenges as its goals are to obtain better resources, utilization of IT capabilities and its
focus on providing the cost effective services for SMEs. It will help SMEs to produce a
valuable product or services with concrete flow of work, material, and information. The
informational/ functional integration and collaboration within the clusters facilitate them in
planning, which involves demand forecasting, level of inventory, manufacturing and
production planning. This level of integration between the different clusters of SMEs in
textile value chains makes fastest the supply chain process to reduce the emission of
carbon. It can also raise the utilization rate of resource and reducing the electricity cost and
consumption as Pakistani SMEs facing now a days.
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This will help to resolve the biggest issue in Pakistani textile sector, that is the workers as
well as entrepreneurs are not very much familiar with software and computer based
applications. It is also costly for the entrepreneurs to spend time and money for training.
ERP based software as services with uniform user graphic interface enhance the workers
adaptability and memorability while working consistently. They can easily adopt such
application with uniform user graphic interface while changing their job from one
organization to another. So in this way, they can work efficiently and consistently, it also
reduces the human mistake and builds confidence in them while working in textile sector.
CONCLUSION
This paper discusses how to make an organizational process and information centric with cloud
based application. It suggests to the government to offer such application to entrepreneurs so
they can reduce their operational cost. To develop this cloud computing infrastructure there are
high prioritiy needs i.e. complete support of Government authorities and the support of the
autonomous bodies that are directly responsible for the development of SMEs in Pakistan.
Pakistan is a developing country where no any organization is ready to take the initiatives to
promote the awareness and capabilities of information technologies in entrepreneurs. This way
government can supply the business communities with enterprise application via cloud
computing and can raise the utilization of data center considerably to reduce the consumption
of energy. Therefore, cloud computing is the best Environment to establish the e-government
The Ministry of Industries, commerce, science and technology, and the Small and Medium
Enterprise Development Authority (SMEDA). The authors have recommended that there
should be some actions taken by the government officials to regulate, promote and to create
cloud computing environment for textile SMEs in Pakistan.
FUTURE WORKS
In previous discussion, authors discussed the business process integration, B2B collaboration as
Cloud computing offering at enterprise level e.g., software as a services In Fig.4, a conceptual
prototype of efficient web based ERP SAS (software as services) information system is
proposed. But there is still need to formulate the requirements for designing it, for future
requirements as it may carry the extensive process of investigation and imperials studies to
gather the basic requirements for an effective information system and, its implementation at
government level to support textile SMEs as shown in Fig.5.
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G2B and B2B

Layer 1: Business process
Layer 2: Industrial collaboration
Layer 3: Uniform user graphic
CLOUD BASED INFRASTRUCTURE FOR
Government to Business
Egovernment
Managemen
Software
As services
Platform as
i
Infrastructure
As services
Employee
personal
experienc
Suppli
Designer
Data
NETWORK
DATA CENTER
Data
Trans
CLOUD BASED INFRASTRUCTURE
CAD data
Retail
Invento
BUSINESS PROCESSES
Distribut
Operation
al /
Work Follow + Raw material Follow
Procureme
Processing
Distributio
Logistics system
IS MODEL FOR BUSINESS PROCESS
Manufacturer
Supplier
Collaboratio
Retailer
Distributor
INDUSTRIAL COLLABORATION
APPLICATION INTERFACE
Application
Uniform user Graphic Interface
INFORMATION SYSTEM CAPABILITIES

Fig.5 Working Methodology of Inforamtion System in Textile Indistry
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REFERENCES
[1] Lizhe Wang, Jie Tao, Marcel Kunze Scientific Cloud Computing: Early Definition
and Experience, Proceedings of the 2008 10th IEEE International Conference on High
Performance Computing and Communications - Volume 00 Karlsruhe, Germany, pp. 825830, 2008.
[2] H, Steve, Cloud computing made clear, Business Week, Issue 4082, pp.59-59, May,
2008.
[3] B. Hayes, Cloud computing, Communications of the ACM, Vol. 51 no, pp.9-11,
May, 2008.
[4] A. Weiss, Computing in the Clouds, networker, vol. 11, no. 4, p.18, Dec, 2007.
[5] R. Buyya, A. Sulistio, Service and Utility Oriented Distributed Computing Systems:
Challenges and Opportunities for Modeling and Simulation Communities, Simulation
Symposium, pp. 68-81, 2008.
[6] Geva Perry, How Cloud & Utility Computing Are Different, at GigaOm. [Online]
[Cited Nov 21, 2008] Available: http://gigaom.com/2008/02/28/how-cloudutilitycomputing-are-different.
[7] Small & Medium Enterprises Department State Bank of Pakistan, SME Finance
Quarterly Review First Quarter, 2008
[8] http://www.smeda.org/ SMEDA, Small and Medium Enterprise Authority
[9] Chaudhry Muhammad Nadeem Faisal, Muhammad Sheraz Arshad Malik Usability
evaluation of Software as Service from Individuals perspective Vol. II No. 7 (March
2011). ISSN: 1697-9613 (print) - 1887-3022 (online). www.eminds.uniovi.es
[10] BScaler enterprise recourse Manager, available online at: http://www.bscaler.com/
retrieved (02-02-2011)
[11] BScaler, available online at: http://www.bscaler.com/saasplus/index_saasplus.htm
retrieved (02-02-2011)
[12] Chaudhry Muhammad Nadeem Faisal, Issues in Cloud Computing: Usability
evaluation of Cloud based application, LAP LAMBERT Academic Publishing, Germany,
ISBN-10: 3838362829, ISBN-13: 978-3838362823, PP, 34.
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Psychological contract breach and work place deviance: moderating

role of relational contract
Muahammad Farooq Hussain

Associate Professor
University of Central Punjab, Lahore, Pakistan
Muahammad Farhan Younas
University Of Central Punjab, Lahore, Pakistan
Numan Ahmed
Adil Humyaun
Rizwan-ul-haq
Fahim-ul-noor
Hassan Yameen
Abstract
This research is an attempt to observe the relation among psycho contract breach with workplace
deviance. In our research we are also examining the moderate function of relational contract
among PCB with workplace deviance. The purpose of our study was to check the relation of
employees with their employers in the financial sector organizations. The findings come out with
this result that relation among employee and employer breaks when there is conflict between both
sides. The employer should safe the psycho contract relation to breach out. In this cross sectional
findings we examine the connection within PCB and WPD by collecting the data of N= 250
employees of financial sector in Pakistan. The result shows so as to PCB is completely correlated
to WPD and further results prove to relational contract has no effect on the model.
Key words: Psychological contract breach (PCB), Work place deviance (WPD) and Relational
contract (RC).
Introduction
In the recent area where organizational structures are changing rapidly, the phenomena of
psychological contracts are taking place in organizations. It is very vital to comprehend the impact
of psycho contract and its antecedents on organization. Our research is based on psychological
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contract breach that leads towards workplace deviance. From the last two decades it observed that
psychological contract is taking place in organizations or more we can say that psychological
contract take into account by researchers and organizations. Psychological contract concept is first
discussed through (Argyris, 1960) and after that discussed through (Levison, 1962) with somewhat
different idea. In simple it is a relationship among worker and its association (Agyris, 1960).
Psycho contract is with reference to an individual belief, that what he perceived during its job.
Psychological contract is a worker insight what he perceive and what he get in return from its
organization (Rousseau, 1995). According to the perception perceived by employee, psychological
contract is further divided into two types; Transactional contract and Relational contract
(Rousseau, 1995). Transactional contracts are short term in nature, because it is purely related to
monetizable exchange (Robinson & Morrison, 1997). In transactional contract employee is more
attractive towards its income than job. Relational contracts are long-standing and socio-fiscal in
nature (Robinson & Morrison, 1997). Relational contract occurs when employee is more loyal
towards its organization. From the last 10 years Psychological contract is becoming alarming
problem for the organization due to its antecedents.
Psychological contract is becoming more important when the phenomena of psychological contract
breach takes place. PCB occurs although worker perceives when association unsuccessful to
execute its obligations/promises (Rousseau, 1995). The worker who perceives psychological
contract breach responds negatively. Commit a breach responses possibly will arise in the shape of
anger, irritation, reduced loyalty, obligation moreover workplace deviance. Perception about
breach may arise shortly after job or may after several years of service. The employee who
perceives breach usually not takes interest any more in his/her job. In our model we are discussing
psychological contract breach leads towards workplace deviance.
From last few years the phenomena of work place deviance has generated interest among
researchers and market managers. It becomes an interest factor for researchers due to its harmful
affects on organization. Workplace deviance is about an employees behavior against its
organization norms (Robinson & Bennett 1995). WPD is a type of frustration that is experienced
by organization from its employees. Workplace deviance is an professional offense (Kowk, Au &
Ho, 2005). Workplace deviance might be minor, like embarrassing co-workers, abusing staff,
leaving early, to major issues like theft, not working properly and giving organizations private
information to rivals. If any employee violates organizational rules and norms, then employee
involves in workplace deviance (Robinson & Bennett, 2000; Spector & Fox, 2002).Workplace
deviance is further divide into two parts; Interpersonal deviance and Organizational deviance. IPD
occurs among employee with employer (abusing, embarrassing co-workers and leaving early).
Organizational deviance occurs between employee and its organization (sabotage, theft).
The research is an effort to check the collision of PCB on workplace deviance under the
moderating role of relational contract. In our model relational contract is moderating variable
among PCB with WPD. Relational contract is a type of psycho contract. Relational contract based
on loyal relationship between employee and its organization. We assume that, when a person is
having relational contract with its organization and its psychological contract breaches it leads
towards more deviance. But According to our cross sectional study and inadequate facts, literature
review indicates that relational contract as a moderator has not been used in association with PCB
with WPD.
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Literature Review
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Psychological contract and psychological contract breach

Psycho contract is defined as person viewpoint, wrought up the organization regarding term of a
trade concurrence between employees with their association (Rousseau, 1995). Psycho contract is
a type of contract that is an informal, un-written and non-verbal contract among worker and
manager (Rousseau & Robinson, 1994). Psycho contract was first discuss in 1960s and 1970s by
Argyris, to some extent dissimilar conceptualization. Schein (1980) also described the
psychological contract as an unwritten and non-verbal agreement built by employee. Psychological
contract examines the relationship among two parties i.e. worker and boss (Rousseau, 1989).
Psycho contract is about employee expectations from its organization (Rousseau, 1995). Psycho
contract is a societal swap process among the worker with the employer (Robinson & Morrison,
1995). Psycho contract refer to employees perception (Robinson, 1990). Rousseau (1997) also
mentioned that psychological contract may vary in strength and geniality. Psycholo contract is
about individuals point of view on its agreement between that individual and other person
(Rousseau & Greller, 1994). In nature, psychological contract was inherently subjective
(McFarlane Shore & Tetrick, 1994). There are two kinds of psychological contract, relational and
transactional contract (Guzzo & Noonan, 1994). Psychological contract has two types, relational
and transactional contract (Rousseau, 1995). Relational contract define as long time contracts and
more related to socio-emotional exchange where as transactional contracts define as short time and
more associated with economic resources exchange (Rousseau, 1995). The TC is connected with
fiscal swap over where as RC is connected with common swap over (Rousseau & Park, 1993).
Transactional contract and relational contract both are different from each other in term of
obligation (Robinson, Kraatz & Rousseau, 1994). Transactional contract can be defined as
economic exchange during a specific period of time (Robinson, 1994). Psychological contract is
built by employee or individual in three ways (Rousseau, 1995). First, individual may perceive
positive communications from employer or during interviews may receive promises from the
recruiters. Second, employee observes the supervisor attitude towards organization and
organizations response towards supervisors. Third, sometime organization provides some positive
signals for instance benefits, settlement and recital remarks that sometime play an significant job in
building psychological contract (Rousseau, 1995). Psychological contract takes interest when
phenomena of psychological contract breach take place, that is when obligation and perception of
an employee or individual is not fulfilled by the employer or organization it perceives
psychological contract breach (Robinson & Morrison, 1997). When an employee perceptions/
expectations not fulfill, then feeling of psychological contract breaches (Rousseau, 1995). It also
defines as a difference among what perceived and what we get in return (Morrison & Robinson,
1997). A PCB arises when employee compares its psychological contract and the actions taken by
its organizations (Robinson, et al, 2004).
The PCB occurs when employee is not receiving according to its expectations (Robinson, 1997).
Breach occurs when organization is not fulfilling its promises according to its employee
(Rousseau, 1995).
Workplace Deviance
Workplace deviance is about an individual or employee behavior violates organizational rules and
also threatens the well-being of an association and its members (Robinson & Bennett, 1995). WPD
is becoming an important and interesting variable as a result of its destructive belongings on the
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association and its employees (Robinson & Greenberg, 1998). According to different surveys it is
proven that workplace deviance is becoming common and expensive problem for the organization
(Bennett & Robinson, 2000). Workplace deviance negatively affects both its employee and
organization e.g. (Gundlach & Douglas, 2002). Workplace deviance is an individual behavior in
which employee will be motivated to violate (Kaplan, 1975). As a result of its costly behavior with
destructive possessions on association are attracted researchers to know about its predictors such
as, (Seabright & Schminke, 2002).
Usually those employees experiences workplace deviance, are more likely to quit, reduce
productivity, feel job-stress (Griffin & OLeary-Kelly, 2004). There are two dimensions of
workplace deviance: interpersonal deviance and organizational deviance (Robinson & Bennett,
1995). Interpersonal deviance occur when member of the organization are targeted, it may include
disrespect, rude behavior etc (Giacalone, Riordan & Rosenfeld, 1997). Its all about how an
employee harms its co-workers (Robinson & Bennett, 1995). Organizational deviance occur when
organization itself targeted, it may include stealing (Giacalone, Riordan & Rosenfeld, 1997). In
Organizational deviance the organization is itself targeted and up to which extent the employee
harms its organization (Robinson & Bennett, 1995). It is important to differentiate interpersonal
deviance and organizational deviance from each other because they both have different results
(Giacalone, Riordan & Rosenfeld, 1997).
Psychological contract breach and workplace deviance
When psychological contract breaches an individual may threat the well being of its organization
(in both way personal and interpersonal deviance) Robinson & Bennett (1995). There are two
types of deviance: Interpersonal and organizational deviance (Robinson & Bennett, 1995).
Contract breach leads to workplace Deviance that may define as frustration against organization
(Robinson & Bennett, 1997).PCB is completely in relation with WPD.
H1: Psychological contract breach is positively related to Interpersonal workplace deviance.
H2: Psychological contract breach is positively related to Organizational workplace
deviance.
Relational contract
Relational contract define as long time contracts and more related to socio-emotional exchange
where as transactional contracts define as short time and more associated with economic resources
exchange (Rousseau, 1995). The relationship among relational contract and transactional contract
are different but they may relate with employees working behavior in different ways (Raja, 2004).
The level of contract in both employee and employers relation with subject matter of RC is
stronger than TC (Coyle-Shapiro & Kessler, 2000). Relational contracts are strongly affected by
contract breach than transactional contracts (Robinson, 1994). In relationship with a person
attitude of relational contract, we suggest that the relationship between promise and what our
studies shows that there should not be consisting of disagreement effect. Researchers findings say
that individual person having many parts when they conclude their result (Rice, Phillips, &
Mcfarlin, 1990). Where as, the level of relational contract also describe that disagreement effects
may be having the necessary relation with higher order (Migonance & Herrbach, 2004) In
relational contract the relationship of employer with employee, the employee seeks to be more safe
for maximum time working within the organization (Denise Rousseau).Relational contract of
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employer & employee are the relationship between them that would reflect the long term
relationship (Rousseau, 1988).
Relational contract as a moderator
We take relational contract as a moderator. Psychological contract breach leads to a number of
circumstances it may cause increase in employee turn over ratio and may it result in the shape of
workplace deviance. We assume that when there is relational contract among worker and its
association with PCB it would lead towards workplace deviance. Relational contract moderate
both psychological contract breach and workplace deviance. In relational contract employee is
more loyal towards its organization and it expectations towards its organization are also very high.
So, when a psychological contract breaches it may create high feelings of violation due to
relational contract and it lead towards workplace organization.
H3: Relational contract moderating the relationship between psychological contract and
Interpersonal workplace deviance.
Organizational workplace deviance.
Theoretical frame work

1.
Relational contract
Psychological
contract breach
2.
Interpersonal work
place deviance
Relational contract
Psychological
contract breach
Psychological contract breach

Interpersonal work place deviance
Organizational work place deviance
Relational contract
Organizational work
place deviance
(Independent variable)
(Dependent variable)
(Dependent variable)
(Moderator)
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Methodology
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Sample and procedures

Our research consists of employees of 29 organizations of financial sector in Pakistan. These
financial sectors include both private and public organizations. In this cross sectional field survey
the data was collected from 300 employees of different organizations of financial sector. After
discarding unusable questionnaires, we left with 250 useable responses. The education of
respondents range from intermediate to post graduate students and 67 % of the sample consisted of
graduate employees and 44% of employees were specialized in finance. The mean age of the
respondents is 33.47 years with (S.D = 10.93) and 75 % of the respondents were male. The
89% of the respondents are from private organizations and 25% of the respondents have more than
10years of experience. We have used 5 or 7 point likert scale on which participants responded.
Measures
All measures were collected through self reported instrument in which participants responded on 5
or 7 point likert scales. Reported values above the mean considered as higher level of
constructs in the questionnaire. As English is the medium of instruction in Pakistani education
institutions. Few other studies are conducted in English in Pakistani context like (Butt, Choi &
Jaeger, 2005; Raja et al., 2004). This raised our confidence in not using translated scales, to
avoid translation and back translation issues.
Psychological contract breach
PCB is calculated with Rousseau 05-items scale. Responses were given on 5-point scale from 1=
strongly disagree to 5= strongly agree. Relational and transactional contract were measured using
10 item scale for each type. An example thing for CB is feel that my employer has come through
in fulfilling the promises made to me when I was hired. Cronbachs alpha of this scale is (0.63).
Workplace deviance
Workplace was measured using Aquino, Lewis & Bradfield, (1999) 14-item scale. 6-items were
used for interpersonal and 08-items were used for organizational workplace deviance. Response be
specified on 5-ponit range from 1= Never, 2= 0 to 3times, 3= 4 to 10item, 4= 11 to 20 item to 5=
more than twenty. An example piece in support of IPWPD is I swore at a co-worker. An
example piece in support of OWPD is I made unauthorized use of organizational property.
Cronbachs alpha for IPWPD is (0.78) and Cronbachs alpha for OWPD is (0.84)
Relational contract
Relational contract was measured using Rousseau (2000) 10-item scale. Responses were given on
5-point scale from 1= strongly disagree to 5= strongly agree. A sample item is Provides stable
benefits to employees families. The cronbachs alpha of this level is (0.79).
Control variable
The Outcome of one-way ANOVA show considerable alternatives in dependent and moderator
variables with one demographic: Organization name. All other demographic factor like age,
gender, qualification, designation, was showed insignificant impact on moderator and workplace
deviance. Therefore, only one variable organization name was entered into the equation as control
variable, when we performed Linear Regression in this study.
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Results
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-----Insert Table 1 Here----Descriptive Statistics and Correlations

Table 1 shows descriptive statistics, mean, standard deviation correlations for the entire
variables used within this research. Alpha reliabilities are reported in bold parenthesis in front of
each variable. The descriptive analysis results revealed mean value for Psychological Contract
Breach 2.75 (S.D = 0.74) the mean value for Relational Contract 3.02 (S.D = 0.68) the mean value
for Interpersonal Work Place Deviance 1.81(S.D =0.71) and mean value for Organizational Work
Place Deviance 1.51(S.D =0.58).
PCB is positively linked with IPWPD and it is Sig. at .05 level of significance i.e. (r = 0.14, p<
.05) Relational Contract is negatively correlated with Psychological Contract Breach and it is Sig.
at .01 level of significance i.e. (r = -.42, p<0.1). Psychological Contract Breach is positively
correlated with Organizational Work Place Deviance and it is Sig. at .05 level of significance i.e. (r
= 0.15, p< .05).
Regression Analysis
Contract Breach, Interpersonal Work Place Deviance and Organizational Work Place
deviance.
Table 2 shows results of regression analysis. In first step of regression analysis we entered
organization name as a control variable. In second step we regressed interpersonal work place
deviance with contract breach which showed the following results (=.13, p=.05). In the new step
of organizational work place deviance was regressed with psychological contract breach and it also
showed positive relation with (=.15, p<.05). Hence, hypotheses of the direct relations are
approved, H1: Psychological contract breach is positively related to Interpersonal workplace
deviance.
H2: Psychological contract breach is positively related to Organizational workplace deviance.
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Table 2
Regression analysis for Contract Breach, Interpersonal Work Place deviance,
Organizational Work Place Deviance, Relational Contract and outcomes
Interpersonal
work place
deviance
Predictors
Organizational
work place
deviance
R
Model 1:
Step 1
Control (organization
Name)
.02
.01
Step 2
Contract Breach
.13*
.34
Relational contract
.04
.05
.02*
.006
.15*
.43
.03
.05
.02*
.01
**. Correlation is significant at 0.01 levels (2-Tailed).

*. Correlation is significant at 0.05 levels (2-Tailed).
***p< .001, **p< .001,
*p< .05
Moderation analysis
In our moderation regression analysis table 3 taking interpersonal work place deviance and
organizational work place deviance as a dependent variable. In step 1 we take organization name
as a control variable, in step 2 we take psychological contract breach as an independent variable
and relational contract as a moderator, in step 3 we take interaction term to find out the
moderation. After conducting the moderation analysis into our model which is basically the
relational contract which according to our belief was influencing the relationship of psychological
contract breach and interpersonal work place deviance, organizational work place deviance. But
after conducting the whole study of sample size 250 respondents and running the proper
moderation analysis we found that our hypothesis is rejected (H3: Relational contract moderating
the relationship between psychological contract and Interpersonal workplace deviance.
Organizational workplace deviance) and there is null relationship. Moderation plays no role with
in the original relation of the main conceptualization.
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TABLE 3
VOL 3, NO 1
RESULTS OF MODERATOR REGRESSION ANALYSIS

Interpersonal Work
Place Deviance
PREDICTORS
Organizational Work
Place Deviance
MODEL 1
MODERATION OF RELATIONAL
CONTRACT
STEP 1
CONTROL
.02
STEP 2
CONTRACT BREACH
RELATIONAL CONTRACT
.13* .04
.02 .05
.02*
.001
.15*
.05
.03
.01
.02*
.004
.34
.006
.43
.05
.01
.01
STEP 3
Contract Breach*Relational Contract
.05
N=250 Organization Name was used as control variable.

***p< .001, **p< .001,
*p< .05
Discussion
The rationale of this research is toward examining the relationship of PCB with interpersonal work
place deviance, organizational work place deviance and relational contract as a moderator in the
financial sector organizations.
In our results we come to know that psychological contract breach is positively connected through
interpersonal work place deviance and organizational work place deviance (Hypotheses 1, 2).
Relational contract has no significance relationship between IPWPD and OWPD (Hypotheses 3,
4).
In our research we have discussed that psychological contract breach affects workplace deviance.
If there is an increased psychological contract breach than there is an increased possibility of
workplace deviance. Relational contract affects workplace deviance and psychological contract
breach according to our assumption in the study. We assumed relational contract because it is kind
of loyalty bonding towards the organization. Relational contract to a greater extent influences
workplace deviance as the employee mind frame is attached with the workplace.
Psychological contract breach occurs due to some dissatisfaction towards job and expected results
are not given according to the expectations. This should be prevented to increase the overall
performance of the employees. Management should see the employees as an important asset and
every possible measure should be taken to increase the job satisfaction and decrease the
psychological contract breach.
Different incentive packages should be given when employee performs according to the
organizations expectations. So that there is an increased motivation for employees to work
effectively and on time.
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Limitation of study
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In this study there are several limitations. Firstly, the research we conducted was cross sectional in
its nature, to explain these relationships in a better way the research should be longitudinal.
Secondly, our research was based on self reported measure, while pervious researchers also used
self reported measures in their studies (1996; Morrison & Robinson, 1997; Robinson & Morrison,
2000) and it may cause common method error.
There are many moderators and mediators that can be explained between psychological contract
breach and work place deviance.
Practical implementation & Future research

Our study shows practical approach towards the organization and employee relations. Employees
have the tendency to deviate if their expectations are not met and they can damage the repute and
image of the organization. Management and board of governors should be able to implement some
comprehensive plans towards the betterment of the employees. Improved salary packages, highly
integrated career path and giving what is promised is the hallmark of any organization.
By following this approach an organization would be able to increase the overall productivity of an
organization and the profitability. Relational contract has no effect on interpersonal workplace
deviance, organizational work place deviance and psychological contract breach according to our
study. There are many moderators and mediators that can be explained among PCB and WPD.
The researcher should use some different moderator to check the association of PCB and WPD.
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References
MAY 2011
VOL 3, NO 1
Amy E. Colbert and Michael K. Mount, James K. Harter, L. A. Witt, Murray R. Barrick.(2004).
Interactive Effects of Personality and Perceptions of the Work Situation on Workplace
Deviance. Journal of Applied Psychology, 89 (4). 599609.
Guest, E. D. (1998). Is the psychological contract worth taking seriously? Journal of
Organizational Behavior, 19, 649-664.
Jonathan L Johnson and Anne M OLeary-Kelly. (2003). The effects of psychological contract
breach and organizational cynicism. Journal of Organizational Behavior, 24 (5).
J.S.C and I.K. (2000). Consequences of the psychological contract for the employment
relationship: a large scale survey. Journal of Management Studies, 37 (7).
Mandy E.G. & Van Der Veld. (2008). Psychological contract breach and job attitudes: A metaanalysis of age as a moderator. Journal of Vocational Behavior, 72,143158.
Muhammad Ahmad -Ur- Rehman, Inam-ul-Haq, Farooq Ahmed Jam, Ahmad Ali, Syed Tahir
Hijazi (2010). Psychological Contract Breach and Burnout, Mediating Role of Job Stress
and Feeling of Violation. European Journal of Social Sciences, 17 (2) 232.
Prashant Bordia. Simon Lloyd D. Restubog, Robert L. Tang. (2008). When Employees Strike
Back: Investigating Mediating Mechanisms Between Psychological Contract Breach and
Workplace Deviance. Journal of Applied Psychology, 93(5), 11041117.
Raja, U., Johns, G., & Ntalianis, F. (2004). The impact of personality on psychological contracts.
Academy of Management Journal, 47(3), 350367.
Rousseau, M. D. (1990). New hire perceptions of their own and their employer's obligations: A
study of psychological contracts. Journal of Organizational Behavior, 2, 389-400.
Robinson, S. L., & Morrison, E. W. (2000). The development of psychological contract breach and
violation: a longitudinal study. Journal of Organizational Behavior 21, 525-546.
Samantha D. Montes and P. Gregory Irving. (2008). Disentangling the Effects of Promised and
Delivered Inducements: Relational and Transactional Contract Elements and the Mediating
Role of Trust. Journal of Applied Psychology, 93(6), 13671381.
Sandra L Robinson & Denise M Rousseau. (1998). Violating the psychological contract: not the
exception but the norm. Journal of Organizational Behavior, 15 (3), 245.
Sandra L. Robinson and Elizabeth Wolfe Morrison (2010). The development of psychological
contract breach and violation: a longitudinal study. Journal of Organizational Behavior 21,
525-546.
Steven H Appelbaum and Barbara T Shapiro. (2006). Diagnosis and Remedies for Deviant
Workplace Behaviors. Journal of American Academy of Business, Cambridge, 9 (2).
Violet T. Ho. (2005). Social Influence on Evaluations of Psychological Contract Fulfillment.
Academy of Management Review, 30 (1), 113128.
William H. Turnley and Daniel C. Feldman. (2000). Re-examining the eects of psychological
contract violations: unmet expectations and job dissatisfaction as mediators. Journal of
organizational Behavior. 21, 25-42.
584
Annexure
Table 1: Mean, Standard Deviation, Correlation and Reliabilities
Variables
Mean S.D
10
11
12
13
14
15
1.Gender
1.26
0.43
2.MaterialStatus 1.57
0.49
0.31**
3.Age
33.47 10.93 0.23** 0.58**
4.Organization
Name
5.Organization
Type
18.26 9.11
0.07
0.41**
2.82
0.52
0.17** 0.01
0.05
0.1
6.Department
7.Designation
4.88
2.79
2.58
2.17
0.11
0.1
0.06
0.03
0.01
0.24** 0.22** 0.11
0.17**
8.Education
9.Specilization
2.86
2.1
0.64
1.24
0.06
0.11
0.19** 0.15*
0.19**
0.14*
0.04
0.06
0.04
0.09
0.11
0.04
0.05
0.05
0.05
10.Organization
Experience
11.Total
Experience
12.Relational
Contract
13.Psychological
ContractBreach
14.Interpersonal
WorkPlace
Deviance
15.Organizational
WorkPlace
Deviance
3.02
1.44
0.06
0.41**
0.55**
0.25**
0.15* 0.04
0.15*
0.09
0.06
3.68
1.33
0.23** 0.59**
0.67**
0.31**
0.04
0.01
0.17** 0.19** 0.11
0.76**
3.02
0.68
0.01
0.04
0.08
0.01
0.05
0.07
0.05
0.05
0.1
0.01
0.01
(0.79)
2.75
0.74
0.05
0.13*
0.21** 0.1
0.04
0.03
0.06
0.06
0.04
0.04
0.08
0.42** (0.63)
1.81
0.71
0.09
0.14*
0.25** 0.14*
0.05
0.12
0.04
0.03
0.08
0.1
0.2**
0.02
0.14* (0.78)
1.51
0.58
0.08
0.24** 0.32** 0.1
0.04
0.1
0.01
0.01
0.05
0.1
0.19**
0.05
0.15* 0.56** (0.84)
0.29**
0.01
0.16*
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Appendix:
Name of Organizations
1. State life insurance company
2. Royal bank of Scotland
3. Habib bank limited
4. Muslim commercial bank
5. Barclays bank
6. Al-Habbib bank
7. Faysal bank
8. Al-Barka bank
9. Warid
10. FGS Textile
11. SMEC pvt ltd
12. KZEN Forex Advisor
13. Standard chartered
14. The bank of Punjab
15. Allied bank
16. Askari bank
17. Soneri bank
18. Al-Falah bank
19. First woman bank
20. National bank of Pakistan
21. United bank limited
22. ATLAS bank
23. Telenor Pakistan
24. Dubai Islamic bank
25. Sitara Chemical limited
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DOMESTIC AND MACRO ENVIRONMENTAL SOURCES OF STRESS
TO THE NIGERIAN WORKERS
NKWAM C. UWAOMA PhD
DEPARTMENT OF PSYCHOLOGY
IMO STATE UNIVERSITY, OWERRI
IMO STATE, NIGERIA
Abstract
The general objective of this paper is to investigate how the domestic and macro-environmental
factors can be sources of stress to the Nigerian workers. Specifically the paper unveiled the
warning signs of excessive stress at work, the domestic and macro-environmental sources of
stress and various ways of reducing domestic and macro-environmental stress.
Keywords: Stress, Domestic stress, Macro-environmental stress, Sources of stress, Nigeria,
Workers, Nigerian workers, Reduction of stress, Excessive stress, Warning signs.
1. Introduction
Nigerian workers are living and working in a difficult economy wherein they find it harder than
ever to cope with challenges on the job. They live in stressful home environments, face domestic
stress, on their way to their offices they struggle with stressful traffics, and the same stress awaits
them on the job. Office noise, heat, pollution and crowding daily stare them in the face. Urgent
job demands, undefined and non-directional supervisions, unpaid and insufficient salaries, and
unfriendly office environments governed by bickering, scheming, fear and seeming bleak future
elicit stressors for the Nigerian workers. For Nigerian workers, the troubled economy may feel
like an emotional roller coaster. Layoffs, non-promotions due to insufficient funding and
policies, budget cuts and epileptic salary payments have become bywords in the workplace and
of course, household phrases, resulting in increased fear, uncertainty, and higher levels of stress.
While some stress is a normal part of the workers life and can be perceived as not
seemingly harmful, excessive stress interferes with the workers productivity and reduces their
physical, mental, social and emotional health. Since job and workplace stress escalate in times of
economic crisis, it is very vital to identify specific sources of stress that compound issues for
workers in such a situation. In real practice, there are many sources of stress for the Nigerian
workers. Could it be as a result of environmental, domestic, economic, social, religious, or
organizational factors? Again, how do these stressors affect Nigerian workers productivity?
The general objective of the paper is to investigate how the domestic and macro environmental
factors can be sources of stress to the Nigerian workers. Specifically, the objectives include;
(1) To investigate the warning signs of excessive stress at work.
(2) To investigate domestic violence as sources of workers stress.
(3) To investigate the macro-environmental sources of workers stress.
(4) To attempt ways of reducing workers domestic and macro environmental stress.
Observations seem to suggest that the ability to manage stress in the home and workplace
can make the difference between successful and failed workers. It is also perceived that emotions
are contagious, and stress has an impact on the quality of workers interaction with others. It is
therefore assumed that the better workers are at managing their own stress, the more they will
positively affect those around, the less other peoples stress will negatively affect them, the more
their productivity and the better their work culture and environment will be.
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1.
WARNING SIGNS OF EXCESSIVE STRESS AT WORK

When workers feel overwhelmed, they lose confidence and become irritable or
withdrawn which makes them less productive and effective and their work less rewarding. If the
warning signs of work stress go unattended, they can lead to bigger problems both for the
employers and employees. Apart from interfering with job performance and satisfaction, chronic
or intense stress can elicit physical, emotional, mental, and organizational problems. Some of
these warning signs and symptom according to Johnson (2006) include:
Feeling anxious, irritable or depressed.
Apathy, loss of interest in work
Problem sleeping.
Fatigue
Trouble concentrating
Muscle tension or headaches
Stomach problems
Social withdrawal
Loss of sex drive
Using alcohol or drugs to cope
Lazarus (1966) categorized the signs into: emotional disturbances such as fear,
anxiety, and depression; psychomotor disturbances such as muscle tension, and facial
expression; cognitive dysfunctions such as impairment of thought, judgment and
memory, and abnormal physiological changes and reactions in the nervous system.
2.
DOMESTIC VIOLENCE AS SOURCES OF STRESS
Almost all types of domestic stress have their sources directly and indirectly linked with
domestic violence. Domestic violence is generally referred to as a pattern of abusive behaviors
by one or both partners in an intimate relationship such as marriage, dating, family, friendship or
cohabitation. It is also seen as misuse of power and control by one person over another who is or
has been in an intimate relationship.
Domestic violence, being the major source of domestic stress has many forms:
Physical aggression (hitting, kicking, beating, shoving, restraining, throwing objects)
among individuals sharing close ties.
Threats (verbal, emotional, physical)
Harassment
Sexual abuse, intimidation and harassment
Spousal rape and battering
Emotional abuse
Damage to property jointly owned or reverend
Economic deprivation and financial abuse
Controlling and domineering\Intimidation
Passive and/or covert abuse (e.g. neglect).
Creating, mounting and sustaining pressure on other
Desertions, unavailability and abandonment.
These domestic sources of stress constitute abusive behaviors in any relationship that is used by
one partner to gain; manipulate or maintain power and control over another intimate partner
(Dutton, 1994; Markowitz, 2000; Johnson, 2006).
-
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Despite the daily dangers presented by domestic violence, it may or may not constitute a
crime, depending on local status, cultural and traditional perceptions, severity, persons involved,
and duration of specific acts. For instance, in a typical Igbo culture, domestic abuse, spousal
abuse (e.g. wife beating and battering), child abuse or intimate partner violence (IPV) is not seen
as a crime either against a person, gender or society. Worse still there is paucity of
documentations and actual report of cases of domestic violence in the appropriate quarters.
However, domestic violence is a serious and preventable public health problem affecting
many Nigerian citizens/workers irrespective of their social status, sexual orientation, gender,
religious inclinations and age (Watts & Zimmerman, 2002). Meanwhile popular views present
women as being more victims of domestic violence (Dutton, 1994). Even though this view may
be culturally influenced, it still holds water. For instance, Igbo culture exposes males to be hard,
more painstaking, and reserved, while at the same time teach females to be docile, expressive
and seemingly sentimental. Indeed, it would even attract more social sanctions and humiliation
if a married Igbo man, no matter how smallish or weak he may be, reports to his kinsmen that his
wife beat him up. But the womans relatives would hang on their war weapons on hearing that
their married sister/daughter is battered by her husband. In all, men that are victims of domestic
violence are very hesitant to report such or seek help.
All forms of domestic violence or abuse have one purpose: to gain and maintain total
control over the victim. An abuser uses many tactics to exert power over his/her partner;
dominance, humiliation, isolation, threats, intimidation, denial and blame, all of which are
measurable sources of stress. With all these challenges, the Nigerian worker becomes completely
worn out and defeated at home. He carries the defeat and weakness to the organization where his
productivity becomes negatively affected. Again, the home frustration elicits a transferred
aggression at the work place and as such destroys his relationships with colleagues.
3.
MACRO-ENVIRONMENTAL SOURCES OF STRESS AND THE NIGERIAN
WORKER.
The perception of stress is highly a personal matter. However, many forms of stress
emanate from environmental circumstances. There are numerous macro-environmental sources
of stress, but for the purpose of this discussion, only environmental noise, heat, pollution,
crowding, global economic melt down, poor workers remunerations, internal displacement and
political instability would be highlighted.
Excessive or high level of noise relates with high blood pressure (Cohen, et al, 1980).
Noise generates restlessness, cognitive distortions and poor concentration. It also induces
tension, fatigue, headaches and sleep problems, which put together, are major signs of stress.
Cohen, Glars and Phillips (1977) in their research, revealed that people exposed to excessive
noise at work experience more nausea, headaches and moodiness than others not exposed to
noise. Evidence also attests to the low productivity and incessant health problems of workers
near major airports, busy motor parks and busy traffics (Cohen et al, 1980).
Excessive heat, according to Fisher, Bell, and Bauym (1984), impairs task performance
and increases the likelihood of aggressive behavior. Recall that aggressive behaviours are signs
of workplace stress. The Nigerian work environments severally lack adequate power supply
thereby generating excessive heat. Even though the Federal Republic of Nigeria has invested
huge amount of money in the power sector, not much has been achieved in this direction. Apart
from the heat this situation generates, many companies are collapsing or performing below
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expected production level. This again has laid to layoffs, poor workers remunerations and
unemployment, exposing Nigerian workers to stress.
In a study conducted by Rotton and Frey (1984), it was found that psychiatric
emergencies increased when air pollution was high. Increase in psychiatric conditions does
favour neither the workers and their families nor the organizations that employ them. High
medical bills are incurred and great levels of absenteeism and low productivity are recorded.
Included in our environmental pollution are air, water and land pollutants and environmental
degradations. Workers daily lose their lives in the face of chemical poisons and their unhealthy
disposals.
Crowding is another source of Environmental stress. Our office spaces are small and are
jam packed with people. The workers residences are densely populated with poor
infrastructures, and there is evidence of an association between high density and aggression, poor
task performance and social withdrawal (Simdstrom, 1978).
Global economic meltdown, our contemporary worry, has brought a lot of stress on the
workers. This new entrant to the macro-environmental sources of workers stress goes with
budget cuts, payoffs, downsizing of workers, and unemployment. The fear and anxiety of not
knowing who will be laid off next, when next to receive salaries, or whether one would ever be
promoted constantly mount pressure on workers.
Poor workers remuneration is very stressful. The laborer deserves his wages is a golden
slogan globally recognized. When this principle is manipulated, distorted or avoided, workers
feel stressed. Sometimes, it is not that the Nigerian workers are poorly remunerated, their
salaries are unduly delayed. Thus, they live in financial uncertainties, confusion and without
good plans. These are extreme manifestations of distressful environmental conditions.
Internal displacement, a forceful and sudden removal of a person from his habitation, is
yet another macro-environmental source of stress. Often workers are internally displaced as a
result of wars, erosion, flooding or earthquakes. Such displacements are unplanned, unfortunate
and distressful. Sometimes, the workers are rendered homeless, helpless and abandoned. This
greatly reduces their productivity and increases their health hazards. Ordinarily, no worker puts
in his/her best under stressful internal displacements.
Nigerian state is, in recent times, known for its political instability. This is a stressful
condition for all citizens especially employed workers whose means of livelihood has become
unstable, unpredictable and unreliable. The political instability in Nigeria has created a situation
where anything can happen and nothing can happen. The effects of the present political
instability in Nigeria includes folding of companies, withdrawal of expatriates and foreign
investors, increased cases of kidnapping, assassinations and all forms of social vices and massive
retrenchment of workers. All these put together generate fear, anxiety and confusion among
workers.
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4)
REDUCTION OF DOMESTIC AND MACRO-ENVIRONMENTAL STRESS

The Nigerian Domestic and macro environmental stress can be reduced thereby
increasing the workers level of productivity. Thus this section discusses various ways this can
be achieved as listed below;
i)
Take care of yourself
When stress on the job interferes with your ability to work, care for yourself, or manage
your personal life, it is time to take action. Start by paying attention to your physical and
emotional health. When you take care of yourself and your needs, you are more prepared to face
your work stress without becoming overwhelmed and over burdened.
ii)
Do Exercises
Aerobic exercise perspiring - has been found to be an effective anti-anxiety treatment
that lifts mood, increases energy, sharpens focus and relaxes mind and body. Try to get at least
30 minutes of heart pounding activity on most days. You can break this exercise into small time
segments.
iii)
Adequate dieting
You are what you eat. Eat small but frequently throughout the day. This helps to
maintain an even level of blood sugar in your body. Low blood sugar makes one to feel anxious
and irritable. Consult your dietitians for food that have a calming effect.
iv) Take enough sleep
Stress and worry cause insomnia (sleeplessness) which heightens and sustains stress.
Ones ability to perform is hampered when he does not sleep well. When one is well-rested, it
becomes easier to keep his emotional balance which is a key factor in coping with job and
workplace stress.
v)
Prioritize and organize your job
Take simple steps when surrounded with jobs and work pressures just to regain control
over yourself and the situation. This can be achieved by creating a balanced schedule, not overcommitting yourself, leaving earlier in the morning and planning for regular breaks. Other steps
include prioritizing of tasks, breaking projects into small steps and delegating responsibility.
vi)
Use of Improved Emotional Intelligence
Retain a large measure of self control and self confidence by understanding and practicing
emotional intelligence.
Emotional intelligence is the ability to manage and use your emotions in positive and
conservative ways. It involves a pattern of communicating with people in ways that will draw
them to you through timely overcoming of differences, repairing of wounded feelings and
diffusing of tension and stress.
vii)
Improve your Managerial Skills
Ones managerial skills can become better through improved communications, consulting
others (both those under and above), offering rewards and incentives, and cultivating and
sustaining friendly social climate.
viii) Drink alcohol in moderation and avoid nicotine.
Temporarily alcohol reduces worry and anxiety but too much of it causes and sustains anxiety.
Drinking to have relief from tension may at the end make an individual addicted to alcohol.
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CONCLUSION
Workplace stress is inevitable. It is environmentally, socially, domestically, religiously
and organizationally induced and sustained and as such drastically retards the Nigerian workers
productivity. Stress as it affects the Nigerian workers manifest in various ways spanning from
fatigue, muscle tension, and headaches, stomach problems, and social withdrawal to loss of sex
drive, use of alcohol, apathy, trouble concentrating and anxiety. However it can be reduced via
exercises, taking care of one, adequate dieting, taking enough sleep, use of improved emotional
intelligence, prioritizing of job and development and proper utilization of managerial skills.
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References
Baum, A. (1990). Stress, intrusive imagery, and chronic distress. Health Psychology, 9, 653
675
Cohen, S, Evans, G.W, Krantz, D.S & Stokols, D. Physiological, motivational and cognitive
effect of aircraft noise on children. Am. Psych 35, 231 243.
Cohen, S. Glass D.C. & Phillips, S. (1977) Environment and health. In H. E. Freeman, S. Levin
and L.G. Reeder. Handbook of medical sociology. Eaglewood Cliffs, Angel prentice-Hall.
Dutton, D.G. (1994). Some evidence for heightened Sexual attraction under conditions of high
anxiety. Journal of personality & Soc. Psy., 30, 510 517.
Johnson, S.L. (2006) Therapists Guide to Clinical Intervention: Academic Press. London.
Markowitz, J. H. (2000) Hostility is associated with increased platelet activations in coronary
heart disease. Psychosomatic medicine, 60, 568-591.
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Comparative study of English teachers behavior of public and private
schools as perceived by their students.
LIAQUAT HUSSAIN
Assistant Professor IER Gomal University, DIKhan, KPK, PAKISTAN.
MUHAMMAD ABRAR KHAN SADOZAI
M.Phil Scholar IER, Gomal University, KPK, PAKISTAN.
KHUDA BAKHSH MALIK
Ph.D Scholar IER, Gomal University, DIKhan, KPK, PAKISTAN.
Abstract
The problem under study was Comparative study of English teachers behavior in public and
private schools as perceived by their students. The main objectives of the study were to know
the teaching behavior of the private and public schools and to compare the teaching behavior of
both types of schools. The study was significant because it, enable the teachers to get feedback
and improve their behavior. The study helps to identify the extent of students dissatisfaction
from behavior of their teachers. The population of the study was all the teachers of private and
public schools. A sample of 100 students of 9th class from public and private schools were
selected on random basis. The null hypothesis that there is no significant difference between
English Teachers behavior in public and Private Schools was tested. Questionnaire was used as
instrument for data collection. The result shows that there is no significant difference in the
teaching behavior of private and public schools.
Keywords: Teachers behavior, public and private schools, secondary level, English teachers
1. Introduction
To teach all students according to todays standard, teachers need to understand subject matter
deeply and flexibly so that they can help students, create useful cognitive map. In education, a
teacher is a person who educates others. A teacher who educates an individual student may also
be described as a personal tutor. The role of teacher is often formal and ongoing. In many
countries a person using to become a teacher at state funded schools must first obtain
professional qualification or certificate from a university or collage. These professional
qualifications may include the study of pedagogy, the science of teaching. Teachers may use
lesson plan to facilitate their students, provide a course of study which covers a standardized
curriculum. Teachers teach literacy, mathematics, arts, business, science or some of the other
subjects. Other teachers may provide instruction in craftsmanship or vocational training, and
religion, or spiritually, civics, community or life skills.
The definition of behavior is that the action or reaction of something as a machine or substance
under specified circumstances, The behavior of small particles can be studied in experiments
the aggregate of the responses or reactions or movements made by an organism in any situation.
The teaching behavior of secondary school teachers in Pakistan needs revolutionary efforts to
improve the teaching. One of these efforts may include the improvement in teacher training so as
to train the teachers positively to meet the demands of the day.
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More C. Shipley (1972) has started 14 principle of good teacher in his book synthesis of teaching
methods
This study is somewhat related with these principles. It aims to investigate the teaching behavior
of English teachers in public and private schools. As we know that in Pakistan, English language
is being taught as a second compulsory language. It is a modern foreign language and occupies
an international position hardly enjoyed by any other language. Moreover, the political superman
of the English people led to the rapid spread of the English language. The finding of this study
shows the actual position as to what extent the English teachers are making efforts for
improvement of their teaching behavior. Constant efforts are being made to meet the challenges
of explosion of knowledge through different teaching behavior.
STATEMENT OF THE PROBLEM
The problem under study was Comparative study of English teachers behavior of public and
private schools as perceived by their students.
OBJECTIVES OF THE STUDY
Following were the main objectives of the study.
1. To know the behavior of English Teachers in Govt. Schools
2. To know the behavior of English Teacher in Private Schools.
3. To compare the behavior of English Teacher in Govt. and Private Schools.
SIGNIFICANCE OF THE STUDY
The study was significant as its findings can.
1. Help to know how the teachers behavior is perceived by their students.
2. Enable the teachers to get feedback and improve their behavior if required.
3. Help to identify the extent of students dissatisfaction from behavior of their teachers
4. Inform the authorities to take necessary measure to take proper, remedial steps brining
positive change in behavior of the teachers.
HYPOTHESIS
H0: There is no significant difference between English teachers behavior in public and Private
schools.
LIMITATION
Because of non-availability of standardized instruments researcher developed instrument was
used for collection of data.
DELIMITATION
1. Study was delimited to D.I.Khan District.
2. 5 public and 5 private schools of D.I.Khan were included in the study.
3. 100 student of 9th class were taken, such that 10 students were taken from each school on
random basis.
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REVIEW OF RELATED LITERATURE

Teaching is essentially a spiritual process involving the contact of mind with mind. A good
teacher is a powerful and abiding influence in character formation; therefore the provision of
proper teaching staff in any educational institution is an important considering, for more
important fine building, rich curriculum and expressive equipment. The present conditions call
for teachers with a broad, deep and though understanding of the life. Pupils learning in many
ways need different point of views from acting on his pupils by suggestions, initiations and
sympathy
TEACHERS EFFECTIVE BEHAVIOR:
Teachers effective behavior has a great impact on students achievement. Keith godhamer
(1973). Prose variables have positive relationship with measure of students achievement, Rose
shine and trust (1971).
William. J. Gangey (1981.p.104) has discussed about improving behavior of pupil in an
appropriate manner. He says although behavior modification after has the image of a sinister
exact, science that feature brain washi8ng techniques, it is really only a more systematic way of
improving what teachers have been doing all through history.
SOME RELATED FINDINGS:
To teach all students according to todays standards, teachers need to understand Subject matter
deeply and flexibly so they can help students create useful cognitive maps, relate one idea to
another and address misconceptions, Shulman(1987).
Representation of ideas in the form of new analogies and metaphors including the way they
speak about teaching, not only includes references to what teachers should do it also includes
presenting the material by using figurative language and metaphors (Glatthorn 1990).
LEARNING STYLES AND PUPIL PERFORMANCE
According to Marricon (1969P. 164) some studies of classroom daily activities of teachers,
primarily serve to show one how things are, although in doing so they may offer a basis for
decision as to how teachers might be helped.
METHODOLOGY OF THE STUDY
POPULATION
All the English teachers and students of public and private schools comprised population for the
study.
SAMPLE
100 students of 9th class from 10 public and 10 private schools were selected on random basis,
such that 10 students were selected from each school on random basis.
INSTRUMENT
A questionnaire was developed by the researcher with the help of related literature for collecting
data from the students. The questionnaire was validated by the experts views.
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PROCEDURE
First of all questionnaire was developed with the help of related literature. For the development
of the instrument discussions with concerned advisor and the experts in institute of Educational
Research were carried on. Unsuitable questions were crossed out. Researcher personally visited
the public and private school and distributed the questionnaire. These questionnaires were again
collected personally. Data were arranged in the form of tables.
DATA ANALYSIS
Mean, Standard deviation and t-statistics were used for analysis of data.
PRESENTATION AND ANALYSIS OF DATA
Table: Showing the Mean, SD, and t-vales of both public and private schools.
Schools
Public
Schools
Mean
S. D
10.35
5.143
T. Calculated
0.511
Private Schools
11.35
4.3683
The above table shows that t- value calculated 0.511 is less then the t-value tabulated 1.96 at 0.05
level of significance, which means that there is no significant difference between teaching
behavior of the public and private schools teachers.
FINDING
Major findings are as under:
1. Mean, Standard Deviation of score of the public schools were 10.35, and 5.143 respectively.
2. Mean, Standard Deviation of score of the private schools were 11.35, and 4.368 respectively.
CONCLUSION
From the findings of the study we reach to the following conclusion.
The t-value calculated is 0.511 and t value tabulated is 1.96. The calculated value is less then
tabulated value and 0.05 level of significance. Which shows that both the groups were same,
so null hypothesis that, there is no significant difference between English teachers behavior
in public and Private schools is here by accepted.
DISCUSSION
Many efforts are made for the improvement of education and effective teaching. The findings of
many researches shows that those teachers are effective who take care of individual differences
and different flexible grouping instruction.
In Pakistan, there are two schools of thoughts, one is in favor of English and the other is against,
both of the classes are extremists a part from sentimental considerations either in favor or
against, the fact remains that the study of English as a second language is indispensable for any
Pakistani young man who wants to reap the full benefits of modern education and technology.
English should mainly be studied as library English. This is one may start believing that the
main purpose of English language is to give the students an understanding of the western way of
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life. To accept it, to be the main purpose of teaching English in Pakistan is quite misleading.
Therefore, the main purpose of teaching English in Pakistan is not to give our students access to
literature but to make them active user of simple, natural and living English. Therefore, the
students should be taught by using good and effective and modern teaching methods and also
keeping good behavior.
The teacher of English needs a sound knowledge of general linguistic. It is highly desirable for
the teacher of English to know the exact aims of teaching English in Pakistan. And through good
and positive behavior they can create a favorable environment in the class, which will help the
students a lot in acquiring and learning English languages. Many students shirk to learn English
language or they are not interested and consider it as a difficult subject for themselves. Teachers
of English can motivate them to learn and produce interest in this language by good teaching
behavior.
According to Guildewel (1966) More frequent pupil interactions, wider dispersion of social
power within the peer group and more self initiated work and personal responsibility are
important in that they not bear upon the immediate situation in the classroom: but also upon
more persisting characteristics or pupil.
RECOMMENDATIONS
In the light of findings and conclusion of the study it was suggested that:1. English teachers should use polite language in Govt. Schools.
2. Teachers of Private Schools should help their students in solving their personal problems.
3. All the English teachers should use A.V aids in their classes.
4. All the English Teachers should use polite language with the students because they are
not satisfied with their behavior.
5. Govt. School teachers are not regular in their class. They should be regular in their
classes.
6. The methods of teaching of English teachers are not satisfactory so teacher should be
informed to improve their method of teaching.
7. The majority students claimed that teachers do not discuss their problems so teacher
should be informed about this to discuss the personal problems of the students.
8. Private school teacher should provide guidance to their students.
9. The teachers should be more cautious towards academic problems of the students.
10. A wrong response to a question by a student should be treated with kindness and proper
correction may be made in polite manner.
11. Regular variations and innovation in teaching method and style may be ensured by
English teacher.
12. The English teacher should provide better guidance to teach English language effectively.
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References
Admis. Harold P. And Dickey, Frank G. (1956). Basic Principles of Students teaching. New
York, American Book Coj.
Belleck, A (1995) The language of The Class Teacher college press New York.
Ball, D.L., 8 Cohen, D.K (1996) reform by the book What is or night be the role of curriculum
materials in teacher learning and instructional reform? Education researcher, 25 (9). P6,8.
Deighton (1971) encyclopedias of education vol-7.
Good C.V (1972) Dictionary of education. Mc Graw-Hil Company New York.
Inamaullah. M (2005) patterns of classroom interaction PP-21,22. I.E.R Dept: Kohat University.
Miller, K.B Effective and responsible Teaching behaviours research on teaching behavior (San
Fransico) and Bass publisher P-19,20,20.
Ornstein, A.C., Thomas. J., 8 Lasley, I (2000) strategies for effective teaching New York. Mc
Graw-Hill.
Sulman, L. (1986) those who understand. Knowledge growth in teaching. Education researcher,
15 (2), P-4-14.
Sulaman, L. (1987) knowledge and teaching behaviour. Foundation of new reform Harvard
Educational Review, 57(1), P-1-22.
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Relationship between the job satisfactions of elementary school teachers with
their teaching behavior
LIAQUAT HUSSAIN
Assistant Professor IER Gomal University, DIKhan, KPK, PAKISTAN.
MUHAMMAD ABRAR KHAN SADOZAI
M.Phil Scholar IER, Gomal University, KPK, PAKISTAN.
KHUDA BAKHSH MALIK
Ph.D Scholar IER, Gomal University, DIKhan, KPK, PAKISTAN.
Abstract
The problem under study was Relationship between the job satisfactions of elementary school
teachers with teaching behavior. The main objective of the study was to find the relationship
between the job satisfaction and teaching behavior. The study was significant because it tells
about the job satisfaction and teaching behavior of elementary school teachers. The research
hypothesis that There is no relationship between the job satisfaction and teaching behavior was
tested. The study was delimited to only one district. All elementary school teachers form the
population of the study. 50 teachers were selected as a sample of the study, 5 teachers from each
of 10 schools (2 female + 3 male) were selected on random basis. Two Questionnaires were used
for data collection. Co-relation was used as statistical technique for data analysis. One
questionnaire was for Job Satisfaction, and the other for teaching behavior. The results show that
there is a strong relationship between the job satisfaction and teaching behavior.
Keywords: Teaching Behavior, Job satisfaction, Correlation, Professional, Elementary school
teachers
INTRODUCTION
Professions are more than institutions on paper. They are groups of people with common goals
who have attempted to institutionalize or systematize their patterns of behavior. All professions
attempt to establish a standard of behavior, which is clearly evident to members and non-member
alike. There are many professions and there is likely to be a wise variety of standards. The
lawyer attempt to win cases and the judges try to do justice where as the doctors attempt cure
patient. Objectives of different professions require different skills and knowledge. They also
imply quite different types of training. More important than their differences, however, are
certain commonalities, which all the real professions share.
Katzell (1961) considers the following factors responsible for job satisfaction and job
performance.
i) Motivation for the job. It may be economical, social, religious and somewhat emotional or
sentimental.
ii) Expectations made with the job.
iii) Aspiration of worker and the rewards obtainable through the various modes of behavior
possible in the work situations.
Morale is a powerful force. Workers with high morale take interest in their job.
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Consequently, their productivity is high and booster for their hidden potentials. Demoralized
workers feel dissatisfaction with their status. They don't take much interest in their job. They just
try to kill the time and their performance is extremely poor. No education system prospers
without the active involvement of teachers. Teachers play a vital role in the implementation of
organized educational system in any society in general, and in developing society in particular.
Pakistan is a developing country and is facing problems related to its teachers.
The basic drive by which the life of the organism is activated is the tendency of an
individual to actualize his personality. Every teacher wants a good status, hand some salary and
good working conditions like other people. The absences of such amenities cause frustration
among the teacher affecting their performance. Naturally every individual strive the fulfillment
of his drive sometimes called need as asserted by Maslow. According to Maslow (1857) human
need can be identified with higher needs coming after lower needs.
A number of studies conducted through out the 1970's and 1980's indicate a gradual reduction in
teacher satisfaction. For example, Fuller and Miskal (1972) found that about 89% of teachers
participating in their study were satisfied or very satisfied with their job, but Bentzen, William
and Hack Men (1980) in investigation reported that slightly more than 75% of the teachers were
satisfied with their job.
Previous researcher shows that high degree of job satisfaction has significant
relationship with good and effective teaching. Therefore it is great need to conduct researcher in
the field of education especially teaching to achieve maximum goals of education. It was because
of these factors that the researcher felt it to explore the relationship between their performance
and job satisfaction of primary school teachers.
The problem under study was Relationship between the job satisfactions of
elementary school teachers with their teaching behavior ".
Following were the main objectives of the study.
i) To find out the level of job satisfaction of elementary school teachers.
ii) To find out the teaching behavior of elementary schools teachers.
iii) To find out the relationship between job satisfaction and teaching behavior of elementary
School teachers.
i) The study is significant because it tells us about the job satisfaction of the teachers, teaching in
different schools at elementary level. Through this study we are able to know about whether the
school teachers are satisfied with their jobs or not.
ii) The study also tells about the teaching behavior of the teachers such as motivation of students,
course completion, regularity, attendance, use of A.V aids and etc. Through this study we will be
able to know the styles of teacher and so we can easily deem the teaching behavior and in this
way the teaching behavior of a teacher can be changed accordingly.
HYPOTHESIS
Following null hypothesis was tested.
H0: There is no relationship between the job satisfaction and teaching behavior.
H1: There is a relationship between a job satisfaction and teaching behavior.
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LIMITATIONS
Following were the major limitations of the study.
i) There was no built in Questionnaire for the teaching behavior of the teachers.
ii) There was no built in Questionnaire for the job satisfaction of the teachers teaching at
elementary level.
DELIMITATION
Following were the delimitations of the study.
i) The study was delimited to the District Tank.
ii) The study was delimited to Govt; Boys Middle School no; 1, Govt; Boys Middle Schools no;
2 Thatour, Govt; Boys Middle Schools no; 3 Amakhail, Govt; Boys Middle School Sabirabad,
Govt Boys middle School Mohallah Maidan, Govt Girls Middle School Mulazai, Govt Girls
Middle School Wazirabad, Govt Girls Middle School Cantt, Govt Girls Middle School Qutab
Colony, Govt Girls Middle School Sabirabad.
iii) The study was only delimited to fifty teachers.
DEFINITIONS OF THE TERMS
Job Satisfaction: means the satisfaction of teachers about their job.
Teaching Behavior: means the study and the behavior of teachers during teaching learning
process.
Elementary Schools: mean schools having the classes of secondary i.e. up to 8th class.
REVIEW OF RELATED LITERATURE
The question of job satisfaction is not simple it is considered complex and controversial. Many
attempts have been made in the literature to define job satisfaction.
According to Locke (1976) job satisfaction may be defined as a pleasurable or positive
emotional state resulting from an appraisal of one's job experiences. The matter of job
satisfaction was started with the vast movement concerned with work measurement in the era of
industrial revolution in the early years of this country.
Frederick Tyler (1911), perhaps, was the first researcher who marked the beginning of
work. Tyler's work based on the assumption that individuals would be motivated to perform well
if rewards were related directly to the performance of carefully planned tasks.
Likert (1932) and Argys (1964) contributed greatly to the development of theories of job
satisfaction. Motivation the internal processes which spur us on to satisfy some need, was the
important and main point of their work.
So, job satisfaction and dissatisfaction of the worker constitute an important
determination of worker's mental health.
Locke (1969) estimated that the number of studies might be exceeding four thousand.
Since then, of course, a great many more studies have been published. According to Michael
grumbler (1976) " The traditional modal of job satisfaction is that total body of feeling is
involved
Following research studies show different factors related to job satisfaction.
a)
The higher the pay, the greater the satisfaction , Lawer and porter (1963).
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b)
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Morse (1968) did find a positive relationship between a person's expectation

and his job satisfaction.
c) An early study , Hoppock, (1935) was followed research efforts indicating a clear
positive relationship between job level and job satisfaction.
Henry Murray (1939) is credited with what is possibly the earliest possible approach to the
study of what motivates people. Murray made long list of needs that people are motivated to
satisfy.
Hoy and Miskal (1978) reformulated Hertzberg's theory to include three than two factors;
motivators, hygiene's, and ambient. Ambient function as either satisfiers or dissatisfies and
include such variables as salary, professional growth possibilities, risk opportunities, relationship
with superiors, and status. Schaffer (1953) has argued that "job satisfaction will very directly with
the extent to which those needs of an individual which can be satisfied are actually satisfied.
Vroom (1964) also sees job satisfaction in term of the degree to which a job provides the person
with positively valued outcomes.
Fulfillment theories have considered fact satisfaction measure combing have overall
satisfaction .the crucial issue is whether the person when combined. We know that some job
factors are more important than other job factors for each individual therefore, the important
factors need to be weighted more in determining the individual's total satisfaction. However,
there is evidence that the individual's fact satisfaction scores reflect this emphasis already and
thus do not need to be further weighted (Mobley & Locke 1970).
Modem two-factor theory was originally developed in a book by Hertzbcrg. Peterson, Mousner
and cap well (1957), in which the authors stated that job factors could be classified according to
weather the factors contribute primarily to satisfaction or to dissatisfaction. Two year later,
Hertzberg, Mousner and Snyder man (1959) published the results of a research study, which they
interoperated as supportive of the theory.
Wiles (1950) found also seven different factors of job satisfactions and a comfortable Living.
Vitals (1953) have pointed out ten factors that are responsible for job satisfaction and interest in
job. Sergiovanni (1967) conducted a study about teachers to find the factors of job satiation
and dissatisfaction. Results of this study were much the same as Herzbergs achievement.
METHODOLOGY
Population
All elementary school teachers form the population of the study.
Sample
50 teachers were selected as a sample of the study. 5 teachers from each of 10 schools (2 female
+ 3 male) were selected on random basis.
Instrument
Two Questionnaires were used as instrument for data collection. One questionnaire for Job
Satisfaction and the other for teaching behavior. There were 14 questions in each of the
questionnaire.
Procedure
First of all the two questionnaire developed by the researcher himself. Each
Questionnaire consists of 20 questions; the questionnaires were given to the experts for different
departments of Gomal University. According to their suggestions six question were crossed out
from each of the questionnaire. The final version of the questionnaire consists of 14 questions.
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The questionnaires were distributed among the elementary school teachers. The
questionnaire consist of strongly agree, Agree, undecided, disagree. After filled up by teacher the
data was arranged in the form of tables. The mean standard deviation, variance and correction
were applied for the analysis of data.
Statistical analysis
The mean, standard deviation, and correlation statistics were used for the analysis of data.
DATA COLLECTION AND ANALYSIS
Table 29: Shows the correlation between the Job Satisfaction and Teaching behavior
Descriptive Statistics
N
Mean
Std. Deviation Correlation
14
21.79
18.264
14
43.79
11.597
.789
The above table shows that there is a strong correlation of .789 between the job satisfaction and
teaching behavior.
FINDINGS
1. The Mean and Standard deviation for the job satisfaction were 21.79 and 18.264
respectively.
2. The Mean and Standard deviation for the Teaching behavior were 43.79 and 11.597
respectively.
3. The correlation value between the job satisfaction and teaching behavior was 0.789.
CONCLUSIONS
The correlation value between the job satisfaction and teaching behavior was 0.789. This is a
very strong correlation. Therefore the null hypothesis that there is no significant relationship
between the job satisfaction and teaching behavior is hereby rejected. The conclusion is that
there is a strong relationship between the job satisfaction and teaching behavior.
RECOMMENDATIONS
Following recommendations were made in the light of the findings.
1) There is a strong correlation between the job satisfaction and teaching behavior, so
this should provide positive results in enhancing the students academic
achievements. So it is recommended that it should be maintained.
2) The results also show that teaching is an honorable profession, so the new teachers
could be motivated towards teaching profession.
3) The majority of the teachers are satisfied with their pays and salaries, therefore the
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existing pay scales and salaries should be maintained the same.

4) This research will provide guideline for the new researcher in this field.
5) The research may also be conducted at the secondary, higher secondary, college and
university levels.
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References
Bentzen, W.H (1980), a study of schooling, 2nd edition, delta keppen publishers, USA,
pp-45.
Lock. E.A (1976) nature& Courses of job satisfaction, 2nd edition, Rand publishers, USA,
pp-67.
Fuller.N.M (1972), work attachment and job satisfaction, Chicago, American
educational research association.
Hertzberg.F (1959) the motivation to work, New York Wiley, p113.
Journal of applied psychology vol: 34 no. 5, October 1951, p 307.
Likert and Argyrus (1964) , leadership style and job satisfaction in primary school, in
dimension. Pp-65.
Mayo.N , M(1976) job satisfaction, London, Mac Milan press, USA.pp-6.
Mouser .(1959). the motivation to work, New York Wiley.pp-76.
Tyler.F (1911), job satisfaction, the concept and its measurement, (work research report)
department of employment. Uk.pp-13.
Vroom (1960), work and motivation. John Wiley and sons.pp-6.
Wayner.k , Miskal.C (1978) Education Administration, theory research and practice, 3rd
Edition, New York Random house, Pp182-183.
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Survey obstacles of implementation of Electronic
Commerce in transport Industry
MAY 2011
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Freyedon Ahmadi
Zahra Avajyan
Abstract
In those regions of the world where there is old, established and often congested road
Infrastructure, any e-commerce-based methods that could lead to trip reduction and/or trip
rationalization can contribute to an improvement in the quality of life. In those regions of the
world where new road infrastructure is being built, or could potentially be built, it is important
for transportation planners and new media and e-commerce planners to develop mutually
supportive systems that avoid the problems of congestion and pollution. While preliminary, this
conceptual framework helps in understanding the relationships between e-commerce activities
and physical travel. in Iran used of ecommerce in transportation is a new issue and this study was
attempted to show an obstacle for implantation of Electronic Commerce in transport Industry.
The result of this study was shown four obstacles such as Structural , Contextual ,Behavioral and
Natural.
Key words: Electronic transport, Information Technology, Electronic Commerce, E_commerce,
Introduction
Our current time has been named as the period of electronic phenomenon. This is because most
electronic phenomena in it such as electronic commerce, electronic banking, electronic
government, electronic transformation and totally electronic life. By benefiting from information
technology in transport industry appeared in electronic transports. There is no more geographical
& time limits with a wide change in information systems of transport industry.
Electronic Commerce has entered into the trade world in 1996 which means three years after
internet. Electronic transport is one of the important phenomena out of applying the information
technology and communication and it is the information manager which has created a deep
change in the manner of selling transport and receiving the loss while there is an increase in
relationship level with the insurer from one side and developing of superficial sale & buy field of
different types of transports on the other.
Electronic Commerce may provide different facilities for betterment of service quality to
citizenship with quick access to all required services and information or issuance of considered
transport premium by asking the rate of damages.
Any establishment of electronic commerce and benefiting from IT in dealing of transport
companies and customer could provide limitless advantages such as day & night services, lack of
personal reference for receiving of compensations, supplying of quick & insured services,
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prevention from transport misuses and increasing the income of transport company, therefore it
seems that the establishment of electronic commerce is an inevitable and necessary parameter.
The collection of these factors made different countries of the world to accelerate the preparation
and regulation of different policies in the field of electronic commerce and its facility and
encouragement.
The history of Electronic Commerce
The history of electronic commerce is originated into two phenomenons as internet &
electronic transfer of data both with a time origin of decade 60. We have the appearance of
electronic transfer of financial resources among the banks through special & safe networks in
decade 70. This could change the financial resources completely. Un-expected progress of
internet was for the first time with electronic mail in 1972 and with development of modern
technologies which may cause a new version of data transfer protocol of TCP/IP. At the
beginning of decade 80 we had electronic commerce among commercial companies with a
considerable progress. At that time there were electronic message transfer technologies such as
electronic data transfer and electronic mail among all commercial companies. Appearance of
internet was a new possibility for electronic commerce such as On-line services. The application
and development of internet with appearance of web was started. Internet caused a change of
electronic commerce into low-cost methods for performing the commercial activities along with
wide variety. Any organization may refer to electronic commerce due to one of the following
factors:
High rate of operation costs and long-term of relevant processes of replying to the customer, high
rate of overhead costs and lack of applying any technology in creation of a competitive
advantage.
Theoretical format & research model
Regarding the theoretical format of the research in which we have used a famous three-fold
model and with the purpose of UNCTAD studies and Economic Information Unit (EIU) and the
experiences of the authors in transport industry as well we may reach to some other factors
which have been selected as the natural factors. These are the real items of complexity and
variety of subject matter. More factors and information about determination of risk rates in
transport fields, may cause more difficulties in selling of its products through internet.
In addition to legal & supportive challenges, natural problem of internet sale including
complexity of different transport products are the major difficulties of transport companies in
electronic processes.As a result we may reach to a four-dimensional model and following
classification (Figure 1):
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Structural factors
Lack of special human force
Weak executive &
coordinative structure
Weak inter-organizational
technology
Non-enough budget
Behavioral factors
Personnel resistance against
changes
Lack of supports & necessity
of master
managers
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Contextual factors
Lack of telecommunication fields
Weakness of legal &
judicial
Weak culture
Great development costs
Implementation &
development of
electronic insurances in
Asia Insurance Co.
(E_insurance)
Natural factors
Complex transport fields
Necessity for primary visits &
evaluation of damages by person
(Figure 1: Explanative model of implementation obstacles of electronic commerce in Transport
Industry)
Research Hypothesis
1. There is a meaningful relation between structural factors and lack of implementation &
development of electronic commerce in Asia Transport Company from the point of view of
specialists and managers
1-1: There is a meaningful relation between the lack of special human force and effective
structural factors in lack of implementation of electronic commerce in Asia Transport Co.
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1-2: There is a meaningful relation between the lack of executive & coordinative structural force
and effective structural factors in lack of implementation of electronic commerce in Asia
Transport Co.
1-3: There is a meaningful relation between the weak inter-organizational technology and
effective structural factors in lack of implementation of electronic commerce in Asia Transport
Co.
1-4: There is a meaningful relation between the lack of enough budget and effective structural
factors in lack of implementation of electronic commerce in Asia Transport Co.
2.There is a meaningful relation between behavioral factors and lack of implementation &
2-1: There is a meaningful relation between personnel resistance against any changes and
behavioral factors in lack of implementation of electronic commerce in Asia Transport Co.
2-2: There is a meaningful relation between lack of supports & necessity feeling of junior
managers any effective behavioral factors in lack of implementation of electronic commerce in
Asia Transport Co.
3.There is a meaningful relation between contextual factors and lack of implementation &
Indirect theory 3-1: There is a meaningful relation between weak telecommunication
infrastructures and effective contextual factors in lack of implementation of electronic commerce
in Asia Transport Co.
Indirect theory 3-2: There is a meaningful relation between weak legal & judicial infrastructures
and effective contextual factors in lack of implementation of electronic commerce in Asia
Transport Co.
Indirect theory 3-3: There is a meaningful relation between weak cultural infrastructures and
effective contextual factors in lack of implementation of electronic commerce in Asia Transport
Co.
Indirect theory 3-4: There is a meaningful relation between high development costs and effective
contextual factors in lack of implementation of electronic commerce in Asia Transport Co.
4. There is a meaningful relation between natural factors and lack of implementation &
4-1: There is a meaningful relation between inspection necessity & personal evaluation and
effective natural factors in lack of implementation of electronic commerce in Asia Transport Co.
4-2: There is a meaningful relation between complex transport fields and effective natural factors
in lack of implementation of electronic commerce in Asia Transport Co.
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Subjective & time scope of the research

The subject of this research is Electronic Commerce in Asia Transport Co. along with a
consideration of current obstacles from the point of view of culture and organizational behavior
and its location is Central Organization of Asia Transport Co. in Tehran and its time scope for
considering the relevant obstacles against electronic commerce progress in Asia Transport Co. is
from the middle of 2008 up to now.
Research method
This is an explanative research with benefiting from library, field and measuring methods for
it. We have divided its varieties into three independent, dependent and adjusting groups
(Electronic Commerce development as a dependent variety and environmental, structural,
behavioral and natural obstacles with a consideration of independent variations such as age, sex,
academic records and so on as the adjusting varieties).
Research tools and collecting of information
There is a questionnaire in accordance with Likkert five-option criteria for collecting of
information through different studies of essays and researches and through interview with
specialists and persons in charge of transport and study of different books, magazines and
Persian/English contexts and key factors for preparing the questions of questionnaire. The
questions of mentioned questionnaire would be prepared in two sections of relevant questions
about sample sociology and relevant questions of testing the research theories.
Remaining & Narration condition of questionnaire
We have used Chronbach method in order to determine its measuring situation in this
research. For a 25-piece one the final obtained measuring digit was equal to %83.6. If it is more
than 0.7 it is possible to say that it will remain. The validity of its content has been confirmed
and certified by different consultant professors and managers of technical departments of Asia
Transport Co. and IT specialists as well.
Information analysis method
In order to have data analysis from the samples, we have used both explanative statistical
methods for presenting the society information by the use of abandon tables and circular
diagrams and comprehensive statistics of sign & dependency test (for testing of parameters and
statistical theories), Freedman test (for classification of field , structural, behavioral and natural
obstacles) and linear multi-variety regression test.
number of 110 persons have been determined by the help of limited sampling formula.
Sampling method:
The sampling method in this research is simple classification sampling method from all parts of
statistical society of Asia Transport Co. in Tehran (153 persons). Table 1 show the relationship
among major factors, parameters and different questions of the questionnaire.
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Analysis of research findings: Followings are different explanative statistical tests and
comprehensive statistical one.
A-Explanative statistical tests
Regarding the statistical distribution it was specified according to different varieties such as age,
sex, academic record, C.V, and organization position. It was revealed that about %45.29 of the
respondents were females and %45.71 males. In addition about %70.71 of them had B.S degree,
%29.19 M.S degree, %7.14 were managers, %8.57 were assistants and more than %42 were the
presidents and the remained were computer & transport specialists.
B-Comprehensive statistical tests
Following tests were applied in the step of data analysis collected by the questionnaire:
1-Sign test (two-phrases)
At first we investigated about the questions of the questionnaire and then on major parameters.
According to the results it was revealed that all respondents specified the mentioned items as the
major obstacles against any development of electronic commerce.
2- Pierson dependency test for indirect theories
Pierson dependency test was used for considering of indirect & major theories of the research.
The test process includes a comparison between the meaningful level with test errors level (here
it is equal to 0.05) which may show the situation of parameter and/or question in the considered
society which have been mentioned in table No. 2. Regarding the obtained results out of Pierson
dependency test in meaningful level (0.001) it has been confirmed that there is a relation between
all mentioned factors in indirect theories and major ones in lack of electronic commerce
development in Asia Transport Co. In most cases there is a powerful relation among mentioned
parameters. Therefore Zero theory has been rejected in most cases (lack of dependency) along
with confirming the claiming theory.
Table 1- The relationship among major factors & parameters and questions of questionnaire
No.
1
2
3
Factor
Structural
Structural
Structural
Parameter
Non-enough budget
Weak structural format
Structural
Structural
Structural
Weak technology of organization
7
8
Structural
Structural
Contextual
Weak technology of organization

Weak
telecommunication
infrastructure
Weak
telecommunication
Description(Annual)
Non-enough allocated budget for project performance
Lack of any coordinating organization for any
programming & performing of electronic transport in
Transport industry
Lack of necessary universality among IT managers in
transport industry
Lack of clear strategy for complete plan of
information technology
Lack of communication network or branches and
supervisions
Lack of electronic transfer with Country's banks
Low speed of internet in Iran
Lack of suitable telecommunication infrastructure and
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10
Contextual
11
Contextual
12
Contextual
infrastructure
Weak
telecommunication
infrastructure
Weak
telecommunication
infrastructure
Weak legal infrastructure
13
Contextual
Weak legal infrastructure
14
Contextual
Weak cultural infrastructure
15
Contextual
16
Contextual
17
18
Contextual
Contextual

High rate of development costs
19
Contextual
High rate of development costs
20
21
Behavioral
Behavioral
Personnel resistance
22
Behavioral
23
Behavioral
Lack of necessity feeling of managers
24
Natural
Complexity
25
Natural
Necessity for visit
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Lack of efficiency of wide band between te centers

and branches
Lack of rules in country for considering internet
crimes
Lack of official digital signature and electronic
negotiations and electronic documentation
Lack of confidence of insures to benefit from internet
services in the field of electronic transport
Lack of confidence of insurers for putting personal
information on internet
Lack of interests of insurers in benefiting from
internet services in the field of electronic transport
Lack of usage of internet banking accounts by major
distribution of insurers
Habit for face to face relation
High rate of software development costs for creation
of electronic transport
High rate of hardware development & communicative
for creation of electronic transport
Usual traditional methods in work performance
Lack of enough intend in personnel specially in IT
personnel
Lack of job immunity and a threat of unemployment
among the personnel
Lack of necessity needs of managers to submit
transport affairs through electronic way
Complexity of different transport behaviors such as
medicine and responsibility with lack of easily
change into electronic format
Necessary visits by person and with personal
evaluation with lack of possibility to change into
electronic format.
3- Pierson dependency test for major theories

Pierson dependency test has been applied for considering the major theories of the research.
According to the findings it was revealed that all major theories have been certified and
confirmed by the respondents. Table 3 shows the obtained results.
4- Freedman test
Freedman test was applied in order to classify all varieties of relevant obstacles against any
implementation of electronic commerce. Followings are the relevant results of Freedman test for
classifying the levels:
The lack of executive structure has the highest rate (2.38) among all structural factors and the
lack of human force has the lowest priority with a grade of 2.67. The lack of cultural
infrastructure has the highest rate (2.19) among all contextual factors and the lack of
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telecommunication has the lowest priority with a grade of 3. The lack of support & necessity
feeling of junior managers has the highest rate (1.45) among all behavioral factors and the
personnel resistance against any change has the lowest priority with a grade of 1.55. The
complexity of transport fields has the highest rate (1.42) among all natural factors and the
necessity for inspection and personal evaluation has the lowest priority with a grade of 1.58. In
addition, according to the results of test we have behavioral factors among all major varieties
with the highest rate (2.10) and contextual ones with the lowest one (2.98).
Table 2- Dependency coefficients of structural, contextual, behavioral & natural factors
Varieties
of Lack of special human Lack of executive Lack of technology
Non-enough budget
structural factors
force
structure
Pierson dependency
0.6
0.62
0.66
0.73
coefficient
Meaningful level
0.001
0.001
0.001
0.001
Varieties of
Weak
Weak legal
Weak cultural
High rate of
contextual factors
Telecommunication
infrastructure
infrastructures
development costs
Pierson dependency
0.64
0.72
0.68
0.67
coefficient
Meaningful level
0.001
0.001
0.001
0.001
Varieties of behavioral factors
Personnel resistance against change
Lack of support & necessity feeling
of junior managers
Pierson dependency coefficient
0.745
0.829
Meaningful level
0.001
0.001
Varieties of natural factors
Complexity of transport fields
Necessity for inspection & personal
evaluation
Pierson dependency coefficient
0.901
0.882
Meaningful level
0.001
0.001
Table 3- Dependency coefficient of major theories of the research

Research varieties
Pierson
dependency
coefficient
Meaningful level
Structural factors
0.245
Contextual
factors
0.549
Behavioral
factors
0.605
0.004
0.001
0.001
Natural factors
0.703
0.001
The findings of the above-mentioned test show that from among all research varieties we have
natural factors with the highest dependency with lack of development of electronic commerce
and after behavioral factors. Then we have contextual factors and finally the structural ones.
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4- Linear multi-varieties regression test

Table 4- Regression test among the lack of development of Electronic Commerce with structural
factors and showing their order
Parameter
Beta coefficients
Non-enough budget
0.202
Weak executive structure

0.19
Weak technology
0.17
Weak human force

0.08
As it is revealed from the above table the greatest obstacle against any development of electronic
commerce is non-enough budget among all structural factors.
Table 5- Regression test among the lack of development of Electronic Commerce with
contextual factors and showing their order
Parameter
Beta coefficients
High
rate
development costs
0.39
of
Lack of cultural
infrastructures
0.35
Lack
of
infrastructure
0.14
legal
Weak
communications
0.02
commerce are development costs among all structural factors.
Table 6- Regression test among the lack of development of Electronic Commerce with
behavioral factors and showing their order
Parameter
Beta coefficients
Lack of support & necessity need of managers

0.5
Personnel resistance against change

0.25
commerce is lack of support of managers among all structural factors.
Table 7- Regression test among the lack of development of Electronic Commerce with natural factors
Parameter
Beta coefficients
Complexity of transport
0.5
Inspection necessity
0.25
commerce is complexity of transports among all structural factors.
Followings are tables 8 to 9 of major varieties of model from the point of view of effects on lack
of implementation & development of electronic commerce.
Table 8- Regression test for lack of development of electronic commerce and its obstacles
Multi-folds regression model
for
lack
of
transport
development & its obstacles
Fixed amount
Structural factors
Contextual factors
Behavioral factors
Natural factors
Non-standard coefficients
Standard
coefficients
B coefficient
0.698
0.148
0.186
0.235
0.253
Beta coefficient
Std Error
0.19
0.04
0.05
0.03
0.03
0.18
0.21
0.36
0.51
Test
statistics
3.59
3.84
4.06
7.61
10.05
Meaningful level
0.001
0.001
0.001
0.00
0.001
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From among these four factors we have natural & behavioral factors as the most effective ones
and structural factors with the lowest effects. In fact, followings are the order of factors from the
point of view of effectiveness on lack of development of electronic commerce:
Table 9- Order of factors from the point of view of effectiveness on lack of development of
electronic commerce
Parameter
Natural factors
Behavioral
Contextual
Structural factors
factors
factors
Beta coefficients
0.51
0.26
0.21
0.18
Conclusions
We have used in this research from dependency test in order to consider any relation of varieties
and then linear regression test. Then it has been used from special theories for comparing the
average along with Freedman Variance analysis. The results confirmed all hyposesize .
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References
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Ghasemzadeh,F.(2003)," Legal challenges in implementation of Electronic Commerce in Iran
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Management, Lule &
University of Technology , Sweden. http://epubl.luth.se/14045508/index-en.shtml
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Presented In The 1
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The Economist Intelligence Unit(2007) ;"e-Transport-creating a competitive Advantage " , 2007.
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UNCTAD ( 2002) : E-commerce & Development Report",New York & Geneva.
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Exploring the casual relationships between organizational citizenship
behavior, organizational Agility and performance
Freyedon Ahmadi
Abstract
The main aim of this paper is survey relationship between three variables such as OCB, OA, and
performance in wood industries in Iranian corporations. The result of this study indicated there
are positive and meaningful relationship between OCB and OA as well as between OA and
performance but there are direct relationship between OCB and performance. In the other word
this study illustrates the mediating role of OA between OCB and performance.
Keywords: Exploring , Casual Relationships , Organizational citizenship behavior,
Organizational Agility , Performance
Introduction
Organizational agility or the ability to execute innovations and competitive moves with speed,
surprise, and competitive disruption has attracted significant attention as a business capability for
competing effectively in the current business environments (Sambamurthy et al. 2003). Agile
firms are resilient to shocks and upheavals in their business environments, adaptive to emerging
opportunities, and entrepreneurial in creating new business models or significant competitive
moves (Bharadwaj and Sambamurthy 2005). Research indicates that firms that have the ability to
continuously generate competitive actions, i.e., more agile, outperform less agile firms (Smith et
al. 1991).
One of the reasons underlying the heightened attention to organizational agility is the growing
sophistication of information technologies. As information technologies provide superior
information management capabilities, analytical decision support, and enhanced communication,
firms are able to utilize information technologies in creating new business models and
competitive advantage (Weill and Vitale 2002). Sambamurthy et al. (2003) argue that
information technology (IT) management capabilities provide a platform for firms to develop the
appropriate digitized processes and knowledge systems that
Enhance their agility
Literature review
Organizational agility
Organizational agility has been defined as a firms ability to sense opportunities and threats and
respond by assembling the needed organizational resources with rapidity (Overby et al. 2006;
Sambamurthy et al. 2003). Agility includes the ability of a firm to detect opportunities and
threats, assemble needed assets and capabilities to launch an appropriate response, judge the
benefits and risks of
Initiating an action, and execute actions with competitive speed and success. Firms encounter
pressures for change in many forms, driven both by external and internal factors, such as new
competition, new technologies and production processes, emerging markets, changing risk
profiles, new customer needs, and new business opportunities. Organizational responses to such
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changes can also occur in a variety of forms, such as building new infrastructure capabilities,
leveraging new technologies and platforms, reducing exposure in high-risk markets, developing
new products or services, or even pulling out of a high risk market or exiting lines of business
that are deemed unprofitable or otherwise unattractive (Bharadwaj and Sambamurthy 2005).
Therefore, agility is both the ability to detect opportunities for competitive actions as well as to
initiate appropriate actions. The detection of opportunities occurs either through a process of
sensing and probing the environment or through a process of anticipating future trends,
opportunities, or threats. Similarly, competitive actions are launched either reactively as a
response to sensed opportunities or proactively to create competitive leadership opportunities as
first movers.
Bharadwaj and Sambamurthy (2005) distinguish between two major types of organizational
agility: entrepreneurial and adaptive agility. Entrepreneurial agility enables proactive actions
that are aimed at competitive leadership. In contrast, adaptive agility enables competitive actions
that are launched in response to sensed opportunities or threats in the business environment. This
distinction is consistent with prior ideas in strategy research, such as the Miles and Snows
(1978) typology, which distinguish between offensive and defensive modes of strategy
execution.
Entrepreneurial agility refers to the ability to launch competitive actions whose focus is on
creating new bases for competitive advantage, disrupting rivals existing advantages, or
transforming the competitive landscape through new business models. These actions are meant
to be frame-breaking, because they introduce a new business model, business process, or product
or service that is revolutionary in nature. They often transform the industry and create a
competitive advantage because other firms have to play catch-up. Examples include the online
commerce models pioneered by Amazon, the search engine and advertising models pioneered by
Google, the build-to-order models pioneered by Dell, or the solution selling (ready-to-pour
concrete as opposed to cement bags) model pioneered by Cemex. Entrepreneurial agility also
includes the ability to opportunistically exploit emerging technological, economic, or social
trends with first-mover speed before other firms.
Adaptive agility refers to the ability to launch competitive actions whose focus is on keeping
pace with innovative industry practices or being resilient to changes in business environments.
Adaptive agility includes resilience to the emerging threats in a firms business environment,
whereby a firm is able
to take actions to defend its competitive positions. High levels of resilience capability ensure a
firms preparedness to mitigate the risks due to natural disasters or even business events, such as
supplier created shortages or demand spikes (Hamel and Valikangas 2003). Further, adaptive
agility also includes
a firms ability to keep pace with innovative industry practices, supplier management practices,
or customer relationship management practices. For example, with the emergence of the Internet
as a channel for online commerce and customer relationship management, firms have responded
by adapting
their channel strategies to create multichannel models of customer relationship (Gulati and
Garino 2000).
Recent strategy research adopts a dynamic perspective, whereby it argues that firms that
continually launch competitive actions in the form of pricing, product, promotion changes, or
new business models outperform those that launch few competitive moves (Smith et al. 1991).
Agility reflects the ability of
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firms to launch more competitive actions (Sambamurthy et al. 2003).

Entrepreneurial agility allows firms to continually seek growth options by penetrating new
markets, implementing new forms of customer relationship building strategies (e.g., enhanced
personalization), offering new products and services, or implementing new business models.
This capability strengthens
the ability of firms to capture first-mover advantages and erect barriers to competitive imitation
(Dehning and Stratopoulos 2003; Piccoli and Ives 2005). Primarily, entrepreneurial agility
enables firms to develop superior insights about emerging opportunities or shape new
competitive playgrounds that favor them and enable them to sustain their competitive advantage.
At the same time, adaptive agility reflects a firms ability to defend threats to its current
competitive position, or keep up with emerging industry best practices. Adaptive agility allows a
firm to develop a repertoire of routines that it can activate when it encounters significant threats
or disruptions. Further, adaptive agility reflects the ability of a firm to rapidly sense and interpret
changes in its environment or industry best practices and activate the needed assets, resources, or
capabilities to respond to those changes. Even when it encounters entrepreneurial moves by its
rivals, a firm with high adaptive agility would be able to develop an effective early imitation
strategy to reduce the window of opportunity for the rivals and dissipate their temporary
competitive advantage. Thus, while entrepreneurial agility captures a firms ability to sustain its
competitive advantage by continually creating new bases of advantage, adaptive agility captures
a firms ability to preserve its existing bases or catch-up with the successful actions of its rivals.
Organizational citizenship behavior
Organizational Citizenship Behaviors (OCB) is defined as those extra work-related behaviors
which go above and beyond the routine duties prescribed by their job descriptions or measured in
formal evaluations (Bateman and Organ, 1983). Since these efforts are made beyond the
requirements specified in the job description, their presence cannot be enforced (Organ, 1988),
and their absence cannot be penalized (Van Dyne et al., 1995). Examples of these efforts include
cooperation with peers, performing extra duties without complaint, punctuality, volunteering and
helping others, using time efficiently, conserving resource, sharing ideas and positively
representing the organization (Turnipseed and Rassuli, 2005).
Workers, who go above and beyond the minimum requirements of their job description, by
suggesting improvements, affect performance and result with enhanced workgroup efficiency.
OCB impacts workgroup efficiency during times of crisis management. For example, having
conscientiousness and helping others result in decreased inter-group conflict and allow managers
to focus on more pressing matters (MacKenzie et al, 1999). Having workers highly engaged in
OCB may improve managers efficiency by allowing them to devote a greater amount of time to
long-range planning matters. Subsequently, managers benefit from positive OCB as well as
employees (Turnipseed and Rassuli, 2005).
According to Turnipseed and Rassuli (2005), OCB elements which enhance performance
include: elements which add social capital, helping or altruistic elements, elements resulting with
time savings or problem solving, and other elements which provide socio-emotional support by
boosting morale or developing a nurturing culture. Walz and Niehoff (1996) argue that only the
helping-type of citizenship behavior element of OCB is linked to performance, while
Karambayya (1990) suggests that more OCB elements are found in high-performing workgroups
compared to low-performing workgroups.
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OCB and performance

Several studies link OCB to performance while separating employees into two groups, the best
performing and the worst performing. These research works attempt to understand which
employee characteristics managers use to rate them as best performing. These employees may be
performing extra work behaviors or they may be involved in activities contributing to the
organization. Organ (1990) points out that OCB not only adds to performance, but it may also
influence how managers evaluate employees. Katzell and Yankelovich (1975) argue managers
believe OCB contributes to performance and suggest analyzing them with that in mind. OCB has
now been included in performance evaluations (Werner, 1994). The problem with having
managers identify which employees or groups of employees may be classified as being the best
performers is that these managers are those who might be highly engaged in OCB thereby
creating bias. Further, some employees may use impression management style in order to create
a favorable impression of themselves (Bolino and Turnley, 2003). In order for OCB to directly
impact performance, these behaviors must be redirected towards promoting organizational
effectiveness. Organ (1988) points out in order for OCB to affect performance, the individual
contributions must be aggregated throughout the organization. Organ (1988) argues that even
though co-workers may benefit from employees who help others with heavy workloads or those
who offer advice to newer employees, individual acts of OCB do not affect performance.
Understanding the overall level of OCB and relating it to firms performance may shed some
light on extant literature. In order to confirm OCB is significantly related to performance, we
propose:
H1: OCB is significantly related to firm's performance.
Organizational Agility and performance
Operational capability is a firms functional capability and is defined as the ability to achieve the
operational goals of speed, quality, cost, and effectiveness in managing interactions with
customers, suppliers, and other important stakeholders (Hammer 2004; Helfat and Peteraf 2003).
Operational capabilities reflect how well developed a firms portfolio of business processes,
including manufacturing, customer relationship, logistics and delivery, procurement, and
customer service, are in supporting the firms business strategies. Since a firms operational
capability is embedded in its specific operational activities, such as manufacturing, product
development, or customer service (Helfat and Peteraf 2003), this capability is viewed as being
idiosyncratic to the firm and not easily imitable.
Hammer focus attention on two significant types of operational capabilities: operational
innovation and operational excellence (Hammer 2004). Operational innovation involves radically
changing or reinventing business processes to create new ways of performing operational tasks.
This often entails rethinking how to conduct the operations of an industry. It also involves the
implementation of new ideas that a firm adopts or invents for its products and services,
production processes, and managerial and administrative activities (Weerawardena
2003).operational excellence refers to the improvement of existing modes of operation to
improve its speed, and reliability, and cost. Often, the goal of operational excellence is to reduce
errors, costs, and/or delays, but without fundamentally changing how the task is accomplished
(Hammer 2004). Operational excellence has also been discussed in terms of organizational
effectiveness and efficiency(Porter 1996), which involve performing similar activities better than
rivals using concepts and tools, such as Total Quality Management (TQM) and Six Sigma
(Powell 1995). According to Hammer (2004), whereas operational excellence activities are
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usually abundant inside a firm but have a narrow scope, operational innovation activities are
usually rare but have a wider scope. Thus, operational innovation capability is a firms capability
to invent and deploy new ways of business operations by rethinking how to do the work in its
industry. On the other hand, operational excellence capability is a firms capability to provide
high performance, i.e., effectiveness and efficiency, by improving its current modes of business
operations in its industry.
In order to confirm organizational agility is significantly related to performance, we propose:
H2: organizational agility is significantly related to firm's performance
OCB, organizational agility and performance
Since both OCB and organizational agility have been theorized to positively contribute towards
organizational performance, it stands to reason that organizational agility should also be
positively impacted by employees going above and beyond what is required of them. Thus, we
propose:
H3: OCB actions significantly affect the organizational agility practices.
Subsequently, the question which arises is, Does the inclusion of organizational agility help to
better explain the relationship between OCB and performance? In other words, is the
relationship between OCB and performance mediated through organizational agility? Thus, we
propose:
H4: organizational agility mediates the relationship between OCB and firms performance.
The hypotheses presented in this section form a theoretical contingency model as described in
Figure 1
H1
Organizational
citizenship
behavior
H
H
Performance
Organizational
Agility
Figure 1: Hypothetical relationship between OCB, Organizational Agility and Performance

Survey instrument
The data used for this study was collected from a 50 company operating in the wood industry.
A survey questionnaire was distributed to managerial employees and was conducted on site. A
total of 170 surveys were collected, but due to missing data only 147 surveys were used for this
study. The participants answered a total of 70 questions on a 5 point Likert-scale, ranging from
1, strongly disagree, to 5, strongly agree. The survey questionnaire was designed to collect
information concerning three areas of management constructs: OCB, Organizational Agility, and
performance. In order to minimize the potential bias, the questions were designed to ask
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managers to evaluate what their personnel exhibit in general, in lieu of asking how much the
survey participants contribute. This approach was used to decrease the potential bias due to selfappraisal and impression-management. There were 20 questions pertaining to OCB, 40
questions for Organizational Agility, and 10 questions for performance.
Data Analysis
The first step of analysis was to perform an exploratory factor analysis (EFA) in order to
understand the statistical relationship between the data and the constructs in question. The EFA
was conducted using the maximum likelihood method of extraction since the data was found to
have passed the assumption of multivariate normality. The factors were rotated using vari-max
rotation in order to simplify the factor structure and to make its interpretation easier and more
reliable.
The two indicators used for performance are customer satisfaction and productivity. We
conducted the reliability analysis Cronbachs alphas. The results indicated that the Cronbachs
alphas for all three constructs (OCB, five items: = 0.7061; organizational agility, two items: =
.8719; Performance, two items: = 0.7559) either exceeded or were close to the recommended
critical point of 0.70 (Hair et al., 1998), indicating an acceptable level of internal consistency.
The correlation analysis conducted in this study is depicted in Table 1.
X1
X2
Altruism =0.748
Courtesy 0.415**
Conscientiousness 0.461** 0.395**
Sportsmanship 0.447** 0.411**
0.398**
0.417**
Civic Virtue
0.417**
0.368**
entrepreneurial
agility
0.214*
0.324**
adaptive agility
0.311**
0.218*
Customer
Satisfaction
0.307**
0.3014**
productivity
X3
X4
X5
X6
X7
0.401**
0.116
0.347**
0.461**
0.447**
0.361**
0.318**
0.217*
0.298*
0.317**
0.247*
0.318**
0.237*
0.361**
0.315**
0.318**
0.214
0.317**
0.347**
0.361**
X8
0.328**
** Significant at 0.01 level, * Significant at 0.05 level

Table 1: Correlations between OCB, organizational Agility and performance
The result indicates the variables are positively related and somewhat correlated, with strengths
ranging from .116 to .461. Even though correlation by itself does not imply causation, it is nonethe-less required in order for there to be a causal relationship (Hair et al., 1998). Therefore, this
result is useful towards making causation in this study.
The structural model was analyzed using the Amos 18. The final SEM framework for this study
is presented in Figure 2. The analysis of the structural model resulted with a chi-square value of
28.168 with 17 degrees of freedom and a probability level of 0.043. This test statistic indicates
the overall fit of the model to the data. Since the probability value of the test is just below the .05
level used by convention, we are forced to investigate the models fit by examining the fit indices.
The chi-square test is sensitive to sample size and the models degrees of freedom, and for this
reason the test is difficult to use as a sole indicator of SEM fit (Hair et al., 1998). The latent
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variables were: OCB=Organizational Citizenship Behavior; OA=organizational agility;

PER=Performance. The observed variables were: Altruism; Courtesy; Conscientiousness;
Sportsmanship; Civic Virtue; entrepreneurial agility; adaptive agility ; Customer Satisfaction;
Productivity.
0.121
OCB
PER
0.61*
Altruism
0.51*
0.57*
Conscientiousness
0.51*
0.44*
Courtes
y
0.618**
0.512**
OA
Civic Virtue
Sportsmanship
0.38*
0.75**
Adaptive agility
Entrepreneurial agility
Chi-square=28.168, dof=17,
prob. =.043, RMSEA=0.069, NFI=0.935, CFI=0.973, RFI=0.894, TLI=0.955
Figure 2: Relationship between OCB, Organizational agility, and Performance
Since the chi-square test is known to be sensitive to sample size and non-normality in the
underlying variables, further investigation is required in order to determine if the overall fit of
the model to the data is truly acceptable. The comparative fit index (CFI) can also be used to test
the absolute fit of the model. In this case the CFI value is 0.973 which is above the .9 level used
by convention. Thus, it is safe to say that the model does fit the data very well. The TuckerLewis Index (TLI) is another fit index whose value closest to one indicates good model fit. The
TLI for the model in this study is 0.955, which also indicates great fit. The Root Mean Square
Error of Approximation (RMSEA) is another fit index whose value signifies the level of error of
approximation. Values under .07 would indicate a reasonable amount of error, and values near
.05 would indicate a close fit to the model. The RMSEA for this study is .069, which also reveals
a very good fit between the model and the data in question.
RESULTS
As depicted in Figure 2, all causal paths were shown to be significant except for the direct path
from OCB to performance. The path from OCB to performance is not statistically different from
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zero at the .05 level. Therefore, H1 which states that OCB is significantly related to performance
is not supported. H2 describes the causal relationship between OA and performance. In this case,
the relationship is statistically significant at the. 01 level which supports the idea that
implementing OA methodology does affect the performance. The causal path from OCB to OA
is also statistically significant at the .01 level, which fully supports H3. Since the direct path
from OCB to performance is insignificant and the remaining paths (from OCB to OA and OA to
performance) are positive and significant, it appears that OA fully mediates the relationship
between OCB and performance, which supports H4.
Our result does not support the hypothesized direct relationship between OCB and performance.
This finding suggests that employees who work above and beyond what they are required to do
will not directly affect firms performance. In other words, there needs to be a management
methodology (i.e., OA) that complements positive OCB in order to impact firms performance.
Our result was able to replicate the findings of other research studies which suggest a causal
relationship exists between the OA and performance constructs. This confirmation helps to
uncover the fully mediating role of OA between OCB and performance. This implies that OCB
does have an effect on the performance of a firm even though it is not directly related to it. In
other words, OCB by itself does not have a direct effect on customer satisfaction or productivity,
but when these actions are directed towards OA, increased performance would result.
One may argue how engaging in OCB, such as being helpful to co-workers and being involved
with company activities, would not directly affect customer satisfaction or productivity.
However, by the similar token, we argue how these same actions, when directed toward
implementing OA, would result with increased customer satisfaction and productivity. For
example, experienced employees who help others improve the quality of their work would in
turn affect customer satisfaction and productivity as well. Further, we argue assessing
employees OCB level can be a good indicator of how a new management methodology such as
OA can turn out. This may bring about a significant managerial implication for firms that are
looking to improve performance by implementing a new innovative management methodology
such as OA. OCB and OA researchers may also benefit from this study as an extension to the
current body of literature in the field.
CONCLUSION
This study illustrates the mediating role of OA between OCB and performance. We add to extant
literature by clarifying the relationship between OCB and performance in that there is no direct
link from OCB to firms performance. This result provides several valuable managerial
implications. For example, managers employing OA may refine their appraisal system to include
identifying and rewarding employees who engage in positive OCB. These employees positive
OCB actions are not directly reflected in firms performance. However, positive OCB actions
facilitate the management methodologies that have direct impact on firms performance.
Managers may also consider assigning these positive OCB employees to areas where a new
management methodology is being implemented such that they indirectly contribute towards
firms performance.
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Measurement of organizational citizenship behavior (OCB) in general inspection

organization in Iran
Freyedon Ahmadi
Seyed Ali Akbar Ahmadi
Golamhosain Homauni
Abstract
Theory and research on Organizational Citizenship Behaviors (OCB) has resumed OCB as a set
of desirable behaviors that contributes to the organizational effectiveness. So far OCB has been
connoted as one of the antecedents of organizational performance. Based of many researches
OCB has much benefit for organization such as productivity, improvement of staff performance,
profitability and so on. Important of OCB spatially for general inspection organization as control
tools is very much. So these study we attempted measurement of OCB in general inspection
organization in Iran. The result of this study show that although level of OCB was high in
sample unit but level of OCB in politics section, planning section and social section was higher
than economy section, produce section and spacial section.
Key words: OCB, Civic virtue, Altruism, Conscientiousness, Interpersonal harmony, Protecting
company resources, Sportsmanship and Courtesy
Organizational citizenship behavior explained
In the 1930s Chester Bernard observed the phenomena of organizational citizenship behavior,
which he then termed "extra role behaviors" [Bernard 1938]. His notion that employees
demonstrated OCB is the earliest example identified in this review. Katz and Kuhn [1966]
defined supra-role behaviors that improved the effectiveness of the organization. In the words of
Katz and Kahn [1966] this, "includes any gestures that lubricate the social machinery of the
organization and do not directly adhere to the usual notion of task performance". The extra-role
behaviors identified included helping other workers with work-related problems, accepting
others into the work group without a fuss, either putting up with or minimizing interpersonal
conflict in the organization, and protecting and conserving organizational resources. Katz and
Kahn coined the term "citizenship" to represent the workers that displayed these extra-role
behaviors.
Managers and executives value employees who display "citizenship behavior" perhaps because
they make their job easier. The extra time obtained by management allows and the manager to
improve the organizational effectiveness by having more time for managerial issues. Bateman
and Organ [1983] in the seminal article, Job satisfaction and the good soldier: The relationship
between affect and employee "citizenship" began a large series of articles into the topic of OCB.
It is crucial to clearly differentiate between in-role and extra-role behaviors at work. In role
behavior is a technical performance required by the job. In other words, in-role behavior is that
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which acceptable behavior to management is. Extra-role behavior on the other hand, is referred
to as "innovative and spontaneous behavior". Extra-role behaviors include the in-role behavior
and extra-role gestures that enhance or improve organizational effectiveness, informal acts of
cooperation, goodwill, and helpfulness [Organ & Batman 1983]. Some examples of extra-role
behaviors are helping to orient new workers in the organization, not abusing the rights of other,
and being friendly to the
Customers. A basic notion underpinning this concept of in-role and extra-role work behavior is
the idea that any employer can in affect force a certain degree of work out of an individual who
needs a job, thus, the in-role. Nevertheless, the organization can encourage the extra-role
behaviors that can increase their competitiveness. For example, if an employer hired a worker
and stated that he or she ought to be able to produce 350 widgets per shift. If the employee was
unable to accomplish that task, one can say that the in-role behavior was not achieved and thus,
no extra-role behavior occurred either. If the employee achieved the goal of 350 widgets per
shift, the employee could then be encouraged to engage in extra-role behavior. Thus, Organ
[1990] theorized that in-role and extra-role behaviors are influenced by different motivational
dynamics. Perhaps in role behaviors or to achieve a certain degree of work from an employee, a
manager may be more apt to use extrinsic tactics. While with an employee that is achieving the
in-role duty, intrinsic tactics may encourage extra-role behavior.
Along with the understanding of in-role and extra-role behavior, a distinction must be made
between the formal and the informal functions of an organization. Organ [1988] defined the
formal organization as including the organizational systems, policies, rules, and regulations that
govern task behavior to achieve effective technical production. Thus, one can clearly understand
that in-role behavior is a requirement by management to obtain the job. The informal
organization exists in any business and can be thought of as a pre-requisite of an effective
organization [Organ 1990]. In the informal organization, extra-role behaviors such as welfare of
co-workers, low absenteeism, or teaching new
hires the ropes are abundant.
Organ [1988] defined organizational citizenship behavior as, "OCB represents individual
behavior that is discretionary, not directly or explicitly recognized by the formal reward system,
and that in the aggregate promotes the effective functioning of the organization."
Organ then proceeds to define what he meant by discretionary, "We mean that the behavior is not
an enforceable requirement of the role or the job description, that is, the clearly specifiable terms
of the person's employment contract with the organization; the behavior is rather a matter of
personal choice, such that its omission is not generally understood as punishable". He gives a
clear explanation of what does and does not constitute OCB behavior in his example of a college
professor. He states, "Thus, college professors who prep for their courses, teach, do research, and
write are not by our construction exhibiting OCB, no matter how good their teaching and
research is judged by others". The notion is that fulfilling one's contractual obligations to the
organization in
which one works is just the in-role requirements. An OCB for the college professor may include
picking up trash on the classroom floor after or before class and tossing it in the wastebasket or
perhaps engaging in a conversation in the community that will promote the organization in a
positive manner.
Organ [1988] provided a multi-dimensional scale of organizational citizenship behavior. The
scale contained five dimensions that make up the OCB construct. The five dimensions identified
by Organ are altruism [welfare], courtesy, sportsmanship, civic virtue, and conscientiousness.
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Altruism is the category consisting of discretionary behaviors that aim at helping certain people
in an organization with a relevant task or problem. Courtesy includes proactive gestures that
consider consulting with other workers in the organization before acting, giving advance notice,
and passing along information. Sportsmanship refers to the forbearance of doing some action
such as filing petty grievances. Civic virtue is the involvement that the employee shows in the
political life of the organization. Finally, conscientiousness is originally termed general
compliance, which involves employees going beyond the minimum requirements of the
organization.
Research in the area of OCB has expanded in the literature since the work of Organ and Batman
[1983] in which they used the Job Description Index at two points in time, finding higher
correlations than in previous satisfaction-performance studies. Skarlicki and Latham [1995]
found that peer evaluations correlated negatively with a professor's publications and years on the
job. Schnake [1991], Organ, and Katherine [1995] have conducted meta-analysis of the OCB
literature. Organ and Katherine [1995] conducted a meta-analysis with 55 studies, which showed
that job attitudes are robust predictors of OCB. Different task, leadership, cognitive and positive
affect studies have also been
conducted [Organ & Konovsky 1989; Farh, Podsakoff & Organ 1990].
An interesting line of research involves unions, their members, and the role that OCBs can play
within a union [Latham & Karambayya 1997; Skarlicki & Latham 1996; Skarlicki & Latham
1997]. Articles in the marketing and organizational decision journals have studied salespersons
and managerial performance appraisals and evaluations [MacKenzie, Podsakoff & Fetter 1991;
1993]. Not all studies have embraced the new conceptualization of OCB as a new and better
measure of performance. Morrison [1994] calls for research clarifying the meaning of in-role and
extra-role performance or reconceptualizing OCB [Van Dyne & Graham 1994]. Still, studies
continue to explain OCB in regard to rewards, in-role, extra-role, dispositional factors [big-five],
personality, and satisfaction [Eastman 1994; Konovsky & Organ 1993; Organ 1994: Moorman
1993].
Moorman and Blakely [1995] found that a collectivistic individual is more apt to engage in
OCBs. The study demonstrated robustness of OCB to the issues of self-report bias and common
method variance in that the use of multiple means of obtaining data is possible [e.g. employee
self-report and the manager rating of the employee's OCB]. These findings are important because
they point out the need for research to understand the Mexican or other international
environment. For instance, Mexico ranked high on collectivism in Hofestede's [1980] study this
study may find that Mexican nationals are more apt to display OCB than United States citizens
are. Power distance as described by Hofstede [1980] regarded that small power distances cultures
require that inequities among people should be minimized [U.S. culture]. On the other hand, a
large power distance cultures believes according to Hofstede that inequalities among people are
both expected and desired [Mexico's culture].
Dimensions of OCB
McClelland (1961) argued that OCB can be best understood when OCB is viewed as motive
based behaviors. McClellands work suggested that all people have some degree of achievement,
affiliation, and power motives. The achievement motive pushes people to perform in terms of a
standard of excellence, seeking the accomplishment of a task, challenge, or competition. The
affiliation motive pushes people toward establishing, maintaining, and restoring relationships
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with others. The power motive pushes people toward status and situations in which they can
control the work or actions of others.
Organizational citizenship behavior was described by Organ and his colleagues (Smith, Organ, &
Near, 1983) as having two basic dimensionsaltruism and generalized compliance.
Altruism is helping behavior directed at specific individuals. When individuals have specific
problems, need assistance, or seek help, altruistic people go the extra mile in assisting them. The
other class of citizenship behavior is generalized compliance, which is a more impersonal
conscientiousness: doing things right and proper for their own sake rather than for any specific
person. Organizational participants behavior far surpasses any enforceable minimum standards;
workers willingly go far beyond stated expectations.
In attempting to further define organizational citizenship behavior, Organ (1988) highlights five
specific categories of discretionary behavior and explains how each helps to improve efficiency
in the organization.
Altruism (e.g., helping new colleagues and freely giving time to others) is typically directed
toward other individuals but contributes to group efficiency by enhancing individuals
performance.
Conscientiousness (e.g., efficient use of time and going beyond minimum expectations)
enhances the efficiency of both an individual and the group.
Sportsmanship (e.g., avoids complaining and whining) improves the amount of time spent on
constructive endeavors in the organization.
Courtesy (e.g., advance notices, reminders, and communicating appropriate information) helps
prevent problems and facilitates constructive use of time.
Civic Virtue (e.g., serving on committees and voluntarily attending functions) promotes the
interests of the organization.
Empirical research on the dimensions of organizational citizenship behaviors (OCB) has
generated somewhat conflicting results. A few researchers have been successful in identifying
four categories of OCB (Moorman & Blakely, 1995) but the weight of the factor analytic
evidence suggests a two-factor structure. Williams (1988)also found a two-dimensional
definition of OCB:
1) benefits to the organization in general, such as volunteering to serve on committees (OCBO),
and 2) benefits directed at individuals within the organization, such as altruism and interpersonal
helping (OCBI). More recently, Skarlicki and Latham (1995) examined OCB in a university
setting; their data also supported a two-factor structure, (organizational and interpersonal) could
be referred as OCB.
In two separate factor analytic studies, DiPaola and Tschannen-Moran (2001) found that there
are not five separate dimensions of the construct, or even two for that matter, but rather that one
dimension captures all aspects of OCB. In other words, both benefits to the organization (helping
the organization) and benefits to the individual (helping individuals) combine into a single,
bipolar
construct.
Since Organ (1988) introduced the concept of OCB into organizational research, it has tended to
be conceptualized in terms of positive contributions
to the colleagues and to the organization, which implies an active positive contribution. Yet the
operationalization of OCB (Farh et. al., 1997) reveals a different picture. There are two types of
citizenship behaviors exist in the OCB measures:
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(1) Active positive contributions or commissions (e.g., helping others) and (2) avoiding to
engage in behaviors that are harmful to others or to ones organization (e.g., not abusing others
rights). This latter behavior that tends to be labeled as omission is a passive behavior that is
based on the moral rule
Do no harm or more specifically Do no harm through action (Baron, 1998).
Discussion on dimensions of OCB is carried further for a through conceptualization of OCB by
investigating the various antecedents of OCB.
Based on what say about OCB , many category were done by researchers, but this research we
follow of Markoczy & Xin used of seven dimension of OCB and was measured it in auditor
organization in Iran .
Methodology
The Sample
In this study 100 people of six section of general inspection organization in iran were selected as
sample. This amount people were determined the below formula:
N Z 2 P (1 P)
500 1.96 2 .05 0.5
2
n
=
= 93
( N 1) d 2 + Z 2 P (1 P ) 499 0.12 + 1.96 2 .05 0.5
2
The measures
For measuring of OCB were used of seven dimension based of Markoczy & Xin study that were
done in cultural of USA and Chinese in University of California. Based their study seven
dimension of OCB are:
Civic virtue, Altruism, Conscientiousness, Interpersonal harmony, Protecting company
resources, Sportsmanship and Courtesy. A 15 Likert scale was used to measure the degree
subjects considered the listed behaviors to be OCBs.
The result
Based of data gathering , the mean level of OCB dimension in six section of auditor organization
in iran were shown in table one.
Table 1: The mean level of OCB dimension in six section of auditor organization in iran
Economy
section
Planning
section
Social
section
Politics
section
Produce
section
Special
section
Total
Civic
virtue
Altruism
Conscienti
- ousness
Interpersonal
harmony
Protecting
company
resources
Sportsmanship
Courtesy
OCB
3.11
2.92
3.06
3.25
3.31
3.15
3.18
3.12
3.35
3.5
3.62
3.83
3.71
3.51
3.46
3.58
3.65
3.58
3.53
3.73
3.64
3.37
3.48
3.57
3.46
3.44
3.72
3.8
3.72
3.64
3.54
3.62
2.98
2.86
2.98
3.23
3.04
3.11
3.01
3.04
3.13
3.03
3.24
3.21
3.06
3.17
3.13
3.11
3.3
3.24
3.39
3.54
3.44
3.36
3.32
3.37
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Based of the table 1, resulats indicat although level of OCB was high in sample unit (abve of
medume (3)) but level of OCB in politics section (3.62) , planning section (3.58) and social
section (3.57) was higher than economy section (3.12) , produce section (3.04) and spacial
section(3.11).
Civic virtue has the most mean in social section and lowest mean in produce section. Also the
most mean of altruism belongs to social section and lowest to produce section. Planning section
has the most mark in Conscientiousness and produce section has the lowest mark in
Conscientiousness dimension. The highest mean in Interpersonal harmony belongs to planning
section and lowest belongs to Special section. The Protecting company resources as one
dimension of OCB has the most mean in Politics section and Special section has the lowest mean
in protecting company resources dimension. Finally politics section has the most mean in
Sportsmanship and Courtesy dimensions and Produce section has the lowest mean in these two
dimensions.
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R.H. Moorman & G. L. Blakely Individualism-collectivism as an individual difference predictor
of organizational citizenship behavior. Journal of Organizational Behavior, 16, 127-142
(1995)
Smith, C. A., Organ, D. W., & Near, J. P. (1983). Organizational citizenship behavior: Its nature
and antecedents. Journal of Applied Psychology, 68, 653_/663.
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Survey and Study anti-corruption strategies in Iran

Freyedon Ahmadi
Zahra Avajyan
Abstract
The preoccupations about conceiving and promoting efficient anti-corruption strategies exist in
most states, especially in the developing countries. The opportunity of such strategies derives
from the direct link, demonstrated theoretically and empirically, between the effects of the anticorruption strategies and government performance, translated both in the economic and social
results and living standard, welfare etc. In the last decades, the transnational actors UN, World
Bank, OECD, EU etc. - have affirmed as promoters of own anti-corruption strategies, directing
the states efforts, conferring adequate levels of relevance, effectiveness, efficiency or
sustainability. In Iran general inspection organization have many tasks that one of the important
duty is fighting with corruption and prepare strategy for it. So in this research is attempted
prepare strategies for fighting with corruption. The result indicated that for fighting with
corruption in Iran there are strategies that is implementation in four sections such as economy,
social, politic and administration.
Key words: Corruption, economy section, social section, politic section, administrative section
Introduction
Definitions of corruption abound, but the most commonly used one refers to the abuse of a
public position for private gain. Corruption is facilitated by bribery, embezzlement and theft but
also by nepotism and cronyism. Corruption affects both the private and public sectors and is
often subdivided into grand and petty corruption which ranges from the provision of small gifts
in the former to the misappropriation of public assets at the highest levels in the latter (McCusker
,2006). The size and incidence of corruption might be attributed to four key factors: The level of
public benefits available, the discretionary power of officials, the level of risk associated with
corrupt deals and the relative bargaining power of the corruptor and corrupted (Rose-Ackerman
1997).
What types of corruption are the most damaging and in which institutions or countries? What are
the relationships between corruption and poverty and how can a state reduce corruption? Within
those two framing questions, three broad levels of assessment should occur: causes and impact of
corruption for example, how far the causes of corruption are influenced by geographical,
political, economic and cultural factors, and by the relationships between political and
administrative processes, and between public and private sector ,the political, economic,
institutional and social environment for example, whether the corruption is country or
institution specific and whether different political, administrative and economic configurations
give rise to differing levels or types of corruption and thus to differing impacts on different
groups in society . the global economy and the links between corruption, fraud, organized crime
and international illicit capital flows for example, how crime is organized and to what extent
corruption is a necessary or sufficient condition for particular forms of criminal behavior, i.e.
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what the shape of crime would be if there were more or less corruption, organized crime and
money laundering? (Doig 1998).
A further indication of the propensity for corruption within a given society might be provided by
an application of the corruption formula, C = M + D A, that is, corruption (C) equals monopoly
power (M) plus discretion by officials (D) minus accountability (A) (Klitgaard 1998).
Basic approaches to anti-corruption
In designing an anti-corruption strategy it is imperative to be cognizant of the fundamental
characteristics and nature of corruption itself. Essentially, it must be recognized and appreciated
that theories of corruption causation have to be interpreted in the context of actual and/or likely
human behavior, drivers and interaction. It should also be noted that some commentators have
suggested that economic progress may in fact be dependent upon, rather than impeded by corrupt
practices. A useful analogy for understanding the impact of, and solutions to, corruption is to
compare its nature with that of a pandemic. There are (at least) three key schools of thought on
corruption reduction and prevention. First, interventionism, in which the relevant authorities wait
for the corrupt action to occur and then intervene to capture and punish the offender. This school
stimulates retribution, rehabilitation and deterrence but there remain a number of obstructive
variables including: the harm has already occurred and cannot be undone ,the majority of crimes
remain unreported .the demand on finite resources will inevitably be infinite given the degree of
supervision necessary to ensure that the deterrence effect operates. If the dark figure of crime
prevents most crimes being detected, reported and responded to, what reasonable measure of
deterrence can pertain?
Second, managerialism, in which those individuals or agencies seeking to engage in corrupt
behavior can be discouraged or prevented from doing so by establishing appropriate systems,
procedures and protocols. In essence, managerialism advocates the reduction or elimination of
opportunities such that those who generally benefit from them cease to be able to do so. There
are limitations with this school of thought also, key amongst which are the fact that individuals
do not necessarily operate according to the predetermined principles of managerialism.
Organizations contain three broad categories of people who will react differently to corrupt
influences: category I: people who want to do the right thing and require guidance on how to
achieve this, category II: people who are too timid to take the risk of operating outside set rules
Category III: people who are corrupt and will operate outside of the rules entirely.
Managerialism attempts to provide one set of rules to deter a number of differently motivated
individuals. The consequences of this approach are that the success of the anti-corruption effort
is fragmented, intercepting the less scheming corrupter but not the more damaging highly
planned exploits of others. Equally, managerialist control of corruption ignores market forces.
Finally, organizational integrity which involves the integration of an organization's operational
systems, corruption control strategies and ethical standards so that a norm of ethical behavior is
created. This school of thought presupposes that deviance stems from the organization rather
than the individuals of which it is comprised, as if the breach of ethics involved in corrupt
practices occurs almost by osmosis from the malfeasant organization to the innocent individual
within it. Arguably, targeting individuals in anti-corruption efforts is likely to be less successful
than targeting the organizational context in which individuals operate. It has been suggested that
the organization must provide a structural framework that removes the possibility of corrupt
practices. In short, the ability of the individual to interpret the rules or to decide whether to apply
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a particular protocol should be circumvented by a system which cannot be manipulated (Larmour

& Wolanin 2001).
Cross- sect oral strategies
Sound anti-corruption strategies recognize the level and degree of formal and informal
interaction between agencies, organizations and individuals. It is imperative that such strategies
incorporate changes in the practices of the public and private sectors. In addition, efforts should
be made to increase public awareness of corrupt practices and to garner support from the public
in the detection and reporting of corrupt behavior. These issues are discussed in greater detail
below.
Public sector
It has been suggested that strategies that reduce the benefits of paying and/or receiving bribes
can only result in positive results for the anti-corruption effort. Reform of the civil (public)
service is an essential initial policy. The provision of adequate pay is a useful first step because,
if the service pays lower salaries than can be obtained by similarly qualified personnel
elsewhere, then there is, arguably, a temptation for civil servants to engage in bribery. However,
it is possible that higher pay may simply increase the level of bribe sought by the official
concerned. Thus, it might be essential to remove other benefits (such as a pension scheme) from
those civil servants who, despite receiving pay increases, continue to engage in corrupt behavior.
Equally, the selection of civil servants needs to be transparent, to avoid the potential for bribery
of officials in exchange for a government post. A further level of civil service control, which
relates both to the briber and bribe, could also be instituted whereby the civil servant who
accepts a bribe could be fined a multiple of bribes received, as well as losing his/her post,
pension and allied benefits. The briber could be penalized in terms of the profits made from the
bribe rather than in relation to the level of the bribe itself. Similarly, it might be possible to
include a debarment procedure which would prevent a briber from contracting with the
government on any project for a specified and economically debilitating period. Other reforms
such as those of the judiciary and the provision of independent review and investigative bodies
are essential if the civil service reforms are to have full resonance. More broadly, corruption
within the public service might be mitigated by reducing the benefits under the control of
officials. First, it might be possible to eliminate programs identified with corrupt practices. Thus,
for example, if a state department has no direct authority to restrict exports or to license
businesses (both activities facilitating the demand for corrupt payments), with that decision being
taken by an independent body, there will be no point in bribes being sought or proffered.
Secondly, if policies increase privatization then competition may control contracts rather than
bribery of a monopolizing state (Rose-Ackerman 1997). Civil service reform or the creation of
professional and well-motivated civil service is integral to the anti-corruption process. Political
appointments destabilize the civil service, undermine continuity and hamper development of
institutional values and standards. There is a need for merit based recruitment and promotion
mechanisms that restrain political patronage and create an impartial civil service, combined with
credible monitoring and law enforcement. Increasing salary reform for the civil service is often
portrayed as key, but salary reform alone will not eliminate incentives for bureaucratic
corruption where high level civil servants retain control of resources. The success of civil service
reform also hinges upon the independence and integrity of the judicial system. Judicial reform
aims to put mechanisms in place that provide for job stability, career paths and adequate salaries.
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It also requires strengthening the prosecutors and defenders offices and establishing internal
controls to prevent corruption within the judicial system through such entities as professional
ethics codes and inspection systems (Tay & Seda 2003).
Private sector
The business sector must also be included in any anti-corruption approach. This cooperation
should be orchestrated through the creation of self-regulatory practices in the form of codes of
conduct subject to external and objective monitoring. The aim should be placed realistically at
setting and adhering to minimum standards. However, this model has attracted criticism from
commentators on the activities of corporations in developed economies and has largely given
way to the Sarbanes Oxley legislation and related regulatory framework (Carr 2006). The
business sector has historically been seen as part of the corruption problem rather than central to
its mitigation, given that the business sector has long recognized the competitive advantage to be
achieved through selective acts of bribery, whether in a blatant pay off situation or the more
common (and corporately more excusable) payment of speed money to oil, rather than start, the
wheels of bureaucracy. The introduction of the Convention on Combating Bribery of Foreign
Public Officials in International Business Transactions (OECD 1997) has, arguably, put pressure
upon the business sector to develop integrity management systems. It is suggested that such
systems need to reflect both the corporate culture and the culture of the country in which they
operate.
Another issue is the interface between the public and private sectors which, in an increasing
industrialized environment, has facilitated a high degree of mutually beneficial, yet corrupt,
practices. This is said to be particularly acute in smaller countries in which citizens may be
influenced by kinship loyalties that may subsume a broader anti-corruption effort. The impact of
this discontinuity may be exacerbated if the level of knowledge and understanding of the broader
impacts of sustained corruption upon a society is at a low level. The OECD has developed
guidelines for managing conflict of interest in the public service which seek to raise awareness of
the issue and lay down instances of prohibited conduct, the occurrence of which would result in
corrupt practices (OECD 2003).
Public support
It has long been maintained that anti-corruption campaigns cannot succeed without attaining and
maintaining public support. Two broad and complementary strategies can increase that support
and impact upon the success of anti-corruption strategies. First, there are public awareness
programs which focus upon the harm done by corruption, the misuse of public money, the denial
of access to public services and the public duty to complain when public officials act corruptly.
Second, there is the empowerment of civil organizations to the extent necessary for them to be
able to monitor, detect and reverse the activities of the public officials in their midst. This
strategy involves drawing on and utilising the expertise of accountants, lawyers, academics,
nongovernment organizations, the private sector, religious leaders and ordinary citizens (Kindra
& Stapenhurst 1998).
Assessment and design
It has been suggested that any anti-corruption effort should have a plan to alter the behavior of
people who misuse power for private gain as its primary driver. It is suggested that in any act of
corruption there are three actors: the person initiating the corrupt act, the person who participates
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actively or passively, and the individual or larger group of people who may pay the costs of that
corruption, even if they are not aware of it. To be successful, an anti-corruption strategy should
consider each actor, understand their motivation and alter the factors underpinning that
motivation by engaging in the process of cost benefit analysis that the actors undertake. It must
be ascertained whether the aim of the anti-corruption strategy is to seek retribution against
malfeasance, or restitution. Aside from the moral case for and against each in the corruption
context there remains an issue of practicality. The former requires an effective criminal justice
system and the latter would require effective asset tracing and confiscation systems.An
assessment should be undertaken of the relative benefits of targeting vulnerable departments or
anti-corruption agencies in terms of achieving systematic anti-corruption reform. Risk
assessments of departments and their procedures may identify important corruption
vulnerabilities and thereby direct and enhance anti-corruption efforts. It has been suggested that
the targeting of the public sector through processes such as the redrafting and updating of
legislation, enhancing the judiciary and ensuring the accountability of public service departments
is, while both logical and laudable, time consuming, expensive and prone to relapse. Similarly,
authorizing externally appointed and funded agencies to engage with countries on corruption
issues may have negative impacts, given that such agencies will, without significant host country
government support, possibly be doomed to short-term success and run the risk of creating an
atmosphere of resentment (and subsequent non-cooperation) among the targeted sectors in that
host country (Doig & Riley 1998).Anti-corruption instruments need to pursue a set of policies
and programs that go beyond relying on government leadership and regulation because state
institutions are generally weak and agencies and officials more likely to be part of the problem
than instrumental in the provision of solutions. Engaging external participation in anti-corruption
processes involves forging broad based coalitions to increase pressure for anti-corruption actions,
following policy reforms that eliminate administrative opportunities for corruption, reinforcing
media independence and citizenship participation, enhancing the effectiveness and accountability
of independent oversight institutions and building the capacity and independence of prosecutorial
agencies and the judiciary with appropriate checks and balances for holding them accountable to
the public (Bhargava & Bolongaita 2004).
Specific methods and measures
In order to be holistic in approach, anti-corruption strategies need to incorporate policies in
relation to a number of sectors vulnerable to corruption and amenable to change. Underpinning
dedicated efforts in relation to those sectors are a number of guiding principles which influence
the nature and direction of the anti-corruption strategy. There are tried and tested mechanisms for
the mitigation of corruption such as anti-corruption commissions. Equally, a number of
pragmatic and innovative mechanisms have been mooted. What is clear in terms of corruption is
that lower and higher income countries share a common view as to the major causes of
corruption and of the value of anti-corruption efforts designed to undermine those causes.
Although there is a degree of disparity between the desire to eradicate corruption and the actual
delivery of anti-corruption efforts, there is nevertheless room for optimism. These issues are
discussed in more detail below.
Huberts (1998) has distinguished six strategies:
Economic emphasizes the need for the economic stimuli for corruption to be reduced and
suggests that such might be achieved by, inter alia, paying higher civil service salaries
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Educational aims at altering the attitudes and values of the populace and civil servants alike via
training and education campaigns and engagement of the media
Cultural ensuring that the behavior and attitudes of those in power are subject to stringent
codes of conduct and their behavior filters down to civil servants
Organizational or bureaucratic strengthening internal control systems such as auditing to detect
corrupt activity, and staff rotation to reduce the propensity for individuals to establish themselves
in entrenched corruption
Political increasing in transparency in terms, for example, of the monitoring of party finances
and more broadly, a clearer and more definite separation of powers in terms of the judiciary and
the state
Judicial or repressive measures advocates harsher penalties for corrupt practices but also the
creation of independent anti-corruption agencies.
It has been suggested that there are four broad themes forming the basis of most anti-corruption
strategies. The first seeks to utilize regulation as a counter to corruption. The second seeks to
provide financial aid with conditions of non-corrupt behavior attached. The third seeks to employ
the media as a means of investigating corruption and publicizing its effects. The fourth seeks to
engage the NGO and allied sectors in pricking the consciences of governments and international
organizations which can in turn bring pressure to bear upon corrupt countries (Carr 2006).
A combination of these generic strategies can be seen in Transparency Internationals Anticorruption handbook (2004) which provides a number of measures including strategies to
provide anti-corruption education, establish anti-corruption agencies, render party political
funding more transparent and facilitate and encourage the involvement of nongovernmental
actors such as the media and the private sector in anti-corruption efforts. Of these, an oft cited
and successful component of anti-corruption strategies is the independent, well-resourced and
politically supported anti-corruption agency. Less well known, but of potentially significant
value, is the proposed special governance zone concept (based in principle upon free trade
zones).
In this study based of the above literature was attempted to determining strategy fit to Iran
situation. For achieve this aim was used idea of excerptors have enough knowledge about issues.
35 excerptors in 7 organizations of Iran selected as samples. These excerptors were said there are
several strategies could be implemented in four sections in Iran. These sections are economy,
social, political and administrative.
Kind of strategy to fighting with corruption
Economy section
1. Deleting planning that creates opportunity for corruption.
2. Generating proper privatization and limiting the role of government in economic section.
3. Modify the structure and work process in organizations.
4. Modify the rules of tax and customs.
5. Improvement of rules in banks issues.
6. Improvement of financial systems in public sectors
7. Improvement management of public costs.
Administrative sector
1. Pay attention to ethics principles
2. Implementation of pretences policy in governmental sections.
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3.
4.
5.
6.
7.
8.
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Pay proper salary to personnel's in organization

Emphasize to enhance administrative efficiency
De centralization of decision making in offices.
Clearing of supervisor and bosses asserts in organizations.
Using heavy penalties for corruption action in every section.
Preparing competitive service in public sector in society.
Using proper auditor system in organizations.
Social section
1. Enhancing public services in society
2. Prepare public education and communication in society
3. Public auditor and public participation
4. Accessible to information for all people in society
Political section
1. Enhancing governmental respondents to people
2. Generating political computations
3. Generating independent party
4. Clarify in financial situation of party
5. Clarify commitment of leader of party
6. Enhancing and improvement of regain corporative
7. Corporative With global and international organization that fighting with corruption
Conclusion
It has been argued that most anti-corruption programs rely on legal and financial institutions such
as the judiciary, police and financial auditors to enforce and strengthen accountability in the
public sector. The assumption here is that more and better enforcement of rules and regulations
will reduce corruption. The problem with such an approach is that in many poor countries the
legal and financial institutions are weak and often corrupt themselves (Svensson 2005). A more
fundamental cause for the relative failure of anti-corruption strategies is that they are more often
limited to rhetoric, and are only rarely sustained (Wei 2001: 6). Wei suggests that this is because
some political leaders fear the political risks associated with radical and entrenched reform of
corrupt processes/practices and that the cost of creating significant reforms and achieving
essential progress is often prohibitive. There remain a number of difficulties with tackling
corruption. First, anti-corruption efforts that seek to establish and appeal to a moral or ethical
high ground via education of the corruptors and corrupters are, some argue, unlikely to succeed.
The very mechanisms of government create overriding incentives for corrupt rather than anticorrupt activities. Second, this also reduces the deterrence component of anti-corruption
penalties within the criminal law or code of the country concerned. The corrupt individual
arguably considers the prospect of being caught rather than the punishment they might incur in
the unlikely event of interception. Third, it is not unusual to discover corruption and
incompetence within government occupying the same space and this may be exacerbated by
systems of allocating influential government positions on the basis of patronage rather than
ability. A corrupt appointment process simply facilitates further corruption by the post-holders
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(Cobb & Gonzalez 2005). Others have expressed doubt about the argument that corruption can
be fought through a series of anti-corruption agencies, the creation of all-encompassing laws and
the establishment of codes of ethical conduct. In many cases it is suggested that these are
constituents of a perception of successful anti-corruption efforts which disguise the lack of real
progress on the ground (Kaufmann 2005).It is suggested that a broad based approach must be
adopted in relation to anti-corruption strategies if systematic corruption is to be mitigated.
Successful campaigns against corruption have included measures to reduce the opportunities for
and benefits of corruption, to increase the likelihood that it will be detected and to make it far
more likely that a transgressor will be punished. Conversely, difficulties with anti-corruption
strategies have included limits being placed upon power or commitment at senior, and therefore
influential, political and social levels, overly ambitious anti-corruption promises leading to
unrealistic and unachievable expectations and subsequent loss of public confidence, piecemeal
and uncoordinated reforms, failure to establish institutional mechanisms that outlive the
reformers, failure of the government to include and utilise private sector opinion leaders and
failure to devise effective communications programs (Kindra & Stapenhurst 1998).
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References:
Bhargava V & Bolongaita E 2004. Challenging corruption in Asia: case studies and a
framework for action. Washington DC: World Bank
Carr I 2006. Strategic improvements in the fight against corruption in international business
transactions. Journal of business law June: 375395
Cobb L & Gonzalez M 2005. Corruption as a system of interlocking vicious cycles: lessons from
NationLab. Louisville CO: Aetheling Consultants
Doig A & Riley S 1998. Corruption and anti-corruption strategies: issues and case studies from
developing countries, in UNDP, Corruption and integrity improvement initiatives in
developing countries. New York: United Nations Development Programme: 4562
Huberts LWJC 1998. What can be done against public corruption and fraud: expert views on
strategies to protect public integrity. Crime, law & social change 29: 209224
Kaufmann D 2005. Ten myths about governance and corruption. Finance and development
September: 4143
Kindra GS & Stapenhurst R 1998. Social marketing strategies to fight corruption. Washington
DC: Economic Development Institute of the World Bank: 132
Klitgaard R 2000. Subverting corruption. Finance and development 37(2): 25.http://www.imf.org/external/pubs/ft/fandd/2000/06/pdf/klitgaar.pdf
Larmour P & Wolanin N (eds) 2001. Corruption and anti-corruption. Canberra: Australian
Institute of Criminology and Asia Pacific Press
McCusker, R., (2006), Review of Anticorruption Strategies, Technical and Background
Paper, No. 23, Australian Institute of Criminology, Canberra, Australia
OECD 2003. OECD guidelines for managing conflict of Interest in the public sector. Paris:
OECD, 1997. Convention on Combating Bribery of Foreign Public Officials in
International
Business
Transactions.
http://www.olis.oecd.org/olis/1997doc.nsf/LinkTo/daffe-ime-br(97)20
Rose-Ackerman S 1997. The political economy of corruption, in Elliott KA (ed), Corruption and
the global economy. Washington: Institute for International Economics: 3160
Svensson J 2005. Eight questions about corruption. Journal of economic perspectives 19(3): 19
42
Tay S & Seda M (eds) 2003. The enemy within: combating corruption in Asia. Singapore:
Eastern Universities Press
Wei S 2001. Corruption and globalisation. Policy brief no. 79, April. Washington DC:
Brookings Institution
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Survey relationship between organizational entrepreneurship and social capital in public

sector in Iran
Freyedon ahmadi
Public management Department, Payame Noor University, 19395-4697 Tehran, I.R. of IRAN
Abstract
More recently, the theory of social capital has been expanded to the field of entrepreneurship
research. At the company level, the entrepreneurship literature has highlighted the significance of
social capital in understanding how firms create and manage a network and what the outcomes
are. At the individual level, studies have demonstrated that an entrepreneurs personal network
allows access to resources that are not possessed internally .The general consensus is that a high
level of social capital, built on a favorable reputation, relevant previous experience, and direct
personal contact, often assists entrepreneurs in gaining access to venture capitalists, key
competitive information sources, potential customers, and others. In this study, researcher has
attempted to indicate relation of organizational entrepreneurship and social capital in
governmental company in Iran. For achievement to this aim were selected 52 companies and
relation between dimension of organizational entrepreneurship and dimension of social capital
were measured. The result of this study were shown that there are meaningful relation between
structural, relational, and cognitive dimensions
of social capital and organizational
entrepreneurship , but the role of cognitive dimensions is very important .
Key words : Organizational entrepreneurship, social capital, governmental company, Iran
Introduction
Today, rapid advance in science and technology has brought new tastes which has led to the
transformation of invention, innovation and creativity systems and has caused entrepreneurship
to be seen as a phenomenon that has undergone such changes. After entrepreneurship was
introduced to be the engine of economic development by Joseph Schumpeter, entrepreneurship
became several times more important. Due to the importance of entrepreneurship and the effects
it has had in different structures, entrepreneurship has become the factor that helps organizations
in promoting their organizational excellence and staff talents.
Governments especially count on entrepreneurship for implementing special programs of
development. The Islamic Republic of Iran has also made entrepreneurship one of their main
axes in the Fifth Development Plan. Today, organizations know it is urgent to have
organizational entrepreneurship which is an organizational strategy to respond to the rapid
increase of new competitors, the formation of distrust towards traditional management methods
and companies and the exit of the best work forces from companies to becoming independent
entrepreneurs.
Literature review
Organizational entrepreneurship
Organizational entrepreneurship is consisted of activities that aim to create new business, new
products and market development. Organizational entrepreneurship has three main concepts:
renewal of strategies (Renovation of strategies or restructuring the organization structure),
innovation (offering something new to the market) and business within the company
(entrepreneurial company activities that has led to new business and work in the mother
company). Tendency has increased towards responding to such rapid entrepreneurship
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competitor, lack of confidence in traditional methods of business, many smart people creating
small independent businesses, international competition and productivity.
Today, many companies have understood the importance of organizational entrepreneurship and
in fact such change in strategy is the response to three needs which have been imposed on
companies: Rapid increase of new competitors, creating a sense of distrust in companies towards
traditional management methods, the best work forces getting out of companies and establishing
their own individual and independent entrepreneurship.
These factors have challenged each and every company and have even caused industries with
advanced technology to face numerous problems. The speed of innovation, rapid environmental
changes and their tendency toward more complexity and lack of environmental sustainability and
market has forced organizations to change their approach and previous strategies. Thus, many
Organizations have no choice but to follow organizational entrepreneurship to survive in the
current dynamic environment.
Just like any live creature, an organization is born, grows, ages and gets old and sooner or later
will die. The emergence of these organizations takes place in two basic stages:
The first stage is when changes occur in the outside world; such as war which can destroy
production facilities in a country, but leave the trained work force remaining; or in many other
countries, it may highly increase the number of population for some years. Such changes affect
the various aspects of life even to an extent where it is necessary to replace some changes in the
number of goods and services. For example, before the war in Japan at the end of World War II,
the Japanese industry was destroyed which caused Japan to rebuild their industry all over again.
Another example could be the population explosion in America in the late 1940's and 1950's
which caused massive market creation
For products and services for specific ages; this specific population shaped the market during the
1970's and 1980's and continued in the 1990's.
The second stage is in the entrepreneurial process of an idea. Here, the question is that where do
entrepreneurs get their ideas from? Many entrepreneurs get their ideas from their work
experience; these people learn new skills by working in a particular field and then use them in
finding new opportunities. In this method, organizations have the role of schools but with the
difference that
Individuals are paid for what they do. "Steve Vosnock", one of the employees at "HewlettPackard" learned how to use micro processors (which have existed in the market since the
1970's) to produce personal computers (PC). Some may think that perhaps the CEO of "Packard"
should have humbly asked "Vosnock" to invent personal computers for the company, because
"Vosnock" himself was Unable to tell the CEO to produce PCs.
The third type of organizational entrepreneurship is "organization transformation & renewal".
This kind of entrepreneurship is only fit with the initial definition of entrepreneurship given by
Joseph Schumpeter, if organizational transformation is consisted of innovation, new combination
of resources and results and creating sustainable economic value.
The fourth type of organizational entrepreneurship is one of the subsets of organizational
development which includes not only the evolution of an organization, but also the competitive
environment that exists in the industry; it causes the formation of something different from what
already existed in the industry.
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Organizational Entrepreneurship Dimensions of Thompson

Thompson has determined five dimensions for the formation of entrepreneurship in
organizations, all of which are essential for an entrepreneurial organization. The below figure is
shown these dimensions.
Figure 1: Organizational Entrepreneurship Dimensions of Thompson
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Social capital
In recent years researchers concerned with understanding why some organizations perform
better than others frequently have looked to the resource based view of the firm as a model for
explaining the sustained competitive advantage some organizations possess (Barney, 1986,
1991). According to the resource-based perspective, successful organizations have unique
capabilities or resources that give them an advantage over their competitors. Such resources are
particularly valuable when they are rare, inimitable, and no substitutable (Barney 1986, 1991).
Consistent with the resource-based view, Nahapiet and Ghoshal (1998) maintain that the
development of social capital within an organization is likely to be a source of competitive
advantage for a firm. In other words, they assert that networks of strong interpersonal
relationships within an organization ultimately facilitate its success. As mentioned earlier,
Nahapiet and Ghoshal's (1998) framework integrates previous research in the area and offers
three specific aspects or dimensions of social capital: a structural dimension, a relational
dimension, and a cognitive dimension.
Structural Social Capital
Nahapiet and Ghoshal (1998) conceptualize the structural dimension of social capital as
encompassing network ties, network configuration, and network appropriability. Network ties
are connections between members of an organization. Previous research using network analysis
indicates that these connections can have a significant influence on information transfer
(Krackhardt & Hanson, 1993), organizational learning (Fisher & White, 2000), and the execution
of organizational activities (Shah, 2000).
Although formal and informal networks can both play a significant role in the overall
configuration of interpersonal linkages (Ibarra, 1992), the important factors to consider in
understanding a network configuration revolve around such characteristics as structural holes,
centralization, and density. These characteristics are often a key determinant of the extent of
movement of information, knowledge, and assistance within an organization, beyond what is
attributable to simply the individual linkages (Krackhardt & Hanson, 1993; Seibert et al., 2001;
Walker et al., 1997).
Finally, network appropriability can significantly affect the flow of information and assistance
within a network (Nahapiet & Ghoshal, 1998). Network appropriability relates to the ease with
which different types of relationships can be transferred within a network. Similarly, connections
established between individuals in informal (e.g., social) contexts also may be relevant in more
formal (e.g., work) contexts. Thus, networks created for one purpose may often be useful for
other purposes (Fukuyama, 1995; Putnam, 1993).
Relational Social Capital
According to Nahapiet and Ghoshal (1998), the relational dimension of social capital is
characterized by high levels of trust, shared norms and perceived obligations, and a sense of
mutual identification. Their conceptualization of relational capital, then, is quite similar to
Granovetter's (1973) notion of strong ties, which he describes as connections between
individuals that are characterized by trust, reciprocity, and emotional intensity. Researchers have
not been entirely consistent in their definition of the relational aspects of social capital, but it is
clear that what are being described are interpersonal connections that are inherently affective in
nature (Krackhardt, 1992).
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Interpersonal trust arises from a belief in the good intentions, openness, competence, and
reliability of another party (Mishira, 1996). In addition, high levels of trust result in a willingness
to be vulnerable to the actions of the other party (Mayer, Davis, & Schoorman, 1995). Prior
research suggests that trust facilitates social and resource exchange, increases communication,
and enhances cooperation between individuals (Jones & George, 1998; Misztal, 1996; Putnam,
1993; Tsai & Ghoshal, 1998). Thus, high levels of trust ultimately may increase innovation,
enhance teamwork, and improve organizational functioning (Bouty, 2000; Jones & George,
1998).
Cognitive Social Capital
According to Nahapiet and Ghoshal (1998), mutual understanding among employees is achieved
through the existence of a shared language and from the exchange of shared narratives. Where
shared language and shared narratives both exist, employees can more easily discuss problems,
transfer ideas, share knowledge, and offer more effective assistance to one another (Klimoski &
Mohammed, 1994; Nahapiet & Ghoshal, 1998). Shared language provides organizational
members with the ability to communicate more effectively (Boisot, 1995). High levels of
cognitive social capital give employees a common perspective that enables them to perceive and
interpret events in similar ways (Boland & Tenkasi, 1995; Nohria, 1992). Shared narratives are
the myths, stories, and metaphors that organizational members communicate to one another
(Nahapiet & Ghoshal, 1998). These narratives also assist or generational members in interpreting
and understanding their experiences in a common way (Morgan, 1986). Both shared language
and shared narratives, therefore, serve to increase the level of understanding among
organizational members. These assets also increase the ability of employees to anticipate and
predict the actions of other coworkers, thereby facilitating the utilization of various members'
inputs, successful coordination of activities, and adaptation to changing conditions (Klimoski &
Mohammed, 1994; Krackhardt, 1992).
Based on the review of the extant literature and the discussions that followed, a theoretical model
proposed for empirical testing is provided in figure 2.
Figure 2: Relationship between social capital and organizational entrepreneurship
dimension
Hard Entrepreneurship
Structural
Paradigm of creativity
Paradigm of risk-tasting
Organizational
Entrepreneurship
Social
capital
Providing of ideas and design
Relational
Cognitive
Soft entrepreneurship
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Based of figure 2 Hypotheses of this research are defined as fallows:
H1: Empowerment of structural dimension of social capital facilitates
entrepreneurship in governmental company in Iran.
H2: Empowerment of Relational dimension of social capital facilitates
H3: Empowerment of cognitive dimension of social capital facilitates
Research Method
Participants:
Ninety four employees of 52 public sector organization in Tehran province
current study. This amount of employees is determined by the below formula:
Pqt 2 1.962 .05 0.5
n0 = 2 =
= 96.04
d
(0.1)2
n=
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organizational
organizational
organizational
participated in
n0
96.04
=
= 94
95.04
n0 1
1
+
1+
500
N
The participants ranged in age from 25 to 53. There were 51 males and 43 females that
participated in the study. Education ranged from high school through graduate school, with the
majority of the participants holding Associates or Bachelors degrees.
Analysis and Results
Table 1 presents the descriptive statistics for the SC (social capital) & OE (organizational
entrepreneurship) variables. The mean for Hard Entrepreneurship is 2.02, for Paradigm of
creativity is 2.18 , for Paradigm of risk-tasting is 3.71 , for Providing of ideas and design is 3.34
for Soft entrepreneurship is 3.54 and for OE is 3.12 Therefore Hard Entrepreneurship have at
least mean among dimension of Entrepreneurship.
The mean for Structural in public sector organization is 3.11; Relational is 3.04, Cognitive 3.19
as well as for SC is 3.19. Therefore Cognitive have greatest mean among dimension of Social
capital.
Table1. Descriptive statistics of selected variables
Variable Description
entrepreneurship
Structural
Relational
Cognitive
Social capital
Mean
2.02
2.18
3.71
3.34
3.54
3.12
3.11
3.04
3.19
2.63
Standard Deviation
0.127
0.201
0.181
0.165
0.134
0.179
0.133
0.154
0.155
0.170
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The output given in Table 2 depicts that there is a significant positive relationship between OE
and SC at the 0.05 significance level. This means that SC is positively associated with
entrepreneurship. As such when the social capital increases, it is expected that dimension of
entrepreneurship will be improvement. The result shows that correlation between dimension of
social capital and entrepreneurship, positive and meaningful. Based on Table 2 all of Hypotheses
are accepted.
Table2. Pearson Moment Correlations
entrepreneurship
Structural
0.235*
0.434*
0.232*
0.251*
0.244*
0.241*
Relational
0.298*
0.463*
0.214*
0.267*
0.227*
0.271*
Cognitive
Social capital
0.337*
0.490*
0. 247*
0.241*
0.298*
0.328*
0.307*
0.476*
0.228*
0.260*
0.273*
0.303*
Conclusion
In this study researcher was attempted to identify impacts of social capital on improvement of
organizational entrepreneurship. Today important of organizational entrepreneurship is
increasing and use of tools to increase of organizational entrepreneurship has more important. So
in this study pay attention to social capital as instrument to improvement entrepreneurship in
organizational level. Further dimension of social capital and amount of it impacts was measured.
Cognitive dimension have the most correlation with organizational entrepreneurship.
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References
Barney, J. B. 1986. Organizational culture: Can it be a source of sustained competitive
advantage? Academy of Man- agement Review, 11: 656-665. Barney, J. 1991. Firm
resources and sustained competitive advantage. Journal of Management, 17: 99-120.
Boisot, M. H. 1995. Information space: A framework for learning in organizations, institutions
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Boland, R. J., & Tenkasi, R. V. 1995. Perspective making and perspective taking in communities
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Bouty, I. 2000. Interpersonal and interactional influences on informal resource exchanges
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Granovetter, M. S. 1973. The strength of weak ties. American Journal of Sociology, 78: 13601380
Ibarra, H. 1992. Structural alignments, individual strategies, and managerial action: Elements
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Networks and organizations: Structure, form, and action: 165-188. Boston: Harvard
Business School Press.
Jones, G. R., & George, J. M. 1998. The experience and evolution of trust: Implications for
cooperation and teamwork. Academy of Management Review, 23: 531-546.
Klimoski, R., & Mohammed, S. 1994. Team mental model: Construct or metaphor? Journal of
Management, 20: 403- 437.
Krackhardt, D., & Hanson, J. R. 1993. Informal networks: The company behind the chart.
Harvard Business Review, 71(4): 104-111.
Mayer, R. C., Davis, J. H., & Schoorman, F. D. 1995. An integrative model of organizational
trust. Academy of Man- agement Review, 20: 709-734.
Mishira, A. K. 1996. Organizational responses to crisis: The centrality of trust. In R. M. Kramer
& T. M. Tyler (Eds.), Trust in organizations: 261-287. Thousand Oaks, CA: Sage.
Misztal, B. 1996. Trust in modern societies. Cambridge: Polity Press.
Morgan, G. 1986. Images of organization. Beverly Hills, CA: Sage.
Nahapiet, J., & Ghoshal, S. 1998. Social capital, intellectual capital, and the organizational
advantage. Academy of Management Review, 23: 242-266.
Nohria, N. 1992. Information and search in the creation of new business ventures: The case of
the 128 Venture Group. In N. Nohria & R. G. Eccles (Eds.), Networks and organizations:
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Putnam, R. 1993. The prosperous community: Social capital and public life. American Prospect,
4(13): 35-42.
Seibert, S. E., Kraimer, M. L., & Liden, R. C. 2001. A social capital theory of career success.
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Shah, P. P. 2000. Network destruction: The structural implications of downsizing. Academy of
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Tsai, W., & Ghoshal, S. 1998. Social capital and value creation: The role of intrafirm networks.
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Walker, G., Kogut, B., & Shan, W. 1997. Social capital, structural holes, and the formation of
an industry network. Organizational Science, 8: 109-125.
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VOL 3, NO 1
Quality Management of Technology Related Services for Student Satisfaction at Private

Universities of Pakistan
Ms. Seema Arif
Asst. Professor , Faculty of Management Studies
University of Central Punjab
Khayaban-i-Jinnah. Lahore. 54770. Pakistan
Ms. Maryam Ilyas
Lecturer
College of Statistical & Actuarial Sciences. University of the Punjab
Quaid-i-Azam Campus, Lahore. 54660. Pakistan
Abstract
This study aims to know about interpersonal and technological linkages between the university
management and use of technology. The study identifies the challenges faced by the
management in procuring customer satisfaction with the services by approaching the problem
from a different angle, i.e. how to reach at best combination of technology and human agency
that would most satisfy customers as well as keep the costs down. Thus, it extends the research
literature on integration of digital technologies in higher education system at private universities
from Pakistani perspective. In this case study, a satisfaction survey was conducted with 400
students of a private university. The results were analyzed using SPSS and exploratory factor
analysis and binary logistic regression was applied to find out student satisfaction and
dissatisfaction with various aspects of technology services to mark risk factors associated with
student loyalty. The results demonstrate weak loyalty of students. The significant risk factors
associated with negative word of mouth were a consequence of poor operations and teachers
poor use of technology during lectures.
Keywords: Higher education. Service quality. Digital technology. Student satisfaction. Student
loyalty.
Background
The business world today is known for its competitiveness where the cutting edge is the
technology (Brynjolfsson and Hitt, 2000; Salinas, 2008; MIT Review, 2010). On one hand,
there is increasing emphasis upon technology-assisted services and transactions, while on the
other Self-service technologies (SSTs) continue to be a critical factor determining the quality
customer-organization relationships (Meuter et al., 2000; Lin and Hsieh, 2007). Therefore, in
this case, private universities operated as businesses (Aldridge and Rowley, 1998; Albatch,
2007; Chieh Hsiung, 2009) are not an exception where the technological infrastructure such as
web and internet facility, computer labs, use of multimedia and projectors in the classroom are
highlighted while marketing the brands and products of university. Furthermore, the operational
use of technology is also exploited as a marketing strategy (Green and Gilbert, 1995;
Brynjolfsson and Hitt, 2000; Selwyn, 2007), such as one window services for admissions and
paying of fees, the web portals maintaining student records for attendance, grades, and course
work progression, granting the opportunity to every student for electronic communication
between the student and the faculty as well as management and student. All of these attractions
have increased customer expectations from the universities that their needs would be timely
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addressed and there will be minimum hassles in provision of services (Hu and Kuh, 2001;
Abouchedid and Nasser, 2002; Makarem and Mudambi, 2009). Since many of the services are
technology integrated, hence, students expect that speed and efficiency would be the integral
part of the services delivery in their day to day university life experiences (Green and Gilbert,
1995; Aldridge and Rowley, 1998; Hu and Kuh, 2001; Abouchedid and Nasser, 2002; Makarem
and Mudambi, 2009).
Previous research results show that student satisfaction vary greatly regarding different
aspects of the service experience (Anderson and Sullivan, 1993; Aldridge and Rowley, 1998;
Abouchedid and Nasser, 2002; Aldemir and Glcan, 2004; Alves and Raposo, 2007). The major
predictor of quality and business success is the customer loyalty (Lin and Tsai, 2008; Klefsj et
al., 2008) and in HE perspective it is expressed in student behaviors such as student
reenrollment in other university programs, and spreading positive word of mouth (Anderson and
Sullivan, 1993; Aldemir and Glcan, 2004; DeShields et al., 2005; Petruzzellis et al., 2006;
Alves and Raposo, 2007 and Douglas et al., 2008). According to Brown and Mazzarol (2009),
perceived image of the university is very important and perceived quality of humanware (e.g.,
people and process) and hardware (e.g., infrastructure and tangible service elements) play an
important role in perception of total quality and predicting student loyalty which is generated by
student satisfaction with student services.
Technology plays a critical role in student achievement in the present digital age.
Aboudan (2008) has alerted that today we deal with students who are digital natives and multitasking adults; they become numb with under-stimulation. Thus, a classroom with black and
white atmosphere (O'Brien and Bauer, 2005) will not keep students engaged, and now teachers
must shift to multiple literacies (Miller, 2007) bringing real life color to the classroom giving
them a chance to remain busy shifting rapidly from one task to another in a rapidly twitching
speed of decision-making and stimulating interactivity (Hu and Kuh, 2001; Selwyn, 2007;
Ramsden, 2008).
Moreover, students' self-attribution for achievement goals is mainly on the basis of
autonomous interest (i.e., personal goals) and without much gender difference, the success is
mostly attributed to personal causes and failure to external causes (Sweeney et al., 1982; Mezulis
et al., 2004; Chen et al., 2009). According to Lipshitz (1989), attributions influence decision
making processes; past experiences generating positive or negative affect subsequently influence
the present and the future (Weiner, 2010) and in this case experiences are assumed to influence
students decisions related to use of technology as well as reenrollment in universitys programs
and/or spreading positive word of mouth about the university.
Esther Baldwin (2010) has stated in an interview that the way that companies implement
business processes, organizational change, and IT-driven innovation is what will differentiates
the leaders from the laggers. Rather than leveling the playing field, IT is actually led to greater
discrepancies. One way of revising business processes can be replicated by leveraging
information technology and private universities managed as businesses are no exception. On the
other hand Brynjolfsson (2000; 2009) has stated that What were going to see in the coming
decade are companies whose whole culture is based on continuous improvement and
experimentationnot just of specific processes, but of the entire way the company runs. I think
this revolution can be fairly compared to the scientific revolution that happened centuries ago.
Thus, quality management may sound synonymous with application of IT innovation or
excellent provision of technology related services in the university.
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The purpose of the study

The study aims to know about the relationship between student perceptions of quality of
the technology services provided and student satisfaction. It is assumed that satisfaction will
lead to loyal behavior, whereas, dissatisfaction may cause decline in positive word of mouth and
corresponding loyalty. Therefore, it is important to know what factors lead to decreased student
satisfaction and increased student dissatisfaction? Whether they are related to infrastructure
related to technology or are product of human agency involved in delivery of the services
(Durrant, 2009)? In other words: What is helping the university to gain loyalty? Is it perceived
quality of hardware (infrastructure and tangible service elements, etc.) or humanware
(people and processes), which moderate the ongoing operations to reach quality (Mazzarol,
2009).
Research Hypotheses
H1 There is relationship between student loyalty and satisfaction with campus life.
H There is no relationship between student loyalty and satisfaction with
campus life.
H2 There is relationship between student loyalty and satisfaction with infrastructure
of technology.
infrastructure of technology.
H3 There is relationship between student loyalty and satisfaction with technology
based operations.
technology based operations.
H4 There is relationship between student loyalty and satisfaction with teachers use
of technology in classrooms.
H There is no relationship between student loyalty and satisfaction with teachers
use of technology in classrooms.
H5 There is relationship between student loyalty and satisfaction with teachers use
of technology during reenrollment and advising.
H There is no relationship between student loyalty and satisfaction with teachers
use of technology during reenrollment and advising.
Method
The data used in this study was collected through the Student satisfaction survey for
technology services. The questionnaire was designed on five point Likert Scale for
undergraduate and graduate programs in business and IT school of private universities. It gathers
information about students background such as age and gender, program they are enrolled in
and time since they are enrolled. Since, it is satisfaction survey aimed to find out student
satisfaction with technology services, the major areas identified were the quality of infrastructure
of technology used in student portal, web and internet facilities, and classroom technology like
multimedia, and overhead projectors, etc. The second area was the use of technology in
operations, such as fee processing, attendance records, delivery of notifications etc. The third
major area was related to use of technology during advising and reenrollment at the beginning of
every new semester. Satisfaction and dissatisfaction with use of technology in these areas were
tested against student autonomy, and student loyalty, i.e. positive word of mouth. In order to
remain unbiased and critical, a neutral factor, satisfaction with campus life was also added to
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know whether satisfaction/dissatisfaction can be attributed to technology related factors, human

factors, or other factors.
The questionnaire composed of 42 items and the response options for all items were:
1="strongly disagree," 2="disagree," 3="neutral, 4= agree," and 5="strongly agree." The
questionnaire was peer reviewed for content validity and was pilot tested with 90 students before
administering it for the final study. The reliability coefficient for the pilot was found to be 0.84
for the pilot and 0.86 for the main study. The questionnaires were distributed to 450 students
studying at PCBA-PICS campus of The University of Central Punjab during April-May, 2010
using convenience sampling technique. 80% of the questionnaires were returned, i.e. 360 out of
450, out of which only 313 were complete and were processed further to tabulate results.
All the data were explored through SPSS 15. The data were analyzed by exploratory
factor analysis to identify the natural connections among different items of questionnaire and to
group the items having maximum correlations with one another and minimum correlations with
other items (Anderson, 2003). Correlation analysis was conducted to test relationships between
variables. Binary logistic regression was further applied to explore the significant risk factors
(Agresti, 2007) associated with dissatisfaction and consequent intention to discontinue with the
university.
Data Analysis
Of 313 students, 95 (30%) were females whereas 218 (70%) were males. Further, in
terms of enrollment in a certain program, 105 (34%) were found to be from MBA, 137(44%)
from BBA and 71(22%) were from EMBA. Average age of students was 21 years and average
studentship time of sample students at university was approximately 8 years. Multiple items
included in each factor were summed (Spector, 1992) to construct subscales. The means of these
subscales are showed in Table.2. The average student loyalty score was approximately 8
showing that the students were not loyal to the university as the minimum possible score of the
sub scale (containing three items) could be 3 and maximum score could be 15. The second
factor, satisfaction with campus life was identified by three items so the possible score on this
sub scale could lie between 3 15. The average student satisfaction with campus life (9.3834)
showed mild satisfaction. Average student satisfaction with infrastructure of technology
(identified by four items) was 11.0895 below the mean value (12) showing student
dissatisfaction. Further, the students were found to be dissatisfied with the technology based
operations, teachers use of technology and teachers use of technology during enrollment and
advising.
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Characteristic
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Minimum Maximum Average Std. Deviation
Age
Time period of studying at this college
15
2.00
26
9.00
21.4089
7.9233
1.83245
1.12967
Student Loyalty
Satisfaction with Campus Life
Satisfaction with Infrastructure
Satisfaction with Operations
3.00
3.00
4.00
5.00
15.00
15.00
19.00
22.00
7.9233
9.3834
11.0895
14.1597
3.20764
3.22351
3.70183
4.12311
Teachers Use of Technology
4.00
18.00
11.3578
3.24824
3.00
15.00
Teachers Use of Technology
during Advising and Enrollment
Table 1.Demographic Characteristics of Sample
8.3802
2.46628
Exploratory Factor Analysis

Different items included in the questionnaire measuring various aspects of student satisfaction
and loyalty were factorized using common factor analysis. Principal axis factoring followed by
varimax rotation identified high factor loadings (approximately 0.6 or more) for all the factors
identifying common factors (Widaman, 1990; Fava & Velicer, 1992). All factors were found to
be fulfilling the minimum identifiability criteria of at least three items per factor (Anderson &
Rubin, 1956; Zwick & Velicer, 1982 ; Fava & Velicer, 1996). Scree plot identified six factors
(see Table 2) to be extracted explaining 65.566% of the total variance. KMO and Bartletts
sphericity test (KMO =0.834, = 4058.534, p < 0.000) showed that the items included in the
common factors fit well making exploratory factor analysis worthwhile. Internal consistency of
each subscale (factor) was measured by using Cronbachs Alpha which was found to be more
than 0.8 for all factors meeting the minimum cut point (Wang, 2003).
N
Factors
Items
o.
1
Factor
Cronbach
loadings
s Alpha
Student
I advise my friends to join this college.
.875
Loyalty
I'll enroll again at this college, if I faced the
.816
0.924
same choice again.

I take part in promotional activities of my
.912
college.
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2
Satisfaction
Campus life of my college is cool.
.763
I enjoy social networking in college.
.903
I feel safe and secure inside the campus.
.744
Infrastructure My college offers high-tech facilities for
.634
with
Campus Life
3
of
teaching and learning.
Technology
The bandwidth of the internet provided at
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0.879
0.833
.840
my university is appropriate.
I can easily approach portal from my home
.797
for enrollment and registration.

Most of the equipment is outdated or out of
.582
order.
4
Satisfaction
Procedure for re-enrollment is user friendly.
.806
with
Paying fees and bills is designed to suit
.599
Technology
student convenience.
based
Operations
I got proper orientation / coaching to use
0.835
.846
portal for re-enrollment.

Procedure for re-enrollment is illustrated by
.805
FAQ's on the portal.

I am in favor of redesigning of the
.577
enrollment process.
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5
Teachers Use
Teachers make good use of technology
of Technology
during lectures.
Intellectual growth of the students is
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.766
0.874
.842
stimulated through assignments that include

use of information technology (IT).
Teachers' make good use of teachers' portal.
.569
It is easy to access teachers via email/phone.
.672
Faculty Using While advising, advisor efficiently makes

Technology
use of web portal.
during Re-
Advisor for registration is knowledgeable of
Enrollment &
the registration process.
Advising
Advisor is not empowered enough to make
.790
0.845
.774
.761
decisions in my favor.
Table 2. Exploratory Factor Analysis and Reliability Analyses
Pearson product moment correlation was determined to test certain hypotheses (see
appendix, Table 3). Student loyalty was found to be significantly correlated with satisfaction
with campus life (r =0.358, p < 0.01), satisfaction with infrastructure of technology (r = 0.803, p
< 0.01), satisfaction with technology based operations (r = 0.650, p < 0.01), teachers use of
technology (r = 0.681, p < 0.01) and teachers use of technology during advising and enrollment
(r = 0.398, p < 0.01).
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Loyalty
Operations Campus
Life
1
Loyalty
.650
1
Operations
.358(**)
.358(**)
Campus Life
.681(**)
.801(**)
Teachers use
of technology
.398(**)
.426(**)
Advising
.803(**)
.704(**)
Technology
Infrastructure
Table 3. Correlation Matrix
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Teachers Advising Technology

use of
Infrastructure
technology
1
.367(**)
.291(**)
.336(**)
.408(**)
.736(**)
1
.400(**)
Binary Logistic Regression

The above quoted results express only one strong link for student loyalty, satisfaction
with infrastructure of technology (r = 0.803, p < 0.01); whereas, other correlation values are not
so strong. In order to further manipulate the results, binary logistic regression was applied to
identify the significant risk factors associated with student loyalty. The dependent variable,
student loyalty (No=1 and Yes=0), was recorded and binary logistic regression was used to
model it. The predictor variables considered were infrastructure of technology, technology based
operations, satisfaction with campus life, teachers use of technology in class rooms and
teachers use of technology during advising. All independent variables were also recoded
(Dissatisfied=1 and Satisfied=0).
95.0% CI for Exp ()
Variables
Wald
Significance Exp
Lower
Upper
()
Entered
1.539
23.475
.000
4.661
2.501
8.687
Operations
1.472
18.650
.000
4.359
2.235
Teachers Use
of Technology
1.463
11.568
.001
4.318
1.859
Campus Life
Technology
1.229
11.052
.001
3.418
1.656
Infrastructure
Faculty using
-1.958
35.784
.000
.141
.074
Technology in
Advising
-2.561
22.916
.000
.077
Constant
Table 4. Logistic Regression Results for Predicting Student Loyalty
8.504
10.031
7.054
.268
Results of logistic regression indicated that five predictor model provided a statistically
significant improvement over the constant only model, 2 (5, 313) = 165.714, p <0.001. The
Nagelkerke pseudo R2 indicated that the model accounted for about 55.2% of the total variance.
Thus, the set of predictors discriminates between those who are disloyal and those who are loyal.
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Table 4 represents the regression co-efficients (), the wald statistic, significance level, odds
ratio [Exp ()], and the 95% confidence intervals for odds ratio for each predictor.
The Wald test identifies the statistical significance of the predictors of word of mouth.
Odds-ratio was considered the parameter of interest and the results would be interpreted in terms
of odds-ratio (Hosmer and Lemeshow, 2000) keeping the other independent variables constant.
Odds-ratio considered as adjusted odds-ratio identify the contribution of a particular variable
when the other variables are held constant (Meyers, Gamst and Guarino, 2006).
As shown in Table.4, the influence of satisfaction with technology based operations is the
strongest; students dissatisfied with technology based operations were 4.661 times more likely to
be disloyal than those who were satisfied with technology based operations, adjusting for the
other predictor variables (Adjusted OR = 4.661, 95% C.I. = 2.501 - 8.687; Wald 2 = 23.475, p
< 0.001). Similarly, students who were dissatisfied with teachers use of technology and campus
life were 4.359 (Adjusted OR = 4.359, 95% C.I. = 2.235 - 8.504; Wald 2 = 18.650, p < 0.001)
and 4.318 (Adjusted OR = 4.318, 95% C.I. = 1.859 10.031; Wald 2 = 11.568, p < 0.01) times
as likely to have negative word of mouth as compared to their counterparts, respectively.
Adjusted odds ratio for satisfaction with infrastructure of technology was 3.418 (Adjusted OR
= 3.418, 95% C.I. = 1.656 - 7.054; Wald 2 = 11.052, p < 0.01). So, the students who were
dissatisfied with infrastructure of technology were 3.418 times as likely to be disloyal to the
university as those of their counterparts.
The influence of satisfaction with teachers use of technology during advising was not
strong as the odds ratio 0.141 (Adjusted OR = 0.141, 95% C.I. = 0.074 - 0.268; Wald 2 =
35.784, p < 0.001) indicated that students who were dissatisfied with the teachers use of
technology during advising were 0.141 times less likely to be disloyal than those who were
satisfied with the teachers use of technology during advising.
Conclusion
The binary logistic regression analysis identified the significant risk factors associated
with student disloyalty as poor technology based operation, teachers poor use of technology
during lectures, dissatisfaction with campus life and infrastructure of technology as for all
these factors the odds ratio turned out to be more than 1 and the lower bound of the confidence
interval does not go below one.
Thus, it is concluded that it is the perceived quality of humanware (people and
processes), rather than hardware (infrastructure and tangible service elements, etc.) which
moderates the student perception of quality of service delivery.
Implications
We have observed the students belonging to digital generation attributing the reasons of
dissatisfaction to managements poor operational strategies or teachers poor use of technology
in the classroom. The research results have confirmed previous findings of McFarland and Ross
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(1982) that students tend to attribute dissatisfaction to external factors rather than internal ones.
Research findings have not only indicated that dissatisfaction with technology integrated services
is more frustrating than unavailability of the technology (Slewn, 2007; Arif and Ilyas, 2010),
they have also solicited Selwyns view that modest use of technology in university is attributed
to a variety of operational deficits on the behalf of students. Since, limited, linear, and rigid use
of technology is challenged by customers of higher education (Selwyn, 2007), the higher
education communities must ensure expansive and empowered use of ICTs within university
settings.
It has also been commonly observed that use of technological infrastructure raises student
expectations about speed and efficiency of the service and thus creates more conflicts than
virtually possible otherwise. It is imperative, therefore that the technology itself and the
knowledge of people about it must evolve constantly (Sethuraman and Parasuraman, 2005).
More innovations should be designed regarding technology use making it user friendly for both
faculty and students. Technology should improve student teacher interaction and thus student
satisfaction. Moreover, in order to retain quality customers, the university management should
focus more on delivery of technology integrated services fostering ways and techniques that
enables the creative, productive, and empowering use of ICTs and other educational technologies
in classrooms.
Flynn et al. (1995, p. 683) are of view, Quality management is a philosophy that
pervades the entire organization, rather than the responsibility of a few isolated individuals or
departments. Still, many organizations are run on 20th century principles and management
thinks that by adding some of the elements of successful digital organizations can help them
sustain and grow, but unfortunately this is not a smart strategy. Baldwin and Martin (2007) think
that such strategies only makes things worst. One has to think in holistic terms, making parts fit
into a harmonious whole to create value for the customer. Thus, it is important to design
operations according to customer needs conforming to Brynjolfsson and Saunders (2009) that
leading organizations are more responsive; do less long-term planning and let forgo short term
profits. They have quicker cycle times, more flexibility, and a higher metabolism for processing
information.
Research has published a link between teachers poor use of technology in classrooms
and student disengagement, i.e. leading to student belief that technology is best used for
entertainment, like playing games and chatting on internet social sites rather than information
seeking and problem solving of real life (Arif, 2008; 2009). Currently, we are faced with the
serious challenge, that is to bring such students into safety net of engagement, who are in other
words distracted by entertainment through technology (O'Brien, D. G., & Bauer, 2005; Ct
and Allahar, 2007). All businesses have right to make profits but still it is advisable that they do
so while keeping in view the collective good of stakeholders, i.e. we must keep in mind what is
important for the next generation and would be beneficial for community knowledge and skills
related to effective use of technology. It applies most critically to higher education which frames
the attitude of future generation towards ways and means of problem solving through
technology.
Keeping in mind that technology is the cutting edge, may we ask ourselves a simple
question at the business and IT school of the university: whether or not we are producing
managers that will not only be able to sustain the quality of future business environment, but also
continue towards improvement meeting the needs and challenges set by times to come. Can we
sit silent? The value of service quality is often challenged by value of money; both quality and
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technology are expensive investment; but dearer are the future generations which must not be
devaluated at any cost, since, the biggest risk might be doing nothing at all as professed by
Latham (2008). Therefore, not only the universities should take technology services seriously by
considerably improving the infrastructure, but they should team up with the people who can
make best use of the available resources.
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Workplace Friendships and Organizational Outcomes
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Pakeeza
Student of BBA (Hons)
Iqra National University, Peshawar, Pakistan
Mohammad Haris
Student of BBA (Hons)
Iqra National University, Peshawar, Pakistan
Dr. Muhammad Sajjad (Corresponding Author)
Sarhad University, Institute of Science and Information Technology,
Peshawar, Pakistan
Abstract
This study is conducted to examine the affects of workplace friendships on organizational
outcomes. Today organizations are becoming of aware the importance of social interaction and
relationships at workplace. These workplace friendships can be formal, informal, among
different cultures, gender, and age. As workplace is a source of many types of relationships
demanding supervisors, subordinates, competitive co-workers and clients. A survey was
conducted by floating questionnaires at different educational institutions of Peshawar, Pakistan.
Simple regression analysis has been applied based on the relationship of dependent and
independent variable. SPSS 16.0 were used for data analysis. It was found that workplace
friendship has significant and strong relationship with organizational outcome. This research
help the managers to increase their organizational outcome and on the other hand help them to
solve the problems that are created by workplace friendships and as well as to reduce the
organizational stress and motivate the employees toward organizational goals in both public and
private institutes.
Keywords: workplace friendship, organizational outcome, formal friendships, informal
friendships
1. Introduction
In workplace people from many types of relationships which can be inform of formal, informal,
male to male, male to female, female to female, boss to employees and supervisor to
subordinates relationships. These relationships have a great deal of outcome on the over all
performance of the organization which can be inform of punctuality, interest, loyalty, production,
overtime, violence, abuse, non friendly and the effect on over all work performance.
Workplace friendships have a great deal of impact on the over all outcomes of the organization
which can be in positive or negative form. These relationships are intense and complex and
impacts the over all performance of the organization. The workplace is a source of many types of
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relationships demanding supervisors, unpredictable subordinates, and competitive coworkers and

challenging clients, but with whom we may share considerable interests (Fritz & Omdahl 2006).
Workplace relationships can be multiplex, intense, interdependent and complicated, but they are
especially significant because of the amount of time spent at work and the frequency with which
workers change jobs and form new relationships. Workplace friendships engaged in mutual
commitment, complete trust and shared values. It creates interests among people which is
beyond mere acquaintanceship excluding romance. Such relations engross norms of openness,
informal relations and inclusiveness of modern management strategies which are increasingly
shared by frequently new job entrants (Berman et al,2002)
Friendships among coworkers are unique type of relationships. They develop between both peers
and supervisors and subordinates. They develop between the people within the same
organization unit and in different organizational units. They involve unique functions and
developmental processes.Friendships often presuppose enduring relations among equals.
Workplace friendships involve people from different gender, age and cultures. Workplace
relationships carry out many important tasks which includes mentoring, information exchange,
social support, influence and control.(Sias, 2005).
1.1
Problem Statement:
This research is aimed to find the relationship between the workplace friendships
and the organizational outcomes.
1.2
Objective of study:
To know the workplace friendships and their real impact on the organizations
over all performance.
To know that what kind of problems are created by workplaces friendships for
the managers and how they deal with it.
To check that weather workplace friendship helps to reduce workplace stress
and motivate the employees towards organizational goals.
1.3
Scope of Study:
This research will mainly focus on the workplace friendships and the organizational
outcomes in Public sector and private sector institutes in Peshawar, Pakistan that how
they effect the over all performance of the organization. All the data used in this research
is primary data that is collected from the different public and private sector institutes
regarding workplace friendships and organizational outcomes.
1.4
Significance of Study:
This study will help us to better understand the workplace friendships and their real
impact on the over all organizational performance. This study will also help the managers
in the organization to know about the workplace friendships so that they can have better
understanding about the employees behavior and their impact on the over all performance
of organizations.
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2.
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Literature Review:
Workplace friendship have direct relationship with a lot of other study areas like
job satisfaction, job cohesion, intention to leave the job and organizational commitment.
The term is closely related to the aspect of informal friendship where friendship is to be
considered a voluntary action. At workplace, when people failed to have informal
relations with other co-workers, they try to find out co-workers of similar interests. These
common interests leads them towards socialization process and to have informal
friendships. These friendships must be identified and investigated thoroughly apart from
regular relational roles as these roles enhance the performance of the organization. (Sias,
Smith & Avdeyeva, 2003).
Friendships in a society as well as on the workplace has different evolving stages which
ranges from just friends to close friends and then to best friends. (Sias et al, 2003). Prior
to this, in another study, Sias and Cahill (1998) found that workplace friendships are
influenced by contextual and individual factors. The additional factors are organization
contextual factors which includes socializing process, time span of the friendship and
common life events. These factors exist only at workplace and consist of common tasks,
physical work proximity, work related issues and spending the leisure time. The outcome
of the workplace friendships can be judged by observing the employees that in which
way they work closely with each other like in groups or teams and to what extent they
consider their organization as single unit. (Carolyn, 2009).
Friendships in workplaces are formed because of working closely, similar employment
statues and shared values and objectives. According to Morrison there are several
motives involved in explaining these relationships: the first being the prospect of a better,
more enjoyable working environment, with friends providing social support at, for
example, times of stress. Further intrinsic rewards accrue from the sharing of information
and knowledge in the completion of tasks. Team working activities further enhance
relationships and increase the likelihood of future co-operation. A further motive for
developing friendships is the prospect of an entirely personal reward. In this case we
observe individuals using friendly networks to leverage better jobs for themselves by
manipulating friendships with others outside of their immediate work environment
(Morrison, 2009).
Majority of American managers have a positive orientation towards workplace
friendships and they feel work place friendships improve communication and help
employees get their jobs done. While there is some concern that workplace friendships
lead to office gossip and romances, these outcomes are also perceived as manageable for
example, through workplace training and policy development (Berman et al, 2009).
Peer relationships perform a variety of important functions in the workplace. Peer coworkers are the most likely, and most important, source of emotional and instrumental
support for employees, primarily because co-workers possess knowledge and
understanding about the workplace experience that external sources do not (Ray,1987).
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Regardless of the amount of work-related information employees received from their coworkers, the quality of that information did differ between peer relationship types. In
particular, employees with higher proportions of information peer relationships reported
receiving lower quality information than those with higher proportions of collegial peers.
Collegial peer relationships are characterized by greater amounts of trust and selfdisclosure. These peers appear to be more forthcoming with information, therefore the
information they provide to one another is perceived as more accurate, useful and timely
than information received from the more superficial and role-bounded information peers
(Sias, 2005).
Workplace norms can be analyzed in terms of typically salient role structures rather than
more generally created and these norms have a great affect on the workplace friendships
(Morris & Leung, 2010). Organizational culture has a very big impact on the workplace
friendships and its outcomes it can take both direct and indirect pathways in order to
demonstrate the organizational productivity (Tesluk et al, 2005).
In organizational culture the workplace friendships differ on the basis of age, rank,
gender which can also have an affect on the organizational outcomes. With changing
demographics and increasing representation of the workforce, there will be increasing
diversity along gender, race and language lines in the workplace. Workplace friendships
involve mutual commitment trust and shared values or interests between people at work
in ways that go beyond mere acquaintanceship, but exclude romance. These relations
involve heightened norms of openness, informality and inclusiveness, which increasingly
are part of modern management strategies and are also shared by most recent job entrants
(Burwell, 1999).
Workplace friendship prevalence and job satisfaction is significant for men but not
women can only be speculative. Men derive satisfaction and identity from being part of a
team; so perhaps when men have friends at work, compared to when they do not, they
will work better and more successfully within the team, achieve goals and there by derive
satisfaction from their job on the other side women derive more social and emotional
support from their friends. Women tend to seek emotional support when they are
unhappy in a way that men will not and thus, may make more friends than men when
they experience dissatisfaction (Morrison & Wright, 2009).
The stronger peoples social relationships in workplace and the more they feel trusted and
trust others, the higher their job satisfaction is likely to be and organizations should be
thinking much more about supporting strong working relationships to help deliver
innovation, ideas and a happier workforce. Both perceive work as an important part of
their life and for both ideal work includes some necessary criteria. The difference occurs
when women and men try to put these criteria in the order of preference which can have a
bigger impact on the over all outcome of organization (Fodor, 2005).
Formal and informal mentoring both have significant relationship and positive correlation
with individuals psychological development. Further it has been observed that with the
inclusion of same gender the formal mentoring remained significant but the informal
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mentoring became insignificant. This study was conducted on a Malaysian public

University and it concludes that same age did not act as a mediating variable for formal
and informal mentoring program (Ismail et al, 2009).
Technologies are having a real impact on the workplace: not by supplanting traditional
forms of communication but by creating new ways to interact with people. People still
talk face to face, but it is clear from our work that people do not need to work in the same
place in order to develop workplace friendships.Deviant behavior has a big impact on
workplace and its outcome so remodeling the organizational norms, attitudes and social
values is necessary for that organization in face of deviant employees (Steven et al,
2006).
Deviant employees can lead the workplace to workplace aggression. Workplace
aggression varies depending on their source of the aggression (e.g. supervisors, peers,
subordinates). Employees are unlikely to expect to experience aggression from their
colleagues, so inside aggression may break their trust and lead to feelings of betrayal.
Workplace friendships can lead to work place aggression and violence which can affect
the overall performance and outcome of organization and can bring big losses to the
organization (Barling, 1996).
Better workplace friendship suggests better collegial relationships that facilitate the
accomplishment of organizational goals. Workplace friendship has positive influence on
organizational outcomes, e.g. performance improvement and positive work attitude; by
contrast, organizational political behaviors damage self and organizational interests and
influence personal and organizational performance. Negative health-related consequences
of workplace violence should be diminished by interventions that enhance the availability
of instrumental or informational support for employees experiencing workplace violence
which can help them control their aggression in the workplace (Schat & Kelloway, 2009).
Workplace friendship gradually evolves from a voluntary and reciprocal relation into a
purposive relationship, and consequently, conflicts of interests in a highly political
environment as a result of
self-interest, managers should attempt to reduce employee
perception on organizational politics and promote workplace friendship by encouraging
teamwork and the division of labor and rewarding employees based on team or individual
performance in order to improve the organizational identification of employees (yen et al,
2009).
People make friends at workplace in order to enhance their own working conditions but
sometime friendships at workplace operate as the boundary between the social norms
governing friendship and the expectations surrounding organizational work roles. A
persons ability to maintain a friendship while sustaining his or her performance levels
are dependent upon the ability to handle contradictory behaviors such as making
objective judgments about friends, whilst simultaneously providing unqualified support
for them. Workplace friendships can present a major, distracting influence, both to the
friends themselves and to those on the periphery of friendly relationships. When work
turns out to be too much fun, one wonders just how much actual work is being done. Its
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argued that these distractions are as likely to hinder workplace performance as to enhance
it (Morrison & Nolan, 2007).
2.1
Theoretical Frame Work:

On the basis of above mentioned literature review, researchers intend to take
Workplace Friendships as Independent Variable, while Organizational Outcomes as a
Dependent Variable.
[Insert Figure 1]
Following hypothesis has been developed from the theoretical framework
H1: Workplace has positive and direct impact on organizational outcome.
Workplace friendships has further subdivided into formal friendships, informal
friendships, peers to peers friendships, boss to employees and supervisors to subordinates
as shown in figure. 2.
[Insert Figure 2]
Furthermore Organizational Outcome has been subdivided into punctuality, interest,
loyalty, performance, over time, working environment, and non friendly.
[Insert Figure 3]
3.
Methodology
3.1
Target Population:
The target population of the study is composed of the Professors, Assistant
professors, lecturers and other staff of different Public and Private sector universities in
Peshawar.
Sampling Technique:
Non probability convenient sampling: The non probability convenient

sampling technique is used because of convenient accessibility and proximity of the
subjects to the researcher. The other reason for selecting non probability convenient
sampling is due to limitation of time and lack of resources.
Statistical Software:
SPSS version 16.0 was used to perform all the statistical tests
a s a p r e l i mi n a r y s t e p t o d a t a a n a l y s e s .
Sampling procedures:
The total sample size of questionnaire was 250 which were distributed in different
universities in Peshawar, out of which 178 were filled back. The rest were non
responsive.
3.2
3.3
3.4
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3.5
3.6
3.7
3.8
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Data:
The data which is collected for this research is primary data.
Method of Collection:
The primary data is collected through floating questionnaires in different public
and privet sector universities such as IQRA University, IM Sciences, IMSTUDIES, CITY
University, IBMS, FAST National University, Department of Economics Peshawar
University, UET Peshawar and Department of Social Sciences Peshawar University.
Methods of Analysis:
The following methods were used for research analysis:
Descriptive analysis
Frequency distribution
Graphical representation(Pie charts)
Regression Analysis
Pilot Test:
Before distribution of the final questionnaire, 80 questionnaires were distributed
in different institutes for the pilot test. In which some of the respondent faced problem in
answering question regarding the vertical and horizontal organizational structures. They
also faced problem in answering the question My co-workers are one reason I look
forward to my job. So keeping in mind these problems these questions have been
removed from the final questionnaire and some wording changes were made to other
question for easy understanding of the respondents.
Analysis
Reliability Analysis:
[Insert Table 1]
While the reliability of the instruments regarding the workplace friendships was checked
the response was greater than the required standard (.700). The reliability of the
instruments regarding workplace friendships was (.805) which is highly reliable.
While the reliability of the instruments regarding the organizational outcomes was
checked the response was greater than the required standard (.700). The reliability of the
instruments regarding organizational outcomes was (.802) which is highly reliable.
[Insert Table 3]
Table 3, gives the summary of the regression analysis. The high Value of R = 0.634 shows the
strong and
Positive relationship between the workplace friendships and organizational outcomes. The
value of R square
represents that the study explained the 40 percent variation in this specific area and the
rest of 60 percent is
still unknown and requires more sophisticated and thorough study.
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[Insert Table 4]
Table 4 is about to show the level of significance between workplace friendships and
organizational
outcomes. The significance value 0.00 confirms the significant relationship between
independent and dependent variable.
[Insert Table 5]
Table 5. shows the level of significance for both variable separately. For both variables
level of significance is 0.001 and 0.000 respectively which are less than 0.005.
Conclusion and Recommendations
5.1
Conclusion:
In the most of organization that data has been collected from shows that workers
have up to some extent formal communication they do meet their colleagues beside
meetings. They have the opportunity to know about their colleagues and most of the
times they communicate to each other through some formal procedures.
Most of the organizations do encourage informal friendships and building close
friendships in the workplace and workers also tolerate informal communication and build
strong social relationships in workplace and most of the workers do socialize with their
co-workers outside the workplace.
While the respondents were asked on their friendships on the basis of age, gender and
rank a very little percent of them were agreeing or disagreeing and most of them were on
neutral side which shows that most of the workers were not clear on their friendships
regarding their age, gender and rank.
Most of the organizations permit their workers to have friendships with the people of the
opposite gender and having friendships with the people of the opposite gender doesnt
affect their working performance.
Most of the workers try to develop friendships in their own respected departments or with
the people who are most doing the same task as him/ her. These friendships bring to the
most of the respondents job satisfaction and they enjoy working with their co-workers.
Most of the respondents think while having friendships with the people of the own
department helps them to do their tasks easily and on time. The other benefit is that their
co-workers help them in solving their problems and also these close friendships help in
generation new ideas and innovations.
Workers in most of the organizations have good working relationships with their
supervisors and their supervisors help them in completing their tasks on time and when
they face problems in their work or feel stressed their supervisors help them to get out of
it.
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In some organizations the bosses have developed good friendships with their employees
and lesson to their workers problems and encourage their employees to do their tasks on
time and motivate them for achieving the organizational goals.
The working of the organization has encouraged most of the employees to perform better
and improve the over all organizational outcome. Workplace friends discourage their
friends from too many absentees which have a positive effect on the organizational
outcome. Most of the workers are highly committed to their job and every time they try
to perform their best for the organization. Most of the workers have trust on their coworkers which brings a positive working attitude and enhance the over all performance.
Workers believe that working with their friends in a group helps them to do the task
easily and on time and achieve the organizational goals effectively and efficiently.
Some workers are not happy with the package that they get from their organization which
in one or other way affects the organizational outcome. Some of the workers believe that
the organizational politics also play a big role in the over all outcome of the organization
and so the organization must be careful while making polices for the workers in-order to
avoid this.
Recommendations
Organizations must introduce a good pay system on the basis of the scale.
For having a better employee performance organizations need to introduce some other
beneficial programs beside their pay.
Having friendships in the organizations motivates employees to perform their tasks in a
better way so friendships should be encouraged by the organizations.
Friendships in the organizations help the employees from too many absentees so
organizations should encourage the friendships in the organization.
Politics must be kept away from the organizations.
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References
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Morrison, R.L. (2009). Are women tending and befriending in the workplace? Gender differences
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1-13.
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L.Albrecht & M. B. Adelman (Eds.), Communicating and social support (pp. 172-191). Newbury
Park, CA: Sage.
Ruan, D. (1993). Interpersonal networks and workplace controls in urban China. The Australian
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Schat, A. C, Kelloway, E. K. (2003). Reducing the Adverse Consequences of Workplace
Aggression and Violence: The Buffering Effects of Organizational Support. Journal of
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occupational health psychology, 8 (2), 110-122.

Sias, P. M.(2005). Workplace Relationship Quality and Employee Information Experiences,
Communication Studies, 56 (4), 375 395.
Sias, P. M., Smith, G., & Avdeyeva, T. (2003). Sex and sex composition similarities and
differences in workplace friendship development. Communication Studies, 54, 322-340.
Sias, P.M. (2005). Workplace relationship quality and employee information
experiences. Communication Studies, 56, 375-396.
Sias, P.M., & Cahill, D.J. (1998). From coworkers to friends: The development of peer
friendships in the workplace. Western Journal of Communication, 62, 273-299.
Steven H Appelbaum, S.H., ; Barbara T Shapiro, B. T. (2006). Diagnosis and Remedies for
Deviant Workplace Behaviors. Journal of American Academy of Business, 9(2), 14-20.
Tesluk, P. E., Hofmann, D. & Quigley, N. (2005). Integrating the Linkages between
Organizational Culture and Individual Outcomes at Work, in Psychological Management
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Ch22.
Yen, W.W., Chen, S., & Yen, S. (2009). The impact of perceptions of organizational politics on
workplace friendship. African Journal of Business Management, 3 (10), 548-554.
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Annexure
Organizational
Outcomes
Work Place
Friendships
Independent Variable
Figure 1. Model of the Study
Dependent Variable
Workplace Friendships
Formal Friendships
Informal Friendships
Peers to Peers Friendships
Boss to Employees
Supervisors to Subordinates
Figure 2. Subdivision of Workplace Friendships
Organizational Outcomes
Punctuality
Interest
Loyalty
Performance
Over time
Working Environment
Non friendly
Figure 3. Subdivision of Organizational Outcome
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Cronbach's
Alpha
N of Items
.805
30
Table 1. Reliability Analysis Workplace Friendships

Cronbach's
Alpha
N of Items
.802
Table 2. Reliability Analysis of Organizational Outcome
18
Model Summary
Model
Adjusted R
Square
R Square
1
.634a
.402
a. Predictors: (Constant), W.F.
Table 3. Model Summary
Std. Error of the

Estimate
.398
.34619
ANOVAb
Model
1
Sum of Squares
df
Mean Square
Regression
14.151
14.151
Residual
21.093
176
.120
35.244
177
Total
a. Predictors: (Constant), W.F.
b. Dependent Variable: O.T.
Table 4. ANOVA
Sig.
118.075
.000a
Coefficientsa
Model
1
B
(Constant)
W.F.
a. Dependent Variable: O.T.
Table 5. Coefficients
Std. Error
.545
.168
.752
.069
Standardized
Coefficients
t
Beta
.634
Sig.
3.234
.001
10.866
.000
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Knowledge Engineering: How to Design Knowledge Based E-Recruitment

Portal Using CommonKADS
Chaudhry Muhammad Nadeem Faisal17
Inam Illahi18
Engr. Sajid Hussain19
Muhammad Sheraz Arshad Malik20
MIS Research Group
Abstract
Knowledge based systems and portals that use knowledge based techniques to support the
humans in decision making, learning and actions. These are AI (Artificial intelligence) based
tools works in intelligent ways and are capable to corporate with humans or users. These
systems / portal (KBP) provide the documentation of knowledge, intelligent decision, self
learning, and explanation. To develop the knowledge based Portal (knowledge based Erecruitment portal), here author adopt and practically implement the knowledge engineering
based techniques and methodological strategies of CommonKADS. The purpose of this paper
is to develop the understanding of CommonKADS methodology, its implementation and the
basic principles, checklists and documents procedure of knowledge engineering to facilitate
knowledge management for the designing of knowledge based portal (KBP).
Keywords: Knowledge based system, Knowledge Engineering, E-recruitment,
CommonKADS, Knowledge Management, KE Designing Models, Expert system
1. INTRODUCTION
In response to globalization, customer orientation and specialization, the companies are
emphasizing on the talent recruitment, sustainment and the development of exiting employees.
Because the companies are very much conscious about the fact that the human resources are
changing from cost factor to success factors and the statistics also shows that the decline in the
population will be main problem in the coming years. Companies in all over the world are in
continues process to acquire more information about the applicants and their assessment has
gained with increasing interest on the biases of efficient employee selection, Trichet, Leclre
(2003). Because it is generally accepted, that the personality profile of a candidate with his skills
is very important for the organization future, Berry Linoff (1997); Lackes, Mack (1998). The
17
Chaudhry Muhammad Nadeem Faisal is currently working with the University of Faisalabad in the department of Management
studies, department of textile engineering, 38850, Faisalabad Pakistan. (Graduate from BTH (Sweden) for MS CS & Continuing
for MS HCI - Uppsala University)
Chaudhry Muhammad Nadeem Faisal is also with the Riphah International University as Visiting Faculty member, with Riphah
International University campus FSD, Pakistan, (Advance Business Courses from School of Business Administration BTHSweden)
18
Inam Illahi is currently working with the University of Faisalabad in the department of QEC as Deputy Director QEC, 38850,
Faisalabad Pakistan. (Graduate from Sweden for MS Software)
19
Engr. Sajid Hussain is currently working with the University of Faisalabad in the School of Textile Engineering as faculty
member, 38850 Faisalabad Pakistan. (MSc Textile Engineering student at National Textile University Faisalabad, PK )
20
Muhammad Sheraz Arshad Malik is currently working with the University of Faisalabad in the department of Information
Technology as IT Manager, 38850, Faisalabad Pakistan. Phone (Graduate from France for MS Information System)
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eHRM is a web based tool to automate and support HR processes. It facilitates in recruitment
process with the help of information technology and is a growing trend for human resource
related knowledge.
Knowledge management is a combinational discipline, to manage the peoples, process and
technology. Knowledge capture is an important key for social perspective where huge amount of
data is available via the internet, as it is the combination of two, the knowledge, and information
technology. The main objective of knowledge management is to capture, store and the
deployment of knowledge using the information technologies; where as the knowledge
engineering about the system engineering to design KBS (knowledge based system). In this
sense the Knowledge Management is always a collection of different techniques use the
organizations to acquire knowledge. Author objectives to focus on the Knowledge engineering
base techniques with particle implementation of CommonKADS methodology to design
Knowledge base e-recruitment portal and to reduce the organizational expenses for
advertisement with traditional media and also to promote the e-HR based recruitments system for
better performance. As such knowledge based portals works affectively and are more efficient to
deals with applicants information as compare the traditional methods or media using by human
resource departments traditionally for the selection of desired candidates.
The purpose of this work is to develop the understanding of CommonKADS methodology, its
implementation, basic principles, checklists and documents procedure of knowledge
engineering to facilitate knowledge management for the designing of knowledge based portal
(KBP). A practical guideline and procedure for the acquisition of knowledge will discuss here.
2. BACKGROUND
Knowledge Management could not carry on without information technologies, it is the
information technology that mange and arrange the knowledge Alun Preece (2001); Rongrong
LU, June LIU (2008). The effective management of Knowledge is an important to gain the
competitive advantages by organizations and can effectively use their resources. Knowledge
Engineering appeared (1990) as a mature field related to the software engineering with rage of
techniques, elicitation and modeling and complete tool kit for auto reasoning with completes
mechanisms, Alun Preece (2001); Christine W. Chan, (2002). The knowledge engineering
includes the requirement analysis, conceptual modeling, knowledge base construction, operation,
validation and maintenance.
Knowledge Engineering is a discipline, it involves the different step for the integration of
knowledge and knowledge based system in a systematic way. The integration is only possible
with the help of information system in order to solve the problems that acquire the human
efforts. It has a great contribution in common with software engineering as well as in others, AI
(Artificial Intelligent), Data mining, and expert system, DSS (Decision support system) and GIS
(Geographic Information system) Sandra m. parker, Robert b. Parker (1989); Hiroshi Motoda
(1991); Li-Yen Shue, Sim Kim Lau (1995). While the Knowledge management concerning to
capture, store and deployment of data with help of information technology, where the mostly
data is gather from individuals. The definition of knowledge management is as defined by Civi,
E. (2000) as "the acquisition, sharing and use of knowledge within organizations, including
learning processes and management information systems" and by Bukowitz, W. R. and
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Williams, R. L. (1999) as "the process by which the organization generates wealth from its
intellectual or knowledge-based assets" also defined by Darroch, 1. (2003) as ''the process that
creates or locates knowledge and manages the dissemination and use of knowledge within and
between organizations" on the other hand the role of the knowledge engineering is to provide the
capture data in timely Alun Preece (2001). We believe that current knowledge management
practice are significantly under-utilizes knowledge-engineering technology, despite recent efforts
to promote its use. In this article author focus on knowledge engineering processes for the
designing of knowledge based system that provides the job related information. In this work,
author is going to use the knowledge Management three facets Christine W. Chan, (2002).
A.
Knowledge Capture: acquisition of knowledge
B.
Knowledge Store: store the knowledge in a structure way
C.
Deployment of Knowledge: deployment using the web browser.
The knowledge engineering includes the number of principles, as there are different types of
knowledge and acquisition expertise, different form to present and way to use the knowledge
with structure form to increase the efficiency. Knowledge engineering is systematic approach
and series of task to gather the information to designed knowledge based system. It helps to
solve the problems with human experts, Hiroshi Motoda (1991); Li-Yen Shue, Sim Kim Lau
(1995); Soumitra Dutta (1997). Knowledge engineering has emerged as an important discipline
to design Knowledge-based system which can further enhance the effectiveness and productivity
of the current information systems of the business and social communities. In this research work
our focus to draw the documentation based procedure and checklist for knowledge based system
using a CommonKADS methodology for job based portals (Knowledge Based e-recruitment
portal). It delivers the appropriate information to the desired individual in a systematic way. By
which both job seeker and employers meet for specific purposes. To develop a knowledge based
portal, authors adopt and practically implement the knowledge engineering based techniques,
methodological strategies of CommonKADS, which enables us to overcome the problems that
are being faced by job seekers and employers, to support the e-HR for recruitment. Knowledge
based strategies provides the guide lines and facilities communities to maximum utilization of
resources. It also make fasten and effective for the selection of suitable able individuals
according to the defined eligibility criteria. To design the knowledge based system knowledge
engineering describe the following phases, eliciting, structuring, formalizing, and
operationalizing, Schreiber A Th. et al (2000).
Figure 1 CommonKADS mode set to design knowledge base system
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There are following models describe by Schreiber A Th. et al (2000) to design and to manage
the knowledge for KBS, Schreiber A Th. et al (2000).
1) Organization model
9 Include the supports analysis of an organization,
9 Goal: to indentify and discover the problems, opportunities and possible impacts
of knowledge based system development.
2) Task model
9 describes the tasks that are performed or will be performed in the organizational
environment or system
3) Agent model
9 Describes the capabilities, norms, preferences and permissions of agents (agent =
executor of task as here in this system job seeker, employer and portal handler are
the agents).
4) Knowledge model
9 Gives an implementation description - of knowledge involved related to tasks.
5) Communication model
9 The Models of communicative transactions between agents (job seekers,
employers and portal handlers in this case).
6) Design model
9 The structure description of the system (KBS) needs to be constructed.
3. KBP DESING PROCEDURE AND IMPLEMENTATION

3.1 Organization Model
Organizational model consists of five work sheets:
OM-1: identifies knowledge-oriented problem and opportunities and possible solution in the
context of organizations missions, goals and its environment.
OM-2: describes the organizational aspects that can affect or affected by the chosen
Knowledge solutions these include structure, process, people, resources and Knowledge.
OM-3: describes the processes in OM-2 work sheet in terms of tasks and their Main
characteristics.
OM-4: describes the knowledge assets used in the organizations tasks, and their
characteristics.
OM-5: gives the checklists questions for the business feasibility, technical feasibility, Project
feasibility and suggested actions
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Table.1: Organizational Model Problems & Opportunities Work Sheet OM-1

Problems and
opportunities
Organizational
Context
Solutions
1) A lot of skilled talent being wasted

2)Unemployment is increasing
3)Fresh graduates have no proper information about jobs being offered
4)People are not aware of proper application methods and resume preparation
5)Employers not finding their required skilled workers and professionals
6)They have no proper channel to advertise their job offers
7) They are not having so many options to get categorized applicants.
8) Increase the satisfaction level among the employer and job seeker through this system.
Mission:
1. Make Awareness in between the people how to properly apply for job to find best one and a
new job.
2. Find the Job hunter to select the best one for proper vacancy and according to the nature of
work.
External Factor:
1. Organization concerned with application
2. Requirement / Analysis specification process
3. Found out the best one on the basis of application and decision to meet the requirement of job
hunter
Strategy:
1. Provide job to job seekers relevant to there qualification, experience and interest.
2. Understanding the condition of
3. Unemployment and to guide them.
4. Employers can get good professional
5. For there organization. Provide all job related information for the job seekers
1 Develop a web based automated system for creating resume for the job seekers.
2 This System will help for jobseekers how to fulfill the requirements and eligibility criteria of
the organizations
Table.2: OrganizationalModelvariantaspectsworkSheetOM2
Structure
Process
People
Resources
Knowledge
Culture and
Power
See Figure 2
See Figure 4
1. Portal Handler
2. Graphic Designer
3. Web Programmer
4. Job Seeker
5. Employer
Computers having good specifications
Databases
Broad band Internet
Telephones
JS (Job seeker) Validation:
Knowledge used to register the jobseeker on portal.
Assessment Criteria:
Knowledge for Assessing the experience, education, Location and joining date of the job
seekers if he is selected for an interview.
Assignment/Interview Notification :
Knowledge used for Selecting a job seeker for a particular Employer.
Updating Resume Information:
Knowledge used to get the resume to be modified.
1. Hierarchal Organization
2. Effectively handle the communication among the job seekers and Employers by the
people of organization.
3. Internal Communication will provide the information to both for conducting
Seminars, Events.
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Universities records
Figure2WebPortalBasedOrganizationalStructure
Figure 3 Activity Diagram for Web Portal
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Figure 4 Process Diagram
Tabel.3: Organizational Model Work Sheet OM-3

Task
Performed by
where
Knowledge Asst
Intensive
Sig
JS Register
Job seeker
Job Portal
JS (Job seeker) Validation
No
Make Resume
Job seeker
Job Portal
Resource Resumes
No
Modify
Resume
Apply Online
Job seeker
Job Portal
No
Job seeker
Job Portal
No
Place
Advertisements
Portal Handler
Job Portal
No
Application
Assessment
Send interview
Notification
Handling
Seminars
Employer
Job Portal
Assessment Criteria
yes
Employer
Job Portal
Assignment
Notification
No
Portal Handler
Job Portal
No
/Interview
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Tabel.4:OrganizationalModelWorkSheetOM4
Knowledge
Asst
Processed
by
Used
In
Right
Form
Right
place
Right
time
Right
Quality
Resource Resumes
Job seeker
No
Yes
Yes
No
JS
Validation
Assessment
Criteria
Job
Seeker
Employer
Make
Resume
JS (Job seeker)
Register
Application
Assessment
No
Yes
No
Yes
No
Yes
No
No
Employer
Send interview
No
Yes
Yes
Yes
Assignment
notification
Interview
Notification
Tabel.5: Organizational Model Work Sheet OM-5
Proposed System will help out the job seekers to efficiently get information of
Business Feasibility
different jobs and they are using efficient record keeping mechanism and they can
easily apply online for job. Well organized record keeping mechanism, fast retrieval
of record, remote access, online case registration, data security and application
Tracking. This system will really be beneficial for employees and employers which is
not possible in any manual way of job finding and hiring. Time and information is
managed to enhance the quality of the service. Benefits are high as compared to Cost.
1. This System includes Knowledge management but it doesnt include
Technical Feasibility
Complex reasoning and methods for developing this system.
2. Essential Feature related to proposed solution is the security which is
controlled by different Encryption Techniques.
3. By using Model Based Testing techniques evaluation of our project will be
done to ensure it as a quality product.
4. Simple User Interface is built in system for users. Different methods and
techniques are used to develop it.
5. Other information systems have no interaction with provided proposed
solution.
6. Technology risks are easily handled in our System. There is no need of
organizational changes in our Suggested System
Project Team should have knowledge about the Assessment Criteria and Data bases
Project Feasibility
and also categories of different jobs. Actors in this system are showing complete
commitment. Work is totally according to the requirements. Interactions path into and
from the organization is well defined. Risks to this project has also been discussed and
found that there are no risks present in our project.
Proposed system will definitely provide perfect login activity for both the employers
Proposed Actions
and the job seekers to register. Requirements are collected for making prototype. All
the tasks will be effectively managed in our system. If there is change in organization
then system will be flexible to adopt those variants. It is required to have proper
project scheduling, resource distribution, requirement analysis, gathering and system
development to get best solution, like our project.
3.2 Task Model

Task model defines the task being performed in the environment, the relationship agent.
Task model helps to know the processes being performed in organization in terms of task.
Now task are performed by the agent and agent model describes the entire agent involved in
doing task and their different properties. In this knowledge model author have described the
knowledge used in the tasks and its validity and appropriateness of the knowledge.
Task.1 The job seeker has to register on the portal. (JS Register 1).
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Task.2 the Job seeker has to make his resume and to enter his person information,
experience and academic related information (Make Resume 2).
Task3 To edit or and to modify the existing resume (Modify Resume 3).
Task.4 Job seeker has to apply against the appropriate job in which he is interested (Apply
Online 4).
Task.5 the employers have to Place the advertisement or information they need (Place
Advertisements 5).
Task.6 The employers have to access the information and CV against their Advertisement
(Assess Resume 6).
Task.7 is to send the notification to the selected candidate by the employers as per
requirement (send the interview notification 7).
Task.8 this task is related to the arrangement of seminar (Seminar Handling 8).
Table 1: task model analysis worksheet tm-1: Task (1) Job seeker registration process
Task Model
Task
Organization
Task Analysis Worksheet TM-1

c.f OM-3
c.f OM-2
Goal and Value

Dependency and Flow
Objects handled
Time and
Control
Agents
1. Input Task:
2. Output Tasks:
1. Input Objects
2. Output Objects
3. Internal Objects
Frequency, Duration
Control Constraints &
Conditions
OM-2:People, System,
resources
JS (Job seeker) Register, 1
JS (Job seeker) Registration
JOB PORTAL
To enable our jobseeker to get information about jobs
and to apply online.
None
Jobseeker Registered
None
Jobseeker Validated
Jobseeker information
Many times, short, filled all the requirements for
registration.
Job Seeker, System
OM-3: Performed by
Knowledge and
Competence
Resources
Quality and
Performance
Task Model
Name
Possessed by
Used in
Domain
Nature of the Knowledge
Formal, rigorous
Empirical, quantitative
Heuristic, rules of thumb Highly
Specialized, don specific
Experienced based
Action based
Incomplete
c.f. OM-4
JS (Job seeker) Validation
OM-2
Measures
Web form, jobseeker

Perfectly Registered.
Knowledge Item Worksheet TM-2
JS (Job seeker) Register
Job seeker
JS (Job seeker) Validation, 1
Web Portal
Bottleneck/ to be improved
X
X
X
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Uncertain, may be incorrect
Quickly changing
Hard to verify
Tacit, hard no transfer
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From the knowledge of the Knowledge

Mind
X
Paper
Electronic
Action skill
Other
Availability of Knowledge
Limitations in time
Limitations in space
Limitations in access
Limitations in quality
Limitations in form
Table 2: taskmodelanalysisworksheettm1:Task(1)JobseekerresumespreparationProcess
Task Model
Task
c.f OM-3
Organization
c.f OM-2
Goal and Value

Dependency and Flow
Objects handled
Time and Control

Agents
1. Input Task:
2. Output Tasks:
1. Input Objects
2. Output Objects
3. Internal Objects
Frequency, Duration
Control
Constraints & Conditions
resources
Make Resume, 2
Resume Preparation
JOB PORTAL
To enable our jobseeker to make his resume

according to the standard by using standard formats.
JS (Job seeker) register
Jobseeker made Resume
Resume Format
Resume
Jobseekers educational and professional

information
Many times, long, appropriate format.
Job seeker, Databases of different formats.
OM-3: Performed by
Knowledge and
Competence
Resources
c.f. OM-4
None
OM-2
Standard Resume Templates
Quality and
Performance
Measures
Effective Resume prepared.
Task Model
Name
Possessed by
Used in
Domain
Formal, rigorous
X
X
Heuristic, rules of thumb

Resume Preparation
Job seeker
Make Resume, 3
None
Highly Specialized, don specific
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Experienced based
Action based
Incomplete
X
X
Quickly changing
Hard to verify
Mind
X
Paper
Electronic
Action skill
X
Other
Limitations in time
X
X
X
Limitations in form
Table 3: taskmodelanalysisworksheettm1:Task(3)tomodifytheresumeprocess
Task Model
Task
Organization

c.f OM-3
c.f OM-2
Goal and Value

Dependency and Flow
Objects handled
Time and Control
Agents
1. Input Task:
2. Output Tasks:
1. Input Objects
2. Output Objects
3. Internal Objects
Frequency, Duration
Control
resources
Modify Resume, 3
Editing Resume
JOB PORTAL
To enable our jobseeker to modify his information
about resume.
Make Resume
Jobseeker updated his resume.

1. Resume, need Update
2. Resume updated
3. Information that has to be modified by the
jobseeker
Many times, short, include update information
Job Seeker/ System
OM-3: Performed by
c.f. OM-4
Resource Resume
Knowledge and
Competence
OM-2
Old resume, jobseeker
Resources
Evaluate
Effective updation has been made
Quality and
Performance
Table 4: taskmodelanalysisworksheettm1:Task(4)ApplyOnline
Task Model
Task
Organization

c.f OM-3
c.f OM-2
Goal and Value

Dependency and Flow
1. Input Task:
Apply Online, 4
Apply Online
JOB PORTAL
To enable our jobseeker to apply for job.
Upload resume for job
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Objects handled
2. Output Tasks:
1. Input Objects
2. Output Objects
3. Internal Objects
Frequency, Duration
Control
Time and
Control
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Jobseeker has applied for job

Resume
Information sent to job seeker.
None
Many times, very short,
None
Submission of Successful application.
Job Seeker/
resources
Agents
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OM-3: Performed by
Knowledge and
Competence
c.f. OM-4
None
Resources
OM-2
Upload, jobseeker
Evaluate
Apply for Job
Quality and
Performance
Table 5: taskmodelanalysisworksheettm1:Task(5)Advertisementplacementbyemployers
Task Model
Task
Organization

c.f OM-3
c.f OM-2
To give the information about the requirements and

eligibility criteria for job by the company to job seeker. It is
connecting layer among the jobseekers and the employers.
Goal and Value
Dependency
and Flow
Objects handled
Time and Control
Agents
Place Advertisements, 5
Advertisements
JOB PORTAL
1. Input Task:
2. Output Tasks:
1. Input Objects
2. Output Objects
3. Internal Objects
Frequency, Duration
Control
Constraints &
Conditions
resources
Getting information about the job from the

company.
Advertisements placed
Requirement of company Advertisement made and

placed.
Knowledge about Experience, Education and

Location and Interview date is included.
Many times, short
None
Make advertisements to give information to customers.
Graphics Designer, Employer
OM-3: Performed by
Knowledge and
Competence
c.f. OM-4
None
Resources
Quality and
Performance
OM-2
Evaluate
Employers, broadband internet, computer

Best Advertisement made by the developer and mentioned
the minimum requirements.
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Table 6: Task Model Analysis Worksheet Tm-1: Task (6) Access Resume By Employers
Task Model
Task
Organization

c.f OM-3
c.f OM-2
Goal and Value

Dependency
and Flow
Objects handled
Time and
Control
Agents
1. Input Task:
2. Output Tasks:
1. Input Objects
2. Output Objects
3. Internal Objects
Frequency, Duration
Control
Assess Resume, 6
Application Access
JOB PORTAL
To select a best employee for any organization
Check Eligibility requirements.

Developer selected the best employee according to the
minimum requirement mentioned by the Employer.
Company requirement.
Selected jobseekers
Information regarding eligibility requirement has checked

by the portal Handler.
Many times, Long
None
Eligibility Criteria is checked.
resources
Employer
OM-3: Performed by
Knowledge and
Competence
Resources
c.f. OM-4
Assessment Criteria
OM-2
Employer, Internet, computers
Evaluate
Quality and
Performance
Task Model
Name
Possessed by
Used in
Domain
Formal, rigorous
X
X
Experienced based
Action based
Incomplete
X
X
Quickly changing
Hard to verify
Mind
X
Paper
Electronic
Action skill
X
Other
Limitations in time
X
X
Limitations in form
X
Best Selection of the Employee for the particular Job companies.

Assess Resume
Job seeker
Assessment Criteria, 7
None
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Table 7: taskmodelanalysisworksheettm1:Task(7)tosendinterviewnotification
Task Model
Task
Organization

c.f OM-3
c.f OM-2
Goal and Value
Dependency
and Flow
Objects handled
Time ad
Control
Agents
1. Input Task:
2. Output Tasks:
1. Input Objects
2. Output Objects
3. Internal Objects
Frequency, Duration
Control
resources
Send Interview Notification, 7
Interview call
JOB PORTAL
To send the notification to the selected candidate
for the interview after comparison of the minimum
requirements from the company.
Assess Resume.
Notification Sent.
Selected candidate.
Send Notification
Selection Criteria with interview date.

Few times, short
None
Selection of Successful candidates.
Employer, Portal Handler
OM-3: Performed by
c.f. OM-4
Knowledge and
Competence
OM-2
Resources
Evaluate
Quality and
Performance
Task Model
Name
Possessed by
Used in
Domain
Formal, rigorous
Experienced based
Action based
Incomplete
Quickly changing
Hard to verify
Mind
Paper
Electronic
Action skill
Other
Limitations in time
Limitations in form
Assignment/ Interview Notification

Internet, computers
Our organization will successfully send the
notification to selected candidate for the interview.
Send Interview Notification
Employer
Assignment / Interview Notification, 7
None
X
X
X
X
X
X
X
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Table 8: Taskmodelanalysisworksheettm1:Task(8)arrangementofseminar
Task Model

c.f OM-3
c.f OM-2
Task
Organization
Goal and Value
Dependency and Flow
Objects handled
Time and Control
Agents
1. Input Task:
2. Output Tasks:
1. Input Objects
2. Output
Objects
3. Internal
Objects
Frequency,
Duration
Control
Constraints &
Conditions
OM-2:People,
System,
resources
Seminar Handling, 8
Portal Handler & Employer
JOB PORTAL
To send the notification to the candidate and conducting
interviews of candidates at run time.
None.
Notification Sent.
Registered candidate.
Send Notification
Run time selection of candidates.

Few times, short
None
Selection of Successful candidates.
Portal Handler
OM-3:
Performed by
Knowledge and
Competence
Resources
Quality and
Performance
c.f. OM-4
OM-2
Evaluate
None
Employers, portal Handler, organizers
Our organization will be organizing seminars to give
information to the registered candidate.
3.3 Agent Model

Table1JS(Jobseeker)(agent)involvementsontheportal
Agent
Name
Organization
Involved in
Communication with
Knowledge
Other Competences
Responsibilities
and
Constraints
Agent Worksheet AM-1

Job Seeker
Job Seeker is a person who can register on our portal and see information about
different jobs offered by the companies. Job Seeker can also make and modify his
resume and can also apply online.
JS Registration, Resume Preparation, Editing Resume and Apply Online
Portal Handler, Employer
JS Validation, Resource Resume
Knowledge about using Internet and computers
To get register himself, make resume, modify resume and apply online.
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Table.2Employers(agent)involvementsontheportal
Agent
Name
Organization

Employer
Employer can view resume of different job seekers and Assess their resume
according to their requirement and eligibility Criteria in order to get a best
professional. Employers can also send Interview notification to candidates.
Employer can also place advertisement to our portal.
View Resume and Assess Resume and can also place advertisements. Send
Involved in
Interview Notification to the selected candidates
Portal Handler , Job Seeker
Communication with
Job Seeker login Validation, Resource Resume
Knowledge
Expertise require to Assess Resume, Proper procedure to send the notification in
Other Competences
time.
Responsibilities
and Included Assess Resume, place advertisement and also send notification to
selected candidates.
Constraints
Table.3portalhandler(agent)involvementsontheportal
Agent
Nam
Organization

Portal Handler
Job portal handles our portal in order to place advertisement of different
companies and also registering Job seekers and organizing Seminars and also
working as center.
Place Advertisements and Handling Seminars
Involved in
Employer , Job Seeker
Communication with
Advertisements and Seminars Handling
Knowledge
Expertise requires making an effective resume and showing the requirements of
Other Competences
different companies to job seeker. Different Seminars are organized by the Portal
Handler by the coordination of external organizing body.
Responsibilities
and Included make advertisements, Showing Requirements and managing
Seminars
Constraints
Table.4Checklistfororganization,taskandagentmodel(3Agents)
Organization Task / Agent
Model
Impact
and
change
organization
Task/Agent
impacts &
improvements
Specific
Attitudes & commitments

Proposed Actions
Checklist for Check and Improvements

Proposed solution will provide the efficient handling of databases.
This system will provide an easy and fastest way to select a best professional for any
company.
Enable our jobseeker to make resume according to standard.
Provide Job Search Facility
This system will enable our Employer to Efficiently view resumes of different
candidates and can easily check Eligibility Criteria and send notification back to the
candidate.
Effective changes and customization in Graphics of the portal.
Easy searching job criteria for the jobseeker.
All the tasks are being done by the agents in sequence.
Portal Handler can get feedback from the Employer and jobseeker.
These tasks solve the problems being faced by the candidates in getting a desired job.
These tasks primarily fulfill the requirements of employers to get a good professional
who will help for them to get good results.
The Agents involved in these tasks have a broad and relational communication on
various aspects
Individuals and employers get benefit from this system and would appreciate the
solution Provided by the system. Suggestions will be accepted for improvements and
changes of system warmly.
As we made the Knowledge base Analysis now we are going for proposed actions
Resume will be made by the Job seeker on our portal.
Employer will assess candidates resume.
Interview notification sent back to the selected candidate by the Employer.
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3.4 Knowledge Model for Portal

Knowledge model specifies knowledge and reasoning requirements of the perspective
system and its helps from input till the implementation of a system. Here authors
select knowledge intensive tasks and works as a tool to clarify the structure.
Knowledge model is use for analysis, process of information, phrased in vocabulary of
application as the domain (jobs) and reasoning tasks (Assessment, Qualification etc).
It use as a logical model but has no physical implementation with structure similar to
traditional models in Software Engineering. Reasoning task is described using a
hierarchal decomposition of functions and data or knowledge types that functions
operate are described as schema, Schreiber, A Th. et al (2000); Pter fehr (2000).
Knowledge model has three parts which is called knowledge category.
1) Domain Knowledge specific knowledge and information like, Job and job seeker
related.
2) Inference Knowledge describes basic inference steps and works as building blocks
for reasoning machine so here the assessment of resume.
3) Task knowledge the defined task to achieve the desired goals
Here discussion on tasks JS (Job seeker) Register and Application Assessment. In our
Project, These two tasks are knowledge intensive tasks.
3.4.1 JS (Job seeker) register
A. Domain Knowledge
Author will explore our first task which is JS Registration. JS Register is a knowledge
intensive task. And knowledge involves in Job seeker registration process to get a login
in to a system. Registration process is primary process which is done by job seeker for a
particular job if he wants to search for a job.
J-Details
JS
JSR
JTitle
JType
JS#
JS
Age
JSUserName
JSEmail
JJob Title
JSPassword
JSInterest
HasNeed
JAge
JSStatus
JType
JMin Qualification
JSStatus
JMin Experience
JApply By
Figure 4: Graphical representations of concepts, attributes and relationship
Here in above figure author describe the concepts, attributes and their corresponding value
types. Also describe the relation between concepts. These concepts are finding from JS
Register. Also describe some concepts by its explicit value-type definition as.
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Example
(1)
CONCEPT JDetails;
ATTRIBUTES:
Value: JType;
END CONCEPT JDetails;
VALUE-TYPE JType;
VALUE-LIST: {Permanent (firstshift), permanent (secondshift), Intership (firstshift) , Intership (secondshift),
Contract (secondshift), Contract (secondshift)};
TYPE: ORDINAL
END VALUE-TYPE JType;
(2)
CONCEPT JS;
ATTRIBUTES:
Value: JType;
END CONCEPT JS;
VALUE-TYPE JType;
VALUE-LIST: {Permanent (firstshift), permanent (ssecondshift), Intership (firstshift), Intership (secondshift),
Contract (secondshift), Contract (secondshift)};
TYPE: ORDINAL
END VALUE-TYPE JType;
(3)
CONCEPT JDetails;
ATTRIBUTES:
Value: JTitle;
VALUE-TYPE JTitle;
VALUE-LIST: {System Analyst, IT Manager, Senior Sales officers, etc};
TYPE: ORDINAL
END VALUE-TYPE JTitle;
(4)
CONCEPT JS;
ATTRIBUTES:
Value: JInterest;
END CONCEPT JS;
VALUE-TYPE JInterest;
VALUE-LIST: {System Analyst, IT Manager, Senior Sales officers, etc};
TYPE: ORDINAL
END VALUE-TYPE JS;
(5)
CONCEPT JS;
ATTRIBUTES:
Value: JSStatus;
END CONCEPT JS;
VALUE-TYPE JSStatus;
VALUE-LIST: {Registered, Not Registered};
TYPE: ORDINAL
END VALUE-TYPE JSStatus;
(6)
CONCEPT JSR;
ATTRIBUTES:
Value: JSStatus;
END CONCEPT JSR;
VALUE-TYPE JSStatus;
VALUE-LIST: {Registered, Not Registered};
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TYPE: ORDINAL
END VALUE-TYPE JSStatus;
A. Rule
JDetails.JType = JS. JType ^ JDetails.JTitle = JS. JInterest => JS.JSstatus = Register
JDetails.JTypeJS.JType^JDetails.JTitleJS.JInterest=>JS.JSstatus=CannotRegister
B. Rule Type
Figure 5: Job seekers interest
C. Inference Knowledge
Figure 6: Knowledge inference
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D.
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Task Knowledge
Figure 7: Task oriented knowledge
2.4.2 Assessment Criteria

A. Domain Knowledge
Author will explore our first task which is Assessment Criteria. Assessment Criteria is a
knowledge intensive task. And knowledge involves in Job seeker resume assessment
process and sends a notification call to the jobs seeker by the Employer. Assessment
process is secondary process which is done by Employer for a particular job seeker if
employer wants to hire a professional Employee
Resume
Age
Qualification
Experience
JDetails
JJob Title
JAge
JMin
Qualification
JMin
Experience
Has
JApply By
Employer
JSEmail
JSNotiStatus
Need
Figure 8 Graphical representations of concepts, attributes and relationship
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Here in above figure to describe the concepts, attributes and their corresponding value
types. Also describe the relation between concepts. These concepts are finding from
Assessment criteria. Also describe some concepts by its explicit value-type definition
as.
Example
(1)
CONCEPT Resume;
ATTRIBUTES:
Value: Age;
END CONCEPT Resume;
VALUE-TYPE Age;
VALUE-LIST: {16-25, 25-30, 30-35, 35-40};
TYPE: ORDINAL
END VALUE-TYPE Age;
(2)
CONCEPT Resume;
ATTRIBUTES:
Value: Qualification;
END CONCEPT Resume;
VALUE-TYPE Qualification;
VALUE-LIST: {Bachelors, Masters, Doctorate};
TYPE: ORDINAL
END VALUE-TYPE Qualification;
(3)
CONCEPT Resume;
ATTRIBUTES:
Value: Experience;
END CONCEPT Resume;
VALUE-TYPE Experience;
VALUE-LIST: {1 year, 2 years, 3 years, 4 years, 5 years, 10 years };
TYPE: ORDINAL
END VALUE-TYPE Experience;
(4)
CONCEPT JDetails;
ATTRIBUTES:
Value: JAge;
VALUE-TYPE JAge;
VALUE-LIST: {16-25, 25-30, 30-35, 35-40};
TYPE: ORDINAL
END VALUE-TYPE JAge;
(5)
CONCEPT JDetails;
ATTRIBUTES:
Value: JMin Qualification;
VALUE-TYPE JMin Qualification;
VALUE-LIST: {Bachelors, Masters, Doctorate};
TYPE: ORDINAL
END VALUE-TYPE JMin Qualification;
(6)
CONCEPT JDetails;
ATTRIBUTES:
Value: JMin Experience;
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VALUE-TYPE JMin Experience;
VALUE-LIST: {1 year, 2 years, 3 years, 4 years, 5 years, 10 years };
TYPE: ORDINAL
END VALUE-TYPE JMin Experience;
(7)
CONCEPT Employer;
ATTRIBUTES:
Value: JSNotiStatus;
END CONCEPT Employer;
VALUE-TYPE JSNotiStatus;
VALUE-LIST: {select, reject };
TYPE: ORDINAL
END VALUE-TYPE JSNotiStatus;
Rule
Resume. Qualification >=JDetails. JMin Qualification v Resume. Experience>= JDetails. JMin
Experience Employer.JSNotiStatus = Select Fdf
B. Rule Type
Figure 9: Rule against experience and qualification of job seeker
C. Inference Knowledge
Figure 10 Inference Structure for Resource allocation
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D. Task Knowledge
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Figure 11: knowledge against task the assessment of job seeker
3.5 Communication Model

In Communication model all the communications between the tasks is described and
information flow in agents as explained using diagrams.
Figure 12: transactions in communication model between agents

Table.1 transaction (1) to fill registration form by agent 1
Communication Model
Transaction
Identifier/Name
Information Object
Agents Involved
Communication Plan
Constraints
Information Exchange
Specification
Communication Model
Transaction
Transaction Description Worksheet CM-1

Transaction 1: Store Case Data: After filling form, JS (Job seeker) submit all
these information to portal database Knowledge system agent.
Data object, transmits between Fill Form and Store
Application task.
JS (Job seeker), knowledge system / portal
Case communication plan
After execution this transaction, resume should be ready for further processing,
for Applying jobs and assessment.
Detailed specification is given in Worksheet CM-1
Given below.
Transaction 1
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1. Sender (JS)
2. Receiver (Web portal, Knowledge System)
3. Sender (Web portal, Knowledge System)
4. Receiver (JS)
Core object for this transaction is JS data; this contains data filled in form.
Information
1. Role: JS data is basic information object. No supporting item.
items
2. Form: it contains numeric and text data.
3. Medium: not applicable
To select a best employee for any organization.
1. Create login
Message
Type: ASK
Specifications
Content: request message data
From: JS (Job seeker)
To: Web portal, Knowledge System
2. Acknowledgement Message
Type: REPLY
Content: text message
From: Web portal, Knowledge System
To: JS (Job seeker)
3. Store case
Type: REQUIRE
Content: case data
To: Web portal, Knowledge System
4. Result message
Type: REPLY
To: JS (Job seeker)
None
Control over messages
Table.2 transaction (2) to prepare the resume by agent 1
Agents involved
Communication Model
Transaction
Identifier/Name
Information Object
Agents Involved
Communication Plan
Constraints
Specification
Communication Model
Transaction
Agents involved
Information
items
Message
Specifications

Transaction 2: Store Data: After filling form according to the requirements and
personal information to registration form, portal handler submits all these
information to portal database. Portal handler agent makes this transaction with
Case Knowledge system agent.
Case data object, transmits between Fill Form and Store
Application task.
JS (Job seeker), Web portal, Knowledge System
Case Communications plan
After execution this transaction, Application should be ready for further
processing, like making Applying, resource allocation etc.
Detailed specification is given in Worksheet CM-2 given below.
Transaction 2
1. Sender (JS)
2. Receiver (Web portal, Knowledge System)
3. Sender (Web portal, Knowledge System)
4. Receiver (JS)
Core object for this transaction is resume data; this contains data filled in form.
1. Role: Resume data is core information object. No supporting item.
To select a best employee for any organization.
1. Create resume
Type: ASK
Type: Require
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From: JS (Job seeker) To: Web portal, Knowledge System

Type: Agree
To: JS
None
Table.3 transaction (3) to advertise the jobs by portal handler or employer (agent 2 and 3)
Communication Model
Transaction
Information Object
Agents Involved
Communication Plan
Constraints
Specification
Communication Model
Transaction
Agents involved

Transaction 3: Store Case Data: In this form the Portal Handler advertise the
job for employers as well as employers also advertise the job according to
there requirement.
Case data object, transmits between Fill Form and Store and send applications
Application task.
Portal Handler, Employer, Web portal, Knowledge System
Case Communications plan
After execution this transaction, Application should be ready
for further processing, like making Applying, resource allocation etc.

Transaction 3
1. Sender (Portal handler, employer)
2. Receiver (web portal knowledge system)
3. Sender (web portal knowledge system)
4. Receiver (Js (Job seeker), employer)
Core object for this transaction is job data; this contains data given by
Information
employer.
items
1. Role: job data is the core information object. No supporting item.
Message
1. Create job
Type: REQUIRE
Specifications
From: Portal handler
To: knowledge system
Type: AGREE
From: knowledge system
To: Portal handler
None
Table.4 transaction (4) to apply online against the advertise jobs by job seeker (agent 1)
Communication Model
Transaction
Identifier/Name
Information Object
Agents Involved
Communication Plan
Constraints
Specification
Communication Model
Transaction
Agents involved

Transaction 4: apply for the desired job mentioned on web portal knowledge
base system by the portal handler and employers
Case data object, transmits between Fill Form and requirements as mentioned
on the web portal Application task.
JS (Job seeker), web portal knowledge system, employers
for further processing, like making Applying, resource allocation etc.
Transaction 4
1. Sender (JS)
2. Receiver (Employer knowledge system, employer)
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3. Sender ( Employer knowledge system, employer)

4. Receiver (JS )
Core object for this transaction is applicant data; this contains data filled in
Information
form.
items
1. Role: applicant data is core information object. No supporting item.
Message
1. Create application
Type: REQUIRE
Specifications
To: web portal knowledge system, employer
Type: REPLY
From: web portal knowledge system, employer
To: JS (Job seeker)
None
Table.5 transaction (5) to assessment of resume (agent 2 and 3)
Communication Model
Transaction
Identifier/Name
Information Object
Agents Involved
Communication Plan
Constraints
Specification
Communication Model
Transaction
Agents involved
Information items
message
specifications

Transaction 5: assessment and check the selection criteria
Case data object, Application for assessment
Employers
Employers knowledge base system,
processing, like making Applying, resource Allocation etc.
Transaction 5
1. Sender (Employers)
2. Receiver (Employers knowledge system)
3. Sender (Employers knowledge system)
4. Receiver (Employers)
Core object for this transaction is assessment data; this contains data filled in
form.
1. Role: assessment data is core information object. No supporting item.
1. assessment
Type: REQUIRE
From: Employer
To: employer knowledge system
Type: REPLY
From: employer knowledge system
To: Employer
From: employer knowledge system
To: Employer
None
Table 6 transaction (6) to send notification to selected candidates (agent 2 and 3)
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Communication Model
Transaction
Identifier/Name
Information Object
Agents Involved
Communication Plan
Constraints
Specification
Communication Model
Transaction
Agents involved
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Transaction 6: After the assessment criteria the employer send the interviews
call to the selected candidates
Case data object, transmits decision, JS (Job seeker), organization
Employer, Web knowledge system,
for further processing, like making Applying, resource
allocation etc.

Transaction 6
1. Sender (employer,)
2. Receiver (web Portal Know ledge base system)
3. Sender (web Portal Know ledge base system)
4. Receiver (JS)
Core object for this transaction is test data; this contains data filled in form.
Information
1. Role: test data is core information object. No supporting item.
items
Message
1. Create interview call
Type: ASK
Specifications
From: Employer
To: knowledge system
Type: REPLY
From: knowledge system
To: Employer
None
Table7:transaction(7)arrangementofseminarby(agent2and3)
Communication Model
Transaction
Identifier/Name
Information Object
Agents Involved
Communication Plan
Constraints
Specification
Communication Model
Transaction
Agents involved
Information
items
Message
Specifications

Transaction 7: After filling form, portal handler send notice to all JS (Job
seeker) for free entry in Seminar arranged by Portal Handler, Organization for
run time interview calls,
Case data object, transmits portal handler, web portal knowledge system, JS
(Job seeker), organization
Portal handler, Web portal knowledge system, Organizer
processing, like making Applying, resource allocation etc.
Detailed specification is given in Worksheet CM-2
given below.
Transaction 7
1. Sender (Portal handler, employer,)
2. Receiver (web portal knowledge system)
3. Sender (web portal knowledge system)
4. Receiver (Employer, JS)
Core object for this transaction is seminar data; this contains data filled in form.
1. Role: seminar data is core information object. No supporting item.
3. Medium: applicable
1. Create seminar
Type: REQUIRE
From: Portal handler, employer
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To: web portal knowledge system

Type: REPLY
From: web portal knowledge system
To: Portal handler, employer
None
3.5 Design Model for Knowledge based system

Design model describes structure of knowledge based system that needs to be
constructed in term of subsystem, software modules, computational mechanism and
representational constructs required to implement knowledge and communication model
Schreiber, A Th. et al (2000). It basically covers the implemented of the system, mode of
designing and the implemented hardware, with architecture. Design model basically is
built on the analysis model by describing in details and how to retrieve the basic
function. The design model also bases on analysis and architectural requirements; it
represents the application components and overall architecture Schreiber, A Th. et al
(2000).
Table 1: Worksheet DM-1: System Architecture
Design Model
Worksheet DM-1: System Architecture
Architecture decision Format
Figure 13 shows the subsystem in the web portal system for JS (Job seeker)
Subsystem structure
Control in the system is based on Event driven, call and return Approach. Web
Control model
portal knowledge system, Organizer, JS (Job seeker)
function-oriented
Sub-system
decomposition
Figure13:Designmethodology
Table 2: System architecture and design tools

Design Model
Worksheet DM-1: System Architecture
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Software package
Potential hardware
Target hardware
Visualization library
Language typing
Knowledge
representation
Interaction protocols
Interaction protocols
CommonKADS support
Table 3: Decisionpoints
Design Model
Architecture
component
Controller
Task
Task method
Inference
Inference
method
Dynamic role
Static role
Knowledge
base
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J2EE,JSP, ASP.net, SQL Server

Personal Computers and Microsoft Web Server
Personal Computer
Visualization library
Full O-O typing software
Knowledge representation is procedural.
ADODB, ODBC
Software Environment supports message
Limited support for CommonKADS
Worksheet DM-3: Target Implementation

Platform
Typical decision points
The Controller follows event driven approach. Concurrency is not needed in the
controller.
The executable task can fail which will return 0 value and 1 for
Success. Initialization method is used to initiate a task.
The system will use If ELSE structure can be used to implement the control. It is
defined in the object control method, internal method control is procedural.
The Internal state variables are resources, when resources become available and
rule is found which is not satisfied by the case. Operations are resource finder and
monitoring which are used to implement inference.
In the Inference methods are part of inferences (i.e., included in the
Implementation of the execute operation). So relationship between inference and
inference method is one to one.
The Element data type is used for roles.
The JS (Job seeker) registration access function, Resource Resume access
function, Assessment criteria access function. Assignment/ Interview notification
The knowledge base contains resource resume, Assessment Criteria knowledge,
they are represented using relational tables. Access and modification of resume
functions are making resume.
The interface of the Standard (Graphical User Interface) GUI view is available to
user having Windows, menus, buttons.
Table 4: Design decision

Element
Controller
Task methods
Dynamic roles
Inferences
Inference methods
Knowledge bases
View objects
Design decision
Transaction TR4 when JS (Job seeker) see any job relevant to our qualification
and experience then we apply
After entering into the system, firstly jobseeker apply online, then after
applying, his resume has been assessed by the employer by checking eligibility
criteria and send back notification to the jobseeker.
For dynamic role we choose element data type.
Inference method is being used by the message passing approach.
gt_resume_resource method, match_assessment_criteria_method, are the
inference methods
J-registration, Resource Resume, Assessment criteria, Assignment/ Interview
notification
Login views, view resume , view resume template
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3.6 CommonKADS METHODLOGY

CommonKADS configuration life cycle explains the iterative planning and monitoring steps
done to get the solution to the system Schreiber, A Th. et al (2000); Pradorn Sureephong et al
(2007).
3.6.1 CommonKADS Configurable Life cycle 0
Review
In first activity of CommonKADS life cycle author have sketched a plan for Web portal
project. Author decided to make the Organizational model, task model and agent model.
There is huge number of fresh graduates who are looking for opportunity and same
condition is with our many employers that they are unable to get a perfect professional at
right time and right place. Job seekers will be able to prepare a suitable resume to display
their qualification and experience and apply online. What it does for employers to place
their job advertisements and hire suitable employee for them.
Risk
CommonKADS methodology provides good understanding of risks and suggests
solutions to these risks. CommonKADS configurable life cycle provides a full activity to
deal with these Risks. Risks like this that an employee has not been able to get a job to
his satisfaction level. Problem in which number of users accessing our portal exceeds to
intended limit which may affect speed of accessing our portal or uploading and
downloading resumes.
Plan
Discussed in Review stage of the configurable life cycle is being elaborated here. In this
stage of cycle 0 authors divide the project work in various tasks and study these tasks in
various environments and make a documentary grip for these tasks. Initial timeline for
these tasks to complete was also designed in this activity of configurable life cycle.
Monitor
At this stage of configurable life cycle and monitored all activities and task which we
have described in review, risk and plan activities. For this project authors have
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conducted meetings with different employers and graduates to know their problems and
also require some useful suggestions from them.
3.6.2 CommonKADS Configurable Life cycle 1
Review
In second cycle of CommonKADS configurable life cycle, the author has inputs from
monitor activity of cycle 0. In this cycle our main focus will be on adjusting new
requirements from and implementing decisions taken in last activity and fill all the
requirement which we need to implement the system.
Risk
At this stage of configurable life cycle we have encountered another risk. Short time has
been identified as another major risk to Job Portal knowledge system. To cope with this
risk we develop a strategy i.e. parallel task processing.
Plan
Our plan is the same as author discuss in pervious life cycle.
Monitor
In this second cycle monitoring phase of configurable life cycle author have some
meetings with the experts and the distributed some questionnaires and got their
suggestions about our portal.
Conclusion
Authors used CommonKADS methodology in which different models like organization, task
and agent models have been used. Other than this author has also used design, knowledge
and communication model to explain and elaborate our project and have explored fully how
these methods will be implemented in our project. In this document we have analyzed the
job portal providing services to educated persons to apply for jobs and employers to find
good professional for their organizations. And the entire problems identified during analysis
are described in the context of CommonKADS methodology and knowledge engineering
approaches.
The objective of this work is not only to define the KE techniques with CommonKADS
methodological implication but also dedication to management for skill extraction from the
Knowledge.
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References
Alun Preece (2001), Batter knowledgement through knowledge engineering, 10947167/01/$10.00 2001 IEEE.
Christine W. Chan, (2002), Cognitive Informatics: a Knowledge Engineering Perspective,07695-1724-2/02 $17.00 2002 IEEE
Sandra m. parker, Robert b. Parker (1989), knowledge base management systems from AI
perspective: a survey, ch2759-9/89/0000-11$61 0. 001989 IEEE.
Hiroshi Motoda (1991), Knowledge Acquisition for Knowledge-Based System,
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Soumitra Dutta (1997), Member, IEEE, Strategies for Implementing Knowledge-Based
Systems, 00189391/97$10.00 1997 IEEE
Rongrong LU, June LIU (2008), The research of the knowledge management technology in the
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978-0-7695-3488-6/08 $25.00 2008 IEEE , DOI 10.1109/KAM.2008.123
Civi, E. (2000) "Knowledge management as a competitive asset: a review", Journal of
Marketing Intelligence and Planning, Vol. 18 No. 4, pp. 166-174.
Bukowitz, W. R. and Williams, R. L. (1999) the Knowledge Management Fieldbook, Pearson
Education, Harlow.
Darroch, 1. (2003) "Developing a measure of knowledge management behaviours and
practices", Journal of Knowledge Management, Vol.7 No. 5, pp. 41-54.
Schreiber, A Th. et al (2000): Knowledge Engineering and Management. The Common KADS
Methodology. MIT Press (2000) ISBN 0-262-19300-3.
Pter fehr (2000), the missing link in the integration of knowledge management practices and
technological solutions.
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of Software as Service from Individuals perspective Vol. II No. 7 (March 2011). ISSN:
1697-9613 (print) -1887-3022 (online). www.eminds.uniovi.es
Pradorn Sureephong et al (2007), Knowledge Engineering Technique for Cluster Development,
Springer-Verlag Berlin Heidelberg 2007
Berry, Linoff (1997) Berry, M., Linoff, G. Data Min- ing Techniques (For Marketing, Sales,
and Customer Support), John Wiley & Sons, 1997.
Trichet, Leclre (2003), Trichet, F., Leclre, M. A Framework for building Competency
Based Systems dedicated to Human Resource Management. Paper submitted to the
international conference ISMIS'2003
Faix, Buchwald, Wetzler (1991) Faix, W. G., Buch- wald, C., Wetzler, R., SkillManagement Qualifikati- onsplanung fr Unternehmen und Mitarbeiter. Gabler
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Lackes, Mack (1998) Lackes, R., Mack, D. Innovati- ves Personalmanagement?
Mglichkeiten und Grenzen des Einsatzes Neuronaler Netze als Instrument zur Eignungsbeurteilung. In: Zeitschrift fr Personalforschung 1998 (4), S. 424-451
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A Study of Owners Inherited Factors Affecting Entrepreneurial Orientation in
Khyber Pakhtunkhwa-Pakistan.
HafizUllah
Lecturer , Institute of Management Sciences, Kohat University of Science & Technology,
Kohat Kpk, Pakistan.
Dr. Bahadar Shah Dean
Professor , Faculty of Law & Administrative Sciences, Hazara University, Garden Campus,
Mansehra. Kpk,Pakistan.
Muhammad Kaleem
Lecturer Institute of Management Sciences, Kohat University of Science & Technology,
Kohat Kpk, Pakistan.
Abstract
The purpose of the study is to measure the impact of Owners inherited factors (Birth order,
Family orientation and Motivations factors) on entreprenruial orientation in the province of
Khyber Pakhtunkhwa (KPK). Quseduestionaire was used to gather data through stratified
sampling method. 219 Questionnaires were distributed among members registerred with
different (Khyber Pakhtunkhwa, Hazara and D.I.Khan) chambers of commerce and indutry in
KPK. T-test was applied to analyze mean difference of repondents about entreprenruial
orientation on the basis of owner inherited factors. The results of T-test has shown mean
difference between the groups on the basis of their inherited factors which have an affect on
entreprenruial orientation.It was concluded that enterprises operated by owner having first birth
order , pull motivation and whose parents are self employed possessed better entrepreneurial
orientation level than others.
Keywords: Entrepreneurial Orientation, Khyber Pakhtunkhwa, Birth order, Family occupation
and Motivation.
1. Introduction:
Entrepreneurship is a phenomenon of great interest throughout the globe, especially in
developing economies and it is considered to be important for economic development (Samli,
2002). Importance, concentration and research in entrepreneurship have been rising over the
recent past (Green, David and Tyshkovsky, 1996; Outcalt, 2000;Alstete, 2002; Morrison, 2000;
Rohaizat and Fauziah, 2002; and Frank, Korunka Lueger and Mugler ,2005) because of its role
in economic growth and development of a country.
Entrepreneurial activities play an important role in local employment creation; resources
utilization; and income generation and in helping to promote change and innovation in gradual
and peaceful manner. Entrepreneurship has long been regarded as a significant factor in national
economic growth and development (Schumpeter, 1934 and Wilken, 1979).It is the
entrepreneurial activity that builds industries and businesses and turn companies and countries
into economic power houses (Naqi, 2003)
Enterprises, creating and introducing new products and technologies, can generate extraordinary
economic performance and have been seen as the engines of economic growth (Schumpeter,
1934, 1954; Brown and Eisenhardt, 1998).
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The 21 century is the century of entrepreneurship and every individual can be an agent for
change and innovation. As such entrepreneurs not only explain the level of income of a society,
but also its dynamics of change. Differences in the rate of growth among countries or across
periods of time in the country are determined by the supply and quality of its entrepreneurial
capabilities, in other words, of its entrepreneurs (Alvaro, 2005).
As an entrepreneur is a human factor of production, he can not act in a social vacuum. He is
influenced by the background into which he is born as well as environment in which he raised.
Being an innovator and a decision maker, he derives strength from certain forces to plunge into
business, fighting against uncertainties, bear risk and endure difficulties in the pursuit of profit.
His motivation, caste, ethnic background, family structure, as source of support enable him to
stay on track and moved in the desired direction (Altaf, 1983).
There are many research studies which measure the impact of the entrepreneur's education,
career history, family and personal background
on the enterprise growth and their
entrepreneurial behavior, in other words entrepreneurial orientation is influenced by these
entrepreneurs inherited factors(Boswell ,1972; Cooper and Gimeno Gascon ,1992; Helfat and
Lieberman, 2002 and Shane ,2000). This approach differentiates the entrepreneurial firms from
others on the basis of their Owners inherited factors.
As entrepreneurial orientation theories have emerged primarily from research in developed
countries, it is important to examine the extent to which these apply in the context of developing
countries such as Pakistan with special reference to Khyber Pakhtunkhwa (KPK), because the
social ,economic structures, gender related issues, cultural differences, family prescriptions,
poverty level, geographical regions, ethnic origin and the rural/urban divide due to uneven
socioeconomic development and the impact of tribal, feudal etc. vary widely in developing
countries with special reference to KPK.
The objective of this study is to measure the differences about entrepreneurial orientation of
members registered with different chambers of commerce and industry in KPK on the basis of
their inherited factors. Although the importance of different entrepreneurs inherited factors i.e.
birth order, role of parents etc. (Matthews & Moser, 1996) has been widely discussed in the
literature affecting entrepreneurial orientation but there is little empirical evidence to determine
the affects of these inherited factors on entrepreneurial orientation in developing countries like
Pakistan with special reference to KPK. In my study entrepreneurial orientation is dependent
variable. The next section reviews these variables as given in the literature review.
2. Literature review:
2.1 Entrepreneurial Orientation:
The term entrepreneurship has been defined for over 200 years from different
prospective(Hebert and Link,1988). The traditional focus was on the efforts of an individual
whose innovative behavior translates his vision into successful business enterprise (Collins and
Moore, 1964). More recently, however, entrepreneurship has been conceptualized as a process
which can occur in enterprises of all sizes and types and which is distinct from, but dependent
on, specific individuals (Burgelman, 1983; Gartner, 1985;Kao,1989; Miller, 1983; Wortman,
1987).
So in this way, entrepreneurship can be defined as process of creating value by bringing
together a unique package of resources to exploit an opportunity (Stevenson, Roberts and
Grousbeck, 1989). This process includes both an entrepreneurial event and an entrepreneurial
agent. The event refers to the conceptualization and implementation of a new venture. While
agent on the other hand is an individual or group that assumes personal responsibility for
bringing the event into successful business enterprise.
The entrepreneurial process has attitudinal and behavioral components (Bird, 1988;Long Tan and
Robinson,1995). Attitudinally, it refers to the willingness of an individual or organization to seek
new opportunities and take responsibility for effecting creative change (Miller and
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Friesen,1982,1884). This willingness is referred to as an entrepreneurial orientation.

Behaviorally, it includes the set of activities required to evaluate an opportunity, define a
business concept, assess and acquire the necessary resources and then to operate and harvest the
rewards through firms creation (Stevenson, Roberts and Grousbeck,1989).
Entrepreneurial orientation refers to the processes, practices, and decision-making activities used
by entrepreneurs to act entrepreneurially that lead to the initiation of an entrepreneurial firm
(Lumpkin and Dess, 1996). Miller (1983) defines an entrepreneurial firm as one that engages in
product market innovation, undertakes somewhat risky ventures, and is first to come up with
proactive innovations, beating competitors to the punch. However, each dimension is
suggested to be positively correlated (Lumpkin and Dess, 1996), which has been validated
empirically (Rauch, Wiklund, Freese, and Lumpkin 2004).So Entrepreneurial firms are those
whose entrepreneurial behavior focuses on risk taking, innovation, and proactiveness. So
entrepreneurial orientation is evidenced through observable entrepreneurial tendency toward
innovativeness, Proactiveness and risk taking.
The construct Entrepreneurial Orientation (multidimensional construct encompassing firm
innovativeness, proactiveness and risk taking) is receiving increased attention in the field of
entrepreneurship (Stevenson and Gumpert, 1985). This entrepreneurial orientation construct
seems too applicable in all types of enterprises. Further Kreiser, Marino and Weaver (2002)
founded that the entrepreneurial orientation construct was valid across different national contexts
and applicable globally
The conceptualizations of entrepreneurial orientation include three dimensions: proactiveness,
risk taking, and innovativeness. A literature review confirmed that these three dimensions are the
most commonly used in entrepreneurial research. (Covin and Slevin,1989,1991; Knight,1997;
Morris and Paul, 987; Miller,1983; Zahra and Covin, 1995; Zahra, 1993). Innovation refers to
the seeking of creative, unusual or novel solutions to problems and needs. These solutions take
the form of new technologies and processes, as well as new products and services(Vesper,1980;
Schumpeter ,1934). Risk taking involves the willingness to commit large resources to
opportunities which have a reasonable chance of costly failure i.e. that includes risk
taking(Stewart ,2001;Gasse,1982), Proactiveness is the propensity to anticipate and act on future
market needs and opportunity (Schwartz, Teach, and Birch, 2005;Kouriloff ,2000;Lumpkin and
Dess, 1996) and has first mover advantage to become pioneer and also always strive to gain an
edge over their competitors(Kerin,1992).
Empirically, the positive impact of entrepreneurial orientation on firm performance and growth
has been supported by several studies (Stuart,1990;Lumpkin and Dess, 1996,2001; Wiklund,
1998,1999, Wiklund, and Shepherd ,2003; Zahra, Jennings, and Kuratko, 1999;Dess, Lumpkin
and Covin,1997).
2.2 Owners inherited factors affecting entrepreneurial orientation:
In Khyber Pakhtunkhwa mostly the family oriented businesses exist, like Arsheen ,London Book
Stall, Saeed Book Bank of Peshawar are involved in family business. Similarly Al Syed medicos
and Shaheen chemist expended their family business on large scale in Peshawar as well as setup
their branches in Islamabad. Similarly in Partnership type of businesses mostly the relatives and
friends are involved. Moreover Family businesses are generally operated by their elder child
keeping in view his responsibility. In the same way success stories of their family members
motivate them to behave entrepreneurially. Due to these circumstances entrepreneurial culture
improves, and if we see example in KPK, Hafiz Misalas in Bannu, owner of city university in
Peshawar, hand loom industry in Islampur of Sawat converted in power looms, import and
export of carpets and rugs in Peshawar specially in Khyber bazaar, pickles and jams business in
Abbotabad and Haripur, cutlery items in Dir, production of strawberry in Sawat, embroidery
business in D.i.khan, beekeeping and honey production in karak as famous all over Pakistan are
mostly involved in family type of businesses which reflect the inherited aspect of an entrepreneur
affecting their entrepreneurial orientation . In the light of above examples and circumstances I
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have divided Owners inherited factors affecting entrepreneurial orientation into following
dimensions.
2.2.1 Birth order:
The studies of birth order shows interesting results. Henning's and jar dim (1977) as well as
Helfat et al., (2002) reported that entrepreneurs tend to be the first born. Being the first born
child, who received special attention and hence gained more self confidence. Hisrich and Brush
(1984) in sample of 408 entrepreneurs founded that 50 percentages were to be first born. Studies
have shown that first born children tend to take more responsibility and be high achievers which
researchers say is likely to correlate with being an entrepreneur (Robinson, Stimpson , Huefner
and Hunt , 1991). Owner who has first birth order increases his probability to run his enterprise
with higher entrepreneurial orientation than others having different birth order and ultimately
increase firm's entrepreneurial orientation. Hence,
Hypothesis (H1): Enterprise owned by owner having first birth order has different
entrepreneurial orientation than others.
2.2.2 Family Occupation:
In term of the entrepreneur parent's occupation, there is strong support that entrepreneur tend to
has self employed or entrepreneurial father .Entrepreneur whose father is self employed provides
strong inspiration for him because at an early age, the independent nature of self employed is
deep rooted by his father (Matthews and Moser ,1996) .Further more the entrepreneurial mother
also increases the feeling of independence. Various studies described that that it is not easy to set
up a business for the first generation entrepreneurs, but majority of the entrepreneurs set up their
business if they already have a family background of business and mostly capital for start up is
provided by family and friends (Lee and Tsang, 2001). Similarly according to Kolvereid (1996)
entrepreneurs tend to have parents with entrepreneurial mind set .Thus entrepreneurs having
entrepreneurial parents are more likely to behave entrepreneurially and to work with higher
entrepreneurial orientation than other whose parents are job oriented and ultimately increase
firm's entrepreneurial orientation. At the end it is stated that enterprises whose owner's parents
are self employed possessed greater entrepreneurial orientation than others. Hence,
Hypothesis (H2): Enterprises whose owners parents are self employed possessed different
entrepreneurial orientation than job oriented parents.
2.2.3 Motivational factors:
Research has also fined out that motivational factors, which provide more effective results. The
entrepreneurial motives behind establishing business enterprise are divided into 'Push' and 'Pull'
motivation (Gilad and Levine ,1986; Storey ,1992;Storey and Wynarczyk, 1996). Shane (2000)
said that the owners of entrepreneurial firms compared to those of other firms might have
different motives for setting up their business. We can distinguish Pull motivation from Push
motivation which is influenced by the economic and social environment of an individual. These
two motivational factors have been applied to entrepreneurial orientation.
The Pull motivation is related to the exploitation of an economic opportunity that encourages
the entrepreneur to establish business enterprise associated with his or her own self-realization
and freedom. So the pull motivation becomes economic opportunity, that is, reward seeking.
While Push motivation or forced motivation occur due to pressure induced because of career
limitations, unemployment, being dismissed, under-reward, or not fitting in and thus creation of
business enterprise becomes an employment opportunity (Gilad et al., 1986; Olofsson, Petersson
and Wahlbin 1986; Wickham, 2001).
Entrepreneur who establishes enterprise due to pull motivation as compare to push motivation
increases his/her chances to run enterprise with higher entrepreneurial orientation (Shane, Locke
and Collins, 2003; Segal, 2005).In order to analyze impact of their motivation as differentiating
factor affecting entrepreneurial orientation, it is proposed that enterprise whose owner possessed
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pull motivation has more entrepreneurial orientation as compare to those who possessed push
motivation.
Hypothesis (H3): Enterprises whose owner possessed pull motivation have different
entrepreneurial orientation than those having push motivation.
2.3 Research framework and variables selection
The research framework employed in the study is presented in Figure 1. The owner inherited
factors selected for analysis are reflected in the hypotheses development. The justification for
selecting these variables has been discussed in the literature review section. In this study the
dependent variable entrepreneurial orientation is measured on five point interval scales.
Schematic diagram of the theoretical framework (at the end as fig. 1)
3. DATA COLLECTION AND SAMLPE SIZE DETERMINATION
RESEARCH METHODOLOGY
3.1 Survey method
Survey research is excessively used in social sciences for data collection (Babbie, 1993). Survey
research can describe the attitudes and behaviors of population by selecting in representative
sample of individuals and entering their responses to set of questions. Finally survey strategy can
also be an excellent vehicle for measuring attitudes and orientation in a large population
(Babbie,1993). The potential of survey research is questionnaire technique.
3.2 Questionnaire development
The survey instrument used in the study is questionnaire. The questionnaire was consist of two
parts. The first part consists of owners inherited factors affecting entrepreneurial orientation.
Questions about birth order, family occupation, and finally motivational factors affecting
entrepreneurial orientation were asked from the respondents(Owners) in questionnaire. All these
questions were asked on nominal scale.
The second part consists of entrepreneurial orientation measurement. Entrepreneurial orientation
is measured by asking nine questions about innovativeness, risk taking propensity and
proactiveness on five-point Likert scale from strongly agree to strongly disagree developed by
Covin and Slevin (1989).Respondents were asked to indicate their degree of agreement or
disagreement with each given statement on a five-point Likert scale from strongly disagree(1),
disagree(2), neutral(3), agree(4) strongly agree(5). All these questions were asked on interval
scale.
3.3 Population size of the Study
The Population of this study consists of 3496 members registered with different chamber
of commerce and industry in KPK, working in different categories (www.kpcci.org.pk). The
detail of population size provided by respective chambers is given bellow in Table 1.
3.4 Sample size determination
In order to determine the readability, clarity of questionnaire and reliability of measures the
researcher conducted a pilot study. Researcher distribute questionnaire among thirty eight
members in pilot study and cronbachs alpha was above the acceptable range .For sample size
determination, the result of pilot study are given in the following Table 2.
The target population of the study included the total number of members registered with chamber
of commerce and industries in KPK. The formula for finite population (Najeebullah, Shah and
Nawaz, 2008) was used to compute the sample size for each population category. The population
was made up traders, services providers and traders and manufacturers working in KPK on small
and medium scale. In the social sciences, 95% confidence level is usable, which equals to 1.96 zvalues.
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Note. As population is the combination of three different groups, and also the population of
traders group with respect to others is too large. It can be seen from the above table that results
of proportionate sampling do not give proper representation to each group. Therefore, situations
like this Sekaran, (1999,p.270) said that disproportionate sampling decisions are made either
when some stratum or strata too small or too large, or when there is more variability suspected
within a particular stratum. So I applied disproportionate stratified sampling procedure which is
shown in the right most to the above Table2.
3.5 Statistical methods:
Descriptive statistics were reported in Table 3 to develop profile of the sample.To test research
hypotheses specified in the study, t-test of mean differences was applied to analyze Owners
inherited factors impact on entrepreneurial orintation.
4. Data Presentation, Analysis and Interpretation
After data have been collected from representative sample of the population, the next step is to
analyze it in order to test the research hypotheses. A descriptive and inferential analysis of the
primary data indicates mean differences among members about their different inherited factors.
The evidence in the favor or against the hypotheses pinpoints the reality of the research study.
Since data was collected from different chambers of commerce and industry in Khyber
Pakhtunkhwa (KPK), therefore the analysis and their interpretation opens-up new levels of
understanding about the different factors affecting entrepreneurial orientation in general, and
KPK particularly. The data was analyzed using SPSS (V.18.0) to examine the Cronbachs alpha
for the measure, to obtain frequencies outputs: Respondents Profile and finally Hypotheses
testing.
4.1 Checking the Reliability of measure: Cronbachs Alpha:
Cronbachs Alpha reliability coefficient of the dependent variables is obtained. This was above
0.80. The sample of the result obtained for Cronbachs alpha test for the dependent variable
(entrepreneurial orientation) is, given below:
Reliability test: N of Cases = 219
N of Items = 09
Alpha = 0.89
The results indicate that the Cronbachs Alpha for the nine items is 0.89. The closer the
reliability coefficients get to 1.0, the better. In general, the reliabilities less than 0.60 are
considered to be poor, those in the 0.70 range, acceptable, and those over 0.80 good (Sekaran,
2000) As the Cronbachs Alpha for all the nine items used in this study is about .89, thus internal
reliability of the measures used in this study can be considered to be good.
4.2 Descriptive statistics: Respondents Profile
In the research study majority of the respondents were consist of those who were not elder child
(n=128, 58.4%),While propotion of elder child having first birth order was (n=91, 41.6%). With
in respect of family occupation ,respondents whose parents were selfemployed composed of
(n=82,37.4%) and remainng (n=137,62.6%) parents were job oriented. Respondents with reppect
to motivational factor,pull motivational onwers formed larger group of (n=144 ,65.8%) as
compare to push motivational group(n=75 ,34.2%).
4.3 Hypothesis Testing
Three hypotheses were generated for this study as stated earlier. This call for the use of t-test
because there are two groups and the dependent variable, entrepreneurial orientation, is measured
on interval scale. The results of group statistics and Independent Samples Test are given below in
Table 4 and Table 5.
All of the hypotheses were tested using independent samples t-test in order to analyze the
differences statistically. Based on the results shown in Table 4, & 5, the difference in the means
of 3.3468and 2.8576with standard deviations of .81982 and .65607 for first birth order and others
about their entrepreneurial orientation level is significant as p<0.05 at 217 degree of freedom.
Hence hypothesis H1 was accepted, which means there was a significant difference between
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entrepreneurially and non entrepreneurially oriented members with respect to their birth order.
Similarly, the difference in the means of 3.6247and 2.7234with standard deviations of .75453and
.54301for the self employed parents and others who are job oriented about their entrepreneurial
orientation is significant as p<0.05 at 217 degree of freedom, therefore hypothesis (H2) was
accepted, which means there was a significant difference between entrepreneurially oriented and
non entrepreneurially oriented members with respect to their family occupation. And finally, the
difference in the means of 3.6207and 2.7693 with standard deviations of .83789 and .53004 for
those who possessed pull motivation and push motivation about their entrepreneurial orientation
respectively is significant as p<0.05 at 217 degree of freedom. Hence hypothesis H3 was
accepted, which means there was a significant difference between entrepreneurially oriented
members and those who are not entrepreneurially oriented with regard to motivational factors.
Discussion: Following are the outcomes that I considered:

Birth Order:
The result of this research supported previous researches(Henning et al.,1977; Hisrich et
al., 1984; Robinson et al., 1991 and Helfat et al., 2002) as already discussed in the literature
review section. As per the birth order it was observed that the first child, especially the son
becomes a good entrepreneur and possesses more entrepreneurial orientation because he receives
more attention from his parents like his education, growth, training, attitude & behaviors etc.
When he grows up then becomes an effective entrepreneur of the society by taking the
responsibility of his family. The elder son shares familys burden and operates his family
business with higher entrepreneurial orientation.
Family Occupation:
Similarly, the result of this research supported previous researches (Matthews et al.,1996; Lee et
al., 2001; and Kolvereid ,1996) as already discussed in the literature review section.Inherent
family business is creating an effective entrepreneur in the KPK. It was come on the surface that
the successful entrepreneur builds up through family occupation. Informal relations plays very
important role in this context especially from family members side because those whose family
members are business oriented their participation is high. For instance in district Bannu Hafiz
Masla Jat is a famous one in the area. It was started by the elders members of family, now their
children promoted it.They convert the product into the different range of Masala jat, also
improved it packaging and developed the meaningful net work in the areas of KPK like
D.I.Khan, Swat, Abbottabad, Kohat, Peshawar. Another case is the city university Peshawar. It
was initiated by a primary school teacher then he build up to the college. Now this becomes an
effective university of KPK which is controlling and managing by their children as well. Same is
true for Qurtaba University D.I.Khan. It started from private Public School, grown to High
school then college and now University at D.I.Khan with campus in Peshawar
Pull and Push Motivation:
Motivation is one of the significant factors of a successful entrepreneur affecting entrepreneurial
orientation. By comparing pull and push motivation, the pull motivation is much better for
promotion of entrepreneurial culture because the entrepreneurs having such type of motivation
become more opportunity seeking oriented. They are self motivated committed with the market
dynamism, informative and meaningful network oriented. They captured opportunities from the
surroundings due to expectation for profits, or the gap between the expected utility and their
opportunity cost. While on the other hand, Push motivation due to the lack of job opportunities
from being unemployed, being dismissed from a job or leaving the firm voluntarily because the
lack of satisfaction has not played too much contribution in entrepreneurial orientation
development as already discussed in the literature review section(Gilad et al., 1986; Olofsson et
al., 1986; Storey ,1992;Storey et al.,1996; Shane ,2000;Wickham, 2001; Shane et al., 2003;
Segal, 2005).In the same way relatively in poor economies, it would be seen that necessity-based
entrepreneurship is the dominant kind (e.g. India, Pakistan) while in richer economies like the
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U.S. the opportunity - based entrepreneur is more prevalent. U.S.A in 2003, where total
opportunity-based entrepreneurial activity (TEA) was 9.1% and necessity-based TEA was only
1.7%. Thus only very few people were pursuing self-employment because of lack of opportunity.
While India in 2001 necessity-based entrepreneurship was far higher at 7.5% than
opportunity-based entrepreneurship of 3.7 %(Manzur, 2008).Likewise in 2009, the Global
Entrepreneurship Monitor (GEM) which looks at 54 countries in the emerging and developed
markets concluded that there are many more necessity-driven entrepreneurs in emerging markets
than in the developed world (Keyes et al., 2010). Same is the case in Pakistan with special
reference to Khyber Pakhtunkhwa (KPK) where level of entrepreneurial orientation is low as
indicated by the research because mostly enterprises are established by the businessmen due to
fulfill their needs, having necessity-based oriented motivation i.e. push motivation.
Conclusion:
Present study measured the difference in perceptions of entrepreneurial orientation among the
owners registerred with different chambers of commerce and industry in KPK based on their
various inherited factors (birth order,family occupation and motivations).The result of the study
supported previous research as already discussed in the literature review section. The present
study result also showed that there is significant difference of respondents perception towards
entrepreneurial orientation on the basis of their inherited factors(birth order,family occupation
and motivational factors), registerred with different chambers and industry in KPK. Similarly it
was also founded that enterprises operated by Owner having first birth order have different
entrepreneurial orientation than others. Also it was concluded that owners whose parents are self
employed possessed more entrepreneurial orientation as compare to those who are job oriented.
At the end enterprise whose owner possessed pull motivation has higher entrepreneurial
orientation as compare to others having push motivation. The results of the current study have
provided useful insight to detremine the entreprenruial orientation in our society in order to
develop entreprenrial culture in Pakistan, particularly in KPK. It further discovers that both
financial and moral support of immediate family members and more opportunities seeking
motivation creates such an environment which promote entrepreneurial culture in the society,
which is an important factor for the development of a country like Pakistan.
Figure1. Impact of entrepreneurs inherited factors on Entrepreneurial Orientation.
Birth order (H1)
Entrepreneurial Orientation
Family occupation (H2)
Motivational factors (H3)

Table1. Details of population size of the study.
Categories
Services
Providers
Manufacturers
and Traders
Traders
Total
Khyber Pakhtunkhwa
(Sarhad) Chamber Of
Commerce and Industry
171
Hazara Chamber Of
Commerce and
Industry
56
D.I.khan Chamber Of
Total
24
251
291
88
51
430
2039
2501
560
704
216
291
2815
3496
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Table2. Sample Selection Procedure (Pilot Study Statistics)

Sample (FINITE population)
Stratified Samples
Pilot Study Statistics
Disproportionate sampling
Standard Deviation
()
(from formula)
0.78
Standard Error (E)
0.10
Z value at 95%
Confidence
1.96
Sample Population N 3496

Sample Size (n)
219
SD()
251
0.69
14
Manufacturers And Traders 430
0.79
29
Traders
0.86
176
Services Providers
2815
N=
3496
n=
219
Formula
na= [(nNaa)/((Naa)+(Nbb)+Nnn))]
Formula
nb= [(n Nbb)/((Naa)+(Nbb)+Nnn))]
n = [2/(( E2/Z2)+(2/N))]
..
Sample size(n)=219
..
nn= [(n Nnn)/((Naa)+(Nbb)+Nnn))]
Table3. Frequencies distributions of sample

Demographic
Frequency
Percentage
Birth order
Frequency
Percentage
First born
Others
Total
Family Occupation
91
128
219
Frequency
41.6
58.4
100.0
Percentage
Self Employed
Job Oriented
Total
Motivation
82
137
219
Frequency
37.4
62.6
100.0
Percentage
Pull motivation
Push motivation
Total
75
144
219
34.2
65.8
100.0
Cumulative
Percentage
Cumulative
Percentage
41.6
100.0
Cumulative
Percentage
37.4
100.0
Cumulative
Percentage
34.2
100.0
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Table .4 Group Statistics
Birth order
Entrepreneurial
First born
Orientation
Others
Entrepreneurial
Orientation
Mean
Std. Deviation
91
3.3468
.81982
128
2.8576
.65607
Mean
Std. Deviation
82
3.6247
.75453
137
2.7234
.54301
Mean
Std. Deviation
75
3.6207
.83789
144
2.7693
.53004
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Family Occupation
Self employed
Jobs oriented
Entrepreneurial
Orientation
MAY 2011
Motivational
Factors
Pull motivation
Push motivation
Table .5 Results of t-test of significant differences (Independent Samples T-test)

Variables
Birth order
Family Occupation
Motivational Factors
Sample
size(n)
219
219
219
degree of freedom
(df)
217
217
217
t-value
p-value
4.89
10.24
9.177
0.000
0.000
0.000
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An Empirical Study of Analyzing Customer Satisfaction towards Service Quality

in Islamic Banks of Sargodha, Pakistan.
Rizwan Ahmad Ch. & Usman Asif
MS Scholars , Riphah International. University, Islamabad, Pakistan
Abstract
Banks are always trying to attract & retain Customers. Therefore today need is to provide better
Services Quality in order to make customer loyal. There Primary Products or Point of Parity are
the same, but the Point of Difference is only the Quality of Services. While the purpose right
behind for analyzing the Customer Service Quality in Islamic Banks of Sargodha is to find the
level of Services quality expecting by Customers & provided by Islamic banks of Sargodha &
then comparing them to fulfill the Service Quality gap. The SERVQUAL model (Parasuraman,
Zeithaml & Berry, 1985, 1988, 1991) & descriptive statistics analysis were used in evaluating
the level of Customer Quality. The result shows that Islamic Banks were not able to provide the
desire Service Quality as per expectations of Customers.
Key Words: Islamic Banks, Customers Expectation towards Banks, Satisfaction, Quality of
Services, Sargodha Pakistan.
INTRODUCTION
Inception of Islamic banking practices in Pakistan created multiple threats and opportunities to
meet customers expectations by the provision of quality services (Ahmad, Rehman, Saif, &
Safwan, 2010). A healthy competition is running for Islamic banks to compete with their peers
and conventional banks for greater profits (Ahmad, Humayoun & Hassan, 2010). It was observed
that the banking industry experienced stiff competition with banks and with other financial
institutions to attract potential customers (Hull, 2002). Now there are more than 40
Conventional, 6 Islamic and Microfinance banks with their hundred of Branches
operating in Pakistan (State Bank Of Pakistan, June 2010). The increase in the Branch
networks of banks resulted into the strong competition. This study examines the service
quality with respect to customers of Islamic banks as Leeds (1992) explained that Better qualityservices always resulted into greater customer satisfaction and also reduced customer erosion. In
order to maintain long term relationship in banking sector customers, Service quality contributes
a lot to-gain competitive advantage (Zeithmal, Parasuraman, & Berry, 2000). Prudential
regulation imposed by the State Bank of Pakistan to improve their Bank Services. Currently
there are more than 06 Islamic Banks operating in this region & more then 10 Conventional
Banks offering some products related to Islamic Banks.
LITERATURE REVIEW
Services is defined as
Benefits, activities & satisfactions offered for sale or provided with the buying of goods.
(American Marketing Association, 1960).
Services are generally consumed at the time it is produced, include all economic-activities,
whose output are not a physical products or construction and also provides added-value in forms
(such as comfort or health, amusement, convenience, timeliness,) & that are always intangible
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concerns of its first buyer (Quinn, Baruch and Paquette, 1987). There are four main
characteristics of Services that differentiate it from goods, which are, 1-intangibility, 2inseparability, 3-heterogeneity and 4-perishability (Hoffman and Bateson, 2002; Parasuraman et
al., 1985). Quality plays a vital role in the acquisition and retention of the customer (Galloway
and Ho, 1996).
Service quality can enhance the organizations long term benefits, competitive position and in
last leads to differentiation in future (Morre, 1987). Hanson (2000) suggested in his study that
organizations/firms should improve their services to fulfill the customers needs, wants and
requirements. Another study underlines the phenomenon that service quality is an important
indicator of customer satisfaction (Spreng and Machoy, 1996). Service quality has been defined
as the degree and direction between customer service expectations and perceptions (Newman,
2001). Perceived service quality is defined as how well a service satisfies the expectations of
customers (Berndt, 2009). Service quality has an impact on profitability and costs (Buttle, 1996),
as service quality influences customer satisfaction, it impacts customer retention, reduces costs
and increases profitability (Zeithaml et al., 2006). One study found that, many activities like
processing information rapidly have impact on customers & resulted in much delighted customers,
customer get dissatisfied due to the reliability of equipment lessened (Johnston, 1997). Due to the
increase in competition, service quality has got popularity among professionals and academia,
further Zeithmal et al. (2000) also explained thats to get competitive benefit & to sustain longterm association with patrons play vital role. Leeds (1992) mentioned that dealing of bank
customers vital, because service-quality primarily depends on its.
Banks need to be more concentrate on service-quality to gain competitive position in market and
customer satisfaction (Caruana, 2002). It is found that customers values and beliefs create its
perception / image in the mind of customer regarding service-quality & that beliefs vary from
one culture/nation to another (Furer, O., Ching-Liu, BS., Sudharshan, D. 2002). Due to culture,
demographics, geographic of a region, religion, and or any other attributes, there is almost no
consensus in the literature regarding service-quality uniform-dimensions among researchers. It
can be vary form one region to another. However, Parasuraman et al. (1988, 1991a,b) urbanized
SERVQUAL model / instrument to find out the degree of the dimensions of service quality,
which are frequently used almost by all researchers to explore service excellence. It consists of
twenty-two (22) items that are coupled into five different dimensions namely 1-reliability, 2tangibility, 3-responsiveness; 4-assurance and 5-empathy.
Different ways have been suggested to measure service quality, the most well known being that
of the SERVQUAL instrument (Parasuraman et al., 1988). This instrument is based on the
differences between the perceptions and expectations of customers regarding the dimensions of
service quality. The difference between the perceptions and expectations indicates the existence
of a gap. The instrument was developed with 22 statements reflecting each of the dimensions
identified, but this has been adapted depending on the industry in which the research has been
conducted.
This service quality model is as under:-
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*******************************************
METHODOLOGY
The purpose behind this study is to investigate the level of Customers satisfaction of Islamic
banks regarding facilities provided in Sargodha (Pakistan). All customers of the Islamic Banks
of Sargodha are the population. A sample of 91 Islamic banks customers selected.
A convenience sampling, non-probability sampling design, method was used due to its
consideration as more appropriate to collect the Data. Convenience sampling was used due to its
easily accessibility of customers & data collection is easy, required less time as compare to
others methods & furthermore data can be collect from the members of the sample that are near.
As Food and Nutrition Technical Assistance Project (FANTA 1997) that non-probability
samples are not complicated and Economical than others probability samples. To collect the
required information from Islamic Banks Customers, A-personal contact approach is also used;
more the researcher clarified the queries of respondent raised by any.
The methodology used for Survey is Questionnaire. A survey is a means of gathering
information about a particular population by sampling some of its members, usually through a
system of standardized questions. Surveys can be conducted by mail, telephone, personal
interview, or Internet. They can be administered either to individuals or groups. The primary
purpose of a survey is to elicit information which, after evaluation, results in a profile or
statistical characterization of the population sampled. Questions may be related to behaviors,
beliefs, attitudes, and/or characteristics of those who are surveyed. Questionnaires structure
included open ended & closed ended Question. A 5-point Likert Scale (Ranging from strongly
disagree=1 to strongly agree=5 used for collecting of required information.
The Questionnaire was divided into two sections.
1. Demographic of the Respondent
2. The last section dealt with the respondents satisfaction levels. Statistical Package for Social
Science (SPSS Version 14) package will be used to analyze the data set. A frequency
distribution was used to describe the sample. The mean and standard deviations of the
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attributes will also be computed. Finally, paired t-tests will be used to test the significant
difference between sample means.
The questionnaire (Attached as Annex A) designed for this study was based on the widely
accepted SERVQUAL model. A total of 22 attributes were categorized under five dimensions as
follows:
S.
Attributes
# of Questions
#
1
Tangibility
4
2
Reliability
5
3
Responsiveness
4
4
Assurance
4
5
Empathy
5
Total =
22
FINDINGS
1. Findings of Descriptive Statistics
120-questionnaires were distributed among sample to collect data. 103 collected back & 91questionnaires were useable for data analysis among them. Response rate is 76%, which is quite
reasonable for data analysis.
The list of Islamic Banks selected for the study as under:a.
b.
c.
d.
e.
f.
AlBaraka Islamic Bank

BankIslami Pakistan Limited
Dubai Islamic Bank Pakistan limited
Dawood Islamic Bank Limited
Emirates Global Islamic Bank Limited (Merged into Al Baraka Bank (Pakistan) Limited)
Meezan Bank Limited-Premier Islamic Bank In Pakistan
The gender-composition was 88 male (95%) and only 3 female (5%) respectively. The reason
behind less # of females respondent was in Pakistani cultural males are responsible for earning.
Men fulfilled the necessities or responsible for outside the home on the other hand females
performed domestic-duties inside the house (Obbe, 1980). Both (these) groups include Business
men (68), Salaried Person (17), Students of different institutions (3) and House Wifes (3) as
mentioned in Table-A.
As per Qualification of the customers, majority of the respondent 68 (65 Male & 3 Female) were
Below Bachelor, 10 (All Males) of them has Bachelor Degree & remaining 13 (All Males) have
Master Degree (Table-B). As per segmentations of Customers according to the age 6 persons
(All Males) lies in age group b/w 18-22, 43 including 3 females lies in b/w 29-34 & 42
respondents lies in age group b/w 35 & above (Table-C). While 25 including 1 Female
customers native language were Urdu & 66 had Punjabi as native language (Including 2
Females) as reported in Table-D.
Table-E showing marital status, 85Males & 3Female are married*, while only 3 person (Male)
are un-married** in respondent.
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Table-A
Your Position * Gender Cross tabulation
Count
Your Position
Business Men
Salaried Person
Students
House Wives
Total
Gender
1.00 (Male)
2.00 (Female)
68
0
17
0
3
0
0
3
88
3
Total
68
17
3
3
91
Table- B
Qualification * Gender Cross tabulation
Count
Qualification
Below Bachelor
Bachelor
Master
Total
Gender
1.00 (Male)
2.00 (Female)
65
3
10
0
13
0
88
3
Total
68
10
13
91
Table-C
Age * Gender Cross tabulation
Count
1.00 (male)
Age
18-22
23-28
29-34
35 & above
Total
Gender
2.00 (Female)
6
0
40
42
88
Total
0
0
3
0
3
6
0
43
42
91
Table-D
Native Language * Gender Cross tabulation
Count
Native Language
Total
Gender
1.00(male) 2.00(Female)
Urdu
24
1
Punjabi
64
2
88
3
Total
25
66
91
Table-E
Marital Status * Gender Cross tabulation
Count
1.00(male)
Marital Status
Married
Un-married
Gender
2.00(Female)
85
3
Total
3
0
88
3
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Table-E
Marital Status * Gender Cross tabulation
Count
1.00(male)
Marital Status
Married
Un-married
Total
Gender
2.00(Female)
85
3
88
Total
3
0
3
88
3
91
2. Results of Reliability and Validity of Data

Cronbachs alpha for instrument (22 items) was 0.826. The Cronbachs alpha for individual
variables of Tangibility (0.842); Reliability (0.761); Responsiveness (0.746); Assurance (0.859);
and Empathy (0.710) were found to be within limits for further analysis as greater then Role of
Thumb (0.7).
3. Results of variability (Deviation)

Table F is showing the variability-statistics for the service quality of Islamic Banks and its
dimensions. The results shows that Islamic banks service quality scores of all items are not more
deviate as Tangibility 4-items mean is 3.82 & Standard Deviation is .83, Reliability 5-items
means is 4.49 & Standard Deviation is .70, Responsiveness 4-items mean is 3.47 lowest as
compare to others factors & Standard Deviation is .94 as respondent might perceived that
employees of those banks remains busy & have less time to deal with them, 4-items mean of
Assurance is 4.49 (Highest) & Standard Deviation is .78 as per respondent might think that
employees although are busy but they have the knowledge to answer their questions, they feel
safe with bank for their transactions. And, for last 5-items Empathy mean is 3.79 & Standard
Deviation is .74.
Table-F
N
Minimum
Maximum
Sum
Mean
Std. Deviation
Tangibility
91
1.75
5.00
347.75
3.8214
.83023
Reliability
91
1.60
5.00
408.60
4.4901
.70254
Responsiveness
91
1.75
5.00
315.75
3.4698
.94121
Assurance
91
2.50
5.00
409.25
4.4973
.78837
Empathy
91
2.00
5.00
344.60
3.7868
.74165
Valid N (listwise)
91
4. Analyses of Customers Satisfactions

The purpose right behind of this study is of analyzing customers satisfaction was to find/confirm
the results of low or high service quality level & the degree of satisfaction or dissatisfaction.
The respondents (Islamic Banks Consumers) were asked to rate statements from 1 to 5 where 1 =
Strongly Disagree, 2 = disagree, 3 = neutral, 4 = agree and 5 = Strongly Agree based on their
level of satisfaction;. The table below showed that the mean for overall customers satisfaction
was 4.013. This indicates that customers were agree/satisfied with the service provided by the
Islamic banks in Sargodha (Pakistan).
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Customers Satisfaction
Description
Overall Satisfaction
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Mean
4.013
Limitations and Future Research

The basic limitation of this study is that all respondent belongs from a single region and the data
gathered from respondent not represent the whole World, although it may be eliminate in
upcoming or future research. If this Research study, taken as a national sample, then this would
provide a better generalization for the Islamic banking sector in Pakistan, because Customer
Satisfaction issues always attached with the domain of Banks or any Customer Services
providing firms.
6. Conclusion and Implication
This study builds on earlier research of Ahmad et all. (2010) and find / examines the level of
service-quality of Pakistan Islamic banking industry from the customers perspective.
Customers perceptions are always very important weather it relates to any industry, but in
Banking Sectors Customers involvement is very high in the delivery of quality services, so their
Banking Customers satisfaction is the key for any Bank to gain maximum share in competitive
market.
In Pakistan, Customers are looking satisfied from the quality of servicers, but Banks shouldnt
be happy as this study attributes had negatives aspects & scores as well from some consumers.
Islamic Banks should care of this & should work to improve & fulfilled these gaps. If these gaps
not taken so seriously, then this can create serious problems for delivery of services & will widen
in future.
In the era of competition Banks Management should work for quality push & should measure the
performance of their employees, so customer response can be find to become a globally
competent as response leads to perception then satisfaction, These measures / actions and
changes may be expensive in terms of employee time, resources and effort, but banks needs to
find-ways to overcome these types of hurdles, otherwise they can lost their existing market share
due to increasing competition from National / international banks..
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REVISIONING SAARC
Dr. Muhammad Saleem Mazhar
Chairman, Department of Persian, University of the Punjab, Lahore-Pakistan
Naheed S. Goraya
Senior Research Fellow
Centre for South Asian Studies, University of the Punjab, Lahore-Pakistan
Jafar R. Kataria
Research Assistant
Centre for South Asian Studies, University of the Punjab, Lahore-Pakistan
Abstract
Regionalism has enormously gained significance in modern times. In this globalized world, even
the greater powers have tried to strengthen their position through alliances and other
understandings with like-minded powers. SAARC, the brain child of Late President of
Bangladesh, Zia-ur-Rehman was founded on December 8, 1985, in order to seek and promote the
intra-regional cooperation and reciprocal assistance in economic, social, cultural and scientific
fields. The success of SAARC is subjected to permanent shift among regional states rather than
rhetorical claims. Bilateral disputes among the SAARC Countries have been the week
motivational factors in upholding cooperation. Though the presence of SAFTA and Observer
States is a good sign yet today after passing 25 years, SAARC falls among the failure regional
organizations, unlike other regional organizations in the world. The paper shall try to analyze the
factors which led to its failure, despite having immense potential for regional cooperation in
South Asia and also why it has failed to merge itself into a political unit? The paper shall also
look into the factors which encouraged the other counties to seek association with SAARC. The
paper will seek the role of Observes in SAARC and also what contribution can made by them to
SAARC and how SAARC can get benefit out of them because has not so far reached the point
where a universal Organization becomes redundant.
Keywords: SAARC, Observers, South Asia, United Nation, SAFTA, FDI, Terrorism, East-West
Connectivity,
1. Introduction
In the age of regionalism, politics is replaced by economics in shaping the inter-state relations.
Post Cold War era in international relations and world politics has observed a strong surge
towards regionalism. It has become very important in modern times on account of the difficulty
of implementing the security provision of the Charter of the United Nations (Mahajan, 1995:
355). The early 1990s heard much talk of regionalism and regionalization of world politics.
Trade within the regions expanded faster than trade between the regions, and many foresaw the
emergence of regional economic blocs, European, North American, East Asian, etc (Huntington,
1996: 130). The world has changed today, being global in scope, revolutionary fundamental and
structural in content. It is the age of regionalism and commercial diplomacy.
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The world now has been divided into two major categories:
1. World Powers: The states whose influence goes beyond a particular region
2. Regional Powers: The states whose influence is confined to a particular region (Iqbal,
2006)
South Asia accounts for nearly 23 per cent of the total world population. However, its share in
the global GDP is less than 3 per cent. The region is home to the worlds 400 million poor,
which means nearly 30 per cent of the regions population lives below the poverty line. All
SAARC countries have a rather low ranking on the human development index (HDI), which
according to the Human Development Report 2007-08 is: Sri Lanka (99), the Maldives (100),
India (128), Bhutan (133), Pakistan (136), Bangladesh (140), and Nepal (142). The HDI ranking
is based on achievements in terms of life expectancy, education and real income. The low HDI
ranking reflects poorly on these vital indicators in the region (Dawn, 2010, May 9). SAARC
covers 21 per cent of the worlds population and 3-5 per cent of total area but they account for
only 0.25 per cent of the worlds GNP. About half of the worlds poor inhabit in this part of the
world. The per capita GNP of all the members together is barely around US $ 350 only (Siddiqi,
2006: 10) (See Table 1).
2. Historical Evolution
Dash (1996) writes following seven factors which led Zia-ur-Rehman to think about the
establishment of a regional organization in South Asia during 1975-79:
1. Change in the political leadership in the South Asian countries and demonstration of
accommodative diplomacy by the new leaders;
2. Ziaur Rahman's need for Indian support to legitimize his coup d'etat regime;
3. An acute balance of payment crisis of almost all the South Asian countries, which was
further aggravated by the second oil crisis in 1979;
4. Failure of the North-South dialogues, and increasing protectionism by the developed
countries;
5. Publication of an extremely useful background report by the Committee on Studies for
Cooperation in Development in South Asia (CSCD), identifying many feasible areas of
cooperation;
6. Assurance of economic assistance for multilateral cooperative projects on sharing water
resources of Ganga and Brahmaputra by United States President Jimmy Carter and British
Prime Minister James Callaghan during their visit to India, Pakistan and Bangladesh in
January 1978;
7. Soviet military intervention in Afghanistan in late December 1979 and the resulting rapid
deterioration of the South Asian security situation.
The King of Nepal, Briendra Bir Bikram Shah Dev had during the speech at the first meeting of
SAARC Summit in 1985 stated that, Regional cooperation can strengthen the building of a
lasting edifice of peaceful co-existence through initiatives and interactions in the fields like the
cultural,
scientific,
technological
and
economic
spheres
(http://india.foreignpolicyblogs.com/2010/05/12/saarc-iii-challenges-and-prospects/).
The origin of South Asian Association for Regional Organization (SAARC), the brainchild of
Bangladeshs late President Zia-ur-Rehman, can be traced back to the initiatives launched
between1971-81. It was established when its Charter was formally adopted on December 8, 1985
which states that, We, the Heads of State or Government of Bangladesh, Bhutan, India,
Maldives, Nepal, Pakistan and Sri Lanka; Desirous of promoting peace, stability, amity and
progress in the region through strict adherence to the principles of the United Nations Charter
and Non-Alignment, particularly respect for the principles of sovereign equality, territorial
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integrity, national independence, non-use of force and non-interference in the internal affairs of
other States and peaceful settlement of all disputes . Its objectives were:
1. To promote the welfare of the peoples of South Asia and to improve their quality of life;
2. To accelerate economic growth, social progress and cultural development in the region and
to provide all individuals the opportunity to live in dignity and to realize their full
potentials;
3. To promote and strengthen collective self-reliance among the countries of South Asia;
4. To contribute to mutual trust, understanding and appreciation of one another's problems;
5. To promote active collaboration and mutual assistance in the economic, social, cultural,
technical and scientific fields;
6. To strengthen cooperation with other developing countries;
7. To strengthen cooperation among themselves in international forums on matters of
common interests; and
8. To cooperate with international and regional organizations with similar aims and purposes
(www.saarc-sec.org).
Someone called SAARC as Snow White and the Six Dwarfs, while others saw it as the Big Bully
and Six Dwarfs (Tamil Net, 2008, July 14). Since the world has undergone the experience of
being known as global village, it is really difficult for any country to remain detached and
restrained itself to one or two regional grouping.
Since its inception, SAARC has undergone following 4 evolutionary phases:
1. The Conception (1977-80)
Before the establishment of SAARC, its idea was discussed in at least three conferences:
1.1. Asian Relations Conference in New Delhi (April 1947)
The discussions about regional cooperation in Asia in general, and South Asia in
particular, were mooted at the Asian Relations Conference held in New Delhi in late
March and early April 1947 but it was ended without any positive results (Malik, 1993:
274).
1.2. Baguio Conference in Philippines (May 1950)
In May 1950, a regional conference, sponsored by Philippines was held in the city of
Baguio. The official representatives of India, Pakistan, Ceylon (now Sri Lanka),
Thailand, Indonesia and Australia attended this conference. It was arranged upon the
invitation of President Elpidio Rivera Quirino, 6th president of Philippines through UN
President Carlos P. Romulo (1949-50). Only economic issues were taken up and this
regional meeting ended with the promise of a future alliance for common cooperation and
aid (http:/www.jstor.org/stable/3023827).
1.3. Colombo Powers Conference (April 1954)
The Colombo Powers included India, Pakistan, Ceylon (now Sri Lanka), Burma (now
Myanmar),
and
Indonesia,
the
host
country
(http://onlinelibrary.wiley.com/doi/10.1111/j.1467-7709.2005.00520.x/pdf).
2. The Meeting of Foreign Secretaries & Foreign Ministers (1981-84)
Four meetings at foreign secretary level took place in order to formulate the principles and
identify its areas. These discussion of three years resulted in a shift to the political level in 1983
(Iqbal, Op.cit).
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3. The Summits (1985-2010)

These summits are the highest authority in SAARC and they are held annually So far there have
been sixteen summits
3.1. First SAARC Summit (7-8 December1985, held at Dhaka
3.2. Second SAARC Summit (16-17 November 1986), held at Bangalore
3.3. Third SAARC Summit (2-4 November 1987), held at Katmandu
3.4. Fourth Summit (29-31 December 1988), held at Islamabad
3.5. Fifth SAARC Summit (21-23 November 1990), held at Male
3.6. Sixth SAARC Summit (21 December 1991), held at Colombo
3.7. Seventh SAARC Summit (10-11 April 1993), held at Dhaka
3.8. Eighth SAARC Summit (2-4 May 1995), held at New Delhi
3.9. Ninth SAARC Summit (12-14 May 1997), held at Male
3.10. Tenth SAARC Summit (29-31 July 1998), held at Colombo
3.11. Eleventh SAARC Summit (4-6 January 2002), held at Katmandu
3.12. Twelfth SAARC Summit (4-6 January 2004), held at Islamabad
3.13. Thirteenth SAARC Summit (12-13 November 2005), held at Dhaka
3.14. Fourteenth SAARC Summit (3-4 April 2007), held at New Delhi
3.15. Fifteenth SAARC Summit (2-3 August 2008), held at Colombo
3.16. Sixteenth SAARC Summit (28-29 April 2010), held at Thimpu
3. ACHIEVEMENTS
In order to meet the economic and political interaction, the regional organizations across the
globe have gained importance. These regional blocs have emerged as platforms which wield
influence in the world affairs but the performance of SAARC has not been totally gloomy.
Despite failures, it has achievements at its credit too.
SAARC Development Fund (SDF) has come into operation with three Windows (Social,
Economic and Infrastructure)
The regional convention on suppression of terrorism
SAARC Agricultural Information Center at Dhaka
SAARC Audio Visual Exchange Programme (SAVE)
Social Charter top set targets for eradication of poverty, population stabilization and
human resource development
South Asian Preferential Agreement (SAPTA) , signed in 7th SAARC Summit in April
1993
Establishment of SAARC University, temporary campus in Jawaharlal Nehru University
(JNU), New Delhi
Additional Protocol to 1987 SAARC Convention on Terrorism, signed in the backdrop of
9/11
Designated SAARC Decades
1991-2000
SAARC Decade of the Girl Child
2001-2010
SAARC Decade of the Rights of the Child
2006-2015
SAARC Decade of Poverty Alleviation
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2010-2020
SAARC Decade of Intra-Regional Connectivity
(http://www.saarc-sec.org/Designated-SAARC-Decades/11/)
SAARC has also developed collaboration, without MoU with other organizations such as
Association of South-East Asian Nations (ASEAN), Deuteche Geselschaft fur
Technische Zusammenarbeit (GTZ), United Nations Industrial Development
Organization (UNIDO); and International Standard Organization (ISO)
4. FAILURES
Samuel (1996) writes that military alliances and economic associations require cooperation
among their members; cooperation depends on trust, and trust most easily springs from common
values and culture. As a result while age and purpose also play a role, the overall effectiveness of
regional organizations generally varies inversely with the civilizational diversity of their
membership (Huntington, Op.cit: 131). SAARC as regional grouping appears to have failed to
live up to its promise. The substantive evolution in SAARC has been painfully slow. Not only
has it been a singular failure in efforts to add an economic dimension of note to regional ties, its
record in regional planning and problem-solving has been pathetic (Saleem, 2010). It is due to
this reason that after 25 years, it seems very obvious that SAARC has done nothing in terms of
implementation. The Prime Minister of India expressed his disappointment in sixteenth SAARC
Summit by saying that, the glass of regional cooperation, regional development and regional
integration is half empty and emphasized that the region must be better connected,
empowered, fed and educated to achieve comparable success with other regional organizations
(Hindustan Times, 2010, April 28). SAARC would have played a coordinating role in bridging
the gaps in economic policies vis--vis globalization and learning replicable lessons from the
innovative developmental activities related to poverty eradication pursued by some member
states. Except for establishing 2 commissions on poverty alleviation, SAARC has not done
enough
in
either
of
these
areas
(http://www.apcss.org/Publications/Edited%20Volumes/RegionalFinal%20chapters/Chapter9Ra
hman.pdf).
Thornton (1996) writes that SAARCs most difficult obstacle lies in the structural problem of
the system, which is overwhelming predominance of India constrained by the presence of a
Pakistan that is too strong to be dominated by India. South Asia must develop a framework in
which India can find a style of regional leadership that the smaller states find acceptable. Clearly,
SAARC as such will not be able to solve that problem; at most it can provide a stabilizing
framework within which India and its more important neighbours become more comfortable with
each other. That, however, could be a critical contribution (http://jstor.org/stable/1046502).
It is due to this fact that India does not enjoy good relations with any of its neighboring countries
and is having bilateral disputes with all her neighbors except Maldives and Bhutan. As earlier,
Pakistan and India both had been reluctant, when SAARC was being established due to their own
reservations, as Pakistan feared that it might be possible that India becomes a giant against
Pakistan; while India was scarred that all small nations of South Asia will be blessed with an
opportunity to solve their bilateral issues.
Since inception, there were two different perceptions behind the idea of the regional cooperation
in South Asia. The Indian ambition to bring the neighbors under its fold its address its security
concerns and neighbors outlook to make a forum to check India interfering into their affairs
(Op, cit, 2008, July 14).
The unavailability of economic incentives has been a reason for the failure of SAARC. It
has not created any standard against which each country could be measured. Not much
has been done as far as free trade is concerned. Nothing remarkable has been done in
terms of human rights as SAARC has failed to perk up the lives of the people. The slogan
of People to People Contact never reflected the real people rather reflected the
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governments. The common people have nothing to do with the foreign policies of the
countries. In fact illiteracy, discrepancy and inequality are the factors which knocked
down the noble concept of SAARC. The handling of SAARC affairs and decisions by
security advisors and intelligence officers indicate the gravity of the problem that it has
not moved an inch from the precincts of security (Ibid).
The trust deficit among member state has deep negative impact on the political will to
realize the economic cooperation and integration. Apart from political confrontations, the
economic factors have also played an unsupportive role. (Dawn, 2010, May 9). India
being dominated in South Asian region (with 74% of the regions population, 75% of its
GDP, 79% of its trade and 81% of the regions FDI flow), has the responsibility to make
SAARC a successful regional organization (Ibid).
Owing to structural scarcity, nothing concrete has been done for the improvement of the
life of common man.
Nothing remarkable has been done from the platform of SAARC for recent flood disaster
in Pakistan (2010).
SAARC Food Security Reserve have not done anything remarkable so far (the worst
example was of 1991 natural disaster in Bangladesh)
The intra-region trade has been dismal too. The combined trade of all eight member
countries accounts for less than 2 per cent of global trade. The region accounts for 1.7 per
cent of world exports and 3 per cent of global FDI inflows. The share of South Asia in
total Asian exports and imports is merely 4.7 and 7.5 per cent respectively. Not only is
global trade volume of SAARC member countries small but intra-region trade is also
low. Intra-SAARC trade accounts for less than 5 per cent of the total trade of the region
(Dawn, May 9, 2010). As Pakistan has not given India MFN status so far, India maintains
high tariffs and non-tariff barriers on products of export interest to Pakistan (Dawn, May
9, 2010).
SAARC lacks the political cohesion, solidity and a shared vision because the inter-state
politics has victimized its novel cause for which it was established. The efforts must be
made top sketch out such approach because it was established to diffuse the political
tensions but so far there has been fractional achievement.
Another factor that leads to the failure of SAARC, is the fact that from political to
economic level, India and its neighbors have many disputes. Indias security perception
vis--vis its neighbors are creating more trouble. Besides all above, there are occasional
conflicts among SAARC nations. Many reasons exist for the uneven progress of
SAARC: most have to do with intra-regional political tensions, and most involve India.
The chronic tension, occasional conflict, and perennial absence of trust between India and
Pakistan; the periodic hiccups in relations between India and her other neighbors-Sri
Lanka, Nepal, Bangladesh and so on. India as the largest country with boundaries with all
the other member States without doubt bears a disproportionate responsibility for the
success or failure of SAARC as compared with the others: it is condemned to be both the
necessary engine as well as the likely obstacle in the fulfillment of SAARCs potential
(http://www.ifa.org.np/document/saarcpapers/rajan.pdf). SAARC can not make progress,
as the states in the Western Europe could arrive at European Union (EU), only after
resolving their security problems. The other factor lies in the fact that there is a constant
US security umbrella which has ensured that the European political rivalries would not
raise their ugly heads again; while in South Asia, the security dynamics between a large
India and its smaller neighbors ensures that it would lead to an uneven road of economic
and political cooperation (www.defence.pk/forums/.../56048-how-chinachanges-saarcsaarc.html).
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Today the natural resources and minerals are facing threats but so far nothing remarkable
has been done in this regard. The reports show that there is a serious threat to natural
resources and minerals which are converting into conflicting zones. In addition to the
diminishing natural resources, there is a serious threat posed by climate change in South
Asia. At 8 feet below sea level, Pakistan's financial capital Karachi shows up on the list
of world's mega-cities threatened by global warming. Other South Asian cities likely to
come under rising sea water in the next 100 years include Mumbai, Kolkata and Dhaka
(http://www.riazhaq.com/2008/07/climate-change-likely-to-Flood-Karachi.htm). A high
altitude stand-off at Siachin (55,00 m above the sea level in the disputed region of
Kashmir) is causing serious threats. It is melting at an unprecedented rate; partly due to
global warming mainly because of the permanent troops deployments which will further
aggravate
the
water
crisis
the
two
nations
are
facing
(http://www.riazhaq.com/2009/11/pakistani-army-documentary-wins-top.html.
SAFTA has not been implemented in its true letter and spirit. It was created in 12th
SAARC Summit and came into force on January 1, 2006. It provides that the members
will reduce their tariffs to 0-5 percent by December 31, 2015, but it requires the bilateral
conflicts of Pakistan and India to be resolved (Dawn, 2010, 9 May).
It seems that the time has come where Article X of SAARC Charter needs to be amended which
states, Bilateral and contentious issues shall be excluded from the deliberations.
(http://www.saarc-sec.org/SAARC-Charter/5/). A proposal was made by ex- Pakistani President
Pervaiz Musharraf at a three day International seminar on Major Powers and South Asia to
amend it as it would help SAARC to resolve the inter-regional and bilateral South Asian
conflicts. (Daily Times, 2003, August 12).This proposal was confirmed by the then Indian Prime
Minister Mr. Vajpayee when he visited Islamabad to attend 12th SAARC Summit in 2004
(Europe
backs
Pak
call
to
amend
SAARC
charter
(http://forum.pakistanidefence.com/lofiversion/index.php/t18088.html).
5. SIXTEENTH SAARC SUMMIT- 28-29 APRIL, 2010
Sixteenth SAARC Summit was held at Thimpu (Bhutan) on 28-29 April, 2010, the first ever
summit hosted by Bhutan since its establishment and for the first time, Austaralia and Mayanmar
attended the Summit as observers. It was in fact the silver jubilee of the organization which
ended with the declaration, Towards a Green and Happy South Asia. It issued two separate
declarations on regional cooperation and climate change. An additional declaration was issued to
mark the year 2010, as Silver Jubilee of the establishment of SAARC, while prior to it, there
used to be only one declaration. The Summit issued a 37-point joint declaration, highlighting the
importance of more cooperation to resolve the issues of poverty, energy, terrorism, water,
promoting development and improving the living standard of the people in the region (The
Nation, 2010, April 30). The decade of 2010-20 was declared as the Decade of Intra-Regional
Connectivity in SAARC. Thus the silver jubilee of SAARC is an right time for reviewing the
role of the regional body. A good point in this summit was that both Prime Ministers of India and
Pakistan met each other with the decision of taking up again the bilateral talks. It was a good
thing in the sense that Indo-Pak dialogues had been hung up after the Mumbai terrorist attacks in
November 2008. South Asian leaders have admitted in this summit that their mutual differences
particularly between India and Pakistan have led to the failure of SAARC. Though the focus of
sixteenth SAARC Summit has been climate but there has been complete silence over water
issues and water management (http://www.ipcs.org/article/south-asia/water-an-opportunity-forsaarc-3127.html).
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6. ROLE OF OBSERVERS
When countries have sizeable stakes in certain region, they start attending as observers, in order
to explore the political, economic and cultural avenues of those nations/ countries. The role
observers have not been defined in the SAARC Charter. Observers and inclusion of states will
lead South Asia towards a new power game. The success of SAARC is conditional on the
perceptual move among regional states rather than metaphorical arguments. The regional
organizations in 3rd world countries are a mechanism to satisfy the national aspirations and
realize the national goals (http://india.foreignpolicyblogs.com/2010/05/12/saarc-iii-challengesand-prospects/). Though not much credit can be given to SAARC in terms of economic
integration yet the increasing number of states as observers is a good sign. The 14th SAARC
Summit was important in a sense that it accepted Afghanistan as 8th member of SAARC and 5
nations, US, European Union, Japan China and South Korea) got observer status. All these
states are economically sound and strategically important in international system. In 15th
SAARC Summit (August 2009 in Colombo), the delegates of 9 countries participated as
observers.
It was Afghanistans great desire to become a member of SAARC since its inception. Its
geographical location, social, cultural and economic links and Pakistan and India as good
markets for Afghan commodities; made the membership case strong. Afghanistan joined as the
eighth Member of the SAARC and China and Japan as Observers, during the 14th Summit held in
New Delhi on 3-4 April 2007. The then Chairperson and Bangladeshs Prime Minister said that,
I am happy to announce that the SAARC leaders have admitted Afghanistan as member of
SAARC, subject to completion of formalities we have also decided to accord observe status to
Peoples
Republic
of
China
and
Japan
(http://www.southasiaanalysis.org/%5Cpapers17%5Cpaper1626.html).
Afghanistan will certainly prove as a bridge between Central and South Asia. India and Bhutan
were not quite happy due to Chinese presence as they thought that the focus on the region would
get thinned. As far as Chinas role as observer, it will have several impacts which can be
discussed as follows: The china card in the region can be used by the countries of South Asia
other than India. The politicization of SAARC will take the focus of regional cooperation from
socio-economic development to global power politics (Pattanaik, 2010). It will promote EastWest Connectivity. China can not be artificially separated from a region with which she is so
inextricably connected: by history, geography, ecology, and vital common interests whether they
have
to
do
with
military
security,
terrorism or
environmental
security
(http://www.ifa.org.np/pdf/prc/mrjosse.pdf). As China has common border with Pakistan,
Afghanistan, Nepal and Bhutan, It can be very beneficial as observer in having a sound impact
on the declining South Asian economy, through both trade and investment.
On March 3, 2007, Iran had made a formal application to the SAARC Secretariat for Observer
status. At the fourteenth SAARC Summit ((3-4 April, 2007), held at New Delhi , on the theme of
'connectivity' a unanimous decision was taken to offer Iran an observer status in SAARC to
enhance South Asia's links with Iran (Rajasingham, 2010). Iran has the distinction that it has
common borders with two of the eight members of SAARC.
As having commercial and geographical links, it would be able to provide the South Asian
region with East-West Connectivity. From Indias point of view, Irans observer status in Iran
has following advantages
To counter the war against terrorism
To fulfill the security and economic needs (As Iran holds 10% of worlds oil and 15% of
natural gas reserves)
Easy access to Central Asia ( North-South Connectivity) (Mohantay, 2007)
The role of observers carries both challenge and opportunity. It has enhanced the international
stature of SAARC and created imperatives for peace and cooperation. It can boast foreign direct
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investment, open up transit trade facilities, provide connectivity and inter-regional trade and
economic cooperation opportunities among member state. US and South Korea were admitted as
observers in the Standing Committees meeting on November 10, 2006, held at Dhaka. With the
coming of these countries as observers has given SAARC a much wider platform for business
and trade and strategic developments. Though the presence of Iran and US in the region will
contribute in the economic growth and mutual aid of the region, yet it might lead to the initiation
of a new power game. It is evident from the fact that US has its own reservations as far as IranPakistan-India (IPI) gas pipeline is concerned. This project will change the face of regional
politics in South Asia. The point can not be negated that if US and Iran relations intensify over
nuclear issue, Pakistan would not be able to move the project. Iran's association with SAARC
will immensely help in stimulating SAARC while enhancing East-West connectivity.
Although the fear of big powers own interest can not be set aside in the SAARC yet it will have
some positive impacts too. The South Asian nations can get benefit in terms of economic
stability and progress both with in the region and outside world. Despite many benefits, there lies
an element of competition, having different political calculations (Chinas trade and commercial
relations
with
India,
but
political
convergence
with
Pakistan)
(http://www.apcss.org/Publications/Edited%20Volumes/RegionalFinal%20chapters/Chapter9Ra
hman.pdf).
7. Conclusion
The evolution of SAARC was likely to gain massively from the historical and cultural knots that
unite people across the national borders in South Asia. As SAARC has failed to deliver on social,
cultural and economic front, it is the high time that this regional organization should have set and
monitored targets. If this regional organization becomes successful in retaining an economic
integration, it will open new avenues of revenue investment and employment in this part of the
world and these nations will surely be in a position to fight against poverty.
There are many issues like natural disaster, apportionment of waters, sharing of energy
resources, and preservation of environment, education, poverty alleviation and extremism /
terrorism; which have nothing to do with bilateral concerns. Today Maldives is facing an
alarming threat of submersion posed by global warming.
The distrust and mistrust among South Asian Nations has to be removed.
SAARC lacks a political will which led to the failure of leaders and officials to envisage the
benefits of regional cooperation. India should re-examine its regional policy. No country should
have any right to squeeze the water of any other country. If Pakistan and India resolve their
differences, it can change the future course of South Asia. In order to reinvent itself, a fresh
approach is needed for which SAARC must get out of the entrenched mindsets. India needs
political farsightedness, sophistication and altogether different and diverse outlook. It must
change its dichotomy in perception. The energy sharing plans can be conducive for meeting the
energy crisis with in South Asian Countries
Visa free travel should be adopted with in the SAARC region. Myanmar, being
historically a part of South Asia, should also be included in SAARC.
The cultural ties that exist in the region have been forgotten. To be successful, SAARC
has to focus on culture, as the strength of harmony and regional support in South Asia
lies not in its political units of today but in its people and culture. SAARC should follow
and adopt a theoretical structure, model and framework. Extremism and terrorism must
be eradicated from the region.
Workshops/ symposiums on the lines of SAARC Youth Summit might be arranged for
students, teachers and researchers as SAARC will make progress by not only holding
yearly summits but by bringing common people together by following SAARC Youth
Action Plan.
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SAARC and China should join hands to establish tourism resorts

An institution for the conflict resolution mechanism should be formed in order to address
the bilateral inter-state issues
SAARC has been failed to provide its people a better quality of life which is really
pathetic. Thus the role of civil society of SAARC should be enhanced.
Media should play positive role in bringing harmony among SAARC countries
Terrorism and extremism needs to be curbed out and that demands for strong institutional
building and flourishing of democracy in South Asia. It is mainly due to the reason that
there has been a gap between the economic growth and poverty reduction.
The common social and economic challenges faced by the people must be dealt because
it will ensure the regional securities rather than military pacts.
Trade could be used as a mechanism for development. Only India and Srilanka have free
trade agreement. Free trade could have been a great success because trade can play a
positive role for poverty alleviation (South Asia, being repository of the poorest people in
the world, with more people without adequate access to energy than any where else in the
world, along with imperative issues of mortality and health. The nations should
themselves sort out what kind of developments their countries need and for that purpose,
the South Asian Identity must be created; otherwise these yearly summits will be of no
use. SAARC as a regional organization has the potential to play an influential role with
far-reaching economic and political consequences. SAARC should work for the progress
in law and order, education, poverty, environment and other areas.
The political and economic issues should be addressed simultaneously.
Less should be spent on military rather human resource development should be made and
social sector should be developed. In principle, the political disputes among nations
should not hamper the economic progress.
SAARC should work for the progress of its social charter. Peaceful nations can exist only
when the political differences are removed. A regional agenda should be developed
which must be included the voice of national concerns.
Water being a vital article of trade in South Asia has created the bilateral tensions as well.
SAARC through collaborative projects and programs can provide an alternative platform.
The food for thought is whether SAARC can heed progress and be functional without resolving
the political strains among South Asian countries and it is worth mentioning that India does not
enjoy cordial relation with any of the South Asian Country except Bhutan and Maldives. The
bilateral disputes among South Asian countries overrun into regional domain in terms of mistrust
and aggression. Unless the core regional controversies and conflicts, like Kashmir issue, illegal
migration, Siachin, water sharing and trade and transit facilities are resolved, the cooperation can
not be made on successful grounds., Though the prospects of any remarkable breakthroughs are
far-flung or virtually nil, SAARC will make cautious incremental growth but the persistent
security dilemmas have to be removed. SAARC is a market of future due to human potential and
huge market. It is attracting the world now and SAARC should get benefit out of it. SAARC
should abstain from the impractical economic and social ambitions; rather it should be used as a
mean to discuss the issues related to peace, security and development with international
organizations and agencies to endorse welfare of the member countries.
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References
Daily Times. 2003, August 12.
Dash, Kishore C. (1996, Summer). The Political Economy of Regional Cooperation in South
Asia. Pacific Affairs. Vol. 69 (2).
Fifield, Russell H. (1951, February 21). Philippine Foreign Policy. Far Eastern Survey. Vol. XX
(4).
American
Institute
of
Pacific
Relations.
Retrieved
from
http:www.jator.org/stable/3023827.
Hindustan Times. 2010, April 28.
Huntington, Samuel P. (1996). The clash of civiilizations and the remaking of the world order.
Penguin Books.
Iqbal, Muhammad Jamshed. (2006). SAARC: Origin, Growth, Potential and Achievements.
Pakistan Journal of History and Culture. Vol. XXVII (2).
Kumar, Anand. (2005, November 24). Dhaka SAARC Summit: High on Ambition, Short on
Progress.
Retrieved
from
http://www.southasiaanalysis.org/%5Cpapers17%5Cpaper1626.html.
Malik, Hafeez. (1993). (Ed.). Dilemmas Of National Security And Cooperation In India And
Pakistan, St. Martin Press: New York.
Mohanty, Satyajit. (2007, April 13). SAARC Observer Status for Iran: Regional Implications.
Retrieved from http//www.ipcs.org/article_details.php?articleno=2261.
Pattanaik, Samruti S. (2010, May 7). SAARC at 25: Time to Reflect. Retrieved from
http://www.idsa.in/idsacomments/SAARCat25TimetoReflect_sspattanaik_070510.
Rajan,
K.V.
Renewing
SAARC.
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from
http://www.ifa.org.np/document/saarcpapers/rajan.pdf.
Rajasingham, K. T. (2010, October 15). Irans Full Membership in SAARC Drags on in the
Absence
of
a
Formal
Application.
Retrieved
from
http://www.asiantribune.com/news/2010/10/15/iran%E2%80%99s-full-membership-saarcdrags-absence-formal-application.
Retrieved from http://forum.pakistanidefence.com/lofiversion/index.php/t18088.html.
Retrieved
from
http://india.foreignpolicyblogs.com/2010/05/12/saarc-iii-challenges-andprospects/.
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from
http://india.foreignpolicyblogs.com/2010/05/12/saarc-iii-challenges-andprospects/.
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from
http://www.apcss.org/Publications/Edited%20Volumes/RegionalFinal%20chapters/Chapter9
Rahman.pdf.
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Retrieved from http://www.indexmundi.com/g/r.aspx?c=bg&v=66.
Retrieved from http://www.ipcs.org/article/south-asia/water-an-opportunity-for-saarc-3127.html.
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Siddiqi, M. (2006). India and SAARC nations. Delhi: Maxford Books.
Siddiqui, Tayyab. (2010, May 9). Saarc: Causes of Failure. DAWN.
TamilNet. 2008, July 14.
Thornton, Thomas Perry. (1991, November). Regional Organizations in Conflict Management.
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Annexure
Country
Real Growth Rate %
India
7.4
Bangladesh
4.9
Pakistan
2.7
Srilanka
Bhutan
21.4
Maldives
5.7
Afghanistan
3.4
Nepal
4.7
Table 1
(http://www.indexmundi.com/g/r.aspx?c=bg&v=66)
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IMPACT OF MODERNIZATION ON THE SOCIAL STATUS OF AGED
JAFAR R. Kataria(Corresponding author)

Research Assistant/ M.Phil Scholar
Centre for South Asian Studies.
University of the Punjab, Lahore-Pakistan
Mughees Bin Aziz
M.Phil Scholar,
Department of Sociology,
International Islamic University, Islamabad-Pakistan
and Visiting Faculty Lecturer
University of Central Punjab, Lahore-Pakistan
Abstract
Due to the higher fertility rate and decrease in the mortality the life span is increasing this has
affected the population of the aged. Aging is very important issue of every society especially in
Pakistan as the family institution is consider very important in Pakistani Society and aged are
major part of it, they are considered as the pioneer and the career of the traditions so they have
less acceptance and adoption for new modern ideas and value. The researches on Pakistani
context are not sufficient to address the issue as the aged population is facing the cost of
modernization thus this research will provide us information about this issue and also help
exploring the social status of the aged in modernizing society.
Keywords: Aging, Modernization, Social Ties, Socio Economic Status
1. Introduction
Modernization is a process of social and cultural change. Modernization means the
process of acceptance and adoption of new modern ideas and value. It changes the attitude of the
people and makes value it change the attitude of the people make them ready to adjust them self
according to new emerging situation or condition.
Social status can be understood as the degree of honor or prestige attached to one's
position in society (Robin et al., 1987). Social stratification is associated with the ability of
individuals to live up to some set of ideals or principles regarded as important by the society or
some social group within it (Harold, 1998). Although there are a few societies around the world
that ascribe everyone at least old people equal status, most societies do have some form of social
hierarchy with some people in stronger, more dominant positions, and other people in weaker,
lower positions. Often this inequity is built into the social system itself through various forms of
structural components and institutions. Social and economic roles are distinguished and accorded
differential status according to what a particular society or culture deems valuable (Moore,
1996).
Age is a dimension of homosapeins, which is inherited, in human biological being. It is
an ingredient in individual personality development, self-concept and mental life. It shapes social
interaction, group formation and social structure. It is also a component of the cultural codes
people use to negotiate to each other and to their environment. Most contemporary thinking
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about human development treats the life span as an integrated, contagious set of age-related
events from birth to death with which people cope in a variety of way.
Sociologists are playing an increasing and increasingly vital role in the study of later life
because of the increasing recognition of the significance of culture and cultural differences in
human life. Sociologists goal in the study of old age is social advocacy and the educational
awareness.
Aging is a broad concept that includes physical changes in our body over adult life,
psychological changes in our mind and mental capacities social psychological changes in what
we think and believe and social changes in how we are viewed, what we can expect and what is
expected of us.
Older people are the keepers of tradition. They know about many unrecorded events that
have taken place over the years in families, at workplace, in communities, and in the nation. Old
age can be a time of extraordinary freedom and opportunity once the responsibilities of
employment and child rearing are set aside (Hoyert and Donna, 1992). Chronologically, the
onset of old age typically occurs in the late 70s although many people in their 80s or 90s show
few signs of it. Old age is characterized by extreme physical frailty. Mental process slow down:
chronic organic brain disease becomes more prevalent. Individuals in old age feel that death is
near, activity is greatly restricted. Social networks have become decimated by the deaths of
friends and relatives and by the individuals own disabilities (Atchley, 1997).
Growing old may be regarded as a time of ripeness and fulfillment or a period of
declining health and failing powers. There is nothing inherently problematical about growing
old. And yet in most nations of the world, old age is increasingly understood in "social problem"
terms. As we all must age and eventually any cultural belief system that cannot provide security,
meaning, and self-esteem for those who reach the conclusion of life's natural sequences will
eventually have to change (Sjaak, 1999).
The process of aging is around us as long as life itself. There have been people on earth
for thousands of years and even though average length of human life in most societies did not
extend into old age until this twentieth century. The aged are perceived as natural in that they
are conceptualized as prisoners of time, closer to death, less resistant to disease subject to
emotional swings and redial emotions as depression, made accultural through isolation stripped
through loss and all in all more greatly affected by biology and other phenomena. The aging
process is complex and is affected by the sociological, psychological, biological and
environment factors.
Feeling of social loss among the aged is tremendous. Mandatory retirements put them out
of work force; if working income becomes drastically reduced because of the weakness and
breakthrough of health. Older people are also thought as slow thinkers, forgetful, rigid, meantempered, irritable and dependent and so on. An older one who is socially lonely may not eat
well and therefore develop physical symptoms of mal-nourishment which includes intellectual
functioning. Hearing loss can lead to suspiciousness that irritates people. Sleep is also affected
by aging, also complains of disrupted sleep as grows older. Snoring is also common among men
which also increase with age, its volume increases which is more than an inconvenient and
disrupts the sleep of others.
The most important fact to emphasize is that the status of the old man is never won but
always granted. They belonged to an unproductive minority, and their fate depends upon the
interests of the active majority. When the majority wished to avoid lawless rivalry between its
members and to maintain the established order they found it convenient to choose men of a
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different kind to act as intermediaries, adjudicators or representative figures, men upon whose
authority all could agree; and the aged obviously fulfilled these conditions.....they are necessary
for the working out of the problem, but once the answer has been reached they are eliminated
(Simone, 1999).
There is a general tendency in old age to shift toward more sedentary, more advisory and
supervisory activities, to those involving more mental exertion than physical, and those directed
toward group maintenance more than economic production. In all societies, the mores prescribe
some mutual responsibility within the family as between old people and their adult children.
Saving for old age appears to be a near universal desire and effort even if it is not always
successful. All societies value life and seek to prolong it even in old age (Rokeach, 1973).
Traditional family values are still very important in third world countries .Aged member
of family demand respect form the young members of family who have the responsibility for
caring for their elders however recent economic health and social change mainly the migration of
many young in search of job in cities or abroad, have produce a decline in the family tradition
system of assigning responsibilities and capacity to deal with some of the fundamental needs of
the aged member.
When society is modernizing the ideal type of family beings to change from extended
family system to nuclear family, when the society is modernizing, the culture, living condition,
education system, health care, more over everything goes under change (Social change)
These types of change make norms and values of the old obsolete. Now the importance of
old is much lesser and no need of, there skills and experiences are required. Young one can learn
there trait from out side family. As there impotence has been reduced they have feeling of
isolation and detachment from their family.
Modernization creates complete break between past present and the future because
modern man and women are living differently from their parents and grand parents. The living
condition education system, health care, roles are very different from there parents and grand
parents. These trends have brought decline in the social status of aged.
2. LITERATURE REVIEW
According to Hendricks (1982), gerontology has uncritically accepted the idea that, prior
to the unleashing of the forces of the modern era, the elderly were active in valued economic
and emotional roles in an extended family setting, thus ensuring that they were accorded
universal respect. In the after phase, values and role definitions are seen to have changed,
leading to an erosion of the position of the elderly as society develops in a manner in which old
people serve no valued function at all.
In 1972, Donald Cowgill and Lowell Holmes developed a theory of modernization as it
related to aging and old age. Their position was that as societies modernized undertaking the
shift from farm and craft production within families to a dominantly industrial mode of
productionrepercussions of modernization would diminish the status of older people.
Cowgills later theoretical refinements (1974) identified four key aspects of modernization that
undermined the status of older people: health technology, economic and industrial technology,
urbanization, and education.
According to Cowgills theory, improved health technology, including advances in both
medical practice and public health, has positive effects of improving health and increasing
longevity, but it also has negative effects for older people. When people live longer, there is
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more competition in the labor market. Employers in industrializing societies prefer younger
workers with new occupational skills to older workers, forcing older workers out of the labor
market into retirement. Once retired, according to modernization theory, loss of income, prestige,
and honor arising from labor market participation lead to a decline in the status of older people.
Modernizing advances in economic and industrial technology create new occupations in factories
located near transportation and services. Younger people acquire the skills for new occupational
slots and join the industrial work force, relegating older people to less prestigious and
increasingly obsolete jobs. This often leads to retirement, reversing the roles of old and young. In
traditional societies, older family members control family production, and younger ones are
dependent on the old. When older people are excluded from the industrial labor market, they
become dependent on the young, losing social status.
Olson (1988) said that one of the principal areas of interest in the study of modernization
is the question of how modernizationa effects the elderly population. The Cowgills theory of
modernization predicts that the traditionally high status of the elderly tends to change under
industrialization. The theory postulates that the proportion of elderly increases as a result of
advances in medical and sanitation practices which contribute to lower mortality rates and a
longer life span. Under these conditions the status of the elderly (status includes both physical
status-their economic well-being-and social status-their level of prestige) changes as the society
places a priority on younger workers who possess the job skills necessary in a technologically
advanced society. Under these conditions the elderly decline in prestige and may or may not
decline in their standard of living, but play a lesser role in the production system, and actually
drain resources from the society rather than adding to its output.
Clark (1973) identifies six silent aspects of aging which emerged years prior to her article
from the research cultural anthropologist. These are dying decrement and disengagement,
disease, dependency and regression, minority group status and life span development. Clark
stressed that these bio-cultural life events are shaped by the cultural content of aging must be
delineated in order to understand it. He concluded that anthropology offers the opportunity for a
fined grained analysis via ethnography that is required to understand the adaptive reaction made
by the old people and to reveal them as vibrant and vital participant in their cultural arena.
Fry (1980) remarks that Sociologists are playing an increasingly vital role in the study of
later life, not only because the event of aging is planet wide, international and cross-cultural but
also because of the recognition of the culture and cultural differences in human life.
Kay and Bergmann, (1980) suggest that depression is the most common functional
disorder in aged persons. He says that we must be careful to separate transient depressive
reactions from prolonged dysfunction depression in aged people. The belief that decreased self
regard is much more important then guilt in the causation of depression in older people has been
in a psychiatric literature. Older people are still capable of actions that produce guilt. Severe
depression reactions are often found associated with physical disease
Tylor and Ford, (1981) in his research find out that the social relationship in which older
ones engage are clearly as important as a part of their environment as physical or ecological
conditions. Some ideas of the density of the social networks in which old black and old whites
lives can be gained from living arrangements and frequency of contacts with friends and
neighbors. They found out that approximately the same proportion of old blacks and white lives
alone. White has but high proportions of couples living together. Whereas the number of older
blacks living alone seems high for a contemporary young group. This data is sketched simply to
show the social environment of old blacks and white. Though they share the same environment
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in the sense of living in the same neighborhood, but the older white seems to be unsatisfied by
their environment because they much anxiety in the future because of neighborhood but blacks
always show less worry and more satisfaction with their lives.
Lippman (1982) found out that elderly loneliness and ill health presents the major
problem of the old age. 97 percent of older people cite illness as compared with 88 percent of
staff. 75 percent of experts and 49 percent of young people. The largest discrepancy exists
between old and young and whilst for older people the level of homogeneity is very high. It is
significant that older people are more likely to think of loneliness as a problem of aging then of
themselves.
Mckee and Patrick, (1982) a common misconception about older people is that they had
it better in the good old days, but it is important to separate the rhetoric and ideology of aging
from the realities. Indeed ideas about aging and the realities of growing older have probably
always had both positive and negative elements. Certainly, this has been the case in western
civilization. For example, Aristotle had the following to say about elderly men. They have lived
many years; they have often been taken in and often made mistakes: and life on the whole is a
bad business. The result is that they are sure about nothing and under-do everything. They
think, but they never know, and because of their hesitation they always add a possibly or a
perhaps, putting everything this way an nothing positively. They are cynical; that is, they put
the worse construction on everything they are small minded, because they have been humbled by
life: their desires are set upon nothing more exalted or unusual than what will help them keep
alive.
Thorndike (1982) in his research analysis concluded that the study of intellectual ability
over wide ranges have suggested that intellectual functioning decline slowly from the third
decade of life to the sixth and abruptly thereafter. In adult learning Thorndike reported that in
learning on a large series of tasks in several ages and socio-economic level, subject reached a
peak between 20-25 followed by a slow, uniform age related decline of approximately 0.5
percent per annum to about 50 years of age. Furthermore, the decline from 22 to 42 was similar
in proportion for both dull and gifted people. The developmental changes in intellectual
functioning with age are central to our understanding and assessment of the normal and clinically
diagnosed elderly. She also suggested different economic and structural reasons for the
preference for sons in rural areas. Unlike urban areas where children are seen as long-term
dependents, in rural areas elderly parents rely on their children for support in old age. According
to her, relationships with in China have traditionally been marked by strong intergenerational
support and reciprocity. But the way such support is actualized differs markedly in rural and in
urban areas.
Getzel (1985) the flow of mutual aid between generation, through the system of kin,
friends and neighbors and the aged repeatedly documented in the social gerontology. The myth
of the isolated elderly abandoned by their kin and the community is widely held by social
workers despite findings that the older persons have children who live nearby and frequently
visit. Families, friends and neighbors are the most significant source of aid to community aged as
they become less able to function independently. Informal social supports are continuous source
of social contact, material aid and instrumental assistance. Old persons are in turn significant
source of aid and to their children and to others. Even older persons without available kin are apt
to have neighbors as social support. Some studies indicate that even when older persons have had
troubled relations with their children, mutually is maintained into the late life.
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Blazer (1990) he also considered social stratification system related to aging. The
dynamic nature of the social stratification and aging process suggest that it have cumulative
effect on the health of the individuals over their life course. Blazer suggests that the frequency of
neurosis and schizophrenia to decline with age, while organic mental disorders and
psychosomatic complaints increase among the aged.
Schooler (1990) demonstrated that psychological performance is very much conditioned
by social roles and social situations people confront and the psychological skills transmitted,
evoked and rewarded in those situations. He suggests that some of the declines in individual
flexibility attributed to aging may infect stem from the fact that many elders are not faced
substantively complex demands in their every day lives.
Guttmann (1995) a cross cultural researcher suggest that old age derives its essential
human meaning from a species role as a post parental phenomenon, developing ultimately from
the natural parental functions. The role of elders in history has been to foster an environment for
effective parenting and help to maintain the evolutionary advantage of the human brain and the
propensity to new learning.
Atchley (1997) argues that a person who losses self esteem in later life tends to do so
because physical changes have become so pronounced that the person is forced to accept what he
or she sees as a less desirable self image. The persons self esteem is precarious or vulnerable as
a result of being either too dependent on social positions and roles or too narrow, or the
individual has lost control over her or his home or community environment to such an extent that
she or he is essentially defenseless. This last possibly is especially likely when a person moves
into a nursing home. Most people have the resources and defenses needed to retain or maintain
self esteem into old age, a fact made very clear by the multitude of studies showing that older
people living in community settings have stable, well defined personalities and high self esteem ,
and that self esteem increases with age.
Erickson considers old age as a good thing and not reaching old age suggests that earlier
problems retarded your development. Erickson sees personality development in case of eight
psychosocial crises. He feels that each psychosocial crisis can be resolved positively or
negatively. His psychosocial theory is an approach to ego development closely aligned with
developmental tasks particular to various life stages.
Altman (1999) argues that addressing the concerns of these early theorists has offered a
number of useful insights to assessing the needs of older adults. The needs of our aging society
are diverse because of the very nature of the aging process and due to the diverse profile of the
older population. Lifespan studies suggest that older people are more unlike each other than
younger populations. Not only do people become more different from each other as they age, but
there are significant differences among the older adults in this population called aging. The
young-old, 65, are quite different from the old-old, 85 plus, in personality, health, vigor and
emotional stability. Therefore, to address the quality of life and basic needs of all older adults
demands a clear understanding of the diverse physical, mental, social, environmental attributes
of the individuals in later life.
Ge Lin ( 2002) stated in his article that The modernization thesis of Goode postulates
that, as a society becomes modernized, its patrilineal extended-family structure shifts to a smaller
nuclear family which, in turn, leads to the weakening of the extended kinship ties and
intergenerational support common to most preindustrialized societies.
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3. CONCLUSION
In the light of above mentioned researches it may be right to say that modernization has
adverse effect on aged population. Researcher found that modernization is affecting the social
status of old aged. It might be right to say that if the level of modernization becomes higher the
status of aged will become more adverse.
Socio Economic Status of the Aged in Pakistan is varied across and its relation with the
status of the house hold, thus it is observed that the upper and lower class due to the availability
and non availability of resources are excluded from the study and only the middle class Aged are
too be studied, and is observed that status of the aged who are living in the family with more
stronger social ties and are less modernized is quite better then those who are modernized having
comparatively weaker social ties. It is also studied that in the household with the stronger social
ties, the financial authority is the aged one regardless of that he is earning hand or not, where as
the case is totally opposite in the house hold with weaker ties, as no matter if the Aged is earning
or not he have less authority over the financial resources of the house. So it is quite right to
conclude at the time that in the house holds which are modernized and have less attachment with
the social ties the status of the aged is deprived and are felt as a burden on the house where as in
those house holds where the ties are stronger the Aged are given due respect and are treated as
the head of the family.
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References
Goode, W. 1970 World Revolution and Family Patterns, New York: The Free Press.
Atchley, C. 1997. Social Forces and Aging, An introduction to social gerontology. 8thed.,
Wadsworth publishing company. Miami. PP. 45. 131-132.
Clark, A. P. 1973. Anthropology and Aging. Mc-Millan Press, New York. U.S.A. PP.89-91
Arifullah, S. and Bhatti, K. M. (1998) Research Process Simplified Islamabad:
PanGraphics (PVT) Ltd.
Babbie, E.1990. Survey Research methods California:
Wads
Worth Publishing Company
Belmont.
Neuman, W. L. 1991. 3rd Edition Social Research Methods U.S.A.: Allyn &
Bacon. A Viacon Company.
Webster, N. 1965. Third New International Dictionary. U.S.A.: G. & C. Merriam Company,
Publishers.
Robin, F, E. Langer and F. John. 1987. Long term care for the elderly. Oxford university press.
NY. P.13
Harold, K. 1998. Social Stratification and Inequality: Class Conflict in the United States,
McGraw Hill Book Co. New York. P. 113.
Moore, C. 1996. The Mediation Process. (2nd ed.) Jossey Bass press club. San Francisco P. 56.
Hoyert, C. and L. Donna. 1992. Factors related to the well being and life activities of
family
caregivers. The gerontologist 41(2): 74-81.
Sjaak, V. D. 1999. Old Age Across Culture and Time. Oxford Press Club. London. PP.32-33.
Rokeach, M. 1973. The Nature of Human Values. The Free Press. New York. P.68
Fry, C. L. 1980. Cultural Dimensions of Age. Brooklyn press, New York. U.S.A. PP. 25-31
Kay, P. and B. Bergmann. 1980. Aging in Sociological Perspective. Herper publishers, New
York. U.S.A. P. 77.
Gen Lin. 2002. Regional variation in family support for the elderly in China: a geo
developmental
perspective.
Source.http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.135.8068&rep=rep1&type=pdf
Olson, P. 1988. Modernization in the People's Republic of China: The Politicization of the
Elderly. The Sociological Quarterly, Vol. 29.2. Blackwell Publishing
Hendricks, J. 1982. The Elderly in Society: Beyond Modernization.
COWGILL, D. O. 1979. "Aging and modernization: a revision of the theory," pp. 54-67 in J.
Hendricks and C. D. Hendricks (eds.) Dimensions of Aging. Cambridge: Winthrop.
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ANALYZING EMPIRICAL RELATIONSHIP BETWEEN TRADE OPENNESS,

INDUSTRIAL VALUE ADDED AND ECONOMIC GROWTH:
Nazima Ellahi
Lecturer Department of Economics,Foundation Universty Colege of Libral Arts and Sciencs Islamabad
Dr. Hafiz Zahid Mehmood

Assistant Professor
Department of Management Science, comsats Institute of Information Technology, Lahore Campus
Prof Dr. Mehboob Ahmad
Head Department of Economics
Foundation University College of Liberal Arts and Sciences, Rawalpindi
Naveed Azim Khattak
Ph.D Scholar, Shaheed Zulfiqar Ali Bhutto Institute of Science and Technology, Islamabad
Abstract
Openness and trade liberalization influenced high rates of growth in the developing countries.
Liberalization and integration took place in the economies of almost all the developing countries
during the late 80s and early 90s, in the previous century, on the inspiration of international
donor agencies to implement the structural adjustment programmes. It is a well admitted fact that
along with trade variables industrial value added work as an impetus affecting economic growth,
positively. Pakistan also adopted the measures and policies to liberalize trade as a result of
Washington Consensus. This study is an attempt to investigate the empirical relationship among
the trade openness, industrial value added and economic growth of Pakistan. Annual time series
data set (1980 to 2009) was utilized to observe the connections amongst the indicators of interest.
Moreover, unit root test was applied to determine the time series properties while OLS technique
of estimation and Granger causality tests were employed to find out directions of causality. The
results inferred from the econometric model articulated that imports and exports affect positively
to economic growth till the industrial value added are taken into account. It is concluded and
recommended from the outcomes of the study that the developing countries must adopt and
pursue trade openness and liberalization to strengthen their economies and consequently enhance
the living standards of their population.
Key Words: Industrial value added, trade openness, economic growth.
1.
INTRODUCTION
Openness to trade has been considered as an important determinant of economic growth and a
well debated issue in the recent growth literature. Initially, the developing nations of the world
followed restrictive trade policies but with the passage of time and emergence of globalization all
the nations realized the need to liberalize their economies in terms of trade openness. It work as a
as a key determinant for the improvement of a countrys industrialization. Moreover,
development experienced by a country brings some changes in trade structure on the basis of
endowments and comparative advantage (Hultman, 1967).
In an empirical analysis Adenikinju and Olofin (2000) suggested that development of industrial
sector can be determined by trade openness and policies of trade. There are a number of ways
through which a positive link between industrial sector growth and trade policies can be
explained. Firstly, scale efficiency is improved through intensifying the scope of domestic
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industrial sector. Secondly, an open trade regime causes high competition in world market,
which further boosts firms to follow and engage in modern technologies and further augment
efficiency. Thirdly, an open trade regime relaxes constraints caused by foreign exchange as
observed in case of developing nations. Last but not the least, it causes high development in
technological progress. (Lucas, 1988, Grossman and Helpman, 1989; 1991; and Romer, 1990).
Furthermore a few more potential gains from trade sector reforms include, (i) opportunities to
access intermediate and capital goods embodying better technologies, (ii) stimulation of
productive performance, (iii) better resources allocation, and (iv) access of local producers and
consumers to less expensive and higher quality goods from abroad (Winter, 2004). However,
many observers like Noland and Pack (2003) and Milner (2006), believed that domestic policies
of institutional development, macroeconomic management, education, health, infrastructure are
largely unrelated to trade which may now be the main obstacles to reap the benefits of trade reform
in developing countries.
As development requires integration of various sectors of the domestic economy therefore, a
dynamic process must be adopted with the production of primary commodities to opt a
developmental shift. It may help embarking on secondary commodities production and
eventually expanding the tertiary sectors until all these sectors of the economy are integrated
(Wade, 2005). So, it can be concluded that trade openness, and industrial value added can be
important factors to enhance overall economic performance.
1.1
Research Objectives
Objectives of a study help to understand the key theme of the research and also play a backbone
role to determine outcomes and achieve targets. This study is based on the following objectives,
1.
To examine the nature of link between exports, industrial value added and economic
growth in Pakistan.
2. To present policy recommendations regarding the trade and industrial sector to support
policy makers and help researcher to further highlight the matters regarding trade,
industrial value added and economic growth.
1.2
Organization of the Study
Section 2 provides brief review of theoretical as well as empirical literature. An overview of
trade openness experiences and its outcome for Pakistan are presented in section 3. Methods,
data set and variables description is contained in section 4, while discussion on results is given in
section 5. Finally, section 6 delineates the conclusions and recommendations.
2.
LITERATURE REVIEW
The theoretical and empirical literature regarding the openness of trade, industrial sector and
economic growth has a number of contributions by recent development economists. In this
regard Ahmad and Dutta (2006) studied the dimensions of industrial sector growth, trade
openness policies and economic growth for Pakistan. The empirical analysis was conducted by
using the annual time series data over the period 1973-1995. The application of cointegration and
error correction methods of estimation found an existence of long run and stable relationship
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among industrial value added, capital stock, real exports and import tarrif and ratio of secondary
school enrollment.
In the same line another study by Carmen and Pilar (2004) investigated the role played by
manufacturing sector imports on real GDP and employment for China. This analysis was carried
by using quarterly time series data set over the period 1979-2002 and employing dynamic
econometric technique of estimation. Its major findings pointed towards a positive long run link
between economic growth and trade openness indicators. Similarly, many other studies
concluded that trade performance of developing countries is dependent on natural factors
endowment and comparative advantages given the imperfect competition, economies of scale
and technological spillovers (Verspagen 1992).
Njikam (2009) examined the phenomenon of trade openness and development of industrial
performance for Cameroon. The study was designed to explore the existence of relationship
between infrastructure and industrial performance during pre and post trade openness periods. In this
analysis they utilized the annual dataset during the import-substitution era (1986-1994), and
immediately after trade reform (1995-2003) for a sample of 29 industrial sectors. Major findings
state that development in infrastructure leads to enhance the productivity of industrial sector,
hence better quality of infrastructure must be included in priority for designing trade openness
agenda. However, Barua and Chakraborty (2006) analyzed the industrial sector performance for
India and observed high market and openness effects on industrial and exports performance.
Major conclusion drawn by them suggested that liberalization leads to high price cost margins
and reduction in concentration of industries, low producer surplus and consequently, consumer
welfare is enhanced.
Adebiyi (2006) investigated the relationship between policies of trade openness and economic
growth performance in Nigeria. This study applied Vector Auto regression techniques and
utilized annual time series data set. Major findings suggested that sustained economic growth in
Nigeria can be achieved by implementing a comprehensive trade openness programme.
Moreover a number of case studies for Pakistan have also been conducted to analyze the
relationship between trade openness and economic growth including Khan et al. (1995) which
showed that economic growth is enhanced through export promotion. Another analysis
conducted by Iqbal and Zahid (1998) concluded that Pakistan had gained walfare effects through
trade openness. Similarly, Mohsin et al. (2001) found evidence that trade openness has helped to
eradicate poverty in Pakistan. An evidence of positive relationship was found for the South
Asian region including Pakistan by Kemal et al. (2002). Khan and Qayyum (2007) also
examined a positive and robust relationship between trade and financial sector policies with
economic growth.
Findings of theoretical and empirical literature above can be summarized that literature
documented strong evidence in the favor of trade openness. Openness to trade is an important
factor to enhance the industrial growth and overall economic performance. But a successful
outcome requires a competitive economy along with strong institutional framework. Developing
nations like Pakistan must adopt the policies to improve trade as well as industrial performance.
Guerrieri (2002) stated that international trade is beneficial but it is not necessary for all the
countries to get the benefits, individually, at national level. Benefits by trade openness are
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dependent upon a great number of endogenous factors out of which specialization pattern is
significant for the benefits. However it also suggested that macroeconomic stability is a key prerequisite to get the maximum gains from trade liberalization.
3.
AN OVERVIEW OF TRADE SECTOR IN PAKISTAN
Since its inception, being an agriculture sector dependent country, Pakistan had a very weak
industrial sector along with poor infrastructure facilities and instability in social as well as
political sectors. The major goal of so-called development economist and policy makers of that
time emphasized to strengthen the industrial structure those days. In this regards, the major
objectives included restricting the imports and promoting the exports culture within the country.
As a consequence high tarrif rate policies were adopted to discourage imports in the country.
During the era of sixties, large scale manufacturing sector started to develop, because of policies
designed to strengthen the industrial base including overvalued exchange rate, export bonuses,
preferential credit access to industries with export potential and automatic renewal of import
licenses.
With the nationalization during the decade of 70s government of Pakistan adopted a few
measures for the openness of trade sector along with removal the pre provided export bonus
scheme. Moreover, devaluation of Pakistani rupee, and confiscating restricted licensing scheme,
increased the exports in manufacturing sector.
Pakistan restricted and protected its trade regime until the late 1980s. Imports were far away
from domestic markets as a result of high tarrif rates and non tarrif barriers. Structural
adjustment programme proposed by international funding agencies (IMF and World Bank) was
introduced in the early 1990s in the country. Pakistan followed liberalization policy for its trade
as well as financial sector. These policies got momentum, especially during the mid nineties,
with the reduction of import duties and eliminating various subsidies (Siddiqui and Iqbal, 2005).
Consequently, a reduction in the share of Pakistani exports in the world was observed from
0.22% to 0.18% and remained stagnant over it. As compared to Pakistan, all other Asian
countries gained lots of benefits in the same time (Hussein, 2007). Structural adjustment
programme resulted in an upward trend in exports as well as industrial value added.
4.
METHODOLOGY AND DATA
A number of studies used time series data set and econometric modeling to examine the possible
impact of trade openness on economic growth21. This study adopted the variable scheme adopted
by Sultan (2008) to achieve the objectives using imports and exports as indicators of trade and
industrial value added a determinant of economic growth. The analysis used imports, exports and
industrial value added as independent variables, and real GDP as dependent variable. Moreover,
all variables were transformed into logarithm form utilizing annual data set over the period 1975
to 2009 in millions of US dollars. Major sources include World Development Indicators (WDI),
and International Financial Statistics (IFS).
21
These studies include Sinha (1999), Hossain and Karonaratne (2001), Dutta and Ahmad (2004), Naryan and Smith
(2005) Jin (2003) and Sultan (2008).
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As a first step, this study applied ADF Unit root test to examine the time series properties of
data. We found all the variables be stationary at their first level. Thus, Ordinary Least Square
(OLS proposed by Carl Friedrich Gauss) is used to estimate the model, because under certain
assumptions namely, the equation to be estimated; is linear in parameters, is non-stochastic, has
zero mean value, possesses equal variance of distribution etc. finally after having established the
longrun cointegration among the variables, study applied Granger Causality Test to find the
directions of causal relation between the variables.
5.
METHODOLOGY AND ESTIMATION RESULTS
The results of unit root are reported in Table 5.1. It is grabbed from the table that all the variables
i.e. exports, imports, GDP and industrial value added are non stationary at level and are
stationary at first difference. It is concluding that all the variables are integrated of order one.
Table 5.1: Unit Root Test Results
Variables
LEXPORTS
LIMPORTS
LGDP
INVA
ADF at Level
-0.6263
-0.1026
-1.3027
-0.1026
ADF at First
Difference
-3.3265*
-2.8863*
-2.6987*
-2.8863*
Decision
I(1)
I(1)
I(1)
I(1)
Note: * shows significance at 5% level of significance, For testing unit root null hypothesis is that
variable possesses unit root, hypothesis is rejected if the calculated value exceeds ADF critical value
at 5% level of significance.
In the second step correlation among the variables was observed. The correlation matrix in Table
5.2 presents the evidence of strong correlation. Positive correlation is indicated between
industrial value added, exports and GDP which implies that high industrial value added cause
GDP to be high. Not a single evidence of negative correlation has been found here. Furthermore,
for the serial correlation LM test was also employed to observe the existence or non existence of
autocorrelation. However, the F-statistic was found very high (F-Stat = 17.9) while probability
was found to be less than 0.05. Therefore, null hypothesis of autocorrelation at 5% level of
significance is rejected.
Table 5.2: Correlation Matrix
Variables
D(LRGDP)
D(LRGDP)
1
D(LEXPORTS)
0.97
D(LIMPORTS)
0.93
D(LINVA)
0.98
D(LEXPORTS)
0.97
0.94
0.98
D(LIMPORTS)
0.93
0.94
0.95
D(LINVA)
0.98
0.98
0.95
Serial Correlation LM Test

F-Stat
n*R2
Probability F-Stat
Probability (Chi square)
17.93959
17.67172
0.000020
0.000145
Note: Null hypothesis for testing correlation is existence of autocorrelation.
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Table 5.3 delineates the results of OLS method of estimation, where C is intercept term,
D(LEXPORS), D(LIMPORTS), D(LINVA) are independent variables and were first differences
of log of exports, imports and industrial value added, respectively. Dependent variable was
LRGDP which is log of real GDP. Furthermore it is observed from the table that coefficient of
exports possesses negative sign indicating a negative impact of growth rate of exports on growth
rate of economic growth. Moreover, it has an overall insignificant effect i.e. 1% increase in
growth rate of imports causes 1.16% increase in real GDP growth rate. However, industrial
value added is an important determinant of economic growth in addition to imports and exports.
Industrial value added has positive and significant impact on economic growth, but its
contribution is very small in economic growth as growth of trade variables. It s also observed
from the table that 1% rise in growth rate of industrial value added causes 0.0001% rise in real
GDP growth rate. Adjusted R2 is 0.96 which is indicating that 96% variation in explanatory
variables was caused by explained variables. Values of coefficients suggest that the effect of
growth rate of imports has more strong effect on dependent variable as compared to growth rates
of exports or imports.
The cointegration among the variables was found in the next step, i.e. it was an endeavor to seek
existence or non existence of longrun relationship between the variables. So, Johansson
bivariate cointegration test was applied to detect the status of longrun relationship.
Table 5.3: OLS Regression Results
Variables
C
D(LEXPORTS)
D(LIMPORTS)
D(LINVA)
R2 = 0.962921
coefficients
7.7333*
-0.6397
1.1618*
0.0001*
F-stat = 243.38
t-statistics
3.83776
-1.21322
4.83107
3.14487
D.W stat = 0.509
Probability
0.0008
0.2364
0.0001
0.0043
Prob(F-tat)=0.000
Note: * shows significance at 1% level of significance, ** at 5% and *** at 10% level of Significance.
All the variables are non stationary at their level but are stationary at first difference and hence
integrated of same order. After testing the existence of cointegration and longrun relationship
between the variables now we move to find the causality amongst the given variables. The
results of causality are given in appendix, which state that bidirectional causality exists between
imports and exports indicating imports cause exports which further cause imports to be high.
Moreover, industrial value added cause imports, a unidirectional causality running from
industrial value added to imports was found showing industrial value added growth requires
more technology and capital goods which is enhanced by growth of industrial value added. In
summary, if we import capital goods and technology from abroad, it will be helpful for the
improvement of industrial value added and its growth.
6.
CONCLUSION AND POLICY RECOMMENDATION
Major findings of our analysis suggested that imports is an important determinant for growth of
industrial (Kemal, 2003) value added which further contributed positively to economic growth.
These findings can be summarized in another way that trade openness or the growth of imports
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and exports are not only determinant of economic growth but a positive and significant
contribution can be achieved by considering the industrial value added as well. The case study
found that potential benefits can be gained by Pakistan economy by adopting more trade
openness policies. Furthermore, these benefits can be positively exacerbated if the policies are
made taking industrial sector into account.
Industrial sector of Pakistan has not yet achieved the competition of world market through high
value added. So, if the demand of imported goods is associated with exports and industrial value
added, we can achieve high and sustained growth of real GDP. Therefore, it is recommended that
there must be reduction in tariff and non tariff barriers along with promotion of exports and
imports. Policies must be introduced to promote the imports of capital goods, in addition new
and advanced technologies must be promoted to enhance the growth of industrial value added
which in turn contributes to positive economic growth.
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Nigeria: An Error Correction Mechanism (ECM) Technique. Selected Papers for the
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Barua, A., & Chakraborty, D. (2006). Liberalization, Trade and Industrial Performance:An
Empirical Analysis for India. Paper for APEA Conference Seattle.
Carmen, M., & Pilar. (2004). The Impact of Industry and Foreign Trade on Economic Growth in
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Din, M., Ghani, E., & Siddiqui, O. (2003). Openness and Economic Growth in Pakistan.
Pakistan Development Review, 792-807.
Dutta, D., & Ahmad, N. (2004). Trade Liberalization and Industrial growth in Pakistan: A
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Hultman, C. (1967). Exports Expansion and Economic Growth: A Survey of Land Economics.
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Hussain, I. (2007, June 17). Trade and Economic Linkages. Islamabad: Quaid e Azam
University.
IMF. (2008). International Financial Statistics (IFS). Issued by IMF Washington D.C.
Iqbal, Zafar, & Zahid G.M. (1998). Macroeconomic Determinants of Economic Growth in
Pakistan. PAkistan Development Review, 37(02), 125-148.
Kemal, A. R. (2003). An Assesment of the Impact of Trade Liberalization in Walfare in
Pakistan. MIMAP Technical Paper Series PAkistan Istitute of Development Economics,
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Kemal, A. R. (2003). An Assessment of the Impact of Trade Liberalization in Walfare in
Pakistan. MIMAP Technical Paper Series PIDE, No. 16.
Khan, M. A., & Qayyum, A. (2007). Trade Liberalization, Financial Development and Economic
Growth. Pakistan Institute of Development Economics Working Paper , No.19.
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Economics, 22.
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Naryan, & Kumar, P. (2005). Trade liberalisation and economic growth in Fiji : An empirical
assessment using the ARDL approach . Journal Of Asian pacific economy , 96-115.
Njikam, O. (2009). Trade Liberalization, Industrial Performance and Infrastructure Development
in Cameroon. Africa Studies Centre, Leiden, the Netherlands.
Romer, P. (1990). Endogenous Technological Change. Journal of Political Economy, 98.
Siddiqui, A. H., & Iqbal , J. (2005). Impact of Trade Openness on Output Growth of Pakistan:
An Empirical Investigation. MArket Forces, 01.
Sinha, D., & Sinha, T. (1999). Relation Between Openness and Economic Growth: Pstwar
Evidence from 124 Counteries. Journal of Economics, 67-83.
Sultan, P. (2008). Trade, Industry and Economic Growth in Bangladesh. Journal of Economic
Cooperation, 71-92.
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APPENDIX
Granger Causality Results
Hypothesis to Test
LEXPORTS does not Granger Cause LRGDP
LRGDP does not Granger Cause LEXPORTS
LIMPORTS does not Granger Cause LRGDP
LRGDP does not Granger Cause LIMPORTS
LINV does not Granger Cause LRGDP
LRGDP does not Granger Cause LINV
LIMPORTS does not Granger Cause EXPORTS
LEXPORTS does not Granger Cause IMPORTS
LINV does not Granger Cause LEXPORTS
LEXPORTS does not Granger Cause LINV
LINV does not Granger Cause LIMPORTS
LIMPORTS does not Granger Cause LINV
F-Statistics(probability)
0.58431 (0.56555)
0.78365 (0.46856)
0.43751 (0.65090)
2.48412 (0.10549)
0.66570 (0.52396)
0.94847 (0.40261)
2.99739 (0.06969)
3.95982 (0.03328)
3.27533 (0.05687)
1.15954 (0.33207)
6.43980 (0.00629)
0.02862 (0.97182)
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PROBLEMS FACED BY SCIENCE TEACHERS AT SECONDARY LEVEL
IN DISTRICT KARAK
Prof Dr. Rabia Tabbssum
Associate Professor, Education Department
Northern University Nowshera Pakistan
Dr. Muhammad Imran
Assistant Professor, Institute of Education and Research,
Punjab University, Lahore
Dr. Ali Murtaza
Assistant Professor, Faculty of Education
Preston University, Islamabad, Pakistan
Kohat University of Science and Technology
Abstract
In this research paper the author discuss to find out the problem faced by science teacher at
Public Secondary Schools of District Karak. In this definition education is the development of
those capacities in the individual, which will enable him to control his environment and fulfill
his responsibilities. The word Science has its origin from the Latin word, scientia, which means
to know. Science is a systematized body of knowledge. The population of the study were
consisted all the Science teachers working in male and female Public Secondary Schools of
District Karak. A sample of 18 teachers was randomly selected from the population. A self
developed questionnaire was used for the collection of data. The questionnaire contained 38
items and two open ended questions. The questionnaire covered the areas of availability of
classroom, lighting arrangement, text book, note book, participation of the students, training of
the teachers, language of text books, teaching methodologies, availability of science lab, the data
was analyzed by using statistical method chi-square and percentage. The major findings and
conclusion of the study were that (1) Combine science lab is available in most of the schools but
separate lab for physics; chemistry and biology are not available. (2) There is deficiency of
science apparatus and the available apparatus are also not workable in most of the schools.(3)
There is a deficiency of science teachers in schools. The major recommendations of the study (1)
It is recommended that efforts may be made for provision of separate laboratories for physics,
chemistry and biology. (2) It is recommended that the already available apparatus may be made
workable.(3)It is recommended that refresher courses may conduct for science teachers.(4)It is
recommended that teacher may be motivated to use audio visual training aids regularly.
Keywords: Science Teachers, Pubic Secondary Schools, Science laboratory, Science
Apparatus
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1.
Introduction
Education is a process that enables the individuals to adjust themselves in the society and
fulfill their personal needs; and the nations to have a literate society and better quality of life.
The strength of a nation is generally reflected by the quality of human resources produced by its
educational institutions. The socio-economic development of a society directly corresponds to its
quality of life. Thus education is valued all over the world and has been on top of the agenda of
every society. No uneducated society has ever attained the power. No educated society has been
left behind in the relentless march of history. (Nureen, 2003)
Teaching is the main part of educational process. Teaching is set of activities which is
designed and performed to achieve certain objectives in terms of changes in behaviour. It is the
process of helping others to achieve knowledge, skills and attitudes. According to Shami (2001),
teaching is a heart of the educational process. Widely recognized and accepted approach of
science teaching is that it should be taught as a process of inquiry. It implies that teaching
learning process should be made wherever of the knowledge. He further stressed as: Teaching is
considered appropriate only it if address all the objectives of science education which are spread
over knowledge domain, affective domain and psychomotor domain. In spite of this
classification the domain are interdependent. The teaching process delivers important
information of facts, concepts and principles so as to develop understanding increase the
knowledge and orientation with scientific process. This process results into not only help to use
the knowledge but also construction of knowledge. The scientific processes themselves identify
the desired skills such as observing, measuring, classifying, analyzing experimenting,
communicating, manipulating etc. During the teaching process focus is also on the development of
attitudes, interests, values, appreciations etc. These elements of affective domains develop during
teaching learning activities.
2.
Literature Review
The main purpose of teaching is to develop the learners capacities but each individual
student learns capacities differently and this difference may probably be enhanced through
teaching. It must be designed in such a way that appropriate learning conditions can be
developed and desirable changes can be brought in learning. Teaching is the way of
accomplishing the learning objectives. (Ahmed, 1996)
The word Science has its origin from the Latin word, scientia, which means to know.
Science is a systematized body of knowledge Science is nothing but organized common sense
(Yadav, 1992).Science has affected every aspect of life and has revolutionized the society. On
the other hand, scientific knowledge is increasing with a great pace, never experienced in the
history of mankind. It is a recognized fact that modern citizen over it existence to science and
can be called as a scientific civilization. Obviously the rule of science and technology remains
the most important factor in the socio-economic of a society. It has been widely accepted that the
amicable survival of a nation in the 21st century depends upon scientific development as well as
scientifically literate society. The comer stone on which the edifice of development programmes
of a country must be built is its expertise in science and technology and its application in
agriculture and industry (Saud, 1998).Pakistan is a developing country and is continuously
striving for respectable status in the community of nation. Pakistan needs a strong base of
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science and technology to solve its problems of food, shelter, energy, health and security, the
exploitation of natural resources and the boosting of agricultural and industrial production.
Pakisan has established itself as a member of global nuclear power society (Iqbal, 2000).
Since independence in 1947, there has been growing consciousness about the role of
science in the development Pakistan, to become a modern state. The first education conference
1947 set the direction of our education system. Quaid-e-Azam Muhammad Ali Jinnah in his
message to the conference emphasized the importance of science education for the emerging
nation. The future of our state will and must greatly depends upon the type of education we
give to our children, and the way we bring them up as the future citizens of Pakistan. Education
does not mean academic education; there is an immediate need of scientific and technical
education to our people in order to build up our future economic life and to see that our people
take science, commerce, trade and particularly well- planned industries. We should not for get
that we have to compete with the world which is moving very fast. (Govt. of Pakistan, 1947).
Science education at secondary level could not attract attention in terms of effort and
investment. With increased emphasis on quality of primary education and renewed efforts to
check high drop out rate in basic education, secondary level education now needs to be
developed for comparatively heavy influx of students. The ESRs included a reform in science
education at the secondary level by constructing science laboratories, provision of science
equipment, revision of Science Curricula and professional development of Science and
Mathematics teachers. Teaching of Science subjects in English is also part of the reform process
(Shami, 2008).
It is an accepted reality that the only road leading to national development passes through
the area of education. One cannot name even a single profession where the role of education
can be undermined. If education is viewed as the back bone and energizing force for the national
progress then how can the exalted and pivotal position of the teacher can be ignored who has
been assigned the responsibility of education for the future generation. The education standard
and professional competence of the teacher would always remain of primary concern and require
top priority for having the fruit of educational enterprise in its true spirit.
Teachers are the torch bears in creating social cohesion, national integration and learning
society. They not only disseminate knowledge but also create and generate new knowledge.
They are responsible for acculturating role of education. No nation can even marginally slacken
its efforts in giving necessary professional inputs to its teachers and along with that due status to
their stature and profession.
The teacher is of paramount importance in the teaching learning process. He is a pivot in the
system of education. The whole education system revolves around him, therefore he must always
try to improve his teaching skills and motivate the pupils whole using various methods and
techniques of teaching suitable for their learning. Since the teacher has been assigned a
Herculean task of being the builders of nation, so he has to come up to fulfill the expectation of
the parents, society and students as well. The prime aim of teachers is to impart right education
and remove the signs of ignorance from all lifestyles. Are doctors held accountable for not
ending disease, dentists for not ending tooth decay welfare agencies for not ending poverty,
police for not ending crime, lawyers for not ending all disputes, or parliament for not ending who
knows what? No, we will always have disease, cavities, poverty, crime, disputes, and wasted
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resources. Yet teachers are expected to end ignorance because this is the only way to way to
prosperity and to survive in dignified manner amongst the comity of nations.
The educational system of any country hinges on the teacher, who occupies a pivotal position in
its evolution as he has been assigned the responsibility of educating the future generation it The
growing number of students and reports that are becoming available suggest that better education
of teachers may be the most crucial input for the development of human resources in the country
(Farooq, 1993).
Richardson (1985) Teachers play the most important and practical role in education. They are said
to be the builders or architects of a nation. Teacher is the central log in the machinery of education.
The quality and worth of teachers determine the quality of education. To develop an individual as a
scientist, we will have to develop a suitable science curriculum, Laboratories, for our educational
institutions and that will be only possible that we remove the problem faced by science teachers in
secondary level.
2.1
Statement of the Problem
The study was aimed to find out the problem faced by science teacher at Public Secondary Schools
of District Karak
2.2
Following were being the objectives of the study: 1.

2.
2.3
To find out the problem faced by science teacher at Public Secondary Schools of District
Karak
To offer recommendation for the removal of the problems of science teachers of Public
Secondary Schools of District Karak
Research Questions
The study was focus on answering the following specific research questions:
1.
2.
3.
4.
Are the classrooms available for science students?

Are the classes over crowded?
Is the lighting arrangement available properly?
Do you properly have been trained for teaching the current science text at Secondary level?
5.
Do you properly have been trained in practical laboratory work in science subjects at
Secondary level?
Is combined science laboratory available for the students in school?
Is there separate Physics, Chemistry and Biology laboratory available for the students?
Do the science teachers have sufficient number of periods for practical?
6.
7.
8.
2.4
Significance of the Study
Science has influenced every aspects of life. It has affected social, cultural, and economic walks of
life every society. New discoveries and inventions in the field of science have created new needs
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for every country. Science must become an essential component in any educational enterprise.
Development of scientific literacy is one of the major purposes of our science technology.
In order to achieve our objectives in education, we need improvement not only in method
of teaching, curriculum and future system of evaluation but also try to solve those problems which
are faced by the science teachers during the teaching. This study will help us to know about the
major problems faced by science teachers particularly in Public secondary schools of District
Karak.
2.5
Delimitation of the Study
Due to limited time and resources, the study was delimited to Public secondary schools of
level of district Karak. The institutions in private sector were not being included in the sample.
3.
Research Methodology
The purpose of this study was to find out the problems faced by science teachers at secondary
level in district Karak. Design of the study was descriptive in nature. The researcher had to
depend upon the literature available and structured questionnaire administered to secondary
school science teachers working in the government schools of District Karak.
3.1
Population
The population of the study constituted all the male and female Secondary Schools science
teachers in District Karak. There were 58 secondary schools for Boys and 28 secondary schools
for Girls in district Karak.
3.2
Sample
A sample of 18 teachers was randomly selected from the population. The description of
the sample science teachers as under;
Male
Female
Total
3.3
9
9
18
Research Instruments
For the collection of data Questionnaire is more efficient in that it requires less time, less
expensive and permits collection of data from much large sample (Best and Kahn, 1992) There
were 38 items in the questionnaire and two were open ended questions. The Questionnaire was
developed in the light of the objectives of the study and was responded on the basis of yes No
and undecided for obtaining the information from the sample secondary school science
teachers.
3.4
Data Collection
The researcher distributed the questionnaires himself to the respondent and through other
and collected and received the responses. Researcher received all the responses, so the response
percentage was 100 percent.
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3.5
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Data Analysis
The data received from the respondents were collected, tabulated and analyzed in the
light of the objectives of the study. Data collected on the above mentioned three point
Questionnaire were analyzed by using the statistical techniques of percentage and Chi Square at
0.05 levels of significance.
4.
RESULTS AND DISCUSSION
This section deals with the analysis and interpretation of data. The data collected through
research instruments were tabulated, analyzed, and interpreted in the light of the objectives of the
study by using chi-square.
Questionnaire for Science Teachers
Table 1: Frequency distribution of Science Teachers
Items
Responses
Yes
No
Availability of classrooms for science

students
Responses
Percentage
Responses
Percentage
Responses
Percentage
13
72
11
62
12
66
5
28
7
38
6
34
0
0
0
0
0
0
18
100
18
100
18
100
Responses
Percentage
Responses
Percentage
Responses
Percentage
Responses
Percentage
Responses
Percentage
Responses
Percentage
Responses
Percentage
5
28
6
34
13
72
15
83
14
78
9
50
4
22
13
72
12
66
5
28
2
11
4
22
8
44
13
72
0
0
0
0
0
0
1
6
0
0
1
6
1
6
18
100
18
100
18
100
18
100
18
100
18
100
18
100
Over crowdedness of classrooms

Availability of lighting arrangement in
classrooms
Facing problems regarding the
availability of text book
Facing
problem
regarding
the
availability of the note book
Participation of students in teaching
learning process in science Subjects
Sufficient number of periods for
teaching theory in science subjects.
Availability of combined science
laboratory for the students in Schools
Sufficient number of periods for
practical in science subjects.
Availability of audio visual aids for
teaching science subjects
* Significant
UD Total
2
14.3*
10.3*
12*
14.3*
12*
14.4*
20.3*
17.3*
6.3*
12.9*
df= 2 Table value of 2 at 0.05 = 5.991
The above table 1 shows that value at 2 degree of freedom the 2 value at 0.05 = 5.991 which is
greater than the table value the chi square (2) value. The table indicate that the calculated value
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of (14.332, 10.3*, 12*, 20.3*, 17.3*, 6.3* and 12.9*) is greater than the table value of 2
(5.991), therefore there is significant difference in the responses of the respondents. Since more
responses are in category, yes so it is concluded that the respondents feel that classrooms are
available for science students, classes are over crowded, proper lighting arrangement is available
in the classroom, students do not have problem regarding the availability of the text book,
student do not have problem regarding the availability of the note book, students as a whole take
participate actively in teaching learning process in science subjects,. The science teachers have
sufficient number of periods for teaching theory in science subjects, science teachers have
sufficient number of periods for practical science subjects, majority of the schools combined
science laboratory is available for the students in school and the respondents feel that audio
visual aids are not available for teaching science subjects.
5.
DISCUSSION
The focus of study was to explain the problems faced by the science teachers of secondary level
in distract Karak. A Sample of 18 schools was selected and a questionnaire containing 38 items
was administered to the respondents for data collection. The findings of the study revealed that
majority of the respondents opined positively about the availability of classrooms, lighting
arrangements, textbook, books. However a reasonable number of respondents opined negatively.
This means that sum of schools are deprived of this facility.
The study also reveled that sum of the schools were of the opinion that student class
participation level and regularity in completing home work is not satisfactory. This
unsatisfactory may be related to lack of combination of variety of lacking methodology i.e.
lecture method, demonstration method and cooperative learning method.
Another finding of the study is majority of the schools do posses combine science
laboratory and separate laboratory for physics, chemistry and biology is not provided .the
apparatus available in the laboratories are not in working condition. This means that science
teachers and students do not pay proper attention to the use and care of apparatus. Principles of
the schools can also held responsible for putting the apparatus in order but allocating sum funds
for the repair of apparatus. The study reveled that most of the schools do not have required
science teachers. This problem can tackled from two directions one is to take up a case with a
higher authorities for the provisions of science teachers 2nd is that `other teacher who have study
it science at intermediate level can also be employed on teaching science subjects
.
6.
CONCLUSION
I.
II.
III.
IV.
V.
On the basis of interpretation and finding of data following conclusion were drawn
Majority of the respondents felt that classrooms are available for the science students, but
the classes are over crowded.
Majority of the respondents felt that lighting arrangement in the classrooms is proper.
Majority of the respondents felt that the student do not face problem regarding the
availability of science text book and note book.
Majority of the respondents felt that the students take participation in teaching learning
process in science subjects.
Majority of the respondents felt that number of period for theory is sufficient but number of
period for practical is not sufficient for practical.
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VI. Majority of the respondents felt that number of the schools combined science laboratory is
available for the students in school
VII. Majority of the respondents felt that the audio visual aids are not provided to the teachers.
VIII. Majority of the respondents felt that the teacher do not use audio visual aids regularly.
7.
RECOMMENDATIONS
On the basis of analysis of data, findings and conclusions the following recommendations
are offered.
I. It is recommended that teacher should use variety of teaching methodologies i.e. lecture
method, demonstration method, lecture cum demonstration method, and discussion method.
II. It is recommended that science teachers are overloaded. Their work load should be
rationalized.
III. It is recommended that allocation of period for theory and practical may be rationalized.
IV. It is recommended that efforts may be made for provision of separate laboratories for
physics, chemistry and biology.
V. It is recommended that refresher courses may conduct for science teachers.
VI. It is recommended that teacher may be motivated to use audio visual training aids
regularly.
VII. It is recommended that efforts may be made for provision of separate laboratories for
physics, chemistry and biology.
VIII. It is recommended that provision should be made for the required number of science
teachers may be ensured.
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References
Ahmed, T. (1996). A Handbook of Teachers, Research in Teaching of Biology. New Delhi:
A.P.H. Publishing Corporation.
Farooq , R, A (1993). Education System in Pakistan: Issues and Problems. Asia Society for
Promotion of Innovation and Reform in Education, Islamabad.
Iqbal,.Zafar. (2000). Teacher Education. Proceedings National Seminar on Education: The
Dream and Reality. Rawalpindi: Army Education Press.
Garrette, H.E, (1997) Statistics in psychology and Education. Lahore: Combine Printers
Good, C.V (1973) Dictionary of Education. London Mc Graw-Hill ,Book company
Noureen, S. (2003). Study to compare Foreign Aided community model and Government Girls,
Primary schools in Punjab. Journal of Educational Research Islamia University
Bahawalpur
Richardson, John. S. (1985) (Science teaching in secondary schools) London: Prentice -Hall,
Incorporation.
Saud, M., (1998), Islam and Evolution of science, Islamabad. Islamic Research Institute
Shami, P. A. (2001). Science Curriculum for the Primary School National Institute of Science
and Technical Education. Islamabad: Ministry of Education, Govt. of Pakistan.
Shami, P.A. 2008. Academy of Educational Planning and Management Ministry of Education
Islamabad
Yadav, M. S. 1992. Teaching of Science. Anmol, Publications, New Delhi, India
772
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ROLE OF BOADCAST M EDIA IN DISTANCE EDUCATION
Dr. Ali Murtaza
Prof Dr. Rabia Tabbssum
Associate Professor, Education Department
Northern University Nowshera Pakistan
Dr. Muhammad Imran
Punjab University, Lahore
Abstract
This study was designed to investigate how the broadcast media is being used in the program of
Bachelor of Education (B.Ed) through the mode of distance education. To find out the real
picture there was one region of Allam Iqbal Open University selected as target population. All
the students enrolled in Semester Autumn 2010 B.Ed students and their tutors of respective
division were the population. The objectives of the study were: To identify the modern tools of
Educational Technology used in Distance Education. To find out the problems involved in the
use of Educational Technology in Teaching Learning Process in Distance Education. To
Determine the Modern Technology used in Distance Learning. To know the effectiveness,
suitability and quality of Educational programme used for in teachers training courses through
Distance Education. Study was completed by descriptive research applying with survey method.
Sample was collected through questionnaires by the researcher. Data was analyzed and the
results were converted into percentage and mean score. The major findings and conclusion
drawn were that the Instructional aids available in study center support in teaching learning
process. Students were satisfied with Radio and TV Programs. The Tutors have views that
programs broadcasted by Radio and TV had relevancy to the contents taught to the students.
Most of the respondents were agreed that the voice of presenter was attractive and effective.
Responded recommended that there is need to decentralized the distance education where
students can able to approach easily. Quantity of the broad cast media should be enhanced.
Key Words: Educational Technology- Broad Cost Media Distance Education
1.
Introduction
Educational Technology implies a behavioral science approach to teaching and learning in that it
makes use of pertinent scientific and technological methods and concepts developed in
psychology, sociology, communications, linguistics and other related fields. It also attempts to
incorporate the management principles of cost effectiveness and the efficient deployment and use
of available resources in men and materials. The term broadcasting covers the transmission of
programs by several types of distribution systems. The commonest of these, particularly in
developing countries, consists of transmitters broadcasting from towers to conventional aerial,
and receivers for radio and television. (David&John, 1982) Educational broadcasting is
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widespread in the Asia-Pacific region. In Japan, for example, the Japanese "University of the
Air" broadcasts over 160 television and radio courses. (http://www.unescobkk.org)
2.
Literature Review
The electronic media (radio and television) are great assets in distance education. In the
traditional face-to-face teaching, the teacher is seen and heard by the students. The television
very much represents the physical teaching because of its audio-visual nature. Besides bringing
reality, the television is useful in teaching great audience at the same time. (Dr. Sydney 2000)
Distance Education has produced notable results in the development of education across the
World. It is indeed, a viable and levels in todays society because of its flexibility, cost
effectiveness and easy accessibility in different settings. Omelewa, (1982,).
These realities are having a profound impact on the classroom and demand programs that
prepare teachers with the capacity to meet them. We need teachers who are well versed in their
curricula, know their communities, apply their knowledge of child growth and development, use
assessments to monitor student progress and effectively engage students in learning. Teachers
need collaboration, communication, and problem-solving skills to keep pace with rapidly
changing learning environments and new technologies.
The appropriate use of media and technology has provided information access to all
students in remote, rural and urban areas as well as across nations. (Dr. Mohammad Habibur
Rahman 1995)
According to UNESCO (1978), the concept of educational technology has passed through
three stages of development. By 1967, it was referred to as audio-visual aids. Till 1975, it was
known as methods, materials and techniques. The concept of educational technology varies from
one group of people to another. The national Council of Educational Technology of U.K.
considers educational technology as the development, application and evaluation of systems.
Techniques and aids to improve the process of human learning. Gagne (1968,) views it as a set
of systematic techniques and practical knowledge for designing, testing and operating schools as
educational systems. Eraunt (1977,) viewed that educational technology as an instrument for
preparation and use of educational materials for improvement of curricula. There is a consensus
amongst all stakeholders that the quality of teachers in the public sector is unsatisfactory. Poor
quality of teacher in the system in a large number is owed to mutations in governance, an
obsolete pre-service training structure and a less than adequate in-service training regime.(
http://www.moe.gov.)Learning is the key process in human behavior, Parents and teachers are
greatly interested in childs learning. His instincts, attitudes, appreciations, skills and abilities are
primarily the product of learning. It influences our language, our goals. Child learns to sit, stand,
walk or run, to talk. He learns to hold a pen and to write. He makes use of language to identify
natural objects.
Briefly speaking, learning is a change in behavior- organization. It is the organism as a
whole that learns. Psychologists remark, Learning as reconstruction, combine thinking, skill
information and appreciation in a single unitary process, and it is characterized by flexibility,
since it must constantly adapt itself to the circumstances of the situation and the environment.
Thus, the child in the school learns many subjects and gradually finds himself a totally change
man.
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3.
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This study was descriptive by nature. Therefore, survey method was adopted to collect
the data A survey design is one of the most effective ways to conducting descriptive research. It
is effective in gathering information that describes the nature and extent of specified data,
providing a systematic attempt to collect information. Describe it and explain perception, beliefs,
value and behavior (Kanjai., 2010). One region of (AIOU) was selected for Pupil Teachers.
There were four districts in the respective region.
3.1
Population
The population consisted of enrolled Bachelor of Education (B.Ed.) students in Spring

2010. The Pupil Teachers were (1000) and (90) tutors of Allama Iqbal Open University
Islamabad,
3.2
Sampling
The representative sample was collected from the population. Population consisted on
two following categories; one is B.Ed. students while the second are Tutors were included as
population of the stduy. The list of students and tutors was taken from the regional office.
3.3
Research Instruments
Data collection tools were the questionnaires. Questionnaires were constructed based
upon the five point likert scale.
In both Questionnaires, the respondents were requested to give their responses in each
item in Yes or No and on a five point scale.
Strongly agreed=5, Agree=4, Uncertain=3, Disagree=2, Strongly Disagree=1
3.4
Data Collection
Data were collected personally and through colleagues at the time of meeting at study centers.
3.5
Data Analysis
Data were arranged by the researcher for the purpose of describing and analyzing as
follows:
1.
2.
3.
Percentage of responses to each item was calculated.

Overall percentage to each item was calculated.
Overall mean score on each item was calculated.
For data analysis Mean has been categorized (11.69, 1.702.39, 2.403.00).
11.69 = Negative attitude
1.702.39 = Moderate attitude
2.403.00 = Positive attitude
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Table: 1.
Sample
Pupil Students
Selected
190
Return
180
Percentage%
95
92
282
90
270
98
96
Tutors
Total =
Above table shows that 95% students responded while Tutors were 96%. The total
respondents were 96%.
Table: 2.
Availability of Radio Sets

No.
Statement
Level
Frequency
Percentage
Have you own
Yes
216
80
Radio set?
No
54
20
Mean Score
1.00
Table 2 shows that 80% respondents had their own radio sets and 20% respondents were
with out radio sets while the mean score was 1.00.Mostly the students of that region have their
own radio sets.
Table: 3.
Availability of T.V Sets

No.
Statement
Level
Frequency
Percentage
Have you own
Yes
126
70
T.V?
No
54
30
Mean Score
1.70
Table: 3. shows that 70% respondents had T.V sets where as 30% respondents were with
out T.V sets. The means score was 1.70
Table: 4.
Opinion about interest

No.
Statement
Level
Frequency
Percentage
All
Radio
program
are
helpful
to
increase interest
regarding
the
subject.
SA
A
UNC
DA
SDA
49
89
46
51
35
18%
33%
17%
19%
13%
Mean Score
3.22
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Table 4 shows that 51% respondents were agreed with the statement while 32.77% respondents
disagree. The mean score was 3.22.Result of the respondents proved that the radio programme
are really helping to increase the interest in the contents. But there is also need to develop more
as per students needs.
Table: 5.
Opinion about relevancy of Radio Broadcast program to the Course

No.
Statement
Level
Frequency
Percentage
Mean Score
Mostly broadcast
Radio Programs
are very relevant
to the course
content.
SA
A
UNC
DA
SDA
100
51
35
62
22
37%
19%
13%
23%
8%
3.54
Table 5 shows that 56% respondents were agreed and 31% respondents disagreed while
the mean score was 3.54. The result illustrated that Broad cast radio programs are very relevant
with course content.
Table: 6.
Opinion about suitability of broadcasting Time.

No.
6
Statement
Time
broadcasting
radio
programmes
suitable.
of
is
Level
Frequency
Percentage
Mean Score
SA
A
UNC
DA
SDA
76
65
49
64
16
28%
24%
18%
24%
6%
3.44
Table 6 shows that 52% respondents were agreed with the statement and 30.00%
respondents disagreed while the mean score was 3.44. All the results show that broadcasting
radio programme is suitable for the learner. The statement is mostly accepted.
Table: 7.
Audio Cassettes of Radio Broadcast Programme

No.
Statement
Level
Frequency
Percentage
Mean Score
Radio Programs
should also be
provided in audio
cassettes.
SA
A
UNC
DA
SDA
143
57
24
38
08
53%
21%
9%
14%
3%
4.06
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Table 7 shows that 74% respondents were agreed and only 17% respondents disagreed
while the mean score was 4.06. The result strongly strengthen that Audio Cassettes of Broad
Cast Radio programme are available.
Table: 8.
Opinion about easy language

No.
Statement
Level
Frequency
Percentage
Radio broadcast
programs are
with logical
presentation easy
to understand for
all students.
SA
A
UNC
DA
SDA
124
86
11
30
19
46%
32%
4%
11%
7%
Mean Score
3.99
Table 8 shows that 78% respondents were agreed with programs and 18% respondents
were disagreed while the mean score was 3.99. Mostly respondents satisfied with the language
which used in the broad cast program.
Table: 9.
Opinion about in time delivery of broad cast program schedule

No.
9
Statement
Level
Frequency
Percentage
Schedule of
Radio
broadcasting
programs sent
well in time in
each semester.
SA
A
UNC
DA
SDA
52
78
35
83
22
19%
29%
13%
31%
8%
Mean Score
3.22
Table 9 shows that 48% respondents were agreed 39% respondents were disagreed while
the mean score was 3.22.Most of the respondents were satisfied that in time delivering of broad
cast program schedule to the students.
Table: 10.
Opinion about Usefulness of T.V in Distance Education

No.
Statement
Level
Frequency
Percentage
Mean Score
10
T.V. is very
useful for
teaching learning
in distance
education.
SA
A
UNC
DA
SDA
70
102
27
49
22
26%
38%
10%
18%
08%
3.53
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Table 10 shows that 64% respondents were agreed and 26% were disagreed while the
mean score was 3.53. Statement the TV is very useful for teaching learning in distance education
is accepted.
Table: 11.
Opinion about Video Cassettes of T.V. Programs

No.
Statement
Level
Frequency
Percentage
11
All T.V.
programs of
related courses
are also provided
in video
cassettes.
SA
A
UNC
DA
SDA
62
108
27
43
30
23%
40%
10%
16%
11%
Mean Score
3.45
Table 11 shows that 63% respondents were agreed with the 27% were disagreed while
the mean score was 3.45. It is concluded that all TV program of related courses are also provided
in the shape of video cassettes.
Table: 12.
Opinion about Clarity of Presenters Voice

No.
Statement
Level
Frequency
Percentage
Mean Score
12
The
presenter
voice is very
clear
and
understandable.
SA
A
UNC
DA
SDA
65
124
22
16
19
24%
46%
8%
6%
7%
3.65
mean score was 3.65.Statemet the presenter voice is very clear and understandable is accepted.
Table: 13.
Opinion about Radio Programs minimize problems

No.
Statement
Level
Frequency
Percentage
Mean Score
13
Radio programs
help the students
to minimize the
course work
problems.
SA
A
UNC
DA
SDA
57
92
49
61
11
21%
34%
18%
23%
4%
3.46
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Table 13 indicates that55% respondents were agreed and 26.66% were disagreed while
the mean score was 3.46.Statement of radio programs help the students to minimize the course
work problems is accepted.
Table: 14.
Opinion about Duration of T.V. Program

No.
Statement
Level
Frequency
Percentage
Mean Score
14
Duration of all
T.V. programs is
reasonable.
SA
A
UNC
DA
SDA
130
81
08
24
27
48%
30%
3%
9%
10%
3.96
Table 14 shows that 78% respondents were agreed 19% were disagreed while the mean
score was 3.96.Mostly the students agreed with the duration of all TV programs is reasonable.
Table: 15.
Opinion about Language of T.V. Presenter

No.
Statement
Level
Frequency
Percentage
Mean Score
15
The language of
T.V. programs
presenter is easy
to understand.
SA
A
UNC
DA
SDA
54
167
17
24
08
20%
62%
6%
9%
3%
3.86
mean score was 3.86.Most of the respondents were stratified with the language of TV programs
presenter is easy to understand.
Table: 16.
Opinion about interest of T.V Programs

No.
Statement
Level
Frequency
Percentage
Mean Score
16
Students Interest
is maintained in
T.V. programs..
SA
A
UNC
DA
SDA
62
118
11
57
22
23%
44%
4%
21%
8%
3.54
Table 16 Shows that 67.78% respondents agree with interesting of T.V programs, where
as 28.89% disagree while the mean score was 3.54.
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Table: 17. Opinion about Change in Timing of Radio and T.V. Programs
No.
Statement
Level
Frequency
Percentage
Mean Score
17
T.V programs are

updated as per
curriculum
demand of the
society.
SA
A
UNC
DA
SDA
78
86
03
54
49
29%
32%
01%
20%
18%
3.34
Table 17 shows that 61.11% respondents were agreed with change of TV programs,
where as 37.78% disagree while the mean score was 3.34. Mostly respondent supported that the
TV programs are updated as per curriculum demand of the society.
Table: 18.
Opinion about T.V programs available in cassettes

No.
Statement
Level
Frequency
Percentage
Mean Score
18
T.V programs
available in
cassettes.
SA
A
UNC
DA
SDA
43
108
24
31
54
16%
44%
9%
11%
20%
3.24
Table 18 shows that 60.00% respondents were agree with T.V programs available in
cassettes, where as 31.11% respondents disagree. While the mean score was 3.24.Most the
respondents were in the favor of TV program are available in cassettes too.
Table: 19.
Opinion about T.V programs available in cassettes

No.
Statement
Level
Frequency
Percentage
Mean Score
19
The quality of all

T.V programs is
appreciated.
SA
A
UNC
DA
SDA
43
118
25
30
54
16%
44%
9%
11%
20%
3.24
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Table 19 shows that 60.00% respondents were agree with T.V programs available in
cassettes, where as 31.11% respondents disagree while the mean score was 3.24.
On open ended questions 80% responses were received.35% respondents given opinion
that distance learning system should be decentralized more. 25% said there is need to improve
the quality of broad cast media as per international standard.20% respondents said the electricity
is big problem to see the TV broad cast lectures.
5.
Conclusion
The study was conducted to evaluate how and to what extent of modern trends are
applied as educational technology tools in the mode of distance education in Pakistan. In
Pakistan 68% population living in the rural areas and they dont have ample opportunities to get
education through formal system of education. Teacher Education is also one of the Key area in
our National Educational Policy 2009.This study evaluated the whole picture, how the broad cast
techniques is used to teach the pupil teachers? To covering the all aspects of the programs of
Radio/TV One region of Allama Iqbal Open University was selected as target population. All
Pupil teachers (B.Ed) of respective region were in population. The second population is the
Tutors of the same region in same program. Pupil Teacher sample was 180 and 95%
questionnaires received from them and Tutor of B.Ed program were 90 and 98% questionnaires
received. Questionnaires were prepared on five point rating scale and data was analyzed through
Percentage and Mean Score. The study was concluded as:
Majority of students had their own Radio, T.V sets,

Majority of respondents showed their response towards radio programs interesting,
relevancy with course and suitability of time.
Majority of the respondents were in favor of the programs provided in cassettes.
Majority of the respondents were in support of understandable of language and voice of
presenter.
Majority of respondents studied their course before attending T.V programs.
Majority of students satisfied with the presentation of lesson by Presenter.
61.11% respondents were agreed with change of TV programs.
78% respondents were agreed with the duration of all TV programs is reasonable.
82% the respondents were stratified with the language of TV programs presenter is easy
to understand.
67.78% respondents agree with interesting of T.V programs
60.00% respondents were agreeing with T.V programs available in cassettes.
Majority of respondents unflavored the supply of electricity to run equipments.
The conclusion of the whole study is Pupil Teacher of Bed program is very appreciated in
rural areas of Pakistan and students are very interested to improve their quality by learning
different skills and comprehension of the respective professional knowledge. The study shows
that there is need to do more advance the system of Broad Cast media in distance education.
Distance Education system should be more decentralized where the learner can approach the
easily. Opportunities of electronic technology should be enhanced for Pupil Teachers.
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References
Bhatt, B.D. & Sharma, S.R. (2007) Educational Technology, concept and techniques. New
Delhi-110002 Kanishka Publishers distributors.
David Hawkridge and John Robinson, 1982 Organizing Educational Broadcasting, London,
Croom Helm. P.25
Dr. Sydney .N., 2000 Turkish Online Journal of Distance Education-TOJDE April ISSN 13026488 Volume :6 Number: 2 Article No:5 Rehman dr. 1995,wikieducator.org/images
Eranut (1997) in Service Education for Innovation London, NCET. P.3
Gagne R.M. (1968) Educational Technology as Technique Educational Technology 6 Nov.
18.P.7
Kanajai N. (2003) Educational Technology, India, Chandrigarh, Abhishek Publications. P.86
Masrur. R; (2003) thesis writing a systematic approach, a manual for Allama Iqbal Open
University graduates (MA, M.Phill, Ph.D) first Edition, Islamabad, Allama Iqbal Open
University.
Omolewa,M.(1982) Historical Antecedents of Distance Education in Nigeria, Vol.7. P.7
Rashid M. (1993) Study Guide on Educational Technology. Code No. 740, Unit 1-9, 2nd
ed. Islamabad AIOU.
Rahsid M.(1999) Non-Formal Education, Islamabad, National Book Foundation.
Rashid M. (1989) Study guide on Advance Course Non-formal Education, 1-9 M.Phill
Education, Islamabad.
Rashid M. (2010) Educational Technology, Pakistan Islamabad, Preston University Press.
Rashid M. (2001) Hand Book for writing Dissertation/ Thesis Islamabad National Book
Foundation.Regional Office AIOU.
Rehman dr. 1995,wikieducator.org/images
Shahid, S.M (2004-05) Modern Educational Technology, Lahore, Majeed Book Depot, 22-Urdu
Bazar.
Dr. Sydney .N., 2000 Turkish Online Journal of Distance Education-TOJDE April ISSN 13026488 Volume :6 Number: 2 Article No:5 Rehman dr. 1995,wikieducator.org/images
UNESCO (1978) Final Report of the Seminar for the training of experts in Educational
Technology, Paris, UNESCO. pp.9-10,
http://www.unescobkk.org/education/ict/technologies/radio-and-television/
www ncate org 2010,TRANSFORMING
TEACHER EDUCATION
THROUGH
Massachusetts
Ave
,
NW,
Suite
500
Washington,
DC
http://www.moe.gov.pk/nepr/NEP_2009.PDF
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PROBLEMS FACED INTO THE USE OF INFORMATION
TECHNOLOGY IN DISTANCE EDUCATION
Dr. Ali Murtaza
Dr. Syed Shafqat Ali Shah
Assistant Professor, Institute of Education and Research
University of Gujarat, Pakistan
Kohat University of Science and Technology
Abstract
There are different modes which applied to educate the human being. To invest in the field of
education is called best future investment in World. It is historically proved we can evaluate
this view by seeing the history of all developed nations. Distance Education is also the best mode
to educate the people who provide opportunity to second chance education especially in poor and
developing countries, where the formal system can not provide a first chance education to all
human being of their nation. Pakistan is one of the biggest country who using the distance
education mode to enhance education and learning. The Allama Iqbal Open University (AIOU)
nearly enrolled Eleven millions students in different program basics to Ph.D in 2009. The main
objective of the study was to highlight the problems into the use of tools of information
technology in distance education. Population comprised of the I.T users; persons were helping,
operating or supervising the IT tools as Planners, academicians, designers, programmers,
producers, operators, regional directors was taken as one sample while 100% of Deans
population was taken as second sample. For investigation all the related material/ reports profile
of the University were studied and questionnaires were also developed on five points rating scale
after the consultation of different scholars. The questionnaires were distributed by hand and by
post. The collected data was tabulated and analyzed. Conclusions drawn from the study are as
under: The use of IT is still limited. Computer net work was not used for distance learners,
radio, T.V. programmes and relevant material audio, videocassettes were prepared and CDs,
software still not prepared. University library was not computerized. Staff got training from time
to time in IT education in their specialization. But there is need to make IT system more
sophisticated according to new trends and students needs. There is also need to develop regional
centres, which should serve as resource centres to the facilitation of distance learners.
Key Words: Information Technology, Application, Distance Education
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Introduction
All countries of the world consider education as a basic requirement for economic development
and political stability. To impart education various systems have been introduced. These systems
are formal, informal, non-formal and distance education. Formal system of education does not
fulfil the entire needs of the concerned society adequately. Due to internal differences,
inequalities and injustices all members of society cannot avail equal opportunities of education
hence some are left behind who need second chance of education in life. In these circumstances,
distance education provides opportunities to enhance education and skills, in Pakistan AIOU
plays a pivotal role in promoting education through distance education system. Allama Iqbal
Open University established in 1974 was the second open university in the World. (AIOU
2009).Public as well as political interest in distance education is especially high in geographic
regions where the student population is widely distributed (Sherry, 1996).
To disseminate knowledge and information, various teaching techniques are used in this
system. These techniques include print and electronic media, newspapers, radio, TV and
audiovisual equipments. In the present age of knowledge and awareness, the world scenario is
rapidly changing. The tremendous achievements in the field of information have transformed the
world into a global village. The things which were impossible and unimaginable even in the near
past are now part and parcel of our daily life. The electronic mail and internet are the most
significant achievements of the present age. Although, development of IT has influence the
whole sphere of human activity, the distance education is most susceptible. It is very easy for
distant learners to make the best use of information technology techniques. Now to be familiar
with the term information technology let us see the definitions.
The whole gamut computer and communication is the subject of information
technology. It includes all activities connecting with fabricating of computers; producing
peripherals spares and accessories; and developing software dealing with collection, processing,
transmitting and presentation of data in the form of meaningful information in any medium. The
data may relate to any walk of life(H.R.Banarjee,1966,p98)
The technology involved in acquiring, strong, processing and distributing information
by electronic means (including radio, television, telephone, computer)
(Khana Anil, 1994) Information Technology that merges computing with high speed
communications links carrying data, sound, and video. (Williams, 1999) it means information
technology provides rapid, latest and accurate information in very limited time to the clientele.
By using this most modern technique efficiently, standard can be achieved. It helps to eradicate
the problems of distance learners and makes teaching learning process most effective and
fruitful. Information technology is concerned with improvements in a variety of human and
organizational problem-solving endeavors through the design, development, and use of
technologically based systems and processes that enhance the efficiency and effectiveness of
information in a variety of strategic, tactical, and operational situations. (http://www.answers.)
NRC, stated, Most people can agree that an ideal information infrastructure would have such
qualities as extended interoperability, broad accessibility, and support for broad participation.
To achieve this standard and strengthening the distance education system different latest
tools/techniques of information technology (Computer Software) internet, e-mail, web page, CD
Rom, On-line Services, Phone, Fax, voice and Video Communications, Satellite, Tele-
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Conferencing, Radio & TV Programmes, LAN, WAN Projects, Computerized Library) can be
used in each module of the University.
Information Technology is divided into two parts first hardware wise and software wise.
Hardware is concerned with physical classification of all devices and software is concerned with
services and applications. Main emphasis is given on databases, web services, Internet and online services.
Objectives of the study: the objectives were as:
1.
To identify the use of Information Technology in distance education by AIOU, users
(academicians, officers concerned with Administration and Computer
Professionals).
2.
To highlight the problems of AIOU in the application of IT in its system.
3.
To make recommendations for the improvement and uplift of information technology
system in distance education of AIOU.
Procedure of the Study:
Descriptive method of research was adapted. . Surveys may be used for descriptive,
explanatory, and exploratory purposes. Survey research is probably the best method available to
the social scientist interested in collecting original data for describing a population too large to
observe directly(Bubbie,E. 1998,p.256).
A comprehensive questionnaire on five point rating scale was developed and structured
interviews from the Deans of four faculties conducted. There were one hundred twenty eight IT
users, comprises on Planners, academicians, designers, programmers, producers and operator of
AIOU selected as population. Sample of the study was 70% of the whole population and 100%
Deans. Scale values of each response were: Strongly Agree=5 Points, Agreed=4 Points,
Uncertain= 3 Points, Disagree = 2 Points, Strongly Disagree = 1 Point. To obtain mean score f
each below formula was used: SDA=1-1.5, DA=1.5-2.5, UNC=2.5-3.5,
A=3.5-4.5,
SA=4.5-5.00
Summary of the returned questionnaires is given below;
Population
Sample
Questionnaire returned
% Q. returned
128
91
80
88
The IT user qualification was as; Bachelor level twenty four, Master level forty two, Master of
Philosophy Six and Ph.D eight.
Regarding the application of Information Technology questions were asked those are described
on these tables;
Q.1. All the offices and regional Offices are connected through the computer Network.
Level
SA
A
UNC
DA
SDA
Frequency
04
14
26
28
04
Percentage%
05
19
34
37
05
Mean Score
2.8
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On the above table shown only 19% were agreed and 42% disagreed. While Mean score
was fall in between range therefore the statement is rejected. There is need a networking CDs
and Videocassettes of all programme are not prepared in the system.
Q.2.
University has designed its own web page.
Level
SA
A
UNC
DA
SDA
Frequency
34
31
03
08
-
Percentage%
45
41
04
10
-
Mean Score
4.1
The above Table shown 86% IT users were agreed while only 10% disagreed. While
mean score was 4.1. The statement revealed that University has designed its own web page.
Q.3.
All information about admission programmes and fee structure is available on web.
Level
SA
A
UNC
DA
SDA
Frequency
18
28
18
12
-
Percentage%
24
37
24
15
-
Mean Score
3.6
The above Table shown 61% respondents were agreed and 15% disagreed. While mean score
was 3.6. Mostly respondents accepted that all information about programmes and fee
Q.4. All the data and basic information are provided by the computer to the distance learners
Level
SA
A
UNC
DA
SDA
Frequency
08
22
24
22
Percentage%
10.5
29
31.5
29
Mean Score
2.2
On above table shown only 10.5 % IT User was agreed while 60.5% were disagreed. While
the mean score is 2.2. It is revealed that all the data and basic information are provided by the
computer to the distance learners was not acceptable.
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Q.5.
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Tele/Video conferencing opportunities are sufficiently available at each level/courses.
Level
SA
A
UNC
DA
SDA
Frequency
24
26
26
Percentage%
32
34
34
Mean Score
1.9
On the above table 68% respondents were disagreed while 32% uncertain while 64% were
disagreed. The mean score is 1.9. Tele/Video conferencing opportunities are sufficiently
available at each level/courses was not accepted.
Q.6.
Telephone /Fax is available for the students to get their queries solved.
Level
SA
A
UNC
DA
SDA
Frequency
Percentage%
08
24
14
24
06
Mean Score
10
32
19
32
07
03
On above table 42% were respondents agreed while 39% disagreed. The statement
Telephone/Fax is available for the students to get their queries solved was not accepted fairly.
Q.7. AIOU computerized library facilitates the distance learners.
Level
SA
A
UNC
DA
SDA
Frequency
14
22
28
12
Percentage%
19
29
37
15
Mean Score
2.7
Above table shown only 19% were agreed while 52% were disagreed. The statement
regarding AIOU computerized library facilitate the distance learners was rejected from the
respondents.
Q.8.
Computer is frequently used in the system of distance teaching/learning.
Level
SA
A
UNC
DA
SDA
Frequency
Percentage%
06
23
22
16
09
Mean Score
07
30
29
22
12
3.0
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Table showed that 37% respondents were agreed while 34% were disagreed. The mean score
is 3.0. It is revealed the statement regarding the computer used frequently for distance teaching
learning system rejected.
Q.9.
Radio programmes are prepared for all courses at each level.
Level
SA
A
UNC
DA
SDA
Frequency
02
40
09
21
04
Percentage%
02
53
12
28
05
Mean Score
3.0
Above table shown 55% respondents were agreed and 33% disagreed while the mean score is
3.0.the statement revealed that Radio program for all programme are prepared.
Q.10. Satellite Technology is used according to the requirements of coverage.
Level
SA
A
UNC
DA
SDA
Frequency
08
37
12
17
02
Percentage%
11
49
15
23
02
Mean Score
3.4
The above table shown 60% were agreed and 25% disagreed. The mean score is 3.4. Most of
the respondents were in favour the Satellite Technology is used according the requirements of
coverage.
Q.11. A separate Broadcast channel is specified for distant learners.
Level
SA
A
UNC
DA
SDA
Frequency
08
12
20
25
11
Percentage%
11
15
27
33
14
Mean Score
2.7
The above table shown 26% respondents were disagreed and 47% disagreed. The mean
score is 2.7. Mostly the respondents were not in favour of separate broadcast channel is specified
for distance learner.
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Q.12. Students have access to get response by e-mail for his query.
Level
SA
A
UNC
DA
SDA
Frequency
02
13
49
12
Percentage%
02
17
65
16
Mean Score
2.0
The above table shown 02% respondents were agreed and 81% disagreed while the mean
score is 2.0.The statement of students have access to get response by e-mail for his query was not
accepted at large scale.
Q.13. Opportunities are provided to all students to keep in touch by e.mil with University.
Level
Frequency
Percentage%
Mean Score
SA
03
04
A
UNC
12
16
2.2
DA
61
80
SDA
The above table shown only 4% respondents were agreed and 80% disagreed.The mean score is
2.2. The statement Opportunities are provided to all students to keep in touch by e.mil with
University was not in favour.
Q.14. Quality of education in distance learners can be improved through IT techniques.
Level
SA
A
UNC
DA
SDA
Frequency
42
21
13
-
Percentage%
55
28
17
-
Mean Score
4.3
The above table shown 83% respondents were agreed and 17% were uncertain. Most of the
respondents accepted that quality of education in distance learners can be improved through IT
techniques.
Q.15. IT provides the fastest, riches, latest and accurate information.
Level
SA
A
UNC
DA
SDA
Frequency
47
29
-
Percentage%
62
38
-
Mean Score
4.6
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The above table shows 100% were agreed. IT is very helpful in providing fastest and latest way
of information.
Q.16. The involvement of private sector is also helpful to develop the IT infrastructure.
Level
SA
A
UNC
DA
SDA
Frequency
24
47
01
04
Percentage%
32
62
01
05
Mean Score
4.1
The above table shows 94% were agreed while only 5% were disagreed. The respondent
strengthened that involvement of private sector can be helpful to develop the University IT
infrastructure.
Q.17. IT is widely applicable to administrative/managerial activity.
Level
SA
A
UNC
DA
SDA
Frequency
29
39
08
-
Percentage%
38
51
11
-
Mean Score
4.2
Above Table shows 89% were agreed while 11% were uncertain. Maximum respondents
were in favour that IT is widely applicable for administrative and managerial activity.
On open ended question 33% respondents replied by saying all the regional offices should be
interconnected and students must have access to get solved their problems.25% respondents
recommended that Regional Offices should be more decentralized and there is need to provide
maximum facilities at these centre.15% respondents due to insufficient vision and lack of
political will tools of IT are not used properly in distance education.10% respondents said there
is need improve the use of IT tools between the tutors and distance learners. In structure
interview all the faculty deans of AIOU accepted it is the need of the society and modern age to
develop the infrastructure for IT tools. This way the distance learner and system will be more
approachable and well integrated to minimize the problems.
Conclusions:
The use of IT in distance education was limited.

Mostly the offices and regional offices have IT network but not used properly.
Except a few software about all educational programmes was not prepared.
University has designed its own web page.
Sophisticated techniques of IT like, on line services, internet, tele/video conferencing
were not used for distance learning.
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Adequate facility was available for students to get information by AIOU through phone
and fax.
The University was not computerized completely however; it is going to be
computerized.
Satellite Technology was used for TV programmes but on limited scale.
Most of the IT users were agreed that the IT training programme may be conducted
periodically.
Basic information about IT tools was not included in all courses at all levels.
Infrastructure of IT in the University was not developed completely, there is need to
develop more.
Most of the respondents were agreed that IT tools are helpful to minimize the problems
of distance learners and improving the quality of education; moreover, these will
contribute a lot on the development of electronic governance and managerial activities.
Lack of funds, planning, and coordination within departments, trained personnel, and
commitment of the organization were the main problems of the University.
The role of regional offices were limited, by expending its infrastructure, the system of
distance education can be strengthen.
Recommendations:
University may plan to uplift the Information Technology system and provide all types of
information and guidance by the computer network to the distance learners.
Regional Offices should be connected through network and may be strengthened as real
resource centres which provide all facilities by using IT tools for the benefit of distance
learners
Relevant material may be increased as audio, video, CDs, and software programmes also
in all programmes.
The web page should be more comprehensive to provide much more information to the
distance learners.
For the guidance and counselling on line services may be improved.
The opportunity of Tele/video conferencing should be provided by the AIOU.
University may establish its own separate Broadcast Channel.
Basic knowledge about IT may be included at all levels of study.
The strength of the IT users should be increased along with proper qualification.
Satellite technology may be used sufficiently.
Academic staff should be well-trained in IT Education.
The use of Internet may enrich through Regional Offices for distance learners and
especially for researchers.
University library should be fully computerized.
For better management and administration electronic governance system may be
introduce.
More funds may be allocated to uplift the IT system as a whole.
Regional Centre may establish at Thana level in all Pakistn.
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References
A.Siddiqui Anwar Hussain, (1999) Jamia Nama, AIOU, Islalmabad
Allana,G.A.1985 Distance Education System and The Role of Allama Iqbal Open University,
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Asghar,M. Aslam, 1999, 25 Years of AIOU, 1974-1999, AIOU, Islamabad.
Babbie Earl, 1998. The Practice of Social Research 8th Edit. International
Thomson Publishing Service Ltd.
Baqai Noor-ud-din ,2000, Short Term Plan to Promote Information Technology, The
News,Rawalpindi.
Danial George Mc, 1994, IBM Dictionary of Computing, Mec Graw-Hill New York
David Hawkridge and John Robinson, 1982 Organizing Educational Broadcasting, London,
Croom Helm:
Ghaznavi I. 1999. Pakistan Journal of Distance Education, R&E Centre, AIOU, Islamabad
Goraya Javid M. 2000, National IT Policy, The News, Rawalpindi.
Hawkridge David, 1983, New Information Technology; KIB, London, N Y.
Holmberg,1997 Distance Education; A Survey and Bibliography, London,NY
H.R.Banarjee,1966. An Encyclopaedia of Computer Terminology, Jacio Publishing
India
Khana Anil, 1994), Kapils Dictionary of Computer Science, Jaico Publisher Bombay, India
Mac Bride and Others, 1980 Communication and Society Today and Tomorrow Many Voices
One World, A Report of International Commission for the Study of Communication Problems,
London, Kogan Page (UNESCO)
Mirabito Michale, MA, 1994, The New Communication Technologies; 2nd Edition Focal Press
London.
Moor M.G.1975, Cognitive Style and Telematic Distance; Teaching, ICCE, Newsletter
National Research Council 2010,Office of Congressional and Government Affairs
2101 Constitution Avenue, NW Washington, DC 20418
Research & Evaluation Centre ,1999 AIOU Profile 1999; AIOU.Islamabad.
Sawyer Williams Hutchinson,, 2000, Using Information Technology, 3rd Edition, Mc Graw Hill,
International Edition, New York
Sherry, L. (1996). Issues in distance learning. Retrieved March, 2011 from
http://www.cudenver.edu.public/education/edschool/issues.html
Spenscer, W.R. 1994, A Dictionary of Computer, CBS, Publisher, Dehli, India.
Stern Nancy, 1993, Computing in the Information Age, John wiley and Sons New York
Torsten Husen,1994), The International Encyclopaedia of Education,2nd Edition, Vol.VIII,
Pergaman, Great Britain.
UCEA,1998), Distance Learning Programme, 2nd Edition Petersons Prensto, New Jersy, USA.
Webster Dictionary, 1974
Williams, Sawger Hutchinson, 1999, Using Information Technology, 3rd Edition, Mc.Graw Hill
London
http://www.answers.com/topic/information-technology#ixzz11NZL1iuV
Zaki, W.M. 1975 Education of the People; AIOU, Islamabad.
Peter Little 1973
793
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Attitude of University Students towards Ethnic Prejudice
MAY 2011
VOL 3, NO 1
S. Farhana Kazmi
Hazara University Mansehra (Pakistan)
Tahir Pervez,
PMA (Kakul Campus) National University of Science and Technology NUST (Pakistan)
Nagina Bano
Hazara University Mansehra (Pakistan)
Abstract
The investigation was aimed to explore the attitude of university students toward ethnic
prejudice. The precipitating event of the study was the renaming of ex-NWFP as KPK, which
infused new spirit in the dormant movement of Hazara province. Convenience sample of 200
students was drawn from different departments of Hazara University Mansehra, Comsat
University Abbottabad, Women Medical College Abbottabad and Sarhad University
Abbottabad. Sample consisted of 100 Pathans (50 males and 50 females) and 100 Hazarawals
(50 males and 50 females). Blatant and Subtle prejudice Scale( Coryn, Beale & Myers, 2004)
was adapted and employed to collect the data. Results revealed that high level of ethnic prejudice
was present between the both groups as both secured below cut of point (70) but Mean value of
Hazarawal (55.99) was less than Mean value of Pathan (59.79) which revealed Hazarawals were
highly prejudice towards Pathans because they were remained deprived of their identity for over
60 years and issue of renaming hurt them badly.
Key words: Ethnic prejudice, Hazarawals, Pathans , Renaming of ex-NWFP as KPK
1.
Introduction
A large number of countries in the contemporary world have experienced ethnic revival
in recent times Pakistan is one of them. In the case of Pakistan, the regional assertion based on
the ethnic identities came to the fore in more pronounced ways in the 1990s. Ethnic disaffection
was simmering in Baluchistan and NWFP since the 1970s. Similarly, the Mohajirs of Pakistan
were emerging as an important ethnic group with the growth of MQM since the 1980s as a major
force in Urban centers in Sindh, especially in Karachi and the twin city of Hyderabad. Carli etal.
(2003) examines linguistic diversity and power interests considered a fundamental element of
ethnic and cultural identity. Klug (1999) claimed that the ethnic question is an instrument for
combating racism. Khanlou, Koh and Mill (2008) studied that in culturally diverse and
immigrant receiving societies can be subject to prejudice and discrimination.
Racism and prejudice are in full swing in the Muslim world (Itmr, 2000). Bhatt (1999)
stated that Pakistan was hardly a year old when its central government was first challenged by an
ethnic group and ended with the breakup of Pakistan in 1971, but with the passage of time
Bolachi, Sindhi, Punjabi, Siraiki and Pashto language movements also started ( Rahman,1997).
In views of Mir (2008) the roots of ethnic conflict in Pakistan, lie in the concentration
of Mohajirs (refugees) spoke Urdu and in Southern Punjab because of Siraki language.
Such problem is also running in Hazara Division as, as Tnoli (2010) stated that the
people of Hazara division from Kohistan to Haripur are united under a single agenda Sooba
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Hazara. Among more than twenty languages in Pakistan, name of the provinces also show
linguistic ethnicity as Sindh, Balochistan, Punjab and Khyber Pakhtunkhwa. Pathans are
Pakistan's second largest ethnic group and Hindkowans are believed to be the transitional group
of people between Punjabis and Pashtuns. Though they have similarities but cultural differences
exist between these two groups. Khyber Pakhtunkhwa ( North-West Frontier Province, the
official name by which it was known from 1901 to 2010) the renaming of NWFP was
controversial and was overwhelmingly rejected by some of the province's ethnic minorities
including the majority Hindko-speaking population of the Hazara region as well as Seraikis
and Chitralis. There was a widespread protest across Hazara. The protests took a new turn that
some Hazara residents said the new name should be Hazara-Pakhtunkhwa while others said the
name should not be changed since people were accustomed to North-West Frontier Province.
This major conflict of Pathans and Hazarawls motivated for a study of expected prejudice
between both groups.
Prejudice and discrimination are woven in the fabric of social culture and may reflect
more specific emotional responses to different out groups, including fear, anger, guilt, pity, and
disgust (Baron, Branscombe, Byrne & Bhardwaj,2009; Fiske ,2004). Primary function of
ethnicity is to differentiate the group members from the generalized others (Sing, 2001). Mullick
and Hraba (2001) revealed that people shared an ethnic hierarchy of out-groups in social
distance, with Pathans at the least and Muhajirs at the most social distance. Ethnicity is focused
on the rise of ethno nationalism which created a situation of ethnic explosion in urban
Sindh(Waseem,1996).
Prejudiced attitudes can be found in many cultural elements, including language,

education, and religion, norms of morality, economics and ethnics negative perception (Gershaw,
1998 ; Axelson, 1998). cultural prejudice is perpetuated by religious supremacist, nationalism,
stories, myth, lies, families, media and schooling has become part and parcel of language itself
(Alertpak,2009).Cultural and sometimes physical characteristics use to classify people into
groups (ONeil, 2006; Yasmeen, 2010). In views of Rakoczy (1996) ethnicity is based
on cultural or social similarities. Racial stereotypes exist among the races (Piston, 2010).
Members of each racial group possess characteristics or abilities specific to that race, especially
to distinguish it as being either superior or inferior to another racial group (Matthew, 2005).
Brigham (2008) stated that failing to treat a person as a unique individual is often seen as a
central characteristic of stereotyping and prejudice.
Prejudice intergroup behavior largely determined by situational factors and is relatively
independent of an individuals attitudes (Duckitt, 2010). Various causal factors have been traced to
develop prejudice e.g., fear and pride (Parsad ,1998), tough situations and scarcity of resources
(Smith 1987) ,self-preservation, uncertainty, insecurity (Solomon, Greenberg, & Pyszczynski ,1999;
Brewer, 1999; Hogg, 2000). In views of Hello, Scheepers, and Gijsberts (2002) education is often
found to be a strong determinant of ethnic prejudice. Farley (2000) contends that higher levels of
prejudice are seen in people of lower class. Hraba, Dunham, Tumanov, and Hagendoorn (1997)
concluded that group status has greater impact on prejudice than does in-group bias. Sari
(2007)
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revealed that individuals perception of threat over economic and socio cultural resources to their ingroups position has the most powerful effect on prejudice.
Tension is hidden roots of racial prejudice ( Shipler, 2002) and it will more strongly influence
the racial policy preferences of people who are feeling anxious than it will for people who are not
(Suthammanont, Peterson, Owens & Leighley ,1988).
Nesdale, Maass, Griffiths, and Durkin
(2003) tested liking for out group members was reduced when the ethnic composition of the outgroup differed from that of the in-group. Hutchison and Rosenthal (2011) predicted more positive
out group attitudes, more perceived out group variability and more positive behavioural intentions.
Enoch (1994) suggested that ethnic prejudice exists latently even in apparently tolerant societies and
tends to surface when a 'suitable' target group becomes available.
2.
2.1
Objective of the Study
The main objective of the study was to investigate the level of the ethnic prejudice between
Pathan and Hazarawal university students.
2.2
Sample of the study
The study was conducted in Mansehra and Abbottabad located in Hazara division of KPK (
Pakistan). Convenience sampling was used in order to collect data from university students
belonging to master level of Hazara University Mansehra, Comsats University Abbottabad,
Women medical college Abbottabad and Sarhad University Abbottabad. Sample was divided
into two ethnic groups Pathan (Pashto speakers) and Hazarawl (Hindko speakers). 100 males and
100 females were selected from each group. 80 students (40 boys and 40 girls) were taken from
Hazara University Mansehra, 50 students (30 boys and 20 girls) from Comsats University
Abbottabad, and 50 students (30 boys and 20 girls) from Sarhad University Abbottabad and 20
girls from Women medical college Abbottabad.
2.3
Research instrument
Blatant Subtle Prejudice Scale was adapted. In original form it was used to measure
prejudice among American and Arab people (Coryn, Beale, and Myers, 2004). Minor changes
with reference to nomenclature were applied with due permission of the author. Preset Scale was
used to measure ethnic prejudice between Hazarawals and Pathans university students.
Questions 1 to 7 and 13to 19 were scored the positive statements as 1, 2, 3, 4, 5 for
SA,A,UD,D,SD and the reversed scoring was used for the items having negative tones (from
Question 8 to 12) 5, 4, 3, 2, 1 score was assigned on SA,A,UD,D,SD. After giving scores to all
the items, it was summed up to get the total score. A high score indicated low level of prejudice
and low score showed high level of prejudice. The reliability statistics for the Aggression Scale
is 0.714shows to be reliable at KR21 formula .
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2.4
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Procedure of the study
To collect data for the present study students were approached individually with the
consent of authority. They were informed about the detail and importance of the study. They
were assured that information provided by them will be kept confidential and will be used only
for research purpose. They were briefed about the objective of the present study and the Blatant
Subtle Prejudice Scale was administered to them.
3.
Results and Discussion
The present study was aimed to investigate the levels of the ethic prejudice among
university students. Results indicate that both groups expressed high level of ethnic prejudice as
both secured below cut of point (70) as above seventy show low prejudice and below seventy
show high prejudice. Mean value of Hazarawals (55.99) is less than Mean value of Pathans
(59.79) which shows that Hazarawals expressed more prejudice towards Pathans (Table 2).
Hazarawals were expressed more Prejudice because presently Hazarawals are suffering
from different issues, chief among them is change of province name from NWFP to Khyber
Pakhtunkhwa which hurt them badly. It was against Hazarawals expectations and they fear that
they will lose their identity. They felt threats to their independence and have feelings of
deprivation ,the perception of challenges( competition for jobs), and the discrepancies between
their expectations and actual attainments, which produces frustration. Hazara division, however,
has always been neglected for over 60 years. Hazarians have been compromising on their
identity and no consideration for their rights has been compensated by the Pakistani government.
Present findings associate with Gross (1998), Stephan (1969) and Petty (1998) when
attainments fall short of rising expectations, relative deprivation is relatively acute and results in
collective unrest and prejudicial attitudes. study has also the support of Baron, Branscombe,
Byrne and Bhardwaj( 2009) and Sari (2007) that feeling secures in ones subgroups
distinctiveness result in less prejudice towards similar out group, in contrast feeling insecure
about distinctiveness of ones subgroups result in greater prejudice towards similar out group.
Previous research has shown that on similar ground people in the U.S. generally possess more
unfavorable dispositions toward Arab-Muslims (Agerstrm & Rooth, 2008).
In the present study insignificant differences on ethnic prejudice scale between boys and
girls similar to the findings of Ekehammar, Akrami, and Araya( 2001) that both gender may in
fact have the same amount of prejudice and contrary to (e.g.,Brinkman & Rickard ,1996 ;
Castillo,2003; Pettigrew , 2006)who reported gender-based differences. Present judgment also
coincides with Hughes (2003) that gender differences in racial attitudes are small, and
inconsistent.
As Hazarawal males and Pathan males carry education in same institutes and same is in
the case of females. They remain in contact with each other in daily life so they have same level
of prejudice and there are no significant differences. According to Ray (1983) the contact
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hypothesis, the more one gets to know personally individual members of a minority group, the
less likely one is to be prejudiced against that minority group.
4.
Conclusion
It is clear from the study that both ethnic groups Pathan and Hazarawal were highly
prejudice about each other. It is concluded that both groups are showing highly prejudice
attitude because of present conflict in province, such as change of name of NWFP.
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Explanations for cross-national variances in the educational effect on ethnic prejudice.
Scandinavian Journal of Educational Research,
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nches=46 - v4646,(1) 5-24. doi: 10.1080/00313830120115589
Hraba, J., Dunham, C. S., Tumanoy. S., & Hagendoorn, L. (1997). Prejudice in the former
Soviet Union. (Electronic version). Ethnic and Racial Studies. 20 (3) 613 627.
doi: 10.1080/01419870.1997.9993978
Hutchison, P.& Rosenthal,H. E. S. (2011). Prejudice against Muslims: anxiety as a mediator
between intergroup contact and attitudes, perceived group variability and behavioural
intentions. Ethnic and Racial
Studies,http://www.informaworld.com/smpp/title~db=all~content=t713685087~tab=issuesl
ist~branches=34 - v3434 (1) , 40 61. doi: 10.1080/01419871003763312
Klug , B. (1999). The Language of Race. Patterns of
Prejudice, http://www.informaworld.com/smpp/title~db=all~content=t713395163~tab=iss
ueslist~branches=33 - v3333 ( 3), 5 18. doi: 10.1080/003132299128810597
Khanlou, N., Koh, J.G.,& Mill,C.(2008).Cultural Identity and Experiences of Prejudice and
Discrimination of Afghan and Iranian Immigrant Youth. Behavioral Science International
Journal of Mental Health and Addiction,6 (4), 494-513.doi: 10.1007/s11469-008-9151-7
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Nesdale, D., Maass, A., Griffiths, J., & Durkin, K. (2003). Effects of in-group and out-group
ethnicity on children's attitudes towards members of the in-group and out-group. The
British Psychological Society British Journal of Developmental Psychology, 21( 2), 177
192. doi: 10.1348/026151003765264039
Ray, J. J. (1983). Racial attitudes and the contact hypothesis. The Journal of Social Psychology,
10 (3),119. Retrieved http://jonjayray.tripod.com/contact.html
Sari, . L. (2007). Perceptions of Threat and Expressions of Prejudice toward the New
Minorities of Western Europe. (Electronic version). Journal of International Migration
and Integration. 8 (3) 289-306. doi: 10.1007/s12134-007-0023-y
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Annexure
Table 1 Alpha Reliability Coefficient for PrejudiceScale (N= 200)
Variable
No. of Items M
SD Reliability Coefficient
PS
19
57.89
0.714
8.4
Table 1 shows that Blatant and Subtle Prejudice Scale is reliable at KR21 formula.
Table 2 Difference between Pathan and Hazarawal students on level of Ethnic prejudice
(N=200)
Suicidal Ideation
Pathan (n=75)
M
59.79
Hazarawal (n=75)
M
55.99
t
3.276
df= 198; **p<0.001

Above table reveals that there is significant difference between Pathan and Hazarawal students with
reference to ethnic prejudice.
Table 3 Gender Differences between Pathan and Hazarawal students on level of Ethnic prejudice
s/no
Variables
Pathan males and Hazarawal
Pathan
Hazarawal
(students)
(students )
59.60
df
57.70
1.026
98
0.664
(insig)
54.28
57.70
1.069
98
0.654
(insig)
59.60
57.70
1.143
98
0.256
(insig )
54.28
57.70
1.969
98
0.52
(insig)
females students
B
Pathan females and

Hazarawal males students
Pathan and Hazarawal

male students
Pathan and Hazarawal

females students
Above table reveals that there is insignificant difference between Pathan males and Hazarawal females
students, Pathan females and Hazarawal males students, Pathan and Hazarawal males students, Pathan
and Hazarawal female students on level of prejudice.
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Mergers and Acquisitions: An Impact on Financial Performance
(A case study of Standard Chartered Bank-Pakistan)
Dr. Nasir Karim
Associate Professor, IMIS, CECOS University, Peshawar Pakistan
Amjad Ameen
Assistant Professor, IMSciences, Peshawar
Dr Muhammad Ayaz
Associate Professor, Commerce College, Peshawar
Abstract
Standard Chartered Bank acquired Union Bank Limited in 2006.Financial data before and after
acquisition is analyzed for this purpose. Secondary data is used for analysis from 2004 to 2008.
Research revealed that the overall financial performance of the bank regressed after the
acquisition of the Union Bank Limited. However, decline in financial performance can be
attributed to excessive focus on expansion of the resources rather than opting to enhance the
operational effectiveness, in the wake of acquisition. Furthermore, the failure to gain
improvement in the operating performance of the SCBP is that, mergers and acquisitions is a
new process which lack confidence in the market regarding display of synergies of the
amalgamation strategies. It is recommended that certain factors such as coordination between the
merged and the acquired groups, modifications and innovations in the products, finding and
retaining talented managers by offering them incentives to motivate them, formulating and
implementing clear objectives, pre-approach plans for the purpose of integration of different
processes, managing intellectual capital, and managing the activism and motivational level of
sales force with a view to linchpin the customers switching to other competitors in the industry.
The ultimate corollary of implementing these strategies in letter and spirit will emerge in the
shape of improved performance and productivity of the bank.
Keywords: Mergers, Acquisitions, Financial Performance, Amalgamations.
Introduction
When one company (the acquirer) procures another company (the target), it is called
acquisition. It is also termed as buying out or taking over a company. Such taking over is
undertaken by larger or stronger firms in order to gain control over the smaller firms. Merger
refers to the amalgamation or the joining of the operations of two firms in order to constitute one
large firm. Such forms of agglomerations are voluntary in nature and initiate with the exchange
of shares and the disbursement of cash to the acquired firms. Mergers are like acquisitions which
result in new company name. However, the two companies do not lose their original identities
and it is a voluntary combination of the two firms and not a hostile take over. Commercial banks
have turned into an era of great concern of economists. In Pakistan, the banking industry has the
major influence of financial institutions that belong to the government and they principally
facilitate the government monetary needs, public and private enterprises (Khan and khan, 2007).
The banking sector and the financial institutions in Pakistan have gone through many hard times
to preserve their profitability. The consolidation of minor institutions was emphasized in order to
transform them into large institutions through proper legal and regulatory structure. Banking
sector strengthening is crucial to gain economies of scale and to establish healthy banks that can
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face the challenges of hard times and surpass difficult business phases. To ensure the
strengthening and consolidation of banking sector, State Bank of Pakistan set up a minimum
capital requirement (MCR) for commercial banks that was intended to grow by Rs. 1 billion
every year, culminating it to Rs. 6 billion by the end of 2009. Certain banks have succeeded in
meeting the standard of MCR while others are making corresponding efforts and seeking to
merge with strong banks to reach the MCR. Thus, mergers and acquisitions trends have
contributed enormously to enhance the strengthening of the banking system. The process of
mergers and acquisitions is ongoing and is anticipated to grow further in future. Through
merging of private sector ownership with those of financial institutions, particular objectives
were anticipated to be achieved such as high financial depth, mediation and competence,
decreased interest spreads, proper management of costs on home debts, curtailing deformity of
interest rates makeup, increased control over monetary policy and gaining efficiency in financial
institutions.
Types of Acquisition.
The acquisition can take place in two forms;
In first case, the acquirer purchases more than 51 percent of the shares of the target and
gains control over the management of the company. However, this whole process also
leads the acquiring company to shoulder the responsibility of all risks and liabilities of
the acquired company as well.
In second case, the acquirer procures all the assets of the acquired company and the cash
remitted by the target is paid to its shareholders by dividends or through liquidation.
Classification of Mergers.
1. Horizontal merger: When two companies dealing in similar business,
2.
3.
4.
5.
products, and operating in similar forms of businesses join together. The

companies involved in competition directly combine with each other to form one
large company.
Vertical Merger: It takes place to gain control over the supply chain of the
firm. It involves the integration of the company and its supplier.
Market Extension Merger: It involves the combination of two companies
that deal in the same products but operate in different market segments.
Product Extension Merger: Such mergers involve the joining of two
companies that transact in distinctive but related sort of products such as
Compressed Natural Gas (CNG) and petrol.
Purchase Mergers: This form of merger involves simply the purchase or
procurement of one company by another company.
Distinction between Merger and Acquisition.

Regardless of the fact that both terms are used in the same sense, however, there exists difference
between both the terminologies.
In case of acquisition, the acquirer takes charge over the company and is considered as the new
owner of the company. Acquisition leads the acquired company to lose its existence i.e. the
acquirer swallows the target and continues to trade its stocks in its own name.
On the contrary mergers take place when two, similar in size, voluntarily join hands and
cooperate with each other in operating a new style of the company. In this case, the companies
give up their stocks and initiate the new merger by the issue of fresh stocks.
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Objectives of the research

The main objectives of this study are to highlight and analyze the changes taking place in the
financial performance of Standard Chartered Bank Pakistan after acquisition of Union Bank
Limited and to provide an overview of the merger and acquisitions in the banking sector in
Pakistan.
Hypothesis
The hypothesis tested in this study is;
Merger/acquisition improves the financial performance of the banks
Methodology
A ratio analysis is carried out to analyze the impact of mergers and acquisitions on Standard
Chartered Bank. Secondary data form the period from 2004 to 2008 is used for the study. The
financial ratios of the Standard Chartered Bank before the acquisition and after the acquisition
are calculated and compared to reach the conclusions. These ratios are given as;
Current Ratio
Debt/Equity Ratio
Debt/Assets Ratio
Receivable Turnover Ratio
Average Collection period
Assets Turn-over Ratio
Gross Profit Margin
Interest Coverage Ratio
Fixed Assets Turn-over Ratio
Return on Invest Ratio
Return on Equity Ratio
Net Profit Margin
Operating Profit Margin
Return on Capital Employed (ROCE)
Earning per Share
Scope of the research

The study has been confined only to Standard Chartered Bank situated in Peshawar. The research
is primarily based on secondary data. The research provides a sound footing for those financial
organizations seeking to acquire minor institutions. Only short term effects are studied which
may not be the true indicator of the long term effects. Further research is suggested in this field.
Review of literature
Banking consolidation requires strong policies on the part of the government. Amel (2002)
points out the fact that approximately 8000 amalgamations of the banks have taken place during
the period 1990-01. Many studies have been carried out that dictate that such banking reforms or
integrations of banks occur with a motive to gain competence in cost and revenue which fetch
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improvement in profitability resulting in financial soundness of the financial institutions (Gerger,

Hunter and Timme, 1993).
Hannan and Wolken (1989) undertook a research to analyze abnormal returns that were gained
as a result of 43 deals taken over during 1982-1987. They found that total value of shareholders
did not considerably improve. Their study found negative correlation of the acquired banks with
that of the variation in aggregate value. Rhoades (1993) conducted a research study taking into
consideration the in-market mergers that were undertaken during 1981-86 with the purpose to
assess the impact of such agglomerations on the financial performance of relevant institutions.
He resorted to Logit analysis. However, it was clear from the study that cost efficiency and
efficiencies in profitability were not gained through agglomerations due to horizontal mergers.
Houston and Ryngaert (1994) analyzed abnormal returns for a sample of 153 takeovers
undertaken during 1985-1991 for duration of four days following the takeover of target firms.
They found that the acquiring firms suffered a decline in their value while the acquired firm
achieved a gain. They concluded that post-merger performance was somehow related to market
expectations regarding the merger. Madura and Wiant (1994) analyzed abnormal returns of
acquiring firms quantitatively of 156 deals for a period of 36 months that took place during
1983-87. Their research demonstrated the fact that the returns of the acquiring firm were
negative in almost each month. Customer attrition was found to be one of the core factors
causing declining returns of the mergers. Akhavein, Berger, and Humphery (1997) examined
difference in profitability of similar set of large mergers. It was found that the profitability or
financial performance of these mergers greatly enhance in the wake of agglomerations. Their
findings indicated that after the merger of these banks, the grading did not vary significantly. De
Long, and Houston (2001) found that bank mergers are usually undertaken to gain enhancement
in the performance especially in cases when they are aimed to achieve economies of scale and
activity lines. They were of the opinion that following a merger, greater economies of scale are
achievable in the backdrop of greater volume of related or same banking products would result in
lowering down the average costs. Burki and Niazi (2003) studied the effect of bank reforms
initiated by the State Bank of Pakistan on the performance of commercial banks by the method
of Data Envelopment Analysis (DEA) for a period 1991-2000. Their findings revealed that the
banking efficiency decreased during the period under review. Suchismita Mishra et al. (2005)
analyzed the performance of the acquiring banks taking into account concentric mergers. They
reached at the conclusion that concentric type of mergers seem to significantly reduce the
unsystematic risk while the systematic risk reduction was found to have shown no significant
influence.
Analysis of the data

This part of the study provides analysis of the data. Financial ratios of the Standard Chartered
bank are calculated and cross examined for post acquisition and after acquisition periods to reach
at the conclusions.
Results
Ratios for Standard Chartered Bank are calculated in the tables given below. The year marked
with bold letters indicates the year of acquisition of Union Bank Limited by Standard Chartered
Bank of Pakistan. The results are given in two tables given below. Table 1 shows those ratios
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which manifested improvement after acquisition of the bank. Table 2 provides the ratios which
gives manifestation of non-improvement of financial performance associated with acquisition.
Table 1: Ratios of Standard Chartered Bank before and after acquisition
Ratios
2004 2005 2006 200 2008
Average
7
before
Acquisition
Current Ratio
0.62
1.34 0.81 1.14 1.16
0.98
Debt/Equity
1.64
0.81 0.56 0.16 0.20
1.23
Debt/Assets
0.11
0.07 0.09 0.03 0.03
0.09
Receivable
0.31
0.48 3.71 1.49 0.75
0.39
turnover
Average
Collection period 1167 756
962
98.39 244 485
Assets Turn-over 0.05
0.06 0.06 0.09 0.08
0.055
Gross
profit 0.03
0.75 0.70 0.71 0.70
0.39
margin
(Source: Survey Results)
Average
after
Acquisition
1.15
0.18
0.03
1.12
365
0.085
0.705
Findings.
The current ratio of the bank has improved on an average from 0.98 before acquisition to 1.15
after acquisition, which indicates that the bank has more liquid assets after acquisition which, in
turn, measures the ability of the firm to liquidate its obligations on maturity and improves its
creditworthiness vis-a- vis represent higher margin of safety for the creditors. The debt-to-equity
ratio has declined from 1.23 on an average to 0.18. The lower level of this ratio depicts that the
company stands better in terms of financial stability, which tantamount to long term solvency of
the entity. The debt-to-asset ratio shows how much a companys total assets have been financed
through debts. This ratio also decreases on an average from 0.09 before acquisition to 0.03 after
acquisition. Again, the lower level of this ratio portray financial soundness of the company. The
Receivable Turn-Over ratio shows a firms strength in terms of its credit terms and policy,
which is used to evaluate a firms ability with regard to collection of its credit sales in timely
manner. It is a gauge of a firms effectiveness in terms of utilization of its assets. This ratio of
the bank increased from 0.39 before acquisition to 1.12 after acquisition. The higher this ratio,
the more efficient a company is in collection of its debts. Average collection period shows the
approximate number of days it takes for a company to collect payments from its receivables. The
average collection period decreased very sharply after acquisition. Assets Turn-Over ratio is used
to fined out an assets dollar is contributing to sales/revenue. The asset turn-over ratio has
increased to 0.085 from 0.055which shows the increased amount of revenue after acquisition.
The Gross-Profit-Margin ratio measures the strength of a company in terms of profitability. The
higher this ratio, the greater the financial potentials a company have in terms of payments of
operating and other types of expenses. In other words, the ratio indicates the combined effects of
liquidity, asset management debt management on operating results of a business enterprise. This
ratio increased from 0.39 before acquisition to 0.705 after acquisition. The elevation in the ratio
can be attributed to remarkable boost in the revenues resulting from the amalgamation of the
two banks.
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Table 2: Ratios of Standard Chartered Bank before and after acquisition
Ratios
2004 2005 2006 2007 2008
Average
before
Acquisitio
n
Interest coverage
0.64
2.93 2.03
1.54 1.47
1.8
Fixed
Assets 0.02
0.04 0.02
0.01 0.027
0.03
Turn-over
Return on Invest
0.02
0.04 0.02
0.01 0.027
0.03
Return on Equity 0.35
0.45 0.14
0.06 0.02
0.4
Net Profit Margin 0.48
0.57 0.37
0.12 0.03
0.525
Operating Profit
Margin
65.13 74.3 60.08 44.37 43.79
69.76
9
Return on Capital
Employed
0.55
0.05 0.03
0.02 0.003
0.3
(ROCE)
Earning per Share 0.64
1.07 1.44
0.73 0.18
0.86
(Source: Survey Results)
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Average
after
Acquisition
1.51
0.0185
0.0185
0.04
0.075
44.08
0.0115
0.46
Findings.
The Investment Coverage ratio reflects how convenient it is for the company to make payments
in terms of interest on remaining debts. The lower this ratio, the more hesitant are the creditors to
extend loan to company. On an average interest-coverage ratio of the bank has declined to 1.51
after the acquisition, which indicates that the banks revenue are not sufficient to meet its interest
expenses. The Fixed-Asset Turn-Over ratio indicates the proportion of net sales that are
generated with fixed assets of the company. On average this ratio has declined from 0.07 to 0.04
after acquisition. The decline in this ratio shows inefficiency and ineffectiveness of the bank in
utilizing its fixed assets for generating sales. Return-on-Investment (ROI) compares the benefits
of an investment to its costs. The ROI ratio of the bank declined to 0.0185 after acquisition from
0.03. This shows that either aggregate assets of the bank have declined or the net profit margin of
the bank has decreased. Return-on-Equity (ROE) shows the efficiency of the bank in utilizing the
investments of the shareholders in the growth of earning of the bank. The ROE of the bank has
decreased from 0.4 before acquisition to 0.04 after acquisition, which, in turn, shows greater
equity financing of the bank. Net-Profit-Margin indicates the amount of profit that a company
makes after taxes in relation to sales. The net-profit-margin declined from 0.525 before
acquisition to 0.075 after acquisition. This phenomenon seems to be offshoot of mounting outlay
on interest payments which swallows major chunk of banks revenues. Operating-Profit-Margin
compares earning before interest and taxes or operating profit to sales volume. The higher this
margin, the better position a company enjoys. The operating margin has declined to 44.08% after
acquisition from 69.76% before acquisition. Return-on-capital-employed is a measure for
assessing the efficiency of capital employed by a company. It is an indicator of evaluating
managements efforts in properly utilizing the funds of the owners and creditors. The Return-oncapital-employed ratio declined from 0.30 to 0.0115. Earning per share indicates the growth rate
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at which the earnings of a company are growing per share. It reflects the true financial picture of
the bank in terms of long term sustainability. On an average earning per share declined from 0.86
to 0.46 after the acquisition, which is an evidence of poor financial health of the bank.
Conclusions
In the aftermath of cut throat competition ensued by rapid waves of globalization, the regime of
mergers and acquisitions is rampant across the globe. In Pakistan also, this wave is on the rise
which fascinated high support from State Bank and Securities and Exchange Commission of
Pakistan. The main purpose of conducting this research was to assess the operational efficiency
and financial performance of the Standard Chartered Bank, Pakistan by comparing its financial
ratios before and after acquisition. The period of analysis ranged from 2004 to 2008. The
analysis shows that in some areas such as liquidity position and profitability parameters, the bank
has acquired improvement after the acquisition. However, some ratios calculated show that the
operating performance of the bank followed a downward trend. It may be concluded that after
the acquisition, the operating and financial performance of the bank has witnessed an overall
declining trend, particularly in the domain terms of return on investment. However, taking into
account the historical evidence of mergers and acquisition, such financial debacle seems to be
the basic ramification of massive emphasis on expansion of resources not followed by focusing
parallel concentration on operational efficiency and effectiveness. The futility inherent in pooling
enormous resources without putting them to proper utilization can hardly be overemphasized.
The failure to Standard Chartered Bank to derive the desired results from acquisition policy
seems to be partly caused by lack of confidence in the industry regarding the inherent synergies
associated with amalgamations. Moreover, mergers and acquisitions is a new phenomenon and it
is yet to gain impetus. So, it seems premature to predict rosy picture in the shape of speedy
positive outcomes from this mechanism.
Recommendations
It is hard to foretell specific types of mergers and acquisitions which may guarantee
immediate success it a new development coupled with acute lack of well established
practices regarding the amalgamation adventures in the money market. One of the
inklings behind the declining performance shown by the financial institutions is the blind
following of instructions issued by the State Bank of Pakistan for the sake of their
survival rather than accomplishing inherent synergies embodied in the regime of viable
amalgamations. Hence the primary focus was to survive in the market rather than to focus
on gaining improvements in financial performance.
Amalgamations can play pivotal role in materializing the cherished objectives of
lowering costs and enhancing economies of scale if proper coordination is maintained
regarding information sharing between the relevant stake holders. The same contention is
maintained by majority of well reputed authorities in the financial discipline.
In addition to ratio analysis, other statistical methods can go a long way to identify
multiple dimensions of amalgamations including its far reaching results for the
economies as a whole.
Pakistans banking sector still has untapped segments which possess great potentials of
profitability. Thus, the acquisition of Union Bank serves as launching pad for Standard
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Chartered Bank to satisfy the needs of underserved segments and enhance its consumers
and wholesale banking by bringing modifications and innovation in its products, leading
towards expanding its horizons to international framework.
Moreover, certain strategies could help the Standard Chartered Bank improve its overall
financial performance in the wake of finding capable managers and offering them
incentives to ensure long term marriage, formulating and sharing clear objectives, preapproach plans for the purpose of integrating different processes, tailoring messages to
keep every one informed and updated including clients and workers, identifying and
locking lucrative opportunities, paying due weight age to different cultures, managing
effectively the human capital, managing the activism and motivational level of sales force
to obstruct the process switching customers to the competitors camp, and pre-planning
regarding integration of new resources.
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References
Akhavein, J., A. Berger and D. Humphrey (1997), the effect of mega mergers on efficiency and
prices: Evidence from a bank profit function, Review of Industrial organization 12
Akhter M. Hanif (2002), :X-efficiency analysis of commercial banks in Pakistan: A preliminary
investigation, the Pakistan Development Review, Part-II.
Altunbas Y. and Jbanez D. M. (2004) mergers and acquisitions and bank performance in
Europe: the role of strategic similarities.
Burki, Abid A. and Niazi, Ghulam Shabbir Khan (2003), the effects of Privatization,
Competition, and regulation on banking efficiency in Pakistan 1991-2000, Strengthening
regulation policy and practice, university of Manchester, UK
De long, Gayle (2001), does long term performance of mergers match market expectations?
Evidence from the US banking industry, Financial Management Vol. 32, No. 2, PP. 5-25
Hannan, Timothy H. and John D. Wolken (1989),Returns to bidders and targets in the
acquisition process: Evidence from th banking industry Journal of financial services
research, Vol. 3, PP. 5-16
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merger from the perspective of insider and outsiders Journal of Financial Economics 60,
PP. 285-320
Houston, J.F, and Michael D. Ryngaert (1994), the overall gaining from large mergers Journal
of banking and finance, Vol. 18, PP.1155-1176
Madura, J. and K. J. Viant (1994), long term valuation effects of bank acquisitions Journal of
Banking and Finance, Vol.19, Iss. 3, PP. 408-417
Mylondis N. and Kelnikola I. (2005), Merging activity in the Greek Banking system: A
financial accounting perspective
Ping-Wen Lin. (2002), cost efficiency analysis of commercial bank mergers in Taiwan
International Journal of Management. Vol. 19, Iss. 3, PP. 408-417
Rhoades, Stephen A. (1993), Efficiency effects of horizontal (in-market) mergers Journal of
banking and Finance, Vol. 17, PP. 411-422
Suchismita Mishra, Arun J Prakash, Gordon V Karels, Manferd P. (2005), Bank mergers and
components of risk: an evaluation Journal of Economics and Finance, Vol. 29, Iss. 1, PP.
85-96
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Timothy, A. Kruse, Hun Y. Park, Kwangwoo Park, and Kazunori Suzuki (2003), Long-term
performance following mergers of Japanese Companies: the effect of diversification and
affiliationAmerican Finance Association, Washington DC, PP. 1-40
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An Investigation of influence of Local Events on Performance of Karachi Stock
Exchange 100 Index
Dr. Ashfaq Ahmad (Corresponding Author)
University of Sargodha, Pakistan
Dr. Mumtaz Ali
Assistant Professor, Department of Social Work,
Asad Afzal Humayoun
PhD Scholar, Department of Management Scineces,
Foundation University, Islamabad, Pakistan
Abstract
Stock market is an important indicator of financial health of any country. It shows the ups and
downs in the economic conditions to reflect the market capitalization and investment ventures.
Karachi stock exchange is the biggest stock market of Pakistan. It deals in different stocks,
securities and financial instruments. This study investigates the influence of selected local events
on KSE 100 index. Data regarding KSE daily closing index was collected from print media. A
total of 1971 observations were recorded for 8 years from July 01, 1998 to June 30, 2006. A
regression equation was devised along-with Post-hoc Tukey test to find out the impact of events
on KSE index. The pre event, event and post event windows were worked out for all major
events. The results indicate that the abrupt events had an obvious negative event window relative
to the pre event and post event window. While on the other hand the events with a build up
period had a more negative impact during their pre event window. A normal level of index is
observed after the occurrence of specific event at the elimination of uncertainty.
Key Words:
1.0
Karachi Stock Exchange, Local Events, Uncertainty.
Introduction
Financial market is an important segment of any economy in the recent age of globalization.
Financial market could be divided into money market and capital market. Stock market
represents the capital markets as a structured mechanism to facilitate the economic activities.
Stock market is considered as an important indicator of financial health of any economy. In
Pakistan, there are three stock exchanges to promote economic ventures. The Karachi Stock
Exchange (KSE) is the biggest stock market of Pakistan. It is located at Karachi, a commercial
hub of Pakistan. It experience ups and downs during the previous decades. It was declared as the
Best Performing Stock Market of the World for the year 2002 (CNN news 01/01/2003).
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This study examines the influence of selected local events on performance of Karachi stock
exchange. Financial liberalization and deregulation during 1990s helped to enhance the
participation of private investors. Similarly, Govt. interventions and reforms also promoted the
stock exchange business in the recent age. In addition, foreign investors are encouraged to make
investment in different sectors. It helped the local investors to explore foreign markets and
foreign investors to invest in local markets like KSE, LSE and ISE. Stock market is directly or
indirectly linked with the favorable or unfavorable events within country or outside the country.
The events happening in the surroundings of the stock market or within the country have greater
impact than in the past. In this study events like Kargil conflict, Musharaf Takeover in Pakistan,
Pak-India border tension and Earthquake in Pakistan are taken as independent variables to find
out their impact on Karachi stock exchange. The common factor for the selection of these events
is the situation of uncertainty, fear and shock caused by their occurrence.
There are several studies that investigate the events studies to explore the influence of specific
events on stock market (Brown & Warner, 1985; Eckbo, 1992). This study examines the impact
of uncertainty caused by events of different magnitude on Karachi stock exchange especially
considering the local events. Investors play the most vital role in the development of an
economy. It is important to maintain the confidence of the investors in an economy in which they
are operating. It is found that a there is a significant volatility shifts in the return of portfolio due
occurrence of specific events (Chen et al. 2005).
2.0
Literature Review
This study explores the impact of selected local events on Karachi stock market. The happening
of specific events could affect the stock indices, even within the same day. There are a number of
techniques applied by several researchers to investigate the influence of different events across
the globe. It is reported that the event study method is the common source of stylized facts and
seminal event study of stock splits is applied for the same purpose (Fama et al. 1969). In
Pakistan, there are several studies that to investigate the influence the political and other news on
stock return. Similarly, this study is primarily undertaken to assess the magnitude to of influence
on stock market by occurrence of specific events.
Cutler et al. (1989) investigated the influence of political events on stock prices and reported that
there is no significant impact of these events on the performance of US stock market. Similarly,
there are number of studies that investigated the relationship between uncertainty, investment
and stock return (Hartman, 1972; MacKinlay, 1997; Binder, 1998). Similarly, it is reported that
increased uncertainty leads to increased investment spending regardless of the characteristics of
the adjustment cost function (Abel, 1983) that confirmed the results found by Hartman (1972).
Saltari & Ticchi (2005) confirmed the results of event study undertaken by Nakamura (2002) by
a different line of reasoning. Their analysis also contains more detail and differentiation. It is
reported that the effect of uncertainty on investment consists of two separate effects.
Aktas & Oncu (2006) investigated the pricing behavior of Turkish stock market with reference to
major political events to record the magnitude of influence on market participants. It was found
that efficient markets are affected by occurrence of unfavorable political events. Similarly, it is
reported that news regarding technological innovation has strong impact on stock market (Pastor
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& Veronesi, 2005). In addition, it is examined that how unfriendly environment news affects the
stock markets in India (Gupta & Goldar, 2005). It is also reported that the happening of a certain
events affects the stock return (Khan & Ahmad, 2009). It is found that the occurrence of event in
shape of acquisition, could affect the acquirer companies negatively (Selcuk &Yilmaz, 2011).
3.0
Methodology
This study investigates the effect of selected local events on KSE 100 Index. A number of local
events were selected. The events selected for this study includes Pak-India Kargal Conflict,
Musharaf Takeover in Pakistan, Pak-India border tension and Earthquake in Pakistan. They are
taken as independent variables and their impact is seen on the Karachi stock market. The
common factor for the selection of these events is the situation of uncertainty, fear and shock
caused by their occurrence. These events are considered as independent from Karachi stock
markets perspective and KSE Index is taken as dependent variable. Data regarding daily closing
index was collected from the print media. Relevant dates of news regarding the events under
study were gathered from the daily Dawn. The KSE daily closing index was collected giving a
total of 1971 observations for a period of 8 years starting from July 1, 1998 to June 30, 2006.
The index for the days when stock market is closed or the days of any public holidays are not
considered under this study.
Procedure
This study examines the influence of selected local events on Karachi stock exchange. It is based
upon an alternative event study test statistic to analyze the event-induced-variance (Boehmer et
al., 1991). Similarly, there are several possible approaches available for formulating test statistics
to find out the event effect. The most flexible and most commonly adopted of these is based on a
multivariate regression model to pick up the event which is clearly laid out (Thompson, 1985). It
could be used to find out the impact of selected events on KSE-100 Index. The normal or
estimated (also known as the estimation) window is usually based on the sampling period of
around 110 to 220 trading days. This method helped to convert the qualitative value into
quantitative values. Thus based on the time period established with the help of event study
analysis KSE daily closing data was required. This method was used to classify the pre event,
event and post event windows for all the independent variables selected for study. The pre event,
event and post event is depicted in Figure 1.
{Insert Figure 1}
4.0
There were two kinds of events examined in this study. Firstly events that were sudden in nature
e.g. Musharaf Takeover, Clashes in Karachi and Earthquake in Pakistan. Secondly, those have a
build up period e.g. Kargal Conflict and Pak-India border tension. The results from the Event
Study regression analysis and Post-Hoc Tukey test show that all events in this study produce
significant models except Clashes in Karachi that is insignificant at 0.05. The values of R2 for the
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most of the events are more than 50 % except a low of 1.13% for Clashes in Karachi. The results
are shown in the table 1 as under:
{Insert Table-1}
Table 1 shows the Tukey test results for events under study. The pre event is labeled I while the
event and post event are labeled J. The difference between I-J or the mean difference is shown in
the next column. The impact of the Pak-India Kargal Conflict was not that severe when post
event window Index was gaining quite significantly with 113 points during event window and
176 points during post event window, being the significant sample size. The sudden nature of the
occurrence of Musharaf Takeover led to a significant fall in KSE index by almost 14 points from
pre event window to event window. But Karachi stock exchange being quickest to recover the
shock was above the pre event index level when it entered the post event widow as it had gained
about 100 points. The Pak-India border tension stemmed out of the scenario caused by
September 11th attacks on US. Thus the market was gaining during the event and post event
window. Clashes in Karachi resulted a negative move when the index entered from pre event
window into the event window, on other hand the index was back even above the pre event level
when it entered the post event window. The Earthquake in Pakistan caused the bullish trend on
KSE index. Thus the market was gaining during the event and post event window. Table 2
represents the regression coefficients for the selected events. The results are consistent with the
previous studies (Pastor & Veronesi, 2005; Aktas & Oncu, 2006).
{Insert Table-2}
Table 2 shows the regression coefficients for all the events under study. Pak-India Kargal
Conflict depicted that the pre event window caused the uncertainty among the investors and thus
led to the fall in index. The sample size being significant, the standard deviation is not so
different when the event windows are compared. Once again the pre event window is not
following the trend here, as the other two windows being 10 and 17 points, the pre event window
is around 14 points. The R-square shows that 51 percent variation in the dependent variable
explained by the regression model. Regression coefficients of Musharaf Takeover showed that
the index gained 14 points during the event window when looking at it by keeping pre event
constant. The index was recovering as mentioned in the Tukey test analysis during the post event
window period. The standard error supports the answer that the Index was deviating from the
mean during the event time period. R-square value shows that only 41 percent of variation in the
dependent variable is shown by the regression model. Pak India border tension was taking some
impact from the post event window of Afghanistan war. The standard error for the three
windows shows deviation from the mean and is not too significant for all the three windows. The
t-statistic shows that all the three windows are useful predictors. R-square is 68.6 percent to
indicate the proportion of variation in the dependent variable.
In case of Clashes in Karachi, by keeping pre event window constant it is evident that the event
window is at 1969.312 (i.e. 1784.244-14932). Thus KSE index lost points during the event time
period. The index was up again at 1796.753 (i.e. 1784.244+12.509) during the post event
window. The regression coefficients for Earthquake in Pakistan has depicted that the pre event
window caused the uncertainty among the investors resulted as the fluctuations in index. All
three windows for this event show a t-value either above 2 or below 2. The R-square indicates a
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high percentage of 79 percent. The F- values for all events show that the models are significant at
the 95% confidence interval. When the independent variables are examined on an individual
basis, the Karachi clashes indicate insignificance at the .05 level. The findings supported the
literature as it was evident from the similar investigations (Khan & Ahmad, 2009; Selcuk
&Yilmaz, 2011).
5.0
Conclusion
Stock market is an important indicator of financial health of any economy. It depicts the overall
trends pf the economy. Karachi stock exchange is the biggest stock market in the Pakistan,
located at Karachi, a commercial hub of Pakistan. This study investigates the impact of selected
local events on Karachi stock market. The selected events could be divided into two groups i.e.
events having sudden and abrupt occurrence as well events with build up period. The general
perception of events like war, terrorist attacks and calamities are negative on sensitive areas like
stock markets. But it is at times possible that certain events might only cause a negative trend in
a stock market due to the uncertainty triggered. The events study method led to dividing an event
into three times windows namely pre event, event and post event helped in studying the events in
more critical manner. Thus the three divisions of each event helped to assess the influence of
each on stock market. The results indicate that the abrupt events had an obvious negative event
window relative to the pre event and post event window. While on the other hand the events with
a build up period had a more negative impact during their pre event window. A normal level of
index is observed after the occurrence of specific event at the elimination of uncertainty. It is
found all the events under study had a negative impact but most probably not concentrated
during the actual happenings of the event.
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References
Abel, A.B. (1983). Optimal Investment under Uncertainty, American Economic Review, 73, 228233.
Aktas, H & Oncu, S. (2006). The Stock Market Reaction to Extreme Events: The Evidence from
Turkey, International Research Journal of Finance and Economics, 6, 78-89.
Binder, J. (1998). The Event Study Methodology since 1969, Review of Quantitative Finance
and Accounting, 11(2), 111-137.
Boehmer, E., Musumeci J. & Poulsen, A. B. (1991). Event-study methodology under conditions
of event-induced variance, Journal of Financial Economics, 30, 253-273.
Brown, S.J., Warner J.B., (1985), Using daily stock returns: The case of event studies, Journal of
Financial Economics, 8, 205-258.
Chen, D., Bin, F. & Chen, C. (2005). The Impacts of Political Events on Foreign Institutional
Investors and Stock Returns: Emerging Market Evidence from Taiwan, International Journal of
Business, 10 (2), 165-188.
Cutler, D. M., Poterba, J. M. & Summers, L. H. (1989). What Moves Stock Prices? Journal of
Portfolio Management, 15, 4-12.
Eckbo, B. E. (1992). Mergers and the value of antitrust deterrence, Journal of Finance, 47,
1005-1029.
Eckbo, B. E., Vojislav, M. & Joseph, W. (1990). Consistent estimation of cross-sectional models
in event studies, The Review of Financial Studies, 3, 343- 365.
Fama, E.F., Fisher & Jensen M. (1969). The adjustment of stock prices to new information,
International Economic Review, 10, 1-21.
Gupta, S. & Goldar, B. (2005) Do stock market Penalize environment-unfriendly behavior?
Evidence from India, Ecological Economics, 52:81-95.
Hartman, R. (1972), The Effects of Price and Cost Uncertainty on Investment, Journal of
Economic Theory, 5, 258-266.
Khan, A. & Ahmad, M.S. (2009). Trading Volume and Stock Return: The Impact of Events in
Pakistan on KSE 100 Indexes, International Review of Business Research Papers, 5 (5), 373383.
MacKinlay, C. A. (1997). Event studies in economics and finance, Journal of Economic
Literature, 34, 13-39.
Nakamura, T. (2002). Finite Durability of Capital and the Investment-Uncertainty Relationship,
Journal of Economic Behavior and Organization, 48, 51-56.
Pastor, L. & Veronesi, P. (2005). Technological Revolutions and stock Prices, Journal of
Business Finance and Accounting, 1-4.
Saltari, E. & Ticchi, D. (2005). Risk Aversion and the Investment-Uncertainty Relationship,
819
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Selcuk, E. & Yilmaz, A. (2011). The Impact of Mergers and Acquisitions on Acquirer
Performance: Evidence from Turkey The Impact of Mergers and Acquisitions on Acquirer
Performance: Evidence from Turkey, Business and Economic Journal, 1-8.
Thompson, R. (1985). Conditioning the return-generating process on firm-specific events: A
discussion of event study methods, Journal of Financial and Quantitative Analysis, 20, 151-168.
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Annexure
Figure 1
Event Study Windows
Estimation
Window
Event
Window
T1
T0
0
T
Post-event
Window
T2
T3
Table 1
Results of Post hoc Tukey Test for Selected Events
95% Confidence Level
Event
(I)
Kargal Conflict
Preevent
Musharaf Takeover
Pak-India Border
Tension
Clashes in Karachi
Earthquake in Pakistan
Preevent
Preevent
Preevent
Preevent
(J)
Mean Diff
(I-J)
Sig.
-112.62
Lower
Bound
Upper
Bound
0.000
-145.46
-79.78
-176.05
0.000
-217.88
-134.22
13.35
0.760
-32.45
59.15
Post Event
-97.24
0.000
-136.19
-58.29
Event
-320.09
.000
-379.98
-260.21
Post Event
-489.96
.000
-548.92
-430.99
Event
14.93
0.893
-63.52
93.38
Post Event
-12.51
0.686
-48.49
23.47
Event
-436.54
.000
-606.79
-266.26
Post Event
-1008.24
.000
-1166.92
-849.55
Event
Post Event
Event
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Table 2: Multiple Regression Coefficients, Standard Errors in parenthesis, t-values in

brackets, p-values and F-statistics in italics for Events under study
Events
Kargal Conflict
Musharaf Takeover
Pak-India Conflict
Clashed in Karachi
Earthquake in
Pakistan
Constant
Pre-event
Post Event
R-Square
FStatistics
1145.482
-112.622
63.427
0.51
58.715
(9.195)
(13.828)
(16.977)
[124.581]
[-8.144]
[3.736]
0.000
0.000
0.000
1176.312
13.346
110.586
0.41
25.322
(14.948)
(19.159)
(18.583)
[78.694]
[0.697]
[5.951]
0.000
0.000
0.000
1795.35
-494.517
-164.764
0.69
197.258
(17.255)
(25.364)
(24.906)
[104.05]
[-19.39]
[-6.615]
0.000
0.000
0.000
1784.244
-14.932
12.509
0.013
0.564
(10.731)
(32.091)
(15.088)
[166.267]
[-0.454]
[0.829]
0.000
0.651
0.409
8577.171
-436.59
571.708
0.79
117.231
(52.512)
(70.969)
(69.665)
[163.227]
[-6.152]
[8.207]
0.000
0.000
0.000
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Impact of Uncertainty Caused by International Events on
Karachi Stock Exchange
MAY 2011
VOL 3, NO 1
Dr. Ashfaq Ahmad (Corresponding Author)

Dr. Sadia Rafi
Assistant Professor, Department of Social Work,
Dr. Mahmood Ahmad Bodla
Director, COMSATS Institute of Information Technology,
M. A. Jinnah Campus, Lahore, Pakistan
Abstract
Stock market is an important indicator of economic growth of any country in the recent age. It
represents the overall health of the economy. This dtudy examines the impact of selected
international events on the Karachi stock exchange. The KSE daily closing index is recorded
from print media to gather 1971 observations for 8 years from July 01, 1998 to June 30, 2006. A
regression equation was devised along-with Post-hoc Tukey test to find out the impact of events
on KSE100 index. The pre event, event and post event windows were worked out for all major
events. Results show that Terrorist attacks on U.S has an obvious negative event window relative
to pre event and post event window, while the events with a build up period had a more negative
impact during their pre event window in case of Afghan and Iraq War. It is also found that when
the uncertainty was over and the outcome of the event was clear, the index started moving back
to normal level.
Key Words: Karachi Stock Exchange, International Events, Uncertainty, Pakistan
1.0
Introduction
Stock market indicates the financial health of any country. It depicts the overall trend within the
specific country regarding investment ventures. Investment is the driving force in the
development of any country. The variation in the interest rate by Pakistani Govt. resulted drastic
changes in the capital markets. Similarly, foreign remittances by the Pakistanis living abroad
have also helped in raising the foreign reserves to a respectful level and led to the bullish trends
in the Karachi Stock Exchange. The Karachi Stock Exchange (Guarantee) Limited (KSE) is the
biggest stock exchange in Pakistan. It is situated in Karachi, the largest industrial city and
commercial center of Pakistan. The Karachi Stock Exchange performed very well and declared
as the Best Performing Stock Market of the World for the year 2002 (CNN news 01/01/2003).
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This study investigates the impact of selected international events on the performance of Karachi
Stock exchange. The recent government incentives to corporate sector have opened up the
Pakistani markets for foreign investors and encouraged Pakistani producers to explore foreign
markets. Thus the events happening around the world have greater impact than in the past. In this
study events like Y2K Computer Problem, Terrorist attacks on US, war in Afghanistan, War in
Iraq and Tsunami disaster are taken as independent variables to explore their impact on the
Karachi stock market. The common factor for the selection of these events is the situation of
uncertainty, fear and shock caused by their occurrence.
Several studies provide a guide to the type of analysis that could best answer the questions
regarding events and their impact on stock markets. Brown & Warner (1985) suggest a logical
framework to examine the impact of events or shocks on stock markets. The main goal in
conducting event studies is to find out the effect of significant information on stock returns at the
time of the event announcement (Eckbo, 1992). This study contributes to the advancement of
event study methodology by conducting a thorough analysis of events of different magnitude and
their impact on stock exchange. Investors play the most vital role in the development of an
economy. It is important to maintain the confidence of the investors in an economy in which they
are operating. This study addresses the problem of uncertainties caused by events of different
magnitude and for how long do they last in Karachi stock exchange.
2.0
Literature Review
This study examines how particular events affect the Karachi Stock Exchange100 Index. As
information reached the market, indexes fluctuated strongly, with downward and upward moves
sometimes within the same day. Evidence of a significant effect may shed light on various
questions including the impact on shareholders welfare, market efficiency, or the effectiveness of
government intervention. Techniques have evolve from the seminal event study of stock splits by
Fama et al (1969) to the point that event study methods are a common source of stylized facts
which influence policy decisions and the direction of research.
Cutler et al. (1989) examined the impact of various political events on stock prices, but found no
evidence of significant impact of non-economic events on U.S. stock market performance.
Recent surveys of the state of the art of event study methods are provided by MacKinlay (1997)
and Binder (1998). The investment and uncertainty relationship is frequently analyzed in
literature since 1970s. One of the first models was developed by Hartman (1972), his study
focuses on the relationship between capital productivity and the uncertainty variable. Pindyck
(1982) used a neoclassical model that allows for asymmetric adjustment costs. He argued that the
impact of uncertainty on investment spending is dependent on the characteristics of the
adjustment cost function i.e. uncertainty may increase (decrease) investment when adjustment
costs are a convex (concave) function of investment. Similarly, Abel (1983) suggests that
increased uncertainty leads to increased investment spending regardless of the characteristics of
the adjustment cost function, thereby confirming the results found by Hartman (1972).
Veronesi (1999) found that uncertainty plays a major role in finance. Imperfect knowledge of
investors about macroeconomic variables or dividend enables them to make estimates vigilantly
based on available data. Nakamura (2002) indicated that if capital has shorter life than the firms
planning horizon being the decreasing returns to scale, increased uncertainty about the future
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leads to a decrease in investment spending. Furthermore, in another study by the same author it is
claimed that uncertainty reduces investment spending when a firm is risk-averse (Nakamura,
1999). In a revision of the framework used in the Nakamura study, Saltari & Ticchi (2005)
confirmed its results but by a different line of reasoning. Their analysis also contains more detail
and differentiation. It is reported that the effect of uncertainty on investment consists of two
separate effects. The first effect is coined the flexibility effect, and is basically the standard
effect brought about by the convexity of marginal capital productivity in, for instance, prices.
The second effect is the risk-aversion effect brought about by the entrepreneurs risk aversion.
Since the two effects work in opposite directions, the net effect is not clear in their model and it
depends on the relative magnitudes of both effects. It is reported that news regarding
technological innovation has strong impact on stock market (Pastor & Veronesi, 2005).
Similarly, it is examined that how unfriendly environment news affects the stock markets in
India (Gupta & Goldar, 2005).
3.0
Methodology
The events of this study were picked up to observe their effect on the Karachi stock market. The
events being independent from Karachi stock markets perspective and KSE 100 Index is taken
as dependent variable. Data was collected through the print media. Relevant dates of news
regarding the events under study were gathered from the daily Dawn. The KSE daily closing
index was collected giving a total of 1971 observations for a period of 8 years starting from July
1, 1998 to June 30, 2006. The index for the days when stock market is closed or the days of any
public holidays are not considered under this study.
Procedure
Boehmer et al. (1991) propose an alternative event study to investigate the test statistic to
account for event-induced variance. There are several possible approaches available for
formulating test statistics to find out the effect of a specific event. The most flexible and most
commonly adopted of these is based on a multivariate regression model to pick up the event
which is clearly laid out (Thompson, 1985). Regression analysis is applied to find out the impact
of selected events on KSE-100 Index. The normal or estimated (also known as the estimation
window) is usually based on the sampling period of around 120 to 250 trading days. This method
facilitated to solve the problem of giving quantitative value to the qualitative variables. Thus
based on the time period established with the help of event study analysis methodology the
estimated time period, for which KSE daily closing data was required, was worked out. This
method was used to classify the pre event, event and post event windows for all the independent
variables selected for study. The pre event, event and post event is depicted in Figure 1.
{Insert Figure 1}
4.0
Regression analysis is used for data analysis to find out the impact of selected events on KSE100 Index. Statistical software SPSS is applied for the regression and Post hoc Tukey test. The
results show that all events in this study produce significant models. The values of R2 for the
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most of the events under this study is more than 50 % except Terrorist attacks on U.S. A. as it
ranges from a high of 82% for Y2K Computer Problem. The results are shown in the table 1 as
under:
{Insert Table-1}
Table 1 shows the Tukey test results for the events in this study. The pre event is labeled I while
the event and post event are labeled J. The difference between I-J or the mean difference is
shown in the next column. The impact of Y2K Computer problem was not that severe as KSE
Index was gaining quite significantly with 123 points gain during event window and 341 points
gain during post event window. The sudden nature of terrorists attack on U.S led to a significant
fall in KSE index by almost 126 points from pre event window to event window. But Karachi
stock exchange recovered the shock when it entered the post event window as it had already
gained about 16 points. Similarly, the impact of the Afghanistan war reflects that the index
gained 169 points during event window and 286 points gain during post event window. In case
of War in Iraq, the pre event and event as well as pre event and post event show a gain in the
KSE index level. In addition, the impact of the Tsunami Disaster was not that severe on KSE, as
index was gaining quite significantly with 651 points gain during event window and 1814 points
gain during post event window. Table 2 represents the regression coefficients for the selected
events.
{Insert Table-2}
Table 2 shows the regression coefficients for all the events under study. The pre event window
created the uncertainty among the investors in case of Y2K Computer problem. The sample size
being significant, the standard deviation is not so different when the event windows are
compared while the R-square shows a very high value of 82 percent. The regression coefficients
of Terrorist Attacks on US show that the index lost a significant number of points during the
event window when looking at it by keeping pre event constant. The event window index level
was 1163.472 (1293.337-129.865). The index was already recovering as mentioned in the Tukey
test analysis during the post event window period and the index level had reached 1304.701
(1293.337+11.364) having 13.7% R-square. The results of Afghan war depicted that the pre
event window led to the fall in index. The sample size being significant, the standard deviation is
not so different when the event windows are compared being the R-square of 52.3 percent. It is
evident that the pre event window is at 1300.833 (i.e. 1795.350-494.517). The event index level
for War in Iraq could also be higher for the fact that KSE was gaining even during the crisis
scenario, therefore a rise in index during the event window could most probably be due to an end
to uncertainty and the upward trend in KSE index simultaneously. The significance level of all
three windows also helps in identifying the variation while the R square indicated that 65.9
percent of the fluctuation in the dependent variable is reflected by the regression model. The
findings of the study supported the previous studies as it was evident in case of terrorist attacks
on worlds capital markets (Cespedes & Christopher, 2003).
In case of Tsunami Disaster there is a rise in index during the event window. The deviation from
the mean as shown by standard error is quite high for all three-event windows; this is mainly due
to the sample size and level of fluctuations caused by the uncertainty as well as the growth trend
in KSE. The R square explains that dependent variable is influenced by 76 percent due to
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regression model. The F- values for all events show that the models are significant at the 95%
confidence interval. When the independent variables are examined on an individual basis, the
terrorist attacks on U.S indicate insignificance at the .05 level. The impact of various political
events on stock prices, but found no evidence of significant impact of non-economic events on
U.S. stock market performance Cutler (1989). It has been evident from the statistical results that
the abrupt events had an obvious negative event window relative to the pre event and post event
window. While on the other hand the events with a build up period had a more negative impact
during their pre event window. Once the uncertainty was over and the outcome of the event was
clear the index started moving back to normal level. The results are in line with literature as it is
reported that the terrorism could affect the global capital markets (Chen & Thomas, 2004).
5.0
Conclusion
The general perception of events like war, terrorist attacks and calamities are negative on
sensitive areas like stock markets. But it is at times possible that certain events might only cause
a negative trend in a stock market due to the uncertainty triggered. This study investigates the
influence of uncertainty caused by; selected international events on KSE. The events study
method led to dividing an event into three times windows namely pre event, event and post event
helped in studying the events in more critical manner. It shows the lasting impact of these events
under study. Thus the three divisions of each event brought under light the impact of an event
before it actually occurred, event, and its aftermaths. It has been evident from the statistical
results that the abrupt events had an obvious negative event window relative to the pre event and
post event window. While on the other hand the events with a build up period had a more
negative impact during their pre event window. Once the uncertainty was over and the outcome
of the event was clear the index started moving back to normal level. It is concluded that all the
events under study had a negative impact but most probably not concentrated during the actual
happenings of the event.
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References
Abel, A.B. (1983). Optimal Investment under Uncertainty, American Economic Review, 73, 228233.
Binder, J. (1998). The Event Study Methodology since 1969, Review of Quantitative Finance
and Accounting, 11(2), 111-137.
Boehmer, E., Musumeci J. & Poulsen, A. B. (1991). Event-study methodology under conditions
of event-induced variance, Journal of Financial Economics, 30, 253-273.
Brown, S.J., Warner J.B., (1985), Using daily stock returns: The case of event studies, Journal
of Financial Economics, 8, 205-258.
Cespedes J. L. & Christopher K. (2003). The effect of September 11th terrorist attacks on world
stock markets, Southern Illinois University working paper.
Chen, A. H. & Thomas F. S. (2004). The Effects of Terrorism on Global Capital Markets,
European Journal of Political Economy, 20 (2), 349-366.
Cutler, D. M., Poterba, J. M. & Summers, L. H. (1989). What Moves Stock Prices? Journal of
Portfolio Management, 15, 4-12.
Eckbo, B. E. (1992). Mergers and the value of antitrust deterrence, Journal of Finance, 47,
1005-1029.
Eckbo, B. E., Vojislav, M. & Joseph, W. (1990). Consistent estimation of cross-sectional models
in event studies, The Review of Financial Studies, 3, 343- 365.
Fama, E.F., Fisher & Jensen M. (1969). The adjustment of stock prices to new information,
International Economic Review, 10, 1-21.
Gupta, S. & Goldar, B. (2005) Do stock market Penalize environment-unfriendly behaviour?
Evidence from India, Ecological Economics, 52:81-95.
Hartman, R. (1972), The Effects of Price and Cost Uncertainty on Investment, Journal of
Economic Theory, 5, 258-266.
MacKinlay, C. A. (1997). Event studies in economics and finance, Journal of Economic
Literature, 34, 13-39.
Nakamura, T. (1999). Risk Aversion and the Uncertainty-Investment Relationship, Journal of
Economic Behavior and Organization, 38, 357-363.
Nakamura, T. (2002). Finite Durability of Capital and the Investment-Uncertainty Relationship,
Pastor, L. & Veronesi, P. (2005). Technological Revolutions and stock Prices, Journal of
Business Finance and Accounting, 1-4.
Pindyck, R.S. (1982). Adjustment Costs, Uncertainty, and the Behavior of the Firm, American
Economic Review, 72, 415-427.
Saltari, E. & Ticchi, D. (2005). Risk Aversion and the Investment-Uncertainty Relationship,
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Thompson, R. (1985). Conditioning the return-generating process on firm-specific events: A

discussion of event study methods, Journal of Financial and Quantitative Analysis, 20, 151-168.
Veronesi, P. (1999). Stock market overreaction to bad news in good times: A rational
expectations equilibrium model, Review of Financial Studies, 12, 975-1007.
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Annexure
Figure-1:
Event Study Windows
Estimation
Window
Event
Window
T1
T0
0
T
Post-event
Window
T2
T3
Table 1
Results of Post hoc Tukey Test for Selected Events
95% Confidence Level
Event
(I)
Y2K Computer
Problem
Preevent
Terrorist Attacks on
USA
Preevent
War in Afghanistan
War in Iraq
Tsunami Disaster
Preevent
Preevent
Preevent
Mean Diff
(I-J)
Sig.
-122.41
Post Event
(J)
Lower
Bound
Upper
Bound
0.102
-263.99
19.17
-340.11
.000
-403.42
-276.78
Event
125.88
.001
45.40
206.37
Post Event
-15.66
0.518
-49.53
18.22
Event
-168.63
0.000
-251.44
-85.83
Post Event
-285..24
.000
-357.74
-212.73
Event
-188.67
.001
-312.09
-65.26
Post Event
-614.48
.000
-704.04
-524.93
Event
-650.08
.000
-996.81
-303.35
Post Event
-1813.54
.000
-2117.67
-1509.41
Event
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Table 2
Multiple Regression Coefficients, Standard Errors in parenthesis, t-values in brackets, p-values and Fstatistics in italics for Events under study
Events
Y2K Computer
Problem
Terrorist Attack on
USA
Afghanistan War
War in Iraq
Tsunami Disaster
Constant
Pre-event
Post Event
R-Square
FStatistics
1468.385
-122.410
217.691
0.82
85.815
(55.775)
(58.053)
(59.378)
[26.327]
[-2.109]
[3.666]
0.000
0.000
0.438
1293.337
-128.86
11.364
0.137
8.668
(9.958)
(31.71)
(14.577)
[129.88]
[-4.09]
[0.778]
0.000
0.000
0.438
130.633
-168.39
122.194
0.523
47.158
(21.604)
(34.38)
(25.727)
[60.39]
[-4.89]
[4.75]
0.000
0.000
0.000
2797.747
-187.503
427.955
0.66
136.125
(45.602)
(53.473)
(52.553)
[61.352]
[-3.507]
[8.143]
0.000
0.000
0.000
6381.554
-650.079
1163.46
0.76
107.539
(107.318)
(144.708)
(134.924)
[59.464]
[-4.492]
[8.623]
0.000
0.000
0.000
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Assessing the Training Transfer in National Institutes of Management (NIM)
of Pakistan: A Proposed Research Strategy
Muhammad Kaleem
Lecturer, institute of management sciences, Kohat University of Science and Technology
Kohat, Khyber Pakhtonkhwa, Pakistan.
Dr. Abdul Qaiyum Khan
Institute of management studies, university of Peshawar, kpk, Pakistan.
Hafizullah
Lecturer, institute of management sciences, Kohat University of Science and Technology
Kohat, Khyber Pakhtonkhwa, Pakistan.
Abstract
This study is part of my PhD dissertation to empirically investigate the transfer of public sector
training in Pakistan. It is further based on the case study of National Institute of Management- an
apex institution that imparts management training to middle level public managers in Pakistan.
The institute delivers the training program under the title Mid Career Management Course
(MCMC) in four different campuses each at Karachi, Lahore, Quetta and Peshawar. The course
is mandatory for officers in Basic Pay Scale of 18 for promotion to next cadre of civil
bureaucracy. The paper in hand is taken from the chapters pertaining to research approach,
framework and methodology. The adopted approach for the study is pure qualitative and
involves two major phases. Phase 1 entails the needs assessment while second phase is about
incorporating the need elements into an institutional policy. Needs Assessment phase is further
divided into four qualitative steps. First step is based on data gathered through focused groups of
trainee officers of each campus. Next step relies on data collected from the semi structured
interviews of public sector figureheads. In third step a research review is carried out to identify
best practices in public sector management training and finally the three steps are triangulated to
shape the policy draft of phase 2. The assessment procedure detailed above is guided from the
proposed Proactive Evaluation of Owen and Rogers (1999, 2006). For the policy draft the Drors
(1987) optimal policy phases are taken as baseline framework.
Keywords:
Public Sector, Management Training, National Institute of Management
1. Introduction
To cope with the challenges of contemporary dynamic work environments, it is inevitable to
groom workforce with most current and modern practices to improve job performance. Training
and development expenditures emerge to be important financial decisions that compel the
organizational decision makers to apply most effective strategies for optimum performance and
profitability. The assessment of such investments in human capital, in public sector particularly,
has received considerable research attention (Baharim 2008, Abozed, Melaine & Saci 2008).
This context makes it necessary for academicians and practitioners to understand the dynamics
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of effective training and its relevance to, and application on workplace. The problem area of this
research is public sector work environment issues related to executives of higher cadre (BPS 18)
including civil service and the extent to which the current training institutes and programs
address these issues. The institution selected for conduct of this enquiry is National Institute of
Management (NIM) which was formerly known as National Institute of Public Administration
(NIPA). Located in Karachi, Lahore, Peshawar and Quetta, it had been serving as an apex seat of
management training for current and future public managers and thus provides a forum where the
study under consideration can be conducted on subjects who are or would be at the helm of
public affairs. By doing so, this study would fill the gap in existing literature on perceived
relevance of training to actual workplace problems in public sector of Pakistan. Moreover the
study does not culminate merely on pronouncing some training impact factors as good and others
bad rather throughout the data collection and analysis, the focus is on recommendation for a
policy formulation as final product. The policy that can be adopted at institutional level and
synthesized from triangulation of a set of qualitative data and international literature on best
practices in public sector training. This work is expected to help the practicing public managers
by working out strategies to enhance the utility of a proposed training program both at
institutional and individual level.
This research is based on an assessment of management training in one of the public
sector training institutes of Pakistan. The assessment might be carried out through a number of
possible approaches. This research however used an approach outlined by Owen and Rogers in
their famous work in 1999 and modified later in 2006. Focus of this approach is needs
assessment through seeking direct responses of concerned stakeholders of a program under
consideration. Selection of proper methodology is highly interactive with the established
objectives of a research exercise (Saif, 1987). The objectives for this study have been clarified in
chapter 1 in brief, and in chapter 2 in detail. Throughout the study, two main objectives remain
focused; development of a draft policy for management development and training of public
servants at institutional level of National Institute of Management (NIM) and secondly
recommendation of strategic shifts in management approaches of public sector to enhance the
efficiency level of service delivery to masses. This chapter is aimed at outlining the procedures
and approaches applied to conduct the enquiry and to achieve the stated objectives.
For policy development Owen and Rogers (1999) recommend the needs analysis as
foundation stone. The research is exploratory in nature and for needs assessment its progress is
two dimensional i.e. needs provided by the trainees of concerned training institute and needs
provided by the pubic sector figureheads who would supervise the trainees at their workplaces.
This approach employs a number of various data collection techniques that are qualitative in
nature. The case study method helped in nearing the focal points systematically and allowed
going deeper in the identified need issues.
2. Research Approach
The paradigm of this study suits with qualitative analysis and is chosen with a vivid influence of
four groups of philosophies or school of thoughts. A glimpse of their discussion is necessary
before proceeding further
2.1 Interpretive Anthropology
The interpretive school, led by anthropologists like Clifford Geertz, advocates use of fine grained
or thick descriptions of what is happening in a particular program and believes that only then our
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impulse of understanding the essence of some problem can proceed. It has a provision of
generalization of findings to higher levels where actions and effects are intertwined into
strategies be they implicit or even tacit. Moreover at policy formulation level it regards the
implications of actions and their proscriptive nature in terms of both rules and sanctions. This
school recommends the enquiry of a discipline to be data driven and prefer this approach over
theory driven analysis (Dick, 2000). It calls for proceeding on basis of empirical observation of
practices and records the things as they are and not under the influence of a pre structured
theoretical base. So the role of researcher is more like an interpretive anthropologist, contrary to
the structuralist approach that uses theory and cultural artifacts as indicators and explanatory
devices of human actions. According to Shwandt (1994), of same school, the investigation must
be attempting to find the true interpretations beneath the layers of complex apparent discussions.
Same author has further explained the analysis of human discourses as interpretive science
tracing the meaning and not the laws as in experimental sciences.
2.2 Radical Constructivism
The philosophy held by the torchbearers like Ernst Glasserfeld cited in Schwandt (2001)) of this
school believes in knowing something into the wider context of its application in a field of
practice. It rejects judging of a case while standing apart from the experience of its practical
application. In other words the knowledge is always embedded as an integral part of the
experiences of knower. It supposes the knowledge as an activity rather than a product. The work
of this school is more prominent in analysis of patterns of teaching or training and learning. It
gives interesting definitions to learning and imparting the learning where learning is process of
knowledge construction by experience and training and development pedagogy or teaching is
more a matter of facilitation of this process rather than the communication of the content
(Shwandt 2001).
2.3 Social Constructionism
The qualitative analysis usually relies on stocks of information from individual mind and
subsequent cognitive processes. The social construction school advocates the integration of the
extrinsic and subjectively shared meanings of concepts with individual meanings and knowledge
(Gergen, 2000). The approach of this school is to see the world as a historically situated
interchanges of social artifacts among people.
According to Schwandt (2001) and Gergen (2000), for a constructionist it is not
necessary to be anti realist. The interest of the matter is not the reality but the image constructed
by the reception of same information in a group with a common and shared purpose of
accumulation of knowledge (e.g. group of trainees in a session).
2.4 Intelligence of Feeling
The undercurrent of this philosophy is the recognition of a specific inner knowledge that mostly
remains inexpressible but plays vital role in directing individual actions. This concept was
refined by Robert Witkin (1974) and renamed as Intelligence of Feeling and according to him
represents reflexive component of knowledge accumulation. Polanyi (1983) augments this
discussion and refers to this clue of knowledge as being tacit and not expressible directly in a
discourse. This concept emphasized that any experiential learning that does not take into account
the stock of such untellable discourse is incomplete (Donmoyer, 2000). Same author argues that
teacher and student relationship is not necessarily like that of scientist and subject rather the
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knowledge accumulation is a shared activity and highly interactive in a learning set up. It
declares that learning is always a synthesis of shared experiences with both the trainer/teacher
and fellow learners.
2.5 The Case Study Approach
This research involves the analysis of inputs provided by the stakeholders of public sector
management training and development. It entails elaboration and construction/reconstruction of
training issues and is based on the interpretation of linear narratives. Researcher has to allow for
the induction of personal styles of changing constructions of discourses and integration of the
construction and interpretations evolved by the stakeholders as well. In such situation Robert
Stake (1995) recommends an approach that takes into account issues and not merely topics as to
drive the research effort to more realistic synthesis of situation. The book titled the art of case
study research by the same author defines the case study approach as the one that revolves
around the complexity and particularity of a unique situation and relies highly on interpretations
of related discourses to study the possible dimensions of situations within particular
circumstances. He further calls for a central but comprehensive research question that guide the
rest of the enquiry and same should be led by interpretation of consequent discourses and sub
questions. The question(s) may be modified as the case is explored and some new stocks of
information may even change the design of the enquiry. The altering definition of the case may
force modification and boundaries of the investigation as the inclusion of the new issues are
considered. Stake (1995) further considers the issues as conceptual structure and involvement of
those issues will set primary and secondary research questions. As the enquiry goes deeper, it
must be kept aligned with the complexity and contexuality of the case. Quoting the importance
of identification of the issues to guide the case study, stake writes:
..issues identification will draw the enquiry into vital problems of the case and will clue out the
complexity of human interaction while helping the researcher to expand on an instance and
analyze it in the light of long historical evidences. The issues are found to be the key units of
discussion in later phases of research/case study (Stake, 1995. pp16.)
In nutshell, case study research has a central place in qualitative research to conclude the
research endeavor with a workable solution adoptable at macro level. According to Stake (2000),
case study acts like a self and integrated system and proves more purposive. A great contribution
is made through this form of study if findings and suggested remedies are transferable to other
similar work set ups. The stock of discourses generated in course of investigation should also be
suitable to different set of audiences.
3. Framework and Methodology
Two phases of fundamental nature form the basic skeleton of the framework of this research.
Both are vivid and pronounced till this point over and again in previous chapters. Phase 1 is
based on needs assessment of management training programs for public sector executives of
Pakistan. Phase 2 is for development of draft of a policy at institutional level. The input for needs
assessment is provided by two investigation exercises i.e. investigation from trainees of public
sector training institute through focus group and investigation from public sector high ups
through semi structured questionnaires. Our adopted framework of Owen and Rogers suggest
that needs assessment from stakeholders must be integrated with a review of available best
practice literature. For development of policy elements, Drors optimal policy model based on
his work of 1973, 1978 and 1987 have been used as guideline.
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As an ethical responsibility of a researcher, all the participants of this research

investigation were made aware of the nature and purpose of study. The consent form printed on
letterhead of Institute of Management Studies, University of Peshawar, was administered well
before the actual arrival of participants for focus group discussion. The questions designed to
guide discussion of focus group were also disseminated in advance with the invitation and
consent letter.
The collected data were analyzed using popular qualitative approach of triangulation, i.e.
triangulation of different sources of data which in our case were needs assessment through focus
group and semi structured interviews and review of research for best and ideal practices. There
was no numerical interpretation required in adopted case study approach except the percentage
and frequency analysis of the number of responses. That needed the coding of information and
responses received from the subject respondents. The need issues were first identified and then
responses were analyzed according to two categories of either agreements or disagreements to
include an issue in our list of needs of management training and development. The coding
specifically helped in looking for similarities and differences among collected data to use that as
vote for particular need issue.
Fig.1 Research Framework

Review of Best Practices
Focus Group
interviews
Need Assessment
Semi Structured interviews
Triangulation
Draft Policy Development
4. Overview and Details of Needs Assessment

As discussed earlier major part of phase 1 is concerned with needs assessment from two main
sources i.e. focus group discussion with public servants who are receiving training in NIM and
heads of the departments of public sector whose comments are vital as they are at helm of the
public affairs and lead the team of executives for whom the training is being designed and
recommendations are sought. The participants of both groups were representing 22 important
government departments. According to local classification of superior government services all of
these departments are major role players in influencing public participation, financial prosperity,
civic and health facilities and pubic financial aspect directly. The aim was to develop a set of
desired management training outcomes and the actual state of affairs in this training at NIMs
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level. Needs of target management training program are then found situated at intersection of
earlier two desired and actual outcomes. Symbolically
N=DA
Where N denoted target needs of a management training program, D is for desired state options
and A is for actual state options.
The goal of needs assessment was accomplished through the use of four qualitative steps.
In first step six focus groups interviews were conducted with NIM trainees where each group
pertained to one NIM campus in Karachi, Quetta, and Peshawar. As the sessions of advance
courses were going on in the time of data collection, each group easily comprised ten trainees.
The selection of the sampled trainees was purposive and almost all the participants had already
attended at least one course prior to the present one. The focus of the questions was to know the
extent to which the current or previous training programs prove successful to meet the
expectations of the sampled trainees. In second step, twenty heads of public departments (locally
called Secretaries) were contacted to obtain their views through semi structured interviews,
about the necessary elements and considerations in any program of management training and
development. The purpose of this step was to inform the enquiry about the critical analysis of the
current training programs for public managers in NIM by the supervisors of potential trainees
and to know about suggested additions in any proposed program of same kind. Third step is of
trawl of international literature for fine grained synthesis by different authors to suggest best
practices in management training and development at institutional level. This step helped in
establishing benchmarks for an ideal training material and delivery. Fourth step was to integrate
and combine the obtained data and reflect their combined effect in establishing the need issues
first and then highlighting key needs of both potential trainees and needs of those who are to
utilize the trained nuances out of the trained human capital for the benefit of the workplace and
its beneficiaries. Details of the discussed steps are given below.
5. Step 1. Focus Group Discussion
Focus group sessions of this research were an interesting exercise to record perceptions and
observe attitude of our pubic sector executives about the current level of competence of
management training and development programs in NIM.
5.1 Perspectives on Focus Group
A number of definitions for focus group discussions/interviews are found in literature. Almost all
have common essence. Some fundamental perspectives include Wenger (1998) and Krueger &
Casey (2000). According to Wenger (1998), focus group consists of around 7-10 individuals
having common interests in a social issue and have frequent interaction with the issue of
consideration having got sufficiently socialized with concerned environment to develop their
own insights about the focused issues. Krueger & Casey (2000) argued that focus group
individuals should have a concern about a focused issue and should possess thrust to improve on
the current state of affairs. They also discussed role of moderator to be able to lead the discussion
of focus group to generate useful information and to a purposeful conclusion. Boonying (2007)
maintained that focus group individuals must be unfamiliar with each other in the sense that they
should not represent a pressure group nor should talk under a political influence of interpersonal
dynamics. The session should not last for more than two hours while 1 to 1-1/2 hours are ideal
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time. The moderators participation into talk should have a nurturing effect on the discussion and
participants should not feel pressurized to come to certain point of view, solution, vote or
consensus (Boonying, 2007).
Krueger and Casey (2000) recommend that focus group discussions should be conducted
more than one time for the same focused issue but provided no ideal frequency. Repeated
discussion would help in judging the right trends and patterns of perceptions and attitudes of
participants about the issue. Great care is necessary at this stage in recording and coding of
information for facts are prone to distortion. Level of Resources must be high enough to timely
record, lead and analyze discussion.
5.2 Advantages
Focus group is a popular method of qualitative data collection. Various researchers have
associated number of advantages of using this particular approach. Krueger (1998) is of the view
that focus group is vital in exploratory and preliminary nature investigation. Where researcher
has still to develop a base of field knowledge for further enquiries. Race et al. (1994) regards the
importance of focus group when a program is to be evaluated as a set of various activities and a
further development of the same program is sought. They further commented that this approach
proved vital in defining new research avenues about already investigated areas. Morgan (1988)
maintains that focus group discussions can also be used as supplemental instruments to augment
a scientific enquiry where other data collection methods have central place.
Boonying (2007) counted few more advantages of focus groups like it is low cost and
expedites results. The group setting proves as a system of check and balance and thus chances of
getting biased or extreme views are reduced. The facilitator openly interacts with participants
and encourages interaction among them and thus attempts to explore a number of unexpected
issues.
5.3 Limitations
Apart from its vivid importance there are certain limitations as pointed out in work of different
authors. Morgan (1988) shows concerns about the facilitators bias that often manipulates the
participants and drive the discussion to his/her own choice of conclusions. It greatly hampers the
reliability and validity of results obtained. The comments of participants should be taken as
contextual as possible and unnecessary generalizations may distort the findings. Boonying
(2007) criticizes the method for being purely qualitative and having no quantitative contributions
that can help in generalization of results on a vast majority of population. Besides, in a group
discussion, talk is normally dominated by few who are vocal and their opinions emerged
exertive, sidetracking others ones.
5.4 Participants of Discussion
The individuals that were invited for focus group session of this research were all middle level
managers of public sector of Pakistan. Locally these services are called central superior services
and consists of an array of different groups of public sector service portfolios like Foreign
Services, District Management Group, Police Servicesetc (to name few). All were at their late
thirties or early forties and consisting of ten members each from three campuses of National
Institute of Management (NIM), Pakistan. All these participants were invited through a letter of
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invitation on letterhead of institute of management studies, university of Peshawar and can be

seen in annexure.
5.5 Mode of Data Collection
The discussion of the focus group participants was audio taped as is in most of the cases of
qualitative data collection from group discussions. Consequently data collection and recording
process during the discussion did not get noticed and could not become a source of distortion of
observations. Participants openly commented on current status of management training and
elements like knowledge sharing among trainees, transfer design dimension of training, odds of
workplaces and particularly compare their expectations from a management training and
development program and the actual perceived outcomes. The findings synthesized out of this
focus group discussion greatly helped to inform the thesis with potential elements of training
programs that need to be reviewed and offer a room for improvement. Moreover following three
aspects are vital outcomes of this research exercise:
Knowing general range of perceptions of NIM Trainees about currently offered modules
of management training and development (details are in chapter 4)
Making a precise judgment of the differences of opinions among various levels of pubic
managers and differences depending on their departmental affiliations.
Getting a deeper insight about the perceptions of these trainees regarding the application of learnt
concepts back on their workplaces and those workplace elements that inhibit the transfer of
knowledge
5.6 Analysis of the Data
The audio taped recording was listened carefully and repeatedly. The next stage was of
transcription. The statements were written down indiscriminately and searched for the key
elements or needs issues that would serve basis for identification of major actual needs of a
training program. Analysis by induction that is one of the standard qualitative data reduction
technique as proposed by various researchers, was applied to the written statements. For every
group of NIM trainees two sets of needs were generated. One is of actual major outcomes and
other is desired by the trainees. The suggested procedures of Denzin & Lincoln (2005) and Miles
& Hubermain (1994) were used for data reduction while the statements pointing to the similar
actual or desired outcomes and needs were sorted, tabulated and color coded through the
extensive use of Microsoft Excel. Analysis of the same color statements helped in identification
of similarities, difference and patterns in recorded data. This procedure fetched the research to
closer looks on criteria and standard to establish the major needs issues, actual need and desired
outcomes more clearly.
Once the categories were established again all the statements were analyzed for positive
or negative counts on the issues. Some statements were neutral and others look to be suggesting
something instead of merely declaring something good or bad. An arbitrary scale was developed
to assign weight age to each identified major need element. The more an element of major need
represents the identified needs issues the higher will be its corresponding weight age. According
to the scale, a strong weight is one that represents more than 35 % of need issues, a moderate one
is 20-35 % and weak is less than 20 %. By this way the comments pertaining to each need
elements were conveniently categorized as strong, moderate or weak. During this first step of
focus group and consequent analysis of data, there was an opportunity to develop and design the
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questions for next step i.e. semi structured interviews from figureheads of various public sector
portfolios.
6 Step 2: Perspectives on Semi Structured Interviews
For studies based on knowledge acquisition, the method of personal interview and particularly
the semi structured one are ideal approach (Flick, 1998). Semi structured interviews provide an
opportunity to simultaneously pursue a highly structured agenda with a provision to keep
clarifying emerging issues and confusions. In this research the anticipated questions for
interviews were sent in advance to the participants with consent letter. Boonying (2007)
advocates the practice of taking the participants into confidence about the interview well before
the actual conduction. An hour of such interview and discussion is enough time with
approximately 10-15 questions. This technique also allows for tap recording of the discussion
and later transcription of the recorded data provides protocol and categorized meanings to the
answers of the questions.
6.1 Overview of Participants
The participants of the semi structured interviews were public sector figureheads of various
departments pertaining to all four provinces of Pakistan. They were secretaries of various
government departments who are locally at one of highest ranks of public service hierarchy.
Each of them was contacted personally through letter of Director of Institute of Management
Studies (see annexure). The consent letter accompanied with interview questions was sent
immediately after completion of first step i.e. focus group. The questions that are discussed in
detail in chapter 5 were focused to investigate the views of these heads about the prospects of a
training program for management development of middle level public managers of Pakistan,
with a special reference to training programs being run in NIM.
6.2 Collection of Data
The discussion was audio taped and later transcribed as a grid. Language used for discussion was
a mix of both English and Urdu as is the case of most of educated class in Pakistan who use
English words and phrases extensively in Urdu conversation. The grid as explained in chapter 5
encompassed the tabulated responses to asked question. These were noted on a spreadsheet for
ease of analysis and categorization
6.3 Analysis
The respondents for this part of data collection comprised of senior officials who are at
supervisory roles of those executives who are or would be the NIM trainees at least once in their
career and for them this training is mandatory for promotion. Moreover the said participants
also had at least one opportunity to go through the training of management development in pre
service sessions. Their professional discussion and dialect made the analysis easy with the use of
color coding and labeling and looking for common words, statements and issues in discussion
and putting them into same category. The principles of distinctive features of Denzin & Lincoln
(2005) helped in componential analysis of recorded statements.
7 Step 3: Purposive Review of Research for Best Practices
This step was another round of going through available international and national literature on
management training and development. This time it was about the identification of best practices
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that either identified in a real set up or proposed by researchers after rigorous research efforts.
Once again the international literature was trawled for the work of Molander (1986), Wexley &
Baldwin (1986), Thomson et al. (1997), Mumford (1987), Storey (1989), Lees (1992), Baldwin
& Padgett (1994), Mumford (1997), Jansen & Van der Velde (2001), OConnor & Mangan
(2004), Espedal (2005), Bhiwajee (2007), Boonying (2007) and Baharim (2008). This purposive
search of the literature, specifically for identification of what is regarded, found or suggested as
best practice elements for a management training and development with a special reference to
public sector entities and executives. The internet based search engines and online access to
books, research journals and other write ups were helpful in this process. Local literature was
though very limited but made available after efforts. The official library of three training
institutes i.e. NIM, PARD (Pakistan academy for rural development) and PPSA (Pakistan
Provincial Services Academy) served as rich resource for local literature on public sector
management training and development. Work of Saif (1987), Islam (1990), Jones (1994, 1997),
Mishra (1997),Hameed (1999), Hashim (2001), Inayatuallh (2004), Iqbal (2004) and Hussain
(2008) were found suggesting a myriad of best practice options in local work set up. Context
Summaries of each mentioned work were prepared and best practice options were sorted, color
coded and categorized according to the type of literature i.e. national and international.
8. Determination of the Net Needs for a Proposed Management Training Program
As a final step the problem now was to work out the intended needs of the management training
for the public sector of Pakistan which is to be proposed at the end of this thesis as final draft of
policy statement. A principal given by Owen and Rogers (2006) suggests that the desired state of
an intended program always lies at the intersection of findings of a number of qualitative
treatments/approaches about that program. In the case of this thesis the needs (N) that are to be
integrated in a proposed training program will lie at the intersection of the desired needs (D) and
actual state (A) of the current training programs.
N = D A or D - A
Extracting the required needs from the essence of three approaches i.e. focus group, interviews
and research review there was then a need of triangulation.
Through the use of spreadsheet and color coding of similar issues related to training
needs, the outcomes of all three approaches were compared, analyzed and combined for a final
set of desired elements of a public sector management training program for NIM-Pakistan. Again
the data reduction techniques of Denzin & Lincoln (2005) helped to generate these needs that
had a reflection of more than one qualitative treatments of data collection.
According to initial enunciation of locating the net needs at the intersection of desired
and actual state, now same principal has to be applied at the policy aspect of the needs
assessment as the efforts of this research are finally focused at producing a draft management
training and development policy for public sector. The elements to be included in policy
statements were mostly found in data collected from semi structured interviews and review of
research for best practices of management training. Now, the policy needs N(P), according to
this formula, were equal to the intersection of actual policy elements that were already applied
to the program of training in NIM i.e. A(P) and desired policy elements D(P) obtained from
synthesis of interviews of public figureheads and best practice reviews.
N (P) = D (P) A (P)
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9. Phase 2: Developing a Policy Statement

The needs elements worked out in the first phase were used in this phase for establishing policy
elements/needs for a management training and development program relevant to public
workplace needs and challenges. For this purpose the optimal model of Drors 1973 and 1987
work were adopted as a framework. Though this model detailed around 18 interrelated steps and
measures this thesis could only make good use of four vital and independent steps out of them.
These four steps have been discussed in chapter 2 in detail.
Apart from Drors contribution, Caldwell (2006) presented another perspective on policy
making elements, also discussed in chapter 2. His work uncovered nine elements of resource
allocation that are mandatory for policy making. In these nine elements some are of preliminary
nature e.g. power, finance, material and human capital. Some are of intermediate level e.g.
technology, knowledge and time. Some are important for the finale and feedback aspect e.g.
information and assessment. All of nine elements were integrated with adopted phases of Drors
model as a rationale to recommend resource base for adopting of proposed policy for
management training in public sector. Now the adopted phases of Drors optimal model became:
1. Working for allocation of certain resource policies
2. Evaluating each items potential costs and benefits using reliable measures.
3. Choosing the best and workable alternatives with provided resource base
A technologically state of the art feedback and follow up system
10 .Triangulation: As Means of Validity
The term triangulation is derived from the name of geometric shape i.e. triangle which in
research world indicates the use of three distinct data collection and analysis techniques (Patton,
1987). For a final result and recommendations the outcomes of all three techniques are
combined. The method is more common in qualitative research. In this research, the undercurrent
of using three distinct techniques in phase 1 is the same approach i.e. Triangulation. Combining
the obtained results helped in concrete choices in policy formulation i.e. phase 2.
For future research avenues, the research is expected to serve a good torchbearer. The policy
guidelines that are synthesized from findings of this research may be validated through further
interviews or even focus groups of local and international experts in public sector management
training and development, seasoned civil servants and public policy analysts.
11. Summary
This paper detailed the methodological framework and applied approaches of data collection and
analysis used for a proposed study. The rationale behind using specific approaches was given
with literature support. Two phases are of vital importance i.e. needs assessment and drafting
policy steps for training and development of management executives of public sector of Pakistan.
The needs assessment is done using three distinct techniques of qualitative data collection i.e.
focus group, experts interviews and review of research for best practices in training. Focus group
respondents are middle level public managers who will be promoted on basis of performance
ratios of training in National Institute of Management (NIM). Interviews are semi structured and
will be taken from secretary level public managers who locally served as Heads of public
sector entities. The research review is historical, national and international to find statements
pertaining to suggested best practices for management training and development. Triangulation
is next step to finally approach the policy development phase of this research. For that phase the
optimal model of Dror (1987) will be used as benchmark.
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12. Reference
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on Motivation to Transfer Management Training: Case Study of Libyan Oil Industry.
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Baharim, S. B. (2008). The Influence of Knowledge Sharing on Motivation to Transfer
Training: A Malaysian Public Sector Context (Unpublished Doctoral
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Management, Faculty of Business and Law,
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University, Melbourne Australia.
Boonying, V. (2007). Using Proactive Evaluation to Develop a Policy for Public Sector
Training Programs in Emotional Intelligence in Thailand (Unpublished Doctoral
Dissertation). School of Education, Faculty of Arts, Education, and Human Development,
Victoria University, Melbourne Australia.
Caldwell, B.J., (2006), Re-imagining Educational Leadership, London: Falmer Press.
Denzin, Norman K. & Lincoln, Yvonne S., ( 2005), Handbook of Qualitative
Research, 3rd Edition, London: Sage.
Dick, b. (2000). Data driven action research, retrieved march 28, 2010 from
www.scu.edu.au/schools/gcm/ar/arp/datadriv.htm
Donmoyer, R. (2000). Generalisability and the single-case study. In R. Gomm, M.
Hammersley & P. Foster (Eds.), Case Study Method. London: Sage publications.
Dror, Y., (1987), Advising Rulers, in N.W. Plowden (Ed.), Advising the Ruler, Oxford:
Blackwell, pp. 185-215.
Flick, U., (1998), An Introduction to Qualitative Research, London: Sage.
Gergen, M. M., & Gergen, K. J. (2000). Qualitative inquiry: Tensions and
Transformations. In N. K. Denzin & Y. S. Lincoln (Eds.), Handbook of Qualitative
Research (2nd ed., pp. 1025- 1046). London: Sage Publications.
Krueger, Richard A. & Casey, Mary Anne, (2000), Focus Groups. A Practical Guide for
Applied Research, 3rd Edition, Thousand Oaks, CA: Sage
Miles, M. B. & Huberman, M.A., (1994), Qualitative Data Analysis: An Expanded
Sourcebook, London: Sage.
Morgan, D.L., 1988, Focus groups as qualitative research, London: Sage
Owen, J.M., with Rogers, P. (1999). Program Evaluation: Forms and Approaches, 2nd
Edition. London: Sage.
Owen, J. M. (2006). Program Evaluation: Forms and Approaches, 3rd Edition. Crows
Nest, NSW: Allen & Unwin.
Patton, M.Q., (1987), How to Use Qualitative Methods in Evaluation, Newbury Park,
CA: Sage.
Polanyi, M. (1983). Personal Knowledge: Towards a Post-Critical Philosophy. Chicago:
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Saif, M. I. (1987). The Basics of Research Process. Sultan Printing Press, Dera Ismail
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Stake, R. E. (2000). The Case Study Method in Social Inquiry. In R. Gomm, M.

Hammersley & P. Foster (Eds.), Case Study Method (pp. 19-26). London: Sage.
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Microfinance Industry in Pakistan Challenges and Opportunities

Dr. Rehman Gul Gilal
Assistant Professor
Department of Business Administration,
Shah Abdul Latif University, Khairpur, Pakistan
Muhammad Masihullah Jatoi
Assistant Professor
(Corresponding author)
Rahim Bux Soomro
Lecturer
Shah Abdul Latif University, Pakistan.
Abstract
This research paper presents the overview of microfinance industry in Pakistan. The paper traces
the development of microfinance sector in country, its current status and future prospects. Based
on experts interviews, observations and literature review, paper outlines the key challenges and
opportunities microfinance industry faces today in Pakistan. The microfinance faces enormous
challenges such as financial and operational sustainability issues, outreach, institutional capacity,
innovation in microfinance institutes and law and order situation of country. In addition,
microfinance sector in country also has enormous opportunities, such as huge untapped market,
favorable political and legal environment and technological developments are few to name.
Finally the conclusions are drawn in the light of discussions in this research paper.
Keywords: Pakistan, Microfinance industry, Challenges, Opportunities
1. Introduction
Microfinance is one of those ideas that have brought the ray of hope and revolution in the lives
of poor households. Microfinance promises to fight against poverty by providing financial access
to poor households who have long been excluded from formal banking system due to their
inability to provide collateral. The microfinance revolution started in Bangladesh, when
Professor Yunus, an economics professor at University of Chittagong, started making small loans
to local villagers during 1970s, on the assumption that poor customers will benefit and repay
their loans reliably. Professor Yunus was right and eventually his project becomes successful.
Later Dr. Yunus established Grameen Bank, since then microfinance has become a success story
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and varieties of microfinance institutes serve millions of poor households across the world. In the
initial years the focus of microfinance institutes was on providing micro credit to poor women
entrepreneurs based on group lending, where every member of a group guaranteed the repayment
of all group members. However in the early 1990s most microfinance institutes started providing
range of financial products to the poor, including, saving, insurance, and money transfers. Over
the years microfinance has achieved astonishing results and demonstrated that poor people are
viable customers.
2. Microfinance Sector in Pakistan
The success of Microfinance Institutes in helping poor has attracted a worldwide interest. Most
government and other private institutes are replicating the Grameen model in their respective
countries to fight against poverty. Pakistan is also not an exception in doing so. Khushhali Bank
(KB) was the first specialized microfinance bank established in Pakistan, in year 2000, in
Government sector. Over the years KB has shown its potential to fight against poverty by
providing financial excess to poor and the marginalized segment of population in country. Today
in Pakistan, over forty microfinance institutes including microfinance banks (Table1 shows the
details of microfinance banks in Pakistan), specialized microfinance institutes and non
governmental organizations are engaged in providing microfinance services to poor and
marginalized groups.
Table 1 Microfinance Banks in Pakistan
Year of
Target market
Establishment
1
Khushhali Bank Limited
2000
Economically active entrepreneurs
including women; operate in whole
Pakistan
2
First Microfinance Bank Limited
2001
Pakistan
3
Network Microfinance Bank
2004
including women; operate only in
Karachi, Pakistan
4
Rozgar Microfinance Bank
2005
including women; operate only in
Karachi, Pakistan
5
Tameer Microfinance Bank
2005
Low income self-employed micro
entrepreneurs in whole Pakistan
6
Pak Oman Microfinance Bank
2006
micro entrepreneurs including women in
whole Pakistan
7
Kashaf
Microfinance
Bank
2008
Limited
Pakistan
Source: Authors own arrangement.
No.
Name of Institute
In March 2008, the outreach of microfinance sector in Pakistan was approximately 1.6 million
active borrowers and 1.7 million active savers, with a gross loan portfolio of Rs, 16.5 billion and
4.2 billion in saving respectively. Pakistans microfinance sector was amongst the fastest
growing globally, with an expansion of nearly 47 percent during 2007 (Aban Haq 2008). By the
end of 2008 sectors outreach stood at 1.7 million active borrowers (Meher Shah 2009). The three
largest microcredit providers in Pakistan are: National Rural Support Program, Khushhali Bank
Limited (KBL) and Kashaf Foundation with market shares of 26.3%, 20.1% and 17.2%
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respectively (PMN 2009). The table 2 shows the outreach and market share of five largest micro
credit providers in country.
Table 2 Largest providers of microcredit in Pakistan (Active Borrowers)
S.no.
Microfinance Service
Provider
Active Borrowers
31 March 2009
National Rural Support Program
459,801
Market share
% of Active
Borrowers
26.3%
Khushhali Bank Limited
351,966
20.1%
Kashaf Microfinance Bank Limited
300,698
17.2%
First Microfinance Bank Limited
197,695
11.3%
Punjab Rural Support Program
78,869
4.5%
Source: Micro Watch, Pakistan microfinance Network (PMN) Jan-Mar. 2009.
3. Challenges and Opportunities in Pakistan Microfinance Industry

Microfinance has shown its ability to assist the poor to make significant strides towards reducing
their vulnerability, improving their livelihoods, paying for basic health care and financing their
childrens education (Littlefield et al). However there is no easy riding for microfinance service
providers, there are many challenges and opportunities microfinance institutes are facing today.
In this section based on the expert interviews, observation and literature review, major
challenges and opportunities faced by microfinance institutes in Pakistan are discussed.
3.1 Challenges for Microfinance in Pakistan
The microfinance sector of Pakistan is one of rapidly growing sector in world, hence creating lot
of challenges for the operators. In the following section major challenges faced by microfinance
institutes in Pakistan are presented.
3.1.1 Financial sustainability

Financial sustainability of microfinance provider refers to the ability of the organization to cover
both the costs of operation and costs of capital from its revenues [5]. Torre, M. L, et al, 2006
distinguish between operational and fully financial self sufficiency. He explains operational self
sufficiency as where the operating income covers operating costs, the costs of inflation, loan loss
provisions and currency loss provisions. He explains fully self sufficiency as, where operating
income is enough to cover not only operating costs, inflation costs and provisions, but also
financing costs, which include debt costs and adjusted cost of capital.
The biggest challenge of most microfinance institutes in Pakistan is to build a viable and
sustainable financial institute which allocate resources for the poor and become part of larger
financial system, but unfortunately very few microfinance institutes are able to achieve this most
important goal. The business models of most microfinance institutes are unsustainable, mostly
because they heavily rely on government and donor subsidies and in many cases their total
lending is based on subsidies and loan. Most microfinance institutes in Pakistan do not offer
saving products and worse is that the interests rate charged by these institutes are not enough to
cover their operational costs, consequently they rely on donor and soft loans. The table 3 and 4
shows the operational and financial self sufficiency statistics of selected microfinance banks of
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Pakistan. Only the First Microfinance Bank seems to be the sustainable. (Note that the
operational and self sufficiency ratios should be equal to or in excess of 100).
Microfinance Institute
Khushhali Bank
First microfinance Bank
Sustainability ratios of Microfinance Banks in Pakistan

Table 3 Operational self sufficiency (OSS)
Year of
Establis 2000 2001 2002 2003 2004
2005
hment
2000
138% 179
79% 62%
53%
72%
%
2001
116% 104 105%
94%
%
2004
58%
2006
2007
77%
80%
109%
90%
Network microfinance
76%
Bank
Rozgar microfinance Bank
2005
70%
62%
Tameer microfinance Bank
2005
53%
Pak Oman microfinance
2006
80%
Bank
Source: Pakistan Microfinance Network & Asian Development Bank Project completion report 2008
Microfinance Institute
Table 4 Financial Self Sufficiency (FSS)

Year of
Establis 2000 2001 2002 2003 2004
hment
2000
16%
98%
55% 46%
39%
2001
77%
82%
2004
2005
2006
46%
49%
47%
60%
2007
Khushhali Bank
51%
57%
58%
First microfinance Bank
65%
87%
80%
Network microfinance
42%
63%
39%
Bank
Rozgar microfinance Bank
2005
47%
46%
41%
Tameer microfinance Bank
2005
53%
43%
Pak Oman microfinance
2006
80%
43%
Bank
Source: Pakistan Microfinance Network and Khushhali Bank & Asian Development Bank Project completion
report 2008
3.1.2 Reach out the poor

According to estimates more than 27 million people live below $ 1 dollar a day and 116 million
live below $2 dollar a day in Pakistan, where as only 2 percent of poor in country have access to
microfinance services (State Bank of Pakistan). Considering the above dismal statistics there is
huge challenge as well opportunity for microfinance institutes in Pakistan to reach out poor and
marginalized segment of population, these people have long been excluded from formal banking
system. Another big challenge for microfinance institutes in Pakistan is the difficulty in reaching
poor women, particularly because of cultural and religious barriers it is quite difficult to access
them. By the June 2008 the female outreach of microfinance sector stood at 49 percent of the
total outreach which is far less from the neighboring South Asian countries (Aban Haq 2008).
3.1.3 Institutional Capacity
Microfinance sector in Pakistan is relatively young as compared to its counterparts in
neighboring South Asian countries like Bangladesh and India, therefore still in the phase of
development. Many microfinance institutes have transformed or in the process of transforming
as a full fledged microfinance bank. One such example is Kashaf Foundation which is now
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transformed as full fledged microfinance bank. Considering that, microfinance sector in Pakistan
is still in the development phase therefore, many institutes still lack institutional capacity to
exploit the huge untapped market. Worse is that, some microfinance institutes even struggle to
satisfy their existing customer base, mainly because these institutes still offer limited product
mix to their customers. To satisfy existing customers and increase outreach microfinance
institutes should develop market oriented products, increase their branch network and hire
qualified and trained professionals.
3.1.4 Product Innovation

Since its inception in Pakistan, microfinance industry is offering limited range of products and
service to its customers. Worse is that microfinance institutes do not undertake research, or take
customer input before developing new financial product or services. They tend to follow market
leader (leader may be global one or may be in other country or may be any regional one etc.).
Virtually there is no product innovation in microfinance industry of Pakistan. As a consequence
customers of microfinance institutes believe that microfinance products and services do not help
them and that they are negatively affected. Considering all this, product innovation has become a
need of hour for microfinance industry in Pakistan.
3.1.5 Customer Retention
As compared to other organizations acquiring new customers in microfinance institutes is
expensive and increase institutional costs. According to research microfinance institutes typically
break even on a customer only after the fourth and fifth loan cycle (Brand, M. and J. Gerschic
2000). Considering the importance of retaining customers in microfinance institutes, most
microfinance institutes in Pakistan are facing a big challenge to retain their existing customers
for longer period. Barely few customers are being graduated from program and qualify for higher
loans; mostly, customers leave after first or second loan cycle. Main reasons of customer dropout
in microfinance institutes of Pakistan are a) organizational structure and performance b)
customers own characteristics and c) industry structure (Gul G.R. 2008). According to Churchill
(2000) Microfinance institutes should work on ways to improve their customer retention rate
mainly for two reasons. First, customer retention provides a blunt indicator of customer
satisfaction, and second, it is important in forecasting the over all health of the microfinance
institutes.
3.1.5 Customer awareness
Level of customer awareness is a major challenge microfinance industry is facing today all
around world including Pakistan. The target market of microfinance institutes are poor men and
women, living near poverty line, mostly in rural or slums of urban areas. Majority of these
people are uneducated, and lack clear understanding about features, characteristics and proper
usage of financial products and services. It has been observed that because of illiteracy and lack
of basic understanding about the financial products, some of customers are perplexed and others
misuse the funds obtained from the microfinance institutes. As a result these customers fail to
repay loan on schedule which leads to loan delinquency and finally customer dropout, which is
ultimately a challenge and threat for microfinance industry. Therefore microfinance institute
should undertake task to aware and educate their customer before disbursing loan, which will
ultimately beneficial for both customers and microfinance institutes.
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3.1.6 Law and Order situation

Political instability and adverse law and order situation pose a major challenge to the smooth
operations and sustainability of microfinance institutes. Unfortunately for the last eight years and
so political instability and adverse law and order situation has hampered the growth of
microfinance institutes in troubled areas of country. According to the recent issue of Micro
Watch, (a quarterly update on microfinance outreach in Pakistan) forty four branches of various
microfinance institutes were closed down in Khyber Pakhtoon Khua province of country due to
adverse law and order situation. The major plunge in branches were seen in Malakand and
Mardan Districts, where National Rural Support Program (NRSP) was forced to close down 19
and 10 branches respectively due to increase in Talabanization in these areas (PMN 2009). Such
adverse situation clearly does not help the young and developing microfinance industry in
country to flourish.
3.2 Opportunities for Microfinance industry in Pakistan
Apart from the challenges which can be translated into opportunities, there are substantial
opportunities for microfinance industry in Pakistan, on which microfinance institutes can
capitalize and get advantage over their rival institutes. Some of these opportunities are presented
below.
3.2.1 To maximize outreach

According to rough estimates more than 90 percent microfinance market in Pakistan is untapped.
Last year the sectors out reach stood 1.7 million customers where as The Government of
Pakistan along with related players has developed five year growth strategy for microfinance
industry. The growth plan set a target outreach of 3 million by 2010 and 10 million by 2015
(Meher Shah 2009). Considering the fact, there is a huge opportunity for microfinance institutes
to reach out the untapped customers and increase their market share. Poor women entrepreneurs
also represent a lucrative market. Experience in Bangladesh and India has shown that women
entrepreneurs are better customers as compared to their male counterparts. Women are usually
more diligent and hardworking, and their loan repayment rate is also high as compared to men.
These characteristics of poor women entrepreneurs make them a lucrative market for
microfinance institutes in Pakistan.
3.2.2 Policy environment
Pakistan is one of those countries in the world which has adopted microfinance friendly rules and
regulations. The government of Pakistan and provincial governments of the country have
adopted positive and helping attitude towards the microfinance industry. Several steps have been
taken to provide favorable environment for the growing microfinance industry. One such step is
the five year tax exemption plan for microfinance banks in country. In Finance bill 2007, the five
year tax exemption plan was approved for microfinance banks started from 2007 to 2012 (PMN
2008). This tax exemption will help microfinance banks to accumulate earnings and plow them
back for the growth of institutes. In addition The State Bank of Pakistan is the regulating body of
microfinance banks in the country. In the role of regulating body State Bank has always
supported and allocated the required financial resource for microfinance institutes in country.
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3.2.3 Technological developments

In Pakistan there is great opportunity for microfinance industry to take advantage of fast
development of communication and mobile industry. According to Pakistan Telecommunication
Authority (PTA) there are over 93 million mobile subscribers as of May 2009. By taking
advantage of growth in mobile industry microfinance institutes can better and cost effectively
reach and serve their customers.
4. Conclusions
The paper has reviewed the current status of microfinance industry in Pakistan. In addition, the
paper has also outlined the most immediate and distant challenges microfinance sector faces in
country. The paper draws the conclusion that Pakistan microfinance industry is still in early
phase of development; therefore for un-halted growth microfinance sector requires not only
continuous support from government and regulatory bodies but also need necessary funding from
bilateral and multilateral donor agencies. In addition, the management of microfinance should
adopt a proactive strategy, so that challenges can be turned into opportunities. The microfinance
institutes should also stream line their operations and processes so that they can increase their
outreach and serve existing customers in a most cost effective way. Above all, the innovations in
all the areas will be the ultimate key for the success of microfinance sector in Pakistan.
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http://www.pta.gov.pk/index.php. 2009, 06, 28.10:45 pm
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IMPACT OF STAFF TRAINING ON CUSTOMER SATISFICATION USING

SERVQUAL MODEL: A CASE STUDY OF RETAIL BANKS OF PAKISTAN
Rahim Bux Soomro
Lecturer
Assistant Professor
Assistant Professor
Abstract
This thesis examined the impact of staff training on customers satisfaction, mainly transfer of
training. In this study different branches of 09 retail banks were selected based on their location
and willingness to cooperate in different cities of the said region. Non-probability sampling
technique was adopted. A total of 180 respondents were contacted from different areas of
Interior Sindh for filling questionnaires. Six hypotheses were tested by Correspondence Analysis
technique by using SPSS V: 14 and found rejected. Results showed that whatever numbers of
trainings delivered to staff members but level of customers satisfaction had remained same.
Means it has been learnt from this study that there was no proper transfer of training. Hence it
was established that by only providing ever-increasing number of training to staff members had
no impact on customer satisfaction with regard to reliabilty, empathy ,responsiveness, assurnace,
tangibility and over-all customer satisfication.
Key Words: SERVQUAL mode, Customer Satisfaction, Staff Training, Reliability,
Responsiveness, Tangibles, Empathy, Assurance.
1. Introduction
Service quality is considered as a key factor in customer satisfaction with his or her bank at the
retail level. Further in retail banks, customers have unique needs and the exchange of
transactions between these customers and bank employees take place at the branch level and
within any service company, the main features that customers consider when determining the
quality are the service, rapid response, delivery times and cost. Berry (1985) and Zeithaml and
Bitner (1996) specified that service quality consists of five dimensions: tangibles (appearance of
physical facilities, equipment, personnel and written materials), reliability (ability to perform the
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promised service dependably and accurately), responsiveness (willingness to help customers and
provide prompt service), assurance (knowledge and courtesy of employees and their ability to
inspire trust and confidence), and empathy (caring and individual attention the firm provides its
customers).
Akin to the cost of producing poor quality products, the cost of delivering poor quality service
includes the costs associated with redoing the service, compensating for poor service, loss of
customers, and negative word of mouth (Bitner et al., 1994). Bowen and Schneider (1988)
differed services from goods in three important ways: they are intangible, they tend to be
produced and consumed simultaneously, and they tend to involve the consumer in their
production and delivery. The immediate delivery and receipt of services in the face-to-face in
service sector brings employees and customers close together and hence distorting the boundary
between the two groups (Parkington & Schneider, 1979).
Though all practices of personnel management are implied in the development of these
resources, training is the central activity in order to have qualified, flexible and well-prepared
employees (Bartel, 1994; MacDuffie & Kochan, 1995; Raghuram, 1994). Training, in this
regard, is seen as a very much useful among all human resource management practices for
coping with ever increasing expectations of various facets of customers in retail banks.
Noe (2009) states that Training is a planned effort by a company to facilitate employees
learning of job-related capabilities. These competencies include knowledge, skill, or behaviors
that are critical for successful job performance.
However, companies maintain an ambiguous position regarding investment in training. They
generally agree to take training as a vital way to improve workers productivity, a present
demand for all companies. But, in practice, they usually face this challenge with cost
suppression, including those costs allocated to training.
Therefore radical objective of this study is to learning empirically the effects of staff training on
customer satisfaction in order to encourage organizations to invest more and more in staff
trainings.
2. Objectives of the study
Banking sector in Pakistan has been rising meaningfully despite its social and economic
problems. However, only a few studies have been found which made an effort to determine the
impact of staff training on customer satisfaction in banks by using SERVQUAL model. This
study is begun to realize this aim. The main objectives for conducting this research are:
Investigate the impact of staff training on satisfaction of customers in retail banks of
Pakistan.
To investigate why business organizations are trying to meet fashion of providing
increasing no of trainings without focusing on quality of training.
To find the reasons of ignoring the importance of investment in trainings in our
organizations commonly and in banks specially.
3. Literature review
In todays world of intense competition, the key to sustainable competitive advantage lies in
delivering high quality services that will in turn result in satisfied customers (Shemwell, 1998).
Within the internal resources which can be pondered as sources of competitive advantage, is the
human element, mainly due to its intangible characteristics: knowledge, skills and attitudes
(Barney, 1998; Kamoche, 1996; Mueller, 1996; Wright et al., 1994) and organizational
knowledge (Alavi, 2001; Bassi, 1998; Bollinger, 2001; Lee, 2000) are being given more and
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more significance. Adequate training enables the generation of a work force that is multiskilled, adaptable to rapid changes and has wide conceptual knowledge of the production
system (Pfeffer 1998).
Various studies on the effects of the combination of human resource practices show that training,
along with other activities positively affects results and is associated with a productivity increase
and a staff turnover decrease (Arthur, 1994; Huselid, 1995; Ichniowski, 1997).
It can be very difficult exercise to measure the quality of a service can be a very difficult.
Services can be characterized as being intangible, heterogeneous, and perishable, produced, and
consumed simultaneously at same time makes it strange to deliver, and challenging to
organizations to achieve a differentiation from the others.
Readings of Parasuraman et al. (1985) and Zeithmal et al. (1990) pointed out that the key
strategy for the success and survival of any business institution is the deliverance of quality
services to customers. In accordance with Looy et al. (2003), service is any activity that one
party can offer to another that is essentially intangible and does not result in the ownership of
anything.
According to Othman and Owen (2001a) SERVQUAL has proven to be the most popular
instrument for measuring service quality because it affords technology techniques for measuring
and managing service quality.
Parasuraman et al.(1991) gave the most popular tool is SERVQUAL, which measures the
difference between expectations and customer perceptions on five factors of service quality
tangibles, reliability, responsiveness, assurance and empathy. Bitner and Hubber (1994)
customer satisfaction could be defined as the customer overall dis/satisfaction with the
organization based on all encounters and experiences with that particular organization.
Delivering high quality services is a prerequisite for achieving customer satisfaction and only
through customer satisfaction can the company gain loyal customers (Grnroos, 2000).
By focusing on the retail banking industry Rust and Zahorik (1993) seek to identify the
relationship among customer satisfaction, retention, and profitability, concluding that retention
rates drive market share and customer satisfaction is a primary determinant of retention. On other
hand Reichheld and Sasser (1990) also discuss the relationship between customer retention and
company revenues. They suggest that three relationships work in conjunction in such a way that
a small improvement in customer retention can have a large effect on company revenues.
Dostafftrainingshaveanyimpactoncustomersatisfaction?
5. Hypotheses
H1: Retail banks with higher frequency of staff training will attain improved results with
respect to reliabilty in terms of customer satisfication.
respect to empathy in terms of customer satisfication.
respect to responsiveness in terms of customer satisfication.
respect to assurnace in terms of customer satisfication.
respect to tangibility in terms of customer satisfication.
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Retail banks with higher frequecny of staff training will attain improved results with
respect to over all customer satisfication.
6. Research Methods
6.1 Sample and Data Collection
This study was conducted in 2009 in different cities of the Upper-Sind like Larkana, Khairpur,
Shikarpur, Jacobabad etc. Almost all the major banks (under study) have their branches in the
said region.
Nine banks were selected for this analysis. The data for this study was collected from 180 bank
customers(Twenty respondents from each bank) through a specifically designed questionnaire
covering the various attributes that can satisfy customers. Simple Random Probability sampling
technique was adopted in selecting respondents because it assures that each element in the
population has an equal chance of being of selected for a sample (Zikmund, 2006). A particular
branch of each bank was selected, based on its location and its willingness to cooperate in
different cities of the said region.
6.2 Research Instruments of Data Collection
A questionnaire based on SERVQUAL model was used to collect the data.
The instrument (Questionnaire) included only 25 closed-ended questions regarding the variables
of SERVQUAL model( like; reliability, Responsiveness, Assurance, Tangibility and Empathy)
along with questions about the respondents demographic information, including name of the
bank they use for baking dealings, gender, age category, length of Banking usage and frequency
of banking transactions per month. Finally each item was based on a five point Likert scale (1)
strongly disagree to (5) strongly agree.
6.3 Theoretical Framework
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7. Findings and Interpretation of the results

In this study all the six hypotheses were tested, by applying technique of Correspondence
Analysis to assess the impact of staff training on customer satisfaction. For this study it was
performed through SPSS 14.0 version.
H1: The hypothesis is rejected owing to no significant change in figures of trainings and
reliability. It has been observed from data that a bank which has provided less no. of trainings
(112), its standard deviation is .40250 and a bank which has provided large no. of trainings
(315), its standard deviation is .55836. While in other cases somewhat same pattern can be
observed except two cases where S.Ds (.73011 and .63466) and training (288 and 286).
H2: This hypothesis is again rejected by applying a test of the Correspondence Analysis. The
results for relation between higher frequency of trainings and customer satisfaction with regard
to empathy are slight. It has been observed from data that a bank which has provided less no. of
trainings (112), its standard deviation is .69301 and a bank which has provided large no. of
trainings (315), its standard deviation is .64520 and hence very slight differnece is there.
H3: This hypothesis is being rejected on the ground that those banks which have provided less
no. of trainings (112, 138) to their staff memebers have higher rate of satisfication with low
variability (.36814, .32922) in term of reponsiveness in comparing to those bank which have
provided higher trainings (315, 303) with higher variaibility(.68765, .70373) received by
applying Correspondence Analysis.
H4: The null hypothesis for assurane has been proved rejected owing to whatever number of
training may be provided but customers remain indifferent regarding the assurance in different
banks like when 112 trainings were adminstrated by such a bank its S.D. is .53496 and in case of
138 trainings again in-significant value of S.D.(.48259) is available.
H5: The results of trainings do not find any noteworthy imapct on customer satisfication with
regard to tangibility and mix type of impact has been shown. Higher variability of S.D.(.77296)
can be found when less number of trainings (112) have been administrated. In another case from
table no:4.5 total 303 trainings have been provided in a year by a such bank but its S.D(.32622)
is very low.
H6: About testing the sixth hypothesis, as the results of other tables showed this hypothesis also
rejected and it can concluded the rejection of null hypothesis. It means that by only increasing
number of trainings customers cannot be come to be satisfied. Like when 138 trainings have
delivered to staff members, S.D is .26907 and 299 trainings have been conveyed to staff
memebers again somewhat low S.D. is.25704. It shows clearly that higher frequency of trainings
do not have any impact customers with regard to overall satisfication.
8. Conclusion
It has been learnt in this study that only by providing ever increasing opportunities of trainings
for staff members, banks cannot achieve satisfaction of customers. But banks are required to
measure training that either trainees have become fully involved in training sessions and also
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being properly trained by trainers or not. Because if trainees (staff members) are not learning
knowledge, skills, attitudes and behaviors provided to them in training sessions how tranfer of
training can be occured when trainess have learnt nothing. Therefore it is highly important for
banks (organizations) to evaluate trainings. There are so many models are available for
evaluation of trainings. In case of tangibility very mixed results were found and most of
respondents were dissatisfied from this factor. Therefore banks must look in this matter and
provide error-free accounting system, cleaned office spaces, properly designed layout of their
branches with modern equipment.
9. Recommendations
The results of this research were very advantageous for managers and bankers that quantity of
training is not plentiful but quality of training and effective conduction of training sessions with
competent trainers is highly important. An other very important factor is proper evaulation of
training. Because training sessions are properly evaulted then possibly encourging outcomes can
be achieved and this practice (eveaulation) leads to a clear commitment to invest more and more
in training. More importantly training should not provided because it has become a fashion and
other organizations and competitors are providing thereofre. Further alongwith training, certain
other factors are also important to proivde to bank emplyees to encourage them to serve
customers in well manner.
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Appendix
Names of Banks under Study
Cumulative
Name of Bank
Frequency
Percent
Valid %
Valid
1 Habib Bank Limited
20
11.11
11.11
11.11
2 Bank Alfalah
20
11.11
11.11
22.22
3 Bank Islami
20
11.11
11.11
33.33
Bank
20
11.11
11.11
44.44
5 United Bank Limited
20
11.11
11.11
55.56
6 Askari Bank
20
11.11
11.11
66.67
Bank
20
11.11
11.11
77.78
8 Allied Bank Limited
20
11.11
11.11
88.89
9 Silk Bank
20
11.11
11.11
100.00
Total
180
100
100
Standard & Chartered
Muslim Commercial
Impact of Training on Relibility

Total
Mean
112
20
3.4375
138
20
142
Std.
Variance
Min.
Maxim.
0.4025
0.162
4.38
3.2438
0.39419
0.155
2.25
3.88
20
4.0563
0.45789
0.21
3.38
4.75
286
20
3.6375
0.63466
0.403
1.88
4.88
288
20
3.1625
0.73011
0.533
1.88
4.38
294
20
3.2813
0.52389
0.274
2.5
4.5
299
20
3.8313
0.30692
0.094
3.38
4.38
303
20
3.1625
0.30913
0.096
2.38
3.63
315
20
3.475
0.43604
0.19
2.63
4.25
Total
180
3.4764
0.55836
0.312
1.88
4.88
Training
Deviation
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Impact of Training on Empathy

Total Training
Mean
Std. Deviation
Variance
Min.
Maxim.
112
20
3.5
0.69301
0.48
2.75
138
20
3.2
0.47016
0.221
2.5
142
20
3.925
0.65945
0.435
2.75
286
20
3.6375
0.51603
0.266
2.75
4.25
288
20
3.2125
0.77492
0.6
1.75
4.75
294
20
3.2375
0.86783
0.753
1.5
4.75
299
20
3.9375
0.43585
0.19
303
20
3.125
0.4624
0.214
2.75
315
20
3.5875
0.6452
0.416
1.75
4.5
3.4847
0.68308
0.467
1.5
Total
18
0
Impact of Training on Responsiveness

Total Training
Mean
Std. Deviation
Variance
Min.
Maxim.
112
20
3.2
0.36814
0.136
138
20
3.1125
0.32922
0.108
2.75
142
20
4.425
2.27269
5.165
2.5
13.75
286
20
3.55
0.48395
0.234
288
20
3.425
0.74824
0.56
4.75
294
20
3.1375
0.56473
0.319
299
20
3.9375
0.44334
0.197
3.5
303
20
3.4125
0.70373
0.495
2.25
315
20
3.5625
0.68765
0.473
Total
180
3.5292
0.9878
0.976
13.75
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Impact of Training on Assurance

Total Training
Mean
Std. Deviation
Variance
Min.
Maxim.
112
20
3.375
0.53496
0.286
4.75
138
20
3.15
0.48259
0.233
4.5
142
20
4.05
0.57124
0.326
3.25
286
20
3.8375
0.59202
0.35
2.5
4.75
288
20
3.5
0.72548
0.526
2.25
4.5
294
20
3.6125
0.64622
0.418
4.5
299
20
3.9875
0.46222
0.214
3.25
303
20
3.4625
0.72218
0.522
2.75
315
20
3.5625
0.67315
0.453
2.25
4.5
Total
180
3.6153
0.65607
0.43
Impact of Training on Tangibility

Total Training
Mean
Std. Deviation
Variance
Min.
Max.
112
20
3.78
0.77296
0.597
138
20
3.49
0.73835
0.545
4.8
142
20
4.1
0.52915
0.28
4.8
286
20
4.53
0.45085
0.203
3.4
288
20
3.87
0.75749
0.574
2.6
294
20
3.31
0.85956
0.739
4.4
299
20
4.15
0.68017
0.463
303
20
3.23
0.32622
0.106
2.6
3.8
315
20
4.01
0.57847
0.335
3.2
Total
180
3.83
0.75472
0.57
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Impact of Training on Customer Satification

Total Training
Mean
Std. Deviation
Variance
Min.
Maxim.
112
20
3.468
0.32885
0.108
4.04
138
20
3.25
0.26907
0.072
2.64
3.8
142
20
4.102
0.61043
0.373
3.28
5.56
286
20
3.8345
0.44121
0.195
2.56
4.48
288
20
3.408
0.58307
0.34
2.28
4.44
294
20
3.3085
0.55819
0.312
2.2
4.25
299
20
3.954
0.25704
0.066
3.52
4.32
303
20
3.276
0.26656
0.071
2.96
3.84
315
20
3.628
0.40567
0.165
2.8
4.36
Total
180
3.581
0.5192
0.27
2.2
5.56
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EXAMING THE IMPACT OF HUMAN RESOURCES MANAGEMENT (HRM) PRACTICES ON
EMPLOYEES PERFORMANCE
A CASE STUDY OF PAKISTANI COMMERCIAL BANKING SECTOR
Rahim Bux Soomro

Lecturer
Assistant Professor
Assistant Professor
Abstract
The nucleus endeavour of this study was to examine the impact of commonly HRM practices on
employees performance. For all the seven HRM practices (training, selection, career planning,
employee participation, job definition, compensation, performance appraisal) support was
founded that these were correlated positively with the employee performance based on responses
from 150 employees of various commercial banks located in Upper-Sindh. A statistical
technique of Spearman Correlation was applied in order to examine impact of HRM practices on
employee performance. Further respondents gave highest importance to performance appraisal
and then to compensation among individual HRM practices.
Key Words: HRM Practices, Employee Performance, Banking Sector, Compensation,
Performance Appraisal, Pakistan.
1. Introduction
Every banking organization is being considered as one of the most vulnerable business
organizations all over the world. There is central role is being played by banks in the economy of
a country and thus in Pakistan too. Banks are guardian to the assets of the general people. The
banks play a very unavoidable role in a current world of money and economy. These are the
banking institutes which are not only influencing and but also facilitating a lot of different but
integrated economic activities like poverty elimination, production and distribution of public
finance, resources mobilization etc. This comprehensive but complex and painful process of
restructuring of banking system started since 1997. Therefore more and more private banks in
Pakistan are paying special attention towards creating and maintaining Human Resource
Managing department. Owing to sever competition among Pakistani banks, human capital is one
of a source of getting competitive advantage for any business (Becker & Huselid, 1998). Pfeffer
(1994) had argued that human capital has long been held to be a critical resource in most firms.
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Therefore a link between practices of HRM and employee and organizational performance has
drawn substantial attention over the past decade both in the US (Huselid, 1995; Pfeffer, 1998)
and the UK (Guest, 1997; Woodand deMenzes, 1998).
It is frequently held opinion that employees who are pleased with their jobs are likely to produce
better job result. The basis of this opinion is that higher levels of satisfaction grow morale and
lessen voluntary turnover (Dole and Schroeder, 2001). Petty et al. (1984) conducted a metaanalysis and concluded that job satisfaction and performance are indeed positively correlated (r =
0.23, uncorrected). How to retain employees has become a very serious question for all banks in
the country. Use of best HRM practices is used as tool, in this regard, to create a centre of
attention for employees and to retain them. Huselid (1995) used eleven HRM practices in his
study which are personnel selection, performance appraisal, incentive compensation, job design,
grievance procedures, information sharing, attitude assessment, labour-management
participation, recruitment efforts, employee training and promotion criteria. This study used
seven HRM practices like training performance appraisal, career planning, employee
participation, job definition, selection, compensation. In the background of above-mentioned
situation, this study will attempt to find effect of certain HR practices on perceived employee
performance in banking sector of Pakistan.
According to Ulrich (1997), human resource management (HRM) plays a vital function in the
success of many firms regardless of their sizes. Service Quality has become a major issue in
service-oriented organizations like in banks. Generally banks throughout the world are providing
somewhat similar type of services (Lim & Tang 2000), quickly matching their competitors
innovations. However, customers can observe differences in the quality of service provided to
them by their concerned organizations (banks). As job of banks needs high-involvement of their
employees while serving bank customers, therefore there is a direct link between human resource
practices and employee performance to create firm-specific human capital. Firm-specific
human capital is important because these customer-contact employees manage the boundary
between the firm and its customers (Mills et al., 1983), and the behaviour of these employees
shapes customers' buying behaviour.
Ooi, Arumugam, Safa, and Bakar (2007) identified that HRM is considered as one of the crucial
subjects in the research area of management and business for the past few decades due to its
impacts on both the individual and organizational performance as a whole. Existing theoretical
work in business strategy has enhanced the worth of HR in generating constant competitive
advantage. In Accordance with the resource-based view of the firm (e.g., Barney, 1986,
1991, 1995), that firms can build up sustained competitive advantage only by creating
worth in a way that is unusual and hard for competitors to imitate competitive advantage .
There are number of studies showing that proper management of human resource plays a vital
role in formulating and implementing organisational strategy. Most of the research recommends
that practices of HRM are fundamental in order for an organisation to accomplish organisational
success (Barney, 1991; Jackson & Schuler, 2000; Pfeffer, 1994). There are number of
researchers who have found a positive impact of HRM practices on performance of
organisations. For instance, Backer and Gerhart (1996), Backer and Huselid (1998), and Dyer &
Reeves (1995) in their empirical studies found that firms which align their HRM practices with
their business strategy will achieve superior outcomes. Wood (1999) and Guest (2002) put stress
that a committed, competent and highly involved work-force is the one which is necessary for
best execution of business strategy. Exercising best human resources practices shows a stronger
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association with firms productivity in high growth industry (Datta et al, 2003).Huselid (1995)
found that the effectiveness of employees will depend on effect of HRM on behaviour of the
employees.
How practices of Human Resource Management influences Employee Performance.

Hypothesis
H 1: There is positive association between Training and Employees Performance.
H 2: There is positive association between Performance Appraisal and Employees Performance.
H 3: There is positive association between Career Planning and Employees Performance.
H 4: There is positive association between Employee Participation and Employees
Performance.
H 5: There is positive association between Job Definition and Employees Performance.
H 6: There is positive association between Compensation and Employees Performance.
H 7: There is positive association between Selection and Employees Performance.
4. Methodology
Data Collection in order to collect data from respondents samples of questionnaire based on
Questionnaires developed by Singh (2004) and Qureshi M Tahir (2006) were dispatched to
employees in different branches of banks during the study period located in various areas of
Upper-Sind like Sukkur, Jacobabad, Khairpur, Dadu, Shikarpur, Larkana etc. In abovementioned cities of the said region almost all the major banks (under study) have their branches.
A sum of 200 questionnaires were sent through courier services and 150 were completely filled
in by respondents and backed. To increase the rate of response, the targeted respondents were
informed regarding the research objective and confidentiality on separate sheet attached with
every questionnaire. Consequently, a response rate of almost 75% was attained. A well-liked
method known as pick any, tick any (Sudhahar et al.,2006) was used where respondents were
merely required to put a tick-mark in any cell/no shown against each and every question. Further
questions were enquired on five-point likert scale from the respondents. 5 for strongly agree, 4
for agree, 3 for neutral, 2 for disagree and 1 for strongly disagree had been specified in order to
analyze data.
Research Variables From the review of literature, following variables which were expressed in
the theoretical framework are given below. Employee performance was the dependent variable,
which was going to be examined for relationship with all HRM practices.
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5. Analyses & Results

All seven hypotheses were tested in this study, by carrying out a technique of Spearman
Correlation and Descriptive Statistics for analyzing data numerically because this study aimed at
founding relationship between human resource management practices and employee
performance. As hypotheses were directional hypothesis, therefore one-tailed test was used.
SPSS v.13 on Windows XP was utilized for all analyses.
Table 1-Descriptive Statistics

EPP
Mean
Median
Mode
Training
PA
CP
EP
JD
Compen.
Selection
3.6867
3.8021
3.6953
3.6020
3.5045
3.8350
3.6707
3.6733
4.0000
3.8300
3.7100
3.5700
3.6700
4.0000
3.8000
3.6250
4.00
4.00
3.57
3.43
4.00
4.00
4.00
3.50
.74308
.48287
.57810
.58801
.83509
.67234
.66681
.70826
3.00
2.67
3.71
3.57
4.00
3.50
3.40
3.75
2.00
2.33
1.29
1.43
1.00
1.50
1.40
1.25
5.00
5.00
5.00
5.00
5.00
5.00
4.80
5.00
553.00
570.32
554.29
540.30
525.67
575.25
550.60
551.00
150
150
150
150
150
150
150
150
Standard
Deviation
Range
Minimum
Maximum
Sum
Count
Employee job performance is a dependent variable. Training, Performance Appraisal, Career

Planning, Employee Participation, Job Definition, Compensation and Selection are the
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Table II- Correlations Results
1
1. EPP
2. Training
3. Per. App.
4. Carr.
Plng.
5. Emp. Part.
6. Job Def.
7. Comp
8. Select
1.00
0.17
1.00
0.13
0.22
1.00
0.25
0.23
0.39
1.00
0.20
0.21
0.22
0.25
1.00
0.26
0.32
0.21
0.37
0.25
1.00
0.07
0.19
0.28
0.32
0.23
0.24
1.00
0.09
0.25
0.39
0.30
0.12
0.35
0.18
1.00
H 1 suggests that there is positive association between training and employees performance.
There is positive relation between training and employee performance (.17). Although this is not
a significant figure but at least it illustrates, definitely, that employees are satisfied that their
performance has been increased in last twelve months owing provision of training facilities.
H 2 suggests that there is positive association between performance appraisal and employees
performance. There is also positive relation between performance appraisal and employee
performance (.13). It signifies that employees are satisfied, though not highly satisfied, with the
techniques in which they are being appraised by their concerned organizations.
H 3 proposes that there is positive association between career planning and employees
performance. The relation between career planning and employee performance (.25) again it is
not very noteworthy but there is a clear positive relation between these variables. This relation
shows that concerned organizations have a clear path for successful career of their employee
hence performance of employees has been increased in last one year.
H 4 offers that there is positive association between employee participation and employees
performance. There is also positive relation between employee participation and employee
performance (.20) but not very noteworthy. This denotes that there are somewhat greater
numbers of opportunities have been given to employees in decision making process at various
levels and resultantly their performance has been increased in the said time.
H 5 proposes that there is positive association between job definition and employees
performance.
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Job definition and employee participation (.26) shows positive relation among themselves but
not very healthy. At least this relation proves that employees are pleased with their jobs and their
performance has been augmented.
H 6 suggests that there is positive association between compensation and employees
performance. There is very slight but positive relation between compensation and employee
performance (.07). This weak relation clearly demonstrates that employees are not content with
compensations given to them by their concerned organizations.
H 7 proposes that there is positive association between selection and employees performance.
In last relation between selection and improvement in performance of employee (.09) is very
fragile. Here employees are not comfortable with employees selection procedures prevailing in
their organizations.
6. Conclusions
The results of this study indicate that there was a good relationship between the employee
performance and the HRM practices, therefore it can be concluded that all HRM practices are
equally vital for all employees of all levels in every organization. Further this study point to that
employees were very much pleased with their compensation and selection procedure adopted by
their respective organizations, therefore it is strongly advised that market-oriented compensation
may be made available to employees along with trustworthy selection procedures.
In accordance with arguments of Wright et al (2003) that an employee will apply flexible effort
if proper performance management system is in place and is supported by compensation system
linked with the performance management system. Therefore when respondents were enquired to
which HRM practice they are given maximum weight than they gave highest weight to
performance appraisal of 27% (41 out of 150). Possibly they might imagine this is the only
practice if went good in it, than all others will also go better like good compensation, training,
career planning and others. For employees second most important HRM practice was
compensation and it was 24 %( 36 out of 150). Observations of Singh (2004) are more pertinent
in our cultural context, argues that compensation is a behaviour aligning mechanism of
employees with business strategy of the firm. Therefore possibly, that most of employees were
not pleased with compensation packages. While remaining HRM practices have got mixed
response.
Table-III HRM Practices priority wise
HRM Practices
Frequency
Percent
1. Training
16
10.5
2. Performance Appraisal
41
27.0
3. Career Planning
14
9.2
4. Employee Participation
15
9.9
5. Job Definition
17
11.2
6. Compensation
36
23.7
7. Selection
11
7.2
Total
150
98.7
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7. Recommendations
In the era of strong competition among organizations all competitive edges can be overcome
except motivated human resource. Generally it is very difficult for any organization to duplicate
human potential of competitors than the plant, equipment or even products that a company
produces (Flanagan and Despande, 1996). Therefore organizations have to forward extraordinary
importance the human resource management practices because these are very significant for
continued existence of the organization. As the results of this research point to that the pleasant
working environment, provision of career development opportunities and rewards are key factors
that have an effect on the retention of employees with organization; should be focused and
attempted to improve them.
8. Limitations
The study is limited in following ways. First, owing to the small sample size generalizability of
these findings is confined. Second, there are many other factors which may affect the level of
employee performance but due to time restriction other factors were not taken for research.
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Annexure
BIO DATA OF RESPONDENTS

Variable
Frequency
Percentage
Male
99
66
Female
51
34
20-25
38
24.7
26-30
68
44.2
31-35
31
20.1
36-40
3.9
41-45
1.9
46-50
1.3
51-55
0.0
Above 56
1.3
Matriculation
1.0
0.6
Intermediate
13.0
8.4
Graduation
68.0
44.2
Masters
67.0
43.5
1.0
0.6
Other
150.0
97.4
Total years of
1 to 3
4.0
2.6
Experience
3 to 6
64.0
41.6
6 to 9
16.0
10.4
Gender
Age of Respondents
Education
Item
Diploma with Matric /Inter.
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Total years of
9 to 12
16.0
10.4
13 to 15
2.0
1.3
16 to 19
2.0
1.3
20 or above
5.0
3.2
1 to 3
88.0
57.1
4 to 6
44.0
28.6
7 to 9
15.0
9.7
Experience with this
10 to 12
3.0
1.9
Organization
13 to 15
0.0
0.0
16 to 19
0.0
0.0
20 or above
0.0
0.0
1.3
Customer Relationship Officer(CRO)
19
12.3
Relationship Manager(RM)
16
10.4
Customer Service Officer(CSO)
24
15.6
Operation Manager(OM)
17
11.0
Branch Manager(BM)
11
7.1
5.2
Teller
27
17.5
No Response
26
16.9
Branch Banking(BB)
12
7.8
Operations
65
42.2
Credit
13
8.4
Consumer Banking
31
20.1
No Response
29
18.8
Branch Operations Officer
Designation
Assistant Branch Manager(ABM)
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Annexure contd..
Name of Bank
Questionnaires
Percent
1 Silk Bank
3.9
2 JS Bank
3.9
3 Bank Islami
3.3
4 Bank Alfalah
5.9
5 Muslim Commercial Bank
10
6.6
6 Standard Chartered
3.3
7 Askari Bank
5.9
8 Allied Bank Limited
5.3
9 United Bank limited
5.9
10 Habib Bank Limited
10
6.6
11 Faisal Bank
5.9
12 My Bank
5.3
13 NIB Bank
5.9
14 Bank Al Habib
5.3
15 Arif Habib Bank
5.3
16 Meezan Bank
5.9
17 KASB Bank
4.6
18 Bank of Punjab
4.6
19 Soneri Bank
5.3
150
98.7
Total
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STOCK MARKET REACTIONS DUE TO ANNOUNCEMENTS OF CONSUMER

PRICE INDEX AND THE INVESTIGATION OF ENDOGENEITY
Dr. Muhammad Imtiaz Subhani
HEAD RESEARCH IURC
IQRA UNIVERSITY RESEARCH CENTRE- IURC
IQRA UNIVERSITY IU, MAIN CAMPUS,
MS. AMBER OSMAN (CORRESPONDING AUTHOR)
ASSISTANT MANAGER RESEARCH IURC
IQRA UNIVERSITY RESEARCH CENTRE- IURC
IQRA UNIVERSITY IU, MAIN CAMPUS,
POSTAL ADDRESS: DEFENCE VIEW, SHAHEED-E-MILLAT ROAD (EXT.)
KARACHI-75500, PAKISTAN
Abstract
In the financial market the very peculiar and key focus is about the trading volume response to
Consumer price index (CPI). Therefore, taking CPI as one of the important economic variables,
the Karachi Stock Exchange-100 index trading volume was investigated in connection with the
CPI. The outcomes of this study suggested that CPI has a major association with the KSE-100
index trading volume. The statistical test further elaborated this significance and has revealed a
negative relationship between CPI Consumer price index and KSE-100 index trading
volume. Another interesting key feature to this research was the presence of endogeneity in the
data used for the research.
Key words: Consumer price index (CPI) announcements, Trading Volume, Endogeneity.
1. Introduction
It is usually considered that financial markets respond to announcements about economic
variables such as money supply, consumer price index (CPI), wholesale price index (WPI),
producer price index (PPI), unemployment rate, discount rate, industrial production etc.
Previous studies have examined the financial markets reaction to these announcements. But this
study was only concerned with the association between CPI and KSE-100 index trading volume.
This study has shown that there is a negative impact of consumer price index on KSE-100 index
trading volume and the impact was significant. This study is helpful for investors in decision
making about changing their investment portfolios around these announcements.
Different price indices are used to measure inflation. A price index is a measure of the Aggregate
price level relative to a selected base year. In Pakistan a consumer price index (CPI), a sensitive
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price indicator (SPI) and a wholesale price index (WPI) are compiled and commonly have the
base year 1991.
CPI is a principal measure of price fluctuations at retail level and it shows the cost of purchasing
a representative unchanged basket of goods and services consumed by private households. In
Pakistan, CPI covers the retail prices of 374 items in 35 main cities and reflects approximately
the changes in the cost of living of urban areas.
Many previous studies have examined the stock market reaction to announcements of
economic variables. Schwert (1981) examined the everyday returns to the Standards & Poors
composite portfolio around the CPI announcement dates from 1953-78 and found that stock
market responds negatively to the announcement of unanticipated inflation in the CPI.
Schwert (1989) reported that there are at least three theories that predict a positive relation
between volatility and volume. First, if investors have heterogeneous beliefs, new information
causes both the price changes and the trading. Second, if some investors use price movements as
information on which to make trading decisions, large price movements cause large trading
volume. Finally, if there is short-term "price pressure" due to illiquidity in secondary trading
markets; large trading volume that is predominantly either buy or sell orders cause price
movements.
Schwert (1989) results have shown a positive relation between stock volatility and trading
activity and results supported the proposition that stock market volatility is higher when trading
activity is higher and there was little evidence that financial volatility helps to predict future
trading volume growth, except for stock volatility from 1920 to 1952.
Whereas, using hourly data Jain (1988) found that CPI announcement surprises have significant
negative effects on stock prices and trading volume was not associated with surprises in the CPI
announcements and the results were consistent with the hypothesis that market participants
interpret the surprises in announcements in an analogous manner and do not engage in additional
trading.
Castanias (1979) reported that the variance of stock prices rises around the days of most
economic news events, which Castanias (1979) interpreted as a reflection of new information
appearing. Using daily data Pearce and Roley (1985) did not find an association between
surprises in consumer price index (CPI) announcements and stock market reaction. By using
monthly data Chen, Roll and Ross (1986) found that inflation related variables were highly
significant in the 1968-77 period and insignificant both earlier and later. Carlton (1983) reported
that the inflation has a tremendous negative effect on volume traded. It appeared that the level of
inflation, rather than the unanticipated component of inflation, was more significantly correlated
with volume traded. A related reason for a decline in trading as a result of increasing inflation
has to do with the different types of the commodity that are deliverable on the futures market.
Smirlock (1986) found a significant positive response of long-term rates to unexpected inflation.
Smirlock (1986) also reported that the unanticipated component of the announced change in both
the PPI and the CPI has an immediate positive effect on long-term rates in the post-79 period, but
no effect in the pre-79 period.
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Using daily prices of indexed bonds Huberman and Schwert (1985) found that about 85 percent
of the reaction of bond prices to unexpected inflation occurred contemporaneously with the
sampling of individual commodity prices from 2 to 6 weeks prior to the announcement. The
remaining 15 percent of the reaction to unexpected inflation occurred on the day following the
announcement. Black (1986) stated that the noise makes trading in financial markets feasible and
therefore allows traders to monitor prices for financial assets. Noise causes markets to be
inefficient to some extent but often prevents traders from taking benefit of inefficiencies. In
Black (1986) model of financial markets, noise was compared with information. Traders at times
trade on information in the common way. Traders are correct in anticipating making profits from
these types of trades. On the other hand traders at times trade on noise like if it were information.
If traders anticipate making profits from the noise trading then it is incorrect. Though, noise
trading is important to the existence of liquid markets. Black (1986) further stated that an
individual with information or insights regarding individual firms liked to trade but realize that
only another individual with information or insights get to the other side of the trade. From the
viewpoint of someone who knows what both the traders know one side or the other must be
making a mistake. In other words, it does not make sense to make a model with the information
trading but no noise trading where the traders have diverse beliefs and beliefs of one trader are as
good as any other trader's beliefs. Dissimilarities in beliefs should derive finally from differences
in information. A trader with an exceptional piece of information knows that the other traders
have their own exceptional pieces of information, and for that reason traders do not
automatically rush out to trade. Black (1986) further mentioned that there was always a lot of
vagueness regarding who is the noise trader and who is the information trader. Noise creates the
possibility to trade profitably, but at the similar time makes it hard to trade profitably. Kandel,
Ofer and Sarig (1993) found that the variance of the inflation anticipation errors declines with
trading days in the period examined. The decrease in the variance indicates that traders learn by
frequently observing prices around the distribution of other traders information.
Kim and Verrecchia (1991) stated that the traders achieve their most favorable portfolios prior to
the announcement through trading on what each one knows in the preannouncement period.
Announcements change the traders viewpoint and induce the traders to enter in a new round of
trade. It is believed that traders are diversely informed and vary in the precision of their personal
prior information hence traders respond in a different way to the announcement and it leads to
the positive volume. When the new public information is released in period all traders revise
their beliefs, and this revision is reflected in the change in market price. Relatively better
informed traders revise their beliefs less because the new information is relatively less important
to those traders than to those who are more poorly informed. The presence of differential
precision thus causes differential belief revision among traders, which in turn creates trading
volume.
Huang (2008) investigated the impact of US economic news on German stock index futures and
compared it with the impact of domestic German news. Huang (2008) found that US economic
news affects German stock futures on multiple dimensions including prices, trading volume,
volatility, quoted spreads, inventory holding costs and the informational role of trading. Huang
(2008) investigated the impact of 17 types of German economic news announcements and 24
types of US economic news. For most US announcements Huang (2008) sample covered the
entire investigation period from 1991 to 2005. Huang (2008) findings strongly suggested that
German traders actively form private opinions about the implications of US economic news
rather
than
just
'free
riding'
on
the
US
market's
response.
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3. Research/ Econometrical Framework
Following model was used to find the relationship between CPI Consumer price index
and KSE-100 index trading volume and to test the hypothesis that there is an impact of CPI on
KSE-100 index trading volume.
TV = + (CPI) +
Equation -1
Where TV = Monthly KSE-100 index trading volume, CPI = Monthly CPI Consumer price
index and the coefficients and are regression parameters for the independent variable and
= (1-R) denotes the error term.
Same model was used by Jain (1988); Smirlock (1986); Pearce and Roley (1985) for examining
the effects of such announcements on financial markets.
4. Data Collection
The sample period used in this study covers the 239 monthly period beginning at January
1991 and ending at November 2010. The monthly trading volume (Number of shares traded) of
KSE-100 index data was obtained from Karachi stock exchange and monthly CPI Consumer
price index (Percentage change) data was obtained from Federal Bureau of Statistics.
5. Econometrical Test
Simple linear regression technique was applied on the 239 months period data of KSE100 index trading volume and consumer price index to test the hypothesis that there is an
impact of CPI on KSE-100 index trading volume sign (-ve or +ve) shows the negative or
positive impact of independent variable on dependent variable. The hypothesis was accepted at
p< .05.
The estimation of error term was investigated to find out endogeneity, for the purpose
Heckmans Correction was applied to see the endogeneity and a new variable was originated
explaining trading volume significantly. Hence, it was concluded that CPI explained trading
volume significantly and as well as the trading volume was explained significantly by another
variable ignored identified through Heckmans correction.
6. Key Findings and Results
R Square value 0.42 suggested that there is 42% variation in KSE 100 index trading volume due
to the model having CPI Consumer price index. as an independent variable. (R = .42, F =
47.788 at p < .05). While the findings of regression coefficient suggest the following equation:
KSE-100 index trading volume = (5.622E8) + (-2500214.024) Consumer price index
Equation -2
Results have shown that there is a negative relationship between CPI Consumer price index
and KSE-100 index trading volume if CPI increases by 1 % the KSE-100 index trading volume
decreased by (2500214.024) shares significantly due to its linear relationship ( = -2500214.024,
t = -6.913 at p < .05).
Constant value (5.622E8) suggested that if the value of Consumer price index becomes zero then
the value of KSE-100 index trading volume would be (5.622E8) shares ( = 5.622E8, t = 10.345
at p < .05).
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While using hourly data, Jain (1988) found that CPI announcement surprises have significant
negative effects on stock prices and trading volume was not associated with surprises in the CPI
announcements.
Schwert (1981) found that stock market responds negatively to the announcement of
unanticipated inflation in the CPI. Carlton (1983) reported that the inflation has a tremendous
negative effect on volume traded. Using monthly data Chen, Roll and Ross (1986) found that
inflation related variables were highly significant in the 1968-77 period and insignificant both
earlier and later in explaining trading volume of stocks. Using daily data Pearce and Roley
(1985) did not find an association between surprises in consumer price index (CPI)
announcements and stock market reaction.
The above Econometrical findings and the relevant literature suggest the presence of endogeneity
in the data for which the Heckmans Correction was applied. The multi-co-linear ignored
variables with error term were found significant in explaining the Dependent variable (trading
volume), as for the stated ignored variables, R Square value .403 suggested that there is 40.3%
variation in KSE 100 index trading volume due to the model having only ignored variables (i.e.
R = .403, F = 44.514 at p < .05)
Coefficient output table gives the following regression equation for the ignored variables which
were causing endogeneity ( = -7762.760, t = -6.672 at p < .05).Thus,
KSE-100 index trading volume = (3.681E8) + (-7762.760) Ignored variables
Equation
-3
Results have shown that there is a negative relationship between new variable and KSE-100
index trading volume if new variable increases by 1 unit the KSE-100 index trading volume
decreased by (7762.760) shares due to its linear relationship.
Constant value (3.681E8) suggested that if the value of new variable becomes zero then the value
of KSE-100 index trading volume was (3.681E8) shares ( = 3.681E8, t = 13.081 at p < .05).
Furthermore, when the multiple regression was applied by keeping the CPI and the new/ ignored
variable (which was identified via Hecksmans Correction), as the independent variables to
explaining the trading volume of KSE 100- index, it was revealed that due the addition of new/
ignored variable which was causing endogeneity, the model explains the trading volume 69.9%
(i.e. Adjusted R square = .699, F= 73.59 at p< .05) and rest 30.1% predictions were not possible
to be measured and it also suggests the presence of exogeneity i.e. the presence of non
measurable ignored variables.
6.1 Hypotheses Assessment Summary
Hypotheses
R Square
F statistics
B (Beta)
T statistics
Empirical
Conclusion
There is an impact
of CPI on KSE-100
index trading
volume
The Ignored
Variables (X)
explains KSE-100
index trading
volume
0.42
47.79
-2500214
-6.9
Accepted
0.403
44.51
-7762.7
-6.7
Accepted
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7. Conclusion and Discussions

In this study a related reason for a decline in trading volume as a result of increasing
consumer price index has to do with the different beliefs of market participants and it indicates
that market participants respond differently to consumer price index announcements because
each market participant interpret the CPI announcements in different way and, more over there
are also the ignored variables which may be, money supply (M2) and/ or interest rates or some
other variables which might act as the indicators in explaining the trading volume of KSE 100
index as suggested by the significant presence of endogeneity in data.
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References:
Black, F. (1986). Noise. Journal of Finance, 41, 529-543.
Castanias, R.P. (1979). Macro information and the variability of stock market prices. Journal of
Finance, 34, 439-50.
Carlton, D.W. (1983). Futures trading, market interrelationships, and industry structure.
American Journal of Agricultural Economics, 65, 380-387.
Chen, N.F., Roll, R., & Ross, S.A. (1986). Economic forces and the stock market. Journal of
Business, 59, 383-403.
Huang, H. (2008). Price and liquidity effects of US economic news releases on German stock
index futures. JEL, 1-49.
Huberman, G., & Schwert, G.W. (1985). Information aggregation, inflation, and the pricing of
indexed Bonds. Journal of Political Economy, 93, 92-114.
Jain, P. C. (1988). Response of hourly stock prices and trading volume to economic news.
Journal of Business, 61, 219-31.
Kandel, S., Ofer, A.R., & Sarig, O. (1993). Learning from trading. The Review of Financial
Studies, 6, 507-526.
Kim, O., & Verrecchia, R.E. (1991). Trading volume and price reactions to public
announcements. Journal of Accounting Research, 29, 302-321.
Mitchell, M.L., & Mulherin, J.H. (1994). The impact of public information on the stock market.
Journal of Finance, 49, 923-950.
Pearce, D. K., & Roley, V. V. (1985). Stock prices and economic news. Journal of Business, 58,
49-67.
Schwert, G.W. (1981). The adjustment of stock prices to information about inflation. Journal of
Finance, 36, 15-29.
Schwert, G.W. (1989). Why does stock market volatility change over time? Journal of Finance,
44, 1115-1153.
Smirlock, M. (1986). Inflation announcements and financial market reaction: Evidence from the
long-term bond market. The Review of Economics and Statistics, 68, 329-333.
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Professionalisation of ELT in Saudi Arabia
MAY 2011
VOL 3, NO 1
Dr Intakhab Alam Khan

King Abdulaziz University Community College, Jeddah- Saudi Arabia
Abstract
English Language T e a c h i n g (ELT) in Saudi Arabia is a key factor for all sort of educational
developments. ELT has now been considered as a Profession in most of the developed and
developing nations. Saudi Arabia is no exception. This paper is a modest attempt to explore the
status of ELT, issues related to it and possible changes in the near future. The teachers of English
should be suitably qualified, trained, and their qualification should be licensed by the
professional body (duly accredited by most institutions), and the teachers should be strong
enough as far as the professional ethics and dedication is concerned. They should be quite aware
of the differences between occupation and profession. And, if they are not, they should be
accordingly trained for character building, effective teaching and maximum results.
Keywords: profession, professionalisation, pre-service education, ELT, professional
development.
1. Introduction
The teaching of English as a foreign or second language has become inevitable in even those
countries where English serves a very limited purpose. This period is noticing a rapid but
substantial growth in the field of ELT in particular. Countries like Saudi Arabia have become a
hub of such educational practices by which the target learners can be brought to the main stream
of global education.
It has been felt by the researchers and pedagogues if the level of education in general and
English education in KSA is supposed to be raised the teaching of English should be
professionalized. As a matter of fact, these days in most English language centres of the main
universities in the kingdom, there is a focus on pre-service teacher training courses as one of the
essential qualifications for recruitment as the target language teacher.
1.1. Teaching as a Profession:

Profession can operationally be defined as an organized activity which includes three aspects:
qualification, licensing and dedication. Teaching in general requires all the three characteristics.
Therefore, the teacher of English should also possess the qualification of a true professional. He
is a professional because he is suitably qualified, his certificates are usually licensed and he is
dedicated the noble cause of teaching.
Larson (1977,37) pointed out in her seminal study, The Rise of Professionalism: A Sociological
Analysis, the conditions of professional work have changed so that the predominant pattern is no
longer that of the free practitioner in a market of services, but that of the salaried specialist in a
large organization. In this age of corporate capitalism, the model of profession nevertheless
retains its vigor; it is still something to be defended or something to be obtained by occupations
in a different historical context, in radically different work settings, and in radically altered forms
of practice. The persistence of profession as a category of social practice suggests that the model
constituted by the first movements of professionalism has become an ideology -- not only an
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image which consciously inspires collective or individual efforts, but a mystification which
unconsciously obscures real social structures and relations.
1.2. The aspect of dedication in Teaching:

Teaching is the noblest profession. The aspect of social service is of prime importance in the
field of teaching. Teachers are known for the making of the future generation. With the change in
the social norms and value system, the teacher community also has become materialistic. The
teachers mold themselves according to the social needs rather than molding the society according
to the philosophical values. Most modern teachers forget the fact that their knowledge and
contribution cant be paid by any agency or institution. Instead they would earn virtues, respect
and satisfaction. Thus, all those who are in teaching profession must always think about the
social service, and they should be dedicated to this noble cause.
1.3. Morality and Teaching:

The loss of moral values is particularly due to the lack of proper education, lack of proper
parental guidance and guardianship, lack of teachers accountability, fall of social values, money
mindedness and materialism etc.(Khan,1999.p.97). In this regards, Rest (1997,pp. 52-55)
opines, however in the context of America , Increased character education is one alternative
available to help what many see as the mayhem of moral decline in America. Research suggests
a correlation between the teaching of character education of youth and its positive ethical results
throughout the United States. A lot of philosophers and educational thinkers have put forth
different useful contribution to the relationship that exists between the teaching and other noble
socio-philosophical concepts. While these findings demonstrate positive changes experienced
by youth audiences, to date, no research has been conducted on the effects of teaching Character
Counts! on those implementing the program. Many feel that one's character is permanently
formed during childhood. However, character education is a lifelong process, say Sprinthall &
Sprinthall (1997,pp67-70). Farmer (2006, p. 80) states, I have suggested elsewhere that in
some respects architecture as practiced in the UK may serve as a model for ELT professionalism.
However, the opinion of Farmer may not be a good model of professionalism in India or Saudi
Arabia especially in the case of English teachers because the situations are very different.
A teacher is basically a moralist. He teaches his students different concepts related to
ethics, values, morality and code of conduct. He shows all these aspects by his deeds and not
only by words. Dalmau and Gudjonsdottir (2002,pp102-115) sought to identify the diverse roles
that professional educators embrace depending on their circumstances and opportunities. A true
teacher is always strong from the view point of ethics- the ability to distinguish between the vice
and virtue, moral and immoral, and right and wrong. If the teacher is professionally sound, he
should try his level best to come to the level of expectation of the management and the students.
1.4.
Fear of Deprofessionalisation of ELT:
As teaching is a crucial profession, a proper training is always essential in order to inculcate

among the future or practicing teachers professional values, accountability and commitment.
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These days there are some organizations that have started promoting a short term teacher training
course even to those who dont possess the essential qualification, and they are licensed to teach.
Such kind of practices may be proved to be very dangerous for the educational system that
finally develops human resource. In short, it must be ensured that the teaching profession is not
de-professionalised because if a Chemistry graduate cant practice medicine, a social science or
a management graduate with a month teacher training should not join or continue teaching
because he is morally and technically a misfit in the educational system.
1.5. Characteristics of effective English teachers:
Teaching is an art as well as a science. Without the proper development of teaching skills a
teacher cant teach his classes. The teacher has to justify his position by showing different traits
as under:
1.5.1. Scholarship and Qualification:
Qualification and experience is the basic trait of a teacher, be English teacher or any other
subject. Therefore, he should have: a sound knowledge of the subject, knowledge of Educational
Theory, creativity, professionally trained. However, it doesn't mean that one possesses all these
traits without having a formal education and training in the field of teaching.
1.5.2. The general qualities of an effective English Teacher:
An effective teachers qualities may be summed up as under:
He knows the objectives of teaching in general and English in particular,
knows English well,
uses psycholinguistic and sociolinguistic theories,
knows what has been learnt and what remains to be taught,
bothers about the performance of the target language learner,
communicates well in the target language,
reviews the previous knowledge and connects well to the new chapter or unit,
prepares well before starting a new lesson especially functional grammar,
assesses the learning individually as well as among colleagues,
keeps good records of the students and update from time to time,
shares his personal and academic experience,
motivates students to achieve the target language,
dedicates himself for the noble profession like teaching,
keeps himself in touch with the latest advancement in the field of ELT such as integrated
curriculum, integrated English, communicative approach to language teaching etc.,
knows about use of technological use such as language lab, computer assisted learning
and e-learning resources.
If we try to have a gist of the overall qualities of an ideal English teacher, the following
correspond:
i. A good English teacher must know why English is taught, what should be taught
within the course and finally how can the same be taught.
ii. He is able to diagnose the weakness and strength of the students in the learning of
English,
iii. He has an access to different methods and strategies of teaching of English as a
second/foreign language.
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The teacher himself is solely accountable for the attainment of aims and objectives of English.
The English teacher must know and try to achieve those aims. He should be clear about the
purpose of different activities chosen for the subject.
1.5.3. General categories of teachers:
As regards the types and variety of teachers there are many kinds. But, in my opinion, basically
there are three types of teachers:1- who actually teach,2- who manage in teaching and,3- those
who manipulate in teaching. At this juncture, I am reminded of one of the Indian educational
philosophers opinion:
An average teacher teaches, a good teacher develops and an excellent teacher inspires. One
more line can be added: A bad teacher finishes the course.
The teacher is a friend, philosopher and guide. A good teacher is like a father, an ideal, a role
model. A teacher is an instructor, teacher, facilitator and curriculum developer. In sum, a teacher
is the maker of future generation. Now, at this point of time I wish to ask a question to me as a
teacher: am I doing the needful?
The teacher always plays a crucial role in the achievement process. As it is known
that there are verities of teachers in general and English teacher in particular. In my opinion there
are some who are teachers by chance, teachers by choice and some are forced teachers. In my
opinion, there are some teachers:
- who can teach in any condition,
- who can't teach,
- who can teach , but need motivation,
- who don't want to teach,
-who don't know what and how to teach,
- who are able to teach, but disinterested in teaching,
-who want to learn how to teach,
- who know that they are the best teachers,
- who can't develop at all,
-who want to develop for effective teaching.
Teaching of English requires sound knowledge, good training and enough dedication to prove
oneself as en effective and efficient teacher. A profession can't be treated as an occupation.
Therefore, it is always important that a teacher should basically join the teaching profession
knowingly in order to serve the society, not only to serve him.
2. Dimensions of Development:
There is nothing permanent except change. Though the teachers are the instruments of change
and development, they should also change, grow and finally develop. With the ongoing progress
in teachers professional career they are supposed to face variety of issues, problems and
challenges. And, if they are not well equipped, they may not do the needful.
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The present age is known as cyber age, and the whole world is considered as a global village.
The chance of knowing, learning and developing is now much more than what it used to be
before. Technology has changed the life of even a common man or a villager to the extent that
the teacher should not live in the world of isolation. He should increase his knowledge, equip
himself with latest and sophisticated technology and apply the same in the classrooms in general
and English language in particular. The global educational input and output can be of much help
in the English classroom because English is an international language and it is going global day
by day.
Professionalization as a process has been described in two very different ways by Wilensky
(1964) and Abbott (1991). Wilensky, examining evidence from a range of professions, sees it as
a bottom up process in which practitioners sharing appropriate skills, knowledge and attitudes
establish their competence in the eyes of the public, start a university level training programme,
and finally apply for full professional status and monopoly of practice. Abbott cites evidence
from the development of the medical profession in the USA to suggest that the whole apparatus
of professional organization and education resulted from the imposition of mandatory regulation
by the government as a top down process.
Van Scotter et al (1991,p.2) support the trait models of professionalism, When professionals
lobby the government for special privileges, they do so on the grounds that their profession is
different from other occupations. Since trait models have traditionally been the basis upon which
professionals have distinguished themselves from other workers, they are naturally reluctant to
abandon the model, since that might imply surrendering their superior status as well.
Consequently, most professionals have simply ignored the advances in sociology which have
discredited this model. They continue to measure their occupation against the characteristics
identified by various trait models in an attempt to support their claim to professional status; or to
lobby for particular reforms within their occupation to bring it closer to some supposed
professional standard.
2. Professionalisation of ELT:
Professionalisation is a process that is being focused in each area: industries, education, business
or any other. It takes time to implement any concept, but it would prove to be better and ideal in
the near future if professionalization is strictly implemented in the educational system of Saudi
Arabia because it is generally felt that the Saudi learners are often unable to join the international
main stream because of lack of proficiency in an internally important language like English. The
government of Saudi Arabia has made all necessary infrastructural facility and equipment
including internet based classes to improve the level of English. But the outcome is not what it
should actually be. Therefore, we need to redefine the roles of English teachers in the context of
professionalization. It may perhaps be quite useful towards realizing the general goal of teaching
English in the kingdom.
Graddol (2006, p. 15) suggests that speaking English may no longer be an advantage
in a globalized world where everyone speaks it. It follows that those who do not speak it are
disadvantaged. The second question is more difficult. Who are the qualified ELT practitioners
and can they show that only they can do the job? The simplest answer is: we should look for
genuinely dedicated, suitably qualified, appropriately trained, sophisticatedly equipped with
technology and as a whole a true professional of ELT.
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3.1. Pre-service Teacher Education:

The case of pre-service teacher training is different from country to country. In India, for any
recruitment at secondary education level, a certificate of education/training is a must. But, for
higher education, there is no condition of a pre-service degree/diploma of teaching. However, in
order to join an institution as a language expert a degree in Language teaching, applied
linguistics or education is always preferred.
In the case of Saudi Arabia, there is a four year teacher training course that is specialized
from the beginning of the program. Especially in the case of teaching of English language
teaching, such courses are quite beneficial. It is felt that at the tertiary level also, a specialized
certificate is found better in order to teach a specific group of students. However, there are many
appointments made every year without considering the actual need. And, mistakenly it is
considered that f one is a master or a doctor he should possess good level of teaching aptitude or
attitude.
There are many courses of teaching even in the place like the UK such as CELTA or DELTA.
Although the teachers may be benefitted by these courses yet cant be guaranteed as sometimes
in service teachers or even future teachers manage to go to a place and get a CELTA certificate
in a month time. However, a training degree such as B.Ed (Bachelor of Education) in India is not
able to train its trainees to a considerable extent even in one year time. Therefore many
educationalists always supported the idea of making one year course to a comprehensive two
year program. It is interesting to note that those who join B.Ed courses have already dome
graduation or post graduation in their respective fields. This way, the future teachers can be
appropriately development for the needful service to the community.
3.2. In-Service Teacher Education:
There are two main purposes of in-service teacher education: for those who have entered the
teaching profession by chance without having a required qualification or an appropriate training,
and those who are still in need of development. The second group always needs a continuous
professional development as it is rightly believed that education is a lifelong process. And, the
process of change and betterment doesnt stop. There are differences in opinions of the in-service
professional on the issue of development. The category of such teachers can be sub divided into
three: those who dont want to develop, those who dont know that they need development, and
finally those who live in fools paradise considering that they are the best teachers. Many
scholars have put forth different outlook in various manners. Eldridge (2005, p. 9) finds that
conflicts of interest are inherent in teacher development. Richards and Farrell (2005, p. 6-7)
conceptualize teacher learning as skill learning, cognitive process, personal construction or
reflective practice, all of which reinforce a teacher centered view of teaching.
4. Professional Development of English Teachers:
4.1. English teachers in Saudi Arabia: International community

ESL/EFL teachers in particular are more responsible for imparting education to those students
who dont have favorable conditions for learning. In this case, the concerned teacher, apart from
being well trained, should be well motivated, have clear vision, know teaching strategies,
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motivating techniques so that his teaching can be more interesting, and the learning yields results
and outcomes.
In Saudi Arabia, in most technical/professional colleges, there are three kinds of
English teachers: native speakers, bilinguals, and the teachers from India, Pakistan and other
similar countries. The native speakers are not found as highly qualified as many others from
Asian countries as they have done M.A.(TOFEL) or M.A. in English with a degree or diploma in
teaching/education.
It has been noticed that most of the native speakers or near native speakers dont have masters
degree in English. Instead, they have done courses like CELTA/TESOL. It is good to have a
training/education/teaching certificate like CELTA, but it is not the only thing needed to be a
successful foreign language teacher. Most teachers with CELTA like background have done
courses like MBA, management, Sociology, History etc. In my opinion, as a biochemistry/
biology graduate or post graduate cant be licensed to practice medicine, a management graduate
/post graduate should not be qualified for teaching of English. At this point of technological and
educational development, while the whole world is looking for specialties, CELTA /TESOL like
certificates are promoting the practices of the general practitioners. But, the genuine issue is yet
to be discussed and resolved as to what extent such training courses are effective as far as the
teaching of English scenario in KSA is concerned.
British council all over the world is promoting CELTA even for those who know little
about English, however they can speak with a humble background of morphology. Moreover,
those native speakers or near to native speakers who have joined academic institutions in Saudi
Arabia because they were born in English speaking countries especially Great Britain, but they
are not native English language teachers. In a country like Saudi Arabia, the teacher should be
well equipped in the methodology of EFL apart from having a certificate in English language
and literature. In the entire process of teaching of a foreign language, the role of the learners
mother tongue is inevitable. And, for native speakers or a native teachers, in most cases, Arabic
is all Greek and Latin to them. Moreover, in Saudi Arabia, there is much scope of American than
British English.
The other category of teachers of English belongs to the bilingual teachers. They are
generally from Egypt, Sudan, Jordan and other similar Arab countries. It is good to have such
teachers who are aware of the teaching/learning problems that exist in the Arab world in general
and Saudi Arabia in particular. But, interestingly, such teachers are also not effective. They are
not very motivated in teaching. Usually they have negative attitude towards learners, and they
dont want to develop thinking that their knowledge and experience is more than enough. They
teach English in the same way as English is taught in their own countries. In spite of the fact that
they should evolve bilingual strategies to facilitate the learners, they jump into the traditional
grammar and translation method as it seems easier for them as well as the students. And, finally
the target language suffers.
The third and the final group belongs to the teachers from India, Pakistan and
similar countries. Such teachers are highly qualified. Some of them have training
degrees/certificates. But, they also face problems in imparting English education in Saudi
because most of them are not aware of the problems of the Arabic speakers. Though such
teachers taught English in bilingual environments like Urdu/ Hindi/Punjabi etc. they arent able
to compare their own scenario with that of bilingualism in Saudi Arabia. They think that they are
suitably qualified and appropriately experienced so they dont need any further research or
training for pedagogic and professional development.
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It is good to have such a combination of native speakers, bilinguals and unilingual

to have a good teaching facilitators. But CPD (Continuous Professional Development) must go
on in order to avoid waste of resource.Training and professional development is always essential
in this fast changing society. Thus, in order o be update, modern and sophisticated, on should
attend in-service training or professional development programs. It is always appreciated if the
teachers of English are research oriented, but ironically speaking, most teachers Saudi are
disinterested in any such program. They think that this is an academic embarrassment to take part
in any training program. They innocently forget that every teacher is not a born teacher. Instead,
some teachers can be made better by good and quality training.
Motivation is another important factor that contributes to the teaching learning effectiveness.
With the experience of Hawthorn in sixties, human relation was found as one of the motivators.
In other words, monetary incentives were not only responsible for motivation. But, both in Saudi
and India, even monetary incentives fail to motivate teachers. First there is no internal
motivation. In addition, recent 100% hike in the salary could also not motivate the teachers any
more.
4.2. Training and professional development:

Teacher factor is the most important of all in the educational setting. It is the teachers
responsibility to afresh his knowledge update his potential and equip himself with the
advancement of the society and use of technology in general and educational environment in
particular. (Khan, 2005,p.43)
In order to justify the job of a teacher he has to attend trainings which are considered quite
essential in this fast changing society. Thus, in order o be update, modern and sophisticated, on
should attend in-service training or professional development programs. It is always appreciated
if the teachers of English are research oriented, but ironically speaking, most teachers in India
and Saudi are disinterested in any such program. They think that this is an academic
embarrassment to take part in any training program. They innocently forget that every teacher is
not a born teacher. Instead some are made good teachers. Professional development is always
needed for every teacher even if he is highly knowledgeable, experienced and trained.
5. Conclusion:
Teachers are respected in societies because they are part of the noblest profession. Teachers in
general and English teachers in particular are always accountable for bringing certain desired
changes in society in general and students in particular. English being the lingua franca holds
very important position in the global scenario of sociolinguistic perspective. It is rightly
considered as one of the major tools of socialization and technological as well as scientific
changes. Saudi Arabia is no exception to such changes and developments.
English as an international language and a means of instruction in Saudi Arabia is
being more emphasized these days. Many researches are being undertaken in the area to
diagnose problems and find out solutions. In spite of the fact that the government has taken many
genuine and serious steps to impart knowledge and develop the level of English in the country,
the students face a lot of problems during the courses of study. Apart from so many other factors,
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teacher remains the most crucial aspect of teaching-learning environment. It has been assumed if
English teachers are properly trained and appropriately educated in the branches like Educational
philosophy, educational sociology, educational psychology and pedagogy, the chances of further
waste can be minimized or even removed from the English education system of Saudi Arabia. In
other words, the teaching of English should be genuinely professionalized to make
teaching/leaning more effective and to account teachers more responsible for the desired
outcomes.
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References
Abbott, A. (1991). The Order of Professionalization. Work and Occupations,18, 355-384.
Bress, P. (2004). What, me? Take responsibility for my teaching? IATEFL
Teacher Development, SIG newsletter 2/04 5.
Dalmau, M.C. and Gudjonsdottir, H. (2002) Framing Professional Discourse with Teachers. In:
Loughran, J. and Russell, T. (eds) Improving Teacher Education Practice Through Self-Study,
London: Routledge
Eldridge, J. (2005). Rendering unto Caesar: The ambivalent case of in-service
teacher education. IATEFL Teacher Development SIG newsletter1/05
6-10
Farmer, F. (2006). Professionalism in ELT. Mexico: Plaza y Valds
Goode, W. J. (1969). The theoretical limits of professionalization. In A. Etzione (Ed.), The semiprofessions and their organization. New York: The Free Press.
Graddol, D. (2006). English next. British Council.
Johnson, T.J. (1981)Professions and Power. London: McMillan
Khan, I.A. (2005). Teaching of English: The Bilingual Context, Delhi: Academic Excellence
Khan, I. A. (1999) IN Ravindra Kumar (1999).Morality and Ethics in Public Life. Delhi: Mittal
publication
Larson, M.S. ( 1977). The Rise of Professionalism: A Sociological Analysis, Berkeley:
University of California Press.
Millerson, G.(1964). The Qualifying Associations: A Study in Professionalisation,
London: Routledge and Kegan Paul
Pratte, R. (1981). Analytic philosophy of education: A historical perspective.
In J. Solis (Ed.), Philosophy of Education since mid- century. New York: Teachers College
Press.
Rest, J. (1997). Can Ethics be taught to adults? In M. Josephson (Ed.), Character Counts!
character development seminars. CA: Josephson Institute.
Richards and Farrell (2005). Professional development for language teachers. Cambridge:
Cambridge University Press.
Sprinthall, N., & Sprintall, L. T. (1997). How to raise a good child. In M. Josephson
(Ed.), Character Counts! character development seminars. CA: Josephson Institute.
Van Scotter, Richard, John Haas, Richard Kraft, and James Schott.(1991) Social Foundations of
Education , 3rd edition , Englewood Cliffs, NJ: Prentice Hall
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Wilensky (1964). The professionalization of everyone? American Journal of Sociology, 70, 137158.
About the Author
Dr. Intakhab Alam Khan ( M.A. in English; B.Ed.,M.Ed., M.Phil., Ph.D in Education) has earlier
served Faculty of Education, Jamia Millia Islamia (New Delhi, India) and College of Health
Sciences, Jazan (a part of Jazan University, Saudi Arabia). He is presently associated with King
Abdul Aziz University Community College, Jeddah, Saudi Arabia.
Dr. Khan writes in the area of Education, Teaching Methodology, English Language Pedagogy
and Philosophy of Teaching. He has to his credit 11 books and many national/international
papers and articles. He has participated and presented in many international conferences. Dr
Khan is the founder editor of GESD (an international journal for academicians) published from
Delhi, India.
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Association between Human Capital and Physical Capital Formation in
Pakistan: A Disintegrated Time Series Analysis
Muhammad Amir
Assistant Professor, Department of Economics, Government Dyal Singh College, Lahore,
Pakistan
Bilal Mehmood (Corresponding Author )
Dr. Muhammad Wasif Siddiqui
Associate Professor, Department of Economics, Government College University, Lahore,
Pakistan
Saima Sarwar
Abstract
In this study, we analyze the role of human capital as determinant of physical capital for
Pakistan. Data used in analysis is of 35 years that spans from 1973-74 to 2007-08. Johansen cointegration is applied to test long run relationship between human capital and physical capital.
While for short run analysis Error Correction Model (ECM) is used. Human capital when
proxied using various levels of education, reveals absence of ability to retain physical capital in
the case of primary and college level education. But when represented by secondary, university
and vocational levels of education show conformity with theoretical expectations. Results reveal
a significant role of certain levels of education in determining the level of physical capital in
Pakistan.
Keywords: Capital Movement, Effective Labor, Human Capital, Johansen Co-integration,
Labor Productivity, Skills.
1. Introduction
Like physical capital, human capital can be increased by investing in education, training and
healthcare. In the era of knowledge-based economy, only cheap labor is no longer the decisive
factor in retaining physical capital while previously, it was considered so. During recent times,
managerial skills and technological innovations which require skilled and educated labor are
crucial for higher productivity.
Economic theory suggests diminishing returns in physical capital market and capital
being scarce in developing countries has higher marginal product as compared to that in
developed countries. Provided there prevails perfect competition in capital market, capital should
move from developed to developing countries until capital-labor ratio and eventually ratio of
respective rewards (interest to wage ratio) gets equalized in developed and developing countries.
Empirical evidence, however, has not fully supported this direction of capital movement. As a
developing economy, Pakistan can also benefit from such a theorized flow of physical capital.
Therefore this paper scrutinizes the role of human capital in attracting physical capital for the
case of Pakistan.
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2. Previous Research
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Nelson and Phelps (1966) studied the relationship between structures of capital technological
progress and found that technologically advanced countries have higher returns to education.
Uzawa (1965) and Lucas (1988) assume human capital as a factor of production, so according to
them human capital is skill embodied labour. According to Lucas (1988) human and physical
capital are used as factors of production as given by:
Y = AK (uhL)1- ha
Where A is the technology level, K is physical capital, u is the time devoted to productive
activities, h is per capita human capital. Secondly, a share of human capital is not used in
production of output but it is used to produce more human capital, therefore human capital
generation is an automated process.
Two years later Lucas (1990) observed that if trade in capital goods is free then direction
of the capital flows must be from rich to poor countries as marginal productivity of capital is
higher in developing countries as compared to developed countries.22 So all new investments in
capital goods should flow to the areas where marginal product of capital (MPK) is relatively high,
until capital to labor ratios are equalized that will eventually equalize the interest to wage ratio in
two countries. Although capital flows from rich to poor countries but it falls short to the
magnitude predicted by theory. Besides the difference in external benefits of human capital (e.g.
cultural impacts) and imperfections in capital markets, the difference in human capital is the
actual cause of low pace of capital flight from rich to poor countries.
Building on Lucas argument, Romer (1990) presented his theory about impact of affected
human capital on long run growth. His model was based on two assumptions relating to
productivity. Firstly, firms make persistent investment to finance learning by doing. So firms
having more capital stock can spend more on education and this will increase the level of
knowledge capital. Secondly, he assumes that knowledge cannot be confined within boundaries
of a firm. It means technological development in a firm will not restrict other firms from availing
that technological development.
Azariades and Drazen (1990) discovered, while investigating the relationship between
physical and human capital formation, the inability of some developing countries to accumulate
physical as well as human capital due to institutional weaknesses. Despite having same
technologies as that in developed countries, they remain below the expected growth trajectories.
They revealed that countries initial amount of human capital is so small that opportunity cost of
drawing resources from other sectors is higher than returns from investing in education.
Secondly developing countries fail to sustain investment in human capital formation. In similar
veins, Benhabib and Spiegel (1994) deduced that international technology spillover rates depend
upon the availability of human capital in follower country and this human capital is guaranteed
through education.
For rural areas of Pakistan, Fafchamps and Quisumbing (1997) investigated the impact of
human capital on the productivity of labor. They found that educated farmers have higher
incomes and human capital facilitates farmers to earn more incomes from non-farm activities.
Their study found no significant impact of education on productivity of labor in crop and live
stock production.
Abbas (2001) while conducting a comparative study of Pakistan and India to examined
impact of different levels of education, found positive correlation between human capital and
22
For further details, see Lucas (1990).
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physical capital. In addition to this, primary education has positive impact on Indias economic
growth only, whereas human capital proxied by secondary education has positive impact on
economic growth of both Pakistan and India. Higher education also had positive impact on
economic growth of Pakistan but have negative impact in case of India.
Awang (2004) examined the significance of Information and Communication
Technology (ICT) for development of human capital in case of Malaysia. Considering education
and training as important factors of development of human capital, she used government
expenditures on education & training and years of schooling as proxy variables for human
capital. Her findings conform to the consensus that ICT can facilitate provision of public services
in a more efficient manner and that it facilitates the transformation of workers into skilled
workers.
Abbas and Peck (2008) have identified the crucial role of human capital to absorb the
world technological progress. They used health expenditures as a percentage of GDP taken as a
proxy for health capital. The enrollment rate at secondary level is taken as human capital. They
conclude that economic growth in Pakistan is endogenous in nature. Returns to secondary
education are below the expected level that implies deficiency in investment on human capital.
3. Hypothesis
This study empirically tests the role of human capital in determining the physical capital. From a
theoretical perspective, this article is based on the theories forwarded by Romer (1990), Becker
and Tamura (1990), an increase in human capital stock leads to increase the physical capital.
H1: Human capital does attract physical in case of Pakistans economy.
4. Research Method
4.1. Data Sources
The data is annual and spans over the period of 35 years from 1973-74 to 2007-08.The databases
consulted for data are various issues of Economic Survey of Pakistan, World Development
Indicators, World Development Reports and International Labor Organization Yearbooks.23
4.2. Model Development
Following Romer (1990), enrollment rates as a proxy variable of human capital are used. We
have disintegrated the enrollment rates for five different levels of education like primary,
secondary, college, university and vocational training in Pakistan. These enrollment rates are
obtained by following formula:
The model used in this study is borrowed from Romer (1990):
Yt f Kt,Lt,Ht
Its modified form in terms of Cobb-Douglas production function is given by:
23
Descriptive Statistics of the pertinent variables are appended.
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Yt AtKtLtHtet
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Yt = Gross Domestic Product.

Kt = Gross Domestic Investment used as proxy variable for capital.
Lt = Employment level as proxy for labor.
Ht = Enrollment rates used as proxy variable for human capital.
In order to study the impact of human capital on physical capital, we take gross domestic
investment as explanatory variable. For all proxy variables of human capital, following model is
estimated.
ln GDINVt
t ln GDPt ln Lt ln Ht t
Where GDINVt = Gross Domestic Investment
Following Barro (1991) gross domestic investment is used as a proxy variable for
physical capital. By replacing all five proxy variables for human capital, we get the following set
of models:
ln GDINVt t ln GDPt ln Lt ln Hp t
(Model 1)
ln GDINVt t ln GDPt ln Lt ln Hs t
(Model 2)
ln GDINVt t ln GDPt ln Lt ln Hcol t
(Model 3)
ln GDINVt t ln GDPt ln Lt ln Huniv t
(Model 4)
ln GDINVt t ln GDPt ln Lt ln Hvoc t
(Model 5)
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Where
Primary enrollment rate
Hp
Secondary enrollment rate
Hs
College enrollment rate
Hh
University enrollment rate
Huni
Vocational enrollment rate
Hvoc
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5. Empirical Findings
5.1 Impact of Human Capital on Physical Capital
In order to test the long run relationship between two or more than two time series, cointegration technique is used. Therefore, we have applied Johansen co-integration test to
investigate the long run relationship among dependent and independent variables.
In light of Trace statistics and Eigen value statistics, we discover that how many cointegrating vectors exist, at a specific level of significance. The null hypothesis of
= 0, means that there is no co-integrating vector is tested against the alternative = 1, which
means there exits one co-integrating vector.
Above table shows that our education levels; secondary, university and vocational training
institutes are successfully attracting physical capital and having positive and significant impact
on physical capital. As it is log-linear form of Cobb-Douglas production function, the
coefficients are elasticity values representing rate of change in gross fixed capital formation as a
result of change in respective explanatory variable. Primary and college level estimated
coefficients are negative which means these two levels of human capital are unable to attract
physical capital.
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Results in above given table reveals but insignificant impact on GDINV in short run of primary,
secondary and university level education on physical capital formation. So, in short run
education at primary, secondary and university level attracts physical capital. Short run analysis
shows college level education and vocational training have negative impact on GDINV. The
error correction coefficient for primary level education is -0.59 which means primary level have
positive impact on physical capital only in short run but there are 0.59% chances that short run
fluctuation will converge towards long run equilibrium, which means primary level education do
not attract physical capital. The secondary level education has positive impact on physical capital
both in short run as well in long run. College level education shows negative impact on physical
capital in short run and in long run. That means college level education can contribute towards
GDP but it fails to attract physical capital in the country. University level education has positive
impact on GDINV both in short and long run. Therefore, it can be inferred that universities are
injecting decent quality of graduates into the labor market that is positively affecting physical
capital. Vocational level training shows positive impact on GDINV in long run but in short run
this relationship remains negative. ECM coefficient for vocational level education is -0.01,
which means there are 0.01% chances that short run deviation may converge towards long run
equilibrium.
6. Conclusion and Recommendations

It can be concluded from this article that primary and college levels of education has negative
impact on physical capital, hence is a bottleneck in attracting the physical capital. Secondary,
university and vocational levels human capital are performing well. Vocational level human
capital although positively affecting physical capital but magnitude is very weak.
Output per labor is a function of skill-embodied labor i.e. effective labor. For surviving in
knowledge based economy in 21st century, high quality human capital is of crucial importance.
Physical capital is likely to follow high quality human capital. For developing countries to attract
physical capital, it is necessary to upgrade their human capital, mainly through education at all of
its levels. In this regard, public-private partnerships should be encouraged to provide quality
education through regularly updated curricula.
Acknowledgment
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References
Abbas, Q., & Foreman, J. (2008). Human Capital and Economic Growth: Pakistan 1960-2003,
The Lahore Journal of Economics, 13(1), 1-27.
Abbas, Q. (2001). The Role of Human Capital in Economic Growth: A Comparative Study of
Pakistan and India, The Pakistan Development Review, 39(4), 451-473.
Awang, H. (2004). Human Capital and Technology Development in Malaysia, International
Education Journal, 5(2), 239-246.
Azariaidis, C., & Drazen, A. (1990). Threshold Externalities in Economic Development,
Quarterly Journal of Economics, 105(2), 501-526.
Barro, R. J. (2001). Human Capital and Growth, American Economic Review, Papers and
Proceedings, 91(2), 12-17.
Benhabib, J., & Spiegel, M. M. (1994). The Role of Human Capital in Economic Development:
Evidence from Aggregate Cross-Country and Regional U.S Data, Journal of Monetary
Economics, 34(2), 143-173.
Fafchamps, M., & Quisumbing, A. R. (1997). Human Capital, Productivity and Labour
Allocation in Rural Pakistan, Stanford University Working Paper Series 97019, Stanford
University.
Gujarati, D. N. (2005). Basic Econometrics. McGraw-Hill, New York.
Lau, L. J., & Louat, F. F. (1991). Education and Productivity in Developing Countries: An
Aggregate Production Function Approach, World Bank Working Paper Series 612,
Washington D.C.
Ljungberg, J. (2002). About the Role of Education in Swedish Economic Growth, Historical
Social Research, 27(4), 125-139.
Lucas, Robert E. Jr. (1988). On the Mechanics of Economic Development, Journal of Monetary
Economics, 22(1), 3-42.
Lucas, R. E. (1990). Why doesnt Capital flow from Rich to Poor Countries? American
Economic Review, 80(1), 92-96.
MacMahon, W. W. (1998). Education and Growth in East Asia, Economics of Education Review,
17(2), 159-172.
Mankiw, N. G., Romer D. & Weil, D. N. (1992). A Contribution to the Empirics of Economic
Growth, Quarterly Journal of Economics, 107(2), 407-437.
Nelson, R. R. and Phleps, E. S. (1966). Investment in Humans, Technological Diffusion, and
Economic Growth, American Economic Review Proceedings, 56, 69-75.
Petrakis, P. E. & Stamatakis, D. (2002). Growth and Educational Levels: A Comparative
Analysis, Economics of Education Review, 21(5), 513-521.
Romer, P. (1990). Endogenous Technological Change, Journal of Political Economy, 98(5), 71102.
Romer, P. (1990a). Human Capital and Growth: Theory and Evidence, Carnegie-Rochester
Conference Series on Public Policy: Unit Roots, Investment Measures and Other Essays,
32(1), 251-286.
Solow, R. M. (1957). Technical Change and the Aggregate Production Function, Review of
Economics and Statistics, 39(1), 312-20.
Schultz, T. (1961). Investment in Human Capital, American Economic Review, 51(1), 1-17.
Uzawa, H. (1965). Optimal Technical Change in an Aggregate Model of Economic Growth,
International Economic Review, 6(1), 18-31.
World Development Indicators CD-ROM, World Bank, Washington, DC, 2007.
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Appendix
Descriptive Statistics of the Data
Mean
Median
Maximum
Minimum
Std. Dev.
Skewness
Kurtosis
Jarque-Bera
Probability
Sum
Sum Sq. Dev.
Observations
Table 1:
LnYt
14.6427
14.7005
15.5190
13.7538
0.5260
-0.1569
1.8780
1.9794
0.3717
512.49
9.41
35
LnKt
13.0544
13.2574
13.7910
12.1149
0.4381
-0.6545
2.3390
3.1357
0.2085
456.90
6.53
35
LnLt
3.4279
3.4298
3.8737
2.9307
0.2585
-0.1060
2.2223
0.9475
0.6227
119.98
2.27
35
LnHp
-0.7608
-0.6646
-0.1184
-1.4351
0.4484
-0.1159
1.5257
3.2482
0.1971
-26.63
6.84
35
LnHs
-2.5671
-2.5745
-1.6517
-3.3755
0.5653
0.1080
1.5261
3.2359
0.1983
-89.85
10.86
35
LnHcol
-5.9143
-6.0563
-4.2161
-7.3310
0.8372
0.7719
3.1619
3.5143
0.1725
-207.00
23.83
35
LnHuni
-2.1684
-2.6424
-1.2392
-3.3061
0.7883
0.0835
1.1667
4.9421
0.0845
-75.90
21.13
35
LnHvoc
-5.0156
-4.9269
-3.6878
-5.8920
0.5621
0.6300
3.1561
2.3510
0.3087
-175.55
10.74
35
Johansen Co-integration Results

Human Capital (in terms of Education at following levels)
GDPt
Lt
Ht
Primary(HP)
2.79
0.50
-2.19
Secondary(Hs)
8.20
1.38
2.18
College(Hcol)
2.93
0.30
-1.35
University(Huni)
1.31
2.29
1.07
Vocational(Hvoc)
1.64
2.55
0.17
At 5% level of significance
Table 2:
Elasticity Estimates
Elasticity of Gross fixed Capital Formation w.r.t Human Capital
Primary
Secondary
College
University
Vocational
Estimated Coefficients
-2.19
2.18
-1.35
1.07
0.17
t-statistics
6.01
-3.38
4.95
-2.81
-4.64
At 5% level of significance
Table 3:
Short Run Analysis

The ECM estimates for Human Capital as Determinant of Physical Capital
Regressors
Short Run
Coefficient
ECM
Long Run
DlnHp
0.78 [1.68]
-0.59
-2.19 [6.01]
DlnHs
0.02 [0.024]
-0.04
2.18 [-3.40]
DlnHcol
-0.10 [-0.59]
0.01
-1.34 [4.95]
DlnHuni
0.14 [1.04]
0.01
1.07 [-2.80]
DlnHvoc
-0.11 [-0.42]
0.01
0.17 [-4.64]
Level of significance is at 5%
D Indicates differences of the variables used
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Relationship Marketing in Microfinance Industry: A Pakistan Perspective

Assistant Professor

Assistant Professor
Rahim Bux Soomro
Lecturer
Abstract
This paper addresses relationship marketing aspect in microfinance institutes. Still now no
researcher in both disciplines, microfinance and relationship marketing has ever written on the
nature of relationships in microfinance institutes, so In this paper effort has been made to
integrate the discipline of microfinance and relationship marketing and show that the nature of
microfinance business is relationship oriented and that the success of any microfinance institutes
is reliant on keeping, serving and enhancing the good relationships with its customers and other
stakeholders.
Key Words: Relationship Marketing, Stakeholders, Microfinance Industry.
1. Introduction
The concept of microfinance was introduced in the of developing countries context to assist
poorest of poor. The main objectives were to alleviate poverty, empower disadvantaged
population groups specially women, create employment opportunities and stimulate economic
development of country by involving poor segments of population (Joanna 2001). Professor
Yunis was the first to give the idea, he established the Grameen Bank in Bangladesh in 1983 to
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gives access of credit to poor segment of population on social collateral. This model was so
successful that almost all developing countries around the world are now replicating this model
in their respective countries to fight against poverty. In year 2006 Professor Yunis and Grameen
Bank were jointly awarded Noble Prize for their pioneering work in lending to the poor.
Professor Yunis is also named as one of the worlds greatest entrepreneurs by Business Week
Magazine.
Microfinance was initiated by observing the needs of its target market (marginal income groups
and vulnerable social groups); however managers have run this industry as a product driven.
Mainly for two reasons first: microfinance industry is relatively young industry as compared
with other industries and Second: there is huge untapped market. Consequently microfinance
institutes followed Selling philosophy of marketing in the hope that market potential is
unlimited and customer will come, the only focus was on making financial products available
and selling aggressively to customers. In doing so some microfinance institutes were successful.
However, over period of time the environment for microfinance sector has changed considerably
and made Selling philosophy inadequate. Microfinance institutes around the world are now
experiencing substantial customer drain and decline in profits. As a result, a strong need is felt
for a customer oriented philosophy that not only deals with these issues effectively but also
makes microfinance business more profitable for its stockholders and beneficial for society and
customers at large. Considering the relationship factor in microfinance industry relationship
marketing is the only answer of all questions. because the very nature and essence of
microfinance business is relationship oriented, right from financial product development to the
delivery of product, the customer interaction, satisfaction and retention is the main focus of
microfinance businesses, so keeping this fact in view the paper discusses the relationship
marketing aspects and benefits of relationship to society and microfinance business
2. Objectives and Significance of Study
The main objective of this paper is to establish up to what extent relationship marketing theory
can be applicable to Microfinance Institutes in Pakistan. To achieve this main objective
following aspects of relationship marketing in microfinance institutes were explored.
Target market of microfinance banks:

How firm contact and establish relationship with customers
How microfinance banks maintain relation ship with customers
What benefits customers enjoy with having relation ship with microfinance banks
The nature of relationship with other stakeholders
The paper is unique in the sense that still now no researcher in disciplines, (microfinance and
relationship marketing) has ever written any thing on the nature of relationships in microfinance
business, so this aspect makes the paper unique. In this paper effort has been made to integrate
the discipline of microfinance and relationship marketing and show that the long term success of
microfinance institutes is related with keeping and enhancing the good relationships with its
customers and other stake holders
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3. Scope of Study
The paper begins with first the concept of relationship marketing and its characteristics; second,
definition of micro financing and microfinance industry in Pakistan; finally application of six
markets in microfinance industry in Pakistan. Six markets model is an analytical tool, which
helps organizations to identify relevant stakeholders, assesses nature of relationship and
respective importance for organization.
4. Research Methodology
Since this paper explores the relationship marketing practices in microfinance institutes,
therefore, the data and information were mainly collected through snap short observations and
interviews. Moreover, to get accurate picture of relationships in microfinance institutes
interviews were conducted with Customer Service Officers (CSO) and branch managers of
institutes because these employees have direct contact with customers and other stakeholders.
Further, for the purpose of validity and reliability of interviews the researcher has traveled
extensively with CSOs in the field and observed what they said is accurate or not. Considering
the nature of research secondary data was also collected from various sources including the
websites and internal records of these institutes.
5. Relationship Marketing Characteristics
Relationship marketing is quickly arriving and certainly here to stay. Some researchers term it
paradigm shift, providing the basis for general theory of marketing, for others it is just a passing
fad. Berry first introduced the term Relationship Marketing to service marketing literature
defining it as attracting, maintaining, and enhancing customer relationships (Berry 1983). Shani
and Chalasani (1992) have defined relationship marketing as an integrated effort to identify,
maintain, and build up a network with individual customers and continuously strengthen the
network for the mutual benefit for both sides through interactive individualized and value added
contacts over a long period of time.
Relationship marketing has many themes that distinguish it from 4Ps marketing like
Relationship marketing seeks to establish individualized ties with customers through strong
personal appeal and continuing commitment
Relationship marketing emphasizes on the retention of existing customers rather than
acquiring new customers.
Relationship marketing emphasis on internal marketing that is related with motivating and
retaining employees in the hope that satisfied employees serve customers well
Relationship marketing advocates interactive marketing concept that emphasize employees
skills and interaction between employees and customers
Relationship marketing embraces all those steps that companies undertake to know and serve
their valued customers.
Relationship marketing emphasize on doing with customer rather than doing for customers
Relationship marketing stresses the need for strategic alliances by discouraging competition.
The core of relationship marketing is its focus on a cooperative and collaborative relationship
between the firms customers and other marketing actors.
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Six Markets Model Six markets model developed by Adrian Payne, which helps to understand
and broaden the context of relationships in market place with various stakeholders. This model
emphasize that to serve and retain customers, organizations should extend the domain of
marketing to six markets (Payne 1991) With the changing marketing environment it becomes an
imperative for businesses to formulate their marketing activities to, and to build relationships,
networks, and interactions with, number of different, but often equally important markets
(Lindgreen). According to Adrian Payne (1991) these markets shown in figure 1
Figure1 Payne (1991) Six Markets Model
Customer Market: customer include existing and potential customers

Referral Market: Referral marketing is a form of marketing which is done for you by your own
customers and other non customer groups. Basically referral marketing done by some groups
including your existing customers for you because they know you, likes, and trusts you and
wants to support you or introduce you to other customers.
Supplier Market: Supplier market provides raw materials, component part and or services to
business entities.
Employee Recruitment Market: Recruitment market consists of all future potential employees
and third parties that serve as access channel. Potential employees can be segmented by function,
job grade, geography and level of seniority. Channels include executive search companies,
employment agencies, job centers, advertising agencies and organizations own employees who
suggest potential applicants.
Influence Market: Influence market includes all the stakeholders who have interest in the
working of organization
Internal Market: The internal market constitutes of the business own employees.
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6. Application of Six Markets Model in Microfinance Institutes.

Based on the research following is the application of six market model in microfinance institutes.
6.1Customer Market
Target market of most microfinance institutes are people who live near poverty line. (The people
who are poor but they want to improve their living standard by earning more). The customers of
most microfinance institutes are low income segment of population. These poor people do not
have access to formal financial institutions. This segment of population is usually self employed,
often household based entrepreneurs in rural areas like Farmers, small shop keepers and women.
The Relationship Initiation, Maintenance and Interaction with Target Customers: Good and
strong ties with customers are very important for success of any organization this is also true for
microfinance organizations. So any microfinance institute that is good at relationship with its
customer is at competitive advantage. Keeping this fact in view Microfinance Institutes establish
broad network of branches usually the main branch in each district along with the service centers
in most sub-divisions of districts with the aim reaching target market at their door steps. These
branches are staffed with highly qualified and properly trained staff with all supporting facilities.
The Customer Service Officer (CSO) is the key person, who is responsible for dealing with
customers, visits the rural market area, contact with the people and introduces the microfinance
institute and its financial products to them. In the first meeting with target customers in any
locality, the CSO encourage men and women to form a group, typically consisting of 20-25
members, known as a Community Organization (CO). CO is an important forum for empowering
people to take an active role in the management of local development initiatives. A CO is more
than a collection of individuals: it is an entity comprising of members who work for the
collective good of the community. A properly functioning CO has both social and economic
'value', thus in a position to contribute to alleviating poverty. On the social side, it brings people
together to work for the common good. On the economic side, the CO functions as a conduit for
the micro-credit that households use to generate income, and as a base for accumulating savings
and putting those savings to work for community development .the Institute provides loan to
each individual in group on social collateral, and make each member responsible for others loan
in Community Organization.
The CSO periodically visits and interact with CO members. In each meeting with CO members
the CSO carefully listen the opinions and problems of members and suggest them solutions, The
CSO also monitor progress and proper utilization of loan and at the same time he also encourage
CO members to pay back their installments of loan on time and suggest them for savings with
the institute. The progress of each CO is periodically reviewed. The community organizations
which perform well are extended credit with an increase in amount. This way the relationship
between community members and microfinance institute lasts longer and a true relation is
created. Two types of relations ships are quite evident in microfinance institutes in Pakistan
because of regular meetings one is relationship between CSO and CO members and second is
among CO members themselves.
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6.2 Internal Market

Ballantyne (2000) have defined the internal marketing as:
Internal marketing any form of marketing with in an organization which focuses staff attention
on the internal activities that need to be changed in order to enhance external market place
performance
The recent research has shown that only satisfied employees can keep good relationship with
customers and contribute to the long term profitability of any business. One such example is
service profit chain model put forward by Heskett and his associate researchers, they discuss
that satisfied, loyal and productive employees can create customer loyalty and customer
satisfaction which results in profitability of the organization (Heskett 1994). Like all other
organizations microfinance institutes are also adopting this strategy in Pakistan. The internal
marketing program of most microfinance banks is based on four principles (1) considering and
treating employees as internal customers (2)proper training and education (3)setting quality
standards for delivering service to target customers and finally (4) reward system based on
performance standards.
Most Microfinance institutes are successful in keeping and retaining their good employees. They
provide them good salaries; better working environment and other benefits. By working well in
the organization employees have good chances to be get promoted, because most microfinance
institutes in Pakistan only hire the initial level work force like CSO from the external sources
and the higher positions like team leaders, regional sales mangers, auditors etc are only
promoted from the inside of the organization. The employees are promoted on criteria first good
past performance and second through internal examination system.
6.3 Supplier and Alliance Market

Pakistan has an estimated population of about 160 million. The incidence of poverty is around 33
percent of the population, around 70 percent of population lives in rural areas. The poverty is
also increasing in the urban areas as well. Most of the people in rural and urban areas suffer from
financial exclusion because they have no access to any formal financial services. Considering the
demand of this huge segment of population microfinance banks in Pakistan are cooperating not
only with other major banks but they also cooperating with other national and local level non
for profit organizations (NGOs) for providing better access and quality services to customers.
Usually three such types of partnerships and alliances could be observed
Alliances and partnership among microfinance institutes

Partnerships with government sector
Partnership with private sector
One such example is of National Support Programme (NRSP) which is another pioneer institute
in microfinance industry in Pakistan NRSP has partnerships with government, private sector and
with international organizations. Most microfinance institutes in Pakistan have adopted the
policy of compete and cooperate. To ensure cooperation these institutes constantly share
information and work on ways to reach target customers in coordinated way.
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6.4 Influence Market

Influence market includes all the stakeholders who have interest in the working of the
microfinance industry or individuals that have influence over existing or potential customers.
The influence market for microfinance business in Pakistan includes the Government regulators,
funding institutions, Sate Bank of Pakistan, venture capitalists, stockholders, bankers and labor
associations. To deal with influence market in Pakistan most microfinance institutes have
adopted the following strategy so that they can use influence market for their own interest. First
Managers in Microfinance institutes have taken measures to profile and identify major players
who have influence on their business and have ranked them in order of their importance. Second
Microfinance institutes have taken measures to increase the awareness of their business among
major influencers and third use influence market to increase the awareness of microfinance
business among its target market.
6.5 Recruitment Market
Recruitment market consists of all future potential employees and third parties that serve as
access channel. Potential employees can be segmented by function, job grade, geography and
level of seniority. Channels include executive search companies, employment agencies, job
centers, advertising agencies and organizations own employees who suggest potential applicants
(Payne 2005).
The Recruitment market of microfinance businesses in Pakistan comprises of fresh university
graduates in the disciplines of business administration, Commerce, Economics, and agriculture.
The age level of potential applicants is maximum around twenty eight years. The top executives
of the microfinance institutes deliver lectures, seminars and hold job fairs in the universities and
colleges around the country to attract and hire competent work force in their respective
organizations. Most microfinance businesses employ following three methods to hire employees
External source CSOs and account officers are only two positions which are filled through
external sources. Usually the openings are announced through leading national, regional and
local news papers. After screening the remaining applicants are called for written tests usually
conducted by Institute Of Business administration (IBA) a leading education institute of
Pakistan. The test results of qualified candidates are handed over to hiring microfinance business
which conducts the final interviews. The final selection is based on results of interview.
Internal sources almost in all microfinance businesses the higher positions except CSO and
accounts officer are filled with existing employees. The criteria for higher positions includes,
two years working experience as CSO and performance appraisal report of employee. If any
employee who fulfills the above said criteria, he is asked to pass written examination. Those who
pass written examination are called in for panel interviews and this way success full employee
are offered higher positions.
Outsourcing most microfinance institutes in Pakistan are outsourcing the lower level openings.
These openings include drivers, office boy, messengers and other lower level jobs.
6.6 Referral market

The referral market for microfinance businesses in Pakistan includes its existing customers,
insurance companies, commercial banks, non- for profit organizations, political parties and local
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elected members of district government. Because of the relationship oriented nature of

microfinance businesses it depends heavily on referral markets particularly existing customers
and locally elected district members. Here we mention the role of existing customers in
introducing the microfinance banks to other customers. As Most of microfinance institutes utilize
Social Mobilization as the primary means for reaching and supporting poor segment of
population. And essence of social mobilization is encouraging men and women to form a group,
typically consisting of 20-25 members, known as a Community Organization (CO).by forming
CO existing customers not only introduce the institutes to other customer but it is an also
important forum for empowering people to take an active role in the management of local
development initiatives. This forum promotes the microfinance institute to other customers.
7. Key aspects of Relationship Marketing in Microfinance Industry of Pakistan
In this segment we discuss key aspects and features of relationship marketing in microfinance
industry of Pakistan and our assumption is that every aspect of microfinance is relationship
oriented. Because of these aspects we believe that relationship marketing is best strategy for
microfinance institutes in Pakistan.
7.1 Customer Selection

The key foundation of relationship marketing is niche markets. Which means organization
identifies and serves some specific part of customer groups. The needs of that market are not
served well else where. Organization develops marketing mix so that they can serve unique
customer needs. This aspect is quite visible in microfinance institutes in Pakistan .almost all
microfinance institutes serves and direct their efforts to one specific market that is poor people
in rural areas mostly women. The customers of most microfinance institutes are low income
segment of population that does not have access to formal financial institutions. This segment of
population is usually self employed, often household based entrepreneurs in rural areas.
Microfinance institutes develop customize product by considering the needs of this customer
group and delivers the financial products at door steps of customers.
7.2 Product Development and Delivery of Products to Customers
Microfinance institutes offer the more customized financial products then any other business.
Products in microfinance institutes in Pakistan are developed considering the needs and wants of
target customers. As mentioned earlier the customers of most microfinance institutes are lowincome self employed segment of rural population usually women who have no access to formal
financial services. This group of customers needs wide range of financial product such as to seize
business opportunities, to spent money on home improvements and to meet expenses of school
fees, weddings of their children and other life events
Mostly the ideas of new product are come from customers because of continuous interaction and
listening to them. Thus the ideas of most products developed in microfinance institutes are based
on from direct feed back from CSOs who have established the relationship with customers. For
example FB Micro enterprise in Pakistan has created Community organizations. The CSOs of
institute periodically visits them. During group meetings with COs ideas for new products are
generated. We have many forums in which CO members including women can talk; just by
listening we hear what their needs are. Thats how we get our ideas for new product, told us by
one CSO during interview. Almost all microfinance institutes in Pakistan deliver products to
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customers door steps. This is another important aspect of relationship marketing for facilitating
customers.
7.3 Customer Satisfaction and Retention
The other important feature of relationship marketing is customer satisfaction and retention. If
the business can accomplish the objective of customer satisfaction and retention with a
competitive advantage in attractive markets, the business will produce above average profits.
This feature of relationship marketing is perfectly applied in microfinance business. Almost all
microfinance institutes put their best efforts to retain their existing customers because of the
money and time associated with acquiring new customers. Most microfinance institutes have
perfect strategies for satisfying and retaining their existing customers. One strategy is
encouraging customers to form community organization. Which consists of 20- 25 members, and
loan is disbursed to them, all members of CO are responsible for each other. Because of
continuous interaction and mutual goal of CO members bond is created not only among CO
members but also with CSO. Second strategy is if any CO performs well in terms of pay back of
its loan the next time a loan with increment is given to CO members. Third strategy is if one CO
performs well then they have been given money to finance small projects of their own choice
like construction of roads, schools, health facilities or other community welfare projects.
7.4 Relationship Marketing in Microfinance benefits to Customers
Having in relationship with customers is not only beneficial for organization but also for
customers. Here we will discuss some benefits microfinance institutes have provided to its
customers in Pakistan.
Outreach one of the measures of microfinance institutes success is number of customers it
reaches. According to one report by Pakistan Microfinance Network (PMN) the number of active
borrowers has increased from 60000 to 600000 during the year 1999 to 2005, this increase is
encouraging although microfinance institutes in Pakistan have reached only six percent of
potential market. (See fig. no1). Another important aspect is number of women borrowers have
also increased substantially. This is also a healthy sign. We can observe from table 2 the
percentage of women borrowers.
Fig.1 Active Borrowers of Microfinance Institutes (Source; PMN, PIR2005)
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Microfinance Institutes help Poor in Savings Money to save money was dream for many poor
people which is come true because of microfinance institutes in Pakistan. Almost seventy percent
poor man and women save money. This is also good indicator how microfinance institutes work
for the betterment of its customers and society at large.
Role in Poverty Reduction The Government of Pakistan has used Microfinance as an essential
instrument to fight against poverty. To alleviate poverty in Pakistan, government
has
established the Poverty Alleviation Fund and Khushhhali bank with the help of World Bank and
Asian Development Bank respectively. Although there is strong evidence from Grameen bank
that microfinance helps in alleviating the poverty, but surprisingly no work in Pakistan has been
undertaken to assess the impact of microfinance on poverty reduction.
Increase in the Amount of loan microfinance institutes first time give very small loan to
customers, usually Rs10000. the customers who pay back their loans on time are usually are
given increment in loan each time. This is a sign of trust by microfinance institute on their
customers and also a benefit to customers by having long term relationship with institute.
Employment generation microfinance sector programmers are seen as an effective tool in
reducing poverty. Most of skilled people become self employed because of micro credit. Other
people open small shop or invest in livestock which results in substantial employment generation
and increase in the income of households.
Health, nutrition, education microfinance institutes have also affected many social variables
positively just like heath, nutrition, and schooling of children. Research has shown that there is
great improvement in these social variables of microfinance customers.
Empowerment of Women microfinance institutes have also contributions in making women more
empowered. The rural women in Pakistan are now economically, socially and politically more
powerful than before. Nowadays it is a common belief that microfinance sector has promoted
gender equity in Pakistan.
8. Conclusions
This paper is an effort to integrate the disciplines of microfinance and relationship marketing.
Currently most microfinance institutes are facing many problems like customer turnover,
competition, and constant demand from government and customers to perform for the betterment
of society. Research in other businesses has shown that Relationship marketing is a complete
marketing philosophy that deals with these issues effectively. The ideas presented in this paper
have also shown that relationship marketing philosophy is a suitable and can be put in practice in
microfinance institutes in Pakistan. From observations it is evident that most microfinance
institutes are following some aspects of relationship marketing philosophy unconsciously and are
bringing good results for stockholders, customers and society at large so there is need to follow
the strategy in a more holistic and systematic way.
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References
Adrian Payne. (1991). Relationship Marketing: The Six Markets Model (working paper).
Cranfield England: Cranfield University, School of Management,
Adrian Payne, Ballantyne, D. & Christopher, M. (2005). A stakeholder approach to relationship
Marketing strategy: The development and use of the six markets model. European Journal of
Marketing, 39 (7/8), 855-871.
Ballantyne, D. (2000). Internal relationship marketing: A strategy for knowledge renewal,
International Journal of Bank Marketing, 18 (6): 274-286.
Berry , L.L (1983) Relationship marketing ,in Berry, l.l ,Shostack, G.L and Upah ,G. (EDS),
Emerging Perspectives on service marketing, American Association, Chicago.
Dr. Adam Lindgreen and Michael Antioco Customer Relationship Management: One European
Bank's experiences, Department of Marketing, Catholic University 1-31
James L. Hesskett, Thomas O. Jones, Gary W. Loveman, W. Earl Sasser, Leonard a. Schlesinger.
L. A. (1994) Putting the Service Profit Chain to Work Harvard Business Review: Vol.72, no.2,
164- 74
Ledger, Joanna. Microfinance Hand Book: An International and Financial Perspective.
Washington DC: World Bank, 2001
Pakistan Microfinance Network (PMN). (2005). Performance Indicators Report 2005. Islamabad,
Pakistan. http://www.pmn.org.pk/link.php?goto=pir2005
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TIMELINESS ATTRIBUTES AND THE EXTENT OF ACCOUNTING
DISCLOSURE: A STUDY OF BANKING COMPANIES IN BANGLADESH*
Dr. Alim Al Ayub Ahmed
Assistant Professor, School of Business Administration,
Asian University of Bangladesh
Dr. Madan Mohan Dey

Professor, Department of Accounting and Information Systems,
Rajshahi University, Bangladesh
Dr. Waheed Akhter

Assistant Professor, Department of Management Sciences,
COMSATS Institute of Information Technology, Lahore, Pakistan.
Mr. Ali Raza

M.Phil Scholar, Superior University, Lahore, Pakistan
Abstract
This research paper attempts to examine the relationship between accounting disclosure in the
annual reports and their timely usefulness for investors. The study has focused the banking
industry of a developing country, Bangladesh. 15 banks were selected from Bangladesh that
constitutes 25% of the total population. The data was collected over a period of 5 years (20022006) from the selected banks. Simple and multiple reg*ressions were used to see the impact of
accounting disclosure on timely usefulness of banks annual reports. It was found that regulatory
changes have not improved timeliness in corporate reporting in the banking sector of Bangladesh
as measured by the extent of audit lag, AGM lag and total lag. The present research considers
only the annual reports for listed banking companies. The present study only focuses on the
banking industry of Bangladesh. This research could be expanded to other sectors of the country
to get more accurate picture of audit delay in the country. The study draws the attention of
regulatory authorities and provides additional insights into the underlying causes for the audit
delay in developing countries in general and in Bangladesh in particular.
Key words: Timeliness; Accounting Disclosure; Audit Lag; AGM Lag; Total Lag.
1. Introduction
The financial information of the organization should be crystal and easily explicable. This
information follows the certain rules of accounting which are differ from business to business.
Therefore it is mandatory to issue the accounting disclosures which are used to make financial
information (International Accounting Standard #1, Paragraph Tenth).
The regulatory body of banking regulation Basel Committee issued a notification bearing title
Enhancing Bank Transparency. It elaborates that the transparency is the crux of factor for the
*
This research paper was presented at 2nd International Conference on Business, Technology and Engineering
(ICBTE) organized by Iqra University, Islamabad, Pakistan at 23-24 January, 2010.
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properly supervision and strong banking system. It also directs to banks to arrange continue
monetary information and other stake holders information well in time so that the stakeholders
may take their decisions timely after assessing the bank performance (Hossain, M. 2008)
Timely disclosure of financial performance of an organization enhances the market efficiency
and helps to build the confidence of related stakeholders. Investors, being one of the important
stakeholders of an organization, are very keen to know about up to date information about their
investments for timely decisions. In developing countries, most of the companies attempt to
linger on the disclosure of their accounts due to their poor financial performance and to avoid
taxes. Most of them even do not present their annual reports before annual general meeting
(AGM) of shareholders (Karim, Ahmed & Islam, 2006). Previous studies have identified several
factors responsible for irregularities in the corporate financial reporting of various organizations
and financial institutions. These factors range from getting tax advantages, having conflict of
interests between management and shareholders, future investment projects as well as ineffective
supervisory control and overall weak regulatory environment (Wallace, 1988; Cooke, 1992;
Robbin and Austin, 1986).
The present study attempts to focus on possible irregularities in corporate financial reporting of
banking companies in a developing country, Bangladesh. Companies Act 1994 requires that all
companies in Bangladesh should submit their annual reports before AGM at least nine months
prior to each financial year. Yet, in the past, most of the companies have delayed their accounts
hence deliberately violating the regulation. Though Securities and Exchange Commission (SEC)
of Bangladesh has initiated several measures to ensure the compliance of regulations by the
companies, most of the financial experts still believe that these measures have not been proved
effective.
The present study aims to investigate the extent to which the efforts initiated by regulatory
regime have been effective in reducing time lag in financial reporting in the banking sector of the
country. The organization of the paper is as follow: first it attempts to explore the un-weighted
scoring index to estimate the level of disclosure in the annual reports of listed banks in
Bangladesh over five years period from 2002 to 2006. Then it measures the timeliness attribute
of financial statements through audit lag and AGM lag. Methodology section discusses the
procedure for selection of banks and type of data required for analysis. Finally, the paper
establishes the impact of disclosure score on timeliness using linear and multiple regression
analysis.
2. Scoring the Index
Various scholars have adopted different approaches to develop a scoring index to assess the level
of disclosure in annual reports of financial institutions and banking organizations. For example,
Hossain et al. (1994) and Ahmed and Nicholls (1994) have adopted a dichotomous procedure in
which an item scores one if disclosed and zero if not disclosed. The approach used by Courtis
(1979), Barrett (1976 and 1977) and Marston (1986) was for a weighted disclosure index to be
employed. In some cases the researchers predetermined the weights subjectively.
In the present study, the annual reports of the Banking organizations have been examined against
unweighted index. In case of unweighted disclosure index, while measuring the level and extent of
disclosure, the disclosure will be heated as a dichotomous variable. Here, the only consideration is
that if a company discloses an item of information in its corporate annual report it has been
awarded 1 and if not, it has been awarded 0. In the disclosure model which we have used and
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followed in this study, the total disclosure score for a banking company taken to be additive. In our
study, unweighted disclosure index have been considered. Among the total of 144 items in the
disclosure index we had 44 items, which consisted of sub-items. For scoring the sub-items the total
score1 has been distributed equally because we have thought that all the sub-items are equally
important.
3. Measuring Timeliness: Audit Lag, AGM Lag, and Total Lag
Three measures of timeliness are defined: (1) audit lag, (2) AGM lag, and (3) total lag:
Audit lag: Audit lag means the interval of days between balance date and the date of the
auditors report. [The interval of the number of days from the year-end to the date recorded as
the opinion signature date on the auditors report. Or the open interval of the number of days
from the year-end to the date recorded as the opinion signature date in the auditors report.]
Audit delay represents the number of days elapsed between the balance sheet date and the date
auditor(s) sign(s) the financial statements.
AGM lag: AGM lag means the interval of days between the date of the auditors report and the
date of the annual general meeting. The open interval of the number of days from the opinion
signature date on the auditors report to the date of settlement of annual general meeting (AGM).
AGM lag represents the number of days elapsed between the date of signing auditors report and
the day on which the AGM is actually held.
Total lag: Total lag refers the interval of days between balance date and the date of the annual
general meeting. The open interval of the number of days from the year end to the date of
settlement of annual general meeting. Total lag represents the total interval time after balance
date before the directors formally present financial results to the owner of the entity.
Audit lag and AGM lag subdivide total lag into two components: the interval of days it takes
before audited accounting information becomes available for release (through the press), and the
time management takes to organize all necessary activities to bring on the companys annual
general meeting.
4. Establish the Impact of Disclosure Score on Timeliness
To test whether disclosure level of sample banks is affected by the timeliness of the banks
financial reporting, we have taken different measures of timeliness such as audit lag, AGM lag
and total lag to regress them with disclosure score. Accordingly, we have formulated different
null hypotheses. The following specific hypotheses have been tested regarding timeliness.
H1:
Timeliness as measured by audit lag does not affect the disclosure score of the sample
banks.
H2:
Timeliness as measured by AGM lag does not affect the disclosure score of the sample
banks.
H3:
Timeliness as measured by total lag does not affect the disclosure score of the sample
banks.
H4:
There is no significant association between three measures of timeliness [viz., audit lag
{AuL}, AGM lag {AgmL} and total lag {TotL} and the extent of disclosure.
4. Methodology
This section considers the research methodology of the present study. The aims of this chapter
are to set up the foundation of the statistical analysis and to highlight the statistical tools,
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techniques and applications of performance measurement regarding disclosure of financial

reporting. The present research decides to adopt the disclosure index method of measurement.
Using the disclosure index method the level of disclosure is measured by selecting items that might
be disclosed in annual reports and giving banks a score based on the number of disclosures actually
made. Despite its inherent problems (e.g., subjective judgments), disclosure index approach has
become an important vehicle for the measurement of the company information disclosure. Some of
the researchers used weighted disclosure indices while other researchers used unweighted disclosure
indices.
In weighted disclosure index, items are given different weights according to their level of
importance in financial disclosure. While in unweighted index, equal weights are given to each
item based on the assumption that all items are equally important (Hossain, 1998). The choice of
an unweighted index over a weighted one does not produce substantially different results (e.g.
Chow and Wong-Boren, 1987; p.537) and there are researchers who favored the use of
unweighted indices (e.g. Spero, 1979; p.57 and Rubbins and Austin, 1986). In the present study,
it has been decided to follow the un-weighted disclosure index approach in his study because we
assume that with respect to their level of importance, all items do not differ from each other and
are considered equally important for disclosure under present study. Most of the researchers as
mentioned above argue that the results obtained have been the same for the use of either method,
yet in our case, un-weighted disclosure index is an appropriate one to follow.
6. Sample Selection and Type of Data
The banking sector of Bangladesh comprises of four categories of scheduled banks. As of June 2008, 49
scheduled banks are operating in Bangladesh with a network of 6236 branches. The scheduled banks
have 3699 branches in the suburban or rural areas, which is 59.32 percent of the total number (SEC,
1993).
Before the study, it was decided that the sample would cover the annual reports of the banking
companies in Bangladesh for the year 2002 - 2006. The planned size of the sample represented 12
banks. The sample banks are listed on Dhaka Stock Exchange in Bangladesh. The sample banks
were selected by using of judgmental sampling approach, which is based on advance commencement
of business as banking companies in Bangladesh, (viz., the banks are old according to the year of
incorporation) and the availability of Annual reports.
The present study is based on the secondary information. The secondary information has been
collected from the corporate annual reports of the selected banking organizations. In the present
study the comprehensive corporate annual reports of the selected banking companies of the
selected years will be used to compute the disclosure scores. Banks annual reports encompass
most of the secondary information of this research. We have also conducted intensive library
work to collect other secondary data. Statistical tools like average, standard deviation, simple and
multiple regression, correlation, t tests have been used to analyze the data.
In unweighted disclosure index, as discussed earlier, equal weights are given to each item so it is
important to know if the organization discloses a particular item or not. For this purpose, we have
used a dichotomous scale in our study. Hence a score of 1 has been given if the Bank discloses a
particular item and 0 if it does not disclose it. Total Disclosure Score (TDS) for a Bank can be
calculated using the following formula:
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di
i =1
Where,
d = 1 if the item di is disclosed
d = 0 if the item di is not disclosed
n = total number of items
7. Results of the study
7.(a) Regression Studies between Disclosure Score vs. Audit Lag (AuL)
Table showing the Regression Studies between Disclosure Score vs. Audit Lag (AuL)
(Insert Table 1)
From the regression result we observe that values of R2 are small in case of year 2002, 2004,
2005 and 2006 and the significance levels of the regression co-efficients are above .05 for the
said years. Further, we observe that values of R2 are high in case of year 2003 and the
significance level of the regression co-efficient is below .05 for this year. So, our null hypothesis
is rejected which means that timeliness as measured by AuL affects the disclosure score.
7.(b) Regression Studies between Disclosure Score vs. AGM Lag (AgmL)
Table showing the Regression Studies between Disclosure Score vs. AGM Lag (AgmL)
(Insert Table 2)
From the regression result we observe that values of R2 are small and the significance levels of
the regression co-efficient are above .05. So, our null hypothesis is accepted at significance level
.05, which means that timeliness as measured by AgmL does not affect the disclosure score.
Further, we observe that values of R2 are relatively high in case of year 2002 and 2006 and the
significance levels of the regression co-efficient are below .12 of this year.
7.(c) Regression Studies between Disclosure Score vs. Total Lag (TotL)
Table showing the Regression Studies between Disclosure Score vs. Total Lag (TotL)
(Insert Table 3)
From the regression result we observe that values of R2 are small and the significance levels of
the regression co-efficient are above .05. So, our null hypothesis is accepted at significance level
.05, which means that timeliness as measured by AgmL does not affect the disclosure score.
Further, we observe that values of R2 are relatively high in case of year 2002, 2003 and 2006 and
the significance levels of the regression co-efficient is below .11 in case of year 2003 and
regression co-efficient are below .16 in case of year 2002 and 2006.
7.(d)
Independent Variables with their Labels and Relationships in the Regression
The description of the three independent variables, their labels and expected signs and
relationships are presented in Table 4.
(Insert Table 4)
Table showing the list of independent variables, their labels and expected signs and relationships
in the regression
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7.(e) Multiple Regression Models

Multiple linear regression techniques are used to test two alternative versions of each hypothesis.
The model is created using UDI as the dependent variable.
UDI = + 1 AuL + 2 AgmL + 3 TotL +
Where UDI =
=
=
total score received each sample bank under unweighted disclosure index;
the constant, and
the error term.
7.(f) Regression Studies between Disclosure Score vs. Multiple Variables

The goal of this chapter is to examine the association between the extent of information
disclosure in published annual reports and timeliness. Accordingly we have formulated null
hypotheses (H4). The anticipated association is examined by that hypothesis. The multiple linear
regression technique is used to test the two alternative hypotheses. To test whether disclosure
level of sample banks is affected by multiple variables, we have taken the measures such as audit
lag (AuL), AGM lag (AgmL) and total (TotL) to regress them with disclosure score.
Table showing the Regression Studies between Disclosure Score vs. Multiple Variables
(Insert Table 5)
From the multiple regression result we observe that values of R2 are small in case of year 2002,
2004, 2005 and 2006 and the significance levels of the regression co-efficient are above .05 for
the said years. Further, we observe that values of R2 are high in case of year 2003 and the
significance levels of the regression co-efficient are below .05 of this year. So, our null
hypothesis is rejected which means that timeliness as measured by Multiple variables affects the
disclosure score only of the context of the year 2003.
8.
Discussion and Conclusion
Regression results for this study indicate that level of disclosure score has negative relationship
with Audit Lag, AGM Lag and Total Lag. Table 1 shows a significant linear relationship
between the level of disclosure score and Audit Lag for the year 2003. It indicates that audit
delay in the year 2003 has significantly affected the level of disclosure score for the selected
banks in Bangladesh. Table 2 shows no significant impact of AGM Lag on Disclosure score.
Due to this insignificant impact of AGM Lag, significant impact of Audit Lag became
ineffective on total Lag as it does not show any significant linear impact on level of disclosure
score as shown in Table 3. Results of multiple regression indicate that combined impact of Audit
Lag, AGM Lag and Total Lag has been significant on level of disclosure score for the year 2003
for the selected banks in Bangladesh.
The regression models of disclosure score formulated here are identical to identify the
relationship between disclosure score and timeliness attributes in the sample banks. The
inclusion of the timeliness attributes used in the regression models has been discussed. The
results suggest that the explanatory variables used in the studies of timeliness proved to be
significantly negatively associated with disclosure score. AGM lag and total lag found not to be
significantly associated with disclosure score. Other variable audit lag failed to establish
significant positive relationship with the disclosure score. From the multiple regressions result
shows that only for the year 2003 timeliness attributes affects the disclosure score and in case of
year 2002, 2004, 2005 and 2006 the timeliness attributes do not affect the disclosure more. The
average interval of time for the listed Banking companies of Bangladesh was found to be 3.4
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months (the mean audit lag over the 5 years period ranges from 95 days in 2005 to 121 days in
2003 with a mean delay of 102 days for the entire population).
Average audit lag for the listed Banking companies of Bangladesh was found to be 102 days as
compared to 40 days for that of USA and 80 days for New Zealand and Australia. It indicates
that list banking companies in Bangladesh are taking more time to complete their audit and
hence the information in the annual reports does not seem to help investors and other
stakeholders to make timely investment decision and ultimately leads to loss of confidence of
investors on companies reports as well as their credibility.
9.
Directions for future research:
The present research considers only the annual reports for listed banking companies of
Bangladesh. This is the first study in Bangladesh that has been conducted on audit delay of listed
Banks in the country. The present study attempts to bridge the gap that exists in timeliness of
annual reports and their audit delay in developing countries in general and Bangladesh in
particular.
Further research could be expanded to Islamic banking and Takaful (Islamic insurance) sector is
required to assess the audit delay longitudinally in Islamic banking and Takaful companies to
judge whether results for these sectors differ significantly from the present study. Though the
sample consisting 12 listed banks (25% of the population) in Bangladesh is reasonable for
present study, actual results might differ slightly if a larger sample of banks is taken for the
present study.
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Owusu-Ansah, S. 2000. Timeliness of corporate financial reporting in emerging capital markets
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Annexure
Table 1: Results of Regression Studies between Disclosure Score vs. Audit Lag (AuL)
R2
F ratios
Significance Level
Y_2002
.090
.985
.344
Y_2003
.520
10.826
.008
Y_2004
.069
.746
.408
Y_2005
.210
2.653
.134
Y_2006
.032
.328
.580
Year
Table 2: Results of Regression Studies between Disclosure Score vs. AGM Lag
R2
F ratios
Significance Level
Y_2002
.237
3.111
.108
Y_2003
.039
.403
.540
Y_2004
.024
.250
.628
Y_2005
.009
.087
.774
Y_2006
.231
3.008
.114
Year
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Table 3: Results of Regression Studies between Disclosure Score vs. Total Lag
R2
F ratios
Significance Level
Y_2002
.192
2.380
.154
Y_2003
.245
3.248
.102
Y_2004
.061
.650
.439
Y_2005
.136
1.580
.237
Y_2006
.190
2.348
.156
Year
Table 4: Description of relationship of variables in Regression Studies

Variable Labels
Variables
Expected sign and relationship
AuL
Audit Lag
AuL has a negative relationship with the level of disclosure
AgmL
AGM Lag
AgmL has a negative relationship with the level of

disclosure
TotL
Total Lag
TotL has a negative relationship with the level of disclosure
Table 5: Results of Regression Studies between Disclosure Score vs. Multiple Variables
R2
F ratios
Significance Level
y_2002
.238
1.403
.295
y_2003
.525
4.982
.035
y_2004
.070
.338
.722
y_2005
.211
1.202
.345
y_2006
.233
1.370
.302
Year
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Perception of Advertisement as a Source of Knowledge on Consuming
Behavior of University Students
Aneeza Bashir
Department of Psychology, University of Sargodha, Sargodha
Najma Iqbal Malik
Department of Psychology, University of Sargodha, Sargodha
Abstract
The present study was conducted to find out the impact of advertisement as a source of new
information on consumers behavior with reference to their fast moving consumers goods
(FMCGs). Six brands of soap were taken as the unit of FMCGs and advertisement effects were
checked out relevant to these soap brands by using a self-explanatory questionnaire. The sample
was consisted of 150 university students (University of Sargodha). For results formulation
frequency, percentage, chi-square, and binomial test analysis were used. The study found out that
the purchase of expensive product was independent of consumers income group and repetition
of advertisement. Results also revealed that consumers considered advertisement as a reliable
source of new information and the information gained from advertisement was independent of
the information gained from other sources. Results also indicated that poorly presented
advertisement had significant negative impact on consumers behavior but it brand loyalty was
not affected.
Keywords: FMCG, Consumer Behavior, Brand loyalty
Introduction
Advertising sells a great deal more than products and services; it sells values, images, and
concepts of success and worth, love and sexuality, and popularity and normalcy for telling us
who we are and who we should be. The social consequences of advertising has long been the
subject of social commentary, with the main criticism that advertising presents an unrealistic or
idealized picture of people and their lives. According to Lasch (1978), in effect, advertising tends
to create an idealistic world in which people are rarely ugly, overweight, poor, struggling, or
disabled. Given the pervasiveness of advertising, it is not surprising that researchers have
theorized and investigated consumers attitudes toward advertising and the consequences of
idealized images for more than three decades. Work of Bauer and Greyser (1968) served as a
foundation for researchers to examine consumers attitudes towards advertising as they
suggested that advertising has two broad effects on society; economic and social.
Advertising is non-personal because it is directed to groups of people rather than to specific
individuals. Advertising communicates information about products or ideas, whether it is the
features of a new videocassette recorder or the benefits of voting for a particular candidate. An
identified sponsor such as a company selling a products or a non-profit group seeking donations
pays for the add message to be placed in the mass media that reaches many people at once. The
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information is intended to persuade or influence people to buy a particular product, vote for a
specific candidate, or donate money to a worthy cause. Sometimes the message is intended to
persuade people against acting in a certain way, which is the point of ads that highlight the
dangers of smoking or drug abuse (Jugneheimer & White, 1980). Advertising was seen as a
stimulus that gives rise to a conditioned response. But today much of advertising is designed to
move the consumer through a process of increasing commitment, culmination in purchase. This
technique is based on hierarchy of effects. The suggestion in all of them is that there are casual
relationship between changes in persons attitude about a product and persons attitude to buy
that product. The models of advertising suggest that to be effective, any piece of persuasive
communication must carry its audience through a series of stages, each stage being dependent on
the success of previous stage (Wilmshurst, 1985). According to the model of Lavidge and Steiner
(1961), people go through seven steps to reach the threshold of purchase by seeing an ad: (i)
unaware of good or service, (ii) awareness of product, (iii) knowledge of what product offer, (iv)
liking for a favorable attitude toward the product, (v) a preference for one brand over another,
(vi) a desire to buy the product and (vii) a conviction that buying would be wise. But Daniel
Starch put forward the idea in his model that in order to be more effective, advertising must be
seen, read, believed, remembered and acted upon. Similarly another model is AIDA model
which suggest that an effective advertisement is one that gains attention of the audience. When
people are exposed to any product, service or idea, it gain attention of the people that lead to
interest in the product, and then to create desire to own product and finally to action.
Several studies have described that attitudes toward advertising are a function of
consumers perceptions of the various aspects of advertising such as its informational value and
its use of idealized images (Andrews, Durvasula, & Netemeyer, 1994; Muehling, 1987; Pollay &
Mittal, 1993). According to Grubb and Grathwohl (1967), all products and brands are thought to
have symbolic meanings and project certain images, and the purchase, display, and use of goods
communicate this meaning to consumers. Symbolic value is expected to equate the consumers
self-image, to have an impact on individual preference, where preferences may develop for
certain brands because they are perceived as reflecting their own self-image or projecting an
image that they aim to possess. If the meaning of a product is not associated with the consumers
self image, it is likely to have little influence on purchasing behavior. So the perceived image of
a product and consumers own self-image highly influenced the impact of product. Researches
also indicated that consumers prefer the products, services, or stores that maintain images
compatible with their own personal perception of self (Dolich, 1969; Sirgy, 1980). With regard
to the economic point of view, some research findings support that advertising results in better
products and promotion competition (Andrews, 1989; Anderson, Engeldow, & Becker, 1978;
Muehling, 1987; Reid & Soley, 1982), while some researches indicate the opposite results
(Haller, 1974; Pollay & Mittal, 1993). Despite of these results, a lot of studies indicated that
consumers do not believe that advertising lowers prices of products (Andrews, Durvasula, &
Netemeyer, 1994; Muehling, 1987; Shavitt, Lowrey, & Haefner, 1998). Therefore consumers
seem to be somewhat ambivalent about the effects of advertising on the economy.
Another focus of research involving attitudes toward advertising includes personal uses
of advertising, such as source of knowledge about products. With regard to advertising being a
source of product information, it appears that sentiment has become more favorable during the
past few decades. A lot of studies have found that, on average, a majority of respondents do not
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feel advertisements are reliable sources of information about either product quality or product
performance (Barksdale & Darden, 1972; Barksdale, Darden, & Perreault, 1976; Barksdale &
Perreault, 1980). However, another research indicated that a strong majority of consumers do, in
fact, endorse advertising as a source of information (Calfee & Ringold, 1994). In more recent
studies, it is concluded that audience s do tend to use advertising to find out about local sales and
particular brands, as well as product and service availability (Pollay & Mittal, 1993; Haefner,
1998). These studies revealed that advertising is perceived as a source of knowledge in younger
audience more than older audience but there are mixed research findings regarding the
usefulness of advertising as a source of information about social roles and lifestyle imagery due
to different subject groups and operationalizations of constructs. The research findings of
Richins (1991) revealed that female college students felt advertising was important for helping
select particular fashion and personal care or cosmetic items. Another study reported that
advertising is only used by a minority of respondents for learning about fashion or buying habits
of specific reference groups (Pollay & Mittal, 1993). They also reported that students had more
favorable opinions about the value of advertising in providing social role, lifestyle imagery
information than adults. Customer roles (Sheth & Mittal, 1999) and consumer involvement
(Mowen & Minor, 1998; Katz, 1960; Mullen & Johnson, 1990; Chiagouris, 1997; Clark, Brock
& Stewart, 1994) also effects the buying behavior of consumer. Consumer innovativeness in part
accounts for the timing of the decision to adopt an innovation (Foxall & Goldsmith, 1994). The
most important thing, which influences the individual behavior, is the consumers family, social
and cultural environment (Stanton & Futrell, 1987; Loudon & Bitta, 1994; Cacioppo, Haugtvedt
& Petty, 1992).
1.1.
Rational of the Study
This study was conducted to find the impact of advertisement as a source of knowledge
on consumers behavior with reference to their fast moving consuming goods (FMCGs). For
that purpose soap was taken as FMCG content and perception of advertisement as a source of
knowledge was checked out. Advertisement is everywhere in our life like on television, radio,
newspaper and billboards are common mediums through which advertisement reach to us.
Advertiser and marketers are more concerned to know what are the consumers motives and their
purchasing pattern in order to use different strategies to influence their consumer behavior and
FMCGs are the main focus of marketing researchers.
The consumers use FMCGs in daily routine and demand uniqueness and variety among
them that is why marketers focused heavily to judge psyche of consumers. Advertisements of
FMCGs are mostly concern about variety, upgrading of products, saving schemes to make it
more influencing and effective for consumers psyche, so it is important to find out the elements
of good advertisements as if the consumers are prone to the advertisement effectiveness then,
which element of advertisement is more effective? Does the income play a role in determining
advertisement effectiveness or not? Does advertisement plays a role as a source of knowledge for
the consumer?
Malik (1999) had done a limited research on advertisement effectiveness and consumer
behavior of women university students but the present study intended to expand the sample in
order to study the buying behavior of male university students either they are influenced by the
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advertisement or not. This study may serve in helping advertisers and marketers to know the
perception of consumers about advertisements.
2.
Method
2.1.
Objectives of study
The study aimed to see the effects of advertisements on consumers behavior by pursuing the
following objectives:
To study the impact and receptivity of electronic advertisement on university students.
To find out the receptivity of advertisement as a knowledgeable source.
To explore the impact of poorly presented advertisements on consumer behavior.
To determine the impact of repetition of advertisement on purchasing behavior of

consumer.
2.2.
Hypotheses
A number of hypotheses were formulated in order to achieve the objectives of the study:
i. Information gained from advertisements will be independent of the opinions from other
sources.
ii. The purchase of expensive product will be associated with income level of consumer.
iii. Repetition of advertisement will be associated with purchase of expensive product.
iv. Brand loyalty is independent of the effect of advertisement.
2.3.
Definitions of variables
2.3.1. Income Group: According to the need of the study two different income groups were
introduced in order to see the impact of advertisement on economic class. Two income groups
are:
2.3.1.1. High Income Group: High-income group involves the people having above Rs.
15,000 monthly fathers income.
2.3.1.2. Low Income Group: Low-income group involves the people having up to Rs.
15,000 monthly fathers income.
2.3.2. Brand Loyalty: Brand loyalty represents a favorable attitude towards a brand resulting
in consisting purchase of the brand overtime (Assael, 1992).
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2.3.3. Acceptance of Advertisement: Acceptance is the extent to which, a consumer relies on

the advertisements information and act accordingly to the appeal, keyword / caption, stanza,
slogan and model personality (Wells et al., 1995).
2.3.4. Consumer Behavior: The decision process and physical activity individuals engage in
when evaluating, acquiring, using, or disposing of goods and services (Loudon & Bitta, 1994).
2.4.
Sample
In this research, a sample of 150 students (N = 150) was selected from University of Sargodha
by convenient sampling technique. The sample consisted of both boys (n = 75) and girls (n =
75) students. Age level was constant ranging from 18 to 26 years. They all were viewers of
electronic advertising.
2.5.
Instruments
The main objective of the study was to analyze the effectiveness of advertisements on the
university students of University of Sargodha. For this purpose a testing booklet consisting of
demographic data sheet and self-explanatory questionnaire was adopted from Malik (1999) and
used as a tool for data collection.
For this study a self-explanatory questionnaire consisting of 25 fixed item responses was adopted
along with the instructions. Questionnaire items contained informative queries about advertised
brand and its consumption process. Question no. 1 about father's income consisted of tworesponse categories i. e. high-level income above 15,000 and low-level income up to 15,000.
Question no. 2, the brand of soap consisted of six brand names and one category of any other.
The items no. 3-20 of questionnaire had 3-response categories i. e., mostly, sometime, and never,
whereas items no. 21-25 had two response categories i. e., yes and no. The technique for coding
questions was that those questions showing high level of acceptability in favor of advertisement
were given high scores and those which show lower level of acceptability were given low scores.
So some questions were scored in negative direction. Coding scheme for question no. 11, 17, 19,
20 having response categories of mostly, sometime and never were assigned the score of 0, 1 and
2 respectively whereas coding scheme for question no. 3-10 and 12-18 having response
categories of mostly, sometime and never with scoring 2, 1 and 0. Rest of the questions
21-25 have yes and no response category with 1 and 0 scoring. Score range of scale was 0
41.
2.6.
Research Design
Present study was completed in two phases:

2.6.1. Phase I (Pilot Study)
Sample and Procedure: The questionnaire was pilot tested and distributed according to the drop
off method among the survey sample of students (N =30, boys n = 15, girls n = 15) of University
of Sargodha. Procedure was that willing students were given the questionnaire with some
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instructions to help out the filling of the questionnaire. Pilot study data were analyzed and results
were formulated.
2.6.2. Phase II (Main Study)
Sample and Procedure: After pilot study in phase II, a sample of N = 150 was used to collect the
data. Data were collected from n = 75 boys and n = 75 girls students. The questionnaires were
distributed by drop off method. Procedure was that willing students were given the questionnaire
with some instructions to help out the filling of the questionnaire. After data collection it was
analyzed by the help of SPSS.
Questionnaires were filled easily. Field experience was good, because the respondents were
educated and could understand the importance of the study, so they cooperated.
3.
Results
3.1.
Phase I (Pilot Study)
The data of 30 students of University of Sargodha was analyzed on the scores of Effects of
Advertisement scale. As the first step the reliability of the scale was obtained by Coefficient
Alpha and validity of scale was measured by content and construct validity. The results indicated
a significant Alpha Reliability Coefficient of scale for the sample of the study (r = .65).
The scale, which was used in study was content valid. The content validity of the scale was high
because each and every item of the scale measured the effectiveness of the advertisement. Each
item was directly related to advertisement of particular brand. The items measured different
aspects of advertisement of particular brand, which might have an influence on consumers. If a
procedure lacks reliability, it also lacks content validity (Heiman, 1995). The satisfactory
reliability showed that the measure had content validity because if the reliability would not be
significant, the measure would not be content valid. Each item was derived from different
theories of advertising like pressure response theory, active learning theory of advertising and
low involvement theory given by Krugman (1965). So it was concluded that the scale used in the
study was content valid.
3.2.
Phase II (Main Study)
The second phase (Main Study) was carried out on comparatively larger sample in order
to see the effects of advertisement on consumer behavior with respect to soap brands (FMCGs).
The results revealed that whatever the brand consumers had decided to purchase; the
advertisements influence them to change their brand loyal attitude to at least check the newly
advertised product once in a lifetime. The study explored the effectiveness of advertisements of
different brands of soaps so for that preferred brand of consumers was also found out with
relevance to its influential and persuasive advertisement.
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4.
DISCUSSION
4.1.
Phase I
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The present study was aimed to determine effects of advertisement on consumer

behaviors. Psychometric properties of scale effects of advertisement were also established on
the sample of our study.
The reliability estimate of the measure was computed to see the internal consistency of
scale. The Coefficient Alpha of scale was .65, which was significant (see Table 1). Our scale was
content valid. First of all it had face validity. All the items of scale were related to advertisement.
It was very clear from one glance that each and every item of scale inquired about different
aspects and components of advertisement with respect to its effectiveness. The items measured
the effects of advertisement of different brand of soaps. The scale contained the questions about
effective of components of advertisement. In the process of adaptation of this scale, committee
found out that either this scale met objectives of the study or not. As this test met our objectives,
so it was also proved to be valid. Scale was valid because it had satisfactory reliability (.65) and
according to Heiman (1995) that a test would be valid if it proved to be reliable.
The scale of Effects of Advertisement used in the study was also proved to be valid on
the basis of previous researches in which this scale was used. Nazir (2000) conducted a study
effects of advertisement on consumer behavior using this scale. The results of the study proved
that this scale measured what it supposed to measure. Malik (1999) also conducted a similar
research on women university students by using this scale and gained significant results. In
nutshell the scale Effects of Advertisement was a reliable and valid measure.
4.2.
Phase II
Our hypothesis that purchase of expensive product will be associated with income level of
consumers was not supported as the results indicated that there was non-significant relationship
between income group and purchase of expensive product (see Table 1). So it can be concluded
that no matter to what social class consumers belong, advertisement effect them equally. It was
clear from this discussion that advertisement could attract any income group having no influence
on their purchasing attitude in order to buy the expensive product.
According to Kiechel (1993) although only whit-collar jobs are portrayed in advertisement but
still it had equal impact on all income groups. Relative Income Hypothesis given by Loudon and
Bitta (1994), which explained that peoples consumption standards are mainly influenced by
their peers and social group rather than there absolute income level. Consumers wanted the
quality not the expensive product. If the quality of brand is good and satisfactory to their needs,
expensiveness becomes the secondary phenomenon. Results also revealed that repetition of
advertisement and purchase of expensive product had non significant relationship (see Table 2).
It could be explained, as consumers were not influenced by the repetition of commercials unless
the advertised product seemed satisfactory to them. Ray (1973) gave the think-feel-do model,
which described that consumers approached a purchase situation using a sequence of response
instead of being influenced by the repetition of advertisement. Marketers should not expect
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continuous positive change among consumers from increased repetitions of a commercial. At

some point message wear out occurs. Here, the positive effects of repetition diminish because of
audience boredom, inattention and increased cognitive response activity that is less positive in
content than the message. Similar findings were gained from previous researches (Munch &
Swasy, 1988, Cacioppo, Petty & Quintanar, 1982, Calder & Sternthal, 1980, Cacioppo, & Petty,
1979, Miller, 1976). It can be inferred that moderate level of repetition of advertisement over
time appears to influence attitudes positively.
Results also revealed that consumers considered advertisement a reliable source of
information as compared to any other source like friends and neighbors (see Table 3 & 4). These
results were also inline with a previous research according to which, there were non significant
relationship between social class and information searching (Hugstad, Taylor & Bruce, 1987).
Although the environmental factors are important in decision making and getting information but
the most reliable and trustworthy source is the ad of particular brand. Opinion leaders (models)
work as the informative agent, so advertisement becomes a reliable source. All these issues
covering appeal phenomena including attractive personality, keyword / caption and source of
information concluded that advertisement had a positive impact on consumers. The study also
revealed that there was non significant relationship between effective advertisement and
changing brand loyal attitude (see Table 5). Consumers did not change their tested brand after
watching the advertisement of new brand. But our results were not inline with previous research
literature finding by Assael (1995) that after 1990s there had been witnesses a decrease in brand
loyalty to burst of advertising mania. Effective advertising campaigns influence people. Brand
loyalty is not an all-or-none phenomenon. There are several types of brand loyalty besides
undivided loyalty. In some cases people may have divided loyalty between two brands. In some
cases they may largely loyal to one brand, but occasionally switch to other brands, perhaps to
break the monotony. Our findings of brand loyalty could be supported by the point that
consumers might continue to buy the same brand because other brands are not readily available,
a brand offers a long series of price deals, or consumers want to minimize decision making. On
the other hand it was also revealed from results that if the brand was poorly advertised, it had no
impact on consumers (see table 6). And consumers did not purchase the product frequently due
to its poor presentation. Consumers want new and novel things, so in order to fulfill their needs,
advertisers and marketers designed novel ads just to gain their attention. It was also found that
advertisement had negative impact on consumers (see Table 7). It means that may be due to
ineffective personality or model, poorly presented keyword / caption, people get negative impact
of advertisement. In order to be more effective and influential in a positive manner, the ad of
particular brand must have all the qualities of a good ad. In nutshell it was concluded that
people form attitudes towards objects on the basis of their beliefs, perception and knowledge
about these objects.
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Annexure
Table No. 1
Relationship between Income Group and Purchase of Expensive Product (N = 150)
Income
Low Level
High Level
(Up to Rs.15000)
(Rs.15000 & above)
Yes
41
48
89
No
37
24
61
Total
78
72
150
Total
Expensive
Product
3.07
df = 1, p = n.s
Results in the above table indicate that there were non-significant relationship between the income group
and purchase of expensive product { (1) =3.07, p = n.s}.
Table No. 2
Relationship between Repetition of Advertisement and Purchase of Expensive Product (N = 150)
Expensive Product
Yes
No
Total
Mostly
17
14
31
Sometime
37
23
60
Never
32
27
59
Total
86
64
150
Repetition of
Advertisement
0.767
df = 2, p = n.s
The results of table 2 revealed that there was nonsignificant relationship between repetition of
advertisement and purchase of expensive product. { (2) = 0.767, p = n.s}. People do not influence by the repetition
of advertisement in order to purchase expensive products unless it seems satisfactory to them.
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Table No. 3
Frequency and Percentages of Advertisement as Source of New Information (N = 150)
Response Category
Frequency
Percentage
Mostly Gain Information
32
21%
Sometime Gain Information
75
50%
Never Gain Information
43
29%
Total
150
100%
Results revealed that almost 21% - 71% of the consumers considered advertisement as a source of new
information and 29% thought that they did not gain any information from advertisement. Further to be more
confident in the advertisement task as an informatory agent of product, was applied to find out the comparison
weather information gained from advertisement is independent of the other informative sources (friends, neighbors).
3.2.4.
Table No. 4
Relationship between Information Gain from Advertisement and Some Other Sources (N = 150)
Other Opinion
Mostly
Sometime
Never
Total
Mostly
11
17
37
Sometime
39
21
13
73
Never
24
16
40
Total
74
54
22
150
Advertisement
15**
df = 4, **p < 0.01
The above table indicated that information gained from advertisement was independent of the opinion from
some other source { (4) = 15, **p < 0.01}.
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Table No. 5: Brand Loyalty of Consumer and Effect of Advertisement (N = 150)

Response Category
Score
Changing tested brand with new advertised brand
85
Do not change tested brand with new advertised brand
65
Total
150
1.63
p = n.s
The results of binomial test suggest that advertisement had no significant impact on brand loyalty (z = 1.63, p = n.s).
Table No. 6 Frequency and Percentages of Effect of Poorly Presented Advertisement (N = 150)
Response Category
Frequency
Percentage
Mostly
72
48%
Sometime
37
25%
Never
41
27%
Total
150
100%
Effects of poorly presented advertisement were also explored and the above table revealed that almost 25 % - 48%
consumers feel that they will not purchase the product if it is poorly (bad location, unimpressive personality,
keyword / caption or slogan, attacking nature on other competitive brand) advertised.
To check weather purchase pattern was affected negatively due to poor advertisement as along with the consumption
blockage consumers feel bad about the product and bad image of the product force it to be out of market.
Table No. 7 Frequency and Percentages of Negative Effect of Advertisement (N = 150)

Response Category
Score
Advertisement does effect negatively
101
Advertisement does not effect negatively
49
Total
150
4.24**
**p < 0.01
The results of binomial suggest that poorly presented advertisement had significant negative impact on
consumer behavior (z = 4.24, **p < 0.01).
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The Relationship between the Leadership Styles of Heads of Departments and Academic
Staff's Self-Efficacy in a selected Malaysian Islamic University
Ismail Hussein Amzat
Department of Foundation and Educational Administration, Sultan Qaboos University, Oman
Ali Khamis Ali
Department of Educational Administration, Nizwa University, Oman. Faculty of Education and
Human Development.
Abstract
This study examines the perceptions of academic staff on the leadership styles practised by
Heads of Departments in a selected Malaysian Islamic University. It also investigates the
perceptions of academic staff towards these leadership styles in relation to their own selfefficacy as well as the relationship between the leadership styles of Heads of Department and the
self-efficacy of academic staff. The Pearson Correlation showed that there was a positive
significant relationship between them. The findings of this study revealed that the higher the
Laissez-Faire leadership style exercised by the Heads in a selected Malaysian Islamic University,
the higher/greater is the self-efficacy of the academic staff
Keywords: Leadership styles, Head of departments, Academic staff, Self-efficacy
1. Introduction
At the helm of every successful organisation there is a good leader. Presently, higher
learning institutions are demanding a restructuring of the education system in order to meet new
developments in the world. The 21st has brought new and difficult challenges some of which are
globalisation and technology. The starting propositions are the role of universities leadership to
adopt the changes and adapt to the new challenges. The impact of globalisation and technology
on educational development as an example has called for dynamic leadership and various
leadership skills and styles. Expectations of higher education are rising with government,
parents; employers and students alike have rising expectations of what higher education can or
should deliver (Robin, 2009, p.25).
Sequential to the above matter, for the educational realm to grow and be able to face the
global challenges, educational settings need a variety of high quality leadership styles with
management skills. In light of this, universities are required to be governed effectively and
efficiently by their presidents/rectors while faculties need to be administered competently by
deans and heads of departments in order to adapt to the changes and effect continuous
improvement. The universities and faculties would find it imperative to stimulate their staff to
employ and capitalize on their skills and capacities effectively. It is also their duty to instigate
and encourage their staff to be more productive for the sake of the universities development
(Sclecthly, 1991). Currently, we need a variety of leadership styles to manage and supervise the
state of affairs in higher learning institutions. Any organisation without a good leader faces
serious problems.
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There are many definitions of leadership in the literature. Leadership could defined as a
process or a way of social influence in which one person is able to demand assistance and
support for other people in the achievement of a common task (Chemer, 2000, p.27). Referring
back into history, the early research on leadership was based on the psychological focus of the
day, which was of people having inherited characteristics or traits and leadership being defined
in terms of traits, behavior, influence, interaction patterns, role relationships, and occupation of
an administrative position (Yulk, 1998, p. 2). Similarly, Leadership is the process of
influencing others to understand and agree about what needs to be done and how it can be done
effectively, and the process of facilitating individual and collective efforts to accomplish the
shared objectives (Yukl, 2002, p. 7). From these definitions, we can conclude that leadership is
about influencing followers in achieving targets and objectives with the help of different styles of
leadership in different situations. This study embarks on employing Kurt Lewins leadership
styles theory according to which leadership styles were divided into three styles: Authoritarian
Leadership (Autocratic), Participative Leadership (Democratic) and Delegative Leadership
(Laissez-faire).
Moreover, leadership consists of knowledge and skills which influence and direct other
activities (Khalili, 1995). Based on Fiedler's model, school performance depends on styles that
the principal has stated in the situations that occur in the school. Till now, there is a lack of a
specific definition of leadership style in the literature. Authors rather define leadership in general
and few have defined it basically without any deep meaning of what leadership style is all about.
Based on extensive reading, the earliest studies defined leadership styles as the manner by
which individuals in a position of authority influenced group activity were conducted This
definition was first defined by Lewin and colleagues in the late 1930s (Lewin, Lippitt, & White,
1939, Robert & David, 2000, p.1). Fertman (1999) added in a resemble manner to the
definitions mentioned early bydefining leadership style asthe manner and approach of providing
direction, motivating people and achieving objectives. They are behavioural models used by
leaders when working with others. He went on to say in his definition that leadership style is a
form of cross -situational behavioural consistency. It refers to the manner in which a leader
interacts with his or her subordinates.
In another definition, leadership style is seen as interaction between leaders and their
subordinates which determines the teams success in any hierarchical organisation (Martin,
Ganna, & Matthias, 2009). However, some authors perceived leadership style as exactly how
leaders carry out their responsibilities and they believed that there is no one standard, correct
style for all leaders in all circumstances at all times. Thus, the application styles depend on the
situation. The situation may demand a leader to be democratic and sometimes autocratic as long
as he/she applies the suitable style that is needed to reach the target and get the job done.
Different leadership styles produce different outcomes and are suited to different times and
situations. Fielder and Chemers (1984) felt that the use of the leadership role or function
involves the motivation, direction, supervision, guidance, and evaluation of others for the
purpose of accomplishing a task. With regards to the definitions stated above, leadership styles in
academic settings could be also be mainly defined as the approaches which an administrator
applies in making things work, developing a rapport with teachers and staff members and
supervising them in order to achieve educational goals and objectives.
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The Malaysian Islamic University has set up various organisational mechanisms to

facilitate consultation whether in the overall management of the University or in any particular
setting. Furthermore, in terms of staff performance, the annual report of the University
(2001/2002) reported that 60% of the respondents revealed that their superiors never discussed
their work performance with them. It was unanimously agreed that the evaluation of staff
performance must be made known to the staff so that the below par and mediocre staff would
have the chance to improve themselves, whilst better performing staff could be motivated to
improve further.
2. Purpose of the Study
This study has three main purposes. Firstly, it aims to investigate the perceptions of
academic staff of the leadership styles of their Heads of Departments. Secondly, it aims to
investigate the perceptions of academic staff of their own self-efficacy. And thirdly, it attempts
to investigate the relationship between the leadership styles of Heads of Department and the selfefficacy of academic staff in a Malaysian Islamic University.
3. Research Questions
1. Is there any significant difference in perceptions of the leadership styles of Heads
according to gender, age, academic qualifications, Faculties/Centres, length of service or
academic experience?
2. Is there any significant difference in the perceptions of academic staff of their own selfefficacy according to gender, age, academic qualifications, Faculties/Centres, length of
service and academic experience?
3. Is there any significant relationship between the leadership styles of Heads and the selfefficacy of academic staff?
4. Literature and Theories
Previous research has found significant relationships between leadership style and staff
self-efficacy (Teng, 2006). Besides, a relationship was also found between teachers/academic
staff self-efficacy and involvement in decision-making (Teng, 2006). The literature suggests a
correlation between school leadership and student outcomes as well as a correlation between
student outcomes and teacher efficacy (Phillips, 2009). Many educationists believe that the good
relationship of an effective principal with staff and students in secondary school administration is
the foundation for a schools progress and development. The relationship of educational leaders
and staff with students could be influenced by various school leadership styles involving some
aspects of human relations such as the relationship between staff and students, on the one hand,
and staff and the community, on the other (Northouse, 2006 and Nakpodia, 2009). In this
situation, educational administration must concern itself with the satisfaction of staff and
students in their work. This satisfaction could be found in an administrative environment where
there is an effective relationship between the principal, the staff and the students (Northouse,
2006 and Nakpodia, 2009).
4.1 The Democratic Leadership Style
From the literature, democratic leadership style has been defined with different
characteristics, looking into various angles and backgrounds. Lewin defined democratic
leadership style as a style that involves people in the decision-making while the execution of the
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decision may be from the leader after facilitating consensus in the group. At the same time, the
decisions may fail to reach the final stage when there are a lot of options flowing in and out
without limit and control. This could be the disadvantage of applying the democratic leadership
style. Additionally, in terms of policy-making, the democratic leadership style plays roles in
implementing policies collectively and tasks are achieved from group discussions. In this
situation, members are given freedom of expression in relation to the issue of division of labour.
In this kind of environment, criticism is allowed and praise is given (Lewin, 1939 and Miner,
2005).
A similar definition was given by Stowell (2004), who defined the democratic leadership
approach as an approach that exercises minimal control over the employees or workers. It
involves the employees in the decision-making process and allows participation (Stanley, 2006).
In fact, the democratic style or democratic leader encourages subordinates to identify problems
and suggest solutions to overcome them. Besides, he shares decision-making with group
members, explains to the group the reasons for personal decisions and objectively communicates
criticism and praise (Altalib, 1991). Democratic bosses allow consultation, inclusion and are
humanistic. They are people-oriented, building consensus, thriving on informality, tolerant in
handling conflict, and obtaining the entire team credit. (John, 1990).
From various authors definitions, the literature and peoples opinions, we can
comprehend and derive our conclusion that the democratic leadership style is about involving
employees in the decision-making process. The style is about participation, freedom of
expression and opinion for good decision-making to take place and the implementation of the
decision. Last but not least, democratic leadership style is people-oriented and seems to believe
in human relations.
4.2
The Autocratic (Authoritarian) Leadership Style

The autocratic style is a style of controlling that expects leaders or managers to make all the
decisions for the workers or employees. This style is perceived as a work-oriented style and
works towards how the work is done (Stowell, 2004 and Stanley, 2006). According to Sinha
(1987), authoritarian leaders:
Use power and are status oriented, have an inflated ego, appeal to personal loyalty, and
over performance.
Are subservient to superiors and dominate subordinates, take up a moral and patronizing
stance, and are insecure, and mistrustful.
Are highly secretive and blame others for failures and claim success as their own. That is,
they do not give credit where credit is due (Maaran, 2001).
It had been shown that the autocratic leadership style may result in a rigid, unimaginative
organisation. Also, since subordinates are not invited to participate in the decision-making
process, they may not be committed to the aims of the organisation. The problem is that such
managers have little trust in their subordinates ability, believe that only material rewards will
motivate people and issue orders to be fulfilled with no questions (Altalib, 1991).
The authoritarian leader, according to Lewin, tends to use power and authority to command.
It is a directive style where one-way communication takes place and little input is sought from
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followers. Besides, one of the drawbacks of this leadership style is that subordinates could be
frustrated by the autocratic ways of decision-making and it could lead to a decision failure when
there is no involvement and contribution from the subordinates (Lewin, 1939). Further, it could
be a better style when there is no need for contributions requested from the followers, and when
any lack of participation would affect the results of the decision. This style could also be
advantageous for enabling a quick decision-making process and it could motivate the respective
and powerful leader to control employees autocratically in putting things in order (Lewin, 1939).
In addition, autocratic bosses are resilient and focused on the bottom line, on output and results,
not people-oriented. They demand obedience and thrive in a formal, rigid, rule-bound
environment. They believe in little participation, and are most interested in personal power to
obtain credit (John, 1990).
From the characteristics and descriptions given for this style, we can understand that the
autocratic leadership style has been labeled and defined as a wrong style for leaders to apply. It
has been described in most of the literature somehow or bluntly as a bad characteristic and a
style in which a good relationship with the followers or subordinates does not exist without
considering its good side as every style has advantages and disadvantages. As a matter of fact,
being an autocratic or authoritarian leader does not mean being evil. We should take it positively
and look at the advantages of this leadership style. An authoritarian leader is perceived to be
good in terms of motivating people to work properly and produce good work. This kind of leader
helps workers in understanding the gravity of the work and the contribution of their work to the
system as well as reassuring them that what they do matters. Overall, it enables people to do
things the way they want, as long as the end result is acceptable (Goleman, 2000).
4.3 The Laissez-Faire Leadership Style
Now we come to the style which people and researchers perceive at the weakest and most
ineffective management style. Laissez-faireleaders are the kind of leaders who relinquish their
responsibility or power by avoiding making decisions (Bass, 1990b). According to this style,
decisions are left for the subordinates to make and execute. It is a situation where subordinates
are yet to decide their tasks and job responsibilities.These descriptions are similar to
Lewinsoriginal 1930s definition where he was saying that laissez-faire leaders minimize their
involvement in the decision-making, and let the subordinates decide on issues for themselves.
This situation occurs when a leader does not have the adequate understanding of a given
decisional problem. Besides, there are some situations in higher institution where the LaissezFaire approach can be effective when the staff are aware of the nature of their jobs and they are
competent to carry out the task successfully. Altalib (1991) has defined the Laissez-Faire leader
as a leader who has little confidence in his leadership ability, sets no goals for the group and
minimizes communication and group interaction (p.55). Laissez-faire leadership is considered
as a hands-off approach to leadership (Northouse, 2004).
The Laissez-Faire style is, just as the term suggests, to let (other people) do as they
choose and ignore others, and so members go their own way. The Laissez-Faire technique at the
university level is usually only appropriate when leading a staff of highly motivated and skilled
lecturers, who have produced excellent work in the past. Once the leader has established that his
team is confident, capable and motivated, it is often best to step back and let them get on with the
task, since interfering can generate resentment and detract from their efficacies or efficiency. In
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Lowas leadership studies (cited by Luthans, 1995), Laissez-Faire was defined differently
compared to the previous definitions. It stated that the Laissez-Faire leadership climate
actually produced the greatest number of aggressive acts from the group (Luthans, 1995, p.
343). The greatest advantage of this style is that there is little work for the leader, and when
group members are "self-starters", the leader has to do very little to look good (Beach
&Reinhartz, 1989).However, there are some disadvantages to this style such as "lower
productivity or task accomplishment, poorer quality of work, and less satisfaction with work"
(Beach &Reinhartz, 1989, p.63).
Looking from another angle, this style could be advantageous for the subordinates,
according to Lewin, in receiving all the decision-making powers to make effective decisions
within their realm of expertise. Besides, subordinates might be motivated by receiving all these
powers which may help them to enrich their jobs. But this could lead to mismanagement, lack of
coordination and unstructured work. Furthermore, research such as Bass (1990a) and
Yammarino and Bass (1990) has found an adverse effect of the laissez-faire leadership style on
employees work-related outcomes. Therefore, the leadership styles of leaders influence
positively or negatively groups or employees ways of working. The result of Daniels (2003)
along with Ronald Lippitt on group structure and behaviour shows that the democratic leadership
style provides changes and these changes have good results eventually. A group with an
autocratic leader or structure has dysfunctional decision-making processes while the laissez-faire
group structure is found to be very inefficient and unproductive.
In conjunction with what had been said about the laissez-faire style above and its
negative impact on workers and the organisation, research conducted in Norway bySkogstad,
Einarsen, Torsheim, Aasland, Merethe and Hetland (2007) on laissez-faire leadership behaviour,
with a sample of 2,273 employees indicates that laissez-faire leadership was found to be
correlated with role conflict, role ambiguity and conflicts with co-workers. Besides, from the
result of Path analysis, the findings also found stressors mediated with the effects of laissez-faire
leadership on bullying at work and that the effects of laissez-faire leadership on distress were
mediated through the workplace stressors, especially through exposure to bullying. Therefore,
with this kind of result, laissez-faire leadership behaviour is perceived or claimed to be
destructive leadership behaviour.
In conclusion, with respect to the overall leadership styles and their impact as well as
influence on organisational development and employees, the literature and the citations above
have confirmed the effectiveness of the democratic leadership style in organisations. Thus, this
indicates the prosperity of/benefits gained by individuals and decision-making through
participation. The literature also speaks of the rigidity and authoritarianism of autocratic
leadership as well as the unproductive nature of laissez-faire leadership on the organisation and
followers.
4.4 Self-efficacy
Without any doubt, academic staff or teachers play an important role in improving
education. Besides, it is universally accepted that a teachers self-efficacy and job satisfaction
lead to the best teaching and good students outcomes. The theory of self-efficacy was developed
by a prominent scholar, Albert Bandura, (1986). He defined self-efficacy as how a person judges
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or perceives himself to be capable of using a set of skills to achieve a certain level of

performance. According to Bandura, self-efficacy could be a tool to predict leadership behaviour
and distinguish leaders from non-leaders. It helps to decide how much effort people will make on
an activity, how long they will persist when confronted with obstacles and hardship, and the
level of strength they will exhibit in the face of adverse situations.
In most cases, based on this theory, people with low self-efficacy may believe and
consider that things are tougher and harder than they really are, a belief and perception that
create stress, depression, sadness and slim down the vision of how best to solve a problem and its
challenges. High self-efficacy, on the other hand, helps to create feelings of serenity and
tranquillity in approaching difficult tasks and activities. As a result of these influences, the selfefficacy belief is a physically and spiritually powerful determiner and predictor of the level of
achievement that an individual finally attains. Based on these reasons, Bandura (in press) argues
that beliefs of personal efficacy constitute the key factor of human agency (p.3 as cited by
Pajares, 1996).
Various findings have shown the importance of a teachers/lecturers self-efficacy in
learning and teaching. These findings have different results. For instance, Gibson and Dembo
(1984), Dembo and Gibson (1985), and Ashton (1985) have arrived at their findings by applying
the concept of self-efficacy to teaching, using a two-factor dimensional construct of teacher
efficacy. The first factor represents a teacher's sense of teaching efficacy (TE), or belief that any
teacher's ability to bring about change is limited by factors external to the teacher, such as home
environment, family background, and parental influences. The second factor represents a
teacher's sense of personal teaching efficacy (PTE), or belief that he or she has the skills and
abilities to influence students learning and behaviour. Researchers have examined and observed
the relationships between teachers' sense of efficacy and their behaviours, including classroom
instruction, behaviour management, and special education placement decisions. Based on Gibson
and Dembos report in 1984, high-efficacy teachers spent more time monitoring and checking
students work and more time leading students to correct answers through questioning rather
than giving the answer or calling on another student. Also the findings of Saklofske, Michayluk,
and Randhawa (1988)indicated that there were significant correlations between student teachers'
sense of personal efficacy and their supervising teachers' ratings of behaviours, such as lesson
presentation, classroom management, and questioning behaviours.
Multon et al. (1991) carried out a meta-analytic review of research into self-efficacy in
educational settings which provided support for the facilitating effects of self-efficacy on
academic performance, and concluded that self-efficacy beliefs accounted for approximately 14
percentile of the variance in staff, which influenced students academic performance.
Subsequently, many studies have also been supportive of self-efficacy and performance links.
For instance, Lane and Lane (2001) report similar findings among a sample of postgraduate
students, which have been influenced by the academic staff efficacy. Chemers et al. (2001) also
find that academic self-efficacy is significantly and openly related to academic expectations and
performance. Chemers et al. (2001) point out that academic self-efficacy has greater and better
predictive power than more objective measures such as past performance. If the findings of
Chemers et al. (2000) are applied to dissertation performance, it can be recommended that
lecturers use self-efficacy judgments as the likely prediction of performance rather than
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performance in related modules, such as research methods, which is typically a pre-requisite

module.
4.5 Research Findings on Leadership Styles and Self-efficacy in the Teaching Environment
In an educational setting, Caitlin (1982) has also authenticated this relationship between
leadership style and teachers personal efficacy or ability.The findings of Caitlin (1982) were
supported by Tseng (1985), who arrives at the conclusion (after the investigation through
teachers' perceptions in public junior high schools in Taipei, the Republic of China) that there is
a relationship between principals' leadership style and personal ability in the teaching profession.
Also, another study conducted by Braddy (1993), which investigated the relationship between
the leadership style of the principal and teachers' abilities in terms of participation in decisionmaking in public schools in North Carolina, produced similar results. The findings demonstrated
that the more opportunities given by a principal to the teachers to prove themselves in
participation, the more the teachers will grow in their ability and self-confidence. Wu (1984) and
Kim (1986) indicated that there is a relationship between the leadership styles of school
principals and teachers' efficacies in their job.In the 90s, leadership was claimed to improve
teachers or members of the academic staffs effectiveness and development (Smylie, 1995).
Besides, it demonstrates the successfulness of leaders that have the ability to solve matters and
contribute significantly to the effectiveness of the school and students accomplishment
(Leithwood et al., 1999).
At the beginning of the 20th century, similar findings to those of the 90s and 80s were
confirmed by Fullan (2001) and Segiovanni (2001) showing that leadership influences teachers'
performance and accomplishment and leads to student motivation. Hence, the excellence of
leadership will determine the motivation and inspiration of teachers/lecturers and the quality of
teaching in the classroom. For more development in the teaching setting, continuous learning and
quality in teaching should be proposed by a schools leaders based on peoples findings to
improve the excellence of the academic staff, while the prominence of spreading good practice to
colleagues can lead to increasing the proficiency of teachers/lecturers throughout the school. In
the academic sector, there should be an increment of capability and self-confidence of the staff,
together with the greater responsibilities vested in them, which will give more courage to
teachers/lecturers to take calculated risks in their jobs and introduce innovative and inventive
teaching methods, which should have a direct relationship with and a positive effect on teacher
effectiveness.
Indeed, the literature and findings have confirmed the relationship between leadership
styles in the educational setting and teachers or academics personal efficacy. The linkages
between leadership style and personal teacher efficacy was confirmed in Hipps, (1996, 1997)
findings. It was believed that teachers with high self-efficacy are in a better position to cope
with stress (Chwalitsz, Altmayer, &Russel, 1992), they are highly committed to teaching
(Coladarci, 1992), have great willingness to infuse new teaching methods (Ghauth&Yaghi, 1997)
and have a good relationship with the parents (Hoover-Dempsey, Bassler, &Brissie, 1992). Thus,
it is evidenced that there is a significant influence of school principals on teachers experiences
on the job (Rosenholtz, 1985), the effort they put in (Geijsel, Sleegers, Leithwood, &Jantzi,
2003), and their commitment and willingness to change (Yu, Leithwood, &Jantzi, 2002) through
their leadership style.
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Additionally, it shows that school leaders are the determinants of a teachers autonomy
(Campo, 1993; Corrigan & Garman, 1999; Riehl&Sipple, 1996). Hence, they determine the type
of support teachers receive (Smylie, 1988), in terms of granting teachers demands and
expectations (Ross, 1995), providing teachers professional growth (Blase&Blase, 2000), stress
relievers (Moore- Johnson, 1990; Smylie, 1988), and conflict managers and deciding overall
satisfaction (Bogler, 2001). As a matter of fact, all these factors are strongly related with a
teachers personal self-efficacy. The conclusion can be drawn based on these findings by stating
that the leadership style of the school leaders may have something to do with teachers personal
self-efficacy (Bandura, 1997; Hoy &Woolfolk, 1993).
According to Allinders (1994) findings, teachers with a strong sense of efficacy tend to
exhibit greater levels of planning and organisation. Proper leadership styles provide a greater
sense of efficacy for teachers and will help teachers to display greater enthusiasm for teaching,
(Allinder, 1994; Guskey, 1984; Hall, Burley, Villeme, &Brockmeier, 1992), have greater
commitment to teaching (Coladarci, 1992; Evans &Tribble, 1986; Trentham, Silvern, &Brogdon,
1985) and be more likely to stay in teaching, (Burley, Hall, Villeme, &Brockmeier, 1991;
Glickman &Tamashiro, 1982).
In conclusion, from the definitions, findings and theories cited above, we can see the
similarities in definitions and findings during the 80s, 90s and the 21st century on the impact of
leadership and school development. This is illustrated in the findings on two aspects of school
leadership styles which are teacher performance and student achievement. Once the teachers or
academic staffs behaviour has been influenced by school leadership styles, it affects teaching
positively or negatively and influences student outcomes. Furthermore, from the findings stated
above, we could observe a significant relationship between leaders and followers in China and
others. Besides, we could see the influence of leadership styles of the principals in school during
the 80s, 90s and the new era. Furthermore, we could the development in teachers; highly
efficacious through effective leadership styles; the ability to cope with stress; more commitment;
changes and professional growth.
From the literature and theories mentioned above, the theories of self-efficacy and
leadership styles have confirmed strong and significant relationships between the leadership
styles of the school leaders and academics or teachers self-efficacy, development, autonomy,
job satisfaction, commitment, professional growth, support and motivation to work hard with
great ability.
4.6 The Malaysian Context
There is a scarcity of research examining the influence, impact, effect or relationship
between leadership styles at the university level and the self-efficacy of academic staff in
Malaysia. The majority of the research conducted on self-efficacy was in schools, looking at
teachers self-efficacy in relation to teaching and student development. Few studies have
investigated the principals behaviour or leadership practices such as the latest research of
Masitah, Azizi, Ahamd and Bahaman, (2010) which examines the relationship between
instructional leadership and self-efficacy in environmental education among Malaysian
secondary school teachers. Their overall findings confirmed a moderate level of teachers selfefficacy and moderate principals instructional leadership practices in environmental education.
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In this sense, this research is conducted to address the issue of leadership styles and
academic staff self-efficacy at the university level. To the best of the researchers knowledge, it
is considered as a first research hypothesising leadership styles with academic staff self-efficacy
in a Malaysian Islamic University and public universities as whole.
4.7 Malaysian versus International Results
According to the OECD Teaching and Learning International Survey TALIS report
(2009), in terms of school leadership style it was reported that school principals in Malaysia
favourthe administrative style rather than instructional leadership (supervision of instruction,
supporting teachers professional development, setting the school goals). This is somehow a
weakness in Malaysia compared with most of the other TALIS countries.
Moreover, in relation to teacher development and teaching, the report of the OECD
Teaching and Learning International Survey TALIS stated that in Brazil, Malaysia and Mexico
over 80% consider they have not received enough professional development and teachers wanted
more development than they had received.In addition, in terms of motivation and job
satisfaction, in Malaysia, more than half of teachers claimed and testified they had received some
reward (monetary or non-monetary) to improve the quality of their work and for being
innovative in their teaching. This practice has meant that Malaysia has the 2nd highest percentage
of the 23 countries in TALIS. In relation to job satisfaction across the borders, Australian
managers (individualist culture) seemed to be more highly satisfied than Malaysians (Fauziah,
2000).
4.8 Research Findings on Leadership Styles: Demographic Variables
4.8.1 Gender & Age
Since leadership is about influencing others as it was defined in the literature, this
influence could be seen or perceived positively or negatively by the followers if leaders apply
unsuitable leadership styles at the wrong time. Males and females normally have different
perceptions towards their leaders, as more females perceived their dean as practising selling
leadership style compared to males in Jamaluddins (1998) findings in relating selling
leadership style in Indonesia with gender. In Malaysia, all the demographic factors show no
differences on perceiving women leaders leadership effectiveness in Usher, (2009), with the
total of 110 workers in SOCSO of Penang branch. The same findings were reported by
Norfarhana (2009), where there were no significant differences between gender, age, educational
level and marital status with servant leadership attributes at the North Malaysian University with
a sample of 71 university management staff.
A study by Boatwright and Forrest (2000) confirmed gender differences, arguing that
women leaders value the relational aspects of their roles more so than men. On a different
leadership dimension, the tendency to lead autocratically or democratically, Eagly and Johnson
(1990) reported that female managers are considerably more democratic than male managers.The
area of leadership style in which women surpass men is gains in leader effectiveness.
Meanwhile, the areas in which men surpass women have negative or null relations to
effectiveness. Eagly and Carli (2003) reached the conclusion that female leaders, relative to male
leaders, are correctly described as possessing both advantages and disadvantages. According to
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Rosener (1995) and Helgeson (1990), they agreed and concluded that women are strong in
generating ideas and innovation. Furthermore, women realise the importance of networks and
connections in organisations, and they take a more proactive approach than men in addressing
problems (Bass &Avolio, 1994). Moreover, women in leadership emphasised personal relations
while men focused on task accomplishment as mentioned in Eagley and Johnson(1990), who
used a meta-analysis to assess the significance of gender differences in leadership styles.
In Helenrose and Looneys(2002) study, the differences in teacher efficacy were found
with respect to gender and academic domain, while no significant differences were found in
teacher efficacy with regard to prior experience, professional level, or age. Scribner (1999)
identified an inverse relationship between personal teaching efficacy and general teaching
efficacy; a positive relationship between female gender and personal teaching efficacy and
general teaching efficacy; a positive relationship between overall teaching efficacy and general
teaching efficacy with years of experience. In terms of age, since there are differences in males
and females ways of perceiving their leaders, we expect the same differences in their ages as the
ages differed in Stogdils ( cited in Bass, 1981) research where the older respondents used to
respond differently in perceiving their leaders compared to younger ones. Additionally, both
male and female academics exercise different styles of leadership in a series of research studies
conducted by Rosener (1990), Mazlan (2008) andKlenke (2003). Similarities were found in their
findings where women were perceived by the respondents to have a transformational leadership
style and men a transactional leadership style. Similar findings were confirmed in Eagly and
Johannesen(2001) where women were perceived as democratic and men as autocratic (RajaSuzana&Rudzi, 2009).
4.8.2 Length of Service and Work Experience
Looking into demographics in terms of length of service and work experience towards
differences in leadership styles, Suhana (2000) reported in her findings that in both the initiating
structure and consideration dimension, the scores were high except for those who had served at
their present school for more than ten years. Similarly, Jamaluddin (1998) in his study found
working experience and occupational rank significant predictors on the telling leadership style.
In contradiction, a study conducted by Franklin (1989) revealed that the perception of school
climate, age, sex, level taught, years of teaching experience and academic qualifications did not
affect teachers sense of efficacy regardless of the setting.
4.9 Self-efficacy & Demographics
On the issues related to academic staff self-efficacy and development at university in
Malaysia, a research conducted by Fauziah (2009), looking into levels of job satisfaction
amongst Malaysian academic staff applied a 7-item general satisfaction scale and had a sample
of 237 academic staff from all faculties. She reported that current status, marital status, ageand
salary appear to have a significant impact on the respondents level of job satisfaction. In
addition, in terms of general satisfaction, the academic staff were moderately satisfied . General
satisfaction showed no indication of significant differences between genders. In terms of gender
and country in relation to satisfaction, there were no significant differences on whether the
respondents had their education in the Asian or Western countries. Overall, there were no
significant differences between male and female respondents with regard to general satisfaction
(Fauziah, 2009).
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As is evidenced by the breadth of research on the impact of demographics and leadership

styles, the mentioned research and cited findings above show great differences in findings in
terms of perceived leadership styles and the influence of demographics as well as relationships
with leadership styles in Malaysia compared with the global view. In Malaysia, the teachers or
academics seemed to be satisfied with their jobs and efficacious compared to other countries.
Therefore, it is interesting to see variance in findings on leadership styles in relation to
teachers/academics self-efficacy, development and job satisfaction.
4.
Methodology
5.1 Population & Sample
The population of this study consists solely of academic staff in one Malaysian Islamic
University. Table 3.1 shows the distribution of academic staff at the University according to
gender. A sample size of 302, according to a suggestion by Krejcie and Morgan (1970) on the
determination of sample size, was required for this research. The sample size was then selected
using the stratified sampling technique and both strata of male and female staff were represented
in the proportion in which they appear in the population.
5.
Instrument&DataAnalysis
For the instrument, the Leader Behaviour Description Questionnaire (LBDQ) was used.
The instrument was adapted from Chee (1998). Initially the instrument was developed at the
Ohio State University and later refined by Halpin and Winer (1966). From this instrument
(LBDQ), the researcher adapted only 9 items and 5 items were taken from the
Management/leadership Assessment scale (MLA) by Heim and Chapman (2004). For selfefficacy, the Collective Teacher Self-efficacy scale (CTS) was employed. The Collective
Teacher Self-efficacy scale was constructed by Schwarzer, Gerdamarie, Schmitz, and Gary
(1999).
For the data analysis, statistical analysis was conducted to answer the five research
questions. Descriptive and inferential statistics were used by employing the SPSS (16.0)
program. To answer the first, second, third and the fourth research questions, descriptive
statistics were used to indicate the percentages and frequencies of the respondents, their age, the
level of their qualification, Faculties/Centres, length of service and academic experience. The
means were then compared in order to determine the dominant leadership styles of the heads.
6.
Findings
7.1 Leadership Styles & Gender
The t-test was used to examine the perceptions of academic staff on the leadership styles
of their heads according to gender. The results in Table 4.1 show that there was a significant
difference between male and female academic staff in terms of the perception of democratic
style, t=5.12, p .01. The mean for the male respondents was higher (mean=78.73, SD=17.11)
than the mean for the female respondents (mean=67.9, SD= 17.5). Thus, the male academic staff
had a higher perception that their heads practised democratic style that their female counterparts.
For the Authoritarian leadership style the analysis shows that there was no significant difference
between male and the female academic staff on the perception (t= -2.57, p .11). In terms of the
Laissez-Faire leadership style, the results show that there was a significant difference between
male and female academic staff on the perception of the Laissez-Faire leadership style and
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gender (t= 2.94, p .03). The mean for female respondents was higher (mean=41.9, SD=12.00)
than the mean for male respondents (mean= 37.6, SD=11) (Table 1).
7.2 Leadership Styles & Academic Qualifications

One-way ANOVA was used to investigate the perception of the academic staff on
leadership styles according to their academic qualifications. The analysis showed that there was a
significant difference among academic staff on the Authoritarian leadership style while there was
no statistically significant difference between Democratic (F=1.85, p .15) and Laissez-Faire
Leadership styles (F=1.35, p .26) (Table 2).
A Post Hoc test was used to show the significance level. Post Hoc analysis using the
Tukey HSD criterion for significance indicated that significant differences were found between
Doctoral and Bachelors degree holders on the leadership styles (p .012) while there are no
significant differences between Bachelors and Masters Degree holders on the leadership styles
(Table 3). Thus, those academic staff members with Bachelors degrees and Doctorates seemed
to perceive their heads to be more authoritarian as compared to the academic staff with Masters
degrees.
7.3 Leadership Styles & Academic Staffs perceptions according to Faculties/Centres
One-way ANOVA was also used to examine the significant differences between the
Faculties/Centres and leadership styles. The assumptions of homogeneity of variance (Levenes
test) for the faculties and the leadership style were sustained. (Table 4).
7.4 Democratic Leadership Styles & Academic Staffs perceptions according to
Faculties/Centres
Table 4 shows the ANOVA analysis which established a significant difference between
leadership styles and Faculty/Centre. The result indicated that there is a significant difference
between leadership styles (Democratic, Authoritarian and Laissez-Faire) and Faculty/Centre. For
the Democratic leadership style and Faculty/Centre F=7.33, p .001. As such, in this research, it
was reported that the Director of the Institute of Education seemed to be perceived as the most
democratic head when compared with the rest of the Faculties/Centres or institutes. The Institute
of Education has the highest mean at 85.33 among the various Faculties/Centres for being rated as
the most democratic faculty by the majority of the academic staff. This is followed by the Faculty
of ICT at 81.66, while the Centre for Languages & Pre-University Academic Development at
55.80 seemed to obtain the lowest mean pertaining to the item of practising the Democratic style.
7.5 Authoritarian/Autocratic Leadership Styles & Academic Staffs perceptions according to
Faculties/Centres
One-way ANOVA analysis reported that there is a significant difference between the
Authoritarian leadership style at different Faculties/Centres (F=4.70, p .001) (Table 5).
Descriptively, the Dean of the Centre for Languages & Pre-University Academic Development
seemed to be perceived by the academic staff at the Centre for Languages & Pre-University
Academic Development as an authoritarian leader with the highest mean score at 55.19, whereas
the majority of other respondents from the Centre for Languages & Pre-University Academic
Development rated their leader as autocratic. This was followed by the Matriculation Centre and
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Islamic Revealed Knowledge and Human Sciences. The Centre for Education with a mean =
37.91 was the lowest.
7.6 Laissez-faire Styles Leadership Styles & Academic Staffs perceptions according to
faculty/centre
ANOVA analysis showed a significant difference between a Laissez-Faire leadership
style and Faculty/Centre (F=4.19, p .001). Descriptively, the Dean for the Centre for Languages
& Pre-University Academic Development seemed to be perceived as more laissez-faire by
obtaining the highest mean at 45.77, compared to the rest of the Heads and the Faculties. This
was followed by Islamic Revealed Knowledge and Human Sciences at 43.9, while the
International Institute of Islamic Thought and Civilization had the lowest mean at 32.60.
7.7 Leadership Styles & Age, Length of Service & Academic Experience
A Spearman Correlation was used to examine a significant correlation between
leadership styles, age, length of service and academic experience. Table 6 shows that there was
no significant statistical correlation between leadership styles and age. However, there was a
positive significant correlation between length of service and both of the Democratic and
Authoritarian leadership styles (rho = -.192, p -.175) and (rho= .126, p .045), respectively. For
the Laissez-Faire leadership style there was no significant correlation between age, length of
services and academic experience and Laissez-Faire (rho = .042, p .490). As for academic
experience, there was no significant correlation between leadership styles and age.
7.8 Self-efficacy and Demographic Variables
Gender
The t-test was used to examine the perceptions of the academic staffs own self-efficacy;
this was done according to gender. The results illustrated that there was no significant difference
between male and female academic staff on self-efficacy, t= -.56, p .57 (Table 7).
7.9 Academic Qualification & Faculties/Centre
One-way ANOVA was employed to investigate if there was a significant difference in
respondents' perceptions of self-efficacy according to Academic qualifications and
Faculty/Centre. In contrast, the results show that there is no significant difference of respondent
perceptions of self-efficacy according to academic qualifications (F=1.93, p .14) and selfefficacy and Faculty/Centre (F= .48, p .88) (Table 8).
7.10 Self-efficacy with Age of Service & Academic Experience

Table 9 shows that there was no significant correlation between the age of the academic
staff and self-efficacy (rho= .004, p .941). However, no significant relationship found between
length of service and self-efficacy (rho= .004, p .942). Also, no significant relationship found
either for the academic staff and self-efficacy (rho = .051, p .402).
A Pearson Correlation was employed to examine the relationship between the leadership
styles of the heads and the self-efficacy of the academic staff. The results show that the
Democratic and the Authoritarian leadership styles were not significantly correlated with the
self-efficacy of the academic staff. For democratic, r=.028, p .642, authoritarian, r=.101 p
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.096, the findings show that there was a positive significant correlation between the LaissezFaire leadership style and self-efficacy (r = .135, p .026). This means that there was a
significant association or relationship between the Laissez-Faire leadership style of the heads and
the self-efficacy of the academic staff at the university (Table 10). The academic staff, in
general, perceived their heads to be more laissez-faire in their leadership style. This means, the
higher the Laissez-Faire leadership style exercised by the heads, the higher the self-efficacy of
the academic staff. Hence, the more laissez-faire the heads are, the more efficacious they will be.
7.
Summary
The result of the t-test analysis showed that there was a difference between the academic
staffs perceptions according to the Democratic and Laissez-Faire leadership styles and gender.
The male academic staff seemed to perceive their heads as being more democratic than the
female academic staff. On the other hand, the female academic staff seemed to perceive their
heads as more laissez-faire than the male academic staff. From the Spearman Correlation
analysis, it showed that there was no relationship between the leadership styles, age and
academic experience.
In another finding, there was a strong correlation between the Democratic and the
Authoritarian leadership styles and length of service, while there was no relationship with the
Laissez-Faire leadership style. The ANOVA analysis showed that there was a significant
difference between the Authoritarian leadership style and academic qualifications on the
perception of the academic staff. However, there was a significant difference between the
leadership styles and the Faculty/Centre. Looking at the demographic variables and self-efficacy,
no relationship was found between demographic variables and self-efficacy. The result of the
Spearman Correlation indicated that there was no significant correlation between the Democratic
and the Authoritarian leadership styles and self-efficacy, whereas there was a significant positive
correlation between the Laissez-Faire leadership style and self-efficacy of the academic staff.
8.
Discussion
With the literature and findings mentioned in this study, it is evidenced that
demographics, particularly gender, play huge role in determining the type of leadership styles of
leaders and how leaders were perceived by the workers or followers in different organisations.
Interestingly, the findings of gender and leadership styles are varied and inconsistent across the
borders especially in Malaysia.
In Malaysia, the cited findings had shown a very consistent result of influence of gender
or demographics in general and leadership as well as the workers and staffs perceptions of their
leaders style or behaviour. According to the findings of Usher (2009), Norfarhana (2009) and
Khadijah (2004), in Malaysia, whether in educational realms or business settings, demographics
do not influence styles and the workers had similar perceptions about the leadership style of their
leaders. These findings were not in line with the present study or that of Suhana (2004), finding
differences between length and work experience but not finding any differences between gender
and leadership style as well as job satisfaction in the Malaysian working sector. Comparing
Malaysian studies with those from other environments, the present study did not support
Jamaluddins (1998) findings relating to selling leadership style (participative) with gender.
Thus, more females perceived their deans as practising selling leadership style than males,
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while in this study, males perceived their deans/heads as being more democratic compared to
females.
In terms of leadership style and workers or teachers sense of self-efficacy, in Malaysia,
the present study supported somehow the latest study of instructional leadership and self-efficacy
at school level by Masitah, Azizi, Ahmad and Bahaman (2010), where moderate self-efficacy
was found among the teachers and where moderate leadership style practices were also found.
Comparing Malaysian findings with others globally, this present finding is consistent with
others such as Smylie (1995), Caitlin (1982), Tseng (1985), Wu (1984), Kim (1986) and Mitchell
(1989) in China, Allinders (1994), Guskey, (1984);,Hall, Burley, Villeme, &Brockmeier (1992),
Coladarci, (1992) Evans &Tribble, (1986), Trentham, Silvern, &Brogdon, (1985), Burley, Hall,
Villeme, &Brockmeier (1991), Glickman &Tamashiro (1982), Teng (2006) and Philips (2009).
More on self-efficacy and academics development in educational settings, the present study is
similar to research on school principals and teachers job satisfaction by Rosenholtz, (1985) and
Geijsel, Sleegers, Laithwood and Jantzi (2003) where school principal leadership style
influenced the job satisfaction of teaching staff and their commitment as well as being willing to
change (Yu, Leithwood&Jantzi, 2002). All these studies found leadership improving workers or
teachers ability and development. Thus, the researchers found a relationship between leadership
styles and teacher s personal efficacy across the nations.
In relation to gender leadership style, it is believed worldwide that women favour
transformational leadership while men prefer transactional leadership style (Rosener, 1990;
Mazlan, 2008; Klenke, 2003; Raja-Suzana&Rudzi, 2009). Similar findings were confirmed in
Eagly and Johannesen(2001) where women were perceived as democratic and men as autocratic.
The mentioned findings are partially supported by the present findings where male director/dean
was perceived as an authoritarian.Thus, this study is in line with Boatwright and Forrest (2000)
who confirmed gender differences, arguing that women leaders value the relational aspects of
their roles more so than men.
Furthermore, this research shows how male and female academic staff are differ in their
perceptions towards their heads leadership styles. Male academic staff perceived their heads as
democratic while females, on the contrary, saw them as being rather autocratic or laissez-faire.
This has shown somehow a poor relation between heads of departments and female academic
staff. It shows the kind of leadership style applied by the heads in dealing with the female. In
terms of qualification, the academic staff with Bachelors degrees and Doctorates seemed to have
different perceptions towards their heads compared with Masters degree holders. Hence, both
seemed to perceive their heads as authoritarians.
It is very interesting to see female staff perceiving their heads as autocratic compared to
male staff seeing them as democratic. Besides, it is also strange to see the academic staff with
Bachelors degrees perceiving their heads as autocratic because they are somehow new to the
system and it is too early to evaluate the style of their heads while it is normal to see the
academic staff with Doctorates having the perceptions because they are experienced staff orhave
high cognitive thinking and intellect to evaluate the leadership style of their heads. In contrast,
the academic staff with lengthy experience seemed to be happy with their jobs and perceived
their heads as democratic in nature and some perceived them as autocratic. In relation to self-
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efficacy, gender, qualification, faculties, age and length of service differences did not have an
influence on academic staff being efficacious or inefficacious. Thus, the perceptions seemed to
beunanimous and most of the academic staff seemed to perceive themselves in all levels as
efficacious.
Disappointingly and, perhaps, surprisingly, laissez-faire leadership style was seen to have
a positive relationship with academic staff self-efficacy. This was despite the destructiveness and
ineffectiveness of laissez-faire style on workers and organisations as was mentioned in the
majority of the literature and findings especially the of study of Torsheim, Aasland, Merethe and
Hetland (2007),which found laissez-faire style to be a destructive style with its relationship with
stress and bullying at work. Besides, it is common to have a positive relationship between
democratic or participative leadership styles with self-efficacy while it is expected for
organisational development to discover a negative correlation between laissez-faire and selfefficacy. But this research has uncovered another new and interesting finding where the
academic staff are efficacious when the leadership style is laissez-faire. Thus, the more the heads
of departments at the Malaysian Islamic University exercise laissez-faire leadership styles, the
more efficacious the academic staff will be.
It is very interesting to note that, even if the Heads of departments and Deans exercise or
apply the laissez-fair leadership style, the academic staff are still efficacious, exercise
responsibility and are committed to their work. Thus, it shows how academic staff are devoted
and ready to perform their job efficiently regardless of the leadership styles exercised by the
heads. This unexpected result of the present research could show a variation of perceptions
across the global and cultural differences across nations. As an implication, this could be a
setback in applying proper leadership styles by leaving things in academics hands to decide and
decisions to make. In addition, it could show mismanagement of the leaders or heads by
relinquishing power unnecessarily without taking action when they should. Unfortunately, till
this moment, further research has not ventured to conduct a replication, continuation or a retest
of the hypothesis at the same university, academic staff and with large sample sizes to confirm
the result of this present study.
9.
Recommendations
Heads of departments at a selectedMalaysian Islamic University should take the
initiative.
Heads of departments should be responsible, taking action with the ability of making
good decisions.
Heads of departments should apply an effective leadership style in matters related to
teaching and learning.
Academic staff should be given autonomy and the chance to participate in the decisionmaking process as well as being empowered.
Further research on leadership styles at a selected Malaysian Islamic University should be
conducted, focusing on deanship styles and management styles as well.
Further research should be conducted to confirm the existent results and findings for
intensive solutions to be made.
Robust statistical analysis should be used and larger sample sizes should be selected in
coming research.
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10.
Summary & Conclusion

From this research, male academic staff perceived their heads as more democratic than
the females, whereas, female academic staff perceived their heads as more laissez-faire than the
males. Besides, the academic staff with Bachelors degrees and Doctorates perceived their heads
to be more authoritarian as compared to the academic staff with Masters degrees. Moreover, it
was also found that the Director of the Centre for Education was perceived as the most
democratic head as compared to the heads of the rest of the Faculties/Centres while the Dean of
the Centrefor Languages and Pre-University Academic Development was rated by academic
staff as more authoritarian and laissez-faire in nature.
Furthermore, the results of this research show that there was a positive significant
relationship between the Laissez-Faire leadership style and the self-efficacy of academic staff at
the Malaysian Islamic University while there was no significant relationship between the
Democratic and Authoritarian leadership styles and academic staffs self-efficacy. Thus, the
higher the Laissez-Faire leadership style exercised by the heads at the Malaysian Islamic
University, the higher is the self-efficacy of the academic staff. Therefore, it is obligatory for the
university management and leader at the Malaysian Islamic University to practise democracy and
apply democratic leadership styles for the academic staff to have a sense of belonging, freedom,
autonomy, participation and self-efficacy for the sake of student achievement.
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The demographics impact of Owner on entrepreneurial orientation:

Evidence from Khyber Pakhtunkhwa-Pakistan.
Hafiz Ullah
Institute of management sciences, Kohat University of science & technology, Kohat, KPKPakistan
Professor Dr. Bahadar Shah
Dean Faculty of Law & Administrative Sciences, Hazara University, Garden Campus,
Mansehra, KPK-Pakistan
Dr. Najeeb Ullah Khan
Department of Public Administration, Gomal University, D.I.Khan, KPK-Pakistan
Abstract
The impact of demographic variables on entrepreneurial orientation has been discussed at the
global level.Similarly many studies are available on the developing countries but there are little
empirical evidence in developing countries like Pakistan with special reference to Khyber
Pakhtunkhwa (KPK).The purpose of the study is to analyse the demograhics(Gender, Age,
Domicile ,Education level and Type of ownership) impact of owner on entreprenruial orientation
in KPK.Quseduestionaire was used to gather data through stratified sampling method. Two
Hundered and nineteen questionnaires were distributed among members registerred with
different (Khyber Pakhtunkhwa, Hazara and D.I.Khan) chambers of commerce and indutry in
KPK. T-test and ANOVA test are applied to investigate mean difference of repondents (Owner)
on the basis of their demographic variables impact,about their entreprenruial orientation. The
results of T-test and ANOVA has shown mean difference between the groups on the basis of
their demograhics about their entreprenruial orientation.Only one hypothesis rejected which
shows that there is not significant differences between proprietor and partners type of business in
respect of entrepreneurial orientation.
Keywords: Entrepreneurial Orientation, Khyber Pakhtunkhwa, Age, Gender, Type of Owners,
Local and non local, and Education level.
1. Introduction:
Nowadays entrepreneurship is playing very vital role in moving the economies of specially
developing countries forward. The new stories of successful entrepreneurship are not only
coming from Silicon Valley and Cambridge Research Park but also coming from Beirut, Saudi
Arabia as well as from Pakistan. Specifically Air Blue Success story (the first paperless airline in
the world which quickly acquired 30% share of the country domestic market (Keyes and
Shadow,2010).Entrepreneurship is occurring in Pakistan and it is important that successful
entrepreneurs such as those created Servaid Pharmacy, Air Blue or the university start up
enterprises emerging now in different cities of Pakistan are recognized and receive visibility that
they need to grow into larger business and this will compel the economy of the country forward.
Further this will motivate our young generation to not become job seeker but to become jobs
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creators and entrepreneurs. Entrepreneurship is a phenomenon of great interest throughout the

globe, especially in developing economies and it is considered to be important for economic
development (Samli, 2002).In the same way enterprises, creating and introducing new products
and technologies, can generate extraordinary economic performance and have been seen as the
engines of economic growth (Schumpeter, 1934, 1954; Brown and Eisenhardt, 1998).
There are different research studies which measure the impact of the entrepreneur's education,
age groups, gender, career history, their motivation on the enterprise growth and their
entrepreneurial behavior, in other words entrepreneurial orientation is influenced by these
demographics (Bates,1995; Cooper et al.1994; Dahl and Reichstein,2005 and Preisendorfer and
Voss, 1990). This approach differentiates the entrepreneurial firms from others on the basis of
demographic variables of their entrepreneurs.
Most of the emerging theories and literature reviews regarding entrepreneurship development are
derived from the growing body of knowledge comprising of the studies conducted in developed
countries. One of the main reasons is the scarcity of research conducted on entrepreneurship
development in developing countries (Allen and Truman, 1993) like Pakistan. More over most of
this work has been conducted by the international development agencies, which have tended to
focus on 'macro-perspective'(Wees and Romijn, 1987) .But this study will discusses in detail the
different demographic variables affecting entrepreneurial orientation with special reference to
Khyber Pakhtunkhwa (KPK).
The objective of this study was to explore the profile of members registered with different
chambers of commerce and industry in Khyber Pakhtunkhwa (KPK) and to measure mean
differences about their entrepreneurial orientation on the basis of demographics. Although the
importance of different demographic variables, such as gender, age groups, levels of education
etc. (Gasse, 1985; Hirsrich,1986 and Matthews & Moser, 1996) has been widely discussed in the
literature but there is little empirical evidence in developing countries like Pakistan with special
reference KPK.
The Khyber Pakhtunkhwa is a fertile land having rich opportunities in different sectors of
economy but enterprises are not operated successfully because of raw technology or low
conceptual knowledge and skills are applied which not properly contributing in the economic
development of country, in the sense that neither creating more job opportunities and nor
reducing poverty as the need of province.
2. Literature Review:
2.1 Entrepreneurial Orientation
The term entrepreneurship has been defined for over 200 years from different
prospective(Hebert and Link,1988). The traditional focus was on the efforts of an individual
whose innovative behavior translates his vision into successful business enterprise (Collins and
Moore, 1964). More recently, however, entrepreneurship has been conceptualized as a process
which can occur in enterprises of all sizes and types and which is distinct from, but dependent
on, specific individuals (Burgelman, 1983; Gartner, 1985; Kao,1989; Miller, 1983and Wortman,
1987).
So in this way, entrepreneurship can be defined as process of creating value by bringing
together a unique package of resources to exploit an opportunity (Stevenson, Roberts and
Grousbeck, 1989). This process includes both an entrepreneurial event and an entrepreneurial
agent. The event refers to the conceptualization and implementation of a new venture. While
agent on the other hand is an individual or group that assumes personal responsibility for
bringing the event into successful business enterprise.
The entrepreneurial process has attitudinal and behavioral components (Bird, 1988;Long Tan and
Robinson,1995). Attitudinally, it refers to the willingness of an individual or organization to seek
new opportunities and take responsibility for effecting creative change (Miller and
Friesen,1982,1984). This willingness is referred to as an entrepreneurial orientation.
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Behaviorally, it includes the set of activities required to evaluate an opportunity, define a

business concept, assess and acquire the necessary resources and then to operate and harvest the
rewards through firms creation (Stevenson, Roberts and Grousbeck, 1989).
Entrepreneurial orientation refers to the processes, practices, and decision-making activities used
by entrepreneurs to act entrepreneurially that lead to the initiation of an entrepreneurial firm
(Lumpkin and Dess, 1996). Miller (1983) defines an entrepreneurial firm as one that engages in
product market innovation, undertakes somewhat risky ventures, and is first to come up with
proactive innovations, beating competitors to the punch. However, each dimension is
suggested to be positively correlated (Lumpkin and Dess, 1996), which has been validated
empirically (Rauch, Wiklund, Freese, and Lumpkin 2004).So entrepreneurial firms are those
whose entrepreneurial behavior focuses on risk taking, innovation, and proactiveness. So
entrepreneurial orientation is evidenced through observable entrepreneurial tendencies toward
innovativeness, Proactiveness and risk taking.
The construct entrepreneurial orientation (multidimensional construct encompassing firm
innovativeness, proactiveness and risk taking) is receiving increased attention in the field of
entrepreneurship (Stevenson and Gumpert, 1985). This entrepreneurial orientation construct
seems too applicable in all types of enterprises. Further Kreiser, Marino and Weaver (2002)
reported that the entrepreneurial orientation construct was valid across different national contexts
and applicable globally.
The conceptualizations of entrepreneurial orientation include three dimensions: proactiveness,
risk taking, and innovativeness. A literature review confirmed that these three dimensions are the
most commonly used in entrepreneurial research. (Covin and Slevin,1989, 1991; Knight, 1997;
Morris and Paul, 1987; Miller, 1983; Zahra and Covin, 1995; Zahra, 1993). Innovation refers to
the seeking of creative, unusual or novel solutions to problems and needs. These solutions take
the form of new technologies and processes, as well as new products and services (Vesper,1980
and Schumpeter ,1934). Risk taking involves the willingness to commit large resources to
opportunities which have a reasonable chance of costly failure i.e. that includes risk
taking(Stewart and Roth,2001;Gasse,1982). Proactiveness is the propensity to anticipate and act
on future market needs and opportunity (Schwartz, Teach, and Birch, 2005; Kouriloff
,2000;Lumpkin and Dess, 1996) and has first mover advantage to become pioneer and also
always strive to gain an edge over their competitors(Kerin,1992).
Empirically, the positive impact of entrepreneurial orientation on firm performance and growth
has been supported by several studies (Stuart,1990;Lumpkin and Dess, 1996,2001; Wiklund,
1998,1999, Wiklund, and Shepherd ,2003; Zahra, Jennings, and Kuratko, 1999;Dess, Lumpkin
and Covin,1997).
2.2 Demographic impacts

The importance of different demographic variables, such as gender, age groups, levels of
education etc. has been widely discussed in the literature affecting entrepreneurial orientation
(Gasse, 1985; Hirsrich, 1986 and Matthews & Moser, 1996). Following is the detail of different
demographic variables discussed in the literature review.
2.2.1 Gender:
There are different research studies which concluded that enterprises operated by female owner
have low chances of success as compared to male (Boden, 1996; Boden and Nucci 1990 and
Cooper et al. 1994; Matthews,1996). This has been justified by the fact that the disadvantage of
female in accumulating both financial and human capital as well as less exposed to managerial
experience. Womens motivations to start their own businesses to fulfill her needs and personal
goal attainment, etc. as the main reason for women showing low performance and growth as
compared to men(Lerner, Brush and Hisrich,1997).Similarly female Owner has low degree of
risk taking capacity, innovativeness and proactiveness .Over al studies results described that men
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are more likely to start and run their business with higher entrepreneurial orientation than women
(Kolvereid, 1996).According to these results, it is stated that enterprises owned by male owner
have different entrepreneurial orientation than those operated by women. Hence,
Hypothesis (H1): Enterprises operated by male owner have different entrepreneurial
orientation than those operated by female.
2.2.2 Age:
The relationship of age to the entrepreneurial orientation has also been vigilantly researched by
Ronstadt(1983).In term of chronological age most of the entrepreneurs initiate their
entrepreneurial career between the age of 22 and 40. Earlier start in entrepreneurial career is
better than later. There are also miles stone year every year when individual is more inclined to
start an entrepreneurial career. Generally male tend to start his first significant business
enterprise in early 30s. The association of owner's age and entrepreneurial orientation has been
discussed in literature (Preisendorfer and Voss,1990). Study conducted by Macrae(1992) and
Birley & Westhead (1994), length of tenure has been recognized as an important factor.
Enterprises started at earlier stage of life by entrepreneur (owned by young) have more
entrepreneurial orientation than later ones (owned by old).Hence,
Hypothesis (H2): Enterprises with different age groups of Owner have different
entrepreneurial orientation.
2.2.3 Domicile (Local and non local):
Non local members of society (marginalized groups) which consist of disproportionate supply of
entrepreneurs also play an important role in entrepreneurial activities and contribute in society
through their entrepreneurial orientation (Irastorza ,2006). For instance Dissentersin England,
Protestants in France, Chinese in South East Asia, Indians and Arabs in Africa, or Parsees in
India (Greenfield and Strickon, 1995) Afghan refugees and Memons in Pakistan (Zeba ,2003)
are some notable examples. As non local members are socially marginalized and feel
discrimination by the majority of society members, always try to overcome this through their
entrepreneurial orientation as a way to achieve high status in society with the support of their
family and/or supply of networks(Claessens,1999). Owner who is non local enhances his chances
to operate his enterprise with higher entrepreneurial orientation than local one and ultimately
increase firm's entrepreneurial orientation. Hence,
Hypothesis (H3): Non local owner of enterprises have diverse entrepreneurial orientation than
local one.
2.2.4 Level of education:
The entrepreneurs level of education has also been gained important research consideration
.Although some may feel that entrepreneurs are less educated than general population, but
research findings indicate that this is not clearly the case. Research has shown that entrepreneurs
are more educated than general public ( Hisrich and Brush, 1986). Studies have shown that
having more years of schooling sharply raises person probability of trying to start business
enterprise (Selz.1995) with higher entrepreneurial orientation. Education has conventionally
been found as key determinant of the entrepreneurs human capital, with a positive affect on the
success of enterprise (Bruderl et al. 1992). Similarly attending training activities in this context is
also an important factor and contains additional advantage particularly for those who are
interested to start and promote their own business. This also increases his awareness and
knowledge in order to flourish entrepreneurial orientation.So it is stated that; enterprises whose
Owner/) with more years of schooling have more entrepreneurial orientation than others. Hence
Hypothesis (H4): Enterprises Owners with Difference of education level changes their
entrepreneurial orientation.
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2.2.5 Type of owners (Sole proprietor and Partners):

Enterprises operated by the two or more partners are more successful than those having single
one (Woo, Cooper, Dunkelberg, Daellenbach &Dennis1989) .Schutjens and Wever (2000) said
that having business partner increases enterprise growth in respect of employment creation and
sales turnover. Enterprises operated by more than one individual may survive for the longer
period of time than those owned by single owner. Two minds are better than single one because
this increases theirs risk taking capacity, to develop new ideas and beat the competitor
collectively. Similarly they are more capable to manage their enterprise with higher
entrepreneurial orientation. Due to these facts, hence it can be said that enterprises operated by
larger number of individuals have more entrepreneurial orientation than single one. Hence,
Hypothesis (H5): Enterprises with single and partner Owners possess different
entrepreneurial orientation
2.3 Research framework and variables selection:
The conceptual framework in this model is based on the demographic variables (Gerder, Age,
local and Nonlocal, Education level and Types of Owner) and the dependent variable
entrepreneurial orientation measured on five point interval scales. The schematic diagram of the
theoretical framework is presented in Figure 1.
Schematic diagram of the theoretical framework
Gender (H1)
Age (H2)
Domicile (H3)
Education level (H4)
Type of owner (H5)
Figure 1 The demographics Impact on Entrepreneurial Orientation

3.1 Survey method and data collection:

Survey research is excessively used in social sciences for data collection (Babbie, 1993:256).
Finally survey strategy can also be an excellent vehicle for measuring attitudes and orientation in
a large population (Babbie, 1993).
Survey based methodology was used in this research in order to obtain data from the respondents
registered with different chamber of commerce and industry in KPK. Data was collected in 2009.
The data for this study was collected through a questionnaire by the researcher. 219
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questionnaires were successfully collected and were found to be complete and usable for data
analysis.
3.2 Questionnaire development

The questionnaire was divided into two sections.The first sections was consists of demographic
variables affecting entrepreneurial orientation. Questions about gender, age groups, domicile,
type of owners and education level of Owner affecting entrepreneurial orientation were asked in
questionnaire. All these questions wer asked on nominal scale.
The second sections was consists of entrepreneurial orientation measurement. Entrepreneurial
orientation was measured by asking nine questions about innovativeness, risk taking propensity
and proactiveness on five-point Likert scale from strongly agree to strongly disagree, developed
by Covin and Slevin (1989). All these questionswere asked on interval scale.
3.3 Population of the Study and Sample size determination

Population size of the Study:
The Population of this study consist of 3496 members registered with different chambers in
Khyber Pakhtunkhwa province like Khyber Pakhtunkhwa previously known as Sarhad Chamber
(2501 members) , D.I.Khan (291 members) and Hazara(704 members) chamber of commerce
and industry working in different categories. (www.Kpcci.org.pk) The detail of population size
of the study provided by respective chambers is given bellow in Table 1.
Table 1. Details of population size of the study.
Categories
Khyber
(Sarhad)
Pakhtunkhwa
Chamber

Services
Of
Hazara Chamber Of
D.I.khan Chamber Of
Commerce
and
Total
Industry
171
56
24
251
291
88
51
430
Traders
2039
560
216
2815
Total
2501
704
291
3496
Providers
Manufacturers
and Traders
3.4 Sample size determination:

In order to determine the readability, clarity of questionnaire and reliability of measures the
researcher conducted a pilot study. Researcher distribute questionnaire among thirty eight
members in pilot study and cronbachs alpha was above the acceptable range .For sample size
determination the result of pilot study are given in Table2.
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Table 2. Sample Selection Procedure (Pilot Study Statistics)

Sample (FINITE population)
Pilot Study Statistics
Standard Deviation
(s) or()
0.78
Acceptable Margin of
0.10
Error (d)
Z value at 95%
1.96
Confidence
Sample Population
(N)
3496
Sample Size (n)
Formula
n0= z2s2/d2
n= n0 / (1+n0/ N)
219
Stratified Samples
Disproportionate sampling
(from formula)
N
SD()
Services Providers
251
0.69
Manufacturers And Traders 430
0.79
Traders
2815 0.86
N=
3496 N=
Formula
na= [(nNaa)/((Naa)+(Nbb)+Nnn))]
nb= [(n Nbb)/((Naa)+(Nbb)+Nnn))]
..
nn= [(n Nnn)/((Naa)+(Nbb)+Nnn))]
N
14
29
176
219
The sample size is determined using Cochran's sample size determination formula (Cochran &
Snedechor, 1980). Legend for Cochran's sample size determination formula:
d = acceptable margin of error of +/- 2% (0.02 x 5 point Likert type scale)
s =estimated standard deviation
z = acceptable risk (z at 0.05, is 1.96)
(Z is used instead of t because, to determine the critical value of t, the sample
size needs to be known, but it is not known yet ( Levine et al, 2005).
N = population size
n0 = unadjusted sample size
n = adjusted sample size
The target population of the study included the total number of members registered with chamber
of commerce and industries in KPK. The population is consisting of traders, services providers
and traders and manufacturers on small and medium scale. In the social sciences, a 95%
confidence level is usable, which equals 1.96 z-values.
Note. As population is the combination of three different groups, also the population of traders
group with respect to others is too large. It can be seen from the above table that results of
proportionate sampling do not give proper representation to each group. Therefore, situations
like this Sekaran, (1999,p.270) said that disproportionate sampling decisions are made either
when some stratum or strata too small or too large, or when there is more variability suspected
within a particular stratum. So we applied disproportionate stratified sampling procedure which
is shown in the right most to the above Table 2.
3.5 Statistical methods:
Descriptive statistics were computed ito develop respondents profile .To analyze the data and test
the null hypotheses specified in the study, t-test and ANOVA test were applied to investigate
means difference of repondents about their entrepreneurial orientation on the basis of its
demographic variables, one at a time conducted.
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4. Data Presentation, Analysis and Interpretation

After data have been collected from representative sample of the population, the next step is to
analyze it in order to test the research hypotheses. The data was analyzed using SPSS (V.18.0) to
examine the Cronbachs alpha for the measure, to develop respondents profile through frequency
distributions and finally hypotheses testing.
4.1 Checking the Reliability of measure: Cronbachs Alpha]
Cronbachs alpha reliability coefficient of the dependent variables is obtained. This was above
0.80. The sample of the result obtained for Cronbachs alpha test for the dependent variable
(entrepreneurial orientation) is given below:
Reliability test:
N of Cases = 219
N of Items = 09
Reliability Coefficient Alpha = .89
The result indicates that the Cronbachs Alpha for the nine items is 0.89. The closer the
reliability coefficients get to 1.0, the better. In general, the reliabilities less than 0.60 are
considered to be poor, those in the 0.70 range, acceptable, and those over 0.80 good (Sekaran,
2000). As the Cronbachs Alpha for all the nine items is about .89, thus internal reliability of the
measures used in this study can be considered to be good.
4.2Demographic Characteristics:
In the study majority of the respondents were males (n=202, 92.2%).While (n=127,58%)
respondents were between the age group of more than 40 years and second large group was of
respondents between the age 31-40 (n=79 ,33.1%).Respondents with reppect to type of
ownership ,soleproprietroship onwer formed larger group of (n=183 ,83.6%). Majority of the
respondent were local (n= 147,67.1%). And also majority of the respondents reported that their
education level was high, means that matric to bachelor level education (n= 147,67.1%). While
the proportion of university level eduction is ver low(n= 20,9.1%).
Table 3: Frequency Distributions of Sample (n = 219) : Respondents Profile
Demographic
Gender
Frequency
Frequency
Male
Female
Total
Percentage
Percentage
202
92.2
92.2
17
7.8
100.0
219
Age
Cumulative Percentage
Frequency
100.0
Percentage
Below20years
13
5.9
5.9
20-40yeares
79
36.1
42.0
More than 40
127
58.0
100.0
Total
219
Domicile
Frequency
Non local
Local
Total
Education level
Primary
High
University
Total
100.0
Percentage
72
32.9
32.9
147
67.1
100.0
219
Frequency
100.0
Percentage
85
38.8
38.8
114
52.1
90.9
20
9.1
100.0
219
100.0
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Frequency
Type of owners
Sole proprietor
Partners
Total
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Percentage
183
83.6
83.6
36
16.4
100.0
219
100.0
4.3 Testing of Hypotheses

Five hypotheses were generated for this study as stated earlier. This call for the use of t-test for
hypotheses H1, H3, H5 because
there are two groups and the dependent variable,
entrepreneurial orientation, is measured on interval scale. Similarly ANOVA is used for
hypotheses H2, H4 because there are more than two groups measured on nominal scale and the
dependent variable, entrepreneurial orientation, is measured on an interval scale. The result of
these tests in Table 4, Table 5and Table 6.and their interpretation is reported below:
Table .4 Group Statistics
Entrepreneurial
Orientation
Entrepreneurial
Orientation
Gender
Male
Mean
Std. Deviation
202
3.1144
.76963
Female
17
2.4248
.29196
Mean
Std. Deviation
72
3.5015
.83835
147
2.8450
.62565
Mean
Std. Deviation
183
3.0795
.75329
36
2.9660
.83183
Domicile
Non local
Local
Entrepreneurial
Orientation
Type of Owners
Sole proprietor
Partners
Table .5 Results of t-test of significant differences (Independent Samples T-test)

degree of
t-value
Variables
Sample
size(n)
freedom (df)
Gender(Male & Female)
219
217
3.66
Domicile(Local and Non local)
219
217
6.49
Types of Ownership
(Sole
219
217
0.812
proprietor & Partners)
p-value
0.000
0.000
0.418
Hypotheses H1, H3 and H5 were tested using independent samples t-test in order to analyze the
differences statistically. Based on the results shown in Table 4, & 5, the difference in the means
of 3.114 and 2.424 with standard deviations of.76963and .29196 for the male and female about
their entrepreneurial orientation perception is significant as p<0.05 at 217 degree of freedom.
Hence H1 accepted, which means there was a significant difference between entrepreneurial and
non entrepreneurial oriented members with respect to their gender. Similarly, the difference in
the means of 3.5015and 2.8450with standard deviations of .83835 and.62565 for the non local
and local entrepreneurs on their entrepreneurial orientation is significant, as p<.05 at 217 degree
of freedom. Therefore hypothesis H3 accepted, which means there was a significant difference
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between entrepreneurially oriented and those who were not entrepreneurially oriented with
respect to domicile (local and Non local). And finally, difference in the means of 3.0795and
2.9660 with standard deviations of .75329and .83183for those who have more than one partner
and others (sole proprietor) about their entrepreneurial orientation perception respectively is not
significant as p>0.05 at 217 degree of freedom. Hence hypothesis H5 rejected, which means
there was not significant difference between entrepreneurially oriented members and others who
were not entrepreneurially oriented with regard to type of owners.
Likewise Hypotheses H2, H4 were tested using ANOVA in order to analyze the differences
statistically. ANOVA was used because there are more than two groups and the entrepreneurial
orientation is measured on an interval scale. The results of ANOVA are shown in Table 6 given
below:
Table 6.ANOVA to measure the mean difference among different Age groups with respect to
entrepreneurial orientation
ANOVA
Between Groups
Within Groups
Total
Sum of Squares Df
Mean Square
Sig.
29.327
98.553
127.880
14.663
.456
32.138
.000
2
216
218
The df is the third column refers to the degrees of freedom, and each source of variation has
associated degrees of freedom. For the between groups variance, df= (K-1), where K is the total
number of groups or levels. Because there was three groups, we have (3-1)=2df. The df for the
with in groups sum of squares equals (N-K), where N is the total number of respondents and K is
the total number of groups. As there was no missing response, the associated df is (219-3) = 216.
The mean square for each source of variation (column 5 of the Table6) is derived by dividing the
sum of squares by its associated df. Finally, the F value itself equals the explained mean square
divided by the residual mean square.
MS explained
F
-------------------MS residual
In this case, F= 32.138 (14.663/0.456). This F value is significant at p<0.05. Hence H2 accepted,
which means there were significant differences among different age groups in respect of
entrepreneurial orientation.Finally the results of ANOVA for the Hypothesis H4 are presented
following in 7.
Table 7.ANOVA to measure the mean difference among different educational groups with respect to entrepreneurial
orientation
ANOVA
Between Groups
Within Groups
Sum of Squares df
Mean Square
Sig.
11.253
116.627
5.626
.540
10.421
.000
2
216
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ANOVA
Between Groups
Within Groups
Total
Sum of Squares df
Mean Square
Sig.
11.253
116.627
127.880
5.626
.540
10.421
.000
2
216
218
The degree of freedom (df) is the third column refers to the degrees of freedom, and each source
of variation has associated degrees of freedom. For the between groups variance, df= (K-1),
where K is the total number of groups or levels. Because there was three groups, we have (3-1)
=2df. The df for the with in groups sum of squares equals (N-K), where N is the total number of
respondents and K is the total number of groups. As there was no missing response, the
associated df is (219-3) = 216.
The mean square for each source of variation (column 5 of the Table 7) is derived by dividing
the sum of squares by its associated df. Finally, the F value itself equals the explained mean
square divided by the residual mean square.
MS explained
F
-------------------MS residual
In this case, F= 10.421 (5.626/ .540). This F value is significant at p<0.05, therefore hypothesis
H4 accepted, which means there were significant differences among different educational groups
in respect of entrepreneurial orientation
Discussions:
As per my research analysis following are the outcomes that I considered:
Gender differences:
Womens productive role, particularly in business activities , empower them economically and
enable them to contribute more to overall development of their country .But the participation of
women entrepreneurs in KPK is very much low in business sector because our society is male
dominated society although females proportion in total population of Pakistan is more than
50% .
Moreover Women are less entrepreneurial oriented in KPK due to lot of problems. For instance
social structures, work, and family life vary widely in developing countries (Allen et al.,1993;
Aldrich, 1989). Women entrepreneurs in Pakistan and particularly in Khyber Pakhtunkhwa
suffer from the lack of access to, including control over capital, business premises, information
and technology, training, production inputs, and assistance from governmental agencies etc.
Women especially in Khyber Pakhtunkhwa also face the problems of the cultural norm like the
notion of Izzat (honor) etc. In addition, the main challenges they face are the limited mobility,
lack of encouragement from male family members, and improper networking mechanisms and
based on the widespread belief in society that men are inherently superior to women and that
women are best suited to be homemakers. The findings of my research supported previous
researches (Boden, 1996; Boden et al.,1990;Cooper et al. 1994; Matthews,1996; Lerner et
al.1997; Kolvereid, 1996) as already discussed in the literature review section.
Age group differences:
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Age is directly connected with the energy and initiative level of an entrepreneur. It is disclosed
that successful owner were relatively younger in age. As per result of my research study is that
the suitable age is 25 to 40 years, Which supported previous researche studies (Ronstadt1983;
Preisendorfer et al.,1990; Macrae,1992; Birley et al.,1994) as mentioned above in the literature
review section. Further, study on Internet caf entrepreneurs in Indonesia, performed by
Kristiansen, Furuholt, and Wahid (2003) founded a significant correlation between age of the
SME owner and business Success. The people in this age of group are become more productive,
initiative and motivated to achieve their targets regarding their entrepreneurial matters.
Domicile (Local and Non local):
The research study support the previous researchers(Irastorza ,2006 Greenfield and Strickon,
1995; Zeba , 2003; Claessens,1999) as discussed in literature review section, that people who are
involved in the entrepreneurial business activities are almost non locals because they are socially
marginalize and migrated ,thats why, their survival become a problem. This problem makes
them a good entrepreneur which increased his/her entrepreneurial orientation. He/she has
committed to take the calculated risk, innovations and become proactive. For example the
Afghans have rich skills in carpet & rugs weaving and exporting businesses especially in
Peshawar as well as the local weavers have a very minute part in such types of businesses.
Likewise in the southern areas of KPK like D.I.Khan, its surroundings people of South
Waziristan migrated and they become the part of business cycle of the city. For instance
establishment of Toyota showroom, Gulf centre, Rose hotel, as well as involved in transport
business etc. Similarly in the region of Hazara divisions, the rural communities transferred and
enhanced their businesses in the city areas like embroidery & boutique centers, strawberry
production and marketed it in to the surrounding markets.
LEVEL OF EDUCATION:
In this research education level is measured on three bases like primary level of education, high
level and university level. As per my findings there is a prominent significant mean difference
among these three groups regarding their entrepreneurial orientation as discussed in the literature
review section by the different researchers (Hisrich et al., 1986; Selz.1995; Bruderl et al.
1992).Mostly those people who are in the space of high level education group are best
entrepreneurs in the society and affecting entrepreneurial orientation much more than others.
High level means the entrepreneurs come in the space of matriculation to bachelor level. The
entrepreneurial concept is that the master or higher level of education is not necessary or
compulsory for the competency of an entrepreneur. To become a successful entrepreneur for that
purpose the entrepreneurial competencies or characteristics should be placed in the attitude of an
entrepreneur. Education creates awareness among the entrepreneurs to enhance their innovative,
competitive aggressiveness and risk taking capacity to flourish opportunities or in other words
enhances entrepreneurial orientation.
Types of Owners (Sole proprietor/Partners):
In relation with respect to Partnership my researches do not support the previous research studies
(Woo et al., 1989; Schutjens et al., 2000) especially in the KPK due to the following reasons:
In KPK mostly businesses are family oriented that is way these businesses are dominated by sole
proprietors. Moreover there are too much cultural constraints due to this the partnership oriented
businesses are not durable. For example In partnership type of business, mostly partners are
relatives and friends etc. and some time this relationship become demerit and creates mistrust
among the partners which leads to inconsistency in the business. In the same way all the partners
are not actively participating in to the matter of business which creates disrupt in to the business
cycle. The sleeping partner and the active partners involved in to the mistrust situations which
again leads to inconsistency in the business. Similarly the people are initiating enterprises
informally, which means that they have no idea of any necessary documentation which is very
significant for the startup of any partnership business. It means that they are not signing any kind
of partnership deed or something else. As per my research findings such type of situations
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creates embarrassments in partnership type of business which leads to overcome the importance
of entrepreneurial orientation.
Conclusion:
This study was conducted to measure mean difference of respondents registered with different
chamber of commerce and industry in KPK about their entrepreneurial orientation on the basis of
demographic variables. The results of the current study have provided useful insight to determine
the entrepreneurial orientation in our society in order to develop entrepreneurial culture in
Pakistan particularly in kpk. It was also found that there was significant difference in perception
of entrepreneurial orientation due to demographic variables i.e gender, age, domicile and
education level of respondent while no significant difference was observed due to type of owners
i.e. sole proprietor and partner has no significant difference in perception of entrepreneurial
orientation.
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Comparative Significance of the Four Perspectives of

Balanced Scorecard
Zafar Ahmed
Lecturer, Hailey College of Commerce, University of the Punjab, Lahore.
Zulfiqar Ahmed
Assistant Professor, Hailey College of Commerce, University of the Punjab, Lahore.
Muhammad Musarrat Nawaz
Khyzer Bin Dost
Lecturer ,Hailey College of Commerce, University of the Punjab, Lahore.
Muhammad Asim Khan
Research Scholar, Hailey College of Commerce, University of the Punjab, Lahore.
Abstract
Balanced scorecard has been emerged as a comprehensive tool of measuring business
performance. It has four perspectives that are financial perspective, customer perspective,
internal business perspective, and learning and growth perspective. This study was conducted to
know whether all the four perspectives of the balanced scorecard were equally significant. The
study was conducted at the managers level in the commercial banks of Pakistan. The relative
importance of the different perspectives were found and compared.
KEYWORDS: Balanced Scorecard, financial perspective, customer perspective, internal
business perspective, learning and growth perspective.
Introduction
The history of the performance measurement is as old as the history of the business
organizations. Performance measurement has been there in its orthodox form where emphasis
was laid upon financial measures such as return on investment, earning per share, net profit rate
etc. As the financial measures were profit oriented, these were thought to be short term measures.
An organization may be financially sound for the time being because of its monopoly or it may
enhance its current profit by reducing research and development expenses. Under each of the
situations, the organization may be in trouble in the days to come especially in the competitive
environment. Later on, in 1980s, magnitude of performance was shifted to the non financial
measures such as customer satisfaction, delivery period, number of complaints etc. The tools
introduced were Total Quality Management, Six Sigma, Baldrige Award, CAMELS Rating
System etc. Now the existence of financial and non financial measurers at a time resulted in
confusion because the management can enhance one measure at the cost of other. We can reduce
the training, research and development cost to improve the current profitability. On the other
hand, we can spend more on non financial variables to have the future benefits but it would
reduce the current profitability. Thus the balance between the financial and non financial
measures was inevitable.
In order to create a balance between financial and non financial measures, Kaplan and
Norton introduced Balanced Scorecard in 1992. Kaplan and Norton were of the view that the
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long term profitability was dependent upon a large number of non financial measures such as
research and development, innovation, customer satisfaction, training etc. Thus Kaplan and
Norton laid more emphasis on leading instead of lagging measures. The Balanced Scorecard
introduced by Kaplan and Norton measures the performance of an organization from four
different perspectives. These are;
Financial Perspective
Customer Perspective
Internal Business Perspective
Learning and Growth Perspective
These perspectives represent three of the major stakeholders of the organization that is share
holders, customers and employees. The objectives for each perspective are set and the measures
are defined. A brief description of each perspective is given here under.
Financial Perspective
The Financial Perspective deals with the long term objectives of the organization. Kaplan and
Norton (1996) summarize the financial perspective as rapid growth, sustain and harvest. Growth
stage measures the volume of sales, sustain puts stress on return on capital employed; net profit
rate etc and the harvest stage deals with cash flow analysis. In short, financial measures are
similar to the ones we use in the traditional performance measurement.
Customer Perspective
The customer perspective measures the extent to which customer is satisfied with the
products or services of the organization. It can be divided into two measures.
i.
Market Share
ii.
Customer Retention and Customer Acquisition
Market share shows the ratio of sales of a specific product with total sales of that product
in a particular market. It can be measured in terms of sales revenue, sales volume and the number
of customers.
Customer retention deals with the existing customers. It can be measured by comparing
the number of old customers with the total number of customers. The retention of the existing
customer reflects the level of satisfaction of the customer.
Customer acquisition, on the other hand, attracts the new customers. It can be measured
by comparing the number of new customers to total customers. It shows to what extent our
product is attractive.
Internal Business Process Perspective
Internal business process perspective deals with innovation of the production process and
the product itself. Kaplan and Norton (1996) identified three basic internal business processes.
Innovation process aims at seeking the priorities of the customers to modify the manufacturing
operation for the production of desired product. The priority of the customer can be sought
through a market survey. It can be measured by the number times market survey is conducted.
Operation process begins with the receipt of an order and ends with the delivery of the
product or service to the customer. It includes the initial information about the product, response
to the customer queries when the product is in process, in time delivery etc. The important
measurers include the number of in time deliveries, number of unattended queries reported by
the customers etc.
The relationship of the company and its customer does not come to an end when the
product is delivered to the customer. This is basically the end of first phase of the relationship
and the beginning of the second phase which deals with the warranty and repair activities.
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Learning and growth perspective

Learning and growth perspective measures to what extent our human resources are
capable of meeting the future requirements. This perspective states that the organizations must
invest in human resources if they are to achieve their long term financial objectives. This
perspective tries to bridge the gap between the required and existing skills. Kaplan and Norton
(1996) were of the view that the objectives of this perspective were,
Satisfaction of employees
Retention of employees
Employee productivity
Employee satisfaction can be measured by a periodic survey, labour turn over is a suitable
measure for the retention of employees and the employee productivity can be judged by the sales
revenue per employee.
The investment in the human resources can be measured by the number of lectures,
seminars, workshops, training session etc. arranged by the organization.
Figure 1 shows the relationship of the four perspectives.
Figure 1
Literature Review
Colin Drury (2000) said that prior to 1980s, management accountant used to focus on the
financial measure such as return on capital employed, profit margin, earning per share etc.
Niven (2005) stated three problems with the traditional performance measurement system.
Traditional measures relied upon financial measures and the financial measures were short term
measures. It was evident from the fact that 2/3 of the fortune 500 companies in 1954 were either
found nowhere or if some were found there, they were not in that prosperous form.
Financial measures were lagging measures.
Slow response to change. In 1999, it was found that 75% failures of the CEOs came not because
of poor strategy but because of poor strategy implementation.
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Thus, managers needed to manage the determinants of performance at all levels. For that purpose,
emphasis was laid on non financial measures such as customer satisfaction, number of
complaints, number of intime deliveries etc.
The problems with non financial measures stated by Niven (2005) were as follows.
A large number of non financial measures were there and it was difficult to select some of them.
Non financial measures might be misleading.
Difficulty of translation of non financial measures into financial outcomes.
Niven (2005) stated the experience of Horizon Fitness. The CEO there was worried about the
strategy implementation. The author and the CEO developed Balanced Scorecard for the Horizon
Fitness. It was so effective that the sales revenue reached $85 million in the third year of
Balanced Scorecard implementation from $6.6 million in the first year of its operation.
Barkley (2000) said that a recent survey showed that 88% of the organizations felt that the
Balanced Scorecard had improved the performance of the employees. Balanced Scorecard was
considered motivating, measuring and rewarding the people and then innovating the strategies.
Will Kaydos (2004) explained that each old system was to be replaced with a new system. The
same was the case with performance measurement where Balanced Scorecard is very popular
those days. Finally the author stated that the Balanced Scorecard was the best performance
measurement system but its success is dependent upon its proper implementation.
Lincoln (2008) has quoted Bailey, CEO of Nemours, stating that the success that they had at
Nemours was proof of the usefulness of the Balanced Scorecard.
Martin (2004) explained that the Balanced Scorecard created a balance between short term and
long term measures, internal and external business processes, leading and lagging indicators,
objective and subjective measures etc.
Elefalk (1998) stated that the Swedish police adopted the Balanced Scorecard in 1998. The
perspectives of the Balanced Scorecard were different from the ones given in the original
Balanced Scorecard. The perspectives included in this Balanced Scorecard were operational,
staff, citizen and resources.
Stawar T (2002) studied Kaplans famous book Balanced Scorecard: Measures that drive
Performance and concluded that Balanced Scorecard was much more than the traditional
performance measures.
Richardson (2004) has given the following six elements of Balanced Scorecard success,
Develop your business strategy
Involve the senior leadership in the process of development of the Balanced Scorecard.
Develop your Balanced Scorecard according to the vision of your organization and describe the
vision of your Balanced Scorecard.
Implement the Balanced Scorecard everywhere in your organization.
Communicate the objectives of the Balanced Scorecard to everyone and educate all of your
employees about it.
Implement your Balanced Scorecard in such a way that it can be adjusted automatically in
accordance with day to day changes.
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Rhom (2004) said that Balanced Scorecards was equally applicable to public sector organizations
only after having certain modifications. This change may be in the form of an additional
perspective.
Stella Mooraj et al (1999) stated that the Balanced Scorecard was necessary good because it
covered all the features of the management control system.
Lapointe (1999) stated that Balanced Scorecard helped marketers and executives. It provided
measures for input and outcomes. He suggested that the Balanced Scorecard might be adopted or
adapted. Whatever the case was, it must have observed the organization from various angles.
Some organizations might be using some other names for the Balanced Scorecard and many
companies used it without even knowing it.
Averson (1998a) said that performance based management was introduced during and after
World War II by Whiz Kidz in Ford Motor Company and the same was used in the Pentagon
during Viet Nam war.
Deming is considered to be the founder of modern performance based management who laid
emphasis on quality, innovation and employee empowerment.
Traditional performance measures used to assess the performance on the basis of number of
rejects. That was why the causes of defect remained unidentified. Deming emphasized upon the
detection of causes of defect at various stages of production. The system Deming proposed is
known as PDCAC (Plan, Do, Check, Act, Cycle).
Deming study was adopted in the USA in the form of Total Quality Management and Baldrige
Award. A brief description of Baldrige Award is given here.
National Institute for Standards and Technology evaluates the performance of large and small
manufacturing and service organizations through a structured questionnaire which is called
Baldrige Criteria. The winner is given a beautiful trophy in a grand ceremony in Washington.
This trophy is called Baldrige Award. The winner of the award is requested to give a
presentation on their best practices for the guidance of others.
In 1933, US Govt. introduced Govt. Performance and Result Act. The organizations used to
measure their performance on the basis of financial data such as profit. Later on, it was found
that the financial measures were the lagging measures which measured the things partially and
told the history.
Kaplan and Norton developed Balanced Scorecard in 1992. It was an alternative approach for the
measurement of performance of an organization. It comprised leading and lagging measures. It
measured the effectiveness of the strategy.
Hendricks et al (2004) stated that the first Balanced Scorecard type was adopted in 1950 in
General Electric.
A survey, conducted by Bain & Company on 708 organizations all over the world, showed that
62% of the responding organizations had adopted Balanced Scorecard. At the same time, 50% of
the fortune 1000 firms had been using Balanced Scorecard in some form. Another survey
conducted by Hendricks on 179 Canadian firms reported that 42 of those had adopted Balanced
Scorecard.
The author further stated that the Balanced Scorecard was a useful technique for
The prospector and analyzer type of organizations.
The large size organizations
The organizations having large environmental uncertainties
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The organizations having investment in intangible assets
So far as the relationship between Balanced Scorecard and financial performance was concerned,
a survey on 42 Balanced Scorecard adopter organizations showed that their financial
performance was not up to the mark before adopting Balanced Scorecard. The results did not
improve much after adopting the Balanced Scorecard. It was perhaps because of the fact that
most of the organizations adopted Balanced Scorecard after 2003 and this study did not cover it.
Lenhard (2007) explained that if the leaders did not know whether they were moving towards
their objectives or not, they needed to study Balanced Scorecard. In order to follow Balanced
Scorecard approach, the managers should have set the objectives and they were to select the
measures to assess whether the stated objectives were being achieved. The author stated three
stages for the development of Balanced Scorecard,
Beginning stage: Initial metrics are defined.
Present stage: Measure results from the beginning state to the present.
End stage: measure results from both the beginning and present state towards targeted objectives.
Figg (2000) said that many of the worlds leading organizations had got benefits out of Balanced
Scorecard approach.
Despina (2008) stated that originally the Baldrige Criteria and Balanced Scorecard were
developed for the business organizations but these could be equally adopted by the nonprofit
organizations.
Ho and McKay (2002) said that Balanced Scorecard was a comprehensive measure and showed
that ABC Manufacturing Company was successfully using a Balanced Scorecard with very
simple and easy measures. The production manager of the company stated that he had never seen
a system better than Balanced Scorecard. On the other hand, Ho and McKay showed that a bank
introduced Balanced Scorecard and after three and half year, it was replaced with a
Compensation Plan Program. This bank states four difficulties in the application of Balanced
Scorecard,
Different interpretation of the Balanced Scorecard by the different managers
Branch managers thought it to be ineffective because it created hurdles for the employees to get
bonuses.
Balanced Scorecard did not ensure good customer services.
It required additional time of the management.
The main reason for the failure of the Balanced Scorecard shown in the article was frequent
regulatory changes.
Finally the author has given four findings for the successful implementation of the Balanced
Scorecard.
Prompt feedback.
Involvement of the employees
It might be effective during time of organizational change
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A number of well thought predetermined parameter.
Mazumder (2006) said that the performance of an organization provided basis for the various
economic decisions. Thus an organization ought to need a reliable system of performance
measurement. It is especially the case in public organizations where public money was involved.
The four types of the banks scheduled commercial banks, joint venture banks, foreign banks and
private banks were formed under special statute or under Banking Companies Act of Bangladesh
1991. Bangladesh Bank monitored the performance of these banks by using CAMEL rating
where C stands for Capital adequacy, A for Asset Quality , M for Management Capacity E for
earning available and L for Liquidity .
CAMEL rating ignored the non financial measures completely. On the other hand, Balanced
Scorecard was a comprehensive measure to achieve the long term objectives of the organization.
However CAMEL has not proved to be a comprehensive performance measure because it lays
emphasis on short term financial objectives of the organizations.
On the other hand, Balanced Scorecard laid emphasis on non financial measures also, which led
to future performance of the organization,
Financial perspective aimed to hit the quantitative measures such as Return on Capital Employed
(ROCE), Residual Income (RI), Net profit margin etc.
Customer perspective tried to know the level of satisfaction of the customers.
Internal process perspective aimed at the desired internal process to meet the expectations of the
customers.
Innovation and learning perspective innovated and improved the existing products and process to
meet constantly changing requirement of the customers.
All the perspectives of the CAMEL rating were covered by Balanced Scorecard but the
perspectives of the Balanced Scorecard were not met by the CAMEL especially the qualitative
measures.
Finally the author stated that in order to make the CAMEL competitive, measures like Customers
Perspective, Internal Process and Learning and Growth should have been introduced.
Steele J (2001) in an article stated that a number of organizations gained financial success
through Balanced Scorecard. According to a series of three surveys conducted to know the
application of the Balanced Scorecard, 40% of the organizations in North America were
following Balanced Scorecard.
The author gave a five point strategy to show what Balanced Scorecard meant to the managers.
These five points are,
It enables managers to review past and predict future performance.
It let the managers recognize useful measures.
It let the managers understand the big picture of enterprise strategy execution.
It let the managers to translate the objectives and measures into different levels within an
organization.
It empowers the front line employees with the collaborative tools necessary to encourage the
swift implementation of improvement initiatives.
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This study was conducted to know whether all the four perspectives of the Balanced Scorecard
were equally significant. The study was conducted at the managers level in the commercial
banks in Pakistan. To accomplish the objective, a sample of 27 out of total 34 commercial banks
was taken. These banks included public banks, private banks, foreign banks and Islamic banks.
The number of the respondents varied from bank to bank. Total number of respondents in this
study was 161. Out of total 161 respondents, 141 were post graduate, 19 were graduate and one
respondent was CA finalist.141 respondents were male and the remaining 20 were female. The
experience of the responding managers was ranging from one year to 35 years. Table 0.0 shows
the demographic characteristics of the respondents.
Table 0.0: Demographic Characteristics of Respondents
Gender
N
%age
Male
141
87.58
Female
20
12.42
Age
N
%age
21-25
24
14.91
26-30
50
31.06
31-35
28
17.39
36-40
27
16.67
41-45
12
7.45
46-50
4
2.48
51-55
13
8.08
56-60
3
1.86
Qualification
Post Graduate
141
87.58
Graduate
19
11.80
Other
1
0.62
Experience
1-5 Years
67
41.62
6-10 Years
31
19.25
11-15 Years
29
18.01
16-20 Years
15
9.32
21-25 Years
6
3.73
26-30 Years
9
5.59
31-35 Years
4
2.48
In order to know the significance of each perspective, the respondent were given a scale from 1
to 4 where 1 was most important, 2 was important, 3 was less important and 4 was least
important.
Findings
The study revealed the followings;
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Figure 2 shows the significance of Financial Perspective.
Figure 2 shows that 40% of the respondents considered financial measures as the most important.
27% reported these measures as important. On the other hand, 18% and 15% of the respondents
reported the financial measure as less important and least important respectively.
Figure 3 shows the significance of Customer Perspective.
Figure 3 shows that 55% of the respondents considered customer satisfaction as the most
important perspective of the Balanced Scorecard, whereas 32% reported customer satisfaction as
important perspective. 6% of the respondents considered this perspective as less important and
7% of the respondents declared it least important.
Figure 4 shows the significance of Internal Business Perspective.
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Figure 4 indicates that 9% of the respondents declared internal process perspective as the most
important. 24% of the respondents considered this perspective as important, 43% and 24% of the
respondents considered internal process as less important and least important respectively.
Figure 5 shows the significance of Learning and Growth Perspective.
Figure 5 shows that 44% of the respondents considered learning & growth in the total
measurement through Balanced Scorecard as the least important whereas 6% considered it most
important. 21 % of the respondents showed that it was important and 29% of respondents felt
that learning and growth was less important.
Conclusion
In order to draw relative significance of the four perspectives of Balanced Scorecard, figure 6
shows the mean value for each perspective. It is reminded again that 1 stands for the most
important, 2 for important, 3 for less important and 4 for least important.
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Figure 6: Mean value for each perspective.
Figure 6 indicates that the mean value for Financial Perspective is 2.08 which is close to
important, Customer Satisfaction 1.65 which is in between most important and important,
Internal Process Perspective 2.81 which is close to less important and Learning and Growth 3.11
which is towards least important.
We may draw a conclusion here that the respondents rate the customer satisfaction as the most
important perspective, financial perspective as important, internal process as less important and
learning and growth perspective as the least important perspective of the Balanced Scorecard.
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References
Drury, C. (2000a). Management & cost accounting. United Kindom: Business Press/Thomson
Learning.
Niven, P. ( Winter2005). Driving Focus and Alignment With the Balanced Scorecard. for
Quality & Participation, 28(4), 21-25. Retrieved July 15, 2009, from Academic Search
Premier Database.
Kaplan and Norton (1992). The Balanced Scorecard- Measures That Drive Performance.
Harvard Business Review, 71-79.
Barkley, S. (2000, Winter2000). Are You in Balance?. Outlook, 67(4), 34. Retrieved July 15,
2009, from MasterFILE Premier Database.
Kaydos, W. (2004). What Should Your Company Measure Beside Financial Results. Balanced
Scorecard Institute.
Lincoln, M. (2008). News Research Shows Balanced Scorecard Helps Companies Achieve an
Execution Premium. Business Wire.
Martin, J. R. (2004). The Balanced Scorecard Concepts. White Paper- Balanced Scorecard
Institite.
Elefalk Kjell (2001). The balanced Scorecard of Swedish PoliceService; 7000 officers in total
quality management project. Total Quality Management, 958-966
Stawar, T., & Zipple, A. (2002, Fall2002). THE STRATEGY-FOCUSED ORGANIZATION:
HOW BALANCED SCORECARD COMPANIES THRIVE IN THE NEW BUSINESS
ENVIRONMENT (Book). Psychiatric Rehabilitation Journal, 26(2), 212. Retrieved July
15, 2009, from Academic Search Premier Database.
Richardson, S. (2004, November). The KEY elements of Balanced Scorecard success. Ivey
Business Journal, 69(2), 7-9. Retrieved July 15, 2009, from MasterFILE Premier
Database.
Rhom, H. (2004). A Balancing Act. PERFORM, 2(2), 1-8.
Stella Mooraj, D. O. a. D. H. (1999). The Balanced Scorecard: a necessary good or an
unnecessary evil. Europeon Management Journal, 17(5), 481-491.
LaPointe, P. (1999). The Balanced Scorecard: Prelude to a Marketing Dashboard. White PapersBalanced Scorecard Institute.
Averson, P. (1998a). Background and History of Measurement Based Management Balanced
Scorecard Institute.
Figg, J. (2000, April). Balanced Scorecards Receive High Marks. Internal Auditor, 57(2), 16.
Retrieved July 15, 2009, from MasterFILE Premier Database.
Ho, S., & McKay, R. (2002, March). Balanced Scorecard: Two Perspectives. CPA Journal,
72(3), 20. Retrieved July 15, 2009, from MasterFILE Premier database
Lenhard Search Premier Database.(2007, July). Achieving Success Through a Balanced
Scorecard. FBI Law Enforcement Bulletin, 76(7), 24-24. Retrieved July 15, 2009, from
Academic
Despina Depias Wilson, Theresa del Tufo and Anne E.C. Norman (2007). The Measure of
Library Excellence: Linking the Malcolm Baldridge Criteria and Balanced Scorcard
Methods to Assess Service Quality. Jefferson, NC: McFarland and Company, Publishing,
Inc
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Mazumder, K. K. P. a. B. C. (2006). Performance Measurement of Baonks: An Application of

Balanced Scorecard. The Cost and Management, 34(6), 21-30.
Steele, J. (2001, September). Transforming the Balanced Scorecard into Your Strategy Execution
System. Manage, 53(1), 22. Retrieved August 6, 2009, from MasterFILE Premier
Database.
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THE RELATIONSHIP OF EMOTIONAL INTELLIGENCE WITH THE

STUDENTSACADEMIC ACHIEVEMENT
Gulap Shahzada (Corresponding author)

University of Science and Technology, Bannu, (KPk) Pakistan
Dr. Safdar Rehman Ghazi
Abdullah Khan
Habib Nawaz Khan
M. Tahir Shah
Abstract
Objectives of this study was to investigate the nature of the relationship between emotional
intelligence and students academic achievement. The population frame work of this study
consisted of all the degree collages students of 1st year. Multistage stage random sampling
technique was used for selection of the sample. Responses of the 714 sampled students were
collected using Armstrong multiple intelligence inventory. In order to observe the relationship
between the dependent and independent variables, Pearson Product Correlation Coefficient and
Statistics was applied. Results of the study showed that there is a significant relationship
between emotional intelligence and students academic achievement. It was recommended that
component of emotional intelligence should be taught in schools and should be included in
school curricula.
Key words: Emotional intelligence, Intrapersonal, interpersonal, academic achievement
1.Introduction
Researchers are exploring new areas of human interests and unfolding mysteries. Knowledge is
increasing every moment. Knowledge of today becomes old the next day. We hear and see what
we have not heard and seen before. New theories related to man have been established and
attracting attention of the man. Every aspect of a childs personality, his reasoning capacities, his
dreams, his creativity, his interpersonal and intrapersonal skills and his emotions have become
the centers of human interests. AbiSamra (2000) reported that Emotional intelligence and
students academic achievement are interrelated. He therefore solicited for inclusion of
emotional intelligence in the schools curricula. The Multiple intelligences theory has been
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introduced by Howard Gardner (1983) and the Emotional intelligence theory by Mayer and
Salovey (1990) and Goleman. (1995). According to Goleman (1995) IQ alone is not the only
standard for success; Emotional intelligence, social intelligence and luck also play a great role in
a persons success. Goleman has observed that Emotional intelligence predicts as much as 80 %
of a persons success in the life, whereas the traditional measure, IQ, predicts only 20 % .
Some researches have explored intelligence and gender as predicators of academic achievement
among undergraduate students (Habibollah.,N., Rohani.,A., Tengku,A.,.H.& Jamaluddin.,
S.2008).
Some researchers are of the opinion that there is friendly relationship between intelligence and
academic achievement. Some say that there is a cause and effect relationship between
intelligence and achievement. Laidra, K., Pullmann, H., and Allik, J (2007) revealed that
students achievement relied most strongly on their cognitive abilities through all grade levels.
The researcher is interested to probe into the dilemma to know the nature of the relationship of
Emotional intelligence with the students academic achievement.
Which intelligence has a more strong relationship with academic acheivements. It is the focal
point of the reseachers attention now days. Resaechers have different claims and opinions about
the relationship of different intelligences with students acaedmic achievement. The rapid
growth in the body of Knowledge about how the brain works has captured the interest and
imagination of educatotrs and the general public (Sylwster, 1994). Researchers are exploring, at
an unprecedented rate, about how the brain processes, stores, and retrieves information.. During
the 1990s, brain research exploded into dozens of subdesciplines, as social learning and
Emotional intelligence. The book Emotional intelligence by Deniel Goleman (1995) brought to
the publics attention the importance of our emotional lives.( Jensen, 1998). There is a rising tide
of understnading among educators that students social and emotional learnig can and should be
promoted in school (Langdon, 1996).
According to Solovey and Mayer (1990), Emotional intelligence is being able to monitor ons
own and others feeling and emotions, to discriminate among them, and to use this to guide ons
thinking and actions.Again Solovey and Mayer (1993) wrote that an emotinally intelligent
person is skilled in four areas: identifying, using, understanding, and regulating emotions.
Likewise Goleman (1995) stressed that Emotional intelligence consists of five components:
knowing ons emotions (self-awarness), managing them, motivating self, recognising emotions
in others (empathy) and handling relationship.
In the same way, AbiSamra (2000) reported that there is a positive relationship between
Emotional intelligence and academic achievement. And If Emotional intelligence is considered
now a days vital for success, then why dont we start teaching its components to our students at
school? If it affects students achievement, then it is imperative for schools to integrate it in their
curricula, hence raising the level of students success. Emotional intelligence has been found a
reliable predicator of academic achievement. (Parker, J.D.A.; Craques, R..; Harris, J.; Majeski,
S.A.; Wood, L.M., & Hogan. M.J., 2003).
In the start Psychologist from time to time propagated theories of intelligence and tried to
uncover the elements of intelligence. Then researchers recognized that there are other noncognitive aspects too. Robert Thorn Dike wrote about social intelligence in 1920. And as early as
1943 David Wechsler proposed that non- intelligence abilities are essential for predicting ability
to succeed in life. Imbrosciano and Berlach (2003) have remarked that Success may be viewed
in three main domains. A good student is often referred to as being intelligent or well
behaved or academically successful. Arising from these are the questions; are there any
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connection between these domains? Is there a strong connection, between intelligence and
academic achievement? Do students with high intelligence behave better? These and many more
questions underscore the important place intelligence has been found to play in academic
success. But Some of research studies explored intelligence and gender is predicators of
academic achievement among undergraduate students (Habibollah.,N., Rohani.,A.,
Tengku,A.,.H.& Jamaluddin., S.2008). According to Watkins, Lei, and Canivez (2007) there has
been considerable debate regarding the causal precedence of intelligence and academic
achievement.
Laidara, Pullmann and Allik (2007) revealed that students achievement relied most strongly on
their cognitive abilities through all grade levels .Laidra et al (2007) investigated as predicator of
academic achievement in a large sample 3618 students (1746 boys and 1872 girls) in Estonia,
intelligence, as measured by the Ravens Standard Progressive Matrices was found to be the best
predicator of students grade point Average (GPA) in all grade.Deary, Strand, Smith, &
Fernandes (2007) found a strong and positive relationship between intelligence and academic
achievement. Goleman and Boyatzis.2001), suggest that EQ is more critical than IQ in
determining the success of students. A students mood or emotions, and the way that they are
managed are postulated to have an influence on their creative and intellectual competencies and
on their ability to form and maintain healthy interpersonal relations.
Statement of the problem
Relationshipbetweenemotionalintelligenceandstudentsacademicachievement
Objective of the study
Objectives of the study was to find out the relationship between students emotional
intelligenceandstudentsacademicachievement.
Research guiding question of the study
Is there any relationship between students emotional intelligence and their academic
achievement?
Delimitation of the study
Thestudywasdelimitedtothefirstyearstudentof10DegreeCollegesofdistrictBannu.
Population
Thestudywasconcernedtofindouttherelationshipbetweenstudentsselfperceivedmultiple
intelligences and their academic achievement. There are 10 Government Degree Colleges in
district Bannu; nearly 1585 students enrolled in 1st year, in all these 10 Government Degree
Colleges,session2010,constitutedpopulationofthestudy.
Sample
The sampling frame for the study was 1585 students. Out of ten, eight Govt. Degree Colleges
were randomly selected using cluster random sampling method four from urban and four
colleges from rural areas were selected using proportional allocation sampling technique. A
stratified random sampling method followed by technique of proportional allocation was used in
order to select the sizes of male and female. Using convenient sampling technique from Govt.
Boys Degree College NO. 1, Govt. Boys Degree College NO. 2, Govt. Boys Durani Degree
College, Govt. Boys Degree College Kakki, Govt. Girls Degree College Bannu City, Frontier
Education Foundation Girls Degree College Township, Govt. Girls Degree College Mandan,
Govt. Girls Degree College Surani; 130, 74, 83, 92, 155, 59, 91, 30 respectively, total 714
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students were selected as sample keeping in view students admission ratio. Among them 180
students were urban and 534 students were rural, 379 students were male and 335 students were
female.
Instrumantation
Multiple intelligence inventory based on Howard Gardners Multiple Intelligences Theory,
developed by Armstrong (1994), was selected as a research instrument in order to measure
students emotional intelligences. The inventory was slightly modified and translated into Urdu
with the help of experts in order to make it easier and understandable to the students in local
environment. Students academic achievement were obtained from their matriculation detailed
marks certificate (DMC) issued by Board of Intermediate and Secondary Education Bannu.
Pilot Study
For the validity and reliability and to remove language ambiguity, the multiple intelligence
inventory was administered to 50 subjects. The reliability of forty items at Cronbachs alpha
obtained was .784 which is quite reasonable.
Inventory in its original form is already standardized, having high validity. Validation of the
inventory Urdu version was checked by experts such as Dr. Riasat Ali Director IER University
of Science and Technology Bannu. Hukam Zad Khan Chairman English Department University
of Science and Technology Bannu, and Professor Attaullah Khan Chairman Urdu Department
Government Degree College No: 2 Bannu. Suggestions of the experts were incorporated.
Data collection
Data collection method is an integral part of any research designs. Therefore, use of a suitable
method extremely enhances the value of the research. This research is a descriptive research.
Therefore the research tool was distributed among the 1st year students of eight Government
Degree Colleges. The research tool was personally administered to the subjects in groups in
order to clarify any doubt on the statement at the spot and collected all the completed responses.
The photo copies of detail marks certificate (DMC) of the students were collected from their
respective colleges record. Data was collected from different colleges on different days.
Data Analysis
The collected data was entered in SPSS-16 and was analyzed using appropriate statistical tests.
The central tendency and variability of the multiple intelligences of the sample students was
measured using Mean and SD respectively. Emotional intelligence and academic achievement
scores were correlated using Pearson Product Moment Correlation.
Formula used for the selection of the subjects was as under.
Formula=
Sample size for male=
Sample size for female=
The following 5-point Likert rating scale was applied to this study. The scale was
adopted from Ann Joe (1999). Job satisfaction of Middle Schools Principals in Virginia,
Dissertation submitted to the faculty of Virginia Polytechnic institute and State University for the
degree of Doctor of Education in Educational Administration Blacksburg Virginia USA.
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The scale options were given different weights from 1 to 5, as given below:
Scale Options
Weight
Never
Seldom
Sometimes
Often
Always
The following range was assigned to the scale

Scale Options
Range
Never
1.00-1.50
Seldom
1.51-2.50
Sometimes
2.51-3.50
Often
3.51-4.50
Always
4.51-5.00
The distribution of intelligence among all human beings is not the same. It is similar to the
pattern of distribution of health, wealth, and similar to other characteristics or endowments. It is
a normal distribution that is governed by a specific principle which say that the majority of
people are at the average, a few very brilliant and a few very tedious. According to the IQ normal
curve distribution therefore most of the people fall in the range 1.00 - 4.50.
Table 1 presents the coefficient of correlation between the statements people do come to
me for advice and students academic achievement is .09 with p value .01, the value of
r and p show that there is no correlation between the statement and academic achievement
of the students.
The coefficient of correlation between the statement having several very close friends
and students academic achievement is .08 with p value .15, the value of r and p show
that there is no correlation between the statement and academic achievement of the
students.
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The coefficient of correlation between the statement enjoying social events and parties
students.
The coefficient of correlation between the statements enjoying being with different
types of people and students academic achievement is .02 with p value .00, the value of
r and p show that there is a significant positive correlation between the statement and
academic achievement of the students.
The coefficient of correlation between the statements enjoying complementing others
when they have done well and students academic achievement is .10 with p value .00,
the value of r and p show that there is a significant positive correlation between the
statement and academic achievement of the students.
The coefficient of correlation between the statements knowing own self well and
students academic achievement is .11 with p value .00, the value of r and p show that
there is a significant positive correlation between the statement and academic
achievement of the students.
The coefficient of correlation between the statements over reaction to minor problems
students.
The coefficient of correlation between the statements keeping of a diary to record
personal thoughts and students academic achievement is .00 with p value .00, the value
of r and p show that there is a significant positive correlation between the statement and
The coefficient of correlation between the statements knowing responsibilities and
being responsible for own actions and students academic achievement is .17 with p
value .91, the value of r and p show that there is no correlation between the statement and
The coefficient of correlation between the statements straight forward in saying what is
felt and students academic achievement is -.00 with p value .91, the value of r and p
show that there is negative correlation between the statement and academic achievement
of the students.
Table 2 shows the overall coefficient of correlation between the intrapersonal
intelligence and students academic achievement is .15 with p .00 value which show that
there is significant correlation between intrapersonal intelligence and students academic
achievement.
The overall coefficient of correlation between the interpersonal intelligence and students
academic achievement is .12 with p .00 value which show that there is significant
correlation between interpersonal intelligence and students academic achievement.
Conclusions
There is a significant positive correlation between students emotional intelligence and students
academic achievement.
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References
AbiSamra,N.(2000). The relationship between Emotional Intelligence and Academic
achievement in Eleventh Graders.Research in Education, FED, Alabama.
Bar-On, R. (1997). The Emotional Quotient Inventory (EQ-i): a test of emotional intelligence.
Toronto: Multi-Health Systems. Canada.
Deary, I. J., Strand, Strand, S., Smith, P., & fernandes, C (2007).Intelligence and educational
achievement. Intelligence. Scotland UK.
Gardner, H. 1983.Frames of Mind. The Theory of Multiple Intelligences.Basics Books Inc, New
York. USA.
Habibollah.,N., Rohani.,A., Tengku,A.,.H.& Jamaluddin., S.(2008). European Journal of
Social Sciences- Volume 7, Number 2 (2008) University of Mazandaran street of
Pasdaran, Babolsar, Iran.
Goleman, D. (1995). Emotional intelligence. New York: Bantam Books. USA.
Goleman, D., Boyatzis.(2001, December). Primal leadership: The hidden driver of great
performance. Harvard Business Review, New York, USA.
Imbrosciano, A., & Berlach, R.S. (2003).Teacher perception of the relationship between
intelligence,student behaviour, and academic achievement. Available at:
http://www.findarticles.com.
Jensen, E (1998). Teaching with the brain in mind .Alexandria, VA: Associatin for Supervision
and Curriculum Development. Alexandria, VA.
Langdon, C.A. (1996).The third annual Phi Delta Kappan poll of teachers: Attitudes towards the
public schools.Phi Delta Kappan.
Laidra, K., Pullmann, H., & Allik, J (2007). Personality and intelligence as predictors of
acedemic achievement: A cross sectional study from elementory to secondary school.
Personality and individual Differences.University of Tartu, Estonia.
Mayer, P., & Salovey, J.D. (1990). Emotional Intelligence imagination, cognition and
personality. Journal of personilty, University of New Hampshire.
Parker, J.D.A.; Craques, R..; Harris, J.; Majeski, S.A.; Wood, L.M., & Hogan. M.J.,
(2003). Academic Success in High School: Does Emotional Matters? ERIC
Clearing House. USA.
Sylwester, R. (994).How emotions affect learning. Educational leadership, West Mount Pleasant
Ave., Suite 105, Livingston, NJ 07039, USA.
Thorndike, E.L. (1920). Intelligence and its uses. Harper's Magazine, New York city, USA.
Wechsler, D. (1943). Non-intellective factors in general intelligence.Journal of Abnormal Social
Psychology, New york, USA.
Witikin, B.R. (1984). Assessing needs in education and social programs (1st ed). San Francisco,
CA: Jossey-Bass.USA.
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Annexure
Table 1:
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Relationship between emotional intelligence and students academic achievement
S.NO
Statement
People do come to me for advice.
.09
.01
Having several very close friends.
.08
.15
Enjoying social events and parties.
.05
.15
Enjoying being with different types of people.
.02
.00
Enjoying complementing others when they have done well.
.10
.00
Knowing own self well.
.11
.00
Over reaction to minor problems.
.12
.94
Keeping of a diary to record personal thoughts.
.00
.00
Knowing responsibilities and being responsible for own

actions.
.17
.91
10
Straight forward in saying what is felt.
-.00
.91
Correlation is significant at 0.01 level

Table2:
Relationship of overall emotional intelligence with students academic achievement

r
Intrapersonal
.15
.00
Interpersonal
.12
.00
Correlation is significant at 0.01 level
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ENFORCEMENT OF FOREIGN ARBITRATRAL AWARDS AND POSSIBLE DEFENSES:

CHALLENGES AND OPPORTUNITIES FOR PAKISTAN
Naeem Ullah Khan
Lecturer, University Law College, University of the Punjab, Lahore, Pakistan

Samee Ozair Khan
Assistant Professor, University Law College, University of the Punjab, Lahore, Pakistan
Abstract
In current scenario of Globalization trade and investment are indispensable and have become an
integral part of the national economy. The escalation of trade liberalization has led to raise
plethora of international trade and investment disputes. In this particular context, the
enforcement of foreign awards has become significant for national economic growth. This paper
highlights those defenses which can be taken as plea against the recognition and enforcement of
foreign arbitral awards. These defenses have been discussed at length by courts of diverse
jurisdictions. The jurisprudential Interpretation of these defenses has been discussed in the light
of judgments of competent courts of USA and UK. This paper inter-alia examines the attitude of
Pakistanis courts with special reference to the enforcement of Foreign Arbitral Awards.
Furthermore, after the comparative analysis of case law it may be concluded that courts in
Pakistan are also inclined to enforce Foreign Arbitral Awards. Pakistanis experience is still
evolving in a positive dimension but the pace is very slow. However, lot of challenges being
faced by Pakistan which can be converted into opportunities by initiating positive measures.
Keywords: Enforcement , Foreign Arbitratral , Awards , Possible Defenses, Challenges ,
Opportunities
1.INTRODUCTION
This paper seeks to examine the possible defenses that can be taken as plea against the
recognition enforcement of foreign arbitral awards as allowed in the article V of the United
Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards1958. The
subject has been studied with special reference to Pakistani Court's attitude and legal framework
for the implication of foreign awards. For judicial interpretation of these defenses leading cases
of American and English superior courts, have been referred to illuminate the subject matter.
Examination of these cases indicates that overall no hard and fast rules have emerged. As far as
Pakistan is concerned it is evident that only scarce number of cases in the superior courts have
been decided in the recent past here again there has been significant divergence in decision
making. Though the Article V of Convention referred to above allows that recognition and
enforcement of the Foreign Arbitral Award can be refused only if the aggrieved party furnishes
specific proof to the competent authority.
2.BACKGROUND
In the contextual perspective of globalization trade and investment have become an
integral part of Economy of contemporary world. [With the advancement of legal framework and
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technology the conflicts relating to commercial transaction are common.] Parties involved in
International business transactions in corporate arbitration, choice of forum and choice of law
clauses in their initial contracts and agreements for the settlement of commercial disputes.25
The United Nation Convention on the Recognition and Enforcement of Foreign Arbitral
Award 195826 (New York Convention) and UNCITRAL model law 198527 provide a uniform
legal framework to enforce arbitration agreements and foreign arbitral awards which contains
substantive and procedural defenses against enforcement of foreign awards. A party against
whom the recognition and enforcement of foreign Arbitral Award is sought may invoke these
defenses before a court of competent jurisdiction.
In year 2010 Pakistan has promulgated Arbitrational Agreements and Foreign Arbitral
Awards Act to give an effect to the New York Convention. The Act has repealed the Arbitration
(Protocol and Convention Act, 1937. The existing law provides statutory defenses in form of
Section 7.28 The approach behind the law is to establish a uniform framework for the
enforcement of civil and commercial Awards. Moreover, the Act provides that the courts in
Pakistan shall recognize and enforce the foreign arbitral Awards in the same manner as a
judgments or orders of the court in Pakistan unless there are some compelling factors.29
3.
SIGNIFICANCE OF RECOGNITION AND ENFORCEMENT
Modern legal system cant operate fairly and transparently without recognition and
enforcement of arbitral awards and judgments in the cosmopolitan field of transnational trade.
Since the importance of international trade and investment cannot be ignored. In current global
economy it has contributed immensely to the all sided development of a nation30. And the
recognition of foreign and domestic awards acts as moment force for national economy and
prosperity of a country. However, investment and trade among the nations is largely seen as the
key to economic growth, peace and better standard of living leading to a happier state of human
existence at a global level31. No country can survive without the trade so, in the common
25
Susan Choi, Note, Judicial Enforcement of Arbitration Awards under the ICISD and New York Convention, 28
N.Y.U.J. INT,LL& Pol 175 (1997).
26
This Convention applies to the recognition and enforcement of arbitral awards made in the territority of a state
other than the Stat where the recognition and enforcement of such awards and sought and to arbitral swards not
considered as domestic awards.
27
United Nation Commission on International Trade Law was established by the UN General Assembly in 1966
since has been working for the Harmonization of International Commercial law sale of goods transport goods and
commercial Arbitration.
28
These defense are thosed which are enshrined in Article V of New York
29
See generally section 6 of Recognize and Enforcement of Freign Arbitral Awards Ordinance, 2009.
30
Available at http://www.google.com visited on 24 July, 2009
31
Views as to benefits of free trade owes much to the work of Adam Smith, (An inquiry into the Nature and Causes
of the Wealth of Nations, 1776) and David Ricardo (on the Principle of Political Economy and Taxation, 1817).
However, there are several eminent economists who do not entirely subscribe to such positive evaluation of the free
trade. (See Krugman, Increasing returns, Monopolistic competition and International Trade, 1979, 9(4) Journal of
International Economics 467). See I. Carr et al, International Trade Law 2005, at 1xxxvii and see also J. Steglitz,
GLOBALIZATION AND ITS DISCONTENTS (2002). Also see I. Haque and N. Khan, Trade Remedy Laws of
Pakistan under the WTO Regime PLJ at Feb, 2009
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parlance there is a slogan Aid for trade. Trade acts as a catalyst for the elimination of poverty,
unemployment and crimes in society.
An exclusive regulatory environment that promotes free trade is inadequate to promote
growth in trade. It needs to be backed by passable infrastructure in sectors that affect trade such
as transportation, banking, marketing, communication and sanctity of arbitration clauses in the
commercial contracts. Equally the legal framework which affects the rights and the obligations
of the parties and entering into business transactions at the international level needs to clear and
certain. Lack of legal certainty about the enforcement of foreign arbitral awards has the potential
to act as an impediment to trade.32 In nutshell the enforcement of an arbitration award is an
extremely important issue in commercial arbitration. If it is not possible to enforce arbitral
awards, arbitration becomes meaningless.33 So the parties would wish to know the nature and the
extent of the obligations they undertake and the remedies available to them should they breach
the contractual terms. Given the plurality of legal systems and the variation in liability schemes,
harmonization through strong, impartial and independent court system is the best option in the
context of international commercial transactions.
Non-recognition of Foreign Arbitral Award in globalized world may pose challenges and
threats for the foreign traders, investors, producers, manufacturers, importers and exporters, stake
holders. These participants of international trade may reluctant to invest in that country where
the recognition of foreign award is not respected and enforced.
4.
INTERNATIONAL
FRAMEWORK
ENFORCEMENT OF AWARDS.
FOR
RECOGNITION
AND
4.1 New York Convention

There is no question that the purpose of the Foreign Arbitral New York Convention was to
facilitate the enforcement of international arbitration awards. The ability to enforcements awards
promotes international arbitration as a dispute resolution mechanism. This also works as catalyst
for enhancement of trade and investment. 34 There are a number of international conventions that
have made the enforcement of arbitration awards a relatively simple process. The relevant
international conventions are the Geneva Protocol on Arbitration Clauses, 1923 and the Geneva
Convention on the Execution of Foreign Arbitral Awards, 1927. The most important one is the
New York (as earlier said) Convention on Recognition and Enforcement of Foreign Arbitral
Awards 1958 provides a international Legal Framework relating to the Recognition and
Enforcement of Commercial Awards in the territorial jurisdiction of a State, other than the State
where the recognition and enforcement of such awards, are sought.35
Each contracting State recognizes arbitral awards as binding and enforced them in
accordance with the rules of procedure of the territory where award is relied upon.36 For the
purpose of recognition and enforcement the party has to be applied through a written application,
32
33
34
35
36
See generally I. Carr, International Trade Law at 1xxxvii, 2005.

I. Carr, International Trade Law (Lecture notes) at 214, 1996.
Richard M. Mosk comments on Enforceability of awards (New Horizon of international commercial arbitration at327.
See generally Article I of the convention 1958.

See supra note, 8 Article III.
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inter alia, the duly authenticated original awards are duly certified copy. Some times the
Recognition and Enforcement may be refused at the request of the party against whom it is
invoked by applying the grounds/defenses like when the award was obtained in contravention
with the principles of natural justice and public policy etc.38 The most important feature of the
convention is that it does not affect the validity of multilateral or bilateral agreements concerning
the recognition and enforcement of arbitral awards entered into by contracting State.39
A parochial refused by the courts of one country to recognize and enforce the foreign
awards and would not only frustrate those purposes40 as set out in the New York Convention
1958. In the form of to encourage the recognition and enforcement of commercial arbitration
agreements in international contracts and to unify the standards by which agreements to arbitrate
are observed and arbitral awards are enforced in the signatory countries.41
4.2
UNCITRAL Model Law On International Commercial Arbitration
The United Nations Commission on international trade law was a established in 1996. The
fundamental principal of UNCITRAL is to progressive development with respect to
harmonization and unification of trade Law. The major achievement of this commission is the
creation of UNICITRAL Model Law on international commercial arbitration the model law
adopted for the purpose of revising and updating the states in their national laws regarding
commercial Arbitration42 . The Article 36 UNCITRAL Model Law on International Commercial
Arbitration43 provides defenses against the recognition an enforcement of awards on the same
grounds as provided in article V of the New York Convention.
37
See supra note, 8 Article IV.

See supra note, 8 Article V.
39
See supra note, 8 Article VII.
40
D. Vagts, Transnational Business Problems at 188, (1998).
41
Schard Vs Alberto-Culver Co. at 417 U.S at 520, n.15, 94 S.Ct , at 2457, n.15
42
Alebert Jan Van Den Beg (p 206) New Horizons in International Commercial Arbitration and beyond
43
Grounds for refusing recognition or enforcement:
(1)Recognition or enforcement of an arbitral award, irrespective of the country in which it was made, may be
refused only:
(a)at the request of the party against whom it is invoked, if that party furnishes to the competent court where
recognition or enforcement is sought proof that:
(i)
a party to the arbitration agreement referred to in article 7 was under some incapacity; or the said
agreement is not valid under the law to which the parties have subjected it or, failing any
indication thereon, under the law of the country where the award was made; or
(ii)
the party against whom the award is invoked was not given proper notice of the appointment of an
arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(iii)
the award deals with a dispute not contemplated by or not falling within the terms of the
submission to arbitration, or it contains decisions on matters beyond the scope of the submission
to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated
from those not so submitted, that part of the award which contains decisions on matters submitted
to arbitration may be recognized and enforced; or
(iv)
the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the
agreement of the parties or, failing such agreement, was not in accordance with the law of the
country where the arbitration took place;
Or
(v)
the award has not yet become binding on the parties or has been set aside or suspended by a court
of the country in which, or under the law of which, that award was made; or
38
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5.
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PROCEDURAL CONDITIONS OF RECOGNITION AND ENFORCEMENT
In the light of New York Convention and UNCITRAL Model Law on International
Commercial Arbitration, a party applying for enforcement of a foreign award is required to
produce before the court of competent jurisdiction following documents and must satisfied other
legal requirements.
(i)
Submission of necessary documents- The original award or a copy thereof, duly
authenticated in the manner required by the law of the country in which it was made; The
original agreement for arbitration or a duly certified copy thereof, and Such evidence as may be
necessary to prove that the award is a foreign award.44
(ii)
Commercial Transactions- The award must be given in a convention country to resolve
commercial disputes arising out of legal relationship. The term commercial construed as in a
wider sense. The Indian SC, In case of RM Investment & Trading Vs. Boeing, Co.45 & Anr. The
Supreme Court while constructing the expression Commercial relationship observed that:
The term Commercial should be given a wide interpretation so as to cover matters
arising from all relationships of a commercial nature, whether contractual or not.
In another case of M.H. Mehta vs. H.H Mehta46, the Supreme Court of India observed
that:
The term Commercial should be liberally interpreted as having regard to manifold
activities which are an integral part of international trade. The same principle was lay
down by Indian Supreme Court that term commercial should be given a wide
interpretation so as to cover matters arising from all relationship of commercial nature
whether contractual or not.
(iii). Relevant Court- The Indian Supreme Court has accepted the principle that enforcement
proceedings can be brought wherever the property of the losing party may be situated. This was
in the case of Brace Transport Corporation of Monrovia v Orient Middle East Lines Ltd.47 The
while pronouncing judgment has quoted a passage from Red fern and Hunter on Law and
Practice of International Commercial Arbitration48 inter alia, as follows:
(b)
if the court finds that:

(i)
the subject-matter of the dispute is not capable of settlement by arbitration under the law
of this State; or
(ii)
The recognition or enforcement of the award would be contrary to the public policy of
this State.
(2)If an application for setting aside or suspension of an award has been made to a court referred to in paragraph
(1)(a)(v) of this article, the court where recognition or enforcement is sought may, if it considers it proper, adjourn
its decision and may also, on the application of the party claiming recognition or enforcement of the award, order the
other party to provide appropriate security.
44
Enforcement of Arbitration Awards IN India, Sumeet Kachwala
45
AIR 1994 SC 1136, Asian International Arbitration Journal Vol.4 Number 1, pp.64-82 (2008)
46
M.H. Mehta vs. H.H Mehta 1995(5) Comp. LJ 517
47
1995 Supp. (2) SCC 280.
48
First Ed, 1986, Sweet & Maxwell.
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A party seeking to enforce an award in an international commercial arbitration

may have a choice of country in which to do so; as it is some times expressed,
She party may be able to go forum shopping. This depends upon the location of
the assets of the losing party. Since the purpose of enforcement proceedings is
to try to ensure compliance with an award by the legal attachment or seizure of
the defaulting partys assets, legal proceedings of some kind are necessary to
obtain title to the assets seized or their proceeds of sale. These legal
proceedings must be taken in the state or states in which the property or other
assets of the losing party are located.
(iv). Written Agreement The Convention expressly states that Arbitration agreements must
be in writing form otherwise party can not invoke these defense against enforcement of awards.
However, Article II sub clause 2 stated that:
The term agreement in writing shall include all arbitral clauses in a
contract or an arbitration agreement, signed by the parties or contained in an
exchange of letters telegrams.
(v)
Time Limitation- The Indian Arbitration and Conciliation Act, 1996 and Pakistani Law
relating to recognition and enforcement of foreign arbitral award Ordinance do not prescribe any
time period within which a foreign award must be applied to be enforced and law relating to
recognition and enforcement of foreign arbitral award in Pakistan. However, the High Courts of
diverse jurisdiction held that:
The period of limitation would be governed by the residual provision under
the Limitation Act 1963 (No 36 of 1963), i.e the period would be three years
from the date when the right to apply for enforcement accrues. The High Court
of Bombay has held that the right to apply would accrue when the award is
received by the applicant.49
The private International Law deals with the recognition that the courts of one country
will effect give to the judgments of the courts of another country. In the event of a dispute over
an International Transaction, the winner will sometimes needs to go another country to find the
losers assets.
The winner would prefer to re-litigate not the merits of the dispute, but to have the
original judgment recognized and enforced.50 In case of Hilton vs. Guyot, the American Court set
out the basic principles of Recognition and Enforcement of Foreign Judgments and awards in
other countries. In this court relied upon the fundamental principles of International Law court
observed that Comity51 and reciprocity are the watches words for courts looking to foreign
judgments and awards. Of the two concepts, reciprocity is the one observed most frequently
around the world. The issue of reciprocity may be handled by treaty. If no treaty controls, a court
in one country will look at the approach of the other country toward the first country nationals.
49
2007 (1) RAJ 339 (Bom), AIR 1986 Gujarat 62.

159 u.s. 113 (1895). Supreme court of USA
51
Comity in the legal sense, is neither a matter of absolute obligation, on the one hand, nor of mere courtesy and
good will, upon the other. But, having due regard both to international duty and convenience, and to the rights of its
own citizens, or of other persons who are under the protection of its laws.
50
1007
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VI.
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Defenses against Foreign Awards
Following are the seven potential legal defenses against the recognition and enforcement
of foreign arbitral awards and agreements as provided in Article V of the convention of
recognition and enforcement of foreign arbitral awards (New York Convention) 1958. There
defense have been explained in the light of case law of diverse jurisdictions relating to
Recognition and Enforcement of Award /Judgment with special reference to USA and England.
1.
Defense V (1) (a):
Invalidity of Arbitration Agreement
The first defense against the recognition and enforcement of foreign arbitral award is
enshrined in Article-V (1) (a) of the Convention which provides that:
Recognition and enforcement of the arbitral award may be refused at the
request of party against whom it is invoked, if it proves before the court of
competent jurisdiction that the parties in dispute were legally incapable under
the law applicable to them to enter into a contract or the agreement is not valid
under the law to which parties have subjected it or under the law of the country
where the contract or the agreement was made.
The convention thus, allows the courts of the state where enforcement is sought to
examine the validity of arbitral awards according to the principle of law of contract and the law
of arbitration agreement.
A few relevant cases of apex courts of different jurisdictions are as
follows; In American Construction Machinery & Equipment Corp. Vs. Mechanized Construction
of Pakistan Ltd, case.52 The court observed that:
The validity of the award was challenged on the ground that it could not be
enforced. Court observed that the award could not be enforced as it was not
valid under laws of Pakistan, because the parties did not validly choose
Pakistani laws as applied to their agreement.
It is worthwhile note that Arbitration Agreement must be valid, legal and not be
ambiguous. Indian Supreme Court in case of Khardah Company vs. Raymon & Co (India)53, held
that:
An arbitration clause cannot be enforced when the agreement of which it
forms an integral part is declared illegal.
In another case i.e. Koch Navigation vs. Hindustan Petroleum Corp54, the Supreme Court of India held
that:
Court must give effect to an award that is clear, unambiguous and capable of
resolution under Indian law.
52
659 F.Supp. 426 (S.D.N.Y.), affd, 828 F.2d 117 (2d Cir. 1987)
AIR 1962 SC 1810
54
AIR 1989 SC 2198
53
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The defense of invalidity can be raised both in respect of choice of law issues and others
substantive issues sometimes parties take plea that an arbitration agreement is not valid because
underlying contract is not valid55. This defense usually fails in United States due to doctrine of
separability56. It means that where a contract is not valid the arbitration agreement is not
ultimately invalid,57.However , the doctrine of separability is not absolute in English legal
system: Courts normally sustain arbitration clauses unless there are compelling reasons58.
2.
Defense V (1) (b):
Procedural defect-violation of Due process of law
Article V (1) (b) of New York Convention 1958 enables the court of competent
jurisdiction to refuse recognition and enforcement of foreign award where the defendant proves
that he was not given proper notice of the appointment of the arbitrator or of the arbitration
proceedings, or was otherwise unable to present his case or there is violation of principles of
natural justice. It is important to mention that this statutory defense also exists in institutional
arbitration rules. By applying this clause enforcing court can review the procedural aspects of
due process of law, it can also ensure that dispute was fairly and transparently resolve by an
impartial arbitration panel.
It is worth-mentioning to note that the following three situations may be considered as
violation of principles of natural justice and due process of law;
a) The party opposing enforcement was not present at the time of arbitration proceedings.
b) The arbitration panel did not allow the party to present evidence in the support of his
case.
c) Arbitration panel did not permit the party to raise objections to the arbitration panels
procedural ruling and composition59.
55
Gary B. Born, International Commercial Arbitration in the United States: Commentary and Materials, in
INTERNATIONAL Law 348.348 (Bary E. Carter et al, eds., 4th ed.2003 at 350) Also see The New York
Convention on the Recognition and Enforcement of Foreign Arbitral Award: Analysis of the Seven Defenses to
Oppose the Enforcement in US and England by May Lu, Arizona Journal of International Law and Comparative
Law, Vol.23, No. 3 2006
56
According to the separability doctrine, an arbitration agreement is presumptively independent from the parties
underlying contract because the parties provide separate consideration through their exchange of promises to
arbitrate, Id.
57
58
Id
The New York Convention on the Recognition and Enforcement of Foreign Arbitral Award: Analysis of the
Seven Defenses to Oppose the Enforcement in US and England by May Lu, Arizona Journal of International Law
and Comparative Law, Vol.23, No. 3 2006
59
See generally article V (b) of New York Convention 1958 (the party against whom the award is invoked was not
given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to
present his case).
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In the American landmark case of Parsons & White More Overseas Co. v. Societe
Generale De IIndustgrie Du Papier60. Where the United State the Second Circuit of Court of
Appeals observed that:
The arbitral tribunal did not violate the United States constitutional standard of due process of
law by refusing to reschedule a hearing because one witness had a prior speaking engagement.
Court further observed that overseas could not claim that the tribunal decided case with out
considering critical evidence and the arbitration tribunal acted within its discretion powers in
decline to reschedule a hearing for the convenience of an overseas witness.
The second defense like the first defense is hardly difficult to prove and frequently it
remains unsuccessfully in the most of the cases. In another leading case of Laminories
Trefillerecies Cableries de Lens s. A vs. Southwire Co.61 The court held that it is the
responsibility of arbitrator to determine what evidence is relevant and irrelevant and that absent a
clear showing of abuse of discretion, the court will not vacate an award based on improper
evidence or the lack of proper evidence.
Sometimes the party deliberately rebuffs to participate in the arbitration proceedings; it
does not amount to deny recognition and enforcement of an arbitral award on the touchstone on a
denial of due process of law. In the leading case of Libyan American Oil Co.s62, where Libya
deliberately declined to participate in the arbitration proceedings on the ground of sovereign
immunity theory but court rejected this argument and held that immunity had been waived, court
further held that party has been failed to explain its absence and such plea cannot deny the
recognition and enforcement of award by arguing that an opportunity was not granted to the
party to present its case before tribunal.
In English legal system the same principles of due process of law (rule of law) have been
still observing in relation to the recognition and enforcement of foreign Arbitral awards. In
leading case of Omnium de Trailtement et de Valorisation S.A. (OTVs)63; where Omnium de
Trailtement et de Valorisation argued among other things that it was unable to present its case on
the grounds that the second arbitrator who over following the resignation of the initial arbitrator
decided not to hear the oral evidence and the second arbitrator held only a short hearing to close
his decision but the court observed that there is no concrete evidence to support OTVS
argument. So, there is no violation of procedural rule and award is maintainable. However, there
are few cases in which US and English courts accepted the due process of law as a defense.
In Iran Aircraft Industries v. Avco.Corp.64, Court refused to enforce an award on the
ground that one of parties was unable to present its case. Court also observed that there is a lack
60
Parsons & White More Overseas Co. v. Societe Generale De IIndustgrie Du Papier 508 F.2d 969, 975 (2d
Cir.1974)
61
484 F. Supp. 1063 (N.D. Ga 1980). Also see Enforcement of Foreign Arbitral Awards By R. Doal Bishop, King &
Spalding, Elaine Martin and Hughes & Luce, L.L.P. Houston 11781 v
62
Libyan American Oil Co. (LIAMCO) v. Socialist Peoples Libyan Arab Jamahirya. 482 F.Supp. 1175 (D.D.C.
1980) 684 F. 2d 1032 (D.C.Cir. 1981).
63
Omnium de Trailtement et de Valorisation S.A. (OTVs) v. Hilmarton Ltd, (1999) 2 Lloyds Rep, 222, 225
(Q.B.D. Comm. Ct.) (Eng).
64
Iran Aircraft Industries v. Avco.Corp. 980 F.2d 141, 146 (2d Cir. 1992).
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of evidence to support the enforcement of foreign award. After analysis of these cases of English
and American courts it is concluded. That the plea of due process of law is hardly successful in
each and every case and it varies form case to case however, the implication of this
ground/defense heavily depends upon the judicial interpretation and attitude of courts.
Interpretation the term due process of law be generously interpreted by courts keeping in view
the changed scenario of globalized world. In Pakistan there is no case law developing.
3.
Defense V (1) (c):
Jurisdictional defect-Excess of Authority
Article V (1) (c) of the New York Convention 1958 provides that court may refuse
recognition of an award if the respondent asserts and proves that the award deal with a
difference not contemplated by or not failing within the terms of submission to arbitration or
contains decisions on matters beyond the scope of the submission to the arbitration.65 This
provision may also be traces in more detailed in section 10 (d) of the Federal Arbitration Act, 9
U.S.C. which authorizes vacation on award where the arbitrators exceeded their legitimate
powers and jurisdiction. The author refers here few case which reflects the judicial attitude and
come to conclusions that this like grand other defenses has been unsuccessful in number of cases.
However, the most dominant point of view in the present time is the arbitration agreement should
be interpreted in a moderate manner. In United Steel Workers of American case court held that
the arbitrator premised the award on a construction of the contract and it is not apparent that
scope of the arbitration has been acceded. In Parson & Whitemore Overseas Co. v. Societe
Generale De L Industries due peppier (RAKTA)66. Case the court enforced an arbitrators award
for loss of production of documents even though the contract provided that the parties would not
be liable for such loss.
In International Standard Electric Corp. (ISECs)67 case the defendant argued that the
panel exceeded its authority and acted beyond the scope of the parties agreement while deciding
the damage issue. However, the court rejected this argument and observed that court had no
authority to reconsider panels finding, nor could it undertake a de nove inquiry. So the award is
enforceable. In another case of Comprehensive Accounting Corp. vs. Rudeel68 where defendant
challenged the enforceability and recognition of the award on the ground that he did not actually
know about the arbitration clause but throughout confused to overturn an enforcing award.
In most interesting case the court refused to accept the whole of the award. A rare case in
which court held that the requirements of article V (1) (c) were satisfied and refused to confirm
an award accrued in Fiat S.P.A. vs. Munistg Finance & Planning of Susinamo69 the Court
observed that the tribunal exceeded its authority. When it purported to bind a non signatory not
expressly covered by the arbitration agreement when the issue submitted to the arbitration court
partly accepted and partially rejected the award. The case is only example which divides the
65
New Horizons in International Commercial Arbitration and Beyound by Albert Jan van den Berg at 301 (2005)
Parsons & White More Overseas Co. v. Societe Generale De IIndustgrie Du Papier 508 F.2d 969, 975 (2d Cir.
1974)
67
International Standard Electric Corp. (ISECs) vs. Bridas Sociedad Anonima Petrolera Industerial Y Commercial.
745 F. Supp. 172 (S.D.N.Y. 1990).
68
Comprehensive Accounting Corp. vs. Rudeel, 760 F.2d 138 (7th Cir. 1985).
69
Fiat S.P.A. vs. Munistg Finance & Planning of Susinamo, 88 Civ. 6639 (SWK), 1989 U.S. Dist. LEXIS 11995
(S.D.N.Y. Oct. 12, 1989).
16
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section v (1) (c) in to parts. In Pakistani jurisdiction there is no reported case on this issue and
that there is need to incorporate such provisions which can properly tackle the potential problems
in this critical situation and find out a solution.
4.
Defense V (1)(d):
Irregularity in the composition of Arbitral Tribunal or
Arbitral Procedure
Under this under this ground, enforcement may be refused if the respondent asserts and
proves that the composition and procedural working of the tribunal is not based on merit. The
clauses (d) of article V (1) New York Convention provides that:
The Composition of the arbitral authority or the arbitral procedure was not in
accordance with the agreement of the parties or failing such agreement was not
in accordance with the law of the country where the arbitration took place.
In Metex Andeslays case award was made in Switzerland between a Finnish party and a
party owned by the Turkish state: The arbitration clause included the proviso:
The Board of Arbitration shall take as base the provisons of this contract and
Turkish Law in force.
In this case the Turkish party argued that this proviso meant that Turkish law applied
both to the substance and the procedure in the award, the majority of the arbitral Tribunals held
that Turkish law in face [should] not be understood as choice of procedural rules having
prevailed in the arbitration, the Finish party sought enforcement in Turkey. The court of First
Instance and court of appeal refused enforcement, holding that award violated Art v(1) (d) of the
convention.70
5.
Defense V (1)(e):
Non Enforceability of an Award
The respondent party can oppose the enforceability of foreign award on the ground that
award is not binding. The article V (1) sub-clause (e) states that:
The award has not yet become binding on the parties, or has been set aside or
suspended by a competent authority of the country in which, or under the law of
which, that award was made.
Terms Binding, Set aside and suspend-explained
Binding- Article v (1) states that in the first place that enforcement of an award can be
refused if the party against whom the award is invoked proves that the award has not be
come binding. The earlier convention 1927 required that the award had become first in
the country of origin. This ward substituted by Binding in New Youk Convenion.
Accordingly, no leave for enforcement in the country of origin is required under this
70
Court of Appeals, 15th Legal Divisions, 1 February 1996, no.1996/627, Metex Andeslay vs. Turkys Electrik
Kumurugend Medurligi General Directorate, Ankara, Reported in Year Book xxII1997, pp 807-814 (Tukey No.1)
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convention. This principle is almost acceptable in the signatories countries.
Set aside- Article v (1) states that enforcement of an award can be refused if the party
against whom the award is invoked proves the award has been set aside by a court of the
country in which, or under the law of which, the award was made. According to Article
VI of the Convention, a court may adjourn its decision on enforcement if the respondent
has applied for infact, only handful cases have setting aside of an award in the country of
its origion led setting aside of an award in the country of its origion to a resueal of
enforcement abroad under the New York Convention. The Paris court of Appeal in
claude clairs case72 refused to enforce an ICC Award made in Genva on the ground that
award had been set aside by the authority.
In the American legal system an arbitral award becomes binding when the arbitration
panel has resolve all the dispute and no further issue to another arbitration panel exists and award
should be final. It is worth while to note that author has been referred cases to illuminate the
subject matter. More over, the US court of appeals for the second circuit in Baker Marines73
case in which two awards set aside in Nigeria were refused for enforcement.
In Fertilizer Corp. of India v. IDI Managements case IDI argued that the award was not
binding because it was under review by an Indian court for error of law.
Suspension Defense V (1) (e) also provides that enforcement of an award can be refused
in the against whom the award has been suspended by a court of the country in which, or
under the law of which, the award was made has been suspended by court of the country
in which or under the law of which by the court of appeal of canton Genva. The Genva
court had done so because it considered the award to be arbitrary which is a ground for
setting aside that award is. The Swiss Arbitration Concordat, 1969.
Another aspect of article V(1)(e) describing for non recognition when the award has been
set aside or suspended by a court in the country of origin, has rarely been successful, but an
award may be set aside as the grounds other then those mentioned in the convention. However,
the burden of proof lies on the respondent that the suspension was ordered by court.
6.
Defense Art-II:
Award Contrary to Public Policy
The convention allows the court in which enforcement of foreign arbitral award sought to
refuse enforcement, on the defendants motion are so or sua-sponte, if enforcement of foreign
arbitral award would be contrary to public policy of the country. Article II makes it clear that a
country can consider a matter as non arbitral for the purpose of the convention only if it will not
expect the validity of an agreement for arbitration in respect of the matter, even if the agreement
is made after the dispute has arisen. In a Ras Al Khaimah Oil Cos, In Deutsche Schachtbau-und
Tiefbohrgesellschaft mvH v Ras Al Khaimah National Oil Co.74 reversed by HL on other
71
New Horizons in International Commercial Arbitration and Beyond (p.305) (ed.2005) by Albert Jan Van Den
Berg.
72
New Torizons in International Commercial Arbitration and Beyound (p.305)
73
US Court of Appeal, Secand Circuit, 12 August (1999).
74
1990 AC295
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grounds) case court of appeal held that it was not contrary to English public policy to enforce a
Swiss Award given under an International Camber of Commerce (ICC) arbitration clause using
as the proper law internationally accepted principles of law governing contractual relation even
though at that time an English arbitrator had to applied by English court. Similarly in other
Westacres Investments v Jugoimport-SDRP75 court of appeal upheld the same view that it is
contrary to English policy to enforce a foreign arbitral award accepting the validity of a contract
for the purchase of personal influence abroad.
However, in ECO Swiss China Time case the European court held that:
It would be contrary to the public policy within the New York Convention to
enforce an Award which had upheld a contract which violated the competition
rules by down by the concern article of the EC Treaty.
In American Parsons and Whittemore Overseas Cos case US court of Appeals, held that:
The Conventions public policy defense should be construed narrowly,
enforcement of foreign arbitral awards may denied on this basis only where
enforcement would violate the form stares most basic notions of morality and
justice and disallowed overseas proposed public defense.
Another, important case of Indians Jurisdiction is referred whereas the Indian Supreme
Court held in a case titled as Renusagar Power Co. Ltd. Vs General Electric Co.76 held that:
The enforcement of a foreign award would be refused on the ground that it is
contrary to public policy of such enforcement would be contrary to
fundamental policy of Indian Law; the interest of India; and justice or
morality.
The above examination of cases shows that public policy defense has been accepted. A
part from these statutory provisions as provided in Article (V) of New York Convention 1958
foreign award are enforceable in U.S, England and India more or less on the same ground and in
the same circumstances.
7.
Defense Art-II:
Arbitration
Issue in Dispute beyond the Legitimate Jurisdiction of
The New York Convention in Article 2 provides that;

Recognition and enforcement of an arbitral award may also be refused if the
competent authority in the country where recognition and enforcement is
sought finds that the subject matter of the difference is not capable o settlement
by arbitration under the law of that country.
75
76
1999 3 All ER 864

AIR 1994 SC 860
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It means unlike the procedural defenses, if the grounds of the disputes cannot be settled
by arbitration under the National Law of the enforcing Nation a court competent Jurisdiction
may refuse to enforce an award granted through a foreign arbitration panel. This defense may be
invoked sua sponte by courts. For instance in (Libyan American Oil Company vs. Socialist
Peoples Libyan Arab Jamabirya) the U.S. Court refused to enforce Arbitral Award because the
subject matter of the dispute, the validity of Libyan Nationalization of Libyan American Oils
Petroleum rights, was not arbitrable. Under the U.S. standards, arbitrating this dispute violated
the Act of State Doctrine.
In another case of Koch Navigation vs. Hindustan Petroleum Corp,77 the Supreme Court
of India held that: Court must give effect to an award that is clear, unambiguous and capable of
resolution under Indian law.
In the light of the above case law the principle of public policy varies from case to case
subject to the facts and circumstances of each case for which no hard and fast rules could be
enunciated.
8.Miscellaneous Grounds for Defense
(a)
Lack of Reasons in award- The court may refuse to enforce a award which does not
contain the reasons. The Supreme Court of Italy refused the enforcement of English
award which did not contain reasons on which mandatory requirement of Art. VIII of the
European Court of 1961 were compulsory78
(b)
Forum non Convenience- Some times, the court has competent jurisdiction, but may
refused the enforcement of an awarded on the basis of Doctrine of term-convenience. In
Monde Re vs Naftogat , the state court of Ukraine refused to enforce the award in U.S.A
made by Russian Court on the basis of doctrine of forum non convention which allows
courts to decline jurisdiction of complex law suits which implicate foreign parties only .
the court reasoned that neither the foreign sovereign immunities Act (FSIA) Noritz
arbitration exception which a party may request enforcement of a foreign award made
pursuant to an arbitration agreement between a sovereign state and a private party is the
award is governed by the an enforcement treaty (New Year Convention 1958) affects the
doctrine of forums non-convenient.79
(c)
Retroactive application of the Conventions- The countries does not contain a provisions
an the question of whether it applies retroactively. This issue has given rise to a number
of diverging court decision, although it is possible to discern a tendency in favor of
retroactively application, where by convention is applicable to the enforcement of an
arbitration agreement and award no matter when they were made. The issue has,
however, led to refused of enforcement of award in Commoditex SA Vs Alexandria
77
78
AIR SC
In cortedi cassazfone [Supreme Court], 8 February 1982, na 722, fratelli Daminano Snc Vs August tropfer & Co. reported in
year book IX (1984) PP. 418-421 (italy no -57)
79
See why are some awards not enforceable? A J. Van Den Berg published in New Horizons in International
Commercial Arbitration ad Bey and General editor Albert Jan Van Den Berg at p.313.
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Commercial Co. and Strojexport Vs Edward Naseer and Co. Ltd. Refused to apply the
convention to an award before it entered in to force and Switzerland and Ghana
respectively. The issue of retroactivity is unlikely to rise in future again. However, an
amendment to convention would be positively undesirable since of it were introduced,
the traumatic experience regarding retroactivity might have to be repeated Article.82
(d)
Fraud and misrepresentation- An award may be vacated when the award is procured by
corruption, fraud, misrepresentation or undermines; when there was evident partiality or
corruption in the arbitrators; when the arbitrators are guilty of misconduct in refusing to
adjourned a hearing, in refusing to hear evidence material to the controversy or other
misbehavior prejudicial to a party, and when the arbitrators exceed their powers, decide a
matter not submitted, or fail to hear a matter that was submitted are grounds against
enforcement.83
(e)
Lack of Impartiality- It is an established principle of law that the arbitrator is required to

disclose to parties in dispute any dealings that may create an impression of possible bias
and injustice between parties. Here referred few case law where the court of competent
jurisdiction set aside the awards on this ground. In Ansros Compania Maritimic, S.As
case court observed that there was close personal and professional relationship between
the arbitrators and party in dispute so the award is not enforceable. In other case the
English Commercial court of Queens Bench Division in China Agribessiness
Developments case the court did not accept the plea of improper procedure and enforce
the award. The award was also enforced in Al Haddec Bros. Engerprises, Inc M/s Agaps
Case84 and held that New York Convention allows recognition and enforcement of an
award that strictly complies with the laws of country where the arbitration conducted
under the English Legal System, a sole arbitrator may decided a dispute and that award is
enforceable and binding.
9.
LEGISLATIVE AND CASE LAW DEVELOPMENTS IN PAKISTAN
Prior to 2005, the law of arbitration awards in Pakistan was spread between these
enactment enforcement of domestic award was dealt with under the Arbitration Act, 1940.
Enforcement of foreign award was covered under the Protocol and convention Act, 1937. To
give effect the New York Convention Pakistan has promulgated an Ordinance in 2005 this
Ordinance is currently on extension. The existing law deals with the recognition and enforcement
of commercial and investment disputes awards the courts of Pakistan recognized the foreign
awards85 in the same manner as the judgment or degree of the Pakistani Court unless there are
some compelling reasons. In Fuerst Day Law sonltds cases the Indian supreme Court held that:
80
Reported in Year Book 1 (1976) p. 199 (Switzerland No.2)

Reported in Year Book III (1978) p. 276 (Ghana No. 1)
82
Id
83
See Fediral Arbitration Act (FAA) (9 USA sect.1 at )
84
Al Hadded Bros. Enterprise, Inc M/s Agapi, 653 F. Supp. 205 CD. Del. 1986) off with out op, 813 F., 2d 396 (3d
Cir 1987).
85
Foreign Arbitral Award means of a foreign arbitral award made in contracting states and such other sate as may
be notified by the federal government in official Gazzelle.
81
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Once the court determines that a foreign award is enforceable it can straight away be excuated
as decree.86
9.1. Law of Arbitration in Pakistan - In Pakistan the New York Convention provides for
certain basic procedures to be complied with. Diverse jurisdiction may have different domestic
requirements. In Pakistan, the procedures are enshrined in Section 587 of existing Act 2010, the
party seeking to enforce a convention award is required to produce the necessary documents
before the court of competent jurisdiction.
After the enforcement of Act 2010 radical changes have been made in law and discretion
of court which was available under Sect. 34 of the Arbitration Act, 1940 apparently is no more
available to Court. The question on which earlier while exercising discretion under Sect. 34 of
the Arbitration Act about convenience or inconvenience of the parties, availability of evidence
on a place other than the place of arbitration whether to stay proceedings or not was within the
discretion of the Court. However, while dealing with the matter under Sect. 4 of the Act court
has not such discretion except where cases fall within exception categories mentioned in the
section itself.88
It is interesting to note that Sect. 3 of the Act 2010 opens with the non-obstacle clause
that notwithstanding anything contained in any other law for the time being in force the court
shall have exclusive jurisdiction to adjudicate and settle matter related to or arising from the Act.
On reading Section. 4(2) with Article II of [the 1958 New York Convention], it is clear that on
filing of an application by any party to the proceeding the court has to stay the proceeding unless
it finds that the agreement is null and void or inoperative or incapable of being performed89 and
it is worthwhile to note that:
Unless the court pursuant to section 7 refuses the application seeking
recognition and enforcement of a foreign arbitral award, the Court shall
recognize and enforce the award in the same manner as a judgment or order of a
court in Pakistan.
The section 7 of said ordinance provides conditions for the non-enforcement of
foreign award. Section 7 of the above said ordinance provides that;
The recognition and enforcement of a foreign arbitral awards shall not be
refused except in accordance with Article V of the Convention.
After examination of these statuary provisions it may be concluded that foreign award
shall not be enforceable, if the party opposing enforcement prove that the parties to the
agreement were under the law applicable to them under in capacity, party was unable to presents
its case, it was not given proper notice of the appointment of arbitrator or no notice was served
with regard to arbitration proceeding. It is impliedly mention that even procedural discrepancy or
other illegalities, or irregularities can cause to the refusal of enforcement of foreign awards in
86
Furest Day Lawson Ltd. v/s Jindal Export Ltd. (2001)6 sec 356.
87
a)
the duly authenticated original award or a duly certified copy of it;
b) The original arbitration agreement or duly certificate copy of it.
When the award or agreement is in a foreign language, a translation of its certified by an official or sworn translator
by a diplomatic consular agents.
88
See Year Book Commercial Arbitration Vol. XXXII-2007 (General Editor Albert Jan Van Den Berg)
89
id
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Pakistan. When the courts in Pakistan satisfied that the foreign award is enforceable and satisfied
all the perquisites of the enforcement then the award shall be deemed to be the degree of that
court, however, enforcement of an award cannot be denied on the suspicious ground that the
award is not acceptable to the party against whom enforcement is sought otherwise this would be
defeating the very object of New York Convention and the said Act.
9.2. Judicial Trends in Pakistan - The Supreme Court of Indian in Big Endra Naths case held
that, the curt should approach on award with a desire to support it, if that is reasonably possible,
rather than to destroy it by calling it illegal.90 However, Pakistani courts are looking firm with
regard to the enforcement of foreign arbitral award. The Supreme Court of Pakistan held in M/s
Eckhardts & Co. vs. Mohammed Hanif,91 this is the first case in Pakistan which interoperates the
New York Convention 1958 on the recognition and enforcement of foreign arbitral awards where
the honorable Supreme Court held that:
. . . There is no cavil about the propositions that under section 34 of the
arbitration Act stay can be refused by the court if it is satisfied that there is no
sufficient reason for making reference to arbitration and substantial miscarriage
of justice would take place or inconvenience would be caused to the parties if
stay is granted. No hard and fast rule can be laid down or line of demarcation is
drawn to say in what case is refusal can be made. Each case has different facts
and grant or refusal of stay is dependent upon peculiar facts and circumstances
of each case. The Court can make objection assessment and come to the
conclusion weather stay of legal proceedings can be granted or refused.
In the above case Mr. Justice Ajmal Mian appended separate note on the
following grounds that section 34 of the Arbitration Act in relation to a foreign
arbitration clause the Courts approach should be dynamic and it should bear in
mind that unless there are some compelling reasons such an arbitration clause
should be honored as generally the other party to such an arbitration clause is a
foreign party. With the development and growth of International Trade and
Commerce and due to modernization of Communication Transport system in the
world, the contracts containing such an arbitration clause are very common now
a days. The rule that the Court should not lightly release the parties from their
bargains, that follows form the sanctity which the Court attaches to contracts
must be applied with more vigor to the contract containing a foreign arbitration
clause we should not over look the fact that any breach of a terms of such a
contract to which a foreign company or person is a party, will tarnish the image
of Pakistan in the comity of the nations.
In nutshell no hard and fast principle can be lay down or line of segregation can be drawn
to say in what cases refusal can be made. Each case has different facts and grant are refusal of
stay is depend upon peculiar facts and circumstances of each case the Court can make objective
assessment and come to the conclusion weather stay of legal proceedings can be granted or
refused.
Upon the coming into the force of the ordinance this prescription has been removed by
section 2(4). Khilji J further interpreted section 4 of the said ordinance that Sub section (2) of
Section 4 of the ordinance 2005 taken away discretion of the Court whether or not to stay the
proceeding in terms of the Arbitration Agreement, even on the ground of inconvenience etc.
90
91
See Bijendra Nath v. Mayank, (1994) 65 cc 117.

PLD 1993 SC 42
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except where the arbitration agreement itself is mull and void, inoperative, or incapable of being
performed. Khilji J thus held that arbitration agreement itself was perfectly capable of being
performed. In the light of above judgment it seems that Arbitration Agreement will be enforced
in line with the provisions of the Recognition and Enforcement of Foreign Arbitral Awards 1958
However, in the most famous HUBCO vs. WAPDA.92 Supreme Court of Pakistan applied
parochial nationalistic approach on the ground of public policy.
The approach of National Court towards the enforcement of arbitration towards is also
well expressed in Federation of Pakistan vs. Al Farooq Builders.93 Where the division Bench of
High Court of Sindh held that:
Truly speaking the arbitrator is a judge of all matters arising out of a dispute
whether of fact or law and the court is not to act as a court of appeal sitting in
Judgment. Over the award the court should always endeavor to sustain the
award rather than destroy it unless it could be shown by sufficient and reliable
material on the record that the arbitrator was guilty of misconduct or that the
award was beyond the scope of reference or that it was beyond the scope of
reference or that it was violate of statute or in contradiction to the well settled
norms and principles of law.
In another case of President of Islamic Republic of Pakistan vs. Syed Tasleem Hussain Naqvi,94
it was held by the Supreme Court of Pakistan that:
the award could be challenged only on thee grounds mentioned in section 30
of the Arbitration Act, 1940 i.e. if the Arbitrator had misconduct himself and
the proceedings and not on merits, for the court whole hearing objections
against the award could not sit as a court of appeal against the award and
interfere with it on merits.
In the most recent case the plaintiff had not filed authenticated copy of the award; court
held that section 8 provided for producing either original award or its authenticated copy.
Original award having been produced, conditions fulfilled, award enforceable court, while
considering the enforcement of a foreign award, merely acts as an executing court and whole
doing so it can not go behind the award and sit as an appellate court and make reappraisal of
evidence.95 In the same case defendant contended arbitrator had no jurisdiction; award was
contrary to law and public policy in Pakistan and arbitrator guilty of misconduct. No material in
that respect produced by the party and the objection that award policy not established objections
had no merit and the award was enforced.
9.3. The issues and opportunities for Pakistan- The position with regard to enforcement of
international arbitration agreement is not so clear. Local stakeholders are reluctant to pursue the
Arbitration clauses in their contracts because the picture is not much clear with respect to the
enforcement of Arbitration Awards and Agreements and there is a need to build confidence of
trade actors and it is possible only when three organs of the state, i.e., Legislature, Executive and
92
PLD 2000 SC 841

2001 MLD 99
94
2004 SCMR 590
93
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Judiciary play its constitutional role in the administration of justice, rule of law, economic
growth and wellbeing of stakeholders. Pakistan can maximize the opportunities for trade,
investment and corporate governance and minimize the challenges by adopting the principles of
globalized economy in a cogent manner.
10.
It is very obvious that with regards to enforcement of foreign arbitral agreements and
awards, courts and the legislature have been removing all potential barriers in favor of complete
arbitral freedom. However, absolute an unchecked power may have serious consequences in
future. The New York Convention has provided legal barriers in the form of Article (V). The
U.S, English, Indian and Pakistani courts are following the Parsons cases standards of morality
and justice, an old precedent being subjected to the strict test of interpretation. It is very doubtful
if any case would satisfy this high level of scrutiny.
The legislature should find out the uniform principles of the structure and standard of
seven legal defenses so that courts can effectively use these defenses against unfair trade
practices. The present standards of statutory defenses are not clear, transparent and predictable
any jurisdiction world. Hence an initiative by the legislature in setting the standard followed by
uniform interpretation by the courts would effectively re-instate legal defenses, a meaningful
defense in the enforcement of foreign awards. In Nutshell the judicial trends in Pakistan is
evolving gradually and there is an utmost need to improve the situation for the interest of
economic development in Pakistan.
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Impact of Manufacturing Industry on Economic Growth in case of Pakistan:

A Kaldorian Approach
Khizra Safadr Khan (Corresponding author)
Ph.D scholar, Department of Economics,
GC University, Lahore, Pakistan
Dr. M. Wasif Siddiqi
Associate Professor, Department of Economics
Abstract
The aim of this study is to empirically test the validity of the Kaldorian approach to growth and
development in Pakistan during the period of 1964-2008. In order to obtain robust results, timeseries was smoothed by 10 year moving average. Ordinary Least square (OLS) regression
analysis is being employed to testify the relationship between growth of manufacturing sector
and economic development. The present study found the significance of Kaldor's first and third
law while some empirical support is found for the second law with some inferences about the
rate of returns, indicating importance of manufacturing sector in economic development of
Pakistan.
Key Words: Kaldors Laws, increasing returns to scale, manufacturing industry.
1. Introduction
The development economists have always tried to examine the process of economic
development in order to recognize the resources for economic development. As far as historical
perspective of industrial development is concerned, it has positively contributed to the economic
development and living standard of many countries. The words of economy and economic
system are often used as synonyms. The contents of these two words are the same but economy
is related to the existence of different productive resources as land, labor, capital equipments,
entrepreneurship, and an economic system is related to the functioning and collaboration of these
productive resources. According to economists, the primary and the main objective of an
economic system is to conserve itself and then to explore new dimensions to develop. The focus
of the present study is to find out the contribution of the manufacturing sector in the economic
development of Pakistan.
During the process of economic development structural transformations are essential. The
contribution of agricultural, industrial and services sectors in GDP growth vary with time. For
any economy the role of manufacturing sector is of paramount importance, especially for
developing countries like Pakistan. Pakistans industrial sector has been subjected to negligence
in the past, despite the fact that in the fiscal year 2008-2009, agricultural sector being the largest
sector, contributed about 21.8 percent in the total GDP and the industrial sector on the other hand
had a share of 46.2 percent in the total GDP. However, the Government of Pakistan has started
formulating policies to organize industrial sector, because agricultural sector is exposed to
natural calamities like floods, storms, famine etc. The impressive growth rates of developing
countries are largely due to their industrial development, for example, the Asian Tigers. On that
account it can be stated that industrial development might help in achieving impressive growth
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rates for less developed countries like Pakistan. The study thus aims to find out the significance
of the manufacturing sector towards the economic development in case of Pakistan.
Economists have evolved different models of economic growth to identify the factors that
contributed to the rapid growth some nations as compared to the others. The growth models can
be classified in three school of thoughts i.e., classical, neoclassical, and new growth theories.
A model related to the classical growth theory can be referred as Harrod-Domer model.
According to Harrod-Domer Model, the economic growth depends upon the quantity of labor
and capital, greater investment results in capital accumulation, which eventually generates
economic growth. The model has its practical implications for less developed countries where
labor is in abundant supply but physical capital is always in shortage leading to slow economic
growth. Developing countries lack adequate average incomes to support high saving rates and
thus capital accumulation. The model suggests the policy measures to enhance investment
through increased savings, and thus utilizing that investment for technological advancements.
Robert Solow and Trevor Swan proposed a model in 1950s known as Solow-Swan model,
attributed as neo-classical growth model. Solow-Swan model exhibited the relationship between
labor time, capital equipments, output and investment. According to the model, the role of
technological change is considered more important as compared to the capital accumulation. It
was the first effort by the neo-classical School of thought to analytically represent the long-run
economic growth. According to the model, countries utilize their productive resources efficiently
and are subject to diminishing returns of capital as employment of labor increases. Three
significant implications were suggested by this model. Firstly, accumulating capital relative to
labor generates economic growth. Secondly, poor countries with less capital per individual can
grow at a faster rate as compared to the rich nations, because investment in capital can yield a
higher return than rich countries possessing abundant capital and thirdly because of diminishing
returns to capital, countries will ultimately attain a position where economic growth will be
accompanied with the constant capital. This position is known as steady state. The model also
suggests that the economies can deal with this steady state by discovering new technologies.
The Endogenous growth theory or the new growth theory mathematically describes the
endogenous role of technology in course of economic growth. The model has incorporated a new
perception of human capital including skills, education and knowledge that enhances the
productivity of work force. According to the model, human capital in contrast to physical capital
is subject to increasing rate of returns. As capital accumulation is concerned with constant
returns, thats why economies are not been able to attain a steady position.
The model asserts that the economic growth rate primarily depends upon the type of capital
in which a country invests instead of capital accumulation. Empirical investigation has
recommended that variation in cognitive skills like skills, training and education, can principally
clarify the differences in growth rates across different countries.
In addition to the above stated growth laws from different school of thoughts, certain causal
relationships between growth of industry, its productivity and their impact on GDP growth have
been identified by Nicolus Kaldor called as Kaldor's growth laws. These laws can be stated as;
The growth of the GDP is positively related to the growth of the manufacturing sector, the
productivity of the manufacturing sector is positively related to the growth of the manufacturing
sector (known as Verdoorn's Law). Increasing returns to scale in manufacturing implying implies
a larger size of the industrial/manufacturing sector which in turns reduces the average cost of
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production. The growth of the industrial/manufacturing sector

productivity
of non-manufacturing sector because of presence of diminishing returns to scale in the nonindustrial sector.
Kaldor initially tested these laws empirically by employing data for twelve OECD
countries (Japan, Italy, West Germany, Austria, France, Denmark, Netherlands, Belgium,
Norway, Canada, U.K. and United States) for the period of 1953-54 to 1963-64 and found a
strong correlation between growth rate of GDP and manufacturing growth rate. Afterwards,
Cripps and Tarling (1973), have utilized the sample of same twelve countries for the time period
of 1951 to 1970 by fragmenting the data into four sub-periods presented support for Kaldors
first law. Fractional support for Verdoorn's law was also obtained along with a fully supported
verification of the third law. McComnie and De Ridder (1984) estimated the Verdoorn's Law by
employing both ordinary-least squares and instrumental variable approaches for U.S. state data.
The estimated results regarding degree of returns to scale ranging from 1.33 to 1.65 depend upon
the specification used. Thus providing support for the Kaldor's argument about the existence of
increasing returns to scale in manufacturing sector in case of advanced countries.
Leon-Ledesma (2000) attempted to test Verdoorns Law with different specifications for
the 17 Spanish regions using a pool of average rates of growth between 1962-73, 1973-83 and
1983- 91 for the presence of dynamic increasing returns to scale. Kaldors second law was
tested for the manufacturing sector along with agriculture, construction, services and total value
added. The results showed substantial increasing returns for Manufacturing, services and for total
value added. Fingleton and McCombie (1998) examined the role of increasing returns to scale
by estimating Verdoorns law using data for 178 European Union regions over 1979-89
providing evidence of large increasing returns to scale.
Bernat (1996) extended McCombie and de Ridders (1983) work in different ways. First,
Kaldors laws are tested using more recent data to see if they held during the 1980s. Second,
McCombie and de Ridder only tested the first two laws whereas this study also looks at the third
law. The results presented by them clearly support Kaldors first two laws for the period 19771990 while providing only marginal support for the third law. One of the most important findings
of the analysis was the presence of significant spatial autocorrelation and after correcting for this
spatial dependence noticeably improved the fit of the models. Harris and Lau (1998) utilized the
Johansen Cointegration approach to estimate returns to scale for the UK industrial data from
1968 to 1991. According to them, as this approach incorporates the role of capital, the
simultaneity problems related with the only equation of Verdoorns law can be overcome. The
results provided the evidence for substantial support of increasing returns for many
manufacturing industries in UK.
Libanio (2003) estimated first and second laws of Kaldor using panel data for a sample of
the seven largest economies in Latin America during the period 1985-2001 and estimation results
appeared to support Kaldors views regarding the importance of manufacturing industry for
economic growth. According to the study an increase in the output leads to an increase in
productivity which in turns has a negative impact on general price level. This fall in prices thus
increases the overall competitiveness, exports and output. The study thus explains the fact that
once a country attains this growth advantage, the process of increasing returns and increased
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manufactured exports will help then to augment this growth advantage and thus experiencing
economic growth.
Wells and Thrilwall (2003) empirically tested the validity of Kaldorian laws for 45 African
countries over the period 198096, using data from the African Development Bank and World
Bank. They found some empirical support for Kaldors growth laws in case of African countries.
The growth of GDP was found to be more closely related with the growth of the manufacturing
sector as compared to the agricultural or service sectors.
Dasgupta and Singh (2005) revisited the role of manufacturing and services in economic
development and explored the validity of the Kaldors laws. Analyses was carried out at three
different levels including cross-sectional analysis of data from 30 developing countries for the
time period of 1980-2000, cross-sectional analysis of data for 29 Indian states during the 1990s
and an estimation of the contribution of un-organized and organized industrial sectors in the
Indian states toward economic growth. According to the results, both manufacturing and services
sectors were found to be closely related to the growth of GDP and the growth of services sector
in turns depends basically on the growth of manufacturing sector.
Dasgupta and Singh (2006) examined an extended dataset of 48 developing countries for
the period 1990-2000 to test Kaldorian laws. The results showed that manufacturing sector
contributes critically to the economic development, along with some vital contribution of the
services sector including ICT is observed in case of a number of developing countries including
India.
Jeon (2006) empirically tested the hypotheses that the manufacturing sector is considered
as the engine of economic growth in case of China during its reform period of 1979-2004. In
order to obtain robust results, both time-series and regional panel data formats were utilized.
Estimated results from both data sets confirmed the Kaldorian hypotheses about contribution of
manufacturing sector towards economic growth in China during its reform period.
Felipe et.al (2007) performed an analysis of structural transformation of the developing
Asias growth experience during the decades of 1970s, 80, and 90s. The most prominent feature
of this transformation was found to be a significant decline in the agricultural share along with a
parallel increase in the share of services in GDP. The study has utilized the Kaldors framework
to analyze the contribution of industrial sector towards economic development in Asian
developing countries. According to the estimated results both industry and services contributes in
economic development, along with some evidence of endogenous growth-induced technological
progress was also observed in case of developing Asia.
Chakerwarti and Mitra (2008) investigated the role of manufacturing sector as an engine of
growth and depicted the interconnection among several activities based on time series data on
employment in the organized sector of India. The objective of the study was to assess the role of
different sectors like construction, IT, services, manufacturing and irrigation projects in
generating employment opportunities. The authors employed a vector- auto regression (VAR) for
analytical purposes. According to the results, manufacturing sector appeared to be one of the
strong determinants of overall economic growth in addition to construction and services sectors.
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3.Research Method
3.1 Ordinary Least Square (OLS) Regression
There are different types of regression models in terms of parameters and variables. The
present study has employed Ordinary least Square Regression Model for analytical purposes.
The relationship between two variables in a regression analysis is expressed by a
mathematical equation called a regression equation or a model. A regression equation when
plotted, may assume one of many possible shapes, including that of a straight line. A regression
equation that gives a straight line relationship between two variables is called a linier regression
model; otherwise it is a non-linier regression model.
The equation expressing the relationships between two variables X and y can be written as
y = a + bx
Where, a represents the y-intercept and b expresses the slope of the line. In other words a
represents the point where the line intersects the y-axis and b shows the amount of change in y
due to change of one unit in X.
3.2 Data sources
Average growth rates of the variables are being employed for estimation purposes for the
time period of 1964-2008, obtained from various issues of Economic survey of Pakistan. The
Kaldorian hypotheses are tested using time-series data sets at the national level. According to
McCombie (1983) and McCombie & de Ridder (1983), as annual time series data sets contain
short-term cyclical fluctuations, the estimated results may provide some biased information
regarding contribution of manufacturing sector toward economic development because of the
presence of short-term cyclical changes. Atesoglu (1993) suggested that in order to remove
short-term cyclical fluctuations, the annual growth rate of each variable should be smoothed with
10-year moving average. Following Atesoglu (1993), a linear specification of 10-year moving
average is being employed to test the validity of Kaldorian laws in case of Pakistan
3.3 Theoretical framework
3.3.1 First Law
According to Kaldor, its first law can be stated as gGDP=f (gm), where gGDP is the growth of GDP
and gm is the growth of manufacturing output.
gGDP = 0 + 1 g m
(3.1)
Two side-tests of Kaldors first law will also be performed to avoid the possibility of
spuriousness. The first is to regress the growth of GDP on the excess of the growth of
manufacturing output over the growth of non-manufacturing output (gnm), and the second one is
to regress the growth of non-manufacturing output on the growth of manufacturing output as.
g GDP = 0 + 1 ( g m g nm )
(3.2)
g nm = 0 + 1 g m
(3.3)
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3.3.2 Second Law:

Kaldors second law states that the growth of productivity of manufacturing sector is
positively associated with the its production growth, this law is also known as Verdoorns
Law. The Verdoorns Law can be specified as
pm = 0 + 1 g m
(3.4)
where pm is the growth rate of labor productivity in i manufacturing, and ( i =0,1 )

are regression coefficients and 1 the
is called the Verdoorn coefficient. The eq. (3.4)
suffers with the problem of definitional identity as the labor productivity pm = gm - em ,
where em is growth rate of employment in the manufacturing sector, implying a strong
correlation between dependent and independent variables. In order to avoid this problem,
another specification can be employed.
em = 0 + 1 g m
(3.5)
where em is the growth of labor employment in manufacturing, and 0 = 0 and 1 = 1 1
.
For estimation purposes, equation (3.5) is preferred due to the correlation existing between p and
g. Rowthorn (1975) suggested the appropriate specification of Verdoorns Law as to regress g or
p on e. Kaldor inferred the slow rate of growth of UK manufacturing industries because of
shortage of labor. Then, the exogenous variable should be the rate of growth of employment, as:
pm = a0 + a1e m
(3.6)
g m = b0 + b1e m
(3.7)
or
Another significant limitation of above mentioned specifications is that neither of them has
considered the role of contribution of capital to increasing returns in manufacturing sector. In
order to draw some inferences about degree of the returns to scale, it is necessary to make some
assumption about the evolution of the capital stock.
In order to include the rate of growth of the capital stock (k) , Kaldor has suggested the
following specification:
em = a1 + b1gm + b2km
(3.8)
Rowthorn has employed the rate of growth of capital stock in the manufacturing growth
specification as:
g m = c1 + d 1e m + d 2 k m
(3.9)
From + = ( 1 b ) b (3.8)
and from + = d 2 + d 1 eq. (3.9) measures the returns
to scale. Bairam (1987) pointed out that the
estimation results from some
studies have obtained an insignificant value or sign regarding role of capital stock in returns to
scale , in equation (3.8), which might be due to the error mis-specification, while, the utilization
of equation (3.9) always yielded statistically significant k with correct sign.
3.3.3 Third Law:
According to Kaldors third law, the growth of productivity of an economy as a whole is
positively related to the growth of manufacturing output because of the labor transferences to the
2
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manufacturing sector from the other sectors including agriculture and service. It can be expressed
as (3.10)
pGDP = d 0 + d1 g m
Practically, it is complex to directly establish the relationship between the transference of
labor and the productivity of the economy because of difficulty of measurement of productivity
in many activities outside manufacturing (Thirlwall, 2003). Kaldor (1968) tried to solve this
problem on the basis of following empirical evidences.(3.11 and 3.12)
g GDP = e0 + e1em
g GDP = y0 + y1etotal
where em and eTotal are the growth rates of employment in manufacturing and total
economy, respectively. The seemingly contradictory results may be reconciled if there is positive
relationship between growth rate of overall productivity and growth rate of employment in
manufacturing sector and negatively related to growth rate of employment other than
manufacturing sector expressed as (3.13):
pGDP = a0 + a1em a2 enm
where enm is the growth rate of employment other than manufacturing. By utilizing the
details about employment growth which is encompassed in the dependent variable, the GDP
productivity of GDP by definition, Thirlwall (1983) and Atesoglu (1993) suggested to regress the
GDP growth on the employment growth in manufacturing and in non-manufacturing sectors as
(3.14)
g GDP = b0 + b1em b2 enm
Cripps & Tarling (1973) suggested to replace the employment growth in manufacturing
with the growth of manufacturing output, which was empirically tested by Drakopoulos &
Theodossiou (1991), Hansen & Zhang (1996) and Thirlwall (2003) as (3.15).
pGDP = c0 + c1 g m c2 enm
The specification of equation (3.15) is preferred, because according to Cripps & Tarling
(1973), most of the variation in productivity growth which is not associated with movements in
employment is concentrated in the manufacturing sector and is therefore correlated with the
growth of industrial output. The specification of (3.15) is also justified by the fact that the
manufacturing output growth is the prime result of net addition in resources as compared to the
redistribution of resources from one use to another. The present study is going to estimate both
specifications of (3.14) and (3.15).
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4.1. Kaldor's First Law
Kaldors first law states that gGDP=f (gm), where gGDP is the growth of GDP and gm is the growth
of manufacturing output. Fitting a linear specification of this function to the time series data for
Pakistan from 1964-08 yields (t statistics in parentheses):
gGDP= 1.686 + 0.871 gm
(0.675) (5.462)
R2= 0.475
F stat (1,33)= 29.831
(4.1)
The results suggest that 47.5% of the variations in the data have been explained by the
model, implying that about half of the growth rate of Pakistans economy is associated with the
growth of manufacturing output. The results indicate that with one unit increase in growth of
manufacturing output, GDP growth will increase by 0.871 units. If the manufacturing output
growth goes down to zero, even then the GDP would grow by 1.686 units because of the other
sectors of the economy. Both the coefficients have turned out to be significant and have positive
signs, so we can say that both the dependent and the independent variables have a positive
direction of relationship i.e., with an increase in manufacturing output the GDP is going to be
increased.
This simple regression is subjected to spuriousness because manufacturing output itself is
a component of the dependent variable (GDP). Two side-tests of Kaldors first law are also
performed to avoid the possibility of spuriousness as described in theoretical framework. The
results are given in Equations (4.2) and (4.3), respectively
gGDP= 15.562 - 0.709 (gm-gnm)
R2=0.385
(75.34) (-4.54)
F stat (1, 33) = 20.695
gnm = 2.054 + 0.844 gm
(0.687) (4.42)
R2= 0.372
F stat (1, 33) = 19.56
In equation (4.2), R2 is relatively low, i.e., 38.5 percent of the variations have been
explained by the model, which is technically not a good fit. However, the regression coefficients
of the excess of manufacturing growth over non manufacturing growth are statistically
significant at 95 percent confidence level. Equation (4.3) is also statistically significant with
relatively low R2. But the close association between manufacturing output and nonmanufacturing output is confirmed. It shows that one unit increase in manufacturing output
would cause the non-manufacturing output to increase by 0.844 units.
In order to consider the manufacturing sector as the engine of growth, it is necessary to
demonstrate that analogous results are not attained when the same exercise is repeated for other
sectors like agriculture and services. For agriculture sector, it appears to be a strong relation
between agricultural growth (ga) and GDP growth (R2=0.715), with a high regression coefficient
(0.710). However, the degree of spuriousness is high in case of agriculture because agricultural
output constitutes a larger fraction of GDP as compared to manufacturing sector. When the side-
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test is performed to find out the relation between GDP growth and the excess of agricultural
growth over non-agricultural growth (gna), no correlation along with a negative regression
coefficient is found, as expressed in eq. (4.2a). But the growth of agriculture output is proved to
be a driving force for non-agricultural output growth as it supplies raw material for
manufacturing activities.
gGDP= 5.529 + 0.710 ga
r2= 0.715
(4.1a)
(5.119) (9.109)
F stat (1,33)= 82.97
along with its diagnostic tests as
gGDP=
15.176 - 0.051 (ga-gna)

(30.43) (-0.27)
gna = 7.404 + 0.626 ga

(4.584) (5.366)
r2=0.002
F stat (1, 33) = 0.073
r2= 0.466
F stat (1, 33) s= 28.79
(4.2a)
(4.3a)
The results for the service sector are proved to be stronger as compared to that of
agriculture sector. Strong correlation between service sector growth (gs) and GDP growth is
found because services sector also constitutes a larger fraction of GDP. However, a relation
between the non-service output growth and service output growth (gs) is also found, as shown in
Equation (4.3b).
2.18 + 0.814 gs
R2= 0.937
(3.643) (22.1)
F stat (1,33)= 488.42
The results for the diagnostic tests are as under
gGDP=
gGDP=
14.249 + 0.708 (gs-gns)

(31.411) (2.663)
R2=0.177
F stat (1, 33) = 7.094
(4.1b)
(4.2b)
3.631 + 0.683 gs
R2= 0.757
(4.3b)
(3.32) (10.137)
F stat (1, 33) = 102.76
It is therefore, concluded that there exists substantial support for Kaldors first law in case
of Pakistan. Agriculture and services are not proved to be serving as engine of growth firstly
because of the fact that they are mostly related to diminishing returns activities and secondly
because they do not possess any backward and forward linkages like that of manufacturing
sectors.
4.2 Kaldors Second Law (Verdoorns Law)
Kaldors second law states that pm=f (gm), where pm is labor productivity growth in
manufacturing sector and gm is manufacturing output growth. The reasoning behind this law is
gns =
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that higher manufacturing output will stimulate higher labor productivity if production of
manufacturing sector is subject to static and dynamic increasing returns to scale (McCombie et
al., 2002, Dixon and Thirlwall, 1975).
Following the theoretical frame work, the empirical estimation of Verdoorns law is based
on the equations from (3.4) to (3.9).
Pm=0.444 + 0.902 gm
R2=0.863
(4.4)
(0.488) (16.291)
F (1,42)= 265.39
The results indicate that the model has successfully explained variations in the data i.e., R2
=0.863. In this equation the Verdoorns coefficient is positive as 0.902 implying a positive and
significant relationship between productivity growth in manufacturing and manufacturing output
growth. According to the results, increasing the growth of manufacturing output by one unit, the
labor productivity in manufacturing will increase by 0.902 units. These convincing results can be
due to the presence of multicolienarity as the labor productivity can be expressed as pm =gm -em,
implying a strong correlation between dependent and independent variables. This problem could
be solved as:
em= -0.444 + 0.098 gm

(-0.488) (1.768)
R2=0.069
(4.5)
F (1,41)= 3.127
The results show that a weak relationship exists between growth in manufacturing output
and employment in manufacturing. One unit increase in manufacturing output would cause the
employment to increase by 0.098 units. This relationship is also supported by the low value of R2
which is 0.069 in this case.
According to Rowthorns specification of Verdoorns law, equations 3.6 and 3.7 are
estimated as
pm= 14.605 - 0.292 em
(15.027) (-0.73)
R2=0.013
(4.6)
F (1, 41) = 0.533
and
gm=14.605 +0.708 em
(15.027)
(1.768)
R2=0.069
(4.7)
F (1,41) =3.127
The above equations relate employment in manufacturing to productivity and growth in

manufacturing respectively. In equation (5.6) there is a negative relationship between the two
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variables. It means with one unit increase in employment in manufacturing the productivity in
manufacturing will decrease by 0.748 units. This relation supports the use of capital intensive
techniques in the manufacturing sector. The employment of more labor with the given capital
will reduce the productivity of manufacturing sector. In equation (5.7) there is a positive
relationship between employment in manufacturing and growth of manufacturing.
Considering the contribution of capital, eq. 3.8 and 3.9 are estimated as Kaldors and
Rowthorns specifications respectively.
em= -0.907 +0.95gm+0.038km
(-0.897)
(1.711)
(0.926)
gm= 14.442 +0.701em +0.012km

(7.752) (1.711)
(0.103)
R2=0.088
(4.8)
F (2,40) = 1.987
R2= 0.070
(4.9)
F (2,40)=1.532
The returns of scale estimated from Kaldors specification are 1.012 , as against Bairam
(1987), results from equation (3.8), k is statistically insignificant but has right sign showing its
positive relationship with employment growth in manufacturing sector. While, in equation (3.9),
k always has the correct sign and is somewhat more statistically significant, as according to
Rowthorns specification the estimated returns to scale are 0.713 showing substantially low
returns as far as manufacturing sector of Pakistan is concerned.
4.3 Kaldors third law

The theory behind Kaldors third law is that the faster the manufacturing growth absorb the
labor from agriculture and other sectors where the marginal product is less then average product
(because of existence of diminishing returns). As labor transference takes place, labor
productivity outside the manufacturing sector increases and thus in turns raises the growth of
labor productivity in the economy collectively (and therefore GDP growth) as.
R2= 0.583
(4.10)
P GDP= 0.834 + 0.758 gm
(0.503) (7.574)
F (1,41) = 57.37
The results show that there exists an extremely strong relationship between growth of
productivity of an economy on the whole and the growth of manufacturing output. The variables
appeared to be significant and the positive sign shows that with one unit increase in the growth
of manufacturing output the overall productivity of the economy will increase by 0.758 units.
An improvement in the above specification by Kador (1968) is
R2= 0.165
(4.11)
g GDP =13.866 + 1.052 em
(15.83) (2.88)
F (1, 41) = 8.317
g GDP =16.288 -0.662 e Total
R2= 0.013
(4.12)
(7.482) (-0.745)
F (1,41) =0.555
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where em and eTotal are the growth rates of employment in manufacturing and total
economy, respectively. In equation (5.11) the relationship between variables is positive i.e.,
employment in manufacturing is positively related to growth of GDP and in equation (5.12) the
total employment is negatively related to the growth of GDP. This usually is the case when there
exists the faulty policies of the government and the fruits of development are not distributed
evenly rather only a smaller proportion of the population enjoys the benefits of the economic
development. So in that case, even if there is growth in GDP, the total employment is usually
undergoes a declining trend.
The productivity of GDP is positively related to the employment in manufacturing and nonmanufacturing sector as shown in equation (4.13).
p GDP= 12.246+0.481em -5.458 enm
(10.479) (0.747)
(-1.02)
R2= 0.167
(4.13)
F (2,40) =4.005
The above results show a positive relationship between productivity growth of GDP and
employment in manufacturing, as with one unit increase in em the gGDP will increase by 0.481
units. However, productivity growth in GDP is negatively related to the employment in nonmanufacturing sector. As the results indicate, one unit increase in enm would decrease the pGDP by
5.458 units.
By regressing the growth of GDP on the growth of employment in manufacturing and in
non-manufacturing sectors yield following results.
g GDP = 14.252 +0.763em- 2.993enm
R2=0.172
(5.14)
(12.97) (1.25) (-0.59)
F (2,40) = 4.268
The above results show a positive relationship between growth of GDP and employment in
manufacturing, as with one unit increase in em the gGDP will increase by 0.763 units. However,
growth in GDP is negatively related to the employment in non-manufacturing sector. As the
results indicate, one unit increase in enm would decrease the gGDP by 2.993 units.
Cripps & Tarling (1973) suggested to substitute the growth of employment in
manufacturing for the growth of manufacturing output as
pGDP= 1.822 +0.704gm- 4.626enm
(1.097) (7.07) (-2.101)
r2=0.625
(5.15)
F (2, 40)= 33.28
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According to the specification suggested by Cripps & Tarling (1973), Kaldors third law is
proved to be significant in case of Pakistan. As the results exhibit a positive relationship between
productivity growth of GDP and growth of manufacturing production, as with one unit increase
in gm the pGDP will increase by 0.704 units. This positive relation is also confirmed by the
relatively high value of R2 which is 60.625 implying that about 62 percent of the variations in
the data is being capured by the above specified model. However, productivity growth in GDP is
negatively related to the employment in non-manufacturing sector. As the results indicate, one
unit increase in enm would decrease the pGDP by 4.626 units.
5. Conclusion
In Pakistan, Kaldor growth laws are found to be significant to some extent using a time
series data from 1964-2008. The growth of GDP seems to be much closely associated with the
growth of manufacturing sector as compared to the agricultural or service sectors. Some support
for Kaldors second law is found by using its specification which yielded high rate of returns,
and also for the third law which was found to be significant through its last specification, as labor
productivity seems to be strongly negatively influenced by the growth rate of non-manufacturing
employment activities.
The estimated results suggest the structural transformation in support of industrial
development to accelerate the growth rate of GDP along with its foreign exchange earnings
through exports. As manufacturing sector exhibit more forward and backward linkages as
compared to services and agriculture sectors, which ultimately have a positive impact on
economic development of Pakistan.
Almost half the growth of GDP is attributable to the growth of manufacturing output, so
increasing the share of manufacturing sector would certainly have far positive implications on
the economy in context with the output as well as the employment. It has been proved from the
study that there exists an increasing return to scale in the manufacturing sector so investing in
that sector would bear fruitful results and would raise productivity in an economy. So, it is
suggested that the government should give due importance to the promotion of the
manufacturing sector as in the long run it will drag the nation out of the list of less developed
countries and would eventually raise the standard of living of the people. The initiation of this
structural change can be considered as a big challenge for policy advisors.
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Chakarvarty, S. & Mitra, A. (2008). Is Industry still the engine of growth? An econometric study
the organized sector employment in India. Journal of policy Modeling, 31, 22-35.
Cripps, T. F., & Tarling, R. J. (1973). Growth in Advanced Capitalist Economists 1950-1970.
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Dasgupta, S. & Singh, A. (2005). Will Services be the new engine of Economic Growth in India?
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Dasgupta, S. & Singh, A. (2006). Manufacturing, Services and Premature De-Industrialisation in
Developing Countries: a Kaldorian Empirical Analysis. Centre for Business Research, University
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Drakopoulos, S.A. & Theodossiou, I.(1991). Kaldors Approach to Greek Economic Growth.
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Felipe, J., Leon-Ledesma, M. Lanzafame, M. & Estrada, G. (2007). Sectoral Engines of Growth
in Developing Asia: Stylized Facts and Implications. Asian Development Bank, ERD (Economic
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Harris, R. I. D. & Lau, E. (1998). Verdoorn's law and Increasing returns to scale in the UK
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Kaldor, N. (1967). Strategic Factors in Economic Development. New York, Ithaca.

Kaldor, N. (1968). Productivity and Growth in Manufacturing Industry: a Reply. Economica, 35,
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Kaldor, N. (1975). Economic Growth and the Verdoorns law. A Comment on Mr. Rowthorns
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Leon-Ledesma, M. (2000). Economic Growth and Verdoorns Law in the Spanish Regions
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McCombie, J.S.L. (1983). Kaldors Laws in Retrospect. Journal of Post-Keynesian Economics,
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McCombie, J. & J. de Ridder (1983). Increasing Returns, Productivity and Output Growth: The
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Thirlwall, A. P. (1983). A Plain Mans Guide to Kaldors Growth Laws. Journal of Post
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Thirlwall, A (2003). Growth and Development: With Special Reference to Developing
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www.anpec.org.br/encontra2009/inscricaq.on/arquivos (March 8, 2011)
Annexure
Table 1:
Kaldors First law (Manufacturing)
Data:
1964-2008
Equations
Variables
Constant
1.686
(0.675)
gGDP = 0 + 1 g m
Dependent
gGDP
g GDP = 0 + 1 ( g m g nm )
gGDP
15.562
(75.34)***
g nm = 0 + 1 g m
gnm
2.054
(0.687)
Independent
gm
0.871
(5.462)***
(gm-gnm)
-0.709
(-4.549)***
gm
0.844
(4.422)***
R2
F-Statistics
0.475
29.831***
0.385
20.695***
0.372
19.557***
Note: *** indicates that coefficients are significant at 1 percent level

**indicates that coefficients are significant at 5 percent level
* indicates that coefficients are significant at 10 percent level
Table 2:
Kaldors First Law (Agriculture)
Data:
1964-2008
Equations
Dependent
gGDP
Variables
Constant
5.536
(5.126)***
Independent
ga
gGDP = 0 + 1 g a
0.710
(9.104)***
gGDP
15.173
(ga-gna)
g GDP = 0 + 1 ( g a g na )
(30.45)***
-0.053
(-0.278)
gna
7.406
ga
g na = 0 + 1 g a
(4.586)***
0.626
(5.365)***
Table 3:
Kaldors First Law (Services)
R2
F-Statistics
0.715
82.884***
0.002
0.077
0.466
28.788***
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Data:
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1964-2008
Equations
Dependent
gGDP
Variables
Constant
2.180
(3.653)***
Independent
gs
g GDP = 0 + 1 g s
0.814
(22.100)***
gGDP
14.249
(gs-gns)
gGDP = 0 + 1 ( g s g ns )
(31.41)***
0.708
(2.663)**
gns
3.631
gs
g ns = 0 + 1 g s
(3.328)***
0.683
(10.137)***
Table 4:
Data:
R2
F-Statistics
0.937
488.428***
0.177
7.094**
0.757
102.762***
R2
F-Statistics
0.863
265.39***
0.069
3.127*
0.013
0.533
0.069
3.127*
0.088
1.987
0.070
1.532
Kaldors Second Law (Verdoorns law)

1964-2008
Equations
Dependent
Pm
Variables
Constant
0.444
(0.488)
Independent
gm
pm = 0 + 1 g m
0.902
(16.291)***
e
-0.444
gm
m
em = 0 + 1 g m
(-0.488)
0.098
(1.768)*
P
14.605
em
m
pm = a0 + a1e m
(15.027)***
-0.292
(-0.73)
g
14.605
em
m
g m = b0 + b1e m
(15.027)***
0.708
(1.768)*
-0.957
g
km
e
m
m
em = a1 + b1gm + b2km
(-0.897)
0.95
0.038
(1.711)* (0.926)
gm
14.442
em
km
gm = c1 + d1em + d2km
(7.752)***
0.701
0.012
(1.711)* (0.103)
Table 5:
Kaldors Third Law
Data:
1964-2008
Equations
pGDP = d 0 + d1 g m
g GDP = e0 + e1em
Dependent
PGDP
gGDP
Variables
Constant
0.834
(0.503)
13.866
Independent
gm
0.758
(7.574)***
em
R2
F-Statistics
0.583
57.37***
0.165
8.317***
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(15.836)***
g GDP = y0 + y1etotal
gGDP
16.288
(7.482)***
em
0.481
(0.747)
14.252
em
gGDP
g GDP = b0 + b1em b2 enm
(12.978)***
0.763
(1.25)
PGDP
1.822
gm
pGDP = c0 + c1 g m c2 enm
(1.097)
0.704
(7.07)***
pGDP = a0 + a1em a2 enm
PGDP
12.246
(10.479)***
1.052
(2.884)***
etotal
-0.662
(-0.745)
enm
-5.458
(-1.02)
enm
-2.99
(-0.59)
enm
-4.626
(-2.101)**
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0.013
0.555
0.167
4.005**
0.172
4.268**
0.625
33.28***
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Principals Leadership Styles and Their Impact on Schools Academic Performance

at Secondary Level in Khyber Pakhtoonkhwa, Pakistan
Muhammad Javed Sawati
Ph.D. Scholar, Department of Education, Hazara University, Mansehra, Pakistan
Saeed Anwar
Professor, Department of Education, Hazara University Mansehra, Pakistan
Dr. Muhammad Iqbal Majoka(CORRESPONDING AUTHOR)
Assistant Professor, Department of Education, Hazara University Mansehra, Pakistan
The work presented in the manuscript is a result of original research conducted by Department of Education
Hazara University Mansehra, Pakistan. This research was not supported by any organization.
Abstract
This study was conducted to identify the leadership styles of secondary school principals and the
impact of these leadership styles on schools performance in Khyber Pakhtoonkhwa, Pakistan.
For identifying the leadership styles of school principals two instruments (one for principals and
the other for the teachers) were developed and administered the sample of study. To find the
Schools academic performance, schools results in the previous five years in the relevant Boards
of Intermediate and Secondary Education were collected. On the basis of analyzed data,
Four major leadership styles of the principals were identified as Democratic, Autocratic, Freerein and Eclectic. However, a small proportion of the principal had no dominant leadership style.
Other major findings show that there are no gender differences in different leadership styles. The
findings also show that in general there is no significant effect of any particular style on schools
academic results. However there is a significant difference in performance of girls schools in
comparison to boys schools with principals having different leadership styles except the
autocratic style.
Keywords: Leadership styles, Academic performance, Democratic style, Autocratic style, Freerein style and Eclectic style
1.
INTRODUCTION
Educational leaders play an important role to meet the quality education and organization of
the school. Most of educational experts consider administrators as the main source and driving
force for the organizational development and academic growth of students (Mirkamali, 1995).
The success of administrators is due to the method used in the administration process. The
administrators leadership style influences the effectiveness and efficiency of the organization,
and is the function of several inter-related factors, such as the employees level of psychological
and social maturation at work and their main expectations (Alagheband, 1997). Due to the
challenges of 21st century, the face of education has changed dramatically over the past century.
Every child with high school education may struggle to accomplish these challenges. Leadership
style of a principal depends upon his/her assumptions about human beings, human learning, and
human nature. These assumptions, consciously and unconsciously, are the foundation for
decision making and choosing a leadership style (Bayst, 1998).
Leadership is the process of influencing other to act for the accomplishment of specified
objectives (Dale & Beach, 1980). According Girja, in simple term a Leader is an individual
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who leads the community or a group of persons joined for a common purpose . A leader is
obeyed, heard and honored by his followers. A perfect leader unifies and embodies the opinion
of the people and nobilities to any desired goal (Cited by Sheikh, 2001). A leader is a sort of
person who motivates a group of people to achieve its tasks and maintain team unity throughout
the process. Many of us tend still to believe that a Leader implies one person dominating
another or a group of people (Sheikh, 2001). Leadership thus, is not only a personality trait; but
the way in which a leader or superior relates himself with his group of followers. It is the quality
of bringing together the people of diversified objects with the people of similar opinions and
objects. Leadership is a key factor to improve the condition of any department of life, and same
is the case with schools. Effective schools and outstanding performance do not exist without
effective and outstanding leadership. What we do at our school is normally called management.
It is concerned with the systems of our school. But to establish an effective school we not only
have to manage the school but to lead it. Leadership is something more than management. If we
just manage things around us and dont take initiative to improve our school and we dont lead
our school to achieve high standards of learning, our school will not be very effective. If we want
our school to be more effective, we need to be a committed leader and take initiative to improve
thing (Sheikh, 2001; AFAQ, 2007).
The style of a leader entails the behavior pattern that he adopts when working with and
through the subordinates, as perceived by those subordinates. Here it must be noted that it is the
perception of the subordinates based on their experience of the leader in guiding them in various
situations. Leadership essentially involves influencing others, and style is a form of behavior that
develops gradually, a leaders preferred style of behavior emerges which is identified by people
who come in contact with the leader (Sheikh, 2001).
The Principals have a fundamental responsibility to ensure overall student achievement and
motivation as well as teacher productivity and satisfaction. It is through effective leadership and
the modeling of values and beliefs important to education that principals are able to shape the
culture within schools (Stolp, 1994).
The job of Principal is very complex and extremely important in any education system. The
way in which he assumes the role, either as manager or leader, shapes how he thinks, acts, and
feels in the school. The principals role in shaping the schools culture is dependent upon his
ability to understand and respond to upcoming situations with passion, purpose and directed by
values and vision. The Principal is responsible for encouraging and shaping the spiritual, beliefs,
ideas and attitudes that make learning more connected, value driven and meaningful (Deal and
Peterson, 1994).
Psychologists have begun to accept the fact that no single configuration of leadership traits is
predictive of successful performance. They turned their attention to the investigation of
leadership style. By leadership style we mean the behaviour of the leader what he does, what he
emphasizes and how he deals with the subordinates (Dale & Beach, 1980). According to Dilts
(1996) there is no one way to lead an individual or group and as a leader, different individuals
have different choice of communication, different degree of conscious awareness of behavioural
cues, meta-messages, group dynamics, and different beliefs and assumptions for achieving
targeted goals and objectives. Hence different leaders exhibit different behaviours / styles to
accomplish their job.
Different experts have identified different leadership styles having distinctive characteristics.
For example Avolio and Bass (2002) presented full range leadership theory according which
three leadership styles known as transactional, transformational, laissez-fair, were identified.
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Douglas (1996) and Robbins & Caulter (1999) claimed that decisions by leaders depend on three
main leadership styles that are democratic, autocratic and laissez-fair. A democratic style is
characterized by cooperation, collaboration, and coordination (Yukl, 2005); autocratic leadership
style allows no participation in decisions; and laissez-fair (free-rein) leadership style empowers
subordinates to work with freedom and free-will (Garrison& Bly, 1997).
According to Gutek and Morasch (1982) gender roles have very significant effect on
organizational performance, and in the view of Ridgeway (1997) gender play an inherent role in
making the workplace distinctive. In most of the previous studies female principals have been
observed to demonstrate democratic, more empowering, interpersonal leadership style contrary
to male principals more autocratic, task oriented style (Eagly, Karau, & Johnson, 1992; Eagly &
Johannesen-Schmidt, 2001). According to Celikten (2005), school administrators in Turkey
consider female principals more capable as compared to male principals.
Nakornsri (1977) conducted a research to find difference between males and female
principals administrative performance as perceived by teachers. In this study female school
principals were found to exemplify higher levels of educational leadership than did male
principals.
On the basis of his study, Nsubuga(2009) concluded that school performance and in particular
students academic excellence in secondary school in Uganda was positively related to the
democratic leadership style and it was the most used style in secondary schools. Smith and Reed
(2010) have concluded from extensive literature that critical life events, culture, personal
characteristics, and socioeconomic variables contribute to vital variations in males and females
leadership styles in different societies. Therefore, they have recommended that further studies be
conducted in developed and less developed cultures and subcultures to explore leadership
patterns of male and female managers and leaders. Thus it was considered suitable to have
insight in leadership styles exhibited by school leaders in `Khyber Pakhtoonkhwa, Pakistan.
The objectives of the study were to: a) to identify different leadership styles of the Principals of
Government Secondary Schools of Khyber Pakhtoonkhwa, Pakistan; b) to compare the mean
leadership scores of the principals with different leadership styles; c) to find out the impact of
different styles of leadership on the academic achievements of the educational institutions under
consideration; and c) to examine the gender-wise effect of leadership styles on the academic
achievement of the secondary schools of Khyber Pakhtoonkhwa.
To achieve the objectives of this study, following research questions were addressed:
What are the different styles of leadership that can be observed in government schools of Khyber
Pakhtoonkhwa?
i. How do the principals with different leadership styles differ in leadership scores?
ii. How do the different styles of leadership influence the schools academic performance?
iii. What difference does the gender make for leadership styles and what is its influence on
schools academic performance?
This study was descriptive in nature and carried out on in Khyber Pakhtoonkhwa, Pakistan.
All the principals and teachers teaching in government schools at secondary level constituted the
population of this study. At first step, 12 out of total 24 districts of Khyber Pakhtoonkhwa
province were selected through random sampling technique. At second stage, 156 secondary
schools were randomly selected from 12 districts of the region using stratified random sampling
technique. From each sample district 13 schools (9 for male and 4 for female) were selected
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using random sampling technique. Then from each sample school, one principal and five senior
teachers were selected as respondents of the study.
For data collection, two questionnaires ( one for principals and one for teahers) probing
leadership styles were developed after a thorough study of related literature. The instruments
were validated by taking the opinions from the committee of experts. To find out reliability of
these scales, Cronbachs Alpha was calculated and these values were found to be 0.778 and 0.69
respectively. To have data regarding academic performance of each sample school, results of
Secondary School Certificate were collected for previous five years from the corresponding
Boards of Intermediate and Secondary Education. On the basis of individual grades of students,
the academic performance of each school was calculated. The response rate from the sample
respondents was 79%., and hence 32 female and 91 male principals provided complete
responses.
Leadership scores in each of the three styles (Democratic, autocratic and free-rein) were
calculated for each principal on basis of principals self-assessment as well as responses of the
corresponding teachers. The style in which an individual principal had equal to or more than
mean score, was considered as dominant leadership style of the principal. However, the principal
having a score higher than or equal to mean score in more than one style, were considered to
have eclectic leadership style. Thus on the basis of collected data, school principals were
categorized into four leadership styles i.e. democratic leadership style, autocratic leadership
style, free-rein leadership style and eclectic leadership style. Among these respondents, 19
principals were not included in final data analysis as they had no dominant leadership style. The
collected data was analyzed by using mean, standard deviation, t-test, ANOVA and Post Hoc
test.
3. RESULTS
The data regarding principals having different leadership styles were analyzed to make
comparisons among these styles. This analysis is demonstrated in the following tables:
Table# 1 Identified Leadership Styles of Principals of Government Schools of NWFP
SN
1
2
3
4
5
Leadership styles
Democratic
Autocratic
Free-rein
Eclectic
No-Style
N
50
18
10
26
19
Percentage
41
15
8
21
15
Table 1 shows that 41% of the principals were democratic, 15% were autocratic, 8 % were
identified as free-rein leaders, 21 % were eclectic, and 15 % had no dominant leadership style.
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Table# 2 Significance of difference among leadership scores of principals with different leadership styles
Source variance
Leadership Scores
df
Sum of square
Mean Square
Sig.
Between Groups 3
5167.55
1722.52
21.72
0.00*
Within Groups
92
7296.94
79.32
Total
95
12464.49
*p<0.05
Table 2 indicates that in the comparison of leadership scores among the four identified leadership styles of
principals, the ANOVA test illustrates a significant difference in leadership scores( p<0.05). To see the significant
difference between different pairs of leadership styles, Post Hoc test has been applied.
Table# 3 Significance of difference between mean leadership scores of principals with different leadership
styles
Dependent Variables
Leadership Score
Leadership Style Leadership Style Mean Difference
Std. Error
Sig.
(i)
(j)
( i-j )
Eclectic
Democratic
17.02
2.27
0.00*
Autocratic
16.92
2.85
0.00*
Free-Rein
6.66
3.50
0.312
Eclectic
-17.02
2.27
0.00*
Autocratic
-0.103
2.52
1.00
Free-Rein
-10.36
2.24
0.021*
Eclectic
-16.92
2.85
0.00*
Democratic
0.103
2.52
1.00
Free-Rein
-10.26
3.67
0.057
Eclectic
-6.66
3.50
0.312
Democratic
10.36
3.24
0.021*
Autocratic
10.26
3.67
0.057
Democratic
Autocratic
Free-Rein
*P<0.05
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Table 3 shows that mean leadership score of the principals with eclectic leadership style was
significantly greater than the mean leadership score of the principals with democratic and
autocratic leadership styles (p<0.05). Similarly, the mean leadership score for free-rein principals
was significantly greater than the mean leadership score of the principals with democratic
leadership style (p<0.05). However, there existed no significant difference between mean
leadership scores of the principals with styles free-rein and eclectic as well as free-rein and
autocratic.
Table# 4
Significance of difference between mean academic scores of schools having principals
with different leadership styles
Source of variance
Academic Scores
df
Sum of square
Mean Square
Sig.
Between Groups 3
188.32
62.77
0.195
0.900*
Within Groups
92
29658.78
322.38
Total
95
29847.10
*p>0.05
Table 4 shows that there was no significant difference between mean academic scores of the
institution having principals with different leadership styles ( p>0.05).
Table# 5 Correlation between leadership scores of principals sand academic score of schools.
Leadership Style
N
Correlation Coefficient
Eclectic
26
0.033891
Democratic
50
0.262892*
Autocratic
18
-0.23364*
Free-Rein
10
0.483445*
*Significant
Table 5 shows that calculated value of co-relation co-efficient between principals leadership
style scores and schools academic scores of sample schools was positive and significant for the
principals with democratic and free-rein leadership styles. There was no correlation between
leadership style and schools academic scores for the principals with eclectic leadership style,
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and there was significant but negative correlation between leadership style and schools
academic scores for principals with autocratic leadership style.
Table# 6
Gender wise description of principals leadership styles
Leadership Styles
Gender
Female Principals
N
%
Male Principals
N
%
Total
N
Democratic
13
41
37
41
50
%
41
Autocratic
19
12
13
18
15
Free-rein
13
10
08
Eclectic
21
19
21
26
21
No-Style
06
17
19
19
15
Total
32
100
91
`100
123
100
Table 6 shows that 41% male as well female principals had democratic leadership style,
18% male and 19% female principal were with autocratic leadership style, 10% male and 13%
female had free-rein leadership style, and 26% male and 21% female principals exhibited
eclectic leadership style. However, 19% male and 6% female possessed no dominant leadership
style.
Table# 7
Gender effect on academic performance scores of schools having eclectic leadership.
Variable
N
M
S.D
t
Female
6
76.63
12.05
2.11 *
Male
17
64.27
13.01
* Significant at 0.05 level.
Table 7 reflects that mean academic score of girls schools having principals with eclectic
leadership style is greater than the mean academic score of boys schools with eclectic leaders.
As the t value (2.11) is significant at 0.05 level of significance, the female principals with
eclectic leadership style were more effective in term of schools academic performance than their
male counterparts.
Table# 8
Gender effect on academic performance scores of schools having democratic leadership.
Variable
N
M
S.D
t
Female
11
75.04
9.06
3.23 *
Male
35
63.88
12.48
* Significant at 0.05 level
Table 8 shows that mean academic score of girls schools is higher than that of boys
schools and t-value (3.23) is significant at 0.05 level of significance. Thus there is significant
difference in mean academic scores of the schools for boys and girls having principals with
democratic leadership style. Hence female principals with democratic leadership style proved to
be more effective than male principals with democratic leadership style.
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Table# 9
Gender effect on academic performance scores of schools having autocratic leadership.
Variable
S.D
Female
70.40
9.23
T
1.80*
Male
12
60.94
12.62
* Non-significant
Table 9 reflects that mean academic score of schools with autocratic female principal is
greater than that of the schools with autocratic male principals. However, t- value (1.80) is not
significant at 0.05 level. Thus there was no significant difference between male and female
principals with autocratic leadership style in term of schools academic performance.
Table# 10
Gender effect on academic performance scores of schools having free-rein leadership
Variable
Female
N
3
M
88.03
S.D
5.94
Male
53.95
13.01
t
5.39*
*Significant
Table 10 shows that mean score of girls schools is greater than boys schools having
principals with free-rein leadership style. As the t- value (5.39) is significant at 0.05 level of
significance, female principals with free-rein leadership style were more effective with reference
to schools academic performance as compared to male principals with free-rein leadership style.
4. DISCUSSION
The analyzed data revealed that on the basis of school principals and teachers perception,
41% of the principals in public sector secondary schools had democratic leadership style , 15%
possessed autocratic leadership style, 8 % had free-rein leadership style, 21 % were practicing
eclectic leadership style, while15 % had no dominant leadership style. Thus democratic
leadership style was relatively more exercised by the principals as compared to the other
prevalent leadership styles. These findings are in line with the findings by Nsubuga(2009).
In the comparison of mean leadership score of the principals with different leadership style,
the mean score for principals with eclectic leadership style was significantly greater than the
mean leadership scores of the principals with democratic and autocratic leadership styles
(p<0.05). Similarly, the mean leadership score for free-rein principals was significantly greater
than the mean leadership score of the principals with democratic leadership style (p<0.05).
However, there existed no significant difference between mean leadership scores of the
principals with styles free-rein and eclectic as well as free-rein and autocratic. Thus mean
leadership score for principals with eclectic and free-rein leadership styles were greater than
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mean scores of those with democratic and autocratic leadership styles irrespective of the
strengths or weaknesses of these leadership styles.
In the comparison of gender, 41% male as well female principals were found to have
democratic leadership style, 18% male and 19% female principals had autocratic leadership
style, 10% male and 13% female principals had free-rein leadership style, and 26% male and
21% female principal exhibited eclectic leadership style. However, 19% male and 6% female
possessed no dominant leadership style. These findings indicate that in Khyber Pukhtoonkhwa,
Pakistan, male and female principals were near about similar in leadership styles. These findings
are contradictory to the findings by Eagly, Karau, & Johnson (1992) and Eagly & JohannesenSchmidt (2001). Perhaps this difference is due to the working environment in which male
principals exercise their potential and administrative power in schools for boys and female
principals work in the schools where teachers as well as taught are both females.
In the comparison of academic performance of the principals with different leadership styles,
no significant difference was found between the academic performance of the schools having
leaders with different leadership styles ( p<0.05).These findings are contradictory to findings by
Nsubuga(2009), who concluded that democratic school leaders were more effective than the
leaders with other styles.
With reference to gender, schools having female principals with democratic, free-rein and
eclectic leadership style had significantly greater academic scores as compared to schools having
male principals (t> critical value of t at 0.05). However, there was no significant difference
between academic performance of the schools having male and female principals with autocratic
leadership style. These findings support the results of the studies conducted by Nakornsri (1977)
and Celikten (2005).
5. CONCLUSIONS
On the basis of findings, following conclusions were drawn:
Majority of the principals possessed democratic style followed by eclectic, autocratic and
free-rein leadership styles respectively. Furthermore, the gender of the principals did not
specify leadership styles.
Leadership styles of school principals did not appear as a significant contributor for
schools academic performance. However, female principals appeared to be more
effective in term of schools academic performance as compared to male principals of the
same leadership style.
Autocratic male and female principals did not differ in academic performance of the
institution and this style had a negative correlation with academic performance of the
institution.
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Assessing effectiveness of Social Media and Traditional Marketing

Approaches in terms of cost and target segment coverage
Muhammad Tariq
(Corresponding Author)
Sarhad University of Science and Information technology, 36 B, Chinar Road University Town,
Fazal Wahid
Sarhad University of Science and Information Technology, 36 B, Chinar Road University Town,
Abstract
Due to their invaluable contributions to the Swedish economy, the survival of Micro Firms
through revenue generating marketing practices has gained much interest. A common
misconception prevalent is that marketing in micro businesses is just a miniature of larger
enterprises. Since Micro firms are often cash-strapped which limits their revenue generating
ability through prevalent marketing practices which are resource intensive. In the back drop of
all the hype about social media as a marketing tool we got the clue to find the right marketing
approaches for these businesses regarding the choice of prevalent practices and social media as a
new marketing tool. The study suggests that Micro businesses have a tendency to carry out
marketing activities in a haphazard manner which limits their likelihood of achieving their
targets. It has also been indicated that conventional approach (low volume, high expense) to
reach target segments, still has a strong effect on micro firms in Sweden and is therefore more
appropriate for them as majority of their customers are geographically concentrated as well as a
major strata of these are yet to start active participation on the social media landscape. In terms
of costs social media is more effective only when used in tandem with conventional marketing
approaches.
Key Words: Social media, micro firms, Target market coverage, Costs
1.
Background
In hindsight it becomes clear that marketing has undergone two notable changes in the past few
decades. The first phase was predominantly driven by manufacturers; while the second by
retailers. The former drove the market by aggressive promotional strategies while the latter
exploited closeness to consumers (Schultz & Schultz 1998). Ever since then marketing has
entered a third phase, influenced by the increased role of information technology (IT) in
consumer lifestyles which has led to a consumer dominant marketplace (Jim Blythe, 2006) and
in the new landscape consumer really is king(Rob, 2009).
In the year (2006), Forrester Research identified an emerging trend taking place in online
communities known as Groundswell in which consumers interact through web 2.0 enabled
technologies which include, but not limited to, Facebook, LinkedIn, MySpace, and usergenerated content sites like YouTube, Helium, and Wikipedia etc for connecting with one
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another. Groundswell is formed by the intersection of people, interactive technologies, and

online economics (Charlene, 2008). It is defined as, A social trend in which people use
technologies to get information they need from one another, rather than from traditional
institutions like corporations (Charlene, 2009). Groundswell is facilitated by Web 2.0
Technologies, a term coined by Tim O' Reilly, which uses collective intelligence of people. Web
2.0 is also known as social media (Tim, 2007). Social media is interactive in nature and is
therefore known as consumer-generated-media, new media or citizen media (Rob, 2009).
Conventional media is company-generated and information flows in one direction i.e., messages
are broadcast from company to target audience (one-to-many) and in social media (many-tomany) in multiple directions.
Dave Evans in his ground breaking study (2008) defines social media as, The democratization
of information, transforming people from content readers to content publishers. It is the shift
from a broadcast mechanism to a many-to-many model, rooted in conversations between
authors, people and peers.
The rise of new social media can be seen from the fact that in first decade of 21st century several
words from social media have entered lexicon as word of the year such as Blog (2004),
Podcast (2005), Facebook (2007) and most recently a verb Unfriend which means to
remove a friend on social network site (SNS) such as Facebook was chosen as the word of year
2009 by New Oxford American Dictionary.
A joint survey conducted by Forrester and the Association of National Advertisers (ANA) in the
United States demonstrate the importance of social media as it depicts how marketers plan on
advertising spending in 2010. Most marketers intend to increase marketing budgets to Social
media by a whopping 77%, Web advertising 73%, and Search engine marketing 59%.
Alternately, marketers plan to increase spending on conventional marketing only by 13% in
magazines, 9% increase on radio advertising, and a dismal 7% raise in newspaper advertising.
These changes have created several opportunities for micro firms to adopt social media
marketing as they are often cash-strapped and lack marketing expertise for carrying out
innovative marketing campaigns. Social media therefore is most relevant to Sweden whereby an
overwhelming majority of the businesses are small-sized.
According to business statistics for (2009), Sole proprietors constitute 74.7%, Small-sized firms
3.2%, Medium-sized 0.5%, Large enterprises 0.1% and Micro firms make up 21.5% of overall
Swedish employment market (ekonomifakta, 2009). This shows that significance of small
businesses are indisputable in Sweden as more than 96% of the employment is coming from sole
proprietors and micro firms together. It is therefore, important for these small businesses to
survive to sustain or increase their contributions towards themselves and alternatively to the
economy. Small firms need either to grow or reduce their operating costs by efficient utilization
of scarce resources, which typically characterize small firms. According to Huang and Brown
(1999) small firms face several constraints. These constraints, when ranked in descending
sequence of their importance, are sales and marketing 40.2%, followed by human resource
management (15.3%), general management 14.3%) and operations (8.6%). The reason is that
small firms are unable to employ seasoned marketers to carry out marketing activities for
themselves (Huang & Brown 1991). As a consequence, in these economic times small firms are
moving from conventional marketing practices such as television advertising, newspapers, radio,
magazines, word of mouth marketing (WOMM), public relations (PR) and relationship
marketing towards more affordable and interactive social media marketing.
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1.1
Problem Discussion
An interesting way to describe social media marketing is to compare it with conventional
marketing practices. The new trend, groundswell enables consumers to connect with one
another and influence collective perception about a company or a newly launched product. As a
result netizens change behavior more quickly than tech-challenged offline consumers who stay
loyal to companies for a longer time. This trend is compelling companies to use media which
consumers value to get a positive image for themselves. The new approach to marketing has not
only brought companies to a new arena but, also, it has threatened the existence of conventional
forms of marketing practices (Charlene, 2008). Social media marketing has created new
challenges for advertisers, companies and strategists. Pre-test interviews coupled with the scarce
treatment of micro businesses by earlier researchers aroused much curiosity in our minds to
know exactly what the real marketing scenario in Sweden is. Due to the increasing popularity of
rapidly evolving social media marketing worldwide it would be interesting to know that whether
it is the right time for small firms in Sweden to adopt the social media bandwagon?
With these studies in backdrop we conducted two pre-test interviews with Micro firm managers
to find out the existing marketing scenario. Both the interviewees were knowledgeable about
conventional marketing practices such as the 4Ps, advertising, customer retention and Word-OfMouth Marketing (WOMM), sales promotions, and web portals. Both were actively using media
sharing sites (YouTube & Flickr) and social media network sites (Facebook and LinkedIn) but
for personal purposes only. The young manager of the two interviewees was actively uploading
materials on Scribed and videos on YouTube. However, they both were unaware of the impact of
using social media for promotion of their businesses. The post-interview responses demonstrate
general mindset thinking more inclined to conventional marketing practices like marketing mix
(4Ps), promotional mix, word of mouth marketing (WOMM) and relationship marketing
strategies. To achieve this purpose, the following research question has been formulated.
1.1.1 Research Question
Which of the two types of marketing is more effective in terms of targeted segment coverage and
expenditures?
According to Schmiemann (2006), in the European Union 90% of the businesses are micro in
nature and same is true within Sweden where micro businesses are considered as the backbone of
the economy. These businesses create employment opportunities; germinate entrepreneurial
spirit in public and innovation in organizations. In spite of this still there is very scant published
material on micro firms and it is relatively complex to define micro firms as there are several
connotations of their qualitative and quantitative definitions. Micro firms in qualitative terms are
businesses which are owner managed, have a small market share and the owner manager has
discretionary power of making his or her own strategic decisions (Bolton Committee, 1971).
According to Johnson, (1999) micro business is a business having up to 10 employees. This
quantitative definition might cause some confusion as in this case the term SMEs can be used
interchangeably with small businesses which also cover the definition of micro firms.
In the year (2005), European Commission introduced new criteria for defining SMEs as shown
in table 1 (see annexure 1). Accordingly, Medium-sized, Small and Micro businesses are
businesses which have fewer than 250 employees or either an annual turnover not more than 50
million Euro. Whereas, Small-sized firms are businesses which have fewer than 50 employees
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and their annual turnover do not surpass 10 million Euros. Finally, Micro firms are businesses
which have fewer than 10 employees with annual turnover not exceeding more than 2 million
Euros. From this discussion evidently micro business is easy to describe but difficult to define.
Therefore for this paper we will follow the most recent definition of European Commission
(2005) for micro businesses as it is recognized and practiced worldwide by academics and
practitioners.
2.1
Marketing in Small Firms
First, we begin by defining marketing in the context of small firms as, Small business
marketing consists of those business activities that direct the creation, development, and delivery
of a bundle of satisfaction from the creator to the target user and that satisfy the targeted user
(Logenecker et. al, 2010). According to Timmons (1999) business mortality statistics for small
businesses show that, small firms experience a high rate of termination during initial years. The
rate of discontinuance can be as high as 70% during the first five years of inception. Whereas,
Marc (2004) argues that marketing practices like a careful analysis of target market can lower
failure rates of small businesses up to by 60%. At the same time small firms confront several
other problems which in descending sequence of their importance are sales and marketing
40.2%, followed by human resource management 15.3%, general management 14.3% and
operations 8.6% (Huang & Brown 1991). This indicates that marketing is the most pressing
problem confronting small businesses and still it has been recognized as most important business
function for small businesses (McKenna, 1991), and of-course marketing in small firms differ
from marketing in large firms (Bjerk & Hultman, 2002). The same course of reasoning is
applicable in the context of micro firms which are influenced by owner-manager and resource
scarcity (Karolina et al, 2007).
These challenges call for a marketing orientation in small firms to improve performance with
respect to competitors. According to Never and Slater (1991) a marketing orientation is defined
the, organizational culture that most effectively creates the necessary behaviors for the creation
of superior value for buyers and thus continuous superior performance for the business.
However, Mike (2002) state that there are other possible orientations which small businesses can
follow such as production orientation, product orientation, financial orientation. Most recently
Kotler and Keller (2009), advocated the concept of holistic marketing orientation meaning that
everything matters in marketing and that a wide, integrated orientation is needed to compete
effectively in marketplace and market space.
It has been agreed on that the principles of marketing theory are equally important for both small
and large firms (Sui & Kirby, 1998). There are several models of marketing that provide
guidelines for businesses to survive and grow in their respective industries. However, Welsh and
White, (1981) proclaims that a small business is not a little big business. There are several
points on which small businesses differ from big organizations like; owner-management has a
distinct strict discipline in small businesses, lack of trained personnel, short-ranged management
perspective, limited financial resources, adoption to steady state conditions and analytical models
used in big organizations have limited usage in small businesses (Welsh & White, 1981). This
shows that small businesses are not like big businesses therefore, the needs of these two types of
organizations differ from each other including its marketing needs.
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2.1.1
Towards a New Model of Marketing
One set of marketing theory cannot be generalized for two types of organizations with different
characteristics and requirements. The marketing theories which are written in the context of big
organizations have little or no relevance to small businesses (Chasten & Mangles, 2002).
Few research has been carried out on small businesses and those researchers tried to draw
models and theories specifically for small businesses but these efforts alone cannot help the
needs of the small firms in totality. For instance, Miller and Antilla (1987) researched 36 Finnish
and Swedish firms but they described their research as being too qualitative for examining
state-of-the-art marketing in small manufacturing firms. Similarly, most of the research that is
done on small businesses focuses on the problems or barriers present in the small firms (Simpson
et. al, 2006). Some research is practical in nature but lacks real time application. For instance, the
Growth/Stage Model by Siu & Kirby, (1998) advocates the consideration of the stage of growth
of small businesses while formulating marketing models for small firms, but the model is unable
to mention the impact of radical technological advances like the internet.
In the light of the above short comings in theories for the small firms, it can be argued that the
theories need to be either modified to suit the small businesses or a completely new set of
theories and models be drawn for the small businesses.
Simpson and Taylor (2002) came up with a new model of marketing, the role and relevance
model of marketing (see Annexure 2 Figure 1). The role and relevance model of marketing in
SMEs explains the role and relevance of marketing in a small business environment. The model
places organizations in four quadrants depending on the relevance and role of marketing. These
quadrants comprise as; Marketing led organizations (MLO), Marketing dominated organization
(MDO), Marketing weak organization (MWO) and Marketing independent organization (MIO).
In Marketing-led organization (MLO), there is strong marketing orientation for maintaining or
increasing market share in a competitive business environment. Marketing-led organization is
perceived to be organizations pursuing best business practices to cope with changes in business
environment. In a Marketing-dominated organization (MDO) there is minor relevance and major
role of marketing in strategy making processes. Normally, such organizations have guaranteed
business from a major account or client. Therefore, marketing may be seen as unnecessary and
the organization might be called a marketing-nominated organization but in the long term
marketing can help the organization move to (MLO) quadrant in the model. In the Marketingweak organization (MWO) a sales orientation is prevalent with major relevance and minor role
of marketing. This type of organization does not have a proper marketing department and these
businesses are normally not interested in growth either. A Marketing-independent organization
(MIO) resembles a marketing dominant organization (MDO) but in such type of organization
there is no unconditional orientation and commitment towards marketing. However, a drawback
of (MIO) approach is that the organization future is at the mercy of the major client (Simpson &
Taylor, 2002)
From the above discussion we come to know that Marketing-led organization (MLO) is the best
strategy for a small business for maintaining or increasing market share in the domain of
competition. There are three possible alternative paths identified for small firms to reach the
desired (MLO) quadrant as shown in Figure 2 below.
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Strategy A as shown in figure 2 (see annexure 2) which follows the route (MIO-MDO-MLO) is
an innovative approach which is resource intensive in the beginning but should help the small
business later in exploiting actionable opportunities, Strategy B which follows the track (MIOMWO-MLO) is more a reaction to market demands, and finally Strategy C which follows
(MIO-MLO) path is seldom used by Small brick and mortar businesses (Simpson & Taylor,
2002). Later in the year, (2006) Simpson and Taylor carried out another research along with
Padmore and Hughes to test their new model. They found that there still lie some deficiencies in
their model but the model has been successful in taking the understanding of marketing in small
firms one step further by categorizing small businesses on the basis of marketing activities they
carry out inside (Simpson et. al, 2006).
2.1.2
Conventional Marketing Mix and Social Media
Traditional marketing practices are centered on the marketing mix model. The marketing mix
model was introduced by Borden in the 1950s (sited from Neil, 1984). Soon after in the 1960s
according to McCarthy (1960), the marketing mix model was termed the 4Ps of marketing as it
contains Product, Price, Place and Promotion variables. Ever since then it became the
indisputable marketing model and replaced the then existing functionalist approach and
parameter approach of Copenhagen Business School of Scandinavia (Alderson, 1957).
Further with the passage of time researchers like Booms and Bitner proposed more
supplementary Ps of marketing to existing list of 4Ps such as people, process and physical
evidences constituting a 7Ps approach which is more inclined to services marketing (Fifield &
Gilligan, 1996), and personnel, physical assets, procedures and personalization (Goldsmith,
1999). Most recently Otalcan (2005) has introduced the concept of (2P+2C+3S) by including
Personalization, Privacy, Consumer, Community, Sales promotions, Site and Security in the
marketing mix list of variables which are more inclined to E-Marketing practices. It is important
to know that although the original marketing mix model has been oversimplified by restricting it
merely to 4Ps of marketing (Gronross, 1999) still it is interesting to know that embedded in the
Promotion P are sub variables such as advertising which can be both below-the-line (BTL)
and above-the-line (ABL) or a hybrid combination of both known as through-the-line advertising
(ABL+BTL =TTL), Sales promotions such as (Samples, Premiums, Point of Purchase (POP),
Trade shows, scientific shows, sweepstakes), Personal selling, Public relations and Direct
marketing (Wilmshurst, 2007). Most recently according to Glyn and David (2009), with the
arrival of social media a new dimension has been added to promotion mix as social media in a
conventional sense can help companies to interact with consumers, while in unconventional
manner it makes possible for customers to interact directly with other customers.
The table 2 (see Annexure 1) reveals the fundamental changes that social media has induced by
making media instantly updateable, control, archives accessibility, freedom and in terms of
measuring the effectiveness of a marketing campaign. On the other hand traditional media is
unchangeable with archives not accessible and reaches a finite number of people (Stokes, 2008).
The above discussion is further elaborated by Charlene Li and Josh Bernoff (2008) who, based
on their observation of hundred of businesses, have come up with five common objectives such
as listening, talking, energizing, supporting and embracing as to why companies use social
media. These five objectives correspond to the traditional business functions as shown in the
table 3 (see annexure) which also reveals that how things have become different in the domain of
groundswell.
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Three Laws of Media
3.1
Sarnoff's Law
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This law was postulated by David Sarnoff who is reckoned to be the pioneer of broadcasting
business for he founded the National Broadcasting Company (NBC). According to Campbell
Ewald (2009), Sarnoffs law for any one-to-one network is worthwhile the specific number of
participants in that network. So a network with 100 participants is worth 10 times more than a
network with only ten members. Dave Evans (2008), elaborates this law in other words as during
the process of broadcasting a single message is sent to infinite number of listeners therefore other
things remaining, A network with 100 people is therefore 10 times as valuable in terms of reach
as a network with only 10 people. However, the drawback of Sarnoffs law is that it is
applicable only for one-way media like television, radio where there is no interaction between
the sender and receiver (Ewald, 2009).
3.2
Metcalf's Law
This law was postulated by Robert Metcalfe (1980), who founded the well known networking
firm 3.com. According to Dave Evans (2008), in any network of two way communications, the
value of such a network increases by the square of number (n2) of users in the network. This is
because people can communicate in two directions and there are more than one conversation
taking place at a time. According to Ewald (2009), therefore, a network with 100 users is worth
hundred times more than a network with 10 users. However Dave Ewald (2009) points out a
drawback with this law is that it assumes interactions, but is only applicable to two-way
communications such as email and telephone conversations.
3.3
Reed's Law
Postulated by David P. Reed this law is also known as The Law of the Pack which states that
the value of a network increases more than the two preceding laws during the formation of
groups, communities via the inter-connections among them (Evans, 2008).Reeds law in
comparison of network of 10 person, the difference in the utility of a network of 100 people who
would not talk to each other as they should under Metcalfes law and within groups of persons is
equal to 2 raised to the 90th (Evans, 2008). He states that Reeds law has considerably more
coverage as it reinforces a new layer of groups such as in social network sites which creates sub
groups and communities, is typical examples of this law. According to Ewald (2009), typical
examples of Reeds Law are social media and the communities formed there in. However a
drawback of the absence of human elements in computer networks is that it presumes unlimited
number of senders and receivers and complete interaction.
3.4
The Starfish Model of Social Media
This model is developed by Robert and is known as the Social media Starfish Model. This model
reflects that social medi consists of varied activities and that social media success depends on
how you combine traditional and social media mix combinations (Evans, 2008). Social media
marketing can take many forms, as shown in the generic Starfish Model figure 3, but for this
paper purposes we will confine our discussions to the most important applications of social
media such as blogs, Twitter, Social Network Sites (SNS) such as Facebook, LinkedIn, Media-
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Sharing-Sites such as YouTube and Flickr, Social Bookmarking and Voting Sites such as Digg
and Delicious.
According to Charlene and Li (2009), since, technologies may change with the passage of time
therefore the social media in principle concentrates more on relationships than technologies. In
this way, we are trying to establish the best combination of conventional and social media
promotion mix for small firms in terms of target market coverage and advertising spending. For
this reason we have elaborated the three laws of social media. Together these laws give an idea
of how consumer generated media (CGM) has become so popular in comparison with
conventional marketing practices. These laws are sometimes referred to as network valuegovernance laws as they basically describe the utility of network from the perspective of those
connected to a focal source, to each other and so on (Evans, 2008).
3.5
Blogs
According to Rob Stokes (2008), the word blog was first coined by Peter Merholz in (1999)
and very soon in the year (2004), it was chosen as the word of the year by the editors of
Merriam-Webster dictionary. The very first blog was created by Pyralabs in 1999 and was
subsequently acquired by Google in 2004 (Paul Beelen, 2006). According to Dan Zarrella
(2010), there are more than 346 million people who read blogs and more than 184 million people
are bloggers themselves and according to Rob Stokes (2008) almost 1.4 blogs are created every
second in the domain of blogosphere. Paul Beelen (2006) describes blogs as web pages which
can be easily updated, published by a single person or group of people. He further states that
normally blogs give reader the chance to write comments on the various posts resulting in
dialogues between readers and the writers. Magnold and Faulds (2008) argue that these
comments may take form of critique, praise or useful suggestions. Generally, blogs are created
free of cost while some blog supporting sites charge fee for displaying blogs on their sites. Blogs
can be accessed on a global basis. Technorati is the foremost blog search engine or a blog index
as it monitors 112.8 million blogs and 250 million tagged items of social media (Singh, 2010).
According to the report by Technorati for year 2008, almost 36 % of bloggers come from the age
rang of 25-34 years, 27% are aged 35-44 years, 13% are 18-24 years, and 8% are aged more than
55 years (Singh, 2010). These demographics reveal the fact that the new generation of consumers
is more active in the blogosphere.
According to www.constantconnect.com, a social media service provider firm in the US, the
advantages of blogs include easy management of articles and company related content, can serve
as archives for company newsletters and help increase the search results for a business. On the
other hand associated disadvantages are more time consuming, as well as advanced knowledge
of HTML is needed to really master the art of blogging to a business advantage (ibid).For small
firms it is advisable to create and regularly update their own blog adding regular posts and new
design and it should act as a focal point of the small firms social marketing efforts (Zarrella,
2010).
3.6
Social Networking Sites (SNS)
According to John Browning (2010), social networking sites (SNS) have quickly inspired the
manner in which people communicate and connect with each other. These social networking
sites (SNS) by design or by default facilitate relationship building with the help of software as
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system (SaaS) technologies such as Facebook, MySpace, and LinkedIn (Li & Bernoff, 2008).
These networks are free of cost for their users but rely on money generated by selling user
demographic characteristics and other data to businesses (Stokes, 2008).
3.7
Facebook
Facebook has more than 400 million registered users and it was somewhere about December
(2008) and February (2009) that it surpassed MySpace as the worlds most famous social
network site (Zarrella, 2009). According to The News most recently on March 17, 2010
Facebook overtook Google in number of visitors in the United States. Facebook was launched in
2004 and is relatively complex than Twitter and it is here where participants develop enduring
relationships with one other (Pearlman & Abram, 2010). Social networking sites (SNS) increased
usage has compelled consumers to share more personal information online which has created
many grapevines and privacy concerns (Browning, 2010). An interesting case in point happened
when Facebook launched Beacon service, a few years ago, which shared online purchase
activities of its users with the list of a users Facebook friends. This was quickly taken back as
consumers did not want Facebook to jeopardize their privacy (Stokes, 2008). Facebook can be
used by business concerns, band, or a public figure as they can create their own Facebook page
which looks the same as a person profile for attracting and informing their customers. According
to www.constantconnect.com a social media service provider firm in the US, from the
perspective of small firms Facebook offers benefits in terns of large customer base where
majority of your business clients are already registered. It is free of cost and you can maintain a
personal and professional profiles separately. However, there are some limitations associated
with advertising on Facebook such as little authority to personalize your fan page and above all it
is a closed environment with only registered users can become your fans and above all there are
no email alerts to inform you when an activity related to your business takes place. The presence
on Facebook can create a fan base leading to growth for businesses no matter small or large
except for China where access to Twitter and Facebook is restricted (Pearlman & Abram, 2010).
3.8
LinkedIn
Founded in 2002 and launched in 2007, LinkedIn is basically meant for users to connect with
one another for business or professional purposes such as finding jobs and exploiting business
opportunities (Pearlman & Abram, 2010). Like Facebook, on LinkedIn marketing activity
revolve around groups and pages, though the terminology is different but their applications are
somewhat the same (Zarrella, 2010). We can say that LinkedIn is an online contact database for
professionals with more than 25 million registered users across 150 industries worldwide on a
scale of three connections levels. The basic connection is where the persons directly known by
users can be viewed and contacted instantly. Second level connections are users that users you
know and the final degree of connections are those which they know (Safko & Brake, 2009).
According to www.constantconnect.com a social media service provider firm in the US, from
perspective of small firms LinkedIn offers the opportunity to market your firm in a cluttered
arena with simple and easy to understand profiles coupled with professional assistance from the
site. On the other hand a disadvantage is that mostly job seekers are active than employed ones
and users see it as a professional network so marketing is sometimes neglected or seen with
doubt.
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Twitter
Twitter is the gateway drug to social media.-- Jim Storer, Sr, Director, Social Media Strategy,
Mzinga.
According to Bernie Borges (2009), Twitter is combination of microblogging and social
network. This is why it is also referred to as micro blogging (Evans, 2008). Twitter gives
opportunity to users to involve in real time sharing. A tweet is usually no more than 140
characters, which followers of the user can see (Pearlman & Abram, 2010). According to Dan
Zarrella (2009 in the tweetosphere or twitterville there are more than 346 million active
twitterers and as per Nielsen Online, Twitter experienced an unbelievable 1,382 % growth
between February 2008 and 2009 and still it increasing at an increasing rate (Singh, 2010).
Twitter can be used both by small and large companies and even employees within an
organization can use Twitter for personal purposes (Borges, 2009).
According to constantconnect.com a social media service provider firm in the US, from the
perspective of small firms Twitter is comparatively more open than Facebook. Twitter feeds are
public which gives greater exposure on search results. However, Twitter supports only text
messages and pictures and company videos should be shared through other links, there are a lot
of spammers and finally users are very vocal and might hurt your business cause if they
complain (ibid).
Recent examples of tweets usage occurred in the (2008) US presidential elections where the
nominee of Democratic Party Barrack Hossein Obama used Twiter as a publicity tool and most
recently during election campaigns in Iran for updating the world about latest news (Safko &
Brake, 2009).
3.10
YouTube
YouTube was founded in (2005) and with the increasing popularity of third generation (3G)
cellular phones, video sharing websites such as YouTube have become convenient tools for
individuals to embark on social media. According to Yen, (2008) almost 60% of online video
viewing takes place on YouTube and the number of viewers can be as many as 79 million during
an evening. According to Rob Stokes (ntent of your business channel (Bernie Borges, 2009). A
small business has four account options when it comes to creating its own YouTube channel
such as Director (producing own videos), Musician (music videos), Comedian (comedy videos)
and guru accounts are meant for anyone having expertise in a given field. Normally the most
suitable account for small businesses to create a market niche is guru (Bernie & Borges, 2009).
As an example of guru strategy Blendtec maintains a site on YouTube (willitblend.com) which
has so far attracted 8,074,267 views as on 7 April, 2010 for a single video where a guru blends
an iPhone to ashes within seconds showing the nature of materials used. This shows the power of
social media and the impact it can have on a brand image.
3.11
Flickr
According to Bud E. Smith (2009) in the 1980s and 1990s the Internet was limited only to text
such as emails, online service forums newsgroups were read on text readable computer only.
There is an old saying that A picture is worth a thousand words and the same is true in case of
Flickr, a photo-sharing site owned by Yahoo!, where consumers, professionals and business
owners upload their pictures for shairing within online groups and communities (Stokes, 2008).
The pictures are normally in JPEG of JEF format and the file size is kept small on purpose.
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Flickr is useful for photo sharing however there are other alternatives available which can be
used (Bud E. Smith, 2009).
3.12
Social Bookmarking
According to Rob Stokes (2008), bookmarking means storing a website for convenient access in
future with the help of an internet browser. Social bookmarking sites like www.delicious.com,
www.stumbleupon.com, www.reddit.com and www.digg.com, give user opportunity to save web
pages online and share them through the process of tagging. These websites rank web pages on
the basis of number of vistors they attract. For a small business it is good idea to get listed on
these sites as they are free of cost. This can help increase the visitors traffic to your website
(Warner, 2010).
3.13
Target Audience of the Research
The basic motive for carrying out research is to find answer to a problem or question in a
systematic manner. According to Saunders, (2003) research is, something that people undertake
in order to find out things in a systematic way, thereby increasing their knowledge. It is
therefore we conducted this paper in a systematic order to explore the applicability of social
media marketing in the context of small firms in Sweden. The results which will be inferred from
this study should help small micro firms in Sweden to know whether or not social media
marketing gives more benefits in comparison to conventional forms of marketing. If so, then the
question is whether or not the social media marketing opportunity is ripe and ready for small
firms or these micro businesses should adopt a wait and see approach till the time when the
consumers can really be influenced through social media marketing?
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4.
Methodology
Obtaining information about the subject is crucial for any type of research. A good data is a prerequisite for conducting a good research. Researchers prefer to have data that has the minimum
amount of error in it; therefore, they pay special attention to obtaining data. There are two kinds
of data namely primary and secondary data (Wren et. al, 2002).
For this paper we conducted a number of interviews in two stages. In the preliminary pre-test
stage we conducted two face-to-face pilot interviews with Micro firms managers to explore and
understand the social media marketing practices in Sweden. These interviews helped us in
refining our research questions as well to ship-shape our later stages of the paper. These two
pretest interviews were conducted in the last week of February 2010. In the second stage of this
paper we conducted seven more interviews with micro business managers to attain the specific
purpose of this paper. Out of these seven one was cast away as it did not meet the specific
standards we have set for this paper in terms of number of employees and annual turnover. The
dates, duration and location along with a description of interviewees is as under.
Xiaoli Du, Nordicpearl Jnkping
14:22-15:30 P.M.
2010-04-14
Mr. Patel, X-One Kldbutik Jnkping
11:00-11:5o A.M.
2010-04-20
Lars, Kingfisher Cuisine & Bar Mariestad
10:10-10:55 A.M.
2010-04-23
Peter Lundell, Puls Gym Skvde
10:00-11:09 A.M.
2010-04-24
Mikael Hjalmers, Treguld Smeder Skvde
09:00-09:45 A.M.
2010-04-26
Kirsten Lothigius, Impelco Trading Skvde 14:00-14:45 P.M. 2010-04-29
Most of the secondary data was collected in February, 2010. For this paper we utilized various
sources available both at the university such as e-Julia and invaluable data from Forrester
Research Inc. There are two different techniques for getting data which are discussed below.
4.1
Data Analysis
Greater care needs to be taken while collecting and analyzing data. Therefore Walker et. al
(2008) has come up with qualitative analysis model which stresses the analysis process of data in
six sequential steps as shown in the table 4 (see annexure 1) The Steps (1) & (2) involve eliciting
crucial information from the interviewees by reading and reading the interviews (Walker et al,
2008). It is over here that unnecessary information is removed and data are refined to satisfactory
extent. Then in the next step (3) summarize the central themes from interviews resulting in
further refinement of the information. Step (4) is relatively harder as it involves making
considerable meaning out of information refined in steps (1, 2 & 3) respectively. In the second
last step, which is step (5), standard and dispersed meanings are adapted by using McAlisters
(2001) principles. This step is more observations based whereas the earlier steps were interview
intensive. In the final step (6) the researcher uses his/her own experience and observations to
incorporate the meaning of obvious and hidden clues and information in the context of cultural,
historical and political influences (Walker et. al, 2008).
Similar model for data analysis has been proposed by Miles and Huberman (1994) (which we
have adopted for this undertaking) consisting of four steps as shown in the Table 4 (see annexure
1). In the initial Step (1) known as data reduction co-authors would review and record the data
collected via various means to achieve a neat and clean data to facilitate clarity (Miles &
Huberman, 1994). Data reduction is the next step in which the authors would further streamline
the data received from step 1. The third step is data display. As the name depicts it is concerned
with arranging data which has been refined from impurities to the next final step (4) known as
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drawing conclusions. In this step conclusions are drawn from data in an objective manner which
facilitates the reader in interpreting the output of the data analysis step as well as cross checking
the conclusions drawn from the process (Miles & Huberman, 1994).
5.
Analysis and Discussion
The specific criteria for an interviewee is that he or she should be involved in the daily affairs of
business and must have some background knowledge of business administration or experience
equivalent to three years in the area of marketing. The post-test six interviews were conducted in
the month of April. The specific description of micro businesses interviewed is as under.
5.1
NordicPearl Jnkping (Interviewee: Xiaoli, 2010-04-14)
NordicPearl is a web based shop founded in the year 2009 by a Chinese entrepreneur Xiaoli
Nordenanker under the shadow of a Swedish based trading firm Oriental melody. Nordicpearl.se
offers pure silk products and Chinese jewellery with its suppliers based in China. Nordicpearl
has an unwavering focus and commitment to provide quality products at affordable prices.
Nordicpearl is also engaged in e-commerce and accepts matercard,visacard and paypal accounts
and sells to mainly in Scandinavian countries of Sweden, Denmark, Norway and Finland, EU
countries such as Iceland, Germany, Holland, Belgium, France, Switzerland and the United
Kingdom.
Nordicpearl is the brain child of Xiaoli Nordenanker who is a graduate from China and she has
been involved in carrying out the affairs of business ever since its inception in 2009. The team of
Nordicpearl is mainly consist of her Swedish husband and mother-in-law.
5.2
X-one Kldbutik Jnkping (Interviewee: Patel, 2010-04-20)
Botique Jasmine was founded some three decades ago and has two big retail stores in Rasllatt
and Osterangen Jnkping respectively. The owner of this business is Mr. Iqbal who is a
Swedish national. Their team consist of his two managers both of them are his sons in law, his
wife. X-one Boutique mainly deals in garments for ladies and gents, personal grooming products,
shoes, bags and other accessories for general use. Their suppliers are mainly from countries like
France and the United kingdom. Their motive is to maintain a steady growth and provide top
notch products and services to their customers. They are in the process of developing their own
e-commerce enabled website and look forward to expand their business to other regions of
Sweden. For this paper purposes we have interviewed Mr.Patel who is managing one of the big
stores and is also son in law to the owner. Mr. Patel by profession is a textile engineer and has
more than seven years of business experience in Sweden and abroad.
5.3
Kingfisher Indian Cuisine & Bar, Mariestad (Interviewee: Lars, 2010-04-23)
Kingfisher Mariestad is an Indian cuisine and bar situated in Mariestad. The restaurant offers
variety of Indian food and various drinks in its bar. Kingfisher offers quality food for its diverse
customer base ranging from working class and families on daily basis to tourists from abroad in
the summer season. Due to a niche market of Indian flavor to its customers, the restaurant
concentrates on word of mouth and location advantage for its business. The restaurant seldom
carries out promotional strategies. The restaurant has its customer base and it relies on their
customers around the year with a rise in sale during the summer season when there are plenty of
tourists in the city.
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Puls Gym, Skvde (Interviewee: Peter, 2010-04-23)
Puls Gym is fitness training centre with a modern approach to training. Peter is the owner of the
gym. He has no former marketing education but created a few websites in the past. Peter took
over the gym from the original owner and since then the number of customers has been
increasing thanks to the variety of marketing strategies used by him. Puls gym has its own
website where all relevant information is provided on regular basis. Peter believes in exploiting
social media marketing.
5.5
Treguld Smeder Skvde (Interviewee: Mikael, 2010-04-26)
Treguld smeder is the local goldsmith business. It is owned by Mikael Hjalmers. The company
has a website, which is aimed at showing information about the company and thus not being
used actively for marketing purposes by the owner of the business. The company has clearly
defined target customers and it reaches to its customers through conventional means of
marketing like advertisement in the local magazines, newspapers and such. The word of mouth
by its extremely loyal customers is the life blood of the business according to the owner and that
is why company does its best to retain its customers and for that purpose it even gives those
augmented services to keep them highly satisfied.
5.6
Impelco Trading Skvde (Interviewee: Kirsten, 2010-04-29)
Impelco Trading is a small firm managed and run by the owner. The company works with
printing names and other writing on clothing, pens, caps and other sales promotion novelties.
The company is run solely by the owner, Kirsten. She does direct marketing by calling and
emailing her potential customers. She thinks it is more appropriate for her because it is more
personal with the customer and brings out more results. The company has web page which is
solely for informative purposes and does not attract customers by its content.
As evident from the discussion in the literature review section that a small business is easy to
describe but difficult to define. Therefore European Commission for SMEs, (2005) defines a
micro firm is as a business which have fewer than 10 employees and an annual turnover not in
excess of (2) Million Euro. Since we have adopted this definition of European Commission
therefore all the companies interviewed were checked against the criteria of micro firms. In total
out of seven interviews six met the requirements. Whereas, one interview with AgriVind Skvde
was discarded as their number of employees were more than 10. All the companies along with
their important particulars are highlighted in the table 5 (annexure 1)
5.7
Conventional versus Social Media Marketing
In the first place the authors with the help of data display table 6 (annexure 1) have come up with
a snapshot of themes generated in a categorical manner to make it convenient for the reader as
under.
As evident from the literature review we know that marketing is one of the challenging tasks
confronting small businesses. The reason is that it plays a vital role in growth and survival of
micro businesses. According to Mike (2002) a proper marketing orientation is requisite for any
business and that orientation can be production, product, financial based and so on. Whereas,
Kotler and Keller (2009), stresses that a holistic marketing orientation in which everything
matters is needed to compete effectively in marketplace and mind space. In this relation when
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the interviewees were asked as to how would they describe their market orientation? Their
responses generated are presented as:
The theme generated from above discussion indicates that micro businesses are mostly inactive
in the domain of social media marketing for relationship purposes. The reason is that micro
businesses have limited personnel who are already over burdened by their tasks. Another reason
is that social media is in the rudimentary stages of development therefore the customers are also
largely absent so it is where micro business are lagging behind. However, young enthusiastic
entrepreneurs have stolen a lead by writing their own business blogs and maintaining their
facebook fan pages.
6.
Conclusions
Micro businesses can be portrayed as using effectual reasoning instead of causal reasoning when
deciding on the marketing orientation for them. Through effectual reasoning micro businesses
come up with creative strategies through their own imagination, risk bearing and salesmanship
skills. From our paper and the study conducted by Erdtman and Wendt (2009) reveal that micro
businesses are mostly marketing weak organizations (MWO) and consider marketing more of a
luxury as they have sales orientation coupled with major relevance and minor role of marketing.
In relation to the purpose of our study which is to compare social media marketing with the
conventional forms of marketing practices in micro businesses, the conclusions we drew are have
been divided in three parts which correspond to three research questions as under.
6.1
Which of the two types of marketing approach is more effective in terms of target
market coverage and marketing expenditures?
Our study indicates that conventional approach to reach target segments is well suited for micro
businesses in Sweden. Majority of these businesses customers are locally concentrated and they
can be reached and contacted easily through advertisements in local magazines, phone calls,
brochures and worth-of-mouth marketing. However, micro businesses in sample have shown a
tendency to carry out their marketing activities infrequently and in a haphazard manner which
reduces their chances of achieving their sales targets.
On the hand, majority of micro businesses customers are not catching up when it comes to using
social media marketing. Their absence in the virtual world reveals that micro businesses are
unable to reach their target segments through social media applications. The point of departure
here is that conventional approach to marketing is more effective and appropriate approach to
reach the target segments for the micro businesses in Sweden.
In terms of cost, social media marketing can be less costly than conventional forms of marketing
because it costs far less to create a company page on Facebook, upload a video on YouTube or
write a blog on free blogging sites. If the micro businesses have target segments present on these
social networking sites and they are dispersed over larger geographical areas, then using social
media marketing can be a very cost effective tool for cash-strapped micro businesses. In this
regard we can say that social media applications will be more useful once the network
externalities of social media are realized to the extent that majority of businesses and their
customers are active in the social media platform. Another alternative is use a blend of social
media (high volume, low expense) and conventional marketing (low volume, high expense)
practices for better results.
The benefits that micro firms can have from social media practices, as we noted during our
study, are as follows:
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If a micro business sets up its customer care service on the Internet, then, it would be far
more efficient in responding to customer complaints than a telephonic call center for
customers care. This would result in high turnover of satisfied customers and, thus, more
business for the company. Inwardly, the company can also lower its costs staff and other
complementary resources.
Normally, the customer care employee knows less firsthand than the actual problem a
product or service may incur during its use. When a company has a social networking site
for business and many customers are present, then, a problem can be solved during the
customers interacting with one another on the page. This is not only time saving for the
customer care officer but, also, the knowledge of the officer is also increased.
When a company constantly interacts with their customers via social media then the
company gets a view of its customers. It is beneficial and helpful in hiring future
employees for the company. It saves a lot of effort and money to hire an efficient and
like-minded individual for the company.
During interaction with the customers on social networking sites, many problems are
raised and many solutions are put forth by a diverse customer base. Therefore, a social
networking site can be a good tool for generating new ideas and saving a lot on R & D at
times.
On the other hand, conventional forms of marketing lack these benefits for the company and
still costs more than this approach. We noted during our study that micro businesses are not
absolutely happy with their marketing coverage and the expenditures involved therein,
therefore, they are in need of some ways which are effective in both coverage and
expenditure. We conclude that it would be better for them to use a blend of both conventional
and new marketing methods in tandem with one another for satisfactory results from their
marketing efforts.
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Annexure 1
Table 1: EUs Criteria for Defining SMEs
Enterprise Category
Headcount
Annual Turnover
Medium sized
Less than 250
Less than or equal to 50 Million Euro
Small sized
Less than 50
Micro Firm
Less than 10
(Source: Adopted from European Commission industry guide, 2005)

Table 2: Traditional Media versus Social Media
Traditional Media
Fixed, unchangeable
Commentary limited and not real time
Limited, time delayed best seller lists
Archives poorly accessible
Limited media mix
Committee publishers
Finite
Sharing not encouraged
Freedom
Social Media
Instantly updateable
Unlimited real time commentary
Instant popularity gauge
Archives accessible
All media can be mixed
Individual publishers
Infinite
Sharing and participation encouraged
Control
Source: Rob Stokes, (2008)

Table 3: Objective of Social Media vs. Conventional Business Functions
Traditional
Business
Functions
Research
Social Media
Functions or
Objectives of
Groundswell
Listening
Marketing
Talking
Sales
Energizing
Support
Development
Supporting
Embracing
Differences in the New Landscape
Ongoing monitoring of yours customers

conversations with each other, instead of
occasional surveys and focus groups.
Participating and stimulating two way
conversations your customers have with each
other, not just outbound communications.
Making possible for your enthusiastic
customers to help sell each other.
Enabling your customers to support each other.
Helping your customers to work with each
other to come up with ideas to improve
products and services.
Source: Rob Stokes, (2008)
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Table 4: The Qualitative Analytical Model

Level
Step
Processes
1. Description
1
Read and reread the transcripts of each interview while
referring to field notes taken during interview. Identify
relevant discourse from each participants transcribed
interview.
Summarize identified relevant discourse from each
2
transcript to produce the core information of each
interview.
Present summary to participants
2. Analysis
3
Generate Common themes via Microanalysis
between
1. Broad extraction of core information via a
participation
critical theory lens to include paraphrased bites
to generate
of RN buddy experience as well as their
themes
relationship with students, facilitators and so on
2. From broad extraction, generation of theme
4
specific to RN buddy;
3. Summary of theme generated.
Points of tension generated from common themes.
Label standard and divergent meanings using the
adaptation of McAllisters (2001) guidelines for
6
reflection.
Explore the explicit and implicit meanings looking for
connections to broader cultural, historical and political
influences.
Source: Walter et al, (2008)
Table 5: Description of Respondents along with Location, Head Count and Annual Turnover.
3.
Findings
Cultural and
Cultural
Analysis
Company Name
Respondent
Nordic Pearl Jonkoping

Kingfisher Cuisine, Mariestad
X One Kladbutik Jonkoping
Puls Gym, Skovde
Treguld Smeder Skovde
Xiaoli Du
Lars
Patel
Peter Lundell
Mikael
Hjalmers
Kirsten
Lothinius
Kesebol Kajsa
Impelco Trading Skovde

AgriVind AB, Skovde
Head
Count
35
79
56
57
23
Annual Turnover
24
1 2 Million SEK
25 30
Undisclosed
Less than 1 Million Euro

2 Million SEK Approx.
Less than 3 Million SEK
Source: Authors own creation
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Table 6: Data Display and theme generation

Nordic
Pearl
Supplier
Kingfisher
Treguld
Smeder
Product/
Customers
Impelco
Trading
Product
Theme Generated
Product &
Augmented
Services
Role &
Relevance
of
Marketing
Market
Research
Desirable,
Flexible
Payment
MWO
Desirable,
Clean
Environment
MWO
Salutary,
Flexible
Timing
MIO
Luxury
Exchange
Desirable,
Flexible
Payment
MDO
Conforms to
theory
Market,
Websites
Location of
Restaurants
Local
Newspaper
and
Weekly
Offers
Economy
Location
and WOM
Print
Media
Networking
Random Approach
and Haphazard
Coverage
Price
Economy
Flexible
Menu
Flexible
Low
Flexible
WOM and
Discounts
WOM and
Target
Discounts
Website
WOM &
Networking
WOM &
Print
Media
WOM &
Print Media
Not at the
Moment
Not for
perishable
items
Not
suitable
for Small
Business
Not
suitable for
us.
Not
suitable
for us.
Not suitable
for our
business.
Social
Media
Usefulness
Still
young
media
Not so
convincing
Yet to
prove its
utility
Good but
not now.
Good
additional
media
Satisfaction
with
Existing
Marketing
Not at all
Not satisfied
We must
do better
Satisfied
Bubble
growth
and Weak
Content
Positive
Economy Pricing
and Confirms
theory
WOM is essential
for success as it
serves as
independent
credibility filter
Interaction is
important and
broadcast media is
too much
expensive for
geographically
concentrated
customers.
Social Media is
still in
elementary/infancy
stage.
A mixed feeling
but generally not
satisfied with
status quo.
Promotion
Mix
Blog,
Sales
Promotion
Radio &
TV for
Micro
business
Market
Orientation
Customers
X One
Kladbutik
Suppliers
&
Customers
Quality
Products,
return
MWO
Puls Gym
Customers
MWO
Improvement
Needed
Effectual
Reasoning
Major relevance
and Minor Role of
Marketing
Source: Authors own creation
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Annexure 2
Figure 1: Role and Relevance Model of Marketing Adopted from Simpson & Taylor, (2002)
Role of Marketing
(Internal)
MDO
Marketing Dominant
Organization
MIO
Marketing
Independent
Organization
Major
Minor
MLO
Marketing Led
Organization
MWO
Marketing Weak
Organization
Minor
Major
Role of Marketing (External)
Source: Adopted from Simpson & Taylor (2002)
Figure 2: Alternative Paths Model to Marketing
MDO
Role of Marketing
(Internal)
Major
Minor
MLO
Marketing Led
Organization
MWO
Marketing Dominant
Organization C
MIO
Marketing
Independent
Organization
Marketing Weak
Organization
Minor
Role of Marketing (External)
Major
Source: Adopted from Simpson & Taylor (2002)
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Figure 3: Adaptation of Social Media Starfish Model
CONVERSION
(PURCHASE)
Broadcast
Print
Online
Integrated
Marketing
Online
Media
Social
Media
Direct
Mail
Events
Videos
CollaborativeTools
SMS
Email
VideoSharing
Audio(Podcast)
PhotoSharing
Microblogs
Blogs
WhiteLabelSocialNetworks
PersonalSocialNetworks
(Source: Adopted from Social Media Marketing , 2008
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Tolle, T. O. (2003). eRelationships-Emergence in small firms. Marketing integllince and
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Zarrella, D. (2010). The Social Media Marketin Book. In L. R. T. Ruma (Eds.) Available from
http://books.google.com/books?id=chd3yfExXMEC&printsec=frontcover&dq=Social+media+m
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THE EFFECTS OF PEER TEACHING IN ACADEMICS ACHIEVEMENT LEVEL OF

STUDENTS IN SUBJECT OF CHEMISTRY AT SCONDARY LEVEL IN PAKISTAN
Shafqat Hussain
Ph.D Scholar, Foundation University Islamabad, Pakistan.
Jameel Akhtar
Ph.D Scholar, Northern university Noshera Pakistan
Zahid Basher
Ph.D Scholar NUMULs University Islamabad Pakistan
Serwat Mobeen
Ph.D Scholar, Foundation University Islamabad, Pakistan.
Abstract
The study aimed at the effectiveness of new trend of peer group activities method of teaching of
chemistry at secondary level. The objective of study were to evaluate the impacts of method on
teaching learning process on academic achievements level on secondary schools students in
subject of chemistry. In this study, an achievement test (pre-test/ post-test) covering six chapters
were used as measuring instrument. Depending upon pre-test scores, 80 science students of
9thclass were divided into two equal groups (n=40) named as experimental group and control
group. The experimental group was taught with peer group activity based method and the
control group was taught by traditional lecture method. Both the groups were taught for a period
of six weeks (40 minutes period per day). The post-test was administered at the end of treatment.
The pre-test and post-test scores of the experimental and control groups served as data for this
study. The collected data was analyze & interpreted. The experimental groups showed better
performance than controlled group. Furthermore the experimental group performed significantly
better than control group in the domain of knowledge, application and comprehension abilities of
students. Hence the ultimate results of the research study indicated that peer groups activitybased learning was more effective for teaching of chemistry as compared to traditional lecture
method of teaching of 9th grade science students.
Key Words: Activity-based learning, Peer group instruction, lecture method, academic
achievement
Introduction
The Student Peer Teaching Strategy is first and foremost student-centre and emphasizes active
teaching and learning approaches. Teachers and students both play active roles to induce handson, heads-on and hearts-on learning in the students. Learning is an active process and there is no
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doubt that it can be initiated by the teacher. Eilks and Byers 2006 cited (Wilkins 2005) that
students centered approaches which include peer group method where meaning is developed
through consensus in a collaborative and cooperative way have been proved very successful in
science (Eilks and Byers 2006) Nind M, et al.(2004) found evidences in favor of peer group
interactive approaches and claimed that it can be effective and stressed that policy should not
deter teachers from adopting such approaches. Peer group activity method is working together to
accomplish shared goals. The individual seeks outcomes that are beneficial to themselves and to
all other group members. It is the instructional use of small groups so that students work together
to maximize their own and each others learning. Timberlake stated that students manage to find
a way to work together regardless of the shape of the classroom or lecture hall. Staver 2007
Learning is also a social and cultural process. Individual students interactions with their peers
are important to each learners active construction process and the group process. The
construction of deep scientific knowledge results from actively practicing science in structured
learning environments.
According to Bruner (1989) in peer group activity method students are organized into
small groups after receiving the instructions from teacher. Then they work together in the groups
until all group members successfully understand and complete assignment. Mutual benefit is
involved in the group work and all members gain from each other's efforts. Boud et. al (2001)
stated that in peer teaching students learn from and with each other in ways which involve
sharing knowledge, experience and ideas between students. In this method the emphasis is on the
learning process along with emotional support that learners offer each other. Peer teaching
techniques help in utilizing all the resources available to teachers. Students can understand how a
student assimilates information. Peer teaching techniques improve the learning environment and
success of all students when implemented properly.
RESEARCH HYPOTHESES
1.
There is no significant difference between the achivements of students taught by peer group
activities method and those tought by traditional of teaching ,lecture method of teaching.
RESEARCH METHODOLOGY
The purpose of this study was to examine the effect of peer group activity-based learning
on academic achievement of secondary school students in the subject of chemistry. This was
experimental study, in order to test relative effectiveness of independent variable (instructional
paradigm), the choice of most suitable design for this experiment was the basic step. Keeping in
view the various factors affecting the internal and external validity of experimental design, pretest post-test equivalent group design was considered a suitable research design for this
experiment. The population of study was science students of grade 9 class studying chemistry in
84 rural and urban high school for boys of district Abbottabad but only one school was selected
for this research study which having required strength at secondary level. The eighty science
students were taken sample in Govt: high school for boys No #3 Abbottabad. The researcher
selected following contents morality, concept of electrolytes and non-electrolytes, hard and soft
water, solubility and its determination, electrolysis, percentage by mass (of solute), method to
remove hardness of water, types of solution (unsaturated, saturated and supper saturated),
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density, effect of temperature on solubility of solute, measurement of a solution by using

percentage by volume method, differentiation between true solution, suspension and colloidal
solution selected from the text book of chemistry for 9th class. The pre test and post test were
comprised on 100 objectives types items of 100 marks. 40 multi choice items, 10 true and false
,10 completing types items,20 short answers items and 20 matching items. In each pre test and
post test 40 items related to knowledge ability, 30 comprehension ability, 22 application ability
and 8 skill development ability. Each items having one mark. The test was validated by pilot
testing as well as judgmental validation. For the reliability of the test, split-half method was used
and the reliability of the test was found to be 0.85.
RESULTS
The raw scores of the students of experimental and control groups were arranged and
then analyzed by using mean score, standard deviation and t-test as statistical tools. The analyzed
data have been interpreted in the following:
Table 1: Comparison of mean scores (knowledge, comprehension, application and skill
development) of experimental and control groups on pre-test
Groups
Experimental
Learning domain
Knowledge
40
Mean Score S D
14.04
1.31
0.27*
ability
40
15.90
5.03
Comprehension
40
13.25
2.99
ability
40
12.99
4.80
Application
40
11.21
3.17
ability
40
11.33
4.83
Skill development
40
3.50
1.66
Control
ability
40
3.38
1.63
Experimental
Overall
40
43.42
4.68
Control
Experimental
0.30*
Control
Experimental
0.09*
Control
Experimental
0.17*
0.29*
Control
achievement
40
43.32
4.71
Table 1 shows that there was no significant difference between mean scores of
experimental and control groups (p<0.05) in the learning domain of knowledge, comprehension,
knowledge application and skill development abilities as well as over all academic achievement
in the subject of chemistry on pre-test. Thus both the groups were at the same level of
achievement in the subject chemistry before treatment.
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Table 2: Comparison of mean scores of experimental and control groups on post-test
Groups
Experimental
Learning domain
Mean Score S D
Knowledge
40
21.28
2.88
ability
40
15.23
5.87
Comprehension
40
24.31
5.55
ability
40
15.22
6.00
Application
40
21.04
21.03
ability
40
15.00
5.24
Skill development
40
6.22
1.75
Control
ability
40
6.00
1.86
Experimental
Overall
40
73.00
5.47
Control
Experimental
3.02*
5.23*
Control
Experimental
3.62*
Control
Experimental
2.26*
5.29*
Control
achievement
40
52.11
6.00
*p<0.05 Critical value of t at 0.05 = 1.96

Table 2 shows that there was a significant difference in mean scores for learning domain
of knowledge, comprehension, knowledge application and overall academic achievement
(p<0.05) of experimental and control groups in the subject of chemistry on post-test. However
there was no significant difference between mean scores of experimental and control groups for
skill development (P>0.05) on post-test.
The results of this study in term of test of hypotheses indicate that on post-test, mean score of
experimental group (73.00) was greater than the mean score of control group (52.11) and p< 0.05.
Thus the hypothesis there is no significance difference between academic achievement of the
students in chemistry taught by a peer group activity based method and those taught by
traditional lecture method of teaching at secondary level was rejected in the favour of
experimental group. Similarly, mean scores of experimental group in the domain of knowledge
ability, comprehension ability, application ability and skill development ability on post-test
(21.28, 24.31, 21.04 and 6.2respectively) were greater than mean scores of control group in these
domains (15.23, 15.22, 15.00 and 6.00 respectively) with p< 0.05. Hence the hypothesis there is
no significant difference between achievement in cognitive learning domain in chemistry
(knowledge, comprehension, and knowledge application) of the students taught by peer group
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activity based method and those taught by traditional lecture method at secondary level was
rejected.
DISCUSSION
The results of the present study for academic achievement and achievement in the domain of
knowledge, comprehension, and knowledge application support the findings by Shymansky,
Hedges and Woodworth (1990); Crouch and Mazur (2001); Harfield, Davies,Hede,Panko and
Kenley (2007).The experimental group shows better performance in learning domain
(knowledge ability, comprehension ability, application ability and skill development ability) than
control groups.
CONCLUSIONS
In light of statistical analysis and the finding of study, the flowing conclusions were drawn.
1. On the whole peer group activity method of learning is more effective as teaching
technique for chemistry as compared to traditional lecture teaching method.
2. The peer group activity based method of teaching improves different learning domains
such as knowledge ability, comprehension ability, application ability and skill
development ability.
3. In peer group activity based method of teaching it is easier to measure the achievement
of instructional objective.
RECOMMENDATIONS:
The researchers makes the following recommendations for improving the peer group teaching
process:
1.
2.
3.
4.
5.
6.
In order to curb rote learning, the peer group activity method may be used excessively
for different subjects at different level.
Being an effective instructional strategy, peer group activity based learning should be
included in the teacher training as integral part. Especially for science teachers.
Inservice science teachers should be encouraged to use peer group activity based
learning and government may conduct the refresher courses, training, and workshops
about peer group activity based method.
The peer group activity based method of teaching improves different learning domains
(congnitive, affective and psychomotor) in this research; therefore it is recommended
that peer group activity method should be used frequently used in instructional process.
Peer group activities method used in primary, middle, secondary levels of public and
private sectors, schools.
Science laboratory should be fully equipped with apparatus so that activity based
teaching could be performed.
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References
Boud, D. and Feletti, G. (2001). The Challenges of Problem-based Learning, Kogan Page,
London.
Bruner, E. (1989). The process of education U.S.A: Havrvard University press.
Eilks and Byers. (2006). books.google.com.pk/books?isbn=1847559581
Harfield, T. at ,al. (2007). Activity-based teaching for UNITEC New Zealand Construction
students. Emirates Journal for Engineering Research, 12 (1), 57-63.
Nind M, et al (2004). A systematic review of pedagogical approaches with a particular focus on
peer group interactive approaches. In: Research Evidence in Education Library. London:
EPPI-Centre, Social Science Research Unit, Institute of Education, University of London.
Staver .(2007).International Academy of Education International Bureau of Education.
UNESCO.
Tee Hwa, Tan.(2009), Student peer teaching strategy, Malaysia. Bangkok: UNESCO Bangko (In
Search of Innovative ICT in Education Practices: Case Studies from the Asia-Pacific
Region) 16 pp.
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STATUS OF PAKISTANI HALAL MEAT EXPORT AND FORECASTING IT`S EXPORT REVENUE,
IMPLICATIONS AND OPPORTUNITIES
Rana Muhammad Ayyub (Corresponding Author)
Department of Economics and Business Management
University of Veterinary and Animal Sciences, Lahore, Punjab, Pakistan.
Muhammad Bilal
Department of Statistics and Computer Sciences
University of Veterinary and Animal Sciences, Lahore, Pakistan
Faculty of Life sciences Business Management
Abstract
Pakistan`s share in world meat trade is negligibly small and she is not Planning to get benefit of
it`s meat production potential. Enhancement of exports from Pakistan is highly essential for it`s
economic growth. Present study is an attempt to highlight this potential alongwith empirical
modeling and forecasting of meat export earnings to access it`s future implications upto the year
2020 and pointing out the future opportunities. The data used in this study was collected from
secondary source of Statistical Year Book 2006 to 2010 published by Federal Bureau of
Statistics. Auto regressive integrated Moving Average (ARIMA) model was applied on the
collected data. Various diagnostic checks were carried out for analysis of data which showed that
ARIMA (1,3,1) is an appropriate model for the time series data of meat export earnings from the
year 1997 to 2009. Further diagnostic checks like NPar test exhibited that upto the year 2020;
there will be a significant increase in meat export earnings. This study apprises the need of some
urgent measures in meat production and targeting the international Halal meat market.
Key Words: Halal Meat, ARIMA model, Meat export earnings, Pakistan, Halal meat trade,
Halal meat market potential.
1.
Introduction
Currently Global Halal industry is valued over $ 3 Trillion. Total market of beef and
mutton in 2008 was $ 24.5 Billion. Out of total world meat trade 47% of world meat trade
comprises of beef products and 16% of mutton (Sheep and Goat). Out of this our share is
negligible and we are ranked 19. Our 97% of mutton export are restricted to ME (Middle
Eastern) countries (Jalil 2010). The demand of Halal meat and other foodstuffs is growing
internationally. This demand in Gulf countries alone exceeded to $ 12 Billion in 2005 (May
2006).
There is a great potential for Pakistani meat export in a no. of other countries (Table-3 ); as
Malaysia could import at least 60,000 Tons of meat from Pakistan if it chooses to do so(Bokhari
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2010). Pakistan is currently exploring this market but not with the intensity which is required.
There is continuous increasing trend in Livestock population in Pakistan (Table-1). Being an
Islamic country Pakistani meat is considered the Halal meat in general perception.
Pakistan is an Agriculture based country and has a rich Livestock source owing to
it`s geographical location and climate. Pakistan has the 2nd largest buffalo population after India
in the world.(PBIT 2011) Livestock and meat products are important export commodities for a
number of developing countries. (Anonymous November, 2010). Regardless of the nature of
Economy, agriculture sector plays a significant role in economic development of developing
countries like Pakistan. It continues to play a central role in it`s economy. It is the second
largest sector, accounting for over 21 percent of GDP. However, Livestock is the single largest
contributor to overall agriculture i.e. 53.2 percent (Anonymous 2009-10). Pakistani meat has a
unique taste that`s why it can be exported to many countries predominantly Arabian countries
but still there is a vast supply gap to be fulfilled there (Table-4). Currently new markets are being
explored like Malaysia, Iran, Turkey and some others (Table -5). This export has a continuous
increasing trend as there is around 56 % increase in meat export from Pakistan as compared to
the previous years. Pakistan is also exporting the live animals and earning around US$ 13.95
million from Live animal export (Anonymous 2009-10).
World meat trade is forecasted to grow by 2.8 percent in 2010, to 26.1 million
tonnes, sustained by a brisk growth in pig meat, but also by gains in bovine and poultry meat.
Increased purchases from Asian countries are expected to fuel much of the expected increase of
meat trade, more than compensating for a 15 percent reduction of imports by the Russian
Federation, which had emerged as the second largest meat importer in 2009, after China
(Anonymous November, 2010).
2.
Research Methods
This study is based on time series data related to earning from Pakistani meat export (19972009), which was collected from Latest Pakistan Statistical Year books 2006 to 2010. The data
thus was thoroughly edited and discrepancies were removed before it`s use to make forecasts for
the earnings from meat export of Pakistan. The data set include meat export values of three
different kinds including:
1. Meat, fresh, chilled or frozen.
2. Meat, dried salted or smoked either or not in air light containers.
3. Meat in Air tight containers n.s. and meat preparations whether or not in air tight
containers.
For convenience and clarity, these values were accumulated for calculating the total foreign
exchange earnings from meat export as a single commodity.
Forecasts can be obtained by various methods such to purely judgmental approval,
Structural econometric models, invariant time series models or in combination (Bessler and
Chamberlain 1989); (Olorunnipa 1989) and (Rosa 1990) . Univariate time series methods are
usually cheaper than causal models and may be used where casual models are inappropriate due
to pack of data or incomplete knowledge regarding the casual structure. From a class of
univariate time series models we have made a choice of auto regressive integrated moving
average (ARIMA) model for making meat export forecasts. ARIMA model are marginally
superior to conventional econometric forecasting models (Miller 1985) and (Albiac 1989).
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The acronym ARIMA stands for Auto Regressive Integrated Moving Average Model
showing a combination of auto regressive and moving averages models. Lags of the differenced
series appearing in the forecasting equation are called auto regressive terms. Lags of the forecast
errors are called moving averages and a time series which need to be differenced is said to be in
integrated version of stationary series. The autoregressive (AR) , Randoms were first introduced
by (Yule 1926) and were generalized by (Walker 1964). The moving average (MA) models were
first introduced by (Chatfield 1984); and later was provided the theoretical foundations to a
combined ARIMA process. The basis of ARIMA approach of (Box and Jenkins 1970) consisted
of three phases namely identification (specification), estimation, testing and application
(forecasting). This method has been used extensively in economic research (Zhang 1986) and
(Muhammad, Bashir. et al. 1992). ARIMA model explains the movement of a time series. Unlike
the regression model, here a set of explanatory past values and to weighted average of current
and lagged random distributions are used (Muhammad et et., 1992). According to (Box and
Jenkins 1970), the ARIMA model is denoted by ARIMA (p,d.q),, where p is the order of the
autoregressive process, d is the order of homogeneity i.e. the number of difference to make the
series stationary and q is the order of the moving average process. These are the mixture of AR
and MA process or models. The time series x t for
t = 0, 1, 2, .............. is said to be ARMA (p, q) if x t is stationary and
xt
1xt 2 xt ....................p xt wt1wt .......q wtq
p
1
2
1
The parameter p and q are called the auto regressive and moving average orders. If x t has nonzero mean then ARMA (p, q) can be written as given bellow
xt 1xt 2 xt ....................p xt wt1wt .......q wtq

p
1
2
1
The ARMA models become AR if q=0 and if p=0 these become MA models. The ARMA models
can be written as bellow: B xt B wt
For the specification and estimation of model edited time series data were introduced in
computer by using the SPSS package. The results thus obtained were put to various diagnostic
checks like Residual analysis, Normality tests and Goodness of fit. Forecasts for 10 years ahead
(i.e. upto 2020) were worked out.
Assumptions
To make the projections more precise and realistic, certain assumptions were made as under:
1. Absence of exogenous disturbances such as war, social upheavals and abnormal climatic
conditions.
2. The relative price structure and policies regarding meat and other meat products will
remain unchanged during the projected period.
3. The projections will take into account those measures which have already been decided
upon under the Government policy.
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Analysis Result
Stationarity Test
Pakistan
Level
Co-efficient
P- Value
First Difference
Co-efficient
P- Value
Second Difference
Co-efficient
P- Value
Third Difference
Co-efficient
4.130
P- Value
0.0343
From the above table it is concluded that meat export become stationary at third
difference, so ARIMA Model will be used at d=3. (It was checked by Eviews software Version
5)
Step 1. Model Specification: The model specification was automatically made by SPSS
package. Parameters p,d.q were determined and ARIMA (1,3,1) was considered as appropriate
model.
Meat Export Earning
Coefficient
1.0
Upper Confidence Limit

Lower Confidence
Limit
ACF
0.5
0.0
-0.5
-1.0
1
Lag Number
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Meat Export Earning
Coefficient
1.0

Lower Confidence
Limit
Partial ACF
0.5
0.0
-0.5
-1.0
1
Lag Number
Step 2. Model Estimation: The brief output of the estimation is as under:

Final Estimates of Paramaters:
Parameter Estimates
Non-
AR1
Seasonal
MA1
Lags
Constant
Estimat
Std
es
Error
Approx
t
Sig
-.854
.255
-3.341
.012
.998
43.494
.023
.982
54.570
30.017
1.818
.112
Residual Diagnostics
Number of Residuals
10
Number of Parameters
Residual df
Adjusted Residual Sum of
2972949.1
Squares
Residual Sum of Squares
52
6114009.4
79
Residual Variance
262147.09
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0
Model Std. Error
512.003
Log-Likelihood
-77.243
Akaike's Information
Criterion (AIC)
Schwarz's Bayesian
Criterion (BIC)
160.486
161.394
The ARIMA Model is as follows:
Y t + 1 = 5 4 .7 0 0 .8 5 4 X t + 0 .9 9 8 Z t
By applying this worked out model The futuristic Halal Meat forecasts are given in the following table
alongwith the Lower and upper limts:
Years
Forecast
Lower Limit
Upper Limit
2010
7241.591
5779.222
8703.959
2011
10550.95
7918.691
13183.2
2012
13519
8641.233
18396.76
2013
17928.05
10514.91
25341.19
2014
22358
11404.2
33311.79
2015
28122.09
13068.21
43175.97
2016
34200.58
14004.66
54396.5
2017
41565
15452.36
67677.64
2018
49487.27
16336.15
82638.39
2019
58689.97
17537.33
99842.61
2020
68657.5
18279.39
119035.6
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Step 3. Diagnostic Checking: Different diagnostic checks were applied on the estimated model.
Time series plot of residuals of the estimated model did not show any trend, which was an
evidence of the fact that model was fitted properly. In order to find the fitness of model, two
normality tests i.e. normality test 1 and normality test 2 (NPAR Test) were carried out. In
normality test 1 normal scores of residuals when plotted vs residuals, gave almost a straight line
which was an indication of normality. In normality test 2, histogram of the residuals was
determined that showed the results which were very close to normality.
In addition plot of residuals vs fitted values depicted that patterns of any kind were
absent hence model was a good fit. The graph of the original and fitted values and forecasts of
meat export are given. It is apparent from the graph that the forecasts are acceptable, as observed
and fitted values overlap to a greater extent.
NPAR-Test
One-Sample Kolmogorov-Smirnov Test
Error for
data from
ARIMA,
MOD_3
CON
10
Mean
98.377704
Normal
Parameters(a,b)
Std. Deviation
494.41202
710
Most Extreme
Absolute
.204
Differences
Positive
.204
Negative
-.158
Kolmogorov-Smirnov Z
.644
Asymp. Sig. (2-tailed)
.801
a Test distribution is Normal.

b Calculated from data.
The model ARIMA (1,3,1) was found appropriate for the data from 1997-2009. The 11
years ahead forecasts (up to 2020) and their 95% confidence intervals given. From the given
model meat export earnings can be calculated by putting the concerned values in this model.
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It was seen from the results of this study that the earnings from meat export will
continuously increase in next coming ten years till 2020. In view of the above situation if solid
policies will not be adopted so there will be much less meat available for local consumers as
evident by soaring meat prices in local market.
4.
Future forecasts exhibited that up to the year 2020, there will be a significant increase
in the earnings from meat export for Pakistan. These forecasts were based on past data which
were affected by the situations like trade policy, agricultural policy and international market. So
efficient and increased production and prudent Governmental policies regarding meat and live
animal export are the only solutions. Following steps should be helpful in this respect:
Pakistani industrialists must focus on Introducing their meat by developing Halal

brand.
Pakistan should also focus on the other new meat markets other than Arabian markets
like Malaysia, Iran and Europe etc.
Some urgent measures must be taken in implementing required quality standards like
ISO 9001-2000, ISO 14000 and HACCP etc.
Regarding meat production, it must be enhanced to a level where after fulfilling the
local demand, enough meat could be exported without affecting local meat supply.
Government should help and facilitate the entrepreneurs to explore these emerging
markets by organizing Trade shows etc.
The urgent measures must be adopted for introduction and development of meat breed
in Pakistan so that meat production per animal can be enhanced..
The animal farming must be modernized to get efficient meat production per animal.
The Government initiatives and projects must be implemented in true sense.
The fattening farming must be promoted.
The farmers must be educated for taking appropriate production from animals through
modern managemental and production techniques.
Liberal credit facility should be provided for the farming machinery and equipments.
Replacement of outdated machinery with new modernized machinery is a dire need

for production.
5.
Opportunities for Pakistani Sector
As per above explained details it can be concluded that there is a big gap in world
meat trade to be fulfilled and Pakistan can play a vital role in this regards. If we just do a
comparison with other competitors so it can be noted that India with a similar climate is the
largest exporter of Buffalo meat in the world having exported a total of 425,000 metric tons
of boneless buffalo meat in 2005; it is worth mentioning that the total buffalo population of
India is estimated at 93 million, while Pakistan is ranked at 2nd in Buffalo population. But our
share in meat export is negligible. According to Food and Agriculture organization (FAO),
the total population of Cattle and Buffalo is estimated to increase to 54 million by 2015 while
production of meat from cattle and buffalo is estimated at 3.2 million tones in 2015, almost
doubling from the 2000 production figure of 1.7 million tones (May 2006).
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There is a huge potential of meat export in many countries other than conventional
markets (See Table 7). As in 2003, the Europe for the first time became a net importer of
Bovine meat and it is expected to grow enormously in near future. As per one estimate there
is growing world market for meat which is valued at $ 81 Billion (May 2006). So by catering
the needs of this huge market Pakistani export earnings from this particular export
commodity can be increased manyfolds.
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References
(May 2006). Pre-Feasibility Study for Cattle Farming & Meat Processing Plant, ARCH VISION
Consulting Engineers, Environmentalist & Architects.
Albiac, J. (1989). "Casuality and price forecasting in the Pig sector." World Agri. Econ. Rural
Sociology Abst. 31:3165.
Anonymous (2009-10). Pakistan Economic Survey. G. o. P. Finance Division. Islamabad,
Economic Advisor`s Wing: 13-38.
Anonymous (November, 2010). FAO, Meat outlook.
Bessler, D. A. and P. J. Chamberlain (1989). "Composite forecasting with Dirichlet priors."
World Agri. Econ. Rural Sociology Abst 31:5537.
Bokhari, A. (2010). Finding a niche in Global Halal product market.
Box, G. E. P. and G. M. Jenkins (1970). Time series analysis: Forecasting and control. , Holdondav, San Francisco.
Chatfield, C. (1984). The Analysis of Time series; an introduction, Chapman and Hall, London.
Jalil, H. (2010). Halal Meat Sector of Pakistan. C. o. b. A. I. a. Lahore. Lahore.
Miller, S. E. (1985). "Predicting time series turning points with ARIMA models." World Agri.
Econ. Rural Sociology Abst. 27:5936.
Muhammad, F., Bashir., et al. (1992). "Forecasting cotton production in Pakistan using ARIMA
model." The Pakistan Cotton 36(1): 35-41.
Olorunnipa, Z. (1989). "Akternative forecasting models for farm wheel tractor horsepower
purchases." World Agri. Econ. Rural Sociology Abst. 31:1237.
PBIT. (2011). "Sectors for investment."
Retrieved 1-1-2011, 2011, from
http://pbit.gop.pk/Sectors/Livestock.aspx.
Rosa, F. (1990). "Single and combined forecasts." World Agri. Econ. Rural Sociology Abst.
32:52521.
Walker, A. M. (1964). "Asymptotic properties of least squares estimates of the parameters of the
spectrum of a stationary non-deterministic time series." J. Aust. Math. Soc.
Yule, G. U. (1926). "Why do we Sometimes get Nonsense-Correlations between Time-Series?-A Study
in Sampling and the Nature of Time-Series." Journal of the Royal Statistical Society 89(1): 1-63.
Zhang, H. (1986). "Application of ARIMA time series Model in tree growing forecast (J)."
Scientia Silvae Sinicae.
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Annexure
TABLE -1
Livestock Population (Millions)
Species
2001-02
2002-03
2003-04
2004-05
2005-06*
Average
Growth
Rate
Cattle
22.8
23.3
23.8
24.2
25.5
2.4%
Buffaloe
24.0
24.8
25.5
26.3
28.4
3.7%
Sheep
24.4
24.6
24.7
24.9
25.5
0.9%
Goats
50.9
52.8
54.7
55.6
61.9
3.9%
Poultry
306.9
314.3
315.58
372.0
386.5
5.2%
Source: GOP(2006); Ministry of Food, Agriculture & Livestock (Livestock Wing)
*Projected estimates
Table-2
WORLD MEAT PRODUCTION IN 2003
Source: Small & Medium Enterprise Development Authority (SMEDA)
Meat Type
Beef
Mutton
Poultry
Pig
Total
Production (Million
Tons)
62
12
77
97
247
Table-3
EXPORT POTENTIAL: MIDDLE EAST
SUPPLY AND DEMAND GAP IN METRIC TONS
Country
Production
Consumption
Saudi Arabia
25,630
75,630
Egypt
440,000
533,000
Bahrain
1440
4,600
Oman
4148
18,000
UAE
9500
43,185
(Source: United States Department of Agriculture -2004)
GAP
50,000
93,000
3,220
13,852
33,685
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Table-4
EXPORT POTENTIAL: MIDDLE EAST- MEAT IMPORTS
TOTAL BEEF AND BEEF VARIETY MEAT IMPORTS
(Metric Tons)
Country
2000
2001
2002
2003
Saudi Arabia
Egypt
UAE
Kuwait
All Others
32,327
195,841
50,722
57
68,930
36,360
130,692
31,103
19
70,571
Source: World Trade Atlas
51,728
140,240
37,263
71
65,246
52,122
113,915
30,765
144
93,595
Table-5
EXPORT POTENTIAL: SOUTH EAST ASIA (MAJOR IMPORTING
COUNTRIES) TOTAL BEEF IMPORTS
Country
2000
2001
2002
2003
Malaysia
Philipines
Indonesia
Singapore
All Others
Total
86,649
87,597
38,383
16,718
6,403
235,732
85,561
82,291
20,151
15,895
4,272
208,170
Source: World Trade Atlas
92,475
82,200
25,477
20,637
5,427
226,216
99,460
83,341
30,605
21,856
9,459
244,721
Table- 6
CURRENT IMPORT POTENTIAL FOR NON-TRADITIONAL MARKET BEEF
AND BEEF PRODUCTS
Country
Current imports
(Metric Tons)
Iran
30,000
Algeria
50,000
Syria
30,000
Indonesia
50,000
Thailand
30,000
Philippines
80,000
Russia
100,000
Ukraine
50,000
Kazakhstan
25,000
Kyrgyzstan
25,000
Tajikistan
25,000
Total
495,000
Source: All India Meat & Livestock Exporters Association (AIMLEA)
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Modeling Rice Production in Pakistan
MAY 2011
VOL 3, NO 1
Rana Muhammad Ayyub (Corresponding Author)

University of veterinary and Animal Sciences, Lahore, Punjab, Pakistan.
Muhammad Bilal
Abstract
A study of Production Rice in four provinces of Pakistan has been carried out in this
research in ordered to obtain a suitable forecast model for production of rice. Data for this
study has been obtained form fifty years of Pakistan in statistics and economic survey of
Pakistan, 2009. Rice has been an important commodity of the country. All the provinces
have there share in total production of the product across the country. In this paper
forecast model for production of Rice in different Provinces in Pakistan has been fitted.
Methodologies for fitting of the model has been used these include ARIMA. ARIMA
model has been fitted for each province. Diagnostic test has been carried out to see the
adequacy of fitted models. It has been found that the model accounts for more than 95%
of variation of the Rice production across country. Forecasted production has been
obtained for coming five years.
Keywords:
Production of Rice, Area, Temperature and Rainfall, Provinces,

ARIMA Models, Forecast
1. Introduction
1.1 Agriculture
Agriculture has an important direct and indirect role in generating economic
growth. The importance of agriculture to the economy is seen in three ways: first, it
provides food to consumers and fibers for domestic industry; second, it is a source of
scarce foreign exchange earnings; and third, it provides a market for industrial goods.
Pakistan is basically an agricultural country and thus agriculture is the 'backbone' of the
economy and the mainstay of our national economic life. Agriculture accounting for 21.8
per cent of the country's gross domestic product (GDP) and keeping employed 44.7 per
cent of its labour force, is rated as the most vital sector in the countrys economy. 67.5%
people are living in the rural areas of Pakistan and are directly involved in it.[1].
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There are two crops in Pakistan i.e. Rabi & Kharif
Crop
Kharif
Rabi
Table 1.1 : Crops in Pakistan

Sowing season
April June
Oct Dec
Harvesting season
Oct Dec
April May
Major crops of Pakistan are wheat, rice, maize, cotton and sugar cane. These major
crops contributed 7.7% last year against the set target of 4.5%. Minor crops are canola,
onions, mangoes and pulses which contributed 3.6% as there was no virus attack last
year. Fishery and Forestry contributes 16.6% and 8.8% respectively. Pakistan is rich in
fertile land yet the land is being wasted in different ways. 79.6% million hectors of land
is culturable where as only 20.43% million hectors is cultivated. The reason can be
described in two points.
1. A major area is owned by feudal. It is difficult to manage such a huge area so only
that part is cultivated which is easy to manage, the rest is left ignored.
2. The rise of industrialization has given threat to this sector. People are migrating to
cities and cities are expanding, thus new towns and colonies are constructed on
fertile lands.
The irrigation system of Pakistan needs improvement as about 67% of the land is
irrigated with canals.
1.2 Rice
Rice is the second most important food grain. It requires irrigation and is grown
as a Kharif crop. Rice is a grain belonging to the grass family. It is related to other grass
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plants such as wheat, oats and barley which produce grain for food and are known as
cereals.
1.3 Rice Growing Areas in Pakistan
Cultivation of rice is mainly confined to the low lying parts of the Punjab plain
and the flooded rivers and canal areas of Sindh.To a small extent it is also grown in the
sub mountain districts in the North and the canal irrigated areas. Rice cultivation in
N.W.F.P .Baluchistan and Azad Kashmir areas is not more than 1 % to 2 % of their total
areas.
1.3.1 Punjab
In Punjab, the division of Lahore and Gujranwala rank at the top. Best equalities
like Basmati, Parmal, Sukhdari, Irri-six etc. are grown in this part of Punjab. Besides
somu rice is also cultivated in Shakhupura, Sargodha, Faisalabad, Multan and
Bahawalpur divisions.
1.3.2 Sindh
In the province of Sindh, the districts of Sukkur division are most famouse for
good quality rice cultivation .Larkana district ranks at cultivated in Khairpur,Nawabshah
and Hyderabad districts.The main qualities of rice which are common in the province of
Sindh are kangni ,Beghi ,irri-8.
1.4 Rice production in Pakistan
Rice is an important food cash crop. Rice is also one of the main export items of
the country. It accounts for 5.9 percent of value added in agriculture and 1.3 percent in
GDP. Pakistan grows enough high quality rice to meet both domestic demand and for
exports. Area sown for rice is estimated at 2963 thousand hectares, 17.8 percent higher
than last year.
The production of the crop is estimated at 6952 thousand tons 24.9 percent
higher than last year. Higher production of rice crop is primarily based on over
achievements of area targets in Punjab and Sindh. In Punjab, area surpassed the target by
12.1 percent and as a result production overshot the target by 14.7 percent. Sindh
production surpassed the target by 22.2 percent solely on accounts of area, which
surpassed the target by 23.2 percent. In Punjab sugarcane area was shifted to rice crop, as
the growers were discouraged from the non-payment of their dues timely by the sugar
mills.
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\
Figure 1.1: Rice Production (000 Tons)
2. Methodology
2.1 Stationarity Test for Rice
The stationarity of the data has been carried out by using the Unit Root test or
Augumented Dicky fuller test[2] & [3] & [4] .
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Table 2.1 Stationarity of Rice

RICE
Punjab
Level
First
difference
Second
difference
Sindh
Co-efficient
P-value
Co-efficient
P-value
Co-efficient
-4.785138
-4.730947
P-value
0.0046
0.011
Khyber
Balochistan
-6.898077
-6.151817
0.0001
0.0002
From the above table it is concluded that production of Rice in Punjab, Khyber and Balochistan
are non-stationary so these series are adjusted after differencing. At 1st difference the production
of Rice in Punjab, Khyber and Balochistan become stationary so it is concluded that for ARIMA
model the value of d is to be taken as 1, and production of Rice in Sindh become stationary at
the second differencing, so ARIMA model with d at 2 will be used.
2.2
ACF and PACF for Production of Rice:

In this section ACF and PACF graph of Production of Rice has been carried for various
Provinces. For the value of order of MA, and AR models the data is plotted at different level of
differences according to the value of d the integrated value.
2.2.1
ACF and PACF for Actual Production of Rice Punjab

For the data of production of Rice for Punjab the data is stationary at 2nd difference so
the ACF and PACF of original data are plotted and from the plot it is observed that for this
the value of p and q are respectively 1, 2.
ACF and PACF for Production of Rice in Punjab
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prod_punjab
Coefficient
1.0

Lower Confidence
Limit
ACF
0.5
0.0
-0.5
-1.0
1
10
11
12
13
14
15
16
Lag Number
prod_punjab
Coefficient
1.0

Lower Confidence
Limit
Partial ACF
0.5
0.0
-0.5
-1.0
1
10
11
12
13
14
15
16
Lag Number
Figure 2.1: ACF for Production of Rice

2.2.2
ACF and PACF for Actual Production of Rice in Sindh

For the data of production of Rice for Sindh the data is stationary at 2nd difference so the
ACF and PACF of original data are plotted and from the plot it is observed that for this the
value of p and q are respectively 1, 1.
ACF and PACF for Production of Rice in Sindh
prod_sindh
prod_sindh
Coefficient
1.0
Coefficient
1.0
Lower Confidence
Limit
Lower Confidence
Limit
0.5
Partial ACF
ACF
0.5
0.0
-0.5
0.0
-0.5
-1.0
-1.0
10
11
12
13
14
15
16
Lag Number
10
11
12
13
14
15
16
Lag Number
Figure 2.4: PACF for Production of Rice
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2.2.3
MAY 2011
VOL 3, NO 1
ACF and PACF for Actual Production of Rice in Khyber Pakhtoon

For the data of production of Rice for Khyber the data is stationary at 1st difference so the
ACF and PACF of first differences are plotted and from the plot it is observed that for this
ACF and PACF for Production of Rice in Khyber Pakhtoonkhwa

prod_kp
prod_kp
Coefficient
1.0
Coefficient
1.0
Lower Confidence
Limit
Lower Confidence
Limit
0.5
Partial ACF
ACF
0.5
0.0
-0.5
0.0
-0.5
-1.0
-1.0
10
11
12
13
14
15
16
Lag Number
2.2.4
10
11
12
13
14
15
16
Lag Number
ACF and PACF for Actual Production of Rice in Balochistan

For the data of production of Rice for Balochistan the data is stationary at 1st difference
so the ACF and PACF of original data are plotted and from the plot it is observed that for this
ACF and PACF for Production of Rice in Balochistan
prod_balochi
prod_balochi
Coefficient
1.0
Coefficient
1.0
Lower Confidence
Limit
Lower Confidence
Limit
0.5
Partial ACF
ACF
0.5
0.0
-0.5
0.0
-0.5
-1.0
-1.0
10
11
12
13
14
15
16
Lag Number
10
11
12
13
14
15
16
Lag Number
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2.3
VOL 3, NO 1
Auto-Regressive Integrated Moving Average (ARIMA) Model
The ARMA (p, q) model applied on thed differences of Yt is called Auto-Regressive Integrated
Moving Average (ARIMA) Model. It is denoted by ARIMA (p, d, and q). Where p is the order
of AR process, q is the order of MA process and d is the order of differencing [5] .
The ARMA models are generalization of the simple AR model that uses three tools for modeling
series correlation in the disturbance.
The model can also be checked for adequacy by doing a chi-square test, known as the Box-Pierce
Q statistic, [6] & [7] on the autocorrelations of the residuals. The test statistic is:
m
Q = ( N d ) rk2
(1)
k =1
Which is approximately distributed as a chi-square variate with k-p-q degree of freedom. In this
equation
N = length of the time series.
K = First k autocorrelation being checked.
M = Maximum no. of lags checked.
rk = Sample autocorrelation function of the kth residual term.
d = Degree of differencing to obtain a stationary series.
If the calculated value of Q is larger than the chi-square for k-p-q degree of freedom, the model
should have been considered inadequate. It is possible that two or more models have been judge
to be approximate, yet none of the models may be an exact fit for the data. In this case, the
principle of parsimony should prevail, and simpler model should have chosen.
2.4
ARMA Models
These are the mixture of AR and MA process or models[8]. The time series xt for
t = 0, 1, 2, ..............
is said to be ARMA (p, q) if xt is stationary and
xt = 1 xt 1 + 2 xt 2 + .................... + p xt p + wt + 1 wt 1 + ....... + q wt q
(2)
With
p 0 and
q 0
and
w2 f 0
The parameter p and q are called the auto regressive and moving average orders. If xt has nonzero mean then ARMA (p, q) can be written as given bellow
xt = + 1 xt 1 + 2 xt 2 + .................... + p xt p + wt + 1 wt 1 + ....... + q wt q
(3)
The ARMA models become AR if q=0 and if p=0 these become MA models. The ARMA models
can be written as bellow:
( B ) xt = ( B ) wt
(4)
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2.5 ARIMA Models
ARIMA stands for Auto-Regressive Integrated Moving Average. These models deal with nonstationary time series, while ARMA (p, q), AR (p) and MA (q) models are used to deals with
second order stationary time series. By using different operation on non-stationary population the
population becomes stationary. The ARIMA (p,d,q) models assume that the d th difference
d yt = (1 B ) yt
d
(5)
is a stationary ARMA (p,q) process.

3. Analysis
3.1
Estimation of Model for Rice
In this section the model estimation along with the diagnostic tests has been
given for Rice for various provinces.
3.1.1 ARIMA Model for Rice
In this section the ARIMA model for Rice has been fitted. The ARIMA model parameters
for various provinces have been given in Table 3.1 below:
Table 3.1
Parameters
AR(1)
Punjab
-0.161
Sindh
-0.107
Kyber
0.341
Balochistan
-0.331
AR(2)
MA(1)
MA(2)
Area
Temperature
Rain
Constant
1.159
-0.940
1.415
-13.604
-0.143
2.800
3.834
35.727
-.023
-3.263
0.890
1.824
-0.414
-0.007
0.656
0.586
2.793
-10.375
-0.238
-2.769
0.910
Estimated ARIMA Model for Rice is

d
yt
= + j
j =1
d
yt j
+ j Zt j + Zt
j =1
The estimated ARIMA Model for Production of Punjab is
YRice, pj = 2.800 0.161Yt1 +1.415X A, pj 13.604XT, pj 0.143XR, pj +1.159Zt1 0.940Zt2

The Wald chisquare test is 30.26 with a pvalue of 0.000, indicating that the overall model for Punjab is
significant and therefore it can be used to forecast the production of Rice in the province.
The estimated ARIMA Model for Production of Sindh is
YRice , Sd = 3.263 0.107Yt 1 + 3.834 X A, Sd + 35.727 X T , Sd 0.023 X R , Sd + 0.910Z t 1

The Wald chisquare test is 35.63 with a pvalue of 0.000, indicating that the overall model for Sindh is
significant and therefore it can be used to forecast the production of Rice in the province.
The estimated ARIMA Model for Production of Khyber Pakhtoonkhwa is
YRice, Ky = 0.656 + 0.341Yt 1 + 1.824 X A, Ky 0.414 X T , Sd 0.007 X R ,Sd + 0.890Zt 1

The Wald chisquare test is 20.78 with a pvalue of 0.000, indicating that the overall model for Khyber
Pakhtoonkhwa is significant and therefore it can be used to forecast the production of Rice in the province.
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The estimated ARIMA Model for Production of Balochistan is
YRice, Ba = 2.769 0.331Yt 1 + 2.793 X A, Ba 10.375 X T , Ba 0.238 X R, Ba + 0.586Zt 1

The Wald chisquare test is 25.26 with a pvalue of 0.000, indicating that the overall model for
Balochistan is significant and therefore it can be used to forecast the production of Rice in the province
3.2
Normality Test
The autocorrelation of the errors terms of the production of the Rice in different
provinces in Pakistan has also been tested. This test showed that errors are normally
distributed. The Kolmogrov Smirnov test has been carried out at the errors to test the
normality of the errors. The p-value of errors of Punjab is 0.21, for Sindh is 0.32, for
Khyber Pakhtoonkhaw is 0.34 and for Balochistan is 0.25 which shows that the errors
for fitted model are normal. From these diagnostic tests it can be concluded that the fitted
model is adequate for forecasting of Production of Rice in Punjab, Sindh, Khyber
Pakhtoonkhwa and Balochistan.
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References
[1]. Anonymous, Economic Surveys of Pakistan for the years, F. Division, Editor.
2009, Finance Division: Islamabad.
[2]. FULLER, W.A., ed. Introduction to Statistical Time Series. 1976, John Wiley,
New York.
[3]. CHATFIELD, C., ed. The Analysis of Time Series: An introduction. 3rd ed.
1984, Chapman and Hall, London.
[4]. WALKER, A.M., Asymptotic properties of least squares estimate of the
parameters of the spectrum of a stationary non-deterministic time series. J. Aust.
Math. Soc., 1964.
[5]. ANDERSON, T.W., ed. The Statistical Analysis of Time Series. 1971, John
Wiley, New York.
[6]. BOX, G.E.P. and G.M. JENKINS, eds. Time Series Analysis: Forecasting and
Control. 1970, Holden-Day, San Francisco.
[7]. BOX, G.E.P. and D.A. PIERCE, Distribution of residual autocorrelations in
auto-regressive integrated moving average time series models. J. Amer. Statist.
Assoc, 1970.
[8]. AKAIKE, H., ed. Time series analysis and control through parametric models,
Applied Time Series Analysis, D.F. Findley (ed.),. 1978, Academic Press, New
York.
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APPENDIX
Abbreviations
Abbreviations
YR , Pj
Variables
Production of Rice in Punjab
YR , Sd
Production of Rice in Sindh
YR , Kp
Production of Rice in Khyber Pakhtoon
YR , Bl
Production of Rice in Balochistan
X A, Pj
Area of Rice in Punjab
X A, Sd
Area of Rice in Sindh
X A, Kp
Area of Rice in Khyber Pakhtoon
X A, Bl
Area of Rice in Balochistan
X T , Pj
Temperature in Punjab
X T , Sd
Temperature in Sindh
X T , Kp
Temperature in Khyber Pakhtoon
X T , Bl
Temperature in Balochistan
X R , Pj
Rain in Punjab
X R , Sd
Rain in Sindh
X R , Kp
Rain in Khyber Pakhtoonkhwa
X R , Bl
Rain in Balochistan
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Comparative Analysis of NBP & MCB Performance under
CAMELS Model
MAY 2011
VOL 3, NO 1
Minhoon Khan Laghari

Assistant Professor
Dept of Business Administration
Shah Abdul Latif University
Khairpur, Sindh Pakistan
Dr. Amant Ali A Jalbani
PhD Coordinator
SZABIST Karachi
Iram Rani
Assistant Professor
Dept of Business Administration
Shah Abdul Latif University
Khairpur, Sindh Pakistan
Abstract
This research investigates the performance of NBP& MCB under camel Model. Data
were collected from NBP and MCB bank by using various ratios. In terms of liquidity
position, a falling assets ratio or a rising loans to deposits ratio indicates problems for
banks. In this study, three ratios i.e., liquid asset to total assets, loans to deposits, and
yield on earning assets are used to gauge liquidity. As shown in Table #5, these two
ratios seem to indicate some sign of difficulty for NBP and MCB after 1997. Movement
in liquidity indicators since 1997 captures the painful adjustment process triggered by the
freezing of Foreign Currency Accounts [FCA]. Ratio of liquid asset to total assets has
gone down from 44.62% in 1997 to 40.4% in 2001 in the case of NBP and from 43.91%
in 1997 to 42.62% in 2001 for MCB. This was consciously brought about by the
monetary policy changes [both the Cash Reserve Requirement (CRR) and the Statuary
Liquidity Requirement (SLR) was reduced to manage the increased withdrawal of
deposits due to freezing of FCAs] by the SBP. These steps were reinforced by decline in
SBPs discount rate and T-bill yield, which helped banks manage Rupee withdrawals and
still meet the credit requirements of the private sector
Keywords: Comparative Analysis of NBP & MCB Performance under CAMELS Model
Introduction:
Performance indicators are statistics, ratios or other quantitative information, which
indicates whether these criteria are being observed in any particular case or not. These are
defined as a numerical value used to measure something, which is difficult to quantify
[Cave et al. 1988: 17]. Performance indicators provide a measurement for assessing the
quantitative or qualitative performance of an organization. The key performance
indicators, which are selected from the Annual Reports of NBP and MCB 1996-2005, for
evaluating performance of these two banks are accordance to CAMELS model. Both
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banks showed good performance in assets and equity during 1996-2005, as shown in the
Table 1. NBP with the large assets and equity base continued to hold No. 1 position. Its
assets are 122% and its equity is 141% above MCB in the year 2001. Due to an easing in
SBPs monetary stance credit expansion [advances] by both the banks accelerated
sharply reflecting double digit growth over the preceding three years. NBP has the large
advances portfolio. Its advances are 69% and MCB 31% of the total advances by these
two banks. On the other hand, investment portfolio of both banks recorded a decline for
the 5th consecutive years with the exception of MCB, which recorded an increase in the
year 2001. Despite the decline, NBP continued to enjoy large investment portfolio in
comparison.
Large volume of non-performing loans [NPLs] is the most dominating factor affecting
the earning capacity of banks. NBPs NPLs portfolio showed a considerable rise because
of NPLs of former National Development Finance Corporation [NDFC], which has been
amalgamated with NBP, while MCBs NPLs showed a modest rise. MCB has the
smallest NPLs portfolio in comparison. Rising trend was observed in the deposits of both
the banks. NBP has managed to hold its 7% deposit growth for the past three years and
10% growth in 2001 and continued to enjoy large deposit base, although MCB recorded
the highest growth 13% in the year 2001 in comparison. Cost effective measures taken by
both the banks have helped in cutting down the overall expenditure, as both banks
recorded declines during the period 1996-2005. With respect to the size of expenditure,
NBP has a sizeable amount. Interest income earning from different sources of each bank
showed a declining trend. Although, income at NBP has fallen, it remains high between
the two banks. However, in 2001 MCB showed a considerable rise in interest income.
Due to downward trend in interest rate, interest expense in the case of both banks
continued to fall for the four consecutive years, with the exception of MCB which
recorded a rise in 1998. Net interest income is the major source of revenue growth.
Growth of revenue in both the banks was entirely on account of 37.5% rise in net interest
income in the case of MCB and 41% in the case of NBP in sharp contrast to preceding
years fall. Both banks showed an increase in provisioning to NPLs. NBP recorded high
growth [57.5%] during 1996-2005 while MCBs provision to NPLs was increased by
45.3% during the same period. Staff size over the past 5 years has been reduced by 16%
for NBP and 14% for MCB. Both banks recorded increase in pre-tax profit in 2000 and
2001 with the exception of year 2001, where NBP emerged as the highest pre-tax profit
earner, MCBs profit was high in comparison to NBP during 1996-2005.
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Financial Analysis under CAMELS for checking the impact of re-structuring on

NBP & MCB:
In this part, financial performance of both NBP and MCB will be analyzed by using
CAMELS framework which involves the analysis of following six groups of indicators.
o
Capital Adequacy Ratios (NBP & MCB)
o
Asset Quality Ratios (NBP & MCB)
o
Management Soundness Ratios (NBP & MCB)
o
Earnings and Profitability Ratios (NBP & MCB)
o
Liquidity Ratios (NBP & MCB)
o
Sensitivity to Market Risk Ratios (NBP & MCB)
1
Capital Adequacy Ratios (NBP & MCB):
Capital adequacy focuses on the total amount of bank capital, which is vital in reducing
the risk of insolvency and potential cost of banks failure. In other words, this determines
the robustness of financial institutions against shocks to their balance sheets. Three ratios
can be used as a measure of capital adequacy. The first ratio is the banks capital to its
liability [CL] that shows the extent to which capital and reserves of a bank provide
coverage to liabilities [primarily to its depositors]. Although there is no benchmark, a
high CL ratio signals strong position of a bank. In the case of NBP CL ratio was
declining, indicating erosion of capital base, while in the MCB case, CL ratio shows
improvement/rising trend indicating MCBs strong position comparatively and at the
same time it reflects that MCB is moving in the right direction. Other measures of capital
adequacy are the capital ratio and capital to risk asset [CRA] ratio. A high capital ratio
and CRA ratio reflect strong position of a bank. Both these ratios in the case of NBP were
declining during 1996-2005, and in the case of MCB were rising comparatively. Despite
this rise in its equity, MCB stood second to NBP, which continued to enjoy the largest
equity base.
Insert Table 1 Here

2
Asset Quality Ratios (NBP & MCB):
The solvency risk of a financial institution often originates from the quality of its asset
portfolio. Asset quality is generally measured in relation to the level and severity of nonperforming assets, recoveries, the adequacy of provisions, distribution of assets, etc. In
this financial analysis six ratios are used to gauge the asset quality of both NBP and
MCB. The first ratio to measure asset quality is earning assets to total assets. A large
share of earning assets would lead to higher profitability at given level of expenses. Asset
quality as measured by earning assets to total assets ratio reveals declining trend
continuously for MCB and marginally for NBP as shown in Table No.2.
NPLs to gross advances ratio as represented in Table No..2, remains high for both the
banks reaching a high of 22.54% for NBP while it was the lowest at 16.22% for MCB. It
is important to note that this ratio has got down slightly from 21.48% to 19.1% for NBP
and from 17.37% to 13.67% for MCB during 1999 2000, shows a significant
improvement. However, in 2001 it started rising again for both the banks. Prior to those
banks were used to report only default or overdue portion of their NPLs instead of total
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outstanding amount of such loans. This adjustment has added to the volume of NPL said
both banks under review. Comparatively, of the two banks, this ratio is still the highest
for NBP and the lowest for MCB.
An increasing trend in this ratio signals deterioration in the quality of asset portfolio and
consequently, in banks cash flows, net income, and solvency. NBP had the larger share in
total NPLs in comparison which was much greater than its share in assets or deposits.
This was due to substantial loans provided by NBP on political ground, especially during
the early and mid-1990s that resulted in NPLs after a time lag.
The ratio of net NPLs to net advances, another indicator of asset quality, grew during the
period 1996-2005 for both banks; however, it was the lowest for MCB and highest for
NBP. The ratio of provisions to gross advances has dropped during 1997-2000 for both
NBP and MCB; however, both banks recorded an increase in this ratio during 2000-2001.
Again, the % of this ratio is high in the case of NBP in comparison. Marked improvement
is visible in recovery efforts during the period 1996-2005. This is remarkable in the case
of NBP in terms of reduction in the ratio of loan defaults to gross advances from 0.02%
to negative. The loan recovery drive of the military regime has led to the reduction in the
stock of defaulted loan. However, MCB does not show significant improvement in this
ratio, indicating that MCB needs to focus on recoveries, side by side with more
aggressive credit extension.
Insert Table 2 here
3
Management Soundness Ratios (NBP & MCB):
Management soundness is a crucial pre-requisite for the growth and success of the
banking institutions. However, it is difficult to judge management efficiency and
effectiveness on the basis of monetary indicators/financial accounts due to the qualitative
nature of management. Nevertheless, total expenditures to total income, operating
expense to total expenses, earning and operating expenses per employee and interest rate
spread are generally used to gauge management soundness. Management soundness
indicators/ratios are reported in Table No.3. A high expense to income [EI] ratio indicates
the operating inefficiency that could be due flaws in management. EI ratio for both NBP
and MCB was very high, almost touching 100% in the case of NBP. This is due to
provisioning against bad loans and to some extent Golden Hand Shake Scheme.
However, it started tempering down since 1998in both banks. Comparatively, in the case
of NBP this ratio is very high. The management inefficiency can also be traced to higher
operating expense to total expenditure ratio due to the extensive branch network of these
two banks. An across the board increase in administrative expenditures to total expenses
and salary & allowances etc. to total expenses is also visible in the Table No. 3. The
reason for this is mostly the high salaries, allowances and perks of banks employees,
surprisingly, the worst performers in this regard is the MCB. NBP did have a good
administrative efficiency in comparison. Administrative expense to expense ratio is high
for MCB and low for NBP. Both banks have successfully reduced their cost of deposits,
while maintaining their deposit base. Extensive branch network has allowed them to tap
into a lucrative base of low cost and stable deposits. Cost of deposits ratio has dropped
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for both banks understudy. Despite the declining trend, cost of deposits ratio at NBP is
high in comparison. On the other hand, intermediation cost is low at NBP and high at
MCB. Interest rate spread can also be used as an important indicator of management
efficiency in relation to profitability of the banks. This is because higher spread may be
caused either by higher operating cost reflecting management inefficiency, or by banks
desire to earn more profit. A rising trend in the spread in both MCB and NBP indicates
growing inefficiency of banks. However, this rising trend is very nominal in the case of
NBP, which can be treated as stagnant.
Insert table 3 here
4
Earnings and Profitability Ratios (NBP & MCB):
To measure earning and profitability, the widely used indicators are ROA, ROE, ROD,
NIM, PTM, and revenue to expense ratio. As shown in Table No.4 both banks have
managed to improve their ROA, ROE, and ROD ratios in 2001. MCBs ROA, ROE and
ROD remain the highest and NBPs the lowest between the two. Despite an increase in
ROA and ROD, these ratios for NBP remained below 1%. These ratios showed
significant improvement for MCB. However, positive value of ROA, ROE, and ROD
indicates that these banks are earning profits. Rise in NIM and PTM can also be seen in
the table. NIM is high for MCB [6.6%] and low for NBP [4%]. The low NIM and PTM at
NBP explain its lower ROA, and ROE in comparison with MCB. High cost of fund, low
ratio of advances to deposits and the low fee based income to total income ratio have
nullified NBP administrative efficiency and better loan quality to such an extent that
ROD and PTM at NBP are the lowest between the banks under review, whereas NBP
both the ratio should have been the highest because of its much larger deposit base. An
increasing trend in ROA ratio indicates that banks are earning profit more on their assets,
thus giving way to increase in profitability. However, a declining trend of total income to
total assets for both NBP and MCB indicated that expenses increased proportionately.
Share of fee based income is only 12.6% in NBP and 11.4% in MCBs total income.
However, the share is on the increase. Both banks have recorded double digit growth in
their fee based income. Revenue to expense ratio remained strong for both banks during
1996-2005. NBP recorded the high growth [194.20%] a sharp turnaround from preceding
years decline. MCB also showing similar trend i.e., sharp increase in 2001, in contrast to
decline a year earlier.
Insert table 4 Here
5.
Liquidity Ratios (NBP & MCB):
In terms of liquidity position, a falling assets ratio or a rising loans to deposits ratio
indicates problems for banks. In this study, three ratios i.e., liquid asset to total assets,
loans to deposits, and yield on earning assets are used to gauge liquidity. As shown in
Table No.5, these two ratios seem to indicate some sign of difficulty for NBP and MCB
after 1997. Movement in liquidity indicators since 1997 captures the painful adjustment
process triggered by the freezing of Foreign Currency Accounts [FCA]. Ratio of liquid
asset to total assets has gone down from 44.62% in 1997 to 40.4% in 2001 in the case of
NBP and from 43.91% in 1997 to 42.62% in 2001 for MCB. This was consciously
brought about by the monetary policy changes [both the Cash Reserve Requirement
(CRR) and the Statuary Liquidity Requirement (SLR) was reduced to manage the
increased withdrawal of deposits due to freezing of FCAs] by the SBP. These steps were
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reinforced by decline in SBPs discount rate and T-bill yield, which helped banks manage
Rupee withdrawals and still meet the credit requirements of the private sector.
Increase in loan to deposit ratio of both the banks under review during 1996-2005 is a
direct consequences of steps described above. The analysis further reveals that yield on
earning assets has also fallen in the case of both the banks; however, MCB has the better
yield on earning assets in comparison.
Insert table 5 here
6
Sensitivity to Market Risk Ratios (NBP & MCB):
In addition to liquidity problems, banks also faced other risks i.e., a large investment in
volatile assets would make banks more vulnerable to fluctuations in the prices of those
assets. Similarly, a concentration of advances in a few sectors would increase default
risks if these sectors do not perform well. Furthermore, interest rate and foreign exchange
risk tend to have significant impact on banks assets and liabilities. However, in this
study two ratios [gap between RSA & RSL and their ratio] are used to measure
sensitivity to market risk. A higher RSL than RSA indicates that banks are risk sensitive
to changes in interest rates; an increase in interest rate may affect them negatively, and
vice versa.
Looking at Table No.5, the growing gap, or declining ratio during 1996-2005 showed
their exposure to rising interest rate. The negative gap has stretched from -57.35 billion to
-81.44 billion during 1996-2005 for NBP and from -10.30 billion to -19.41 billion for
MCB during the same period. Negative value indicates comparatively higher risk
sensitivity towards liability side than the assets side. It also reflects that an increase in
interest rate may affect banks negatively, while decline in interest rate may prove
beneficial. Higher sensitivity towards liabilities also reflected in less than 100 value of
ratio between RSA and RSL. Decline in this ratio in the case of both the banks indicates
the rise in their sensitivity.
Conclusions & Recommendations:
CONCLUSIONS:
I.
II.
III.
IV.
Comparative study suggested that both NBP and MCB have performed better
during the period under review.
NBP has maintained its position as Pakistans largest bank [under strong
government support] and despite some weak indicators like declining investment,
over staffing, large NPLs, political intervention, and high administrative expense,
NBP emerged as financially strong bank.
MCB after being privatized has made substantial improvement and also emerged
as a strong bank. It has maintained profitable growth along with proactive risk
management and expansion of product range for customers and has been rightly
declared the best bank of Pakistan for 2001 among all local and foreign banks
by Euro money a world renowned financial magazine.
While both banks deposits grew, investment has fallen.
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V.
VI.
VII.
VIII.
IX.
X.
XI.
XII.
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VOL 3, NO 1
Despite the shrinking spread, revenue growth has been impressive. Interest
income has also increased significantly.
Despite efforts to curtail operating costs, significant growth in administrative
expenditure and staff cost was recorded by NBP and MCB.
An increasing trend in ROA ratio indicates that banks (NBP & MCB) are earning
profit more on their assets, thus giving way to increase in profitability. However,
a declining trend of total income to total assets for both NBP and MCB indicated
that expenses increased proportionately.
Both banks have managed to improve their ROA, ROE, and ROD ratios in 2001.
MCBs ROA, ROE and ROD remain the highest and NBPs the lowest between
the two.
Yield on earning assets has also fallen in the case of both the banks; however,
MCB has the better yield on earning assets in comparison.
EI ratio for both NBP and MCB was very high, almost touching 100% in the case
of NBP. This is due to provisioning against bad loans and to some extent Golden
Hand Shake Scheme.
The management inefficiency can also be traced to higher operating expense to
total expenditure ratio due to the extensive branch network of these two banks.
Although some financial ratios have improved, efforts are needed to bring them at
par with internationally accepted standard. The below par performance on return
on assets needs to improve on four counts, namely; reduction in NPLs to enhance
markup income, reduction in staff and administrative costs, reduction in cost of
deposits, improvement in fee based income from international trade related and
corporate finance activities.
Recommendations
I. Financial institutions have sturdily suggested apply CAMELS in factual means to

measure the soundness of institution. Otherwise real reforms are unexpected.
II. CAMELS is a best tool for bank supervision because it evaluates the risk inherent
in the bank operations either off-site & on-site.
III. NBP is suggested to take measures so that they desist from government
intervention for merit based environment. A high need of vigilance is required to
control the over staffing & other administrative expenses.
IV. A clear line of demarcation of responsibilities is available in the State Bank policy
in between board and management. It should be ensured.
V. In developing the credit administration areas, bank should ensure in
documentation, legal covenants, and contractual requirements, collateral.
VI. Before loan sanction first monitors the financial condition of borrower so that
recovery problem will not face the bank.
VII. Credit risk should monitored should taken through the exposure profile until
maturity in relation to potential market movement.
VIII. If the ROA, ROE & ROD is improved by reducing the NPL`s over employment
and non profitable business units then bank become strong in public entities.
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IX. MCB also need extra spirit of team work & commitment for performance
maintenance.
X. MCB deposits are well but investment should be increased by local or foreign
investor to strengthen the business.
XI. Income generated from revenues should proper utilize to clear the debts burden so
that sustainability can be assured.
XII. Closing down of unprofitable branches and curtailment of other administrative
expenses can increase the income.
XIII. ROA is well but if again there are a proper control on expenses then a moir
chance of income rising.
XIV. ROA, ROE & ROD further improved if NPLs reduced increase in mark up
income from foreign trade and corporate finance activities.
Areas for Further Research:

Reforms/Restructuring is a continuous phenomenon. Therefore the banks/financial
institutes should keep it up with new emerging standards like BASEL II with CAD III for
making the financial institutions more competitive.
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References
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Cambridge: Harvard University Press.
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Gilbert, R. Alton; Meyer, Andrew P. and Vaughan, Mark D. Could a CAMELS

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Annexure
Table:No.1
NBP
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
Ratios
Capital Section
Total Capital to Total Assets
5.88%
8.36% 12.87%
36.70% 15.24%
67.65% 60.75%
Growth rate of Capital
43.85%
49.45%
6.75%
5.02%
3.11%
Growth rate of Assets
13.31%
4.66%
7.80%
6.06%
11.69%
4.27%
8.36%
3.37%
4.89%
4.84%
4.79%
4.40%
5.85%
6.25%
69.23% 66.67%
27.36%
80.03%
75.91% 43.79%
15.24%
4.24%
69.23% 95.07%
41.54% 124.95% 105.64% 152.53% 127.26% 66.61%
28.31%
8.72%
2003
2004
2005
4.08%
5.62%
7.80%
Equity / Total Liabilities
2.64%
17.97%
4.43%
9.12% 14.77%
Net Non-Performing Advances To

Capital (including surplus)
70.78% 104.17%

Core Capital
MCB
1996
1997
1998
1999
2000
2001
2002
Ratios
Capital Section
Total Capital to Total Assets
Growth rate of Capital
34.00%
1.01%
5.55%
9.59%
23.14%
Growth rate of Assets
10.79%
-0.25%
5.92%
10.17%
7.06%
3.29%
3.34%
3.32%
3.31%
3.82%
Equity / Total Liabilities

2.71%
53.05% 65.92%
83.78% 163.63% 139.88% 104.28%
1116
69.87%
-5.04%
31.00% 60.16%
25.71% 15.81%
-4.83% 15.28%
5.24%
4.25%
5.95%
8.46%
49.73% 37.71%
14.74%
2.48%
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Capital (including surplus)

Core Capital
53.05% 89.19% 111.95% 213.33% 174.48% 144.04%
92.15% 54.21%
23.32%
3.24%
Table: No. 2 Asset Quality

Assets Quality Ratio
NBP
1996
1997
1998
1999
2000
2001
2002
19.0%
19.0%
16.4%
21.5%
19.1%
22.5%
Net NPLs to Net Advances
5.7%
6.4%
3.8%
10.6%
8.6%
Net NPLs to TA
1.8%
2.2%
1.3%
3.7%
Provisions to NPLs
74.2%
70.8%
80.0%
Net NPLs to Total Capital
69.2%
66.7%
NPLs to Advances
Recoveries to NPLs
Earning Asset to Total Assets
71.2%
Growth rate of Advances
2003
2004
2005
26.3%
21.0%
14.4%
11.3%
10.7%
12.9%
7.5%
3.2%
1.2%
3.2%
4.4%
4.2%
2.6%
1.3%
0.5%
56.9%
60.4%
58.8%
58.4%
69.6%
80.5%
90.7%
27.4%
80.0%
70.8%
104.2%
75.9%
43.8%
15.2%
4.2%
0.0%
0.0%
16.0%
7.7%
8.3%
0.0%
0.0%
0.0%
0.0%
70.0%
65.7%
62.2%
69.4%
70.1%
78.9%
81.4%
77.8%
81.9%
23.0%
3.7%
11.9%
14.5%
21.4%
-17.5%
14.7%
36.9%
21.8%
85.1%
94.4%
17.7%
17.7%
Provision to Weighted NPLs

Advances to Public Sector To Total
Assets
Assets Quality Ratio
MCB
NPLs to Advances
9.4%
10.9%
11.6%
17.4%
13.7%
16.2%
14.1%
10.6%
6.1%
4.5%
Net NPLs to Net Advances
3.1%
4.9%
6.2%
12.4%
9.1%
9.4%
7.4%
4.3%
1.6%
0.3%
Net NPLs to TA
1.4%
2.1%
2.7%
5.3%
4.5%
3.8%
2.5%
1.5%
0.8%
0.2%
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Provisions to NPLs
68.9%
57.7%
49.6%
32.7%
37.1%
46.6%
51.6%
61.9%
75.7%
93.1%
Net NPLs to Total Capital
53.0%
65.9%
83.8%
163.6%
139.9%
104.3%
49.7%
37.7%
14.7%
2.5%
0.0%
0.0%
5.6%
12.0%
10.6%
0.0%
0.0%
0.0%
0.0%
82.2%
81.1%
77.2%
83.0%
80.5%
87.0%
87.1%
85.3%
87.4%
6.6%
1.8%
2.9%
28.1%
-11.3%
3.1%
23.2%
41.3%
31.3%
Provision to Weighted NPLs
79.4%
98.3%
Advances to Public Sector To Total Assets
13.0%
13.0%
2004
2005
Recoveries to NPLs
Earning Asset to Total Assets
79.9%
Growth rate of Advances
Table: No.3 Management Soundness

Management
NBP
Total Expenses / Total Income
1996
1997
1998
1999
2000
2001
2002
2003
104.5%
97.1%
93.8%
98.5%
96.9%
91.6%
81.3%
66.3%
59.0%
55.7%
23.2%
19.4%
19.0%
22.8%
24.5%
26.6%
34.8%
46.8%
51.5%
46.6%
0.0%
0.0%
0.0%
0.0%
15.2%
26.6%
17.4%
26.9%
33.0%
27.4%
Admininstrative Expenses To Total

Expenses
Salaries & Allowances To Total
Expenses
Administrative Expenses Per Employee
0.522
0.574
0.749
0.624
0.646
0.810
Interm.Cost (Admin expense./Ave.

Dep&Borrow.)
2.8%
2.5%
2.2%
2.7%
2.5%
2.5%
2.5%
2.1%
2.0%
2.4%
4.4%
3.7%
2.5%
3.8%
3.1%
3.2%
3.1%
2.8%
2.4%
2.8%
Intermediation Cost (including

provision)
1118
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MAY 2011
VOL 3, NO 1
Deposits per Employee
20.617
23.057
29.755
29.799
33.872
33.523
Profit per Employee
0.030
0.076
0.185
0.316
0.451
0.919
Cost per Employee
0.522
0.574
0.749
0.624
0.646
0.810
Assets per Employee
24.209
27.375
35.490
35.335
40.250
41.791
144.3%
176.8%
Net Interest Income+Fee Based Income

to Administrative Expenses
111.8% 143.9%
164.8%
158.9%
1119
170.3% 192.9%
219.5% 252.2%
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MAY 2011
VOL 3, NO 1
Table: No. 3 Management Soundness

Management
MCB
Total Expenses / Total Income
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
98.3%
93.7%
95.2%
93.3%
92.2%
89.1%
82.7%
75.8%
69.5%
43.8%
33.6%
33.0%
32.2%
42.3%
45.8%
42.8%
50.8%
58.4%
78.2%
63.6%
0.0%
0.0%
0.0%
0.0%
29.4%
42.8%
30.3%
35.7%
43.1%
45.5%
Admininstrative Expenses To Total

Expenses
Salaries & Allowances To Total
Expenses
Administrative Expenses Per Employee
0.588
0.631
#DIV/0! 0.648
0.733
0.689
Interm.Cost (Admin expense./Ave.

Dep&Borrow.)
4.4%
4.7%
4.5%
5.3%
4.9%
4.6%
4.1%
2.9%
3.0%
2.6%
5.5%
6.0%
4.7%
5.5%
5.7%
6.0%
4.5%
3.3%
3.2%
3.1%
Intermediation Cost (including

provision)
Deposits per Employee
11.208
13.307
#DIV/0! 20.810
22.355
24.458
Profit per Employee
0.061
0.095
#DIV/0! 0.219
0.246
0.952
Cost per Employee
0.588
0.631
#DIV/0! 0.648
0.733
0.689
Assets per Employee
#DIV/0!
1120
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MAY 2011
VOL 3, NO 1
14.400
16.106
109.3%
141.3%
26.793
26.208
31.863
Net Interest Income+Fee Based Income

to Administrative Expenses
97.6% 127.9%
117.2%
102.7%
1121
135.4% 128.7%
124.5% 269.7%
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MAY 2011
VOL 3, NO 1
Table: No. 4
Earnings and Profitability Section NBP
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
Interest Income to Total Assets
9.1%
10.7%
10.0%
9.3%
8.2%
8.0%
6.4%
4.3%
4.1%
5.9%
Interest Expense to Total Assets
6.8%
7.9%
7.2%
6.2%
5.8%
4.8%
3.5%
1.5%
1.3%
1.8%
Net interest income to Total Assets
2.3%
2.7%
2.8%
3.1%
2.4%
3.2%
2.9%
2.8%
2.8%
4.1%
Non-interest income to Total Assets
1.2%
1.0%
0.9%
1.2%
1.1%
1.1%
1.2%
1.6%
1.6%
1.7%
Non-interest expense to Total Assets
2.5%
2.4%
2.7%
3.1%
2.1%
2.3%
2.2%
1.8%
1.7%
2.0%
5.1%
5.6%
5.2%
5.1%
5.1%
6.6%
6.0%
6.1%
5.7%
5.4%
Income before taxes to T. Assets
-0.5%
0.3%
0.7%
0.2%
0.3%
0.8%
1.4%
2.0%
2.3%
3.4%
Provision Expense to Gross Income
41.2%
27.6%
6.2%
23.1%
13.1%
12.7%
12.0%
13.1%
7.7%
6.8%
Operating Expense to Total Income
38.2%
29.2%
27.4%
39.3%
27.2%
31.3%
34.9%
41.0%
36.5% 31.8%
Net Interest Income to Gross Income
66.4%
72.8%
75.8%
72.1%
68.6%
73.4%
70.5%
63.7%
63.5% 71.2%
Non-interest Income to Gross Income
33.6%
27.2%
24.2%
27.9%
31.4%
26.6%
29.5%
36.3%
36.5% 28.8%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
2.2%
10.4%
2.9%
4.2%
0.0%
0.0%
0.0%
0.0%
6.0%
4.7%
3.7%
3.6%
4.5%
3.7%
72.0%
63.4%
75.4%
73.2%
58.4%
53.6%
52.0%
41.8%
Provision for loan losses to Total

Assets
Gains on Sale of Securities to Gross

Income
Trading & Foreing Exchange gain to
Gross Income
Operating Expense to Gross Income
(Cost Income Ratio)
1122
39.4% 35.0%
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MAY 2011
VOL 3, NO 1
Admin Expense to Gross Income

(NII+Not Interest Income)
71.7%
58.8%
53.2%
55.2%
62.3%
51.5%
51.8%
41.5%
ROA before Tax
-0.5%
0.3%
0.7%
0.2%
0.3%
0.8%
1.4%
2.0%
ROE Before Tax
-17.9%
11.6%
16.9%
3.3%
6.2%
17.5%
29.2%
35.0%
ROA After Tax
-0.3%
0.0%
0.2%
0.0%
0.1%
0.3%
0.5%
0.9%
ROE After Tax
-11.3%
0.7%
4.2%
0.2%
2.8%
6.7%
10.9%
16.3%
3.2%
3.9%
4.1%
4.8%
3.7%
4.5%
3.9%
3.5%
3.5%
5.2%
7.6%
9.1%
8.4%
7.1%
6.6%
5.5%
4.0%
1.7%
1.5%
2.2%
12.8%
15.1%
14.7%
14.5%
12.5%
11.4%
8.6%
5.4%
5.2%
7.4%
5.2%
6.0%
6.4%
7.4%
5.9%
5.9%
4.6%
3.7%
3.7%
5.3%
3.1%
3.8%
2.6%
3.1%
1.9%
3.0%
5.8%
7.2%
6.2%
7.9%
Operating Cost to Deposits
2.9%
2.7%
3.2%
3.6%
2.4%
2.6%
2.5%
2.1%
1.9%
2.5%
Return on Loans & Advances
0.0%
0.0%
0.0%
0.0%
11.0%
10.9%
9.9%
6.2%
5.7%
8.6%
cost of Deposits
0.0%
0.0%
0.0%
0.0%
6.5%
5.4%
4.0%
1.7%
1.5%
2.2%
Spread
0.0%
0.0%
0.0%
0.0%
4.5%
5.5%
5.9%
4.4%
4.2%
6.4%
Return of Total Advances
0.0%
0.0%
0.0%
0.0%
9.7%
9.6%
8.5%
5.2%
5.0%
7.7%
Return on Performing Loans
0.0%
0.0%
0.0%
12.2%
12.1%
11.2%
6.8%
6.0%
8.8%
Spread Between Return on Performing Loans
0.0%
0.0%
0.0%
2.5%
2.5%
2.7%
1.6%
1.0%
1.1%
NIM (based on earning assets)
39.2% 34.2%
2.3%
3.4%
32.4% 31.6%
1.2%
2.2%
16.8% 21.1%
Average Cost Of Deposits &

Borrowings
Avg. Return On Advances &
Investments
Average Spread
Basic Earnings(pre provision and tax)
to net loans
1123
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MAY 2011
VOL 3, NO 1
and Total Loans

Incidence of NPLs:
Effective Return on Gross Loans
-3.9%
-2.7%
-0.6%
-2.5%
8.6%
8.4%
7.3%
3.8%
4.2%
6.9%
0.0%
0.0%
0.0%
12.2%
12.1%
11.2%
6.8%
6.0%
8.8%
Total Effective Incidence of NPLs
2.7%
0.6%
2.5%
3.6%
3.7%
3.9%
3.1%
1.8%
1.9%
1124
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MAY 2011
VOL 3, NO 1
Earnings and Profitability SectionMCB

1996
Interest Income to Total Assets
1997
1998
1999
2000
2001
2002
2003
2004
2005
10.0%
11.9%
11.5%
10.2%
8.5%
9.4%
7.3%
4.1%
3.4%
6.4%
Interest Expense to Total Assets
6.8%
7.1%
7.4%
6.1%
4.3%
4.2%
2.9%
1.2%
0.8%
1.0%
Net interest income to Total Assets
3.2%
4.7%
4.1%
4.2%
4.1%
5.2%
4.4%
2.9%
2.6%
5.4%
Non-interest income to Total Assets
1.9%
1.8%
1.6%
1.5%
1.7%
1.2%
1.2%
1.8%
1.6%
1.9%
Non-interest expense to Total Assets
3.9%
4.6%
5.0%
4.6%
4.3%
4.1%
3.8%
3.0%
2.8%
2.4%
3.1%
3.0%
2.7%
2.6%
2.8%
3.5%
2.9%
2.7%
2.5%
2.8%
0.2%
0.9%
0.6%
0.8%
0.8%
1.2%
1.5%
1.4%
1.5%
4.7%
Provision Expense to Gross Income
18.8%
17.5%
2.1%
3.7%
11.7%
19.0%
6.1%
6.5%
2.5%
5.6%
Operating Expense to Total Income
41.1%
41.6%
38.8%
41.4%
49.3%
49.8%
49.0%
56.1%
57.9%
33.3%
Net Interest Income to Gross Income
62.1%
72.2%
71.5%
73.8%
71.4%
81.2%
78.2%
62.1%
62.4%
73.4%
Non-interest Income to Gross Income
37.9%
27.8%
28.5%
26.2%
28.6%
18.8%
21.8%
37.9%
37.6%
26.6%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
3.2%
17.1%
7.0%
4.3%
0.0%
0.0%
0.0%
0.0%
6.3%
5.9%
4.2%
2.8%
4.4%
2.6%
77.4%
69.3%
86.8%
82.4%
74.6%
63.1%
67.9%
63.3%
66.0%
32.2%
Provision for loan losses to Total

Assets
Income before taxes to T. Assets
Gains on Sale of Securities to Gross

Income
Trading & Foreing Exchange gain to
Gross Income
Operating Expense to Gross Income
(Cost Income Ratio)
1125
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MAY 2011
VOL 3, NO 1
Admin Expense to Gross Income

(NII+Not Interest Income)
77.4%
64.4%
70.2%
81.9%
73.9%
62.7%
63.4%
55.0%
64.3%
31.7%
ROA before Tax
0.2%
0.9%
0.6%
0.8%
0.8%
1.2%
1.5%
1.4%
1.5%
4.7%
ROE Before Tax
7.5%
29.5%
19.7%
24.4%
24.7%
33.7%
33.4%
31.7%
31.6%
68.8%
ROA After Tax
0.1%
0.2%
0.3%
0.4%
0.4%
0.6%
0.8%
0.9%
0.9%
3.2%
ROE After Tax
2.9%
5.7%
8.3%
11.5%
13.7%
17.8%
18.7%
19.6%
19.0%
47.1%
NIM (based on earning assets)
4.0%
5.8%
5.0%
5.3%
5.1%
6.4%
5.2%
3.4%
3.1%
6.2%
7.6%
8.0%
8.3%
6.9%
5.0%
4.8%
3.3%
1.3%
0.9%
1.1%
12.5%
14.6%
14.1%
12.9%
10.6%
11.5%
8.7%
4.7%
4.0%
7.4%
4.9%
6.7%
5.7%
6.0%
5.6%
6.8%
5.4%
3.4%
3.1%
6.2%
2.6%
4.5%
1.7%
2.3%
2.8%
5.6%
4.8%
4.5%
3.2%
7.9%
Operating Cost to Deposits
4.7%
5.2%
6.0%
5.5%
5.3%
4.8%
4.4%
3.6%
3.4%
2.9%
Return on Loans & Advances
0.0%
0.0%
0.0%
0.0%
9.1%
11.1%
9.4%
5.2%
4.2%
7.6%
cost of Deposits
0.0%
0.0%
0.0%
0.0%
4.3%
4.2%
3.1%
1.1%
0.7%
0.2%
Spread
0.0%
0.0%
0.0%
0.0%
4.8%
6.8%
6.3%
4.1%
3.5%
7.4%
Return of Total Advances
0.0%
0.0%
0.0%
0.0%
8.6%
10.4%
8.7%
4.9%
4.0%
7.3%
0.0%
0.0%
0.0%
10.1%
12.2%
10.3%
5.5%
4.3%
7.7%
Spread Between Return on Performing Loans
0.0%
0.0%
0.0%
1.6%
1.8%
1.6%
0.7%
0.3%
0.4%
Average Cost Of Deposits &

Borrowings
Avg. Return On Advances &
Investments
Average Spread
Basic Earnings(pre provision and tax)
to net loans
1126
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MAY 2011
VOL 3, NO 1
and Total Loans

Incidence of NPLs:
Effective Return on Gross Loans
-2.0%
-2.5%
-0.3%
-0.5%
7.2%
7.8%
7.9%
4.0%
3.7%
6.6%
0.0%
0.0%
0.0%
10.1%
12.2%
10.3%
5.5%
4.3%
7.7%
Total Effective Incidence of NPLs
2.5%
0.3%
0.5%
2.9%
4.4%
2.4%
1.5%
0.6%
1.1%
1127
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MAY 2011
VOL 3, NO 1
Table No .5
Liquidity & Sensitivity Section
NBP
Net Call Money to Total Liabilities
1996
1997
1998
1999
2000
2001
2002
2003
2004
0.0%
0.0%
0.0%
0.0%
2.3%
1.8%
0.7%
0.0%
36.4%
41.4%
40.1%
41.6%
44.3%
48.7%
38.7%
40.8%
47.4% 58.0%
34.0%
39.1%
37.2%
38.5%
43.6%
48.2%
38.2%
40.3%
46.7% 57.1%
8.0%
7.3%
7.8%
7.4%
10.5%
3.8%
9.0%
17.7%
-0.5%
0.0%
0.0%
0.0%
0.0%
2.0%
9.3%
5.0%
3.8%
4.5%
4.4%
Liquid assets to Total Assets
55.1%
46.2%
42.9%
43.3%
43.6%
40.3%
51.4%
51.9%
46.5% 37.1%
Liquid assets to Deposits
64.0%
56.2%
51.0%
51.5%
51.2%
47.9%
61.3%
61.6%
55.3% 46.3%
0.0%
0.0%
0.0%
0.0%
2.9%
4.4%
1.0%
1.2%
53.5%
51.7%
52.9%
51.7%
63.5%
49.6%
43.2%
46.0%
62.1% 78.6%
50.1%
48.1%
49.1%
46.7%
60.7%
48.0%
41.8%
44.2%
60.1% 76.5%
10.1%
-0.5%
5.3%
4.3%
13.6%
18.2%
15.8%
0.0%
0.0%
0.0%
0.0%
8.7%
7.3%
5.0%
4.6%
10.1% 12.8%
Liquid assets to Total Assets
41.8%
43.4%
42.6%
38.4%
35.8%
46.1%
57.6%
56.5%
37.2% 30.9%
Liquid assets to Deposits
50.1%
52.4%
51.6%
46.8%
46.0%
55.7%
74.1%
72.8%
43.6% 40.2%
Loan and Advances to Total Deposits
0.2%
2005
1.1%
Loans to Deposits Ratio: Net of Export

Refinance Borrowings
Growth rate of Deposits
Equity Market Holdings to Fixed
Income Gov. Securities
Liquidity & Sensitivity Section
MCB
Net Call Money to Total Liabilities

Loan and Advances to Total Deposits
2.9%
3.0%
Loans to Deposits Ratio: Net of Export

Refinance Borrowings
Growth rate of Deposits
4.5%
3.7%
Equity Market Holdings to Fixed

Income Gov. Securities
1128
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MAY 2011
VOL 3, NO 1
The Impact of Political Events on Lahore Stock Exchange

During 2003-2009
Lubna Ali
Reseach Scholar, Hailey College of Commerce, University of the Punjab, Lahore.
Komal Daniel
Research Scholar,Hailey College of Commerce, University of the Punjab, Lahore.
Dr. Qais Aslam
Professor, University of Central Punjab, Lahore.
Manal Talat
Lecturer, Kinnaird College for Women, Lahore.
Zafar Ahmed
Abstract
The stock market is important gauge of the economys health. It absorbs the changes in
the political environment. The political incidents political implications cause the stock
market index to go up or down. This study attempts to find the relationship between
political events and Lahore Stock Exchange (Pakistan) during 2003-2009. For this
rationale, we identified key events that had taken place since 2003 and gathered Lahore
stock index data for these events. On the whole we found no relationship between the
political events and stock market performance. The results also indicated that stock
market abruptly respond in unconstructive way to those events directly associated to
Government actions.
Key words: Political events, Stock Market performance, Lahore Stock Exchange
1. Introduction
Political stability means the permanence in the policies and regulations of the state .The
coming up government is going to track the policies and laws of the preceding
government so that a smooth running is seen in the state. It also means that the running
government is also accommodating the economy & public. On the other hand, there may
be such events that deteriorate the economy which in turn affect the public. If the
influence is negative, it results in political instability even when there is a stable
government.
The stock market is important gauge of the economys health. It absorbs the changes in
the political environment. The political events have some meaningful effect on the
performance of stock markets.
Some global events affect the financial market in all over the world, there seems to be
uncertainty all around and abrupt changes occur. There's no doubt that world crises of the
magnitude of the September 11 attacks put significant stress on the global economy,
financial markets and international political stability. While past performance is no
guarantee for the future.
1129
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MAY 2011
VOL 3, NO 1
Jane Levine found that, On June 26, 1950, the day after North Korea invaded South
Korea, the index 500 fell by 5.38%. When the Korean War ended in July 1953, the index
was almost 30% above the level it was on the invasion.
The financial market is so much sensitive to the political concerns that not only the
governing party but also the opposition has influence on its performance in some way.
Lee Hyo-sik (2007), stated that the bank's evaluation of Korea's political stability
deteriorated in 2006 and the index fell to 0.42 from 0.55 a year ago, reflecting escalating
conflicts between present-government and opposition political parties
When there is unpredictability about the government, the investors and the traders are
incapable to make correct judgment as forecasting is not promising. When there is change
in government, the investors have some expectations with the new government, if such
expectations are not satisfied the investors lose their confidence that in return affect the
stock markets.
Jang Group economic session (2009) found that, it was thought that with arrival of new
government, index would increase from 15,000 to 22,000, but the white paper against
previous government - released by former Finance Minister Ishaq Dar - badly affected
the investment in the market
Pakistan has three stock exchanges. Lahore stock exchange was established in 1970, it is
25-index with 771 listed companies. Pakistan stock markets are considered to be the
riskiest markets in respect of political instability.
EARTH TIMES (2008), stated that Analysts are agreed in seeing political stability and
prospects of overall improvement in law and order in the country as two chief driving
factors for the index.
EARTH TIMES 27 Mar (2008) stated that Pakistan's market is protected from the current
global economic turmoil because it's a more local economy with about 6 per cent of the
market's capitalization from overseas.
So the global issues are quite less important as compared to the domestic issues. And
when we talk about domestic issues particularly related to the political implications (in
the past 10 years) such as catastrophes, domestic conflicts, change in the Government
policy. They are found quite influencing on the investors study prior to the investment
decision in the financial markets resulting in the huge ups and downs in the stock market.
We have studied the impact of political events that happened in the last 10 years and their
effect on the performance of the Lahore Stock Exchange (LSE).
2. Literature review
2.1 Political stability and economy:

Political stability is a state of hope that the government will be the same tomorrow as it is
today and will not instigate any steps which will affect the economy, peace and
prosperity of nation. The role of political stability in the prosperity of any country in
broad-spectrum and efficient performance of stock market in particular, is extremely
imperative and it is supported by the literature.
Dormandy, (2008) found that Pakistan had a stable and fast growing economy with GDP
growth of 6.5% in 2006.
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Aktas and Oncu, (2006) provided that the news regarding favorable market modification
reduces capital flight.
Dr.Ghaleb, (2005) concluded that because of political stability and safety measures, the
Lebanese market grew 8.5% in 2008 and 9% in 2009. It persuades investors to come into
Lebanon and invest there. It boosts their confidence on the market.
2.2 Political instability and economy
Political instability is a state in which country faces political chaos, and in most cases ,
country gets weaker in terms of economic progress e.g. low foreign direct investment
(FDI), decreasing gross domestic product (GDP).
Brada et al. (2006) Found that the negative impact of political instability on foreign direct
investment (FDI) in transition economies of Central Europe.
Alesenia, (2009) explained that income inequality results in political instability which
leads to lower investments and resultantly a reduced growth rate.
Voth, (2001) found that the war weakened the German republic resultant in inflation in
1919-1923, which was a political happening. Uncertain inflation rate cause the
irregularity in stock prices and eventually in the stock market.
Voth, (2002) stated that not only the unconstructive impact of political precariousness is
related to drop in stock market but frequency of political events and overall volatility of
stock price is also play a vital role.
2.3 Political instability and stock market
Beaulieu et al. (2005) provided that hostile news regarding political event has more
impact on the precariousness of stock return than constructive political events.
Dar-Hsin Chen et al. (2005) found that investors consider political jeopardy as a dictating
feature for valuing asset which is equally imperative for judging the investment
opportunity.
Mei and Guo, (2002) Said that market precariousness, financial crisis, political instability
are sturdily related.
Dimitrios et al., (2000) provided that precarious political stipulations and general index
of Athens Stock Exchange are negatively related.
Beaulieu et al. (2005) analyzed the outcomes of the common stock return of Quebec
firms due to the 30th Oct, 1995 Quebec referendum and found that when financial
markets are unanticipated, the Quebec and Canadians short run stock returns influenced
by political insecurity.
Sidra Malik et al. (2009) found that the trading level and stock return fluctuated as per
intensity of the incident either positively or negatively.
P Chidambaram, (2010) stated that Stock markets of any state would be influenced by the
political shakiness.
Olivia A. Jackson, (2008) found that investors were already alert of the instability of U.S
economy after 9/11 attack There are some socio-political upsets that were pointing out
the deteriorating conditions of the economy.
Demir, and Firat, (2007) studied that the volatility of the short-term capital flows greatly
depend on the socio-political instability.
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Zlin Ismail, and Herry Suhardjo, (2001) showed the reaction of efficient and inefficient
market to the information available after the socio-political events, and the one who can
foresee such situations will gain from the market.
Hans-Joachim Voth, (2001) analyzed that the time of Hitler was the most uncertain and
saw the fourth major price fall that ended up in, stock market crash in 1927.
Hans-Joachim Voth, (2002) found that the state of emergency in Reich caused share price
index dropped by more than 50%.
Hans-Joachim Voth, (2002) found that Rathenaus assassination in June 1923 was the
underlying aspect of stock price index declined by 14.4 %.( Germany).
Huseyin Aktas, and Semra Oncu, (2006) found that astonishing events had an effect on
the ability of market participants to reasonably assess consequences of events.
Demir. (2007) found that the immediate changes in stock prices and portfolio choice are
often provoked by inconsistent and major incidents.
Wang, (2003) found that Decisions concerning investment in stock are influenced by
uncertainty of particular laws and policies.
Lay-Huey Wang, (2003) concluded that lack of Public confidence on government and
domestic economy had severely contracted the Taiwans stock trading.
Mohammad G. Robbani, and Sekhar Anantharaman, (2002) found that political events
with lasting outcomes were not overlooked by the stock market and the stock prices
counter such events perfectly.
3. Research Methodology:
The focus of our study is preliminary on stock market performance in relation to political
events; aimed at anticipating the effect of political precariousness on volatility of stock
markets efficiency. Our methodological approach is time series analysis. This method
integrates time series data of independent as well as dependent variables. We gathered
annual time series of stock index of LSE and political events from year 2003-2010.
The index of the stock market is a statistical depiction of value of stock usually a
portfolio of stocks, which represent either section of an exchange or the whole stock
exchange. It is method of measuring the section of stock market. The Lahore Stock
Market index shows the changes in the stock prices. If stock index goes down it means it
is negatively affecting and if it goes up it shows positive effect on stock index level.
3.2 Data:
From the secondary data we accumulated major political events which influenced Lahore
Stock Market.
Dec. 24, 2003:
Musharaf announces the date of his resignation from chief
of army staff.
May, 22, 2004
Pakistan readmits to Common Wealth.
Sep. 24, 2006:
National Blackout.
Dec. 15, 2006:
Supreme Court Blocks Hasba Bill.
Mar. 9, 2007:
Suspension of Chief Justice.
Apr. 7, 2007:
Lal Masjid Assault in Islamabad.
Apr. 27, 2007:
Benazir Musharaf deal.
June 4, 2007:
Govt. Cracks Down on TV News Channels.
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July, 6, 2007:
July, 20, 2007:
Sep, 10, 2007:
airport.
Oct. 2, 2007:
Nov. 3, 2007:
Aug. 3, 2009:
Nov.20, 2009:
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Assassins attempted to assassinate Musharaf.

Supreme Court reinstates Chief Justice.
Former Prime Minister Nawaz Sharif arrested at Islamabad
Lt. General A.Kiyani appointed as army chief.
Emergency Declared in Pakistan.
Gojra riots.
Death of Ghulam Mustafa Jatoi.
4. Sample
During year 2003-2009, 40 political events have taken place. For gathering data we used
News Papers, (Dawn, The News, & Business recorder) and reports. For our purpose of
study we have taken a sample of 15 major events to observe their brunt on stock market
trading volume. These major events have been chosen randomly. Among these events
some affected the index negatively, but some others had no impact on the index level.
5. Findings
i.
Musharaf announces his resignation from chief of army staff:
Pervaiz Musharaf was former president of Pakistan

who took over presidency on 12 Oct, 1999 from
Nawaz Sharif as chief of army staff (appointed on
Oct 6, 1998). He served the nation as president and
as a chief of army staff at the same time. On 24th
Dec 2003 Musharaf announced that he would
resign by the end of 2004. Index on 23rd Dec was
at 2469.34 and it was at 2479.06 on 24th of Dec. it
shows a steady increase in the level of index. But
following this political incident the index went
down by 19.92 points and reached 2459.14.
ii.
2485
2480
2475
2470
2465
2460
2455
2450
2445
2479.06
2469.34
2459.14
23rd
Dec,2003
24th
Dec,2003
26th
Dec,2003
Pakistan readmits to Common Wealth:
Common wealth is a universal organization

established to sanction world peace, individual
freedom, and representative democracy. Pakistan is
a member of Common Wealth of Nations right
from the first day of its independence. The
membership of Pakistan was suspended in 1999.
On 22nd May 2004 Pakistan regained its
membership. This caused stock market to plunge
down. The index on 21st May was at 2997.44 and
after this happening, the index dropped on 24th May
3010
3000
2990
2980
2970
2960
2950
2940
2997.44
2974.93
2962.88
21st
May,2004
24th
May,2004
25th
May,2004
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th
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and reached 2974.93 and continued to drop and reached 2962.88 on 25 May resulting in
index level to fall by 34.56 points.
iii.
National black out:
On September 24, 2006 there was a national black

out. This was a political event as there was
electricity breakdown all over Pakistan. It had a
detrimental impact on stock market. As the graph
shows index on 22nd September was at 4380.31
and on 25th September it was at 4322.62. The
index level shows a turn down of 57.69 points.
The rationale for this decline can be the holding of
stock market for that time period.
iv. Hasba bill rejection:
The Hasba bill was passed by the assembly of
Khayber Pakhtoon khwan. It was blocked by
Supreme Court on Dec 15, 2006. The graph point
toward the index level, dropped from 4380.37 to
4237.52 within three days because investors lack
of confidence.
v. Suspension of Chief Justice
Chief justice Iftikhar Muhammad Chaudhry was
appointed as chief justice of Pakistan on May,
2005. And he was suspended by President
General Pervaiz Musharraf on March 9, 2007 for
the reasons of transgressing the judicial power,
corruption and misconduct. This political
precariousness pretentious the stock market as
index fell from 4611.63 to 4582.19. It was
because investors lost their confidence and
withdrew their investment resulting in index
level to fall by 29.44 points.
vi.
LalMasjidAssaultinIslamabad:
4400
4380.31
4380
4352.32
4360
4340
4322.62
4320
4300
4280
4400
4350
4380.37
22nd
sep,2006
4358.55
25th
sep,2006
4300
26th
sep,2006
4237.52
4250
4200
4150
4611.63
4620
4600
4582.19
4580
4560
4554.11
4540
4520
8thMar,2005 9thMar,2005 12thMar,2005
The operation of Red mosque was between Islamic

militants and Government of Pakistan on April
7, 2007. This event did not have a profound
negative influence on stock market performance
as index continued to increase from
4370.76 to 4404.83.
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vii.
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BenazirMushrafdeal:
The agreement between the Musharaf and the

former prime minister Benazir Bhutto that
took place o April 27, 2007 and as a result
Benazir Bhutto had to come to Pakistan. It
was taken by the investors optimistically. The
Stock market index moved 10 points up. The
graph shows the increase in the market index.
viii. Pakistan Cracks Down on TV

NewsChannels:
4583.75
4590
4580
4570
4560
4550
4540
4530
4520
4510
4545.84
4535.95
april262007
april272007
4800
The
government
of
Pakistan
banned
th
transmission of TV news channel on 4 June,
2007 on the grounds of violating the PEMRA
rules. The stock market did not respond to this
event negatively as index increased from
4708.67 to 4775.73
april302007
4775.73
4780
4760
4740
4702.82
4708.67
3rdJune,2007
4thJune,2007
4720
4700
4680
4660
Assassins attempted to murder Musharaf:

On 6th July, 2007 assassins attempted to
murder Musharraf, but luckily he was saved
as his plane had taken off. Prior to open fire
from rooftop Mushrrafs plane was far away
from the military airfield in Rawalpindi. The
index before this event on 5st July, 2007 was
at 4875.9 and on event happening day it
increased and arrived at 4879.79 on 6th July
but after this event the index dropped and
reached 4874.25 on 9th July. This event
4882
4879.79
4880
4878
4875.9
4876
4874.25
4874
4872
4870
negatively affected stock index and caused it to

decrease by 5.45 points.
ix.
5thJune,2007
SupremeCourtreinstatesChiefJustice:
Chief justice Iftikhar Muhammad Chaudhry was

suspended by General Pervaiz Musharaf for the
reasons of contravening the judicial powers and
dishonesty. But on July 20th, 2007 Supreme Court
reinstated Iftikhar Muhammad Chudahry as chief
5thJuly,2007 6thJuly,2007 9thJuly,2007
4800
4750
4700
4650
4600
4550
4500
4450
4773.73
4678.11
4589.19
19th
July,2007
20th
July,2007
23rd
July,2007
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justice. This political confrontation affected the stock market positively as index raised
by 95.62 points.
x.
Former Prime Minister Nawaz Sharif arrested at Islamabad airport:
On 10th Sep, 2007, former Prime Minister

Nawaz Sharif was arrested at Islamabad
airport after he tried to enter Pakistan. It
was a political incident but it did not affect
stock market significantly. The level of
index increased from 4380.61 to 4390.09 as
exhibited in the graph.
xi.
Lt.
General
A.Kiyani
appointed as army chief:
President General Musharraf appointed

Lt. General A.Kiyani as army chief of
Pakistan on October 2, 2007. By doing
so, he fulfilled his promise which he
made in December 2003 to resign as
Army chief. Government of Pakistan also
ceased all cases of fraud against Benazir
Bhutto and allowed her to return to
Pakistan. This political event had
significant positive effect on stock
market and index level of LSE rose from
4821.02 to 4901.66.
xii.
EmergencyDeclaredinPakistan:
4400
4380.61
4390.09
4350
4300.36
4300
4250
7thSep,200710thSep,200711thSep,2007
4950
4901.66
4900
4850
4821.02
4800
4750
4737.26
4700
4650
1stOct,2007
2ndOct,2007
3rdOct,2007
A state of emergency was declared by Pervaiz Musharraf (Pakistans president) on 3rd

November, 2007 and lasted until 15th December, 2007. This was the major political event
that highly affected the LSE index level. The index on 2nd November was at 4625.19
which fell on the event day and dropped to 4398.1 on 3rd Nov, but after the incident index
again grew up to 4436.97 as shown in the graph.
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xiii. Gojrariots:
On 1st of August, 2009, Gojra riots

started as
aggressive Islamists
attacked
Pakistan's
Christian
minority. This political event had
little effect on index level as shown
in the graph it goes down from
2317.81 to 2316.56 but next day
again went up to 2343.93.
xiv.
Death
of
MustafaJatoi:
2350
2343.93
2340
2330
2320
2317.81
2316.56
2310
2300
31stJuly,2009
3rdAugust,2009 4thAugust,2009
Ghulam
Many other incidents have affected the

index widely, an example the death of
2900
2893.4
acting prime minister of Pakistan Ghulam
2890
Mustafa Jatoi. Mr. Jatoi (14 August 1931
20 November 2009) was a Pakistani
2880
2872.93
politician and he served as the Acting
2870
2860.63
Prime Minister of the country for a period
2860
of 3 months, from August 6, 1990 to
November 6, 1990. The index on 19th Nov,
2850
2009 was 2872.93 and on 20th Nov, 2009
2840
it was at 2893.4. The index showed a rise
19thNov,2009 20thNov,2009 23rdNov,200
of 20.47 points. But after this event it went
down to 2860.63 as shown in the graph. It affected Lahore Stock Exchange (LSE) index
negatively.
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Below are the graphs showing the overall index position of LSE before and after the
occurrence of these political events.
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11. Conclusion
If we go through the entire study of these political events and their impact on the index of
Lahore Stock Exchange, we come to the following conclusions.
1. Most of the political events in our study are not affecting the stock market
significantly, such as Musharraf announced his resignation, Pakistan readmitted
to Common Wealth, assassins attempted on Musharraf, gojra riots, death of
Gulam Mustaffa jatoi.
2. The readmission of Pakistan to Common Wealth has not affected the index of
Lahore stock exchange positively. This strengthens the finding of Earth Times
(2008) where it was stated that global issues are quite less important as compare
to the domestic issues for the stock markets.
3. Some of the political events have affected the stock market significantly. The
declaration of emergency in Pakistan has caused the index of LSE to fall by
188.22 points.
4. The appointment of Lt. General Ashfaq Pervaiz Kiyani as Chief of Army Staff
has let the index increase by 164.4 points.
5. The arrest of Mian Muhammad Nawaz
index by 89.73 points.
Sharif has unexpectedly increased the
6. Restoration of Chief Justice of Pakistan, Iftikhar Muhammad Chudary, took the

market from 4589.19 to 4773.73 causing an increase of 184.54 ponits.
7. The rejection of Hasba Bill by the Supreme Court has caused the index of Lahore
Stock Exchange to decrease by 142.85 points.
In overall the behavior of the stock market is very unpredictable such as it went up when
a political leader was arrested and it went down when the membership of the country to
Common Wealth was restored.
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Evidence from the 1995 Quebec Referendum.
Sidra Malik, S. H. (2009). Impact of Political Event on Trading volume and Stock
Returns: The Case of KSE.
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Suhardjo, I. I. (2001). The Impact of Domestic Political Events on an Emerging Stock

Market : The Case of Indonesia. 28.
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RELATIONSHIP BETWEEN THE FAMILY BACKGROUND AND SCHOOL BEHAVIOR AT
PRIMARY SCHOOL LEVEL.
Fehmida
Lecturer IER Gomal University, Dera Ismail Khan, KPK, Pakistan.
Liaquat Hussain
Assistant Professor IER, Gomal University, Dera Ismail Khan, KPK, Pakistan.
Allah Noor Khan
Shehla Sheikh
Abstract
The problem under study was relationship between the family background and school
behavior. The study is important because it tells about the impact of family background
on the student behavior and in this way helps to modify the behavior towards the set path
by the society. Three research hypotheses were tested. First hypothesis was that there is
no relationship between the family background and the school behavior. Similarly the
other two hypotheses were separately for male and female students family background
and teaching behavior. All the primary school students form the population of the study.
A sample of 200 students was taken from the 10 male (5 urban + 5 rural students) and 10
female (5 urban + 5 rural students) schools of district DIKhan on random basis. A likert
type scale and research questionnaire was used for data collection. Mean, standard
deviation and correlation statistic were used for data analysis. The result shows that there
was a strong relationship between the family background and the school behavior, where
as moderate correlation for separated group of females.
Keywords: RELATIONSHIP BETWEEN THE FAMILY BACKGROUND AND
SCHOOL BEHAVIOR AT PRIMARY SCHOOL LEVEL.
INTRODUCTION
The students in the school belong from different backgrounds. Some students belong
from the rural areas while other from the urban areas. Similarly some from the crowded
homes where as other from the broken homes. Students also differ in their socio
economic statuses. Some come from the rich families having every facility of life while
others dont avail such facilities. The behavior of the student in the schools is also the
factor of their home environment and family background. What they se in the home try to
implement it in the school also. Language is usually thought of as a way to express ideas
and feelings and to communicate messages (Leonard, 1981). Language affects the school
behavior and the attitude of the listeners. Similarly other aspects of culture such as
clothing, colors, socio economic status, religion, technology, Population and the care of
the parents all effect the school and classroom teaching behavior of the students.
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The present study uncovers some of the facts that whether there is any relationship
between the family background and students behavior at the school.
The problem under study was Relationship between the family background and school
behavior at primary school level.
Following were the major objectives of the study
1. To know the family background of the student
2. To know the school behavior of the students
3. To find the relationship between the family background and teaching behavior
The study was significant due to following reasons:
1. It tells s about the student classroom behavior which is an important factor in
maintaining the classroom discipline.
2. The student behavior can be modified according to the set path by the society.
HYPOTHESIS
Following null hypothesis were tested
1. H01: There is no relationship between the family background and the school
behavior of the students.
behavior of male students.
behavior of female students.
REVIEW OF THE RELATED LITERATURE
Family background and school behavior
In earlier times the family was a way of life. As a unit of production it had a strong claim
on its members and was closely linked to other institutions and to the community. The
modern family is less closely tied to other institutions. Relationship among family
members is not as clearly defined as they were century ago.
A family is a kin-based cooperative unit. Kinship is more inclusive than family because it
does not always refer to a functioning group. Instead it refers to a network of relatives
who may or may not have much to do with each other. Broadly speaking kinship is a
relationship that is close and lasting enough to create a sense of common origin. In theory
it can be base on long association and shared tradition (Broom. L, Selznich.P, Darroch.
D.B ,1981).
According to (Shahid.S.M, ) Islam is a way of life. Islam is not mere concerned with
religious ritual but it seek to regulate bhuman conduct and behavior in all fields of life
including educational institutions and all spheres of action. We being a muslim practice
in the school those values which we acquire from the home.
According to ( Shah,L.H, 2011) All the steps stated in the Erik Erikson theory of social
development states that the family background of the individual effects very much the
life and school behavior of the children.
Behavior Modification
Behavior modification is based on the behavior philosophy of B.F. Skinner, who assumes
that most behavior are learned, that learning is largely controlled by the environment.
Behavior that are rewarded or reinforced in some manner will occur again.
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According to ( Moore, 2001) The basic premise of behavior modification is that behavior
is changed by altering the consequences, outcomes or rewards which follow the behavior
( Presbie and Brown, 1976). In behavior modification model the reinforcement is used
systematically to change some aspects of student behavior at school.
METHODOLOGY
POPULATION
All the primary school students form the population of the study.
SAMPLE
A sample of 200 students was taken from the 10 male (5 urban + 5 rural students) and 10
female (5 urban + 5 rural students) schools of district DIKhan was taken on random basis.
INSTUMENTATION
Two instruments were used for this study as under:
1. The Likert type scale to know the student school behavior. This scale was
developed by the researcher himself and was validated by the experts from
different departments/institutes of the Gomal University, DIK, KPK, Pakistan.
2. The questionnaire to know the family background of the students. . This
questionnaire was also developed by the researcher himself and was validated by
the experts from different departments/institutes of the Gomal University, DIK,
KPK, Pakistan.
PROCEDURE
The likert type scale consisting of 20 items and the questionnaire consisting of 20
questions were distributed among the primary school students to know the student school
behavior and family background respectively. The likert type scale consists of 3 options
only keeping in view of the primary level. The questionnaire was also in urdu. The
questionnaire also was in Urdu version consisting of Yes/ No type of questions. The
students responses were arranged in the form of table and the correlation statistic was
used for the analysis of data.
Table1: Showing the overall correlation of family background and school behavior
N
Mean
family background
20
4.25
.851
school behavior
20
3.75
.444
0.870**
**. Correlation is significant at the 0.01 level (2-tailed).

Table2: Showing the correlation of Male family background and School behavior
N
Male family
Mean
10
background
Male school
behavior
4.00
Std. Deviation
Correlation
1.054
1.0*
10
3.50
.527
*. Correlation is significant at the 0.01 level (2-tailed).
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Table3: Showing the correlation of Female family background and

school behavior
N
Female family
Mean
10
background
Female school
behavior
4.50
.527
0.50*
10
4.20
.422
*. Correlation is significant at the 0.01 level (2-tailed).
FINDINGS
Following were the major findings of the study:
1. Overall mean score for the family background was 4.25 and that of school
behavior was 3.75.
2. Overall standard deviation for the family background score was 0.851 and that of
school behavior score was 0.444.
3. Overall correlation between the family background and the school behavior was
0.870.
4. In case of male students the mean score for the family background was 4 and that
of school behavior was 3.5.
5. In case of male students the standard deviation for the family background score
was 1.05 and that of school behavior score was 0.52.
6. In case of male students the correlation between the family background and the
school behavior was 1.0.
7. In case of female students the mean score for the family background was 4.5 and
that of school behavior was 4.2.
8. In case of female students the standard deviation for the family background score
was 0.527 and that of school behavior score was 0.422
9. In case of female students the correlation between the family background and the
school behavior was 0.5.
CONCLUSION
Following conclusions are hereby made in the light of the findings.
1. The overall correlation between the family background and the school behavior was
0.870 at 0.01 levels, which is a very high correlation. This means that the family
background and the school behavior are correlated with each other. There fore the
first null hypothesis that there is no correlation between the family background and
the school behavior is here by rejected. This means that family background has an
impact on the school behavior of the students at the primary level.
2. In case of male students the correlation between the family background and the
school behavior was 1.0 at 0.01 levels, which is a very high correlation. This means
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that in case of male students the family background and the school behavior are
correlated with each other. There fore the second null hypothesis that there is no
correlation between the family background and the school behavior of male students
is here by rejected. This means that family background has an impact on the school
behavior of the male students at the primary level.
3. In case of female students the correlation between the family background and the
school behavior was 0.5 at 0.01 levels, which is a moderate correlation. This means
that in case of female students the family background and the school behavior are
correlated with each other. There fore the third null hypothesis that there is no
correlation between the family background and the school behavior of female
students is here by rejected. This means that family background has an impact on the
school behavior of the female students at the primary level.
RECOMMENDATIONS
Following recommendations are here by made in the light of the findings and
conclusions.
1. Family background and the school behavior are highly correlated. Best family
background having the good habits promote good behavior at the school.
2. The students belonging from the families where character building is practiced
from the very start of children provide a best nursery to the schools where these
characters are more polished if the students encounter the able teachers.
3. Students belonging from the literate families practice the socio effects at the
school with their peer groups.
4. There is also no much difference of the family backgrounds and school behavior
of the male and female students where as the rural and urban students were up to
some extent different in their behaviors at the school.
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References
Broom. L, Selznich.P, Darroch. D.B (1981). Sociology, Seventh edition.

Harper and Row Publishers, New York, pp-324
Shahid.S.M (2006). History and Philosophy of education. First edition. Majeed Book
Depot, Lahore, Pakistan. Pp-92.
Shah.L.H (2011). Human Development and learning. First edition. Nawaz Book
Centre. Rahim Bazar, DIKhan, KPK, Pakistan. Pp-37.
Moore. K.D (2001). Classroom Teaching Skills. 5th edition. MC Graw Hill Company,
Singapur.
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Attitude of Gomal university teachers toward pre-step programme of H.E.C

Allah Noor Khan
Liaquat Hussain
Fehmida
Shehla Sheikh
Abstract
The problem under5 study was to find out the attitude of Gomal university teachers
towards pre-step programme of HEC. The problem was significant because it would tell
about the attitude of Gomal university teachers which is helpful for the implementation of
pre-step programme. The study would also helpful to the detailed description of pre-step
programme which is very beneficial for person concerned. Two research hypotheses were
tested. First was Gomal university teachers have negative attitude toward pre-step
programme, and the second hypothesis was there are no hurdles in implementation of
pre-step programme. The population of the study was all the teachers of the Gomal
University, DIKhan. A sample of 100 teachers was selected from 10 different
departments and institutes of Gomal University for the study. A likart type scale was used
for data collection. Percentage statistic was used for data analysis.
Keywords: Attitude , Gomal university , Teachers , Pre-step Programme , H.E.C
INTRODUCTION
The Pre-Service Teacher Education Program (Pre-STEP) is a USAID-funded preservice teacher training program serving six out of seven areas of Pakistan. Pre-STEP is
jointly implemented by AED, Michigan State University and EDC. The goal of Pre-STEP
is to improve the quality of basic education by increasing the effectiveness classroom
teaching, an area identified as a major concern for Pakistan's Ministry of Education.
EDC and Pre-step team collaborate with the Ministry of Education, the Higher
Education Commission, selected universities and the district-level colleges responsible
for the training and certification of pre-service teachers.
As a partner in Pre-STEP, EDC would be primarily responsible for strengthening
the capacity of teacher training colleges. In particular, EDC would help prepare colleges
to provide a two year diploma program, linked to the four year B.Ed. Improving. The
practicum experience for student teachers would be an important part of the Preparation.
EDC will use technology tools (video, audio and other multi-media content) to support
its capacity building work with the GCETs and, where appropriate, use them and
other tools and products of capacity development with Colleges to extend the reach and
strengthen the impact of Pre-STEP interventions over all.
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This research was focused to identify the attitude of Gomal University teachers
towards Pre-Step programme and to determine the possibilities of implementation of this
programme in Gomal University and its constituent and affiliated Colleges and
institutions.
The problem under study was to find out the Attitude of Gomal university teachers
toward pre-step programme of H.E.C
OBJECTIVE OF THE STUDY
1. To investigate the attitude of Gomal university teachers toward pre-step
programme.
2. To point out the possibilities of introducing this programme in Gomal university.
3. To identify the problem and hurdles in introducing this programme.
4. To provide proper suggestions for the hurdles and difficulties if founded any.
SIGNIFICANT OF THE STUDY
The study was significant due to the following,

1. It would tell about the attitude of Gomal university teachers which is helpful for
the implementation of pre-step programme.
2. The study would also helpful to the detailed description of pre-step programme
which is very beneficial for person concerned.
3. The finding of this study would helpful increasing positive attitude toward prestep programme.
HYPOTHESES
Ho1: Gomal university teachers have negative attitude toward pre-step programme.
Ho2: There are no hurdles in implementation of pre-step programme.
REVIEW OF THE RELATED LITERATURE
ATTITUDE
Attitude is the tendency to react specified toward objects, situation or value, usually
accompanied by feeling emotion. Attitude plays a significant role in the behavior, can
learn and invest his energy, time and finance. There are so many definitions of different
psychologist about attitude but some definitions are given below.
According to the Encyclopedia Britannica. (1960)"Attitude technically is predisposition
toward a certain type of reaction, loosely and popularly it has been used a catch all term
for the whole body of ones opinions, belief, sentiments and disposition. According to
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Johnson (1959) "We not only see with the eyes but with our assumption also.
According to Ebel (1960) "Attitude is generalizations whose validity is open to Winston".
According to C.V good Attitude means the reaction of a person towards object or
situation. It is the like and dislike of any one towards the person, political party, event,
custom etc
Characteristics of Attitude
Some characteristics of Attitude that have come to be commonly accepted.
Attitude is not in born, they are learned through experience.
Attitude have objective reference, one holds an attitude regarding some object,
person. Or issue.
Attitude differs in valence, having an attitude regarding an object signifies that
person concerned is either favorably or unfavorably disposed toward it. Stated
Otherwise, attitude is positive or negative.
They orient the organism to the attitude object and channel the energy at the
disposal of the organism.
Form operational point of view, attitude are manifested in the consistency of the
response made to specific object or situation (Mohsin, 1990)
Measurement of Attitude
Attitude concerns feeling about particular object, physical, types of people, particular a
person, social institution, government policies and other. Some statements relating to
attitude are as following.
The united Nation is a constructive force in the world today.
The trade Union has too much affected our economy.
All public schools should be fully integrated.
Attitude are distinguished from interest and value by the fact that they always concern
a particular "Target" or object .The most approach to the measurement of attitude is to
people in one manner or other. What these attitude are. For example objects are presented
with a list containing favorable and unfavorable statements toward the United Nation and
are asks to agree or disagree with each .such self report inventories are called attitude
scale.
Attitude Chang
The problem of attitude change belongs largely to the area of social influence
process, and most of the earlier researchers on attitude change have generally, used the
method of direct or indirect persuasive communication. For a communication to be
affective a producing change in behavior, it has to cover successfully six intermediate
stages, namely delivery of the communication attention to its comprehensive, its
acceptance, its retention, and finally, its influence and behavior. Failure at any one of the
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mediating steps would make the communication fruit less. McGrew explain his point by
the example of an advertising campaign. The advertisement will influence the buyer's
motivate if it succeeds.
History of Pre-step
Pre-service teacher education in Pakistan has a long history. As a part of a colony

of the British Empire its institutional structures were similar to those used in Britain.
Thus the first two Normal Schools were set up in Karachi and Lahore, the two largest
cities of Pakistan, in the middle of the nineteenth century to help prospective teachers
learn about pedagogy in addition to their other school subjects.
Shortly after Pakistans independence in 1947 the first national conference on
education was organized, which recommended the following academic and professional
standards for teachers:
Grades taught Academic qualification Duration of training
1-5 (Primary) Matriculate / Secondary (10 years) 1 year
6-8 (Middle) Intermediate / Higher Secondary (12 years) 2 years
9-10 (Secondary) Bachelors degrees (14 years) 2 years
11-12 (Higher Secondary) Masters degree (16 years) short training course
These prescriptions were not followed primarily because of the rapid increase in
demand for teachers in newly established schools and the shortage of academically
qualified and trained Teachers to work in them. This shortage was acutely felt in the
smaller provinces of Baluchistan and KPK where schools for girls in rural areas could not
be set up, or closed down because of teacher shortage.
METHODOLOGY
Population
All the teachers of Gomal University comprised the population of the study.
Sample
A sample of 100 teachers was selected from 10 different departments and institutes of
Gomal University for the study.
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Instrument
A likart type scale was developed by the researcher him self and was validated by experts
from I.E.R Gomal University and different other departments of the Gomal University
D.I.KHAN.
Procedure
After preparation of instrument photocopies of instrument were distributed among the

teachers and were filled up and recollected. After receiving response from the teachers
the data was arranged in the form of tables. Finding and conclusions were drawn in the
light of analysis and suggestions were made at the end. The percentage% was used for
analysis of data.
Table 01: Per-step focuses on the improvement of Per-service teacher
education in Pakistan.
Strongly
Agree
Undecided
Agree
36
12
0
72%
24%
0%
Disagree
2
8
Strongly
Disagree
0
0%
The above table show that 72% teachers are Strongly Agree, 24% Agree, 0%Undecided,
4%DisAgree, and 0% are strongly disagree.
Table 02: Pre-step programme are source of providing experts to the nation.
Strongly
Agree
18
36%
Agree
Undecided
Disagree
2
4%
8
16%
2
4%
Strongly
Disagree
0
0%
Table 03: Pre-step is a wastage of time and money.
Strongly
Agree
10
20%
Agree
Undecided
Disagree
11
22%
14
28%
11
22%
Strongly
Disagree
4
8%
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Table 04: Per-step is an expensive programme.
Strongly
Agree
17
34%
Agree
Undecided
Disagree
12
24%
8
16%
8
16%
Strongly
Disagree
5
10%
The above table show that 34% teachers are Strongly Agree, 24% Agree, 16%Undecided, 16%DisAgree,
and 10% are strongly disagree.
Table 05: Through pre-step programme classroom teaching will be improved.
Strongly
Agree
23
46%
Agree
Undecided
Disagree
17
34%
4
16%
4
8%
Strongly
Disagree
2
4%%
The above table show that 46% teachers are Strongly Agree, 34% Agree, 8%Undecided, 8%DisAgree, and
4% are strongly disagree
Table 06: Pre-step programme may change the behavior of students through effective teaching.
Strongly
Agree
19
38%
Agree
Undecided
Disagree
22
44%
7
14%
1
2%
Strongly
Disagree
1
2%
Table 07: Per-step may also create new financial incentive for teachers education
Strongly
Agree
14
28%
Agree
Undecided
Disagree
13
26%
17
34%
5
10%
Strongly
Disagree
1
2%
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Table 08: Per-step programme may improve the teaching skills.
Strongly
Agree
Undecided
Disagree
Strongly
Agree
Disagree
25
14
3
3
5
50%
28%
6%
6%
10%
10% are strongly disagree.
Table 09: Per-step may help new teachers to improve teaching practical skills.
Strongly
Agree
26
52%
Agree
Undecided
Disagree
14
28%
5
10%
3
6%
Strongly
Disagree
2
4%
Table 10: pre-step may help to develop a national policy framework for teacher education.
Strongly
Agree
13
26%
Agree
Undecided
Disagree
19
38%
12
24%
3
6%
Strongly
Disagree
3
6%
Table 11: Per-step programme is a source of encouragement and motivation.
Strongly
Agree
Undecided
Disagree
Strongly
Agree
Disagree
18
17
9
5
1
36%
34%
18%
10%
2%
Table 12: pre-step programme save energy and time.
Strongly
Agree
Undecided
Disagree
Strongly
Agree
Disagree
17
13
13
6
1
34%
26%
26%
12%
2%
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Table 13: pre-step programme requires more qualified and trained teachers.
Strongly
Agree
Undecided
Disagree
Strongly
Agree
Disagree
26
14
4
4
1
52%
28%
8%
8%
2%
2% are strongly disagree.
Table 14: pre-step programme is interesting way of teaching for the teachers.
Strongly
Agree
Undecided
Disagree
Strongly
Agree
Disagree
25
17
4
3
1
50%
34%
8%
6%
2%
The above table show that 50%% teachers are strongly Agree, 34% Agree, 8%Undecided, 6%DisAgree,
Table 15: Through pre-step programme teachers may teach effectively.
Strongly
Agree
Undecided
Disagree
Strongly
Agree
Disagree
19
22
4
2
3
38%
44%
8%
4%
6%
The above table show that 38%% teachers are Strongly Agree, 44%% Agree, 8%Undecided, 4%DisAgree,
Table 16: pre-step programme satisfy the teachers.
Strongly
Agree
Undecided
Disagree
Strongly
Agree
Disagree
19
13
9
5
4
38%
26%
18%
10%
8%
Table 17: pre-step programme if implemented in Pakistan may achieve the objective.
Strongly
Agree
18
36%
Agree
Undecided
Disagree
20
40%
10
20%
2
4%
Strongly
Disagree
0
0%
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Table 18: This programme satisfying the present needs of the students.
Strongly
Agree
Undecided
Disagree
Strongly
Agree
Disagree
17
21
9
3
0
34%
42%
18%
6%
0%
Table 19: This programme may be helpful in satisfying the need of the teachers.
Strongly
Agree
17
34%
Agree
Undecided
Disagree
18
36%
9
18%
3
6%
Strongly
Disagree
3
6%
Table 20: Pre-step programme increase creative thinking in students.
Strongly
Agree
Undecided
Disagree
Strongly
Agree
Disagree
16
18
8
5
3
32%
36%
16%
10%
6%
Table 21: The duration of pre-step is extended over four years that may not be suitable for female
students.
Strongly
Agree
Undecided
Disagree
Strongly
Agree
Disagree
29
12
12
5
2
58%
24%
24%
10%
4%
Table 22: One year B.E.D programme is preferable to B.E.D 4years because weightage of the degree
is the same.
Strongly
Agree
21
42%
Agree
Undecided
Disagree
11
22%
8
16%
8
16%
Strongly
Disagree
2
4%
The above table show that42% teachers are strongly Agree, 22% Agree, 16%Undecided, 16%DisAgree,
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Table 23: Per-step 4years may be problematic as it is not announced by public service commission.
Strongly
Agree
Undecided
Disagree
Strongly
Agree
Disagree
15
10
15
7
3
30%
20%
30%
14%
6%
Table 24: Pre-step 4years may be costly for the students.
Strongly
Agree
Undecided
Disagree
Strongly
Agree
Disagree
22
15
5
8
0
44%
30%
10%
16%
0%
Table 25: Pre-step programme is liked by students.
Strongly
Agree
Undecided
Disagree
Strongly
Agree
Disagree
27
12
5
3
3
54%
24%
10%
6%
6%
FINDINGS
Following were the finding of the study:1. 72% teachers strongly agree, 24% agree, 0% undecided, 4% Disagree and 0% are
strongly, disagree about pre-step focuses on the improvement of Pre-service
teacher education in Pakistan.
2. 36% teachers strongly agree, 44% agree, 16% undecided, 4% disagree and 0% are
strongly disagree that pre-step program is source of providing experts to the
nation.
3. 20 % teachers strongly agree, 22% agree, 28% undecided 22% disagree, and 8%
are strongly disagree that pre-step is wastage of time and money.
4. 34% teachers strongly agree, 24% agree, 16% undecided, 16% undecided, 16%
disagree and 10% are strongly disagree that pre-step is an expensive program.
5. 46% teachers strongly agree, 34% agree, 8% undecided, 8% disagree and 4% are
strongly disagree that through pre-step programme classroom teaching will be
improved.
6. 38% teachers strongly agree, 44% agree 14% undecided 2% disagree and 2% are
strongly disagree that pre-step programme may change the behavior of student
through effective teaching.
7. 28% teachers strongly agree, 26% agree 34% undecided 10% disagree and 2% are
strongly disagree that pre-step may also create new financial incentives for
teacher education.
8. 50% strongly agree, 28 agree, 6% undecided, 6% disagree and 10% are strongly
disagree that pre-step may improve that teaching skills.
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9. 52% strongly agree, 28% agree, 10% undecided, 6% disagree and 4% are strongly
disagree that and pre-step may help new teachers to improve teaching practical
skills.
10. 26% teachers strongly agree, 38% agree, 24% undecided ,6% disagree and 6% are
strongly disagree that pre-step may help to develop a national policy frame work
for teacher education.
11. 36% teachers strongly agree, 26% agree, 26% undecided, 12% disagree and 2%
are strongly disagree that pre-step program save energy and time.
are strongly disagree that pre-step program save energy and time.
13. 52% teachers strongly agree, 28% agree % undecided 8% disagree and 2% are
strongly disagree that pre-step requires more qualified and trained teachers.
14. 50% teachers strongly agree, 34% agree, 34% agree, 8% undecided 6% disagree
and 2% are strongly disagree that pre-step is interesting way of teaching for
teachers.
15. 38% teachers strongly agree 44% agree, 8% disagree and 6% are strongly
disagree, that through pre-step programme teachers may teach effectively
16. 38% strongly agree, 26% agree, 18% undecided 10% disagree and 8% are
strongly disagree that pre-step programme satisfy the teachers.
17. 36% teachers strongly agree, 405 agree 20 undecided, 4% disagree and 0%
strongly disagree that pre-step if implemented in Pakistan may achieve the
objectives.
18. 34% teachers strongly agree, 42% agree, 18% disagree and 0% strongly disagree
that this programme satisfying the present needs of the student.
19. 34% teachers strongly agree, 36% agree, 18% undecided 6% disagree and 6%
strongly disagree that this programme may be helpful in satisfying the needs of
the teachers.
strongly disagree that pre-step increase creative thinking in students.
strongly disagree that the duration of pre-step is extended over four years that
may not be suitable for female students.
22. 42% teachers strongly agree, 22% agree, 22% agree, 16% undecided, 16%
disagree and 4% strongly disagree that one year B.Ed programme is preferable to
B.Ed 4 Year because weight age of degree is the same.
23. 30% teachers strongly agree, 20% agree, 30% decided 14% disagree and 6%
strongly disagree pre-step 4 years may be problematic as it is not announced by
public service commission.
24. 44% teacher strongly agree, 30% agree, 10 undecided, 16% disagree and 0%
strongly disagree that pre-step 4 year may be costly for the student.
25. 54% teachers strongly agree, 24% agree 10% undecided 6% disagree and 6%
strongly disagree that pre-step is liked by student.
CONCLUSIONS
Following conclusions were hereby drawn from the finding of this research.
1. Majority of the teachers are in favor that pre-step focuses on the improvement of
pre-service teacher education.
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2. Most of the teachers are agree that pre-step is source of providing experts to the
nation.
3. After knowing the good side effect pre-step majority of teachers are strongly
agree that pre-step change the behavior of the student.
4. Majority of teachers disagree that pre-step is wastage of the time and money.
5. Most of the teachers strongly agree that pre-step is and expensive programme.
6. Most of the teachers agree that pre-step improve classroom teaching.
7. Most of teachers are strongly agree that pre-step create new financial incentives
for teacher education.
8. Majority of teachers strongly agree that pre-step improve teaching skills.
9. Majority of teachers strongly agree that pre-step help to develop a national policy
framework.
10. Most of teachers strongly agree that pre-step help new teachers to improve
teaching practical skills.
11. Majority of teachers strongly agree that pre-step save time and money.
12. Most of teachers strongly agree that pre-step requires more trained teachers.
13. Most of teachers strongly agree that pre-step is interesting way of teaching for
teachers.
14. Most of teachers agree that through pre-step teachers teach effectively.
15. Majority of teachers strongly agree that pre-step satisfy the teachers.
16. Majority of teachers agree that pre-step achieve the objectives
17. Most of teachers agree that pre-step satisfying the present needs of the student.
18. Most of teachers agree that pre-step helpful for the teachers.
19. Majority of teachers agree that pre-step programme increase creative thinking in
student
20. Majority of teachers strongly agree that duration of pre-step is not suitable for
female students.
21. Majority of teachers strongly agree that weight age of B.ED programmes is same.
22. Majority of teachers agree that pre-step 4 Year is problem for public service
commission to announce.
23. Most of teachers strongly agree that student liked the pre-step programme.
RECOMMENDATIONS
1. Pre-step should be introduced in all the education institution.
2. Qualified professional teachers may be appointed for this programme.
3. Seminars, conference and discussion should be arranged to give awareness to the
teachers.
4. Pre-step should be arraigned in teacher education program so the new teachers
should be known about pre-step.
5. Pre-step should be implemented very soon so that the universities of Pakistan
should become as pre foreign institutions.
6. Teachers should be convinced and informed about the advantages of pre-step.
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References
Mushin S.M (1990) Attitude concept. Formulates and change, New Delhi, vilely Easter
limited P-22.
Rosenberg Milton J. Tlovlan Carl. (1960), Attitude organization and change New York,
Ubial poolrooms press Inc p-4.
Ghorpadae B.M (1985) Essentials of psychology New Delhi 3rd Edition P-385.
William C.B (1960) Encyclopedia Britannica Chicago, Benton Publisher P-75.
Encyclopedia of Education Britannica. (1960).
Ebel (1960). Attitudes. M.C Graw Hill publishing company.
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Risk factors of low back pain among rural & urban areas of Pakistan.
Dr.Muhammad Naveed Babur
BSPT(Pak),DPT(Pak)
Member,NCRC,Physical Therapy(HEC)
PRINCIPAL/Associate Professor
ISRA School of Rehabilitation sciences(ISRS)
ISRA University, Islamabad
Dr.Waqar Ahmed Awan
Senior Lecturer
Isra university,islamabad campus.
Abstract;
Objective: To find out the different risk factors for developing mechanical chronic LBP
in the rural and urban societies of Pakistan and to find out which one is the most pronesociety to develop chronic LBP
Study design: A cross sectional survey
Place and duration of study: At Multan, Faisalabad, and Rawalpindi from 5 April to
May 20, 2010.
Material and Methods: The information was collected through self-administered
questionnaire. The questionnaire was filled from the clients (age 30-50years) and was
classified into two groups rural and urban. The data was collected, scored, analyzed and
interpreted by SPSS. The total no of participants were n=100(urban.n=52, rural, n=48)
Result: The prevalence of mechanical chronic low back pain (MCLBP) in the urban and
rural was 39.3%, 31.3% respectively. The percentage of awareness about health in the
clients of urban and rural was 17.9%, 12.5% respectively. The percentage for cases
diagnosed in urban and rural was 12.3%, 10.4% respectively.
The percentage that others of their family members have MCLBP pain in urban and rural
was 17.9%, 29.2% respectively. The percentage of urban and rural clients, that they have
congenital abnormalities 1.8%, 0% respectively. The percentage of MCLBP due to
obesity in urban and rural societies was 10.7%, 4.2% respectively .the percentage of
MCLBP due to pregnancy in urban and rural societies was 0%.0% respectively. The
percentage of MCLBP in urban and rural societies, due to psychological disorders was
28.6%, 18.8 % respectively, to labor job was 35.7%, 41.7% respectively, due to repetitive
movements of bending, lifting and turning was 39.3%,70.8%
respectively, due to
prolong sitting job was 50%, 41.7% respectively, due to vibration of the vehicles was
23.2%,20.8% respectively and due to irregular exercises was 21.4% ,16.7% respectively
and clients who do exercises regularly was 5.4%, 4.2% respectively.
Conclusion: The study showed high prevalence of MCLBP in urban then in rural region.
The study showed that MCLBP in the urban societies are mostly caused by obesity,
prolong sitting job ,psychological disorders and lack of exercises, and MCLBP in rural
societies are mostly caused by lack of health awareness ,heavy labor job and repetitive
movements of bending ,lifting, turning etc.
Key words: MCLBP, urban, rural, prevalence, risk factors.
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Introduction;
Although the literature is filled with information about the prevalence and incidence of
back pain in general, there is less information about mechanical chronic back pain
(MCLBP), partly because of a lack of agreement about definition. Chronic back pain is
sometimes defined as back pain that lasts for longer than 7-12 weeks.[1] Others define it
as pain that lasts beyond the expected period of healing, and acknowledge that chronic
pain may not have well-defined underlying pathological causes.[2] Others classify
frequently recurring back pain as chronic pain since it intermittently affects an individual
over a long period.[3] Low back pain (LBP) is the most prevalent musculoskeletal
condition and one the most common causes of disability in the developing nations.[4]
There is a general assumption that LBP prevalence in Asia is comparatively lower than in
developed countries. It is not the truth. [5]
The lifetime prevalence of LBP (at least one episode of LBP in a lifetime) in developed
countries is reported to be up to 85%.[6] .LBP results in significant levels of disability,
producing significant restrictions on usual activity and participation, such as an inability
to work. Furthermore, the economic, societal and public health effects of LBP appear to
be increasing and not constant or decreasing. It is an established fact that LBP incurs
billions of rupees in medical expenditures each year [7]. This economic burden is of
particular concern in poor nations such as Pakistan, where the already restricted health
care funds are directed toward epidemics such as HIV and AIDS and polios etc.
A review of research publications on LBP suggests that most research has been
conducted in the developed World,(America, European countries etc ) where little racial
heterogeneity exists [8]. Racial, economic and social homogeneity is not a feature of
Pakistan, a developing country. In Pakistan, it is quite the reverse one, It is logical,
therefore, to argue that genetic diversity, and differences in social structure and
economics between the developed and developing nations, may underlie reported
differences in the prevalence of LBP [9]. Other Pakistan -specific factors such as poverty,
lack of medical facilities, low standard of education , low literacy rate ,the prevalence of
HIV and AIDS epidemic, types of work tasks ,more working hours and lack of jobsecurity for workers as compared to the developed countries and poor nutrition may also
influence certainly LBP prevalence among Pakistani societies. [10]
Mechanical low back pain (LBP) exists in every culture and country (both in developed
and under-developing countries). Estimates by numerous investigators indicate that at
some point in their lives, 80% of all human beings experience LBP [11].Mechanical LBP
becomes more prevalent in countries with higher per capita income and where more
liberal policies and adequate funds provide for compensation (e.g., Germany, Sweden,
Belgium). The literature on the epidemiology of LBP is accumulating, but for the most
part, studies are restricted to high-income countries, therefore little is known about the
epidemiology of LBP in the rest of the world [12]. In developed countries such as the
United States of America (USA) and Australia, LBP prevalence ranges from 26.4 to
79.2%. [13]There appears to be a general assumption that LBP prevalence in Africa and
Asia is lower than that reported in the developed nations, While the research-based study
shows quite the reverse of that.[14].
A systematic review into the global prevalence of LBP by Walker in 2000, identified that
of the 56 included studies, only 8% were conducted in developing countries,(approx 4
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studies) and among these 4 studies only one study conducted in Asia [15],The lack of
information on the prevalence of LBP in developing countries is therefore a significant
shortcoming(it shows that Asian-workers , particularly workers of the developing
countries are not aware about back health and thus more prone to develop chronic
mechanical low back pain.) particularly as it is predicted that the greatest increases in
LBP prevalence in the next decade will be in developing nations [15]. Understanding
prevalence and causality of LBP in developing nations such as Pakistan may assist
understanding of global LBP causes and management , and will determine whether the
Factors( such as heavy labor works, vehicles vibration ,poor nutrition, lack of medical
facilities etc) differ in socio-cultural characters or not ?
LBP is common and prevalent disorder among office-workers and non-office workers
working in Japan [13-15]. Several studies have reported that the prevalence of back
disorders during a specific period of employment ranged from 26.4% and 55.3% [14, 15].
The significance of studying risk factors that influence work-related disorders and the
occurrence of LBP among the working population is thus emphasized [1, 2]. Some
studies report complicating information as that female gender [2, 6, 9, 11] or higher age
[9, 6] increase the risk of LBP, whereas other studies report no association between these
factors [6, 9].
Recent studies (on the prevalence of mechanical low back pain) have reported that
psychological factors such as job satisfaction [2, 3] and job strain, anxiety, depression [5,
2, 7] also may be risk factors for developing LBP in the candidates. However, evidence
for an association between psychological factors and LBP among workers has not been
studied in detail. The above-mentioned studies have found that demographic
characteristics, such as daily life conditions, job-related factors, and psychological factors
(as job stress and strain, job satisfaction, more working hours) may influence the
occurrence of mechanical LBP. These studies indicate the need to take into account
multiple work-related and life-associated factors that can be changed (i.e. variable-factors
of mechanical LBP) to help the workers and reduce the prevalence of LBP, including
daily life conditions (lifestyle and dietary habits, exercise), job related factors (work
activities and workplace environment, rest during work, availability of refreshment etc),
and psychological factors (such as job satisfaction etc).
There have been reported interactions between the above-mentioned factors. However,
many earlier studies did not adjust for potential confounding variables (such as sleepdisorders, postural disorders, high BMI, lack of regular exercise etc). Therefore studies
evaluating the risk factors associated with LBP are full of loopholes. There is a lack of
well-designed studies on the prevalence and risk factors associated with LBP among
professional office workers and non-professional workers particularly those working in
the periphery of the country (such as buner, swat, muzafarabad ,Multan etc), as they are
exposed to high workloads [13-7]. Therefore, we carried out this study on a nationally
representative sample of the clients including office-workers of both rural and urban
societies and non-office workers of both societies in Pakistan. The objectives of the study
were (1) to estimate the prevalence of self-reported rates of mechanical chronic LBP and
(2) to identify factors that could influence the occurrence of mechanical LBP among
office-workers and non-office workers in the urban and rural set-up of Pakistan.
Particular attention was paid to the physical environment (compounding variable) as a
potential cause of mechanical LBP. Attention was also paid to the links between LBP and
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psychological aspects of the work environment (job-satisfaction, job-stress etc) and to

several others intrinsic and extrinsic risk factors(poor nutrition, frequent bending and
turning etc) for developing chronic mechanical LBP.
Methods & materials; we conducted a cross-sectional survey using a mailed selfadministered questionnaire that investigated the prevalence of self-reported LBP and its
association with various risk factors among professional office-workers and non-office
workers in both distinct communities of Pakistan.(the rural and urban) Population-based
studies reporting the prevalence of chronic mechanical back pain, including people aged
30- 60 years and over with no gender ,religion and ethnic background differentiations
were included in the study while the rest were excluded .The methodological quality of
articles in relation to the question under study was assessed using a grid of inclusion and
exclusion criteria..Criteria were considered fulfilled, not fulfilled or not applicable.
Each paper was given a score that corresponded to the percentage of applicable criteria
that were considered fulfilled. When the information necessary to rate a criterion was not
available in a paper or another clearly specified reference, the criterion was rated not
fulfilled. Only papers that were given an arbitrary score of 75% and more (good quality
studies) were used in the analyses and interpretation of results. The data was collected,
scored, analyzed and interpreted by SPSS.
The total no of participants were 100 (n=100, urban n=52, rural, n=48) the questionnaire
comprises of 15 questions about the different risk factor (such as obesity, spinal
abnormalities, lack of exercises, vibration and psychological disorders) for developing
MCLBP.
Results:
Result 1: The prevalence of mechanical chronic low back pain (MCLBP) in the urban
and rural societies was 39.3%, 31, 3% respectively.
Result 2: The percentage of awareness about the health in the clients of urban and rural
societies was 17.9%, 12.5% respectively.
Result3: The percentage for cases diagnosed in urban and rural societies were 12.3%,
10.4% respectively.
Result 4: The percentage, that others of their family members have MCLBP pain in
urban and rural societies were 17.9%, 29.2% respectively.
Result 5: The percentage of urban and rural societies clients, that they have congenital
abnormalities were 1.8%, 0% respectively.
Result 6: The percentage of MCLBP due to obesity in urban and rural societies, were
10.7%, 4.2% respectively.
Result 7: The percentage of MCLBP due to pregnancy in urban and rural societies, were
0%, 0% respectively.
Result 8: The percentage of MCLBP due to psychological disorders in urban and rural
societies, were 28.6%, 18.8% respectively.
Result 9: The percentage of MCLBP due to labor job in urban and rural societies were,
35.7%, 41/.7% respectively.
Result 10: The percentage of MCLBP due to repetitive movements of bending, lifting
and turning in urban and rural societies were, 39.3%, 70.8% respectively.
Result11: The percentage of MCLBP due to prolong sitting job in urban and rural
societies were, 50%, 41% respectively.
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Result 12: The percentage of MCLBP due to vibration of the vehicles in urban and rural
societies was, 23.2%, 41.7% respectively.
Result 13: The percentage of the clients who dose exercises in urban and rural societies
were
21.4%, 16.7 % respectively.
Result14: The percentages of the clients who do exercises regularly in urban and rural
societies were 5.4%, 4.2% respectively.
These above-mentioned results are shown below graphically.
MCLBP IN URBAN REGION
39.3, 21%
92.9, 50%
3
53.6, 29%
MCLBP IN RURAL REGION
31.3, 21%
48, 32%
1
2
3
68.8, 47%
Clarification notes for the above two pie graphs:

1=% of population having MCLBP
2=% of population having not MCLBP
3=% of population excluded in the study.
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Graphical representation of the risk factors of MCLBP in rural region of Pakistan:
120
PREG, 100
CSA, 100
RE, 95.8OBES, 95.8
100
PD, 81.3
DE, 83.3
V V, 79.2
80
RM, 70.8
GI, 70.8
unknown
HLJ, 58.3
60
known
PE, 58.3
no
HLJ, 41.7
yes
PE, 41.7
40
GI, 29.2
20
RM, 29.2
PD, 18.8
, 18.8
DC, 18.8
, 12.5
DC, 10.4
V V, 20.8
DE, 16.7
RE, 4.2 OBES, 4.2
PREG, 0
CSA, 0
Graphical representation of the risk factors of MCLBP in urban region of Pakistan:
120
PREG, 100
100
RE, 87.5
CSA, 91.1
OBES, 82.1
80
GI, 75
V V, 69.6
DE, 71.4
unknown
PD, 64.3
HLJ, 57.1
60
known
RM, 53.6
no
yes
HLJ, 35.7
40
DC, 28.6
, 23.2
, 17.9
GI, 17.9
20
DC, 12.5
RM, 39.3
PD, 28.6
V V, 23.2
DE, 21.4
OBES, 10.7
RE, 5.4
PREG, 0
CSA, 1.8
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Clarification notes for the above two multiple bar graphs:

1. HW= health awareness
2. DC=diagnostic causes of LBP
3. GI=genetics involved (it means LBP that run in family)
4. PREG=pregnancy
5. PD=psychological disorders
6. HLJ=heavy labor job
7. V V= vibrations of the vehicles
8. RM= repetitive movements
9. DE= doing exercises
10. RE=regularity in exercises
11. OBES=obesity
12. CSA=congenital spinal abnormality
Discussion:
In this cross-sectional study, the prevalence of self-reported chronic mechanical LBP was
high among urban population then in rural populations. This high prevalence was noted
regardless of occupation, ethnic, religious and gender back grounds. The questionnaires
results indicated that the prevalence of MCLBP was associated with daily life conditions,
job-related factors, repetitive movements such as bending or lifting, poor nutrition, lack
of exercises, sleep-disorders and psychological factors (job stress).
These results are important as the study was conducted in a large sample of office and
non-office workers selected from specified cities and communities of Pakistan, with a
good response rate of 92%. Thus the results may thus be considered representative of
office workers and none-office workers working in the rural and urban communities of
Pakistan. It was of particular interest that 95% of our sample was male, considering that
the proportion of male office workers and non-office -workers in both communities are
high. The 2-month prevalence of MCLBP were 39.3%% among urban and 31.3%
among rural regions. Comparing rural and urban societies: We found urban society were
more prone to produce and develop MCLBP.
We found higher % of these variables for urban society then the rural society, which
includes, types of occupation, lacked of awareness about health, increased height, spinal
abnormalities, family history of LBP, poor nutrition, poor posture, vibration of the
vehicles, kitchen-related risk factors, infrequent exercises and heavy labor and other daily
life conditions: We found a significant relation between prolong sitting habits and the
prevalence of LBP among office workers. Beija et al. reported that playing sports had a
protective effect against LBP [2, 4]. In our study, participants who participated in regular
physical activity (including sports) reported a lower prevalence of MCLBP. Available
literature about the association of MCLBP with regular sports/physical activity is open to
doubt. Further research is needed to prove their effectiveness of sports/physical activity
for preventing LBP among the working population.
In our study, there was a clear cut association between job-related factors (job-stress, jobsatisfaction etc) and developing MC LBP among workers both societies. Previous studies
dealing with professional workers also reported that job-related factors such as work
Activities, workplace conditions increased the risk of developing MCLBP [1, 6, 9].
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Our study reported that more frequent tasks involving materials handling, including
working with heavy loads, during the morning hours than in the afternoon causes
MCLBP and this fact was also reported in a previous study [14].
It has been suggested therefore that introducing a period of rest in the morning session
may have a positive influence on recovery from fatigue and reduction of symptoms such
as pain and stiffness, especially in the back, neck and upper limbs among workers [14, 6].
It would be of interest to study the timing and duration of the break period during
working hours an area of research which should be explored further.
Psychological factors related to work, such as high work stress and low job satisfaction,
have been linked with LBP in previous studies [2, 7]. Nevertheless, the relationship
between psychological factors and LBP among Office workers and non-office workers
has not been explored in detail. Our study confirmed a close association between
psychological factors such as job satisfaction, stress at work, financial constraints, healthrelated problems, and worries about the future and the occurrence of MCLBP among
office workers and non-office workers in both communities of Pakistan.
In our study, higher rates of MCLBP were observed among the office workers and nonoffice
Workers who reported a higher level of stress, in a previous study, workers exposed to
high stress at home and at work also suffered a significantly higher rate of LBP [4]. It
may be vital to examine the health status of office workers and non-office workers in
relation to their workplace conditions because it is reported that these conditions could
cause not only MCLBP but also complaints in the neck, shoulders, and arms [1, 8]. LBP
is known to be a major reason for the loss of work days and therefore decreased
productivity [12]. Along with this many others studies have confirmed that work-related
injuries, disorders, and diseases can be prevented by proper risk assessment and
employee training [4, 3]. A need is suggested for conducting a longitudinal study to
confirm the relationships observed in this study. Information on these relationships would
be useful for developing training programs to prevent MCLBP among office workers and
non-office workers in both communities of Pakistan.
Conclusion:
The study showed high prevalence of MCLBP in urban then in rural regions. The study
showed that MCLBP in the urban societies are mostly caused by obesity, prolong sitting
job, psychological disorders and lack of exercises and MCLBP in rural societies are
mostly caused by lack of health awareness, heavy labor job and jobs that required
repetitive movements of bending, lifting, turning etc.
This high prevalence was significantly associated with daily life conditions, job-related
factors, and psychological factors. These results suggest the importance of taking
comprehensive preventive measures. For reducing the prevalence of low back pain
among office workers(such as poor fitness, lack of exercises, poor posture and job related
stress) and non-office workers (heavy load ,repetitive movements poor fitness, poor
nutrition, poor working environment, lack of health awareness etc), it is generally
necessary to address a range of work-related and life related MCLBP causative factors.
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References;
[1]. Japan Industrial Safety Health Association: General guidebook on industrial
health (in Japanese). Tokyo, Japan: Japan Industrial Safety and Health
Association; 2004.
[2]. Sheehan D, Al-Jarallah K, Moussa MA, Adham N: Prevalence of low back pain
among physical therapists in Kuwait. Med Princ Pract 2003, 12:224-230.
[3]. Burdorf A, Sorock G: Positive and negative evidence of risk factors for back
disorders. Scand J Work Environ Health 1997, 23:243-256.
[4]. Jin K, Sorock GS, Courtney TK: Prevalence of low back pain in three
occupational groups in Shanghai, People's Republic of China. J Safety Res 2004,
35:23-28.
[5]. Muto S, Muto T, Seo A, Yoshida T, Taoda K, Watanabe M: Prevalence of and
risk factors for low back pain among staffs in schools for physically and mentally
handicapped children. Ind Health 2006, 44:123-127.
[6]. Papageorgiou AC, Croft PR, Ferry S, Jayson MI, Silman AJ: Estimating the
prevalence of low back pain in the general population. Evidence from the South
Manchester Back Pain Survey, Spine 1995, 20:1889-1894.
[7]. Mehling WE, Krause N: Are difficulties perceiving and expressing emotions
associated with low-back pain
[8]. The relationship between lack of emotional awareness (alexithymia) and 12month prevalence of low-back pain in 1180 urban public transit operators. J
Psychosom Res 2005, 58:73-81.
[9]. Loney PL, Stratford PW: The prevalence of low back pain in adults: a
methodological review of the literature. Phys Ther 1999, 79:384-396.
Gilgil E, Kacar C, Butun B, Tuncer T, Urhan S, Yildirim C, Sunbuloglu
[10].
G, Arikan V, Tekeoglu I, Oksuz MC, Dundar U: Prevalence of low back pain in
a developing urban setting 2005, 30:1093-1098.
Omokhodion FO, Umar US, Ogunnowo BE: Prevalence of low back pain
[11].
among staff in a rural hospital in Nigeria. Occup Med (Lond) 2000, 50:107-110.
Cassidy JD, Carroll LJ, Cote P: The Saskatchewan health and back pain
[12].
survey. The prevalence of low back pain and related disability in Saskatchewan
adults. Spine 1998, 23:1860-1866.
Lee P, Helewa A, Goldsmith CH, Smythe HA, Stitt LW: Low back pain:
[13].
prevalence and risk factors in an industrial setting. J Rheumatol 2001, 28:346351.
[14].
Nagasu M: Prevalence and risk factors for work-related disorders in
school lunch workers, Japan. PhD thesis. Kagawa Nutrition University, Health
Sciences Department;2005 Kagawa
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A Study of factors effecting customer citizenship behavior
MAY 2011
VOL 3, NO 1
Abbas , Abbasi
( Faculty Member of Shahid Bahonar University of Kerman(Iran))
Department of Management, Economy and Management Faculty, University of Shahid
Bahonar Kerman, Kerman, Iran
Hasan , Safarnia
( Faculty Member of Shahid Bahonar University of Kerman(Iran))
Department of Management, Economy and Management Faculty, University of Shahid
Bahonar Kerman, Kerman, Iran
Mehdi, Baradaran
(Master of Business Management, Azad Islamic University, Qeshm Unit (Iran))
Department of Management, Azad Islamic University, Qeshm Unit, Qeshm, Iran
Rasoul.Abbasi (Corresponding author)
(Master of Business Management, Isfahan University (Iran))
Department of Management, Administrative Science and Economics Faculty, Isfahan
University, Hezar Jerib Street, Isfahan, Iran.
Abstract
Extra-role behaviors in organizations have recently drawn the ever-increasing attention of
researchers and managers regarding both their employees and their customers. While
relatively more attention has been paid to extra-role behaviors performed by employees,
this research tried to study the same behavior on the part of customers in some Iranian
banks in Shiraz province, I.R. Iran. The effective factors were recognized and studied
through historical approaches as well as literature review. Sampling was carried out in
simple classified random method. In order to collect data, we applied a closed
questionnaire while data analysis was performed through structural-equations model
using Amos. This research introduced loyalty and commitment as mediator variables for
customer-based corporate reputation and customer citizenship behavior. Citizenship
behavior is studied in the two aspects of helping-to-customers and helping-toorganization. Results show that hypotheses related to customer-based corporate
reputation (CBR) and customer citizenship behavior (CCB) of helping-to-customers and
helping-to-organization are rejected; other hypotheses, however, confirmed with the
acceptable affect.
Key words: customer citizenship behavior, Extra-role behaviors, Iranian banks.
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1. Introduction
In the very competitive and ever-changing world of today, paying attention to customers
needs and trying to attract their attention are among the main concerns of managers
especially in service-based organizations. On the other hand, keeping the customers
satisfied and loyal gives the organization such significant advantages that will highlight
the importance of paying attention to customers. Organizations rise to fame by their
customers and the very reputation attracts more and more customers. Although the way
their reputation affects the customers voluntary behavior is not clear enough, the
customers who maintain relations with reputable organizations tend to be more loyal and
committed (Sung and Yang 2008; Walsh et al. 2009). It is also possible that these
customers support highly reputable organizations via their voluntary extra-role behaviors
or it may be that they offer valuable feedbacks to the organization. Such customer
citizenship behaviors (CCBs) result in effective organizational performance (Bove et al.
2009; Gouthier and Schmid 2003; Groth 2005; Singh 0000) and provides them with
profit through their capital returns (Oliva and Sterman 2001).
The question is whether organizations should directly improve their customer citizenship
behaviors (CCB); if so, how is it related to other dependent variables regarding
customers' commitment and loyalty? Recent researches of service marketing mention the
importance of the mediating affects of such related variables as satisfaction and
commitment which are evaluated according to changes resulting from customer behavior
(Hennig-Thurau et al 2002; Walsh et al 2006; Wang et al,2003). Previous researches, too,
have stated that citizenship behavior helps productivity, efficiency and success of the
organization. Since citizenship behavior causes a more efficient application of the
institutions' resources, it allows employees and managers to allocate more of their time to
enhancement of employees capabilities and productivity of the organization as their
duties (LeBlanc 1992). During the past decade several researches have been conducted in
the field of citizenship behavior in human resources studying the effect of employees
levels' variables including job satisfaction, confidence, organizational justice,
organizational commitment on managers' evaluation of their employees performance
(Morrison 2006); there is still a lack of sufficient research regarding the relationship
between the company's reputation and the customer's income. How customers' voluntary
behaviors affects the organizations' reputation is not clear yet. Although mediating effects
of commitment and loyalty between the company's reputation and the citizenship
behaviors have not been clarified through sufficient experimental studies, the issue of
how these variables interrelate to create various kinds of customer citizenship behaviors
(CCB) is by itself a considerable step towards a boroader understanding of voluntary and
optional behaviors of customers (Bartikowski and Walsh 2009). All this reflects the
importance of the companys reputation in relation to the key results of marketing
(Ambler 2000). The present research studies the direct and indirect mediating effects
between the company's reputation and the customer citizenship behaviors, i.e. loyalty and
commitment, and further examines the mediating variables of commitment and loyalty
between customer-based corporate reputation (CBR) and customer citizenship behaviors
(CCB).
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2. Conceptual framework
2.1. Customer citizenship behavior
Concentration on customer citizenship behavior recently exists in management and
marketing literature with an increasing rate (Aherne, Bhattacharya and Gruen 2005;
Bettencourt 1997; Groth 2005; Lengnick-Hall, Claycomb and Inks 2000). It is possible
that the customers get involved in a set of citizenship behaviors the way organizational
employees themselves are directly guided to a special organizational direction. Having
several productive companies studied, Bowen (1986, p. 371) argues that their customers
seldom get involved in the process of production. In service organizations, moreover,
both customers and employees are regarded as human resources. Customers often take
part in activities different way or under different circumstances from how employees may
do the same; it is therefore possible that customers replace employees in service-based
organizations (Halbesleben and Buckley, 2004). Previous studies suggest that servicebased organizations should, in some cases, consider customers at least as organizational
members or even as employees (Kelley, Donnelly and Skinner 1990). Based on these
descriptions, it can be claimed that service customers may display citizenship behavior
the same way as employees themselves do. Thus, we can apply findings of citizenship
behavior studies to the customers. In management literature customer citizenship
behavior is formally defined as the voluntary individual behavior which is not explicitly
or directly recognized by means of formal reward system and generally strengthens the
effective efficiency of the organization (Organ 1988, p. 4). Similarly, customer
citizenship behavior is defined as the voluntary behavior which is not essential to
successful production or to introduction of services but totally useful to the whole service
organization (Groth 2005, p. 11). Several terms can be used to explain customer
citizenship behavior among which the following are considerable: customer voluntary
behavior (Ford 1995) customer's voluntarily performance (Bailey, Gremler &
McCollough 2001; Bettencourt 1997), organizational citizen in customers' section
(Lengnick-Hall et al 2000), lateral product of production process (Gruen, Summers &
Acito 2000), and extra-role behaviors of customer (Aherene et al 2005).
The literature regarding the term service suggests various aspects of customer citizenship
behavior. Groth (2005) has identified three aspects of customer citizenship behavior: 1)
Introducing feedbacks to the organization which means the presentation of applicant's
information to the organizations with an aim to help them improve their serviceproviding process, 2) Helping other customers parallel to the philanthropy aspect in
organizational citizenship behavior, and 3) Giving commercial recommendations to
friends or family members (Groth, Mertens & Murphy 2004). In addition, Ford (1995)
suggests that customers who display citizenship behavior may show their commitment to
the service organization and report potential protective issues to the employees. Keh and
Teo (2001) have claimed that the customer's resistance against the failure of a service is
another aspect of customer citizenship behavior. They state the case as a customer's
tendency to accompany the services they encounter while these services are not executed
as expected. Such an attitude results in permanent customerization and does not publish
negative word-of-mouth marketing (advertisements). marketing literature slightly
suggests the main characteristics of customer citizenship behavior to be: voluntary
feedback, voluntary behavior, and helping the organization.
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Previous factors of citizenship behavior have been studied in very few empirical studies.
Bettencourt (1997) found out that customer satisfaction, customer commitment and
perceived support for customers have a positive relation with customer citizenship
behavior. Gruen, Summers, and Acito (2000) have shown a positive relation between
effective commitment and customer citizenship behavior. Aherene, Bhattacharya, and
Gruen (2005), too, have suggested links between customer- identification of the
organization and customer citizenship behavior. Finally, Groth (2005) has figured out
customer's socialization to be in relation with his/her satisfaction with customer
citizenship behavior.
2.2. Reputation arises from the customer-based company
Organizations reputation as a concept has attracted the attention of academicians in
different fields of management, economy, sociology and marketing (Brown, Dacin, Pratt,
and Whetten 2006). Generally, researchers have observed reputation of the company
from an economical viewpoint so that the company's reputation is conceived as
expectations of internal or external members of the organization, estimating specific
organizational characteristics (e.g. Weigelt and Camerer 1988) or it is created from
organizational theory which identifies the understanding of shareholders' groups reflected
from collective perceiving, including customers, employees and investors (Deephouse
2000; Fomburn and Shanley,1990; Olins 1990).
Based on organizational viewpoint, company's reputation is defined as a general
evaluation of whetther the organization is originally good or bad (Weiss, Anderson, and
Maclnnis 1999; Roberts and Dowling 2002). Rindova, Williamson, Petkova and Sever
(2005) have pinpointed prominent sources such as quality of data and factors of
production, rating in progress, organizational success, and dependence upon other
institutions as arrangements of organizational reputation (though some researches have
limited the generality of their model). Carmeli and Tishler (2005) have studied the roles
of production quality and customer satisfaction in predicting the company's reputation.
Previous researches demonstrate that the company's reputation has a positive effect on
financial performance (e.g. Fombrun 1996; Roberts and Dowling 1997, Podolny 1993).
Moreover, companies can benefit from a desirable organizational reputation through
various methods like: 1) delay in the capability of the competitor's motion in industry, 2)
increasing the value-added price for customers at least in certain markets, 3) attracting
more amounts and higher quality of investments from the stock market, 4) preserving the
spiritual value among the employees, 5) increasing the benefits related to reduction of the
contract's costs, supervising providers and reducing employees' wages, and 6) enhancing
the introduction of new products and supporting improvement strategies in critical times
(Benjamin & Podolny 1999; Carmeli & Tishler 2005; Fombrun & Shanley (1990;
Fombrun, 1996; Rindova et al. 2005; Roberts & Dowling 2002).
A good reputation has not already work as a cure-all medicine. In a recent study, Page
and Fearn (2005) have stated that although a bad reputation definitely makes the
competition of commercial brands a more difficult task, a good reputation does not
guarantee strong commercial brands. Researches also show that earning a strong
organizational reputation has a pitfall especially when organizations are faced with a
problem. Rhee and Haunschild (2006) have studied production companies in the USA
automobile industries in order to demonstrate the necessity of a good reputation. Their
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findings, specifically, reveal that companies with a good reputation will have, in cases of
mistake occurrence, more trouble than those with a weak reputation (a fact which is
probably due to the contradictive effect of satisfying the customers' high expectations)
(Herr 1989). A strong organizational reputation represents an organizational brand which,
in turn, reduces transactional costs and attracts incomes to the company (e.g., Caruana et
al. 2004; Einwiller et al. 2006; Rose and Thomsen 2004; Shapiro 1983).
Fombrun (1996) and Sung & Yung (2008) have recommended that customers of
organizations with a good reputation and privileged background are committed to offer
supportive behaviors; the company's reputation will consequently result in a reduction of
payments. Since higher-level customers attribute competence and quality to the
organization, they in fact support the organization in this way. In order to obtain more
profound knowledge about reputation based on customers' viewpoint, Walsh and Beatty
(2007, p. 129) have introduced the concept of customer-based corporate reputation
(CBR). This concept is defined according to the general valuation of the customer by the
company based on customer's contacts with goods, services, communicative activities,
interactions with the company and/or representatives and its members (including
employees, managers or other customers), or identified activities of the company. Their
customer-based corporate reputation (CBR) scale contains five aspects of background
(i.e. orientation of customer towards employer's quality, financial ability, quality of
services, quality of productions, and social responsibility) perceived by recent customers
of the company.
2.3. Customer commitment
Commitment is one of the main factors that take part in successful relations of marketing
owing to its capability in indirect guidance of voluntary behaviors as well as the results of
production which enhances the productivity potential and impacts of performance
(Morgan and Hunt 1994). Commitment is one of the main concepts in researches of
relations' marketing in social-exchanges theory (Dwyer, Schurr, and Oh 1987; HennigThurau, (Gwinner and Gremler 2002). Commitment is a long-term exchange of parties
for maintaining valuable permanent relations (Moorman, Zaltman, and Deshpande 1992;
Morgan and Hunt 1994). Berry and Parasuraman (1991) have stated that relations in the
field of service-marketing are built based on mutual commitment. The customer's
commitment is mainly defined as a tendency in partners' interactions for maintaining
permanent relations (Garbarino and Johnson 1999; Hennig-Thurau et al. 2002).
Commitment against service-based organizations reflects the customers' permanent
tendency to maintain their valuable relations (Moorman et al 1992). This tendency may
be a result of lateral advantages of long-term relations with service organizations such as
increase in confidence and mutual social relations (Gwinner et al 1998). In order to
maintain the customers' relations with service organizations, benefits of products and
self-sacrifice should be increased and choices should be extended in order to decrease
customers' resistance (Wieselquist et al 1999). Therefore, customer's organizational
citizenship behavior (OCB) may be a result of a self-service motivation of the customer,
that is, "I need these relations to continue". Consequently, it is useful for service
organizations in such direction. Moreover, Bettencourt's results (1997) show that
customer's commitment towards the company increases the possibility of positive wordof-mouth marketing and active voice.
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2.4. Customer loyalty

Customer loyalty is a mixture of customer's attitudinal loyalty in terms of degree of
priority and perceived differences of customers in relation to service companies (Dick
and Basu 1994). This issue is derived from theories of confidence and commitment and
has more influence on customer behaviors compared to other forms of relations, as far as
loyalty can be developed (Lacobucci and Ostorm 1996). This is due to the fact that
commercial relations with high levels of customer loyalty are probably regarded as social
relations. In such social relations, individuals have a sense of responsibility for private
wealth of other individuals/companies (Clark et al 1987). They feel responsible for the
benefits of organizations when needed with the purpose of enhancing the institutions.
Therefore, while the customer is loyal to the service companies, it is also possible that
another service motivation be in progress at the same time. Based on feelings of
dependence and affection, the customer is exposed to this issue so much so that he has a
sense of unanimity towards service companies and wants to help them by representing
right behaviors at the right time. This issue provides evidences which support customer
loyalty and link with customer organizational citizenship behavior. Reynold and Arnold
(2000) have shown that customer loyalty to a seller in a retail sale environment is
accompanied directly with important outcomes of the store, such as word-of-mouth
marketing, sales share, and competitive resistance. Besides, Macintoshs findings reveal
that customers with strong inter-individual behaviors show higher levels of particulars
that include voluntary extra-role behaviors like identification, reinforcement, cooperation
and support.
The studied samples in researches carried out in France, 2009 were customers of banking
services, retail sale and fast-food restaurants after mediating roles of commitment and
loyalty of customer between the company's reputation and the customer citizenship
behaviors had been examined. Citizenship behaviors were considered in two dimensions
of helping other customers and helping the company. Results reveal that the company's
reputation is the most prominent factor with regard to commitment and loyalty of the
customer. Variables related to commitment and loyalty with regard to customer
citizenship behavior (CCB) in helping other customers were not supported. And
voluntary and extra-role behaviors have been considered useful just in relation with the
company (Bartikowski and Walsh 2009a).
In studies performed in Korea, 2008 the purpose was to examine the intensity of
customers' fair understanding of developing the received services or of the failure to
receive services. The studied sample was 609 MBA students and 68 purchasing
companies; the impact of the customers fair understanding and its influence on customer
citizenship behavior, as well as the unusual behaviors of customers have been studied.
The effect of factors like distributive justice, procedure justice and mutual justice (along
with their positive or negative impacts) on customer citizenship behavior and on
customers unusual behavior were studied and most hypotheses of the research were
confirmed (Yi and Gong, 2008 767).
In researches of Bove et al. (2008), the role of service workers in encouraging customer
organizational citizenship behavior has been studied. Research variables of commitment
to service workers, personal loyalty, credibility of service worker, and finally the
benevolence of service worker were all tested in relation with customer organizational
citizenship behavior; personal-loyalty variable was considered as a commitment mediator
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for service workers and organizational citizenship behavior. Results reveal that other
hypotheses are confirmed except for the effect of benevolence of service workers on
customer organizational citizenship behavior (Bove et al. 2008, p. 702).
A research in China, 2008 studied the company's reputation and customer behavioral
purposes, together with the role of confidence, identity, and commitment of customer.
The sample in this research was three Chinese service-based companies. Customer
confidence, customer identity, and customer commitment are regarded as mediators for
the company's reputation and the customers purchasing behavioral purposes plus
satisfaction for paying the reward. Results show that company's reputation, with a
positive effect on customer's confidence, identity, and commitment, is placed as a
mediator between the structural relations (customer confidence and customer identity)
and the behavioral purposes (Keh and Xie 2008, p. 732). The present article , however,
aims to study a model edited and tested by Bartikowski and Walsh (2009); the primary
model together with hypotheses of the research are represented as figure 1:
Hypothesis 1. CBR has a positive impact on customer commitment.
Hypothesis 2. CBR has a positive impact on customer loyalty.
Hypothesis 3. CBR has a positive impact on helping other customers dimension of
customer citizenship behaviors.
Hypothesis 4. CBR has a positive impact on helping the company dimension of
customer citizenship behaviors.
Hypothesis 5. Customer commitment mediates the effect of CBR on the (a) helping
other customers dimension and (b) helping the company dimension of customer
citizenship behaviors.
Hypothesis 6. Customer loyalty intentions mediate the effect of CBR on (a) helping
other customers dimension and (b) helping the company dimension of customer
citizenship behaviors.
3. Methodology
The statistical population of this research is permanent customers of Tejarat bank and
Keshavarzi bank branches in Shiraz province. As the population is statistically large,
access to all the above-mentioned customers was practically impossible. So, we have
used sampling and the time period of research is the first six months of the year 2010; the
sampling method of this research is classified sampling proportional to the volume;
samples are selected through simple randomization in each class. The sample volume is
considered from among unlimited population formula with error amount 196 (0.07) of
random sampling.
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2
n=
Z / 2 P (q )
=?
e2
n=
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1 / 96 0 / 5 ( 0 / 5 )
= 196
0 .07 2
In order to determine sample volume in classes, Partial abundance of each class is taken
into consideration. Therefore, number of samples in each class has been determined with
regard to the portion of each class from the total population (applying Kokran formula)
and is shown in table 1 as the following: (Table 1)
Metrical data is firstly collected from a sample of 196 individuals of permanent
customers of banking services and then applied in testing the hypotheses. Respondents of
the recent questionnaire have been two groups of customers of bank services in Tejarat
and Keshavarzi banks. They have used Likerts fifth score scale (1 for the strong
disagreement to 5 for strong agreement). Five aspects of customer-based corporate
reputation (CBR) are adopted from Walsh and Beatty (2007) consisting of 14 items.
Measuring the remaining structures of each one includes three items. Items related to
commitment are adopted from Hennig-Thurau et al (2002), items related to customer
loyalty are obtained from Arnold and Reynolds (2003), and two aspects of customer
citizenship behaviors are derived from Groth (2005).
In order to determine the reliability of the selected tools, the questions' factorial analysis
based on variables were used with an aim to study and confirm its significance and
standard coefficient. The standard questionnaire of Bartikowski and Walsh (2009, p. 5) is
applied. Validity of the research has been identified through Cronbach's alpha coefficient
of 30 customers as random sample in the form of a case-study with classified sampling
method. Alpha coefficient is obtained 0.88 percent which is confirmed (related
explanation in table 2).
4. Data analysis and research findings
According to the general information obtained, the largest age-group is 25-30 yrs old
with 29.1 percent of all respondents while the smallest group is 15-20 yrs old with 1.5
percent of all respondents. Regarding the respondents' level of education, most are
finished school graduates (or below that) with 38.8 percent of all respondents. Regarding
the time period of working with the branch, the highest number is related to 1-4 years
with 34.7 percent of all respondents. Regarding the gender of respondents, 81.1 percent
are male and 18.9 percent female. Regarding their marital status, 69.9 percent are married
and 30.1 percent single. Further information is shown in table 3.
4.1. Testing of hypotheses
To examine the direct effect of Customer-based corporate reputation (CBR), the research
hypotheses are tested by structural equations modeling in Amos 18, regarding
commitment, loyalty and two aspects of customer citizenship behaviors (CCB) together
with the mediating effects of commitment and loyalty for Customer-based corporate
reputation (CBR) and two aspects of customer citizenship behavior (CCB). According to
the research structural model, its suitability indexes CMIN/DF is obtained 791/120
(which is a high number due to the large number of variables). The amount of CMIN/DF
equals 2/719. Since it is between 2 and 3, goodness of the model is acceptable. The
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remaining square mean roots (RMR) shows that goodness of fit index (GFI= 0.759) and
adjusted goodness of fit index (AGFI=0.709) are not between 0.9 and 1. Root mean
square of estimation error of squares (RMSEA=0.94) is higher than 0.05, PCLOSE
(being 0.000) is lower than 0.05, and the low limit is higher than 0.05. All these indicate
that the compiled model doesnt acquire an acceptable goodness in terms of this index.
4.2. Primary analysis and estimation of hypotheses
Factorial analysis proves the regression weight for problem-solving of error variables
without scale. Considering the factorial analysis according to the effect of all hypotheses,
hypothesis 1 shows the relation between Customer-based corporate reputation (CBR) and
commitment with a significant p-value and the amount of effect of its loading factor is a
standard coefficient of (= 0.843, p< 0.001); hypothesis 2 shows the impact of Customerbased corporate reputation (CBR) on loyalty with a significant p-value lower than 0.05
and a standard coefficient of (=0.817, p< 0.001); Hypothesis 3 shows the effect of
Customer-based corporate reputation (CBR) on customer citizenship behavior (CCB) of
helping the customers with no significant p-value and a standard coefficient of (= 0.443); this hypothesis is hereby rejected. Hypothesis 4 is with no significant p-value and
a standard coefficient of =0.332; this hypothesis is rejected too. Hypothesis 5A shows
the amount of impact of commitment on customer citizenship behavior (CCB) of
helping the customers with a significant p-value of 0.012 and a standard coefficient of
(= 0.524, p< 0.05). Hypothesis 5B shows the amount of impact of commitment on
customer citizenship behavior (CCB) of helping the company with no significant pvalue and is therefore rejected. Hypotheses 6A and 6B show the amount of impact of
loyalty on customer citizenship behavior (CCB) of helping the customers and helping
the company, both with significant p-values and standard coefficients of (= 0.637, p<
0.001) and (= 0.346, p< 0.05) respectively. These hypotheses are confirmed as
explained in table 4.
4.3. Factorial analysis and primary estimation of research questions
Factorial analysis of questions is studied regarding standard and non-standard regression

volumes of research items. The standard coefficient of these items () is confirmed to be
higher than 0.4 with significant p-values lower than 0.05. Results show that all questions
of the questionnaire have significance amount of (p< 0.001). The amount of standard
coefficient () for all items is higher than 0.4. In this phase, the reliability of questions
used in this research is confirmed with a positive effect. Related data is shown in table 5.
4.4. Final analysis of research hypotheses
Estimating the factorial analysis of hypotheses based on modified model of this research,
some differences in research results are found (compared to its primary analysis) which is
due to the elimination of hypotheses with rejected significance. Results derived from our
significant hypotheses, p-value, and standard coefficient () show that hypothesis 1 is
confirmed, showing the impact of customer-based corporate reputation (CBR) on
commitment with a significant p-value and a standard coefficient of (=0.844,p<0.001);
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hypothesis 2 is confirmed, showing the impact of customer-based corporate reputation

(CBR) on loyalty with a significant p-value and a standard coefficient of
(=0.817,p<0.001); hypothesis 5A is confirmed, showing the effect of commitment on
customer citizenship behavior (CCB) of helping the customer with a significant p-value
and a standard coefficient of (=0.322,p<0.05); hypothesis 5B is confirmed, showing the
effect of commitment on customer citizenship behavior (CCB) of helping the company
with a significant p-value and a standard coefficient of (=0.307, p<0.05); hypothesis 6A
is confirmed, showing the effect of loyalty on customer citizenship behavior (CCB) of
helping the customers with a significant p-value and a standard coefficient of
(=0.484, p<0.001); hypothesis 6B is confirmed, showing the effect of loyalty on
customer citizenship behavior (CCB) of helping the company with a significant p-value
and a standard coefficient of (=0.471, p<0.001); hypotheses 3 and 4 are rejected due to
their insignificance. Explanation of the results is shown in table 6.
4.5. Final analysis of research questions
Few changes are obtained in the amount of impact of standard coefficient () of each
research items through factorial analysis of research questions. But all questions still have
significant p-values (p<0.001) and their amounts of standard coefficient are higher than
0.4. Final validity of all items is consequently confirmed. Explanation of factorial loads'
analysis is represented in table 7.
According to table 6, hypothesis 1 shows the direct effect of Customer-based corporate
reputation (CBR) on customer's commitment is confirmed; hypothesis 2 shows the effect
of Customer-based corporate reputation (CBR) on customers' loyalty is positively
confirmed. There is no significant relation in hypotheses 3 and 4, showing the effect of
Customer-based corporate reputation (CBR) on customers' citizenship behaviors, and are
therefore rejected. Hypothesis 5A shows the amount of effect of commitment on
customer citizenship behavior (CCB) of helping the customers to be of positive impact.
Hypothesis 5B shows the effect of commitment with customer citizenship behavior
(CCB) of helping the company with a significant effect; Thus, hypotheses 5A and 5B
are both confirmed. According to hypotheses 6A and 6B which show the effect of
customers' loyalty on customer citizenship behavior (CCB), loyalty has a significance
lower than 0.05 and a positive effect on customer citizenship behavior (CCB) of both
helping the customers and helping the company; these hypotheses are confirmed,
too. Related descriptions are illustrated in the figure 2.
5. Discussion and conclusion
This research studies factors affecting the citizenship behavior of customers of Tejarat
and Keshavarzi banks in Shiraz province. Based on tests performed on our hypotheses,
some of the hypotheses show a significant relation for customer-based corporate
reputation (CBR), commitment and loyalty variables with customer citizenship behavior
(CCB) of helping the customer and customer citizenship behavior (CCB) of helping
the company variables. Results also reveal that the strongest amount of impact belongs
to customer-based corporate reputation (CBR) and commitment variables (hypothesis 1);
the second strongest impact pertains to customer-based corporate reputation (CBR) and
loyalty variables (hypothesis 2); the background provided by the previous researches (e.g.
Bartikowski and Walsh 2009, p. 3) confirm our results. Other highest significances in our
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results can be ranked as follows: the variables of customers' loyalty and customer
citizenship behavior (CCB) of helping the customer (hypothesis 6A), loyalty and
customer citizenship behavior (CCB) of helping the company (hypothesis 6B),
commitment and customer citizenship behavior (CCB) of helping the customers
(hypothesis 5A), and commitment and customer citizenship behavior (CCB) of helping
the company (hypothesis 5B). It should also be noted that the hypotheses related to the
effect of customer-based corporate reputation (CBR) on customer citizenship behavior
(CCB) of helping the customers (hypothesis 3) and the effect of customer-based
corporate reputation (CBR) on customer citizenship behavior (CCB) of helping the
company (hypothesis 4) are rejected.
Researchers can develop a customer-based corporate reputation (CBR) scale including
five main aspects as well as potential dimensions specific to a country through
explorative interviews. Several organizations in the USA and many countries of
European Union, for instance, apply variety management for achieving valuable human
resources for increasing production and creating a development culture (Harris et al
2003). Results of this research show that the reputation of a company has no direct or
positive effect on its helping other customers and the company; this is in contrast with the
results obtained from previous researches. Commitment has a good relation with
customer citizenship behavior (CCB) of helping other customers and the company.
Loyalty of customers has an acceptable relation with customers' cooperation in terms of
helping other customers and the company; this, by itself, shows that paying attention to
plans for developing the customers commitment and loyalty will bring about more
effective results for reputation of the company on customers' precautionary behaviors
instead of philanthropic and helping-other- customers.
Findings further reveal that behaviors a good reputation stimulates the customer
citizenship behavior (CCB) and positively affects the commitment and loyalty. CCBCBR link is deceptive in a special form for those who have jobs. Customer's integration
is considered to be the most effective way to increase service production (Lovelock and
Young 1979; Gouthier and Schmid 2003). One of the useful methods for creating
commitment and loyalty in customers' consumption is to pay more attention to
sensational aspects for customers' commitment. It will result in repeated purchasing or
becoming a permanent customer for preferred services by focusing on customers' attitude
and ideas. This subject is similar in tendency to recommending the company to other
customers and thats the reason why such customers' loyalty can be considered as an
attitudinal structure. Strong relations of customer-based corporate reputation (CBR),
commitment, and loyalty of customers show equal dependence. As mentioned in the
literature of services marketing, it is essential to nurture customers' commitment to the
service organization with an aim to gain positive effects of marketing results (e.g.,
Hennig-Thurauet al., 2002).
An especially important result which can be presumed according to the rejection of the
direct impact of corporate reputation on customer citizenship behavior (CCB) to the other
customers as well as to the organization, is that organizations high reputation alone does
not cause a customer to show any citizenship behaviors; on the contrary, customers who
have become loyal and committed to an organization can be a more probable source of
such behaviors.
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6. Limitations of the research

Some limitations exist in this study:
1- Since the statistical population of the research is permanent customers of Tejarat
and Keshavarzi banks, and they both are known as specialized banks, this
limitation exists that characteristic of their services is different and their
customers reveal various precautionary behaviors based on such characteristics.
2- The conceptual model is obtained from the current literature but it is not
supported by quantitative field work. A strategy which includes interviewing the
customers and the service managers may offer additional insights not specified in
the current literature so far.
3- As there is no access to the information about permanent customers of banks in
Shiraz province, the volume of the population has been regarded in this study as
unlimited. Thus, generalizing of the acquired results to the whole population may
face deficiencies.
4- Some permanent customers' reluctance to participate or lack of cooperation in
completing the questionnaires may make imbalances in data collection based on
the current fact.
5- Because of the time restriction in collecting the questionnaires, this limitation
exists that all data is not gathered by target customers during data collection.
This research is merely focused on the main and effective aspects of commitment and
loyalty as mediator variables in reputation-income relation. This study demonstrates
customer citizenship behaviors as two-dimensional structures, while other researches
recommend more dimensions of citizenship behavior.
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Annexure
COMMITMENT
CCB:
Helping other
customers
CBR
CCB: Helping
the company
LOYALTY
Figure 1 - Conceptual Model
Collected questionnaires
Total number of
Keshavarzi branches
Total number of
Tejarat branches
Bank rankings of
Tejarat & Keshavarzi
branches
Keshavarzi
Tejarat
excellent
5
5
20
41
10
5
18
53
26
3
1
1
4
8
2
17
3
11
33
16
2
68
1st grade
2nd grade
3rd grade
4th grade
5th grade
Total
196
Table 1 - The Method of Spreading the Questionnaires per Selected Branches
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Variables
Number of questions
Cronbach's alpha coefficient
CBR
Commitment
Loyalty
CCB-CU
CCB-CO
total
1-14
15-17
18-20
21-23
24-26
1-26
0/79
0/75
0/76
0/81
0/74
0/88
Table 2- Cronbach's Alpha Coefficients

>45
24/0
100/0
40-45
8/2
76/0
35-40
8/7
67/9
30-35
18/4
59/2
20-30
20-25
15-20
29/1
40/8
10/2
11/7
1/5
1/5
Without
academic
education
38/8
38/8
Age
Percentage
Aggregational
Percentage
Ph.D
Master
Bachelor
Associate
degree
Education
2/6
100/0
3/1
98/4
30/6
94/4
25/0
63/8
More
than 10
years
21/4
5-9 years
1-4 years
Less than
1 year
24/5
34/7
19/4
Percentage
100/0
78/6
54/1
19/4
Aggregational
Percentage
Female
18/9
100/0
Male
81/1
81/1
Gender
Percentage
Aggregational
Percentage
married
single
marital status
69/9
100/0
30/1
30/1
Percentage
Aggregational
Percentage
inactive
active
17/3
100/0
82/7
82/7
Type of
connection
Percentage
Aggregational
Percentage
Percentage
Aggregational
Percentage
connection
duration
Table 3-General Information: Age Combination, Education, Connection Duration, Gender, Marital
Status, Type of Connection
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hypotheses
H1
H2
H3
H4
H5a
H5b
H6a
H6b
p-value
CBR - COMMITMENT
LOYALTY- CBR
- CBR CCB-CU
- CBR CCB-CO
COMMITMENT CCB-CUCOMMITMENT CCB-COCCB-CU-LOYALTY
CCB-CO-LOYALTY
***
***
.187
.168
.012
.561
***
.036
Non-standard
coefficients
1.321
1.141
-.443
.388
.429
.081
.586
.298
standard
coefficients
.843
.817
-.345
.322
.524
.106
.637
.346
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Result
Confirmed
Confirmed
Rejected
Rejected
Confirmed
Rejected
Confirmed
Confirmed
Table 4 -The Summary of Hypotheses Estimation of Initial Model

Questions
Variables
p-value
Non-standard
coefficients
q1
***
.962
q2
***
.0201
q3
***
.972
q4
***
.865
CBR
q5
***
.698
q6
***
1.042
q7
***
.966
q8
***
.940
q9
***
.972
q10
***
1.107
q11
***
.960
q12
***
1.055
q13
***
.912
q14
***
1.000
q15
***
.644
COMMITMENT
q16
***
.898
q17
***
1.000
q18
***
.772
LOYALTY
q19
***
.839
q20
***
1.000
q21
***
.958
CCB-CU
q22
***
.916
q23
***
1.000
q24
***
.957
CCB-CO
q25
***
1.101
q26
***
1.000
Table 5-Regression Coefficients (Volume of Items) Questions of Each Item
standard
coefficients
.668
.606
.642
.546
.428
.597
.564
.571
.591
.670
.610
.610
.500
.640
.601
.805
.694
.657
.716
.807
.655
.746
.697
.669
.794
.613
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hypotheses
H1
H2
H5a
H5b
H6a
H6b
p-value
Non-standard
coefficient
1.320
1.137
CBR - COMMITMENT
***
LOYALTY- CBR
***
COMMITMENT CCB.013
.263
CUCOMMITMENT CCB.021
.232
COCCB-CU-LOYALTY
***
.444
CCB-CO -LOYALTY
***
.400
Table 6-Summary of the Results of Modified Model
Questions
Variable
p-value
Non-standard
coefficient
q1
***
.960
q2
***
1.019
q3
***
.964
q4
***
.863
CBR
q5
***
.696
q6
***
1.039
q7
***
.961
q8
***
.931
q9
***
.961
q10
***
1.101
q11
***
.953
q12
***
1.048
q13
***
.908
q14
***
1.000
q15
***
.640
COMMITMENT
q16
***
.894
q17
***
1.000
q18
***
.776
LOYALTY
q19
***
.836
q20
***
1.000
q21
***
.977
CCB-CU
q22
***
.927
q23
***
1.000
q24
***
.973
CCB-CO
q25
***
1.100
q26
***
1.000
Table 7- Regression Coefficients (Volume of Items) Questions Related to Items
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standard
coefficient
.844
.817
.322
.307
.484
.471
standard
coefficient
.670
.608
.640
.547
.428
.597
.563
.568
.587
.669
.608
.608
.500
.643
.599
.805
.696
.661
.714
.808
.665
.751
.693
.674
.786
.607
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.322
.844
CCB:
Helping other
customers
.307
CBR
.484
CCB: Helping
the company
.817
LOYALTY
.471
Figure 2 - Final Model
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Media Influence on Marketing Communications
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Ms.Ume-Amen
lecturer
CoMS
PAF-KIET
Abstract
The focus of the study was to conduct the research on Influence of Media on Marketing
Communications. Based on the literature survey the predictor variables were identified.
These dimensions were Customer Attitude, Mass Media, Selective Exposure,
Involvement, and Mood. The questionnaire administrated for the study was based on 22
items in which 7 items were related to personal data, and the rest of the 15 were related to
identifying media influence among people. The sample size of the study was 120. Any
sample size above 30 tends to be normally distributed therefore; 120-sample size was
found to be appropriate.According to the respondents opinions, the selective exposure
was high with a mean of (3.57). On the other extreme the respondents opinion on
involvement was low (3.37). The standard deviation of respondents opinions on
selective exposure and mood was the least (1.00), as compared to others dimensions. This
indicates that there is less polarization on the respondents opinions on this Customer
Attitude dimension. The Standard Deviation of respondents opinion on involvement
was the highest (1.06), as compared to other dimensions. This indicates that there is a
high polarization of the respondents opinions on this Customer Attitude dimension.
The Skewness for all the determinants of Media influence on marketing communications
was negative. It was as low as (0.35) for involvement and as high as (0.63) for selective
exposure. The negative skew ness indicates that the respondents opinions on the
respective determinants were below average. The correlations of attitude ranged between
0.90 for selective exposure and 0.64 for involvement. This indicates that comparatively a
higher degree of correlation was found between selective exposures and attitude as
compared to the other determinants. The correlations of the other determinants had
similar trend accept selective exposure that were found to be the highest with an r of
.94. Four different hypotheses were developed. The results and interpretation of the
hypotheses are described below: a) The hypothesis relating to a relationship of the
determinant Media usage with dependent variable customer attitude was accepted. b)The
hypothesis relating to a relationship of the determinant Selective exposure with
dependent variable customer attitude was accepted. c)
The hypothesis relating to a
relationship of the determinant Involvement with dependent variable customer attitude
was accepted. d) The hypothesis relating to a relationship of the determinant Mood with
dependent variable customer attitude was accepted.
Keywords: Media , Influence , Marketing Communications
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1.
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Introduction
Communication is a two way process and it requires a medium, a path, device or mode to
convey ones message. Though with perspective of marketing communication, the term
advertising has traditionally used to mass communication media. Advertising media have
traditionally been characterized as "measured" media, to refer to the availability of
quantitative information to assess the number of viewers or readers potentially exposed to
advertising messages. In addition, advertising has traditionally been conceptualized as
one-way communication from an advertiser to a recipient. Personal selling and direct
response marketing have more typically been characterized as interactive. Both the
practice of marketing management--the organizational domain in which advertising
decisions are generally made--and the technological environment, have made traditional
conceptions of advertising media open to discussion. Several scholars have argued that
the increasing availability of information, and the sophistication of the technology for
obtaining, processing, and analyzing this information, are blurring the boundaries of the
several elements of the marketing mix (Glazer 1989, Ray 1985).
2. Literature Survey
The discussion begins with the nature of media effects on marketing communications,
what are the managerial, theoretical and empirical approaches to understand media
effects.
The Nature of Media Effects on Marketing Communications
Media choice has become the most important component while looking at the changing
trends in our surroundings. The need and demand of the customers, advertisers are more
concern with the media choice. Mass communications historians tell us that the earliest
models of communication effects posited that communications were very powerful: the
early "bullet" or "hypodermic needle" models of mass communication (Katz and
Lazarsfeld 1955, p. 16).
Managerial Approaches to Understanding Media Effects:
The approach of advertisers has changed with the passage of time. Today it is being
accepted that individual media has its own unique effects on the customers. according to
the media planning model It has revealed commercial television, and printing
technologies to make narrow, segment specific magazines possible.
Marketing communications managers evolved rules of thumb to account for these
effects, e.g., print media are better to explain complex products, television is better
because it can show product demonstrations, etc. There was an evolving idea that there
are "qualitative" media factors, but generally these were--and are today--relegated to the
subjective judgment of media influences. Similarly, the advent of interactive technologies
such mobile telephones and the Internet has given rise to efforts to individualize
communications or, at the very least, customize marketing communications for very
small but especially relevant audiences for the marketers messages (Stewart and Ward
1994).
Theoretical and Empirical Approaches to Understanding Media Effects
Marshall McLuhan is well known for his "Medium is the Message" statement, implying
that a medium communicates an image or generates effects independent of any single
message it contains. In fact, as the preceding discussion makes clear, media effects can
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only be understood in the context of consumer characteristics that influence the

effectiveness of marketing communications in particular media. While there are many
such consumer characteristics, five factors have received considerable attention in
empirical research and theory development (McLuhan and Fiore 1967):
1. Attitudes toward the medium;
2. Uses of the medium;
3. Selective Exposure of the medium
4. Involvement while using the medium;
5. Mood states affecting media usage;
Attitudes toward Media
The attitude of a consumer toward a specific medium can radically alter how that media
affects the consumer and any marketing communications it carries. In an early landmark
study, the Politz Research Organization compared the vehicle effects of McCall's with
that of Look and Life magazines (Politz Research, Inc. 1962).
The Role of Relationship and Trust.
One particularly important attitude toward a medium is related to its perceived credibility
or trustworthiness (Shimp 1990). There is considerable consistent with the conclusion
that marketers relationships with consumers plays an important role in how consumers
respond to marketing communications (Fontenot and Vlosky 1998, Hoffman and Novak
1996). Perhaps the most important element of a successful marketer consumer
relationship is the notion of trust. Research has shown that trust reduces transaction costs
(Ganesan 1994), lowers the risk of transacting (Mayer et al. 1995), increases future
interaction intentions (Doney and Cannon 1997), and brings more favorable pricing terms
(Pavlou and Ba 2000). Moreover, Keen (2000) posited that the very foundation of
electronic commerce rests on trust. While consumers may decide to interact with the
marketer in a variety of contexts, any collaboration will always be limited by the extent
of mutual trust among consumers and marketers. Thus, for media that are interactive, the
perceived trustworthiness of the medium is likely to play an especially important role in
determining it influence on consumers. Although trust has long been recognized as an
extremely important element of every interaction, traditional advertising media provide
the marketer with limited ability to raise the level of consumers' trust since one-way
communication is unlikely to produce trust (Mayer et al. 1996). Reciprocal interaction,
communication, and cooperation, however, facilitate trust building and commitment
(Anderson and Weitz 1989, Anderson and Narus 1990).
Trust is a subjective evaluation of another entity's characteristics based on limited
information (Beccera and Gupta 1999). In the context of marketing, limited information
about products' attributes and the intent of the marketer to provide a fair transaction can
give rise to the need for consumers either to trust the marketer, rely on third parties for
additional information, or take other actions to reduce risk. Consumers' trust towards a
marketer can be defined broadly as the subjective probability with which consumers
believe that the marketer will perform a particular interaction in a manner consistent with
their expectations. While it is generally agreed that trust has an economic value (Hill
1990) and can be a source of competitive advantage (Barney and Hansen 1994),
traditional advertising has not necessarily been focused on building trust, despite the fact
that trust has an important influence on the behavior of consumers (Schurr and Ozanne
1985). On the other hand, interactive media have the potential to promote consumers'
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trust towards the advertiser and product through reciprocal information exchange,
customer support and technical assistance, reciprocal communication, operational
linkages, and other specific adaptations by the marketer to the needs of the consumer
(Forrest and Mizerski 1996).
Uses of Mass Media
In a broader sense, media effects may be considered in the context of the stream of
research examining uses and gratifications individuals obtain from using mass media.
This paradigm holds that social and psychological needs generate expectations of the
mass media which lead to differential patterns of exposure, need gratification, and other
outcomes (Rubin 1986, Atkin 1985, Katz, Blumler and Gurevitch 1974). While this
research approach has been criticized on many grounds, the notion that people have uses
for and obtain gratifications from, exposure to marketing communications in different
media is appealing. There is also some empirical support for the notion. For example,
research has found that "social utility" motives influence the viewing of commercials on
television. O'Guinn and Faber (1991) suggest that uses and gratification approaches may
be most usefully applied to media such as special interest magazine readership ( O'Guinn
and Faber 1991).
Evidence for different uses and gratifications from mass media is seen in studies of
differential loyalty among consumers of media types and vehicles. In addition, there are
selective patterns of exposure or preferential attitudinal dispositions toward certain kinds
of media and vehicles within media that are not constant across all viewers (Gunter
1985). How people think and feel about various vehicles or the extent to which the
audience flows toward or across certain programs varies between demographic divisions
of the population. More significant, however, are findings that indicate differences in
viewing patterns or attitudinal preferences for programs associated with enduring
psychological characteristics of viewers (Gunter 1985).
The Role of Selective Exposure.
There is also strong evidence that people selectively attend to information based on its
relevance to them at a given point in time (Broadbent 1977, Greenwald and Leavitt 1984,
Krugman 1988, Pechmann and Stewart 1988, Tolley 1991). Research is rather clear on
the point that characteristics of consumers directly influence media effects. For example,
in her review of consumer processing of advertising, Thorson (1990) identifies such
individual difference factors as motivation (involvement), ability, prior learning, and
emotion, among others that influence how, and even whether, consumers process
advertising. The theoretical foundation for these effects is selective exposure: the
proposition that consumers tend to see and hear communications that are favorable,
congenial, or consistent with their predispositions and interests (Zillman and Bryant
1994).
Involvement
The concept of involvement has become a key construct in a number of theories of
attitude formation and change (see Greenwald and Leavitt 1984, Petty and Cacioppo
1986, Chaiken 1980, Chaiken, et al 1989). Involvement has generally been
conceptualized in terms of how consumers interact with a given medium or message.
Messages and media are conceived of as more or less involving for a particular
consumer, and such involvement is posited to influence the amount and type of
information processing in which a consumer engages. Involvement has also been one of
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the more frequently researched and controversial constructs within the disciplines of
social psychology, advertising, and communication (Zaichowsky 1985).
Mood
The term "mood" denotes specific subjective feeling states at the time of exposure to
marketing communication. A rather substantial body of research makes it quite clear that
mood influences an array of psychological processes - attention, information processing,
decision making, memory, attitude formation. Srull (1990), Isen (1989), and Gardner
(1985) provide reviews of much of this work and its implications for advertising and
consumer behavior. Conceptually related to "uses and gratifications" research, discussed
earlier, the concept of mood and the related construct of arousal, focus on affective,
rather than cognitive factors that link individuals with media. The essential idea is that
people use media to maintain or change feeling states (moods) or excitatory states
(arousal). Self-report data suggest that people use television to both increase and decrease
arousal (Condry 1989), and physiological studies have shown that television viewing can
alter blood pressure, heart rate, and other physiological states that presumably reflect
arousal states (Klebber 1985). There is certainly evidence that moods induced by
television programs interact with commercials embedded within these programs to
produce differential responses among viewers. For example, Kennedy (1971) found
viewers of suspense programs had poorer recall of a brand name in an embedded
commercial than viewers of a comedy. However, attitudes toward the advertised brand
were more positive among viewers of the suspense program than among viewers of a
comedy. Similar results for recall are reported by Soldow and Principe (1981). found that,
compared to commercials viewed in the context of a sad program, commercials viewed in
the context of a happy television program resulted in happier moods during viewing of
both the program and commercials, more positive cognitive responses about the
commercials, and higher evaluations of commercial effectiveness. They also found that
the mood induced by the program had a greater effect on commercials with a greater
emotional appeal than commercials with more informational appeals. These investigators
did not examine whether there was an interaction between the emotional tone of the
commercials and the programs in which they were embedded (Goldberg and Gorn 1987).
The potential interaction of the emotional tone of commercials and programs was
investigated by Kamins, Marks, and Skinner (1991). They find that a "sad" commercial
embedded within a "sad" program was rated by viewers as more likeable and produced
higher ratings of purchase intention than a humorous commercial embedded within a
"sad" program. Conversely, a humorous commercial embedded within a humorous
program performed better than a humorous commercial embedded within a "sad"
program. The authors interpret these results in terms of consistency theory, which
suggests that viewers seek to maintain a mood throughout a program (Kamins, Marks and
Skinner 1991).
Since commercials represent interruptions, Kamins, et al (1991) suggest that commercials
that are more consistent in emotional tone with the program will perform better than
those that are inconsistent in tone. In an earlier study, Krugman (1983) also examined the
relationship between responses to advertising and the programming context. While he did
not explicitly address the question of mood, his hypotheses reflect processes that would
seem to be conceptually related to the construct of mood: he tested the convention
wisdom that "commercials are particularly objectionable when they interrupt interesting
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programs." Thus, some reasoned, "the more interesting the program, the less effective the
commercial" (Soldow and Principe, 1981).
Krugman first distinguishes between viewer opinion, and impact on viewers, as separate
phenomena. Then, he examines the impact of advertising in 56 television programs that
were determined to vary in interest level. He finds a pattern that is just the reverse of the
conventional wisdom: commercials interrupting interesting programs are more effective.
This is consistent with Krugman's earlier hypothesis that involvement with advertising
tends to be consistent with interest in the editorial environment. While this study does not
make comparisons with other media, and the notion of interest relates as much to
message variables as it may relate to media effects, the finding is indicative of the
importance of the media viewing context as a mediator of advertising effects (Krugman
1983).
Finally, a major field experiment (Yuspeh 1977) examined the programming context as a
determinant of responses to television advertising. This time, the programming context
was manipulated by having viewers watch either situation comedies or action programs.
No explanatory concepts are offered to suggest what it is about the different
programming types that might account for different effects, but the implicit idea seems to
be that linkage between programming stimuli and advertising responses is attributable to
variations in mood, or excitatory states experienced while watching (Yuspeh 1977).
Individuals were asked to watch particular programs (experimentally manipulated so that
half watched three action programs and half watched three situation comedies).
Commercials for six products were embedded in the programs, and effects were
measured with multiple indicators, such as brand recall, attitudes and buying intention,
and commercial element playback. Interestingly, there were only slight differences
between the two types of programming contexts on commercial effectiveness (Yuspeh
1977).
However, there were significant differences among specific episodes with each program
type, across products and performance measures. It appears that different episodes of the
same program may have different effects on the performance of commercials appearing
in those programs. It is likely that such an effect is the outcome of a complex set of
interactions between program type, advertising message, and viewer characteristics,
especially programming-induced moods (Yuspeh 1977).
None of the studies that explore the relationship between programming context and
advertising response clarify whether the effects of prior moods differ from programminginduced moods. Nor is it clear whether the types of mood effects that occur in a television
context occur in other media, although it is certain that other media are capable of
creating or changing moods (Gardner 1985, Isen 1989).
3.
The primary focus of this study was to examine the relationship between Customer
attitude and media influence by use of mass media, selective exposure, involvement, and
mood. This study was built on the work of David W. Stewart, Paulos Pavlou and Scott
Ward by conceptualizing media influence on marketing communications that media has a
strong impact on marketing communication and also a very effective tool in forming the
attitude of the customer. The secondary focus of this study was to examine which level of
impact media does play in the attitude formation and how the mood involvement and
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selective exposure play important role in attitude formation as also presented in the study
of David W. Stewart, Paulos Pavlou and Scott Ward.
Hypothesis 1: Media usage influences customer attitude towards marketing
communications.
Hypothesis 2: Selective exposure influence customer attitude towards marketing
communications.
Hypothesis 3: Involvement influence customer attitude towards marketing
communications.
Hypothesis 4: Mood influence customer attitude towards marketing
communications.
Uses of
Mass
Media
H1
MoodH4
Attitud
e
H2
Selective
Exposure
H3
Involvement
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3.1.0 MEASURING VARIABLES

The variables used to measure the Media influence of marketing communications in this
recently conducted research are Customer attitude, use of mass media, selective exposure,
involvement, and mood. Their descriptions have been mentioned below.
Customer Attitude
It is the ones interest and trustworthiness through which a person forms his or her
intention.
Use of mass media
It is the use of both the print media and the electronic media which is widely used for the
communication and to send the marketing messages in order to create the
awareness among the people.
Selective Exposure
People selectively attend to information based on its relevance to them at a given point in
time. The proposition that consumer tend to see and hear communications that are
favorable, congenial, or consistent with their predispositions and interests.
Involvement
Involvement has generally been conceptualized in terms of how consumers interact with
a given medium or message. Messages and media are conceived of as more or
less involving for a particular consumer.
Mood
The term "mood" denotes specific subjective feeling states at the time of exposure to a
marketing communication. A rather substantial body of research makes it quite
clear that mood influences an array of psychological processes - attention,
information processing, decision making.
3.2.0 Methodology
The methodology adopted for the subject study is briefly discussed below.
3.2.1 Population And Sample Size
The population for the subject study is the number of household in Karachi.
According to an estimate there are 0.9 million households in Karachi, excluding
non recognized colonies. If sample were to be drawn on simple random, the
approximate sample size comes out to 60. However to have a better
representation, about 120 samples were drawn. These were drawn
nonrandomly from pre-selected areas.
3.2.2 Data Collection Method
Based on the literature survey a theoretical framework and a closed-ended
questionnaire were developed and were pre-tested before being launched. They
were appropriately filled by the people belonging to different occupation,
education and income levels living in different regions and places of Karachi. The
instrument contained 22 questions of which 7 were related to personal data and
the rest were related to the subject study. The questionnaire comprised of a rating
scale numbering from 5 to 1.
3.2.3 Sample Characteristics
The respondents have a representation from all the demographic used for the
study purpose. Some of the demographics have higher representation while the
other had smaller. The characteristic of the respondents is enclosed in annexure
one.
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3.2.4 Data Analysis Method

The data were mostly measured through the measure of central tendencies. The
developed hypotheses were tested through Simple Regression, MultipleRegression and Pearson correlation.
4.0.0 SURVEY FINDINGS
The survey findings were analyzed linearly, cross-sectionally in order to have a
better comprehension and understanding of the relationship between dependent
and independent variable, which are discussed below:
4.1.0 Measure Of Central Tendencies
The respondents opinions on the determinants of media influence on marketing
communications were obtained. The determinants were customer attitude, use of
mass media, selective exposure, involvement, and mood. The summarized results
related to measure of central tendencies and measures of dispersion are presented
below:
TABLE1
MEASURE OF CENTRAL TENDENCIES
Mean
Standard Error
Median
Mode
Standard
Deviation
Sample Variance
Kurtosis
Skewness
Range
Minimum
Maximum
Sum
Count
Attitude
3.53
0.09
3.63
4.00
Mass
Media
3.52
0.09
3.61
3.00
S/Exposure
3.57
0.09
3.67
4.00
Involvement
3.37
0.10
3.25
3.00
Mood
3.47
0.09
3.37
4.00
1.02
1.01
1.00
1.06
1.00
1.05
0.14
(0.53)
4.00
1.00
5.00
423.00
120.00
1.03
0.12
(0.51)
4.00
1.00
5.00
422.56
120.00
1.00
0.38
(0.63)
4.00
1.00
5.00
428.33
120.00
1.12
(0.26)
(0.35)
4.00
1.00
5.00
404.75
120.00
1.00
0.18
(0.46)
4.00
1.00
5.00
416.95
120.00
According to the respondents opinions, the selective exposure was high with a
mean of (3.57). On the other extreme the respondents opinion on involvement
was low (3.37).
The standard deviation of respondents opinions on selective exposure and mood
was the least (1.00), as compared to others dimensions. This indicates that there is
less polarization on the respondents opinions on this selective exposure and
mood dimension. The Standard Deviation of respondents opinion on
involvement was the highest (1.06), as compared to other dimensions. This
indicates that there is a high polarization of the respondents opinions on this
involvement dimension.
The Skewness for all the determinants of Media influence on marketing
communications was negative. It was as low as (0.35) for involvement and as
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high as (0.63) for selective exposure. The negative skewness indicates that the
respondents opinions on the respective determinants were below average.
4.2 PEARSON CORRELATION
The correlation of all the determinants of media influence on marketing

communications on one-to-one basis was worked out to find the relationships.
The summarized results are presented below:
TABLE2
PEARSON CORELATION
Attitude
Mass Media
S/Exposure
Involvement
Mood
Attitude
1.00
0.88
0.90
0.64
0.72
Mass
Media
1.00
0.94
0.79
0.88
S/Exposure
1.00
0.67
0.79
Involvement
1.00
0.75
Mood
1.00
The correlations of attitude ranged between 0.90 for selective exposure and 0.64
for involvement. This indicates that comparatively a higher degree of correlation
was found between selective exposures and attitude as compared to the other
determinants.
The correlations of the other determinants had similar trend accept selective
exposure that were found to be the highest with an r of .94.
3.3.0 HYPOTHESIS TESTING
Four different hypotheses were developed. The results and interpretation of the
hypotheses are described below:
3.3.1 Multiple-Regression
The respondents opinions media influence on marketing Communications were
based on determinants such as attitude, use of Mass media, selective exposure,
involvement, and mood.
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TABLE-3 :
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MULTI REGRESSION
Regression Statistics
Multiple R
R Square
Adjusted R Square
Standard Error
Observations
Regression
Residual
Total
MAY 2011
df
4.00
115.00
119.00
Coefficients
0.91
0.82
0.82
0.44
120.00
SS
102.71
22.09
124.80
Standard
Error
MS
25.68
0.19
F
133.65
Significance F
0.00
t Stat
Pvalue
Lower
95%
Upper
95%
Lower
95.0%
Upper
95.0%
Intercept
Mass
Media
0.30
0.16
1.90
0.06
(0.01)
0.62
(0.01)
0.62
0.56
0.16
3.44
0.00
0.24
0.89
0.24
0.89
S/Exposure
0.53
0.12
4.36
0.00
0.29
0.77
0.29
0.77
Involvement
(0.04)
0.07
(0.53)
0.60
(0.17)
0.10
(0.17)
0.10
Mood
(0.15)
0.08
(1.79)
0.08
(0.32)
0.02
(0.32)
0.02
The r square is 0.82, which indicates that about 82% of the variations on the
dependant variable is explained by the predictor variables, which is significantly
high. The slope for selective exposure is highest. This means that comparatively
the selective exposure has stronger relationship with the dependant variable,
media influence on marketing communications. The coefficient of determinate for
selective exposure is 0.53. This also means that an increase of one rating (On the
scale of five to one) of the selective exposure will cause the media influence on
marketing communications behavior to increase by 0.53 rating.
3.3.2 HYPOTHESIS ONE
The determinants for the media influence on marketing communications were
customer attitude, use of mass media, selective exposure, involvement, and mood.
An analysis was carried out to measure the relationships of the independent
variables and dependent variable i.e. Customer attitude. The hypothesis developed
in this context is presented below:
H1O: Media usage do not influences customer attitude towards marketing
communications.
H1A: Media usage influences customer attitude towards marketing
communications.
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Statistical Representation
Statistical representation of the above hypothesis is presented below:
H1O: 1=0
H1A: 1 0
The above hypothesis was tested through simple regressions and the summarized
result is presented below:
TABLE- 4
SIMPLE REGRESSION
Multiple R
R Square
Adjusted R Square
Standard Error
Observations
0.88
0.78
0.77
0.49
120.00
ANOVA
Regression
Residual
Total
df
1.00
118.00
119.00
Coefficients
Intercept
Mass
Media
SS
96.90
27.90
124.80
Standard
Error
t Stat
MS
96.90
0.24
F
409.83
Significance F
0.00
Pvalue
Lower
95%
Upper
95%
Lower
95.0%
Upper
95.0%
0.39
0.16
2.42
0.02
0.07
0.71
0.07
0.71
0.89
0.04
20.24
0.00
0.80
0.98
0.80
0.98
dependant variable is explained by the predictor variable mass media, which is
significantly high. The coefficient of determinant for mass media is 0.39. This
also means that an increase of one rating (On the scale of five to one) of mass
media will cause the media influence on marketing communications to increase
by 0.39 rating, which means that the relationship between predictors variable
mass media and media influence on marketing communications is strong.
There was positive relationship between mass media and media influence on
marketing communications as was suggested by the literature.
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3.3.3 HYPOTHESIS TWO

The relationship of the determinant selective exposure with dependent variable
Customer attitude was measured. The hypothesis developed in this context is
presented below:
H2O: Selective exposure do not influence customer attitude towards marketing
communications.
H2A: Selective exposure influence customer attitude towards marketing
communications.
H2O: 1=0
H2A: 1 0
TABLE-5
SIMPLE REGRESSIONS
Multiple R
R Square
Adjusted R Square
Standard Error
Observations
0.90
0.80
0.80
0.46
120.00
ANOVA
Regression
Residual
Total
df
1.00
118.00
119.00
Coefficients
SS
100.05
24.75
124.80
MS
100.05
0.21
F
477.13
Significance F
0.00
Standard
Error
t
Stat
Pvalue
Lower
95%
Upper
95%
Lower
95.0%
Upper
95.0%
Intercept
0.25
0.16
1.64
0.10
(0.05)
0.56
(0.05)
0.56
S/Exposure
0.92
0.04
21.84
0.00
0.83
1.00
0.83
1.00
dependant variable is explained by the predictor variable selective exposure,
which is significantly high. The coefficient of determinant for selective exposure
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is 0.92. This also means that an increase of one rating (On the scale of five to
one) of perceived social status will cause the compulsive buying behavior to
increase by 0.92 rating, which means that the relationship between predictors
variable selective exposure and customer is very strong.
There was relationship between selective exposure and customer attitude.
3.3.4 HYPOTHESIS THREE
The relationship of the determinant involvement with dependent variable
customer attitude was measured. The hypothesis developed in this context is
presented below:
H3O: Involvement do not influence customer attitude towards marketing
communications.
H3A: Involvement influence customer attitude towards marketing
communications.
H3O: 1=0
H3A: 1 0
TABLE-6
SIMPLE REGRESSIONS
Multiple R
R Square
Adjusted R Square
Standard Error
Observations
0.64
0.41
0.40
0.79
120.00
ANOVA
Regression
Residual
Total
df
1.00
118.00
119.00
Coefficients
SS
50.83
73.97
124.80
MS
50.83
0.63
F
81.07
Significance F
0.00
Standard
Error
t
Stat
Pvalue
Lower
95%
Upper
95%
Lower
95.0%
Upper
95.0%
Intercept
1.44
0.24
5.94
0.00
0.96
1.92
0.96
1.92
Involvement
0.62
0.07
9.00
0.00
0.48
0.75
0.48
0.75
dependant variable is explained by the predictor variable involvement, which is
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significantly low. The coefficient of determinant for materialism is 0.62. This

also means that an increase of one rating (On the scale of five to one) of
Involvement will cause the customer attitude to increase by 0.62 rating, which
means that the relationship between predictor variable involvement and customer
attitude is weak.
3.3.5 HYPOTHESIS FOUR
The relationship of the determinant mood with dependent variable customer
attitude was measured. The hypothesis developed in this context is presented
below:
H4O: Mood do not influence customer attitude towards marketing
communications.
H4A: Mood influence customer attitude towards marketing communications.
H4O: 1=0
H4A: 1 0
TABLE-7
MULTIPLE REGRESSIONS
Multiple R
R Square
Adjusted R Square
Standard Error
Observations
0.72
0.52
0.52
0.71
120.00
ANOVA
Regression
Residual
Total
df
1.00
118.00
119.00
Coefficients
SS
64.78
60.02
124.80
Standard
Error
t Stat
MS
64.78
0.51
F
127.37
Significance F
0.00
Pvalue
Lower
95%
Upper
95%
Lower
95.0%
Upper
95.0%
Intercept
0.96
0.24
4.07
0.00
0.49
1.43
0.49
1.43
Mood
0.74
0.07
11.29
0.00
0.61
0.87
0.61
0.87
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dependant variable is explained by the predictor variable mood, which is
significantly not high. The coefficient of determinant for mood is 0.74. This also
means that an increase of one rating (On the scale of five to one) of mood will
cause the customer attitude to increase by 0.74 rating, which means that the
relationship between predictor variable mood and customer attitude is low.
4.0.0 CROSS-SECTIONAL ANALYSIS
An attempt was made to do a cross-sectional analysis between personal data and
determinants of compulsive buying behavior which are discussed below:
4.1.0 MEDIA INFLUENCE ANALYSIS BY GENDER:
Respondents opinion by Gender was obtained on determinants of customer
attitude to ascertain whether the opinions changes with Gender groups. The
summarized result is presented below:
male
female
Attitude
3.49
3.66
Mass Media
3.48
3.70
S/Exposure
3.51
3.80
Involvement
3.29
3.73
Mood
3.42
3.71
4.00
3.80
3.60
male
3.40
female
3.20
3.00
Attitude
Mass
Media
S/Exposure Involvement
Mood
The respondents opinion gender wise on selective exposure is as high as 3.80 for
females and as low as 3.51 for males. This indicates that females are more
exposed towards media. On the other hand males have the less selective exposure,
because females spend more time in the home and closely attach to media by
watching television and listening radio on the other hand males spend their most
of the time in the offices. Similar results are obtained on mass media that is
closely related to selective exposure which shows as high as 3.70 in females and
as low as 3.48 in males. This also represents that women by nature like to read
magazines and watch T.V.. In short, female gender show higher scores in every
dimension of media influence on marketing communications such as customer
attitude, mass media, selective exposure, involvement and mood than the male
gender.
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4.2.0 MEDIA INFLUENCE ANALYSIS BY AGE:

Respondents opinion by age was obtained on the determinants of customer
attitude to ascertain whether the opinions change with age groups. The
Under 20
20 - 30
30 - 40
40 - 50
50 +
Attitude
3.50
3.49
3.79
4.00
-
Mass
Media
3.63
3.52
3.50
4.00
-
S/Exposure
3.17
3.53
3.95
3.50
-
Involvement
3.50
3.29
3.98
4.25
-
Mood
3.33
3.42
3.92
3.75
-
5.00
4.00
Under 20
20 - 30
3.00
30 - 40
2.00
40 - 50
1.00
50 +
Attitude
Mass Media S/Exposure Involvement
Mood
Respondents opinion on involvement by age group is as high as 4.25 in age

group of 40-50 and second highest 3.98 in the 30-40 age group, while is as low as
3.29 in the age group of 20-30. The results are quite obvious if we compare 40-50
age group with age group of 30-40. because the age group of 40-50 stay at home
and more interactive with the media so their attitude is also very high as 4.00.
4.3.0 MEDIA INFLUENCE ANALYSIS BY MARITAL STATUS:
Respondents opinion by marital status was obtained on the determinants of
customer attitude to ascertain whether the opinions changes with marital status.
The summarized result is presented below:
Single
Married
Attitude
3.50
3.64
Mass
Media
3.50
3.64
S/Exposure
3.52
3.77
Involvement
3.29
3.70
Mood
3.42
3.68
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4.00
3.80
3.60
Single
3.40
Married
3.20
3.00
Attitude
Mass Media
S/Exposure
Involvement
Mood
Respondents opinion on selective exposure is as high as 3.77 in married and as

low as 3.52 in single people. The score of attitude is as high as 3.64 in married
and as low as 3.50 in singles. Because singles are always energetic people and
they want to go outside and having different activities while married usually stay
at home and enjoy their family life.
4.4.0 MEDIA INFLUENCE ANALYSIS BY OCCUPATION:

Respondents opinion by occupation was obtained on the determinants of
customer attitude to ascertain whether the opinions changes with occupations. The
Banker
Doctor
Accountant
Engineer
Businessman
Student
Other (specify)
Attitude
3.44
4.00
3.23
3.00
3.14
3.77
3.62
Mass
Media
3.10
4.00
3.63
4.00
3.93
3.65
3.25
S/Exposure
3.30
4.00
3.38
3.10
3.14
3.81
3.72
Involvement
2.97
4.00
3.22
3.03
3.11
3.46
3.73
Mood
3.15
3.88
3.27
3.40
3.00
3.62
3.69
5.00
Banker
4.00
Doctor
3.00
Accountant
2.00
Engineer
1.00
Businessman
Student
Attitude
Mass Media
S/Exposure
Involvement
Mood
Other (specify)
Again the mass media represents the strongest determinant of customer attitude. No
matter what occupation people have, which is as high as 4.00 for doctors and
second highest is 3.93 for the businessman.
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4.5.0 MEDIA INFLUENCE ANALYSIS BY INCOME:

Respondents opinion by income was obtained on the determinants of customer
attitude to ascertain whether the opinions changes with income levels. The
Attitude
Under Rs 15,000
Rs. 15,000 - 25,000
Rs. 25,000 - 35,000
Rs. 35,000 - 45,000
Rs. 45,000 - 55,000
Rs. 55,000 +
3.42
3.63
3.42
3.82
4.13
3.42
Mass
Media
3.48
3.57
3.38
4.07
4.08
2.33
S/Exposure
Involvement
Mood
3.45
3.67
3.47
3.90
4.33
3.50
3.27
3.19
3.54
3.82
3.96
4.25
3.37
3.45
3.44
4.03
3.90
3.92
5.00
Under Rs 15,000
4.00
Rs. 15,000 - 25,000
3.00
Rs. 25,000 - 35,000
2.00
Rs. 35,000 - 45,000
1.00
Rs. 45,000 - 55,000
Attitude
Mass Media
S/Exposure
Involvement
Mood
Rs. 55,000 +
Respondents opinion by Income is as high as 4.33 in above Rs.45,000- 55,000

income group and as low as 3.45 in income group of under 15,000 in selective
exposure. This shows that higher are the salaries and earning s of people, more
exposure they will have.
4.6.0 MEDIA INFLUENCE ANALYSIS BY LOCATION:
Respondents opinion by location was obtained on the determinants of customer
attitude to ascertain whether the opinions changes with Location. The summarized
Clifton
D.H.A
P.E.C.H.S
Nazimabad
Gulshan
Others (specify)
Attitude
3.38
3.58
3.23
3.00
3.65
3.76
Mass
Media
3.56
3.81
3.70
3.42
3.39
3.48
S/Exposure
2.96
3.68
3.36
3.06
3.77
3.79
Involvement
2.88
3.31
3.08
3.09
3.55
3.59
Mood
2.83
3.56
3.24
3.18
3.69
3.64
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4.00
3.50
3.00
2.50
2.00
1.50
1.00
0.50
-
VOL 3, NO 1
Clifton
D.H.A
P.E.C.H.S
Nazimabad
Gulshan
Others (specify)
Attitude
Mass Media
S/Exposure
Involvement
Mood
Respondents opinion by Location is as high as 3.79 and as low as 2.96 in selective

exposure. That indicates that people who live in posh area like Clifton have less tendency
towards selective exposure and those who live in other parts of Karachi, lets say, Malir
cantt, and Gulistan-johar, main Malir, Cantt station and others have more selective
exposure. Although the result is not as it was expected but if this is so then that means
that the people living in Clifton are not necessarily more selectively exposed towards
media, they are those have the same living style as it exists in Nazimabad, and Gulshane-Iqbal. But those who are living in Malir cantt, and Gulistan-Johar have more tendencies
towards selective exposure. This may be because Karachi is developing and Malir cantt is
becoming an ideal place to live due to the security reasons so the business class is shifting
to Malir Cantt and thats why Malir Cantt showed high selective exposure in other
location.
4.7.0 MEDIA INFLUENCE ANALYSIS BY EDUCATION:
Respondents opinion by Education was obtained on the determinants of customer
attitude to ascertain whether the opinions changes with Education. The
Attitude
Under
Matriculation
Intermediate
Graduate
Post Graduate
Othre (specify)
3.50
3.37
3.77
3.79
Mass
Media
3.50
3.37
3.77
3.79
S/Exposure
Involvement
3.17
3.43
3.77
3.91
3.50
3.22
3.46
4.00
Mood
3.33
3.37
3.56
3.90
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5.00
4.00
Under Matriculation
3.00
Intermediate
2.00
Graduate
1.00
Post Graduate
Othre (specify)
Attitude
Mass Media
S/Exposure
Involvement
Mood
Respondents opinion on involvement is as high as 4.00 in other specify and as

low as 3.22 in graduation. The second highest is the selective exposure as high as
3.91 in other (specify) and as low as 3.17 in intermediate.
5.0.0 RECOMMENDATIONS
The media has a great influence on marketing communications and as well to
form a attitude of the customer so if we use the mass media and can get the
marketing communications right in the mind of the customers we can get the best
reward in shape of the attitude formation of the people so it would be easy for the
marketer to sell our their products.
According to the respondents the selective exposure with an average of 3.56 is the
best determinant which influences more towards attitude formation and to get the
messages of the marketing communications, so those types of marketing
messages must be created which have more exposure for the people. The others
determinants followed by the selective exposure are mass media with an average
of 3.52, mood with an average of 3.47 and involvement have the average of 3.37.
Respondents opinions on mass media have the second highest result which mean
that marketers must use the mass media campaign to form the attitude of the
customer while mood also play the role in attitude formation upto some extent so
the marketing communications should be communicated in relevance of the mood
but as the study shows the involvement has a low result as it was not expected but
it can be created by giving the good exposure of the marketing messages or
communications.
The respondents rating also shows that female has more attitude formation in
term of media influence on marketing communications. As most of the ads being
produced are family oriented and females play important role in purchasing the
household products as they are more influenced by the media so marketing
communication can also be focused to this group and more attitude formation can
be made possible. As warid is producing the same messages (bushra ansari baton
ki committee) and surf excel (daag tu acha hota hai).
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References
Aaker, David A., and Philip K. Brown (1972), "Evaluating Vehicle Source Effects,"
Journal of Advertising Research, 12 (August), 11-16.
Ajzen, I. and J. T. Madden (1986), "Prediction of Goal-Directed: Attitudes, Intentions
and Perceived Behavioral," Journal of Experimental Social Psychology, 22, 453-474
Alba, Joseph, John Lynch, Barton Weitz, Chris Janiszewski, Richard Lutz, Alan Sawyer,
and Stacy Wood (1997), "Interactive Home Shopping: Consumer, Retailer, and
Manufacturer Incentives to Participate in Electronic Marketplaces," Journal of
Marketing, 61 (July), 38-53.
Audits and Surveys, Inc. (1986), A Study of Media Involvement, (New York: Audits and
Surveys)
Fontenot, Renee and Richard Vlosky. Impacts of the Internet on Marketing and
Business Relationships. Southwestern Marketing Conference. New Orleans, Louisiana.
March 12-15, 1997.
Glazer (1989), Ray (1985). Media Effects: Advances in Theory and Research
(Routledge Communication Series) by Jennings Bryant and Mary Beth Oliver (Dec 18,
2008)
(Jennifer Yurchisin, from University of Arizona and Kim K.P Johnson from University of
Minnesota) Family and Consumer Science Research Journal (2004, p.291-313)
Katz, E., & Lazarsfeld, P. F. (1955). Personal influence: The part played by people in the
flow of mass communication. Glencoe, IL: Free Press.
Marshall McLuhan and Quentin Fiore (1967) The Medium is the Massage: An
Inventory of Effects (Penguin Modern Classics). Bantam books
Stewart, D.W. and S. Ward (1994), "Media Effects on Advertising," in J. Bryant and D.
Zillmann (Eds.), Media Effects: Advances in Theory and Research, Hillsdale, N. J.:
Lawrence Erlbaum Associates, Inc., pp. 315-363.
Shimp, Terence A.(1990). Promotion management and marketing communications. 2nd
edition. Dryden Press (Chicago)
http://www.addictions.co.uk/addiction.asp?id=shop ing_addiction.htm
http://www.addictionrecov.org/spendaddict.htm - 6k
.http://www.google.com
http://www.yahoo.com
.http:// www.ask.com
http://www.mindpub.com
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(A
ANNEXURE-1)
SAMPLE CHARACTERISTICS
1.
DISTRIBUTION BY GENDER
TABLE-1
Gender
Male
Female
2.
Percentage number
80.83%
19.17%
100.00%
DISTRIBUTION BY AGE
TABLE-2
Age
under 20
20-30
30-40
40-50
50+
3.
Number
97
23
120
Percentage
1.67%
86.67%
10.83%
.83%
100.00%
Number
2
104
13
1
120
DISTRIBUTION BY MARITAL STATUS

TABLE-3
Marital Status
Single
Married
4.
Percentage
80.00%
20.00%
100.00%
Number
96
24
120
DISTRIBUTION BY OCCUPATION
Table-4
Occupation
Banker
Doctor
Accountant
Engineer
Businessman
Student
Other (Specify)
Percentage
14.17%
1.67%
12.50%
8.33%
5.83%
35.00%
22.50%
100.00%
Numbers
17
2
15
10
7
42
27
120
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5.
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DISTRIBUTION BY INCOME
TABLE-5
Income
Under Rs. 15,000
Rs. 15,000-25,000
Rs. 25,000-35,000
Rs. 35,000-45,000
Rs. 45,000-55,000
Rs. 55,000 +
6.
Percentage
55.00%
21.67%
10.00%
5.83%
5.00%
2.50%
100.00%
Number
66
26
12
7
6
3
120
DISTRIBUTION BY LOCATION
TABLE-6
Location
Clifton
D.H.A
P.E.C.H.S
Nazimabad
Gulshan-e-Iqbal
Other (Specify)
7.
Percentage
6.67%
10.83%
12.50%
13.33%
18.33%
38.33%
100.00%
Number
8
13
15
16
22
46
120
DISTRIBUTION BY EDUCATION
TABLE-7
Education
Under Matriculation
Intermediate
Graduate
Post Graduate
Other (Specify)
Percentage
0%
1.67%
60.83%
26.67%
10.83%
100.00%
Numbers
0
2
73
32
13
120
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QUESTIONNAIRE
MAY 2011
VOL 3, NO 1
(A
ANNEXURE-2)
personal Information
1) Gender:
5) Income:
1) Male
1) Under Rs. 15,000
2) Female
2) Rs. 15,000 25,000

3) Rs. 25,000 35,000
4) Rs. 35,000 45,000
2) Age:
3) Under 20
5) Rs. 45,000 55,000

6) Rs. 55,000 +
4) 20 - 30
5) 30 - 40
6) 40 - 50
7) 50 +
6) Location:
1) Clifton
2) D.H.A
3) P.E.C.H.S
3) Marital Status:
4) Nazimabad
1) Single
5) Gulshan-e-Iqbal
2) Married
6) Other (Specify) ________________
4) Occupation:
7) Education:
1) Banker
1) Under Matriculation
2) Doctor
2) Intermediate
3) Accountant
3) Graduate
4) Engineer
4) Post Graduate
5) Businessman
5) Other (Specify) _________________
6) Student
7) Other (Specify) ________________
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RATE THE FOLLOWING ON THE SCALE OF FIVE (5 Being higher part and 1 being
lower part)
ATTITUDE TOWARDS MEDIUM
Rate your attitude towards Marketing communications
5 4 3 2 1
Rate your perception on the credibility of media on

marketing communications?
5 4 3 2 1
10
Rate your trustworthiness of media on marketing

communications?
5 4 3 2 1
11
Rate how relationship play important role for consumer

respond to marketing communications?
5 4 3 2 1
USE OF MASS MEDIA
12
Rate how social environment influence on marketing

communications?
5 4 3 2 1
13
Rate how market communications are used to fulfill the

physiological needs?
5 4 3 2 1
14
Rate how market communications used to generate the

expectation that leads to exposure and gratification?
5 4 3 2 1
15
Rate how good would you consider your knowledge about

market communications?
5 4 3 2 1
THE ROLE OF SELECTIVE EXPOSURE
16
Rate would you consider motivation has importance in

marketing communications?
5 4 3 2 1
17
Rate your perception that consumer ability influences on

media effects?
5 4 3 2 1
18
Rate how emotions influence on marketing

communications by using different media?
5 4 3 2 1
INVOLVEMENT
19
Rate how involvement with media is used to construct

attitude formation of consumer?
5 4 3 2 1
MOOD
20
Rate how media is used to maintain or change mood?
5 4 3 2 1
21
Rate how media influence on moods in order to create

attention?
5 4 3 2 1
Rate how media influence on moods in order to create

information processing and decision-making?
5 4 3 2 1
22
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CORPORATE CITIZENSHIP, IDENTITY AND IMAGE MANAGEMENT: A

FUNCTIONAL APPROACH IN PROMOTING CORPORATE
GOVERNANCE IN BANKS
Okorie Nelson
Department of Mass Communication,
Covenant University, Ota Ogun State.
Km 10 Idiroko road Ota, P.M.B 1023, Ota, Ogun State, Nigeria
Oyewole Oyedayo Sharon
Department of Accounting and Taxation,
Covenant University, Ota Ogun State.
Km 10 Idiroko road Ota, P.M.B 1023, Ota, Ogun State, Nigeria
Abstract
This research paper examines the conceptual framework of corporate governance in
Nigeria and seeks to understand current best practice. It also examines the importance of
corporate citizenship as a panacea for efficient implementation of validated international
corporate governance best practice in Nigeria. This paper identified corporate image and
identity management as a major purveyor to efficient functioning of corporate
governance. The paper suggests that there is a need to emphasize a functional approach
of identity and image management in promoting corporate citizenship in Nigerian banks
so that good corporate governance practices can be achieved
Keywords: Corporate Governance, Corporate Citizenship, Identity And Image
Management, Banks, Nigerian Society.
Introduction
The conceptual framework of corporate governance can be viewed from at least two
perspectives: a narrow one in which it is viewed as being concerned with the structures
within which a corporate entity or enterprise receives its basic orientation and direction
(Rwegasira, 2000); and a broad perspective in which it is regarded as being the heart of
both a market economy and a democratic society (Sullivan, 2000). The narrow view
perceives corporate governance in terms of issues relating to shareholder protection,
management control and the popular principal-agency problems of economic theory. In
other words, the narrow perspective of corporate governance stresses the need for
promoting public confidence and managing shareholder relationship with the
organization.
In Nigeria, the Securities and Exchange Commission (SEC) reported in a publication in

April 2003, which showed that corporate governance was at a rudimentary stage, as only
about 40% of quoted companies, including banks, had recognized codes of corporate
governance in place. Specifically for the financial sector, poor corporate governance was
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identified as one of the major factors in virtually all known instances of a financial
institutions distress in the country.
Presently, the massive and prevalent frauds, mandatory retirement of CEOs of banks, due
to corrupt practices and inefficient rubber-stamped board, have combined to signal the
absence of or failure of existing corporate governance structure. The Company and Allied
Matters Act (CAMA) enacted to regulate and balance the relationship among the board,
shareholders and the management including other stakeholders, failed woefully due to
inadequate enforcement capacity. This trend calls for the need of corporate citizenship in
promoting good ethical practices of bank executives and representatives in Nigeria.
Furthermore, there is a need for corporate image management to salvage the battered
image of banks in the eye of Nigerians in the society. This paper examine the role of
corporate citizenship, identity and image management in promoting corporate governance
among banks in Nigeria
The thesis of this paper is centered on image restoration theory, which is also referred to
as image repair theory in recent literature, to imply that an image might be improved
but not completely restored addresses the question of what a person or organization can
say when accused or suspected of wrongdoing(Benoit, 1997; Blaney & Benoit, 2001).
Image restoration theory stresses that accusations or suspicions have two components:
responsibility (blame) and offensiveness. An image is at risk only when an offensive act
has occurred and one is believed to be responsible for that act. Those accused or
suspected of wrongdoing have five general options, which are related to responsibility
and offensiveness. Denial argues that the accused is not responsible for the offensive act.
A second general option is to evade responsibility (partially reducing blame), with
strategies such as claiming the offensive act was an accident, that one was provoked into
performing the act, or that one lacked the ability or information necessary to prevent the
offensive act. A third group of strategies address the second component, attempting to
reduce offensiveness by minimizing the damage or attempting to justify the offensive
action (e.g., I stole to feed my starving family). Corrective action attempts to fix the
problem (or prevent it from happening again), addressing offensiveness. Finally,
mortification admits responsibility and asks for forgiveness. For this paper, the theory
explains the approaches an organization must take as a corporate citizen in managing
stakeholder relationship. It also expounds on the ethical behavior necessary in promoting
the corporate citizenship and governance
The Concept of Corporate Governance
Corporate governance is the system by which business corporations are directed and
controlled. The corporate governance structure specifies the distribution of rights and
responsibilities among different participants in the corporation, such as the board,
managers, shareholders and other stakeholders, and spells out the rules and procedures
for making decisions on corporate affairs. By doing this, it also provides the structure
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through which the company objectives are set, and the means of attaining those
objectives and monitoring performance.
Today, companies are required to comply with tenets of corporate governance as well as
good corporate citizenship by way of corporate social responsibility, non-payment of
bribes for contracts and sensitivity to the needs and interests of communities in their areas
of operation. Accordingly, the overall aim of corporate governance is that companies
adhere to their memoranda and articles of association and the web of legislation, rules
and regulations that order their operation. Thus, companies do not have untrammeled
powers to act and function in their quest for profit but should also pay heed to matters
such as fair labour practices, environmental pollution, global warming and sustainable
development. In other words, corporate governance is concerned with ways in which all
parties interested in the well-being of the firm (the stakeholders) attempt to ensure that
managers and other insiders take measures or adopt mechanisms that safeguard the
interests of the stakeholders. Such measures are necessitated by the separation of
ownership from management, an increasingly vital feature of the modern firm. A typical
firm is characterized by numerous owners having no management function, and managers
with no equity interest in the firm. Shareholders, or owners of equity, are generally large
in number, and an average shareholder controls a minute proportion of the shares of the
firm. This gives rise to the tendency for such a shareholder to take no interest in the
monitoring of managers, who, left to themselves, may pursue interests different from
those of the owners of equity.
However, corporate governance has wider implications and is critical to economic and
social well being, firstly in providing the incentives and performance measures to achieve
business success, and secondly in providing the accountability and transparency to ensure
the equitable distribution of the resulting wealth. The significance of corporate
governance for the stability and equity of society is captured in the broader definition of
the concept offered by Sir Adrian Cadbury (2002): "Corporate governance is concerned
with holding the balance between economic and social goals and between individual and
communal goals. The governance framework is there to encourage the efficient use of
resources and equally to require accountability for the stewardship of those resources.
The aim is to align as nearly as possible the interests of individuals, corporations and
society.
The Challenge of Corporate Governances in Nigerian Banks
The challenges and failure of corporate governance in Nigeria is rooted in the culture of
corruption and lack of institutional capacity to implement the codes of conduct governing
corporate governance. Quadri (2010) has reasoned that company executives enjoy an
atmosphere of lack of check and balances in the system to engage in gross misconducts
since investors are not included in the governing structure. Policy and procedures
required to ensure efficient internal controls are disregarded, and total lack of thorough
selection process (of CEO and board members round pegs in square holes) remain a
challenge in Nigeria. Quadri further explained that lack of managerial training and
capacity development among Nigerian executives to manage business risks has resulted
in huge agency costs, and shareholders have had to shoulder several avoidable agency
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costs since the board of directors usually failed as a monitoring device to minimize
agency problems.
The recent collapse of The Nigerian Stock Exchange market is a pointer to a system
devoid of controls and accountability, which resulted in lack of shareholders interest and
confidence in the operating environment. Some Nigerian companies relocated their
operations to more stable and vibrant neighboring countries like Ghana and South Africa.
Failure of corporate governance in Nigeria has also been traced to lack of effective
yardsticks to evaluate board and management processes and performance, since the board
sub-committees required to be fully independence, especially the audit
and remuneration committees, are compromised(Quadri, 2010).
The Need for Corporate Citizenship in Nigerian Banks
Corporate citizenship as a field of public relations refers to the organizational

commitment to ethical behavior in business strategy, operations and culture. Furthermore,
it has been on the periphery of corporate governance and board leadership, linked mainly
to corporate reputation. However, in todays globalized and interconnected world,
investors, creditors and other stakeholders have come to recognize that environmental,
social, and governance responsibilities of a company are integral to its performance and
long-term sustainability.
Corporate citizenship also refers to a term used to describe a company's role or
responsibilities towards society. For this reason, it is sometimes used interchangeably
with corporate social responsibility, and in fact many companies including Microsoft,
IBM and Novartis have used it in this way to describe their social initiatives (Matten,
Crane & Chapple,2003). In other words, corporate citizenship refers to how a company
conducts itself as a responsible member of society. It also refers to how a company
invests in the future of a country through charity, sponsorships, skills development, job
creation and its relationships with stakeholders. On a more subtle level, governance
comes into play and a good corporate citizen is one that ensures that it has proper risk and
compliance processes are in place.
Smith and Taylor (2006) has reasoned that corporate citizenship means doing business
not just to meet the needs of owners and stockholders, but to incorporate the interests of
all stakeholders in business operations including, employees, customers, the community
and the environment. A responsible corporate citizen is a business that operates in an
ethical manner and supports the interests and concerns of the community in which it
operates. The concept of corporate citizenship, also known as corporate social
responsibility, proposes that businesses have a responsibility to the community in which
they operate and to society in general. Typically, corporate citizenship includes several
areas of responsibility, such as economic, legal, ethical, philanthropic, and environmental
areas.
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Corporate Identity, Corporate Image and Corporate Citizenship

When building corporate citizenship in organizational management, one must note that
image is closely linked with the identity of a company. Corporate identity and corporate
image have to be strategically interpreted to emphasize the importance of corporate
citizenship in the field of public relations. Therefore, in order to avoid misinterpretations
we will use the following definitions in our dissertation to characterize these three
concepts.
Corporate image is all about the reputation of an organization, the way in which the
organization is being perceived by its publics (Oyedepo & Okorie, 2011). It is the mental
picture of an organization in the mind of the audiences (Balmer.J. Gray, E, 1999).
Corporate image will be created by all the intentional or unintentional actions of an
organization (Ind. N, 1992). An organizations image is a valuable asset and can be as
important as its financial performance (Argenti, 1994). A positive corporate image is
crucial in gaining sales or contracts, employees, and shareholders (Rossiter & Percy,
1987). The organizations perceived trustworthiness, competence, and attractiveness
especially influence such decisions (O'Keefe, 1990). Clearly it is better to throw in one's
lot with a trustworthy (or competent, or attractive) organization than with an
untrustworthy (or incompetent, or unattractive) one. A corporate image is at least partly
determined by the media (Argenti, 1994).
In the process of managing corporate image, the fundamental variables are: corporate
identity, corporate communication and feedback. Corporate identity is the reality of the
corporationthe unique, individual personality of the company that differentiates it from
other companies. Corporate communication is the aggregate of sources, messages, and
media by which the corporation conveys its uniqueness or brand to its various audiences.
Corporate image is in the eye of the beholderthe impression of the overall corporation
held by its several audiences. The objective in managing corporate image is to
communicate the company's identity to those audiences or constituencies that are
important to the firm, in such a way that they develop and maintain a favorable view of
the company. This process involves fashioning a positive identity, communicating this
identity to significant audiences, and obtaining feedback from the audiences to be sure
that the message is interpreted positively. An unsatisfactory image can be improved by
modifying corporate communication, re-shaping the corporate identity, or both.
In public relation management, image and identity has been conceived as primarily
determined and controlled by the organization and has been conceptualized largely in
terms of the strategic plan in handing organizational relationships with investors and
stakeholders (Smith & Taylor, 2006; Oyedepo & Okorie, 2011). Public relations studies
also have suggested that image is determined mostly by the organization and is presented
to employees in visual and verbal form (Ashforth & Mael, 1989; Chajet, 1988).
Corporate citizenship provides the link between corporate identity and corporate image. It
should be defined in the broadest possible sense, because companies communicate
identities in many different ways. Corporate citizenship can include almost anything the
company does, from the way telephones are answered to the involvement of company
employees in community affairs. Corporate citizenship is primarily determined in the
manner executives and employees communicate with their key publics Some of the
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principal sources of corporate communication include company and product names and
logos, formal statements (mission statements, credos, codes of ethics, annual reports,
advertising copy, and company slogans), and behavior during important events. These
events encompass scheduled events such as open houses and anniversary sales as well as
unscheduled events such as lawsuits or negative press coverage. In other words, it can be
said that corporate citizenship is the nexus that bring corporate communication, corporate
identity and image management together for the success of the organizational objective
The Functional approach in promoting Corporate Governance

The overall aim of corporate citizenship is to promote good corporate governance
practices, which instill in companies the essential vision, processes, and structures to
make decisions that ensure longer-term sustainability. Also, it emphasizes that companies
can be profitable as well as achieving environmental, social, and economic value for
society. In other words, good corporate governance is the nexus that holds together
responsible business practices, which ensures positive workplace management,
marketplace responsibility, environmental stewardship, community engagement, and
sustained financial performance.
Good corporate governance practices are essential built by maintaining a consistent
image among the several stakeholder groups. Although it is prudent to stress different
facets of the firm's identity to its various publics, the firm should avoid projecting an
inconsistent image, because the concerns and memberships of different stakeholder
groups often overlap. For instance, the financial community and the shareholders would
have many of the same financial and strategic concerns about the company. In fact, many
shareholders rely heavily on the advice of experts from financial institutions. Similarly,
both employees and the general public have an interest in the overall prestige of the firm
and the reputation of its products. A social action group's criticism, whether economically
effective or not, is bound to influence some customers and affect the company's public
reputation. A regulatory agency such as CAMA or SEC would focus narrowly on the
firm's safety record and policies, but the company's employees and their labor unions also
have a stake in these matters. A crucial way of maintaining a consistent image is to
always communicate the truth to your stakeholders or investors because it is better
primary shareholders are informed about the practices or activities of their organization
than to be informed by outsiders or external authorities. Secondly, the use of corporate
communication in maintaining the image of an organization must be optimized and not
negotiated. Furthermore, the delay to supply information to stakeholders could be
detrimental to the existence of a firm. Bank executives and employees must learn to
supply the required information on time to their key publics before they are informed by
external authorities, this approach would promote public confidence and trust among the
stakeholders or shareholders.
Corporate communication involve all form of media (television, radio, newspaper, press
release, news leaflet, annual reports, etc.) used in communicating the activities and
operations of the organization. As it relates to corporate citizenship, it also involves the
ethical behavior in which these form of media is used to communicate the activities and
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operations of the organization. In sum, the integrity of truth is primarily emphasized in

maintaining a positive image and good corporate governance practices
The importance of corporate identity is quite obvious for organizations that operate in a
good corporate governance practices. Identity management has several contributions to
totality of corporate citizenship: it symbolizes the organization, it provides visibility and
recognizability, it expresses its structure, and internally, it may enhance the extent to
which employees identify with the organization (Bromley, 2001; Dutton, Dukerich, &
Harquail, 1994; Kiriakidou & Millward, 2000; Olins, 1989). Corporate values first need
to be incorporated by employees before they can be expressed externally (Fombrun &
van Riel, 2004).
In organizational management, people work toward common goals and the results are
influenced by strategy, structure, culture, and technology. Organizational dimensions,
based on the various perspectives on organizations found in the literature, emphasize the
strategy of organizations (Johnson & Scholes, 1999; Mintzberg, Ahlstrand, & Lampel,
1998), organizational structure and principles of coordination among various functions
and tasks (Mintzberg, 1979; Hall, 1991; Hodge, Anthony, & Gales, 1996), and culture,
which includes how the shared values and beliefs of the organization's members are
described, how one is supposed to communicate and behave, how newcomers are
socialized, and how leaders influence others (Deal & Kennedy, 1982; Schein, 1992).
Good corporate governance practices emphasize employees of an organization to have
shared values and ethical beliefs that underpin corporate citizenship, so as such behaviors
can translate to the identity of the organization. In sum, the proper management of an
organization identity contributes significantly to the image and practices of corporate
governance
Conclusion
The central thesis of this paper reviewed the conceptual practice of corporate governance
and the need for corporate citizenships in banks, which was essential because of the
recent economic challenges and the financial scandals that characterize the Nigerian
banking industry. Against the backdrop of image restoration theory, which calls for
organizations to engage in corporate citizenship in managing stakeholder relationship as
well as promoting ethical strategies in projecting the corporate image of the organization,
the paper suggests that corporate citizenship is pivotal in promoting good corporate
governance practices in Nigerian banks. Furthermore, image and identity management
can only be properly managed and maintained when bank executives and employees have
shared values, beliefs and ethical behavior that underpin corporate citizenship
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LIQUIDITY SQUEEZE AND THE REAL SECTOR OF THE NIGERIAN

ECONOMY: A THEORETICAL EXPOSITION
OJEKA, Stephen A.
(B.SC, M.SC ACCOUNTING) ACCOUNTING DEPARTMENT
COVENANT UNIVERSITY
NIGERIA
AJAYI Anijesushola Olusegun
ACCOUNTING DEPARTMENT
COVENANT UNIVERSITY
NIGERIA
Abstract
The global financial recession started in the United States before it snowballed into other
countries globally. This can be linked to the connection between financial market and
economies of the world. The crisis affected all the major economies especially the real
sector which serves as the backbone to the economy. This paper therefore considered the
effect of liquidity squeeze on the real sector of the Nigerian economy, to examine
strategies which the manufacturing industries can use to counter the effect of liquidity
squeeze in the real sector even as the global financial crisis bite harder on the liquidity of
the corporate bodies. The paper concludes that, for any country to thrive and make
maximum impact in this era of global recession, more attention must be given to liquidity
which has affected the real sector in Nigeria negatively and to restore confidence in the
sector, there is an urgent need for Nigerian government to wake up and rescue this ailing
economy. We therefore recommend that Nigerian government should pay critical
attention to the real sector by instituting legislations that will herald the flow of fund to
the sector and set up a Manufacturing Support Fund (MSUF) which would be a pool of
resources from the government at all levels.
Keywords: Real Sector, Liquidity, Global recession, Nigerian Government
1.0
INTRODUCTION
Liquidity plays an important role in the real sector therefore, due to the absence of cash
flow in the economy, managers and investors in the manufacturing sector need
information, techniques and solutions to forecast the major challenges which are likely to
affect the business going concern. The different sectors of the economy have to strive in
the midst of this recession in order to avoid sudden collapse in the nearest future. Chizea
(2001) posited that liquidity is essentially a measure of the money supply and liquidity
management is a determination of the quantum of liquidity that would be consistent with
optimal level of output and policies. He explained that liquidity of financial systems
sustains the lifeline of an economy.
A liquidity squeeze is triggered when an otherwise sound business finds itself temporarily
incapable of accessing the bridging finance it needs to expand its business or smooth its
cash flow payments. In this case, accessing additional credit lines and "trading through"
the crisis can allow the business to navigate its way through the problem and ensure its
continued solvency and viability. It is often difficult to know, in the midst of a crisis,
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whether distressed businesses are experiencing a prolonged and intractable credit crunch
caused by mistaken and unsustainable valuations and lending practices, or whether these
businesses are experiencing a temporary liquidity crisis which can be traded through and
survived.
Liquidity challenge started in subprime mortgage (USA) due to the fact that mortgaging
was taking place with lack of guaranteed collateral to pay back. This lead to the global
financial crisis that has also affected the banking sector because majority of the funds
used in mortgaging is provided by the banking sector. The real sector and the banking
sector go hand-in-hand because the banking sector is their major source of fund (loans)
but recently, the banking sector has also been facing crisis from the capital market as the
market price of shares has reduced because expatriates and investors move their money
invested originally that acts as source of funds to the banking sector back to their home
country to help the deteriorating conditions (Akinluyi, 2009). The real sector is now
confronted by yet a bigger challenge acute credit squeeze caused by the recent clamp
down on five banks by the Central Bank of Nigeria (CBN) due to their mismanagement
of funds . All these challenges will tend to have a huge effect on the continuous existence
of the real sector of the Nigerian economy in the long-run.
However, the manufacturing sector has been facing numerous challenges before now but
with the global financial crisis, these problems are being compounded by the depreciating
naira in the foreign exchange market, rising interest rates, smuggling, counterfeit etc.
Globally, activities of the manufacturing sector reflect that unique role on the
contribution of growth in an economy through their production and availability of goods
and services as a medium to communicate and satisfy consumers/customers.
Manufacturing sector is considered to be one of the most important sectors of the
Nigerian economy. The purposes of running them are to see that it operates at a profit,
employment generation and to ensure that it pays its creditors and expenses at the
appropriate time. If these points are not covered effectively, it could mean that they have
to be closed down.
The objective of this paper therefore is to examine the effect of liquidity squeeze on the
real sector of the Nigerian economy, to examine how liquidity squeeze affects the
attainment of manufacturing industries objectives and lastly to provide strategies which
the manufacturing industries can use to counter the effect of liquidity squeeze in the real
sector.
2.0 LITERATURE REVIEW
2.1
BRIEF HISTORY OF GLOBAL FINANCIAL CRISIS
The current liquidity squeeze was triggered by the global financial crisis that has its
origin in the U.S. subprime mortgage crisis of August 2007. The subprime mortgage
crisis had its origin in the program the directors of Fannie Mae initiated in the late 1990's
to pursue social welfare goals rather than maintain financial viability. Lenders were
strongly encouraged to reduce the requirements for mortgage below what had been found
to be the minimum adequate levels. Having pushed the lenders into the subprime
mortgage market Fannie Mae made the financially infeasible feasible by being willing to
buy such subprime mortgage and to grant default insurance on such mortgages. When
Fannie Mae effectively went bankrupt the lenders who had written such subprime
mortgages found that there was no longer a market for them and thus they were stuck
with them. Also those lenders who had obtained default insurance now find that
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insurance is useless if Fannie Mae cannot pay off on the defaulted mortgages. The
lenders should have been aware that there is a risk with any insurance company that it
might not be willing and able to pay off on claims. The supposed guarantee of Fannie
Mae obligations by the Federal Government removed any concern of businesses with the
risk of counter-party default. However, this crisis was caused specifically by housing and
credit markets mismatch, poor judgment by borrowers and/or the lenders, inability of
homeowners to make mortgage payments, speculation and overbuilding during the boom
period, risky mortgage products (financial innovations with concealed default risks), high
personal and corporate debt profiles and inactive/weak central bank policies. The
environment then led investors, firms and consumers to expect a bright future and
underestimate risk. Housing and other asset prices went up in U.S. as several risky
mortgages were approved and sold as being nearly riskless. Therefore, when housing
prices fell and subprime mortgages and securities based on them reduced in value, the
stage was set for a crisis. The crisis became contagious and quickly moved across assets,
markets and economies in view of global integration and connections among financial
institutions.
2.2
IMPLICATIONS FOR AFRICA
In the first few months of the financial crisis, there was the widely held view that the
impact on African countries would be minimal because of their slow integration into the
global economy. The financial crisis is hitting the Western nations the hardest; Africa
may yet enjoy increased trade for a while. In the long run, it can be expected that foreign
investment in Africa will reduce as the credit squeeze takes hold. Furthermore, foreign
aid, which is important for a number of African countries, is likely to diminish. Africa
should weather the first round effects of the financial crisis in developed markets because
of its weak integration into the global financial system, but export demand and access to
finance could be hit, especially in a prolonged downturn, Africa economically represents
a small share of global markets, with 1.3 percent of world stock market capitalisation, 0.2
percent of debt securities and 0.8 percent of bank assets, with less than ten percent of
Global Foreign direct investments (Ekweremadu, 2009).
All these elements might suggest that for most African countries, the direct turbulence in
the United States and Europe will have a limited impact on the domestic financial
markets. Due to the fragile nature of African economies and their level of dependence on
supportive investments and foreign aids, one will begin to doubt the ability of African
Nations to withstand and absorb the negative economic effects of the sudden global
financial crisis. Furthermore, African countries tend to have very small inter-bank
markets and several countries have restrictions on new financial products as well as
market entry, which should shield them from the direct effects of the global financial
crisis. Recent developments have, however, shown that the negative contagion effects of
the crisis are already evident in the Africa region. Given the diversity of African
countries, the crisis is certainly going to affect some countries much more than others. It
is also interesting to note that the crisis is affecting all categories of countries in the
region, those considered to have good economic policies and governance; those with poor
macroeconomic records; fragile States; small and large economies; oil- and non-oil
exporting countries (African Union Commission, 2009). An implication of this assertion
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is that the real effects of the crisis in the region are not simply due to the nature of
macroeconomic policies and governance in African countries. The impact of the crisis on
Africa comes from both direct and indirect channels. The direct effects have been felt
mostly through the financial sector. For example, stock market volatility has increased
since the onset of the crisis and wealth losses have been observed in the major stock
exchanges. So far, bank failures have been rare in the region, largely because most
African banks do not have any significant exposure to the sub-prime mortgage market
and asset-backed securities. They are, however, vulnerable to contagion effects arising
from the high rate of foreign ownership of banks in several countries in the region. To the
extent that foreign-owned banks reduce their support of local banks or sell their assets, it
will have serious negative consequences for the financial sector in Africa. The crisis has
also increased the cost of imported intermediate inputs, with consequences for
production, output and employment.
Moreover, since several countries in the region are import dependent, the depreciation of
currencies in the region has increased domestic prices of consumer goods and reduced
access to food by vulnerable groups. Exchange-rate depreciation has also increased
exchange-rate risks faced by domestic firms and increased the likelihood that they will
evade loans owed to domestic banks, which has consequently increased the vulnerability
of these banks. The financial crisis has also increased the risk premiums that African
countries have to pay in international capital markets which automatically led to several
countries in the region having difficulties obtaining funds from international capital
markets. For example, Kenya, Nigeria, Tanzania and Uganda have cancelled plans to
raise funds in these markets. The drying-up of this source of external finance has in turn
slowed down development in the region because the money raised would have been used
to finance infrastructure development and boost growth (African Union Commission,
2009).
The volume of exports by African countries has also declined because of the financial
crisis. The slowdown in economic growth in three key export markets; Europe, the
United States and China, has affected the demand for exports from Africa. Forecasts by
the World Trade Organization indicate that the volume of global trade is expected to
decline by 9% in 2009, which will have a negative effect on Africas exports in 2009.The
declines in commodity prices and export volumes have led to a decrease in export
revenues in African countries. The reduction in expected export earnings has constrained
the ability of Governments to finance imported inputs necessary for production. It would
also limit the ability of Governments to cushion the negative effects of the crisis on the
economy.
2.3
OVERVIEW OF THE NIGERIAN REAL SECTOR BEFORE THE CRISIS
Players in the Nigerian industrial and manufacturing sector can be classified into four
groups, namely: multinational, national, regional and local. Apart from the multinational
operators, most of the other players have disappeared in the last two decades, due to
unpredictable government policies, lack of basic raw materials, most of which are
imported. Today, the Nigerian Industrial & Manufacturing sector accounts for less that
10% of Nigerias GDP, with manufacturing capacity utilisation remaining below 35% for
the most part for the last decade (Bureau of Public Enterprises, 2009). The history of
industrial development and manufacturing in Nigeria is a classic illustration of how a
nation could neglect a vital sector through policy inconsistencies and distractions
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attributable to the discovery of oil. The near total neglect of agriculture has denied many
manufacturers and industries their primary source of raw materials. The absence of
locally sourced inputs has resulted in low industrialization.
Before independence, British industrial policy for the nation systematically discouraged
local crafts and manufacturers. At independence in 1960, the Nigerian economy was
largely agricultural and only 150 plants of medium and large scale size in the industrial
sector were available, evidently, modern manufacturing accounted for a mere 3.2.% of
our GDP at independence Ugwuonah & Omeje, (1998), with expatriate investors
dominating the business. After independence, the government of the first republic placed
immense premium on foreign investment and active partnership with foreign capital as a
major strategy for industrial growth and enhancing the productive performance of
manufacturing sector. But throughout the period, industrial establishments engaged in
manufacturing remained few and widely dependent on foreign inputs and technical
support (Ugwuonah et al, 1998). As against the pursuance of industrial development
through the attraction of foreign capital investment, emphasis was diverted to the creation
of a sound industrial base for the long term growth of the economy through government
direct investment in strategic industries such as agro-based industries, iron and steel and
vehicle assembly.
The crisis forced many industries out of production, while a lot more operated far below
their normal capacities. Retrenchment of industrial employees became rampant. The
manpower situation was compounded by the emergence of a high rate of graduate
unemployment. Despite all efforts at reviving the economy, available indicators show
that the Nigerian economy is still in serious recession, displaying unhealthy features like;
Slowdown in economic activity, low industrial capacity utilization average of 38% per
annum, an annual inflation rate of 80%, rising unemployment and lack of new
investments and heavy build-up of business inventory owing to flagging domestic
demand. The prospects of manufacturing in Nigeria are bright, given the nations nascent
democracy, a market size of over 120 million people, rich mineral and other resources,
size of the West African market, as well as cheap and abundant labour. Developing
Nigerias real sector requires the concerted efforts of government and the private sector
to create an environment that would encourage investments, primarily by Nigerians as a
firm basis for attracting and sustaining foreign investments in the sector. A fully
developed industrial sector would provide a firm basis for sustainable economic growth
and development. Compounded by the crisis, the following are the lingering challenges
being faced by the real sector.
2.4
IMPLICATIONS FOR NIGERIA
It could seem, on the surface, as though Nigeria is one of those countries that might be
fortunate enough to avoid the global meltdown. Nigeria is not as inter-dependent on the
global capital systems as other nations on the continent and there is little that Nigeria
exports (with the exception of oil) to really throw it into a crisis. According to (Ibegbu,
2008), Bartholomew Ebong, M.D. and CEO of Union Bank of Nigeria Plc was adamant
that the world's global crisis was not Nigeria's. Ebong stated, when interviewed, that the
bank is stepping back to assess the situation, but is confident that Nigeria, and its trading
partners, likely won't get caught in the economic backlash. He posited further that, what
is aiding Nigeria further is that unlike other nations, it has no significant foreign
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ownership in the United States except its foreign reserve that is currently lodged in
United States and European Banks and stands at a fluctuating rate of $59B therefore,
it's not directly connected to the U.S. economy, which was the first to spur the meltdown
The managers of the Nigerian economy could not contemplate the crisis having an impact
on the Nigeria given the consolidation exercise in the Banking sector (2005/2007) that
subsequently increased their capital base, enhancement of capacity of the Insurance
sector arising from the increase in equity capital, unprecedented boom in the capital
market and crude oil price that packed at $147/barrel (Ajakaiye & Fakiyesi, 2009). But
when it started becoming obvious that the crisis would affect Nigeria, the managers of the
economy and the government engaged in self denials claiming that the economy is
immune to the crisis. Since our global business is relatively low, you tend to believe
them. In complying with capital base increase under the consolidation exercise, banks
made several private placements and public offers to raise the required funds. With
projected performance level supporting these offers being regularly surpass, the capital
market reflected these in the price of shares. It became a competition amongst banks to
raise money from capital market with stockbrokers and analysts promising huge dividend
and unmatched price appreciation. Investors looking for quick profits were sucked in. the
increase capital base of the banks coupled with better technology and human capital
enable them to commence cross-border investments including affiliation, business cooperation and other forms of working arrangement with international banks. This was
progressed further to include application for credit lines for their other business. This also
increased the liquidity available to the banks and capacity to contemplate bigger deals.
However , with the liquidity available to the banks following consolidation coupled with
their reluctance to lend the real sector of the economy, banks were virtually deploy their
huge pile of cash through any channel that appears to be credit worthy. Following the
hype surrounding the Nigerian capital market, hedge funds and private equity managers
from the western world invaded the market and took significant positions but when the
financial crisis began to unfold, this category of investors unwound their investments to
cover worse conditions in their home countries. The international correspondent banks
also withdrew the credit lines availed to the local banks which in turn made them call in
most of the loans they had extended to stock brokers who had significant positions in the
market. With the pressure to liquidate the facilities mounting, everybody wanted to sell at
the same time. The crisis has significantly weakened investors confidence in Nigeria,
both in the capital and money markets. In view of the Bearish features of the capital
market 23% or N2.9 trillion in market capitalisation has already been lost since March,
2008 resulting in the CBN granting reprieve to banks that has large portfolio of margin
facilities to re-structure for longer periods (Ekweremadu, 2009).
The global crisis negatively impacted international commodity prices following the
demand in most economies across every sector. The crude oil price declined precipitously
from US$147 per barrel in July 2008 to $47 per barrel in January 2009 which in turn
resulted to a fall in revenue accruing to Nigeria as over 95% of revenue is obtained from
crude oil export, prompting the government to seek other sources of financing for the
2009 fiscal year, as it cannot rely on earnings from crude oil exports (Ajakaiye, et al.
2009). Given that the country is import dependent in all areas including food items and
the influx of cheaper products following from globalization and with falling revenue,
there commenced a sustained pressure on the Naira to Dollar exchange rate. Exchange
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rate depreciation usually comes with higher domestic prices. Even though the prices of
foreign goods remain unchanged, traders will have to charge higher prices as they require
more domestic currency to get the needed foreign exchange for their imports. Conversely,
exporters are favoured, as they will have more naira for their exports. The problem here
is that demand for such exports may be low due to the economic recession in the foreign
countries. In addition, production of such exports depends on some imported foreign
inputs and thus higher costs of production. It is not only due to exchange rate
depreciation that inflation may worsen, another factor is the financing of the fiscal
deficits arising from the declining government revenue. Normally, the global economic
crisis may make interest rates to rise in Nigeria considering the depreciating naira, fiscal
deficit and rising inflation. Banks still charge high interest rates despite the reduction of
the monetary policy rate by the central bank and the directive to reduce their lending
rates. Investors will want to have positive interest rate. So, as inflation rises deposit rate
has to rise. Lending rate has to be higher than the deposit rate (Ekweremadu, 2009).
It is of no doubt that Nigeria has been hard hit by the turbulence. Certain states of
Nigeria are presently relying on funds from off shore financiers to fund mega projects
such as road construction and power generation. With this crisis, it is possible that the
completion of some of these projects would be prolonged. Similarly, Nigeria relies on
several foreign grants and funding from developed countries to complement public
spending on education, health care delivery, and transportation, amongst others. The
crisis has caused a squeeze on grants to Nigeria as some of the Countries we rely on for
funding are the worst hit by the crisis. Also, grants from donor agencies such as the IMF,
World Bank and USAID could also be affected as they in turn rely heavily on the
contributions of the G7 states, which would reduce as the credit crunch persists (Detail
Commercial Solicitors, 2008).
Presently, the debt profile of Nigeria is gradually increasing, from US$17,349.69 billion
in 2006 (after repayment of the substantial debt owed by the country to the Paris Club) to
$22,229.88 billion in 2007 and $23,383.98 billion in 2008. The domestic debt share,
which is in the range of 79-84%, drives this increase (Ajakaiye et al, 2009). This might
rise further in 2010, as the government has promised to meet planned budgeting targets
through loans (external/domestic). Further, the growth of domestic debt will also lead to
an increase in inflation. The impact of the global economic crisis has made the level of
unemployment to rise in Nigeria while salaries of those that are able to remain in
employment have been reduced. In addition, the amount of money remitted home by
Nigerians working abroad to family members has reduced because of the hardship they
are facing abroad. Some of the Nigerians abroad may return home thereby increasing the
number of those in the unemployment market. The lower household income will increase
the rate of poverty and undesirable social vices like corruption, crime, prostitution, etc.
Already, about 54.4% of the Nigerian population is living below the international poverty
line (Ekweremadu, 2009).
2.5
IMPLICATIONS ON THE REAL SECTOR
As important as the manufacturing sector is to the growth of Nigeria economy, available
statistics unfortunately still show that the sector only contributes marginally to the
national GDP. The sector is bedeviled by serious difficulties in the operating environment
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which has led to its decline from nearly 13 percent in 1982 to mere 4 percent in 2008 of
national output (Nwaoguji, 2009). The agencies noted that during the third quarter of
2009, manufacturing activities increased relatively to the level recorded in the second
quarter of 2009 but decreased when compared with the corresponding period in 2008.
The sector recorded a decline in growth rate from 8.43 per cent in 2008 to 8.36 per cent
in 2009 (Owoseye, 2009). The real sector has little investment in infrastructure by the
government, especially the firms that source their raw material from abroad might suffer
greatly. Impacts and their extent would depend on the depth and duration of the crisis: the
liquidity squeeze which originated from the withdrawal of foreign portfolio investors
from Nigeria, the extent to which remittances will decline and, more importantly,
investors confidence in the economy (Ajakaiye et al, 2009).
The impacts on inflation depend on the degree of changes of commodity prices and the
accompanying change in the terms of trade has affected the real sector. Owing to the
commodity price boom, inflation rates rose strongly. Officially, Nigeria started
experiencing a two-digit inflation rate from the third quarter of 2008. With falling
commodity prices, inflationary pressures should subside to some extent as well. A strong
and extended downward movement of the exchange rates will keep inflation levels high,
most especially since Nigeria is import dependent and has no more foreign earnings to
maintain this flair.
The average manufacturing capacity utilisation rate, estimated at 52.6% in 2008, fell by
3.1% and 0.2% below the level in the preceding half year and the corresponding period of
2007, respectively (Ajakaiye, et al. 2009). The decline in manufacturing production could
be attributed to poor facilities, especially electric power supply, which remained
irregular, and the poor road network. Other constraints to increased production include
unfair competition from imported finished products, which constrained the demand for
locally produced goods, high cost of production, poor state of infrastructural facilities,
high interest rates, multiple taxes, insecurity, etc.
The real sector, particularly, has been facing the aforementioned numerous problems
before now. However, with the global economic crisis, the sectors problems are being
compounded by depreciating Naira in the foreign exchange market, rising interest rates,
rising cost of diesel, etc. In addition, the real sector is import dependent and is therefore
currently finding it difficult to establish letters of credit due to the fall in the value of the
Naira, rising interest rates and low foreign exchange supply in the market. The global
recession also led to the closure of the industries, particularly for companies which
depend on importation to survive and had to spend more foreign currency. Operators in
the sector are jittery anticipating more hard times in terms of lower investment, lower
profits and possible factory closure and retrenchment of workers. This is more so, in view
of the slowing of global demand. Those of them that strive to export manufactured goods
would be negatively affected. Added to these challenges facing producers in the Nigeria
real sector is the difficulty in securing credit facilities for their operations from banks
(Ekweremadu, 2009).
According to Kunle Quadri, the new President and Chairman in Council of the Chartered
Institute of Taxation of Nigeria (CITN), The financial crisis is affecting Nigeria because
of its over-dependence on oil revenue and the neglect of the real and agricultural sectors
of the economy. The drop in oil prices at the world market has drastically affected the
revenue accruable to all tiers of government. This current low price of crude oil in the
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international market should spur the government to speed- up her industrialisation

process with trade and economic policy that is export led, focusing hard with emphasis
on infrastructures that will reduce the problems encountered in the manufacturing,
agriculture, tourism and other non oil sectors (Adepetun, 2009; Richard & Olayiwola
2010). Dafinone (2009) opined that the increased unemployment in the manufacturing
sector provides insignificant employment within the country due to the fact that the
economic crisis has caused cramped the growth of manufacturing industries thereby
making them lay-off workers. These industries cannot continue their operations with the
same amount of workers during the recession because they cannot afford their salaries.
The people employed within the manufacturing sector pay personal income taxes, rates
and levies to the states and local governments. The loss of people employed in
manufacturing reduces the revenue profile of these tiers of government thus creating
dependence on the centre.
2.6
STRATEGIES TO COUNTER THE EFFECT OF LIQUIDITY SQUEEZE
IN NIGERIA
The debate in rich countries about the impact of the global financial crisis has largely
ignored its impact on developing countries. Nevertheless, instability in financial markets
around the world is already spilling over to the real economy in poorer countries. It is
vital that policymakers understand how this crisis may affect developing countries like
Nigeria and the implications for development policy. This research has examined the
channels of impact of the current financial crisis on Nigeria. The set of policy responses
can therefore be considered with regard to what is needed immediately and in the
medium to long term to minimize the loss of welfare owing to the crisis. Optimal policies
therefore should be perceived in terms of what is possible in the short run as a response to
the global financial crisis, and what should be the long-term objective, in order to avert
reoccurrence of current experiences while minimizing the impact of the current recession
in terms of welfare losses for the people of the country.
The following are some suggested strategies that can be used to counter the effects of the
global economic crisis in Nigeria:
1. Government need to play active roles in economic management for the development
and stability of the economy. The visible hand of the government must assist the
invisible hand of the market. It is now clear that if left unchecked, market forces,
with all their limitations and inadequacies, can lead to damaging outcomes. Relying
on the market cannot provide an effective agenda against poverty;
2. Stronger regulation and more professional supervision of the Nigeria financial
institutions and strict enforcement of existing financial rules, regulations and laws.
Noteworthy is the fact that failed regulatory policy in America contributed
immensely to the present crisis just as in the case of the East Asian crisis of 1997/98.
May be Nigeria should separate the banking and supervisory/regulatory functions of
the Central Bank of Nigeria. Another institution may be established to perform the
regulatory functions more effectively;
3. There is need to put in place a contingency plan for possible bail-out of any
distressed financial institution. This may take the form of injection of funds into such
ailing banks through government acquisition of shares, which would be bought back
when they recover. This approach can aid recovery from recession and ensure safety
of jobs, and savings;
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4.
5.
6.
7.
8.
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It is not justifiable to use public money to bail out the Nigeria capital market. By
nature, share prices are dynamic. Eventually, share prices will rise through the
operation of the market mechanism as the other sectors of the economy recover. As
people have more money, they will buy shares thereby leading to an increase in the
values of the shares. Clearly, the recovery of the Nigeria capital market largely
depends on developments in other sectors;
Even though we need to stimulate aggregate demand for goods and services by
public spending, such government expenditure must be very productive. A situation
of un-implementable budgets whereby funds meant for capital projects are returned
to the treasury at the end of the year will make it difficult to counter the adverse
effects of the global economic crisis in Nigeria. Hence, profligate, corrupt and
inefficient public spending should be discontinued or sanctioned more seriously;
The Central Bank of Nigeria sometime ago announced a number of expansionary
monetary policy measures: reduction of Monetary Policy Rate, slashing of liquidity
ratio, cutting down of cash reserve ratio, etc. These are in the right direction, but
they must be complemented with fiscal policy measures also aimed at boosting
aggregate demand and avoiding economic recession;
The current global economic crisis presents a golden opportunity to take decisive
steps to reduce the current precarious dependence of the economy on just one
product for revenue and foreign exchange earnings. In the periods of oil windfall, the
country had missed golden opportunities to diversify the economy and develop a
robust infrastructure base. Rather, oil revenues were largely squandered and
mismanaged by some corrupt officials. A diversified economy has some inbuilt
mechanism to withstand external shocks;
There is need for an aggressive non-oil revenue drive starting from this year to bring
all taxable adults who had been evading and avoiding tax into the tax net. It is only
non-oil revenue that can guarantee us sustainable development. Also, there is need to
strive for improved revenue through improvement in the efficiency in collection and
administration of existing taxes and;
Confidence must be built in the Nigeria banking subsector and industrial sector
which has shown some resilience towards the global financial/economic crisis. The
recent floating of bonds in the capital market by both the Federal Government and
Lagos State Government point to governments confidence in the market. Given the
high degree of capitalisation of the banks, their continued posting of huge profits,
and their strategic moves at the moment, they should be able to withstand shocks.
They should equally endeavor to boost confidence in the capital market by
enhancing the liquidity of that market (Ekweremadu, 2009).
3.0 CONCLUSION AND RECOMMENDATION

From the foregoing analysis, the study has revealed that the effects of liquidity squeeze
cannot be overlooked in any manufacturing industry. For any country to thrive and make
maximum impact in this era of global recession, more attention must be given to
liquidity. It has been revealed from the analysis that the real sector is the backbone of any
economy. The illiquidity in the real sector has led many companies into reducing their
staff strength, which have been witnessed most in Nigeria recently both in the real sector
and the financial sector. This has dropped the purchasing power of the general public and
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has paralysed the sector. To restore the confidence back and to sustain the sector, there is
an urgent need for Nigerian government to wake up and rescue this ailing economy. The
Central Bank of Nigeria will have a great role to play with relevant regulatory policies in
ensuring that the investors have access to fund at a relatively cheap rate for favorable
competition.
We therefore recommend that, Nigerian government should pay critical attention to the
real sector by instituting legislations that will herald the flow of fund to the sector.
1. There should be a reduction cost of capital (i.e. cost of borrowing) to at least 1
digit to encourage borrowing
2. Most importantly, the Central Bank of Nigeria should strengthen its oversight
functions over the deposit banks and other related institutions in ensuring capital
are channeled in a right direction.
3. A proposed Manufacturing Support Fund (MSUF) which would be a pool of
resources from the government at all levels, maybe a direct deduction from the
excess crude oil account, the central bank of Nigeria, or the private sector
especially the financial sector of the economy. The fund will be administered on
behalf of the government of Nigeria while beneficiaries will be expected to meet
the stipulated guidelines for such fund (Richard et al. 2010).
4. And the government should also on another ground endeavor to inject funds in
form of bail out as done in the banking sector towards the real sector as well.
5. The government should ensure the infrastructures needed are in place so as to
reduce cost of production.
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References
Adepetun, A. (2009). CITN Tasks Govt on Economy. Retrieved January 2, 2011, from
http://www.ngrguardiannews.com//
African Union Commission (2009). The global financial crisis: impact, responses and
way forward. Retrieved Feb 6, 2011, from http://www.financial_regcomm.com/
Ajakaiye, O. & Fakiyesi, T. (2009). Global Financial Crisis Discussion Series: Nigeria.
Retrieved Dec. 11, 2010, from http://www.odi.com/
Akinluyi L. (2009) Financial Meltdown: A dilemma for the Risk Manager?
Unpublished work Retrieved Jan.10, 2011
Bureau of Public Enterprises, (2009). Industry and Manufacturing Background.
Retrieved Jan. 9, 2011, from http://www.bpeng.org/
Chizea, C. (2001). Liquidity Management. Journal of the Chattered Institute of Bankers

of Nigeria January-June, 2001. Pg. 31
Dafinone, D. (2009). Global Economic Recession: The Lessons of the Global Meltdown
for Nigeria. Retrieved January 2, 2011, from http://www.aiaenigeria.org/
Ekweremadu, I. (2009). The Global Economic Crisis: Implications for Africa. Retrieved
Dec.28 20, 2010, from http://www.primopdf.com/
Ibegbu, C. (2008). Global Financial Meltdown and its Effects to Nigerian Economy.
Retrieved Jan 11, 2011, from http://www.nigeriavillagesquare.com
National Bureau of Statistics, (2007). Foreign Trade Statistical News 2nd Quarter 2007.
ISSN 0734-3954 Retrieved Febr. 6, 2011, from http:// www.nigerianstat.gov.ng
Nwaoguji, C. (2009). Global meltdown: A threat to manufacturing sector, says D.G
LCCI. Retrieved January 2, 2011, from http://www.sunnewsonline/money.com/
Nwaoguji, C. (2009). Manufacturing sector remain distressed in 2008 Borodo, MAN
President.
Retrieved
January
2,
2011,
from
http://www.sunnewsonline/money.com/
Owoseye. A. (2009). Further Decline in Manufacturing Sector. Retrieved January 2,
2011, from http://234next.com/
Richard A. & Olayiwola S.A (2010) Global Financial Crisis and Industrial Sector
Performance in Nigeria
Ugwuonah, E. & Omeje, C. (1998). Higher Education and the Demands of Manpower
Development in the Nigerian Manufacturing Sector: An Empirical Study of Enugu
and Anambra States.
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VOL 3, NO 1
An Analysis of Preventive Health Care in Pakistan

Ahsan Ali Mangi
Civil Servant associated with Capital Development Authority, Islamabad (Pakistan)

Hafeez ur Rehman
Associate Professor/Chairman, Department of Economics

University of the Punjab, Lahore-54590 (Pakistan)
Imtiaz Ahmed
Officer in Economic Group presently working in Finance Division

Government of Pakistan, Islamabad (Pakistan)
Abstract
Preventive health care in Pakistan has always remained a lower priority. In Health Policy
2001 although the Government had put emphasis on preventive care yet a lot of gaps
exist in implementation. As a result the various indicators and targets set under
Millennium Development Goals (MDGs) have remained elusive. This study is an attempt
to examine in depth the major causes of governments bias towards curative care. It
throws light on the causes due to which the government has failed to implement the
National Health Policy 2001 properly. An effort has been made to highlight various
challenges facing the health system and preventive care in particular. Discussing the
various aspects of preventive health care in Pakistan, the significance of creating
awareness among masses and provision of safe drinking water has been emphasized.
Keywords: Analysis , Preventive Health Care , Pakistan
1.
Introduction
The right to health is defined as the right to the highest attainable standard of health
encompasses medical care, access to safe drinking water, adequate sanitation, education,
health-related information and other underlying determinants of health.96 It includes
96
Committee on Economic, Social and Cultural Rights. The right to the highest attainable standard of
health: 11/08/2000. E/C.12/2000/4, CESCR General Comment 14. Twenty-second session Geneva, 25
April12 May 2000 Agenda item http://www.unhchr.ch/tbs/doc.nsf/(symbol)/E.C.12.2000.4.En (accessed
nov 21, 2010).
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freedoms, such as the right to be free from discrimination and involuntary medical
treatment, and entitlements, such as the right to essential primary health care. Like other
human rights, the right to health has particular concern for disadvantaged people,
including those living in poverty. The right to health requires an effective, responsive,
integrated health system of good quality that is accessible to all. Provision of universal
health care is enshrined in the Constitution of Pakistan. Access to Health services is a
basic right of every citizen and is linked to poverty as catastrophic health expenditures
are shocks which can throw households into poverty especially in the absence of any
social security.97
Pakistan health sector has suffered from chronic lack of finances as the states
priorities in public sector expenditures have never let more than 0.6 % of GDP to be
spent on health against the international prescription of at least 4% of the countrys GDP.
Pakistan has improved its health indicators since its inception in 1947, however, the
improvement has been slow and erratic, resultantly Pakistan reels behind in health
outcomes within south Asia as well. The comparative analysis of various health
indicators reveals that Pakistan is relative behind in health outcomes among Asian
countries (see Table 1).
Table 1
Comparative Analysis of Health Indicators
At the time of independence, Pakistan inherited two parallel health care systems,
i.e. public and private. Initially the private sector in health care was very small which
consisted of the private practice of doctors in their communities. The bulk of health care
was existed in the public sector, which was organized in late 1960s and 1970s. The health
system was expanded gradually with a large network of health facility, workforce and
services across the country. Furthermore, regulatory bodies were established to regulate
and monitor various aspects of health care system.98
97
In Pakistan more than 75% of expenditures on health are out of pocket expenditures meaning thereby that
people pay from own pockets to get access to health services in private sector (For details see Pakistan
National Health Accounts 2005-06, FBS, GOP.
98
Pakistan Medical and Dental Council (PMDC) monitors and regulates medical education and practices.
College of Physicians & Surgeons Pakistan (CPSP) regulates the teaching hospitals and is concerned with
specialist and post-graduate medical education. National Institute of Health (NIH) is concerned with Public
Health and Immunization Program.
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Government of Pakistan has an obligation under the constitution to provide health

services to the citizens so that they are ensured ideal health to enjoy life.99 The domain of
preventive, curative, rehabilitative, promotive and proactive programmes, therefore,
mainly lies with the government. The Government over a period of time developed health
care system pertaining to above areas with primary, secondary and tertiary health systems
where tertiary health care provision is largely concentrated in urban areas through 968
hospitals while primary and preventive health care is provisioned through a network of
over 5345 Basic Health Units (BHUs) and 572 Rural Health Centres (RHCs)100 in
addition to other specialized preventive health care units spread over rural Pakistan.
Federal Government through Ministry of Health is involved with policy making,
coordination, technical support, research, capacity building and seeking foreign
assistance. Provincial and district governments are responsible for delivery and
management of healthcare facilities.
Private health sector became private corporate business in 1980s as international
health polices changed their focus from provisioning of universal health to disease
specific health provisioning. Private sector now plays a significant role in providing
curative health care services in the country. According to estimates the ratio of health
care services provided by the public sector and private sector is 20:80. Furthermore,
drugs and vaccines are imported, manufactured and/or packaged by private sector in
Pakistan. Government acts as registering authority of drugs as well as ensuring quality
through regulatory regime. There are over 47000 drugs registered by Government.101 Till
eighties medical education provisioning in the country was through public sector
institutions however later private sector was allowed to establish medical, nursing and
Para-medic education imparting setups which have mushroomed. Pakistan Medical and
Dental Council (PMDC) regulates these institutions to ensure quality and training
standards.
2.
Financing of Health
Government of Pakistan received funds from international agencies for educational

awareness and promotive campaigns for public, students and stakeholders against
prevention of communicable diseases, right sanitation and safe drinking water practices.
Despite a nearly threefold increase in public sector expenditure since 2001, spending on
health remains abysmally low and has declined as a percentage of GDP. In fiscal year
2009-10, total public sector expenditures on health in Pakistan is 0.54 percent of GDP,
which is lowest among all other countries at a similar income level.
99
After the 18th Amendment health is to be devolved to provinces exclusively.

100Pakistan Economic Survey 2009
101
After Generic drugs act 1972 was deactivated doctors can prescribe drugs by their company names
which have not only increased the prices of drugs but flooding of market with same drug with numerous
names.
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Table 2 Health and Nutrition Expenditures (2000-01 to 2009-10) (Rs. billions)

Public Sector Expenditure (Federal and
Health
Fiscal
Percentage
Provincial)
Expenditures
Years
Change
Total Health Development
Current
as % of GDP
Expenditures
Expenditure
Expenditure
2000-01
24.28
5.94
18.34
9.9
0.72
2001-02
25.41
6.69
18.72
4.7
0.59
2002-03
28.81
6.61
22.21
13.4
0.58
2003-04
32.81
8.50
24.31
13.8
0.57
2004-05
38.00
11.00
27.00
15.8
0.57
2005-06
2006-07
40.00
50.00
16.00
20.00
24.00
30.00
5.3
25
0.51
0.57
2007-08
60.00
27.22
32.67
20
0.57
2008-09
2009-10
74.00
79.00
33.00
38.00
41.10
41.00
23
7
0.56
0.54
Source:
Planning and Development Division
Of total health expenditures in Pakistan, about 33% of health spending is funded

by the government. The breakdown of government expenditures on health is as follows;
Federal Government funding 41.5%, provincial government funding 34.6% and district
government / local bodies funding 23.9%. Interestingly, of total federal health
expenditures 69.9% are for civil part of the government and the rest 30.1% is disbursed
through military set up. Rest 67% of the total health expenditures are funded through
private sector out of which 97.5% is out of pocket health expenditures by households.
Like many other developing countries, Government of Pakistan has also
implemented numerous donor funded programs and projects in preventive health care to
improve the health status of the people. The overall share of donor agencies in health
sector is quite minimal.102 However, donor agencies had played a significant role on
preventive side by providing technical support and some funding for various
immunization and primary health programs in last decades. In spite of weak performance
in these programs their support has been substantial in child and mother health. Weak
coordination between the Government and multiple donors is cited as one of the reasons
for difficulties requiring strengthening of coordination between them. Other challenges in
donor coordination include aligning the donors behind the national health reform
strategy, establishing clear priorities for funding areas of responsibility and benchmarks
for each donor, and establishing a mechanism for sharing information. Moreover, various
vertical programs funded by the UN, its agencies and foreign donors are supply driven
which reduce their impact and effectiveness. The vertical programmes which are in
preventive health care are partly funded by donors and these funds are used on
monitoring and technical backstopping. Due to budget release constraints and high
establishment costs, out of released funds, 30-35 percent is spent as establishment
102
Only a small proportion of resources allocated to health sector originated from donors, i.e. around 1.9%
of overall public sector health expenditure.
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charges and actual amount utilized for the preventive health care activity is around 20
percent of the budgeted amount.
3.
Preventive Health Care: Analysis of Health Policies
Prior to 1960, District Councils were responsible to provide medical facilities in rural
areas. They started few dispensaries wherein curative services were available. Due to
increase in population and keeping in view the needs of the people, the Government had
decided to participate in running the dispensaries since 1960. After independence health
planning began with inclusion of health sector in the second Five-Year Plan (1960-65)
which continued till eighth Five-Year Plan (1993-1998). In the due course Government
framed three national health policies, the first two polices framed in 1990 and 1997 took
disease control as central theme and thus initiating several disease control, immunization
and primary health program. But both policies were criticized to be based on bio-medical
model favoring more expansive curative health. Urban and tertiary health bias of these
policies were also criticized and Pakistans progress on health indicators remained slow.
Government of Pakistan approved the third National Health Policy in 2001 which
provides an overall national vision for the Health Sector based on Health for All and
makes health investments part of Poverty alleviation.103 In spite of a good policy which
refocused on the concept of Health for All and aimed at provisioning of preventive
health care to the rural masses through revitalizing and strengthening District Health
Structures, was not able to deliver on its aims. During the period 2001-2009 urban-rural
bias in health provisioning could not be removed because large rural population recurrent
expenditures remained concentrated in urban area. Similarly preference to curative
health care at the cost of Preventive health care continued. Furthermore, prevention
and safe behaviours, incorporation of health, hygiene and communicable diseases related
information in the curriculum of primary, secondary and higher secondary school is
considered to be essential, but unfortunately these health related informations could not
attract the attention of authorities in Pakistan.
Preventive health services include early diagnosis of disease, discovery and
identification of people at risk of development of specific problems, counselling, and
other necessary intervention to avert health problems. It starts from population control as
it is believed that no measure can be effective unless population growth is checked in line
with economic capacities of the country. Since independence, the population of the
country has increased six times, but there is no parallel increase in health infrastructure.
Furthermore, Malnutrition makes individuals susceptible to diseases. In Pakistan large
segment of population suffers from malnutrition and despite efforts and initiatives by
Government under various programs including MDGs, malnutrition in children remains
at 35% over many years. Similarly lack of iron and other essential nutrients remain
endemic in child bearing women and old, although nutrient supplement program for folic
acid, iron, calcium has been active since a longtime. While reduction of poverty through
103
Public health policy 2001 identified ten key areas of action: (a) Reducing widespread prevalence of
communicable diseases, (b) Addressing inadequacies in primary/secondary health care services, (c)
Removing professional/managerial deficiencies in DHS, (d) Promoting greater gender equity, (e) Bridging
basic nutrition gaps in the target population, (f) Correcting urban bias in health sector, (g) Introducing
required regulations in private health care, (h) Creating mass awareness in public health matters, (i)
Effecting improvement in the drug sector, and (j) Capacity building for health policy monitoring.
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economic development is the main way to healthy population but midway government
can target vulnerable groups through effective provisioning of nutrient supplements.
National Nutrition Program with primary objective is to improve the nutritional status of
the people of Pakistan in general, with special emphasis on certain sub-groups like
women of child bearing age, adolescence girls and children.
Focus on disease control has remained the corner stone of Pakistans Health
policy. Universal immunization coverage of newborns for eight communicable diseases
under MDGs remains central target in Governments preventive health policies.104
Likewise provision of clean environment with safe drinking water and timely and safe
waste disposal is essential preventive measure for disease control. Safe disposal of liquid
and solid waste has become a big problem for country and water aquifers are being
contaminated by domestic, agricultural and industrial waste in the absence of coherent
policy of these issues. Less than 30% of population in Pakistan has access to clean
drinking water and more than 50% mortality amongst children is due to water and
sanitation problems. Analysis of burden of diseases for Pakistan shows more than 50%
diseases are communicated through water, air and physical contact which can be easily
prevented through cleaner environment. Thus, cleaner water supply and better waste
disposal can pay heavy dividends in favor of disease prevention.
The preventive health care in Pakistan is organized into a network of public
service delivery outlets of Health Houses (community health outlets run by and set up in
the homes of Lady Health Workers), a chain of first-level care facilities, and district and
sub district hospitals. Preventive and Primary health care is implemented through BHUs,
RHCs, Maternal and Child Health Centres (MCHCs) and Dispensaries. Primary health
care services are offered by BHUs and RHCs to their respective catchment area
communities. The BHUs having an operational scope comparable to 30% of the services
offered by RHCs. Despite this impressive network of first-level care facilities, their
utilization rate by the catchment area population is low with less than one, i.e. 0.6 patient
visit/person/year.105
4.
Pakistans MDG Initiatives in Preventive Health
Progress towards health targets committed by the country in 2000 for MDGs was also
slow and it seems that Pakistan will miss all three Preventive Health related targets in
2015.106 The proportion of children under two years who have been fully immunized
against six preventable diseases has increased by 1 percent between 2004-05 and 200809. The provincial breakup during this period shows that immunization cover-age has
fallen in all the provinces except Punjab and highest decline being observed in
Balochistan, where the coverage has gone down by 19 percentage points, KP and Sind
104
Following programs are being run by government for immunization against diseases: Expanded Program
on Immunization: National Program for Family Planning & Primary Health Care (LHW Program) National
Maternal, Neonatal and Child Health (MNCH) Program National Program for Prevention and Control of
Hepatitis: National Tuberculosis Control Program National AIDS Control Program National Malaria
Control Program
105
Siddiqi et al (2010)
106
Reduce Child Mortality, Improvement of Maternal Health and Combat HIV/AIDS, Malaria and other
diseases.
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have experienced the low decline in immunization coverage of 3 and 4 percentage points
respectively. MDG target of more than 90% coverage remains unlikely.
The situation of maternal mortality has improved during the last few years.
Maternal Mortality Ratio has declined substantially to 276 deaths per 100,000 live births
in 2006-07 from 400 in 2004-05. This decline has reversed the rising trend in this
indicator. However, in order to achieve the MDG target of 140 per 100,000 live births
will be challenging and requires allocation of more resources and effective efforts.
Table 3
MDG Indicators for Goals / Indicators
Definitions
Under-five
Mortality Rate
Infant Mortality
Rate
No. of Deaths of children

under five years of age
per thousand live births
No. of Deaths of children
under 1 year of age per
thousand live births
199091
200102
200405
200506
200607
200708
200809
MTDF
Targets
200910
MDG
Targets
2015
117
n/a
n/a
n/a
n/a
n/a
n/a
77
52
102
77
77
76
75
n/a
n/a
65
40
Proportion of
Proportion of
fully
Children of 12 to 2
75
53
77
71
76
73
78
90
>90
immunized
months of age who are
children
fully vaccinated against
EPI target diseases (%)
12-23 months
Proportion of
Proportion of children 12
under 1 year
months of age and
80
57
78
76
77
76
79
90
>90
children
received measles
immunized
Vaccine (%)
against measles
Proportion of
Proportion of
children under
children under
five who
26
12
14
12
11
10
10
16
<10
5 years suffering from
suffered from
diarrhea in past 30 days
diarrhea in the
(%)
last 30 days
Lady Health
Households
Workers
Covered by Lady Health
coverage of
n/a
38
66
72
76
76
83
90
100
Workers for their health
target
care services (%)
Population
Sources: Pakistan Demographic and Health Survey 2006-07, Baseline set by Health Section, Planning Commission, and Pakistan
Demographic Surveys 2006-07. Survey after 2006-07 has not been undertaken, PIHS 2001-02, PSLM 2004-05, 2005-06, 2006-07,
2007-08 and 2008-09, The LHW Programme, Ministry of Health (Whole series).
In Pakistan, the burden of AIDS/ HIV disease has not been very significant but
HIV epidemic is expanding particularly among Injecting Drug Users (IDUs). Since 1987,
over 4000 cases have been registered. In Pakistan malaria has been a major public health
problem for many years threatening millions of people due to the prevailing socioeconomic conditions. The proportion of population facing malaria risk using effective
malaria prevention and treatment measures is 25-30 percent against MDG target of 75%.
Tuberculosis still remains a major problem in Pakistan with a large proportion of
TB cases in the age group 15-49 year. Lack of adequacy immunization & health care
facilities and incomplete treatment of TB patients are the main causes of its prevalence.
Incidence of tuberculosis per 1000 person has to be reduced from 130 cases in 2009 to 45
in 2015.
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5.
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Problems/Challenges in Preventive Health Care
Due to Pakistans Health policies pre disposition towards Bio-medical model favoring
curative health compared to preventive care resulted in major chunk of public spending
earmarked for curative and tertiary health.107 Resultantly expansive district health system
which essentially caters to Prevention health is dried of funds. Very low utilization of
public sector health institution (about 20% only), indicates low trust or accessibility
problems for communities. Administrative fragmentation mars the district level
preventive and primary health setup as vertical programs for immunization, community
outreach programs, population planning and reproductive programs are run exclusive of
each other under different administrative setups (Federal, Provincial, NGO, District etc.).
This has resulted in divided efforts, wastage of resources, weak administrative and
regulatory oversight, below standard service provisioning and lack of services to
communities.
The entire preventive and primary health system is short in medical ethics.
Pakistans implementation of health policy suffers from deviations and gaps as in spite of
clear endeavor in the policy, implementation shows bias in expenditures and investments
towards tertiary curative care. Similarly there is clear bias in favor of urban compared to
rural areas in terms of health care investments. It can be observed that the health
indicators of Pakistan giving a dismal look when compared with the countries in the
region and show improvement with a tendency to regress as well.
Poor segments of the society are worst hit by the counter implementation of
health policies directed towards curative than preventive side. Lack of preventive care
resulted in perpetuation and prevalence of communicable diseases and lack of awareness,
costing poor segments of the society dearly. People are forced to pay over 70% of
expenditures on health from their own pockets.
Presently health care system in Pakistan is facing many problems like poor
governance, lack of equity and effectiveness. It can be observed that poor governance in
Pakistan has affected the performance of health sector badly. The provisions of health
services in the country are inequitable. Rural population which consists of 2/3 of the total
population has relatively less health facilities available because most of the health
services are located in urban areas. This indicates that majority of population gets
minimum budget. Furthermore, poor effectiveness is demonstrated by low health
statistics and failure to achieve MGD objectives is because of primitive and defunct
preventive health efforts in the country. Realizing the challenging issues in preventive
health care in terms of outreach quantity and quality, government has been looking for
initiatives to improve service delivery. But effective and universal provision of
preventive health care remains a big problem yet to be fully addressed. There is a dire
need of improving the general conditions of the population of the country. Major
challenges faced by Pakistan today in quality and universal preventive health care are
107
The study of Public Sector Development Programs (PSDP) 2010-11 Government of Punjab clearly
shows the disparity between the preventive and curative components of health budget. The ratio is 1:3.
Budget for preventive and primary health care is 1280.165 m whereas for tertiary care hospitals it is
5185.277 million (for ongoing program). For new program 25.00 million has been reserved for preventive
and primary health care where as 1313.195 million for tertiary care hospital. For details please see
Government of Punjab, Budget Documents 2010-11.
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identified as quantitative and qualitative challenges, structural and infrastructural

challenges, knowledge management and technological challenges (see Appendix A).
6.
Pakistan health care system is run by the state and private sector but it is the
responsibility of the state to ensure an organized, structured and planned health care
system for its citizens. Federal Government through Ministry of Health is involved in
policy-making, coordination, technical support, research, capacity building and seeking
foreign assistance. Provincial and district governments are responsible for delivery and
management of health care facilities. The dispensation of health services by multiple set
ups creates administrative and coordination difficulties besides wastage of resources
resulting in less than satisfactory performance in health care.
Electronic and print media holds promise in propagating Preventive health
agenda of health, hygiene and abstention far and wide in the country. The services of
mass media have been under-utilized apart from some donor-driven initiatives in polio,
HIV, reproductive health. However, a comprehensive policy on mass awareness
campaign for preventive health care is still missing, which may utilize education,
corporate, non-government and media sector for mainstreaming preventive health
awareness and practices. Furthermore, effective efforts are needed to provide safe and
clean drinking water facilities to the people particularly living in rural areas. Provision of
clean environment can help in achieving MDGs targets. The major strategy for
improvement of preventive health in Pakistan may include universal coverage of whole
population for primary and preventive care through operationalization and full utilization
of district level installation spread all over Pakistan. Basic Health Units and Rural Health
Centres may be made main hubs of activities for targeted population and Tehsil and
District hospitals can be used for referral purpose in addition to curative health care. In
order to improve health outcomes, preventive health services need to be improved so that
many ailments can be avoided rather than cure. This calls for Pakistans shift from
curative to preventive health care for better health outcomes.
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Appendix A
Quantitative Challenges
1. Determination of essential services package for all citizens served by the
particular BHU/RHC (all these persons must be registered with the BHU/RHC),
catering for all preventive health care and primary health facilities for the whole
family
2. Gaps in adequate staffing of the BHUs/ RHCs based on the service provided
under Essential Services Package
3. Non-Sustained availability of drugs and vaccinations and non-proper storage
facilities.
4. Under utilization of BHUs and RHCs by people due to lack of trust, ignorance
about available services and non-availability of staff.
Qualitative Challenges
1. Development of Quality of Care (QOC) standards for all services preventive and
primary provided at the setup, for improved performance and accountability.
2. Non-availability of an effective referral procedure, so that only needed persons/
patients are referred to THQH and/ or DHQH, so as to reduce burden at tertiary
hospitals.
3. Non-Framing of ethical standards for medical staff for effectiveness, efficiency
and accountability
4. Lack of professionalism and sense of responsibility in the BHU/RHC staff.
Structural Challenges
1. Lack of political will in government representatives to induce major policy shift
towards preventive and primary care concentrating on urban fringes and rural areas.
2. Lack of transparency resulting in nepotism, corruption and administrative lock
jam.
3. Governments non committal attitude towards sustained and increasing trends in
expenditures on preventive health care provisions in particular and health in general
4. Governments inability to shift focus and resources from urban and tertiary health
sector
5. Inability of Government to induce work ethics, sense of responsibility,
commitment and efficiency in health staff dispute increased pays and security of
service.
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6. Failure of government to induce sense of trust in people about their care and
wellbeing in public preventive setups resulting under utilization of resources (only
22% people go to public facilities as against over 65% to private health setups)108
Infrastructural Challenges
1. Inadequate placements of district level preventive structures, e.g. close to
graveyard, in the depression results in avoidance by community and health workers
both.
2. Rationalizing locations of district level setups so that there is even distribution of
people, who will compulsorily be registered with on preventive health setup at district
level.
3. Patchy availability of essential services, i.e. electricity, water supply and drainage
at different BHU/RHCs resulting in non-optimal use of medical equipment, whose
availability and usefulness need be ensured as well.
4. Contraction and maintenance of BHU/RHCs and accommodations of staff within
also remains a challenge due to financial constraints.
Knowledge Management and Technological Challenges

1. Existing health management system is segregated and data is not recorded in real
times, information of vertical programs coverage is recorded separately.
2. There is no record of people benefiting from primary health services therefore
individual records of citizens are not available.
3. Due to lack of central administration of Preventive health services at district level
data collection, recording and analysis is sub optimal.
4. Lack of appropriate data management makes public awareness campaigns for
targeted populations difficult.
5. Lack of resources and knowledge for adoption of appropriate, new and
economical technologies in the field of Preventive health care
108
USAID report on PHC initiatives in Pakistan 2009
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War of Independence 1857: Lessons for

Present Situation of South Asia
Dr. Muhammad Saleem Mazhar
Director of Centre for South Asian Studies, University of the Punjab, Lahore Pakistan
Mussarat Jabeen
Assistant Professor, Department of International Relations & Political Science,

Abstract
The war of independence 1857 was a desperate attempt by the Indian people to overthrow
the British subjugation, who occupied India by different tactics. This war was a reaction
against British racial arrogance. The aliened rule itself served to harden the line of
differences between the rulers and the people, which brought a widespread military
mutiny and large-scale civilian uprisings against the British in India. The war started at
Meerut on 9th May 1857. The immediate reason was supply of greased cartridge by the
company for new rifles. The soldiers refused to use these rifles due to some reservations
and resultantly they were sentenced to imprisonment. Other soldiers based in Meerut
revolted against the rulers. The revolt spread to the larger parts of India and acquired a
broad popular base in people from all walks. The revolt created a panic in the British
camps and they suppressed the people forcefully. The history of war is deeply rooted into
colonization and conquest of India. The basic purpose of the paper is to analyze the
nature and character of the unity, which was dominant factor during the war. For drawing
some conclusions to the shared objectives of the South Asian region in the present
scenario, the study is to explore common ground for future development of South Asia.
Key Words: Independence, colonialism, slavery, unity, extremism, fanatic, economy.
King and British Rule.
The War of Independence 1857
The year of 1857 witnessed a widespread military mutiny and large-scale civilian
uprisings against the alien rule (British) in India. This revolt was a local reaction against
British rule, which was threatening Indian freedom with its formidable clutches of
slavery. To overthrow this subjugation, struggle had been begun long before March 1857
and it took one hundred years after the first colonial conquest of Bengal in 1757. The
history of war is deeply rooted into colonization and conquest of India with cultural and
religion oppression. About the interpretation of war, two competing narratives are found
between the historians up to this day. The colonial historian, who won the war, called it
Sepoy mutiny while history claimed by the Indian, who were defeated, referred it as the
first war of Indian independence. However, this was a unique struggle in which both
feudal lords and common people fought together. Either this war was a forward looking
movement or a poorly organized struggle of freedom against the colonialism, all sections
of society including feudal lords, local rajas, nawabs or unorganized peasants of poor
land participated in it.
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This movement was probably a mixture of secular ingredients cutting across communal
affiliation, a religiously inspired Jihad, anti-colonial revolt and a civil war putting
resistance against colonialism. Not a single group was to deny surging sentiments against
the British rule. Each category had its own reason to join the rebellion as the people from
all walks of life participated in it. It brought together soldiers of different regions and
religions, who fought one of the most powerful empires of the world to near defeat with
limited resources and even poor military training. The other unique aspect of this war was
the convergence of various feudal lords, rajas, nawabs and chiefs of respective rule and
territories into one united force (Indian Mutiny...1998). All these people had a common
objective of ousting the British from their land who had consolidated their authority
through an export company known as English East India Company, which was
established in 1600. This company proved a driving force behind much of the occupation
of India. It changed its motive from trade to political dominion in the region. Since the
British conquest of Bengal in 1757 to its occupation of Delhi crown in 1857, it adopted
different tactics to occupy more and more territory. The state of Mysore and Maratha
confederacy presented the most formidable obstacle to colonial expansionism but
ultimately fell to the British.
The oppressive policies of occupation created turmoil among the subject people. The
civilian uprisings accompanied by the military mutiny deteriorated the situation when
soldiers in the companys army raised arms against their rulers. The war started at Meerut
on 9th May 1857. The immediate reason was supply of greased cartridge by the company
for the new Lee Enfield rifles, which had to load manually before firing. It was rumored
among the soldiers that fat of cow and pig was used in these cartridges. Cow was sacred
for the Hindus and pig was forbidden in Islam. The soldiers, who refused to use these
rifles were sentenced to imprisonment and sent off to jails in fetters. The soldiers based in
Meerut revolted against this humiliation on the night of 10th and 11th May 1857. They
marched to Delhi and installed Bahadur Shah Zafar as the symbolic head of the revolt
(Ibid). The revolt spread to the larger parts of India and acquired a broad popular base in
both rural and urban areas; people from all walks of life joined the revolt to over throw
the company rule. The revolt created a panic in the British camps and fear was being felt
that the rule would collapse and would face a disastrous situation on hundredth
anniversary of the War of Plessey 1757. British troops applied different methods and
used all sources of might at their disposal to win back their control. They attempted to
suppress the fierce resistance and ultimately succeeded in their efforts. It was the summer
of 1858, when Governor General Canning declared that the war was over and Queen
Victoria took India under her crown and ended the company rule. She assured that the
Indians would be duly respected in future (Bose & Jalal, 1998: 92).
To narrate a short version of war is not simply the basic purpose of the paper but
objective is to analyze the nature and character of the unity, which was dominant factor
during the war.
Challenges to South Asia:
South Asia is consisted of seven countries, India, Pakistan, Bangladesh, Sri Lanka, Nepal,
Bhutan and Maldives. However, these nations are not tied into linguistic and religious
bonds and these factors are engulfing distance among the people and contributing to
division and diversification of the countries of South Asia, which covers one fifth of the
worlds population.
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South Asia remains a hot bed of deep rooted mistrust and hostilities and it provides a
decimal picture in social, economic and political fields. It is also facing territorial
challenges and inter-state rivalries. The region is trapped in multiple issues ranging from
the quest of autonomy to terrorism and extremism, ethnicity to sectarian disputes. The
clashes on political interests, disputes on water-sharing of common rivers; refugee and
migration problems are equally threatening the stability of the region (Abbas, 2002: 75).
In many states, democracy and democratic institutions have failed in strengthening the
political culture and resolving the social issues of unemployment, social injustice and
poverty. While self-centered politics has also obstructed the path to social economic
development of the region. Transition to modernity is slow, which has led to ethnic
solidarities and identification with religious culture.
Poverty
Poverty is the major problem of the region. South Asia presents a poor picture of
economic resources. The per capita Gross National Product (GNP) of South Asia is $
450, which is lower than any other region of the world. About 40 percent of the worlds
poor live in South Asia while the region contains 22 percent of the world population. It
produces 1.3 percent of the total income of the world. The adult literacy rate is 48 percent
which at present is the lowest in the world. It shares 46 percent of the worlds total
illiterate population (Haq, 1997: 23). History shows that regional economic integration
can be successful only if the concerned countries establish a community for political
purpose. It is common phenomena in international relations that small neighbors often
suffer from a fear complex with regards to their larger neighbor especially if they have
unresolved disputes and complicated factors in their bilateral relations. This is true in the
case of South Asia. The current era is the age of globalization, where economy is a major
factor and the world has changed from national economies to a global economy. But this
economic globalization is characterized by a great division. The developed world is
getting richer at phenomenal pace, the inequalities between the rich and the poor have
been increasing. Two billion people earn less than two dollars per day, while one billion
are earning even less than one dollar per day. The main cause for this difference is the
barriers to immigration and agricultural imports erected by the richer countries and the
failure of the developing countries to attract investment (Bruce, 2000: 180).
South Asian people need to make efforts to overcome the problems in the way of
globalization so that maximum benefits would be reaped. There is also need to resolve
the regional disputes and re-structuring of the interstate relations. It would be in the
interest of South Asia to attract capital from rich-countries as this region has scarcity of
resources. Privatization is also favored by the international economic organizations and
more than a hundred countries have sold their assets to private investors (Ibid).
It is required to initiate such steps that facilitate the investors and make this process more
helpful and rapid for those countries, which are supporting South Asia for overcoming its
economic problems and to exit from cycle of poverty. Privatization or globalization is not
enough to eliminate the poverty. There is need to develop mutual trust in bilateral
relations, development of infrastructure and communication sources. It is also required to
reduce the military budget, so more money can be spent on social sector.
Ideologies
Ideology was a major factor in British India during movement of independence,
which led to the creation of two separate countries in 1947. After freedom from
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foreign rule, this element was no more required to characterize the bilateral
relations but biased behaviour remained as usual and narrow national ideologies
continued to inflict unity and brought great loss and multiplication of suffering
to South Asia. Prevailing mistrust and suspension resulted in military build up,
which is still continued. Though the ideologies of secularism and nationalism
have lost credibility but they paved way for the most ideologically committed
and organized cohesive forces. Hindutva is one example of such ideologies as its
tone is anti-Muslim and it is being used for political purposes. Hindutva ideology
of Rashtriya Swayamsevak Sangh (RSS) is widening the gap between religious
groups. The symbolic issue that came to the surface was the temple-mosque
controversy of Ayodia, which was site of 16th century mosque named after
Babur, the first Mughal emperor of India. Some extremists of Hindu groups
demanded that the Babri Masjid should be pulled down to build a Mandir to Ram
in its place. This demand was rooted in Hindu claim that Ram, the mythical
leader of Hinduism, was born on the place where the mosque was built (Bose and
Jalal, 1998: 226-28). Maoist movement in Nepal and Hindu nationalism are also
giving rise to its brand of politio-religious fundamentalism, which has been
exploited by the political entrepreneurs to gain political ends (Parikh, 1998: 49).
The ideology and use of religion in politics has created a very dangerous
situation for the region.
Ethnicity
The ethnic diversity along with colonial heritage has brought political division and
resultantly politics of the region is marked by turmoil, turbulence and conflicts. The
emergence of ethnicity as a significance force in politics has intensified conflicts
involving various ethnic groups. It is the most drastic recent global development that has
contributed in increasing the number of small ethnic states. Their ability to maintain their
territorial boundaries, autonomy in policy making and to assure their own political and
economic development is still questionable. Most of them are facing external threats and
considerable tensions created by hostile internal forces. Such challenges bedevil deeply
stability of the region (Inbar & Sheffer, 1998: 18-20).
The end of the cold war and collapse of Soviet Union further strengthened the tide of
ethnicity. The assertiveness of ethnic groups remained and exercising their right of self
determination continued. As a result of new global conditions and international policies,
number of ethnic minorities is increasing, that are struggling for their right of separate
homelands. These groups tried to attain their goals through the employment of
secessionist elements, separatist ideologies and irredentists strategies. The presence and
designs of such groups are affecting the system as well as the security of region,
especially when they launch their struggle for self-determination and enter into conflict
with other ethnic groups.
In South Asia, the fall of Soviet Union not only created a vacuum but also gave birth to
ethnic forces that have further increased regional instability and consequently
exacerbated international anarchy. In the Indian subcontinent, India itself entertains the
idea of regional hegemony and to an extent has achieved it. It is at the same time, main
actor to strengthen the ethnicity and the target of ethnic assaults. Despite its democratic
status, it is involved in a number of violent internal and external ethnic conflicts posing a
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political and economic threat to region. Sri Lanka, the Punjab and Kashmir disputes are
such examples (Ibid).
Tamil in Sri Lanka struggled to establish their own authority, which created dangerous
and uncomfortable threat to regional tranquility and stability. The claim for right of selfdetermination without considering size and economic viability of a community is
dangerous. Such trends of ethnic groups may lead to disputes becoming international in
nature especially when the interests of any major power are at stake. Indian Prime
Minister, Rajiv Gandhi was a victim of ethnicity as he was killed by the Liberation Tigers
of Tamil Eelam (LTTE) on 21st May 1991. LTTE admitted its role in assassination
because they were not satisfied with the political solution proposed by India (Times of
India 2006, June 28).
Independence from colonial rule was claimed by the sub-continent as the triumph of
centralism, nationalism, rule of law, recognition of the right of religious communities and
democracy. But area is victim of regionalism, parochialism and factionalism. Ever since
1947, regional dissents against central authority of states have spilled across national
boundaries. Interstate relations are full of doubts due to unrest in Indian Punjab, dilemma
presented by Sindh, discomfort of Chakma Bhuddist in Bangladesh and rebel groups in
Assam. All have been demonstrating the extreme permeability of the borders defining
nation states in the South Asia in their respective ways.
Territorial Disputes
South Asia is the hot bed of deep rooted mistrust and hostilities. Many of the problems of
the region are rooted in unresolved territorial disputes. Bilateral relations are defined by
antagonism and mistrust due to these regional conflicts on various territories. IndiaPakistan rivalry on Kashmir creates an ever- disputed situation with militant separatist
movements. The region experienced a paradigm shift in the strategic environment in May
1998, when both India and Pakistan overtly demonstrated the nuclear capabilities. Both
states had fought three wars in 1948, 1965, 1971 besides the recent one at Kargil in 1999
(Haider, 2001: 427). There was chance to go out of control and lead to a nuclear
catastrophe in South Asia. The situation drew the world power particularly the US
towards this problem. This makes South Asia an important strategic region in the world.
Southern Areas are also outstanding examples in this regard. Sri Lanka and India have
tussle over nationality of Tamilian. India and Bangladesh have clashes over illegal
migration from Chittagong Hills Tracts and other is demarcation of boundaries involving
fertile island and sharing the water of Ganges. Sri Lanka accused India, especially state
government of Tamil Nadu for supplying arms and providing training to Tamil terrorists
(Raj & Paul, 2003).
Terrorism
Terrorism is the major threat to the stability of South Asian region. Terrorism is a
philosophy to obtain political objectives using violence against governments, institutions,
organizations, personalities and civilians. Currently terrorism is defined as political
motivated behaviour, while terrorist group is considered a group which has significant
sub-groups and conducts terrorism (Terrorism, 2002). In the wake of terrorist attacks of
September 11 on the US, American President Bush launched a military operation in
South Asia to eliminate the terrorist groups, who were assumed to Afghanistan-based.
President threatened of adverse consequences and South Asia was the target of
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retaliation. American operation increased problems for the region by generating security
threat to the stability and peace of the area.
The roots of terrorism are deep in South Asia. Terrorism and its political consequences
have direct and visible effects on interstate relation. Another important aspect of
terrorism in South Asia is destruction of infrastructure for regional development.
Elimination of terrorism from region is in the best interest of South Asia for poverty
alleviation.
It is hoped that slow transition towards democratic and political culture would led to end
extremism and terrorism. Identification with biased religious and ethnic groups is the
most potent threat to stability of the area as this enhances the terrorist activities. These
factors deepen the crisis in the region where societies are already fragmented along with
caste and community, linguistic and religion cultural differences. Many of the internal
security crisis that plague South Asian states have cross-border implications and are interrelated with ramification for regional security.
Extremism
Extremism is not confined to any particular sect, state, religion and region. Threats of
extremism and terrorism have taken place in South Asia for a variety of reasons including
political and social perpetration of tyrannical groups with aggressive goals. Rebel
elements of socio-political environment of oppressive culture, social injustices and
ideological contradictions also contribute to these activities. Rigid religious beliefs,
foreign interference, social and economic factors like poverty, unequal job opportunities,
huge backwardness and unemployment have added in worsening the situation.
Extremism in South Asia is not a new phenomena, it is just changing its names
and forms. At times it adopts the shape of religious fanatic while on others it is
face of an ethnic separatist. In the last decades, this region has the higher annual
number of fatalities as a result of acts of terrorist violence. Extremist elements
have been destroying peace and harmony since independence. Mohandas
Karamchand Gandhi, known as Mahatma (great soul), was shot dead by a Hindu
fanatic named Nathu Ram. The Hindu zealots accused him of being soft towards
the Muslims whom they held responsible for division of India and hostile to his
own community supported them. According to their belief only way to stop
Gandhi from doing further loss was to eliminate him. But such brutal acts had
precisely the reverse effect to the desired results (Malhotra, 1989: 22).
Indian Prime Minister Indira Gandhi was also target of religious extremism.
She was killed by her Sikh guards due to her decision to attack the Golden
Temple, the holiest of the holy Sikh shrine. The Sikh community converted it
into a fortress and the head quarter of Sikh activities for an independent Sikh
homeland to be called Kalistan. An independent and impartial inquiry has
testified that Indiras decision was right and did not stem from enmity for the
Sikhs (Ibid, 19-20). But extremist and terrorists did not saw the things in just
manner. Ethnic ideologies and political conflicts are being consolidated and
worsening economic conditions is also its result. It poses a threat to internal
stability and inter-state relations (Sridhar, Kathri & Kueck, 2003: 403-04).
An economically strong and integrated South Asia will be less vulnerable to
extremism, unrest and interstate tensions and can provide more positive
environment for democracy. It would also provide an increasingly larger
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market to attract Foreign Direct Investment (FDI). Multinational

corporations have already been sifting their business and productive units in
South Asia (Haider, 2001:430). Such elements need to change their extreme
behaviour to strengthen regional internal order rather than pursuing external
goals at the expense of its internal stability as regional destabilization
generates terrorism and terrorist activities.
Democracy
Democracy is continuously getting roots in South Asia and it is challenge for
the region to promote democracy which will bring open mind norms in the
region and also help to eradicate problems deep rooted in South Asia. The
military domination of political power only grows further and comes at the
expense of democracy. After a few years of independence, Pakistan came
under dominance of military and civil bureaucracy. A democratic country is
always better that authoritarian in preventing the recurrence of regional
dissidence.
The Role of Superpowers
The role of superpowers is also a challenge for the region after British rule. The
involvement of Washington and Moscow has become a part of balance of power in the
sub-continent conflicts. Other is Indo-Pak-Chinese triangle, which behaved differently on
occasions. The position of the region would be very different if all the three actors
relinquish the competition for the support of at least one superpower or other to enhance
their strength in the regional conflicts, which was a common practice in the past. Such
attitude gave certain shape to their foreign policies as well as wars, fought by them. The
past showed that the superpowers have little success in limiting violent conflicts in the
region.
Iran-Pakistan India (IPI) pipeline has been called the peace pipeline and mother of all
Confidence Building Measures (CBMs) between India and Pakistan. All three countries
stand to benefit from this pipeline. Apart from getting energy supplies, Pakistan will be
able to facilitate the trade between Central and South Asian regions. However, the US is
opposing this pipeline due to its hostility with Iran and blocking this project by
pressurizing its strategic partner, India. The US is also threatening that the proposed
project would result in economic sanctions on India and Pakistan (Dawn 2005, October
15). This project is an important tool for on-going peace process between India and
Pakistan.
Militarization and proliferation
The wide spread human deprivation is sharply contrast with large armies, modern
weapons and expanding military budget of India and Pakistan. Indeed both the countries
have the largest armies in the world. It is noticeable that this is the only region where
military expenditures are still high despite the end of the cold war. While military
budgets in the world are on decline since 1988. South Asian leadership should end the
cold-war in the region as the strategic importance of the region cannot be denied. The
military situation has been gradually moving away from the deterrence towards a mixture
of conventional and nuclear strategies since 1970. In this situation, credibility of the old
methods to control the conflict is doubtful as new category of nuclear weapons is also
involved in conflicts (New priorities in 2003: 47-48).
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Both nuclear powers have not signed Nuclear Non-Proliferation Treaty (NPT). Most of
the nuclear facilities are not opened to the safeguards of International Atomic Energy
Agency (IAEA). There is continuing hostility between the two states. Despite four wars,
there are still possible flash points on some disputed areas that can flare up into a nuclear
war. Such a war could destroy the whole area and could also spread in the other areas of
the Asia (Ibid: 53-54).
No doubt, South Asia is attracting the world attention toward its long lasting conflicts and
disputes. International community is feeling great threat of nuclear disaster in South Asia
and trying its best to harmonize the interstate relations. To end the nuclearization of
South Asia, each state is required to adopt tools of democracy, rule of law, independence
media, grass root activism, good-governance, and transparency to address the problem of
region. Their success will bolster stability throughout the region with peace and progress
that will have global consequences.
There is no doubt that present is the age of trade, technology and geo-economics. The
future battle-field will be drawn on these issues. In this technological driven world, a
country should move ahead on the strength of its knowledge and development not on the
basis of its size and military might. The future battle-field will be won by the power of
information technology.
Conclusion
War of independence represented the unity of different groups by shedding the communal
division for common cause of freedom. The war was democratic in its nature as it was an
uprising of masses. It assembled the people irrespective of religion, ethnic, cast and
regional division for winning the war to protect their country. Today war is against the
regional issues, which are affiliated by innumerable ailments. Different level of
development, colonial background, neo-commercial constraints, neo-colonialism,
poverty, terrorism and extremism are proving hurdles in the areas of political
development, nation building, public participation and distribution of economic sources.
To solve these issues, there is need to coordinate and cooperate for generating such
mechanism, which reduce tension and hostilities in mutual relations. Provision of basic
education and good health facilities should be on top priority with better standard of
living in this poor region of the world. With emerging global trends, the need of
economic integration and liberal economy has been increased today as ever before.
Economy is dictating change in geo-political status of the countries by importance of
their geo-economic interests. Integrated economics can create jobs, trust, harmony and
peace. Regional cooperation has proved to be an effective instrument of conflict
resolution and economic cooperation in the post cold-war era. At the same time many
states have moved from authoritarianism to democracy and the most have adopted
forward looking economic reforms aimed at restoring fiscal balance, improving the
private sector and attracting foreign capital.
India and Pakistan may have come a long way from their position of
confrontation but peace between them is still far off cry. Only spirit of sacrifice, courage
of conviction, a strong belief in ultimate victory of the peace and prosperity would tell if
there has been an enduring change in region towards resolving issues. It is hoped that in
time CBMs and people to people contact among respective countries will bring their own
reward and would increase economic and commercial change. The people would able to
work for regional identity with the acceptance of national identities like European Union.
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The policymakers of the sub-continent should take priority to the nuclearnonproliferation, strengthening stability to deter conflict, promotion to increased respect
for human rights, supporting wider democratization, developing more rapid economic,
averting demographic explosion and combating environmental degradation. Despite
several limitations, the SAARC is still important forum, which can bring respect to South
Asia. SAARC is a unique example of regional cooperation because it is non-western,
non-militaristic and non-ideological. Determination of the people of South Asia to work
together towards finding solution of their common problems in a spirit of friendship and
trust can create an order based on mutual respect. The main goal should be to accelerate
the process of economic and social development in area. Much can be achieved in social
economic and cultural area by eliminating tension and conflict among the South Asian
nations to enhance the speed of progress towards peace and prosperity. There is a need to
revive the spirit of 1857 to strengthen the regional actors for solving their disputes
without the involvement, dictation, mediation and pressure of extra regional hegemonic
powers. It is hoped that an institutional arrangement of unity among South Asians nations
would pave way for utilizing the enormous potential of human and natural resources of
the region and solution of the long-standing disputes.
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Health-related Quality of Life Assessment in Patients with

Hepatitis: A Case of Pakistan
Masood Sarwar Awan
Assistant Professor Department of Economics, University of Sargodha, Pakistan
Muhammad Waqas
Graduate Student Department of Economics, University of Sargodha, Pakistan
Muhammad Amir Aslam
Probation Officer, District Courts Sargodha. Punjab Home Department, Pakistan
Faisal Abbas
Junior Researcher Department of Economic and Technological Change,
Centre for Development Research (ZEF) University of Bonn, Germany
Abstract
The intention of this study is to dig out the demographic, medical, economic, and
psychological factors that affect the health related quality of life of the hepatitis B and C
patient in district Sargodha. 120 patients of hepatitis B and C virus are interviewed.
WHOQOL-BREF questionnaire is followed for the construction of health-related quality
of life (HRQOL) instrument. Age of the patient, disease severity, use of drug, pain,
depression, financial hindrance and threat of death negatively affect the HRQOL of the
hepatitis patient while, vaccination, income, education, sleep, opportunity of leisure and
better living condition affect HRQOL positively.
Key words: HRQOL, HBV, HCV, Pakistan.
1.
Introduction
Many mortal diseases have become chronic, in spite of enhancement in medical
technology. During past years some researchers paid their concentrations towards health
related quality of life (HRQOL) of patients. HRQOL generally means the impact of
disease on social, psychosocial and physical life of the patient. The World Health
Organization (WHO) defines quality of life as;
Individuals perception of their position in life in the context of the culture and value
systems in which they live and in relation to their goals, expectations, standards and
concerns (WHO, 1996).
It is a wide concept that incorporates persons' physical health, psychological position,
level of independence, social relationships, personal thinking and relationships to the
environment. This definition reproduces the vision that quality of life refers to a
subjective assessment, which is entrenched in a cultural, social and environmental
context. Quality of life cannot be associated merely with the requisites health condition,
life style, life satisfaction, mental condition or well-being. World health organization
quality of life (WHOQOL) instrument hubs upon patients "apparent" quality of life, it is
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not projected to give a means of evaluating in any comprehensive fashion indications,

diseases or circumstances, nor disability as impartially arbitrator, but quite the apparent
effects of disease and health intercession on the persons quality of life.
No doubt patients physical, emotional and social functioning is affected by disease.
Hepatitis is one of the fatal diseases, which spoils quality of life of the patient. Hepatitis
(inflammation of the liver) viruses like A, B, C, D and E are the responsible of this
disease. 102, 813 people died due to HBV and 53,769 died due to HCV across globe,
every year. In worlds ranking Pakistan is at 53rd and 63rd number regarding HBV and
HCV, causing 2,340 deaths and 925 deaths respectively (World Life Expectancy, 2009).
The distribution on Hepatitis patients in Pakistan varies provincially and regionally.
Sargodha is the eighth largest district of Punjab, out of total population (10, 81,459),
0.8% people were diagnosed with hepatitis above the average of Punjab province which
stood at 0.7% (MICS 2007-08). Poor hygienic conditions, injecting drugs through
injections, insecure injection practices and blood transfusion, un-fair sexual relations,
poor drainage and sanitary systems, drinking water quality and food items etc are the
major origins of hepatitis.
Only about 1.1% people of Sargodha use boil water and 35.2% drinking water of the
district is affected with harmful bacteria. In Sargodha district around 44.4% of sewerage
is connected to open drain, while 37.9% is with open fields. Sargodha is among the few
districts of the province which has hepatitis disease level above the average of the Punjab
(MICS 2007-08). Figure 1 shows the diagnosed hepatitis patients at the district level in
the province of Punjab.
Various studies show that HRQOL is fragile in patients with chronic liver disease (CLD),
hepatitis C (HCV) and hepatitis B (HBV). Many studies that show a cheap HRQOL in
hematology, comparatively few studies inspect the causes that influence HRQOL.
Depression, itch, anxiety, muscle cramps, joint pain, memory problems, fatigue, financial
troubles, sexual functioning problems etc, are among the important factors that affect
patients quality of life. At macro level, demographic, economic and psychosocial factors
also affect HRQOL. In this study WHOQOL-BREF questionnaire, along with some
modifications was used. The study aims to highlight the determinants of HRQOL in the
patients of hepatitis B and C in district Sargodha. Moreover, study endeavors the
demographic, economic, medical, physical and psychosocial factors that affect the
HRQOL of hepatitis patient in district Sargodha.
The rest balance of paper is designed as: part two explains the HRQOL instrument, part
three investigates data sources and methodology of this study; part four presents and
interprets the empirical results. Finally, part five presents the conclusions and also
provides some policy implications.
2. Health-related quality of life instrument
HRQOL is a wide concept which represents that how the disease affect the patients
physical, psychological, social and environmental health. Disease severity, age, disease
treatment etc affect patients HRQOL. The purpose of the medicine is to cure the patient
from disease and its symptoms. Patients well-being is an important aspect of health care
and assessment of HRQOL will help in focusing the different aspects of health care.
WHO developed WHOQOL-100 questionnaire for the assessment of patients HRQOL.
Out of 236 questions, 100 questions were selected after conducting a pilot project. This
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questionnaire consists on six domains namely, physical, psychological, and level of

independence, environment, social relationships and spirituality. Then SF-36 was
developed because WHOQOL-100 requires lot of time. SF-36 is the short form of
WHOQOL-100 and consists on 36 questions. The main drawback of this questionnaire is
that it is failed to incorporate a sleep variable. Therefore, WHOQOL-BREF questionnaire
was developed. It is consist on 26 questions and four domains namely, physical,
psychological, social relationships and environment. Physical domain discovers that how
the bodily pain, medication, sleeps, energy and work are disturbing the life of patient.
Psychological domain explores that how positive or negative feelings, happiness,
persons expectation about themselves and his bodily look affect his mental health.
Disease will definitely affect the patients economic condition. Social relationships
domain observes how patients family, friends and relatives give support to him.
Environmental domain observes the feelings of a patient about his financial position, life
security, and place of living, leisure opportunity and learning of new skills (WHOQOLBREF, 2004).
3.
Data Sources and Methodology
The study includes HBV and HCV patients because both types of hepatitis affect the
patient life more severely than other types. Also because HBV and HCV are relatively
common viruses found in patients of Sargodha District. HCV contaminate liver cells and
responsible for inflammation of liver and certain other diseases. 100 million people are
chronically infected with HCV virus (http://www.who.int). This virus comes in different
forms and is not easy to identify.
In this study, 120 patients of HBV and HCV were selected and interviewed from
Sargodha district. For this intention different private and public hospitals were visited.
WHOQOL-BREF questionnaire was used in this study for the development of HRQOL
instrument. To identify the impact of demographic, social, economic and medical
variables on HRQOL of hepatitis patients, data on age, disease severity, gender,
education, vaccination, income, region and drug addiction was collected. Multiple linear
regression analysis is performed to explore the factors that affect HRQOL of hepatitis
patients. In the first model, effect of demographics factors are investigated while in
second, third and fourth model; medical, economic, physical and psychosocial factors
contributions to HRQOL are examined.
4.
Results
4.1 Descriptive Analysis
Out of 120 patients, 66 are male and 54 are females, in which 61 patients belonged to
urban and 59 are from rural areas, 55 patients are HBV while 65 are HCV infected. 76
years is the maximum age that has been interviewed, while minimum age is 14 years and
mean age is 36 years (see table 1).
Variable of disease severity is obtained by asking the time period of patients disease. 8
years is the maximum disease period for hepatitis patients, while minimum is 0.3 year
and the mean is 2.52 years. 89 patients are vaccinated but 31 of them are not vaccinated.
Out of 120 patients 46 are smokers, while 74 patients never use any type of drug (see
table 2).
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Maximum household income is 50,000 Pakistani rupees per month, while minimum is
2,500 Pakistani rupees per month and the mean income is 12,725 rupees (see table 3).
Out of 120 patients, 93.3% of the patients are caught by pain due to HBV and HCV.
94.4% feel depression and 49.2% patients feel problems and not satisfied to their sleep.
89.2% patients face financial hindrances and not have enough money to meet their needs.
76.7% patients are facing the threat of death due to HBV and HCV. Only 50.8% patients
have an opportunity of leisure, while 40% are not satisfied to their living conditions (see
table 4).
4.2 HRQOL Scores
Domains are scored through collective scaling. Each item has an equal share to the
domain score. Scaling is in the direction of the domain, determined by whether the
domain is positively or negatively framed. Some domains holds questions which need to
be reverse scored and some contains negatively structured constituent questions. HRQOL
instrument contains collective share of each domain.
Table 5 present the mean, maximum and minimum score HRQOL instrument and its four
domains. Patients with hepatitis get maximum score of physical health about 85.71,
whereas its mean value is 39.22. These illustrate that due to hepatitis B and C virus,
patients physical health is very much destroyed. Mean score of psychological health is
somewhat demonstrate a better condition, which is 46.18, while its minimum score is
4.17 that show the patient, is suffering with severe psychological problems. Maximum
score of social relationships is 100, which shows that patients social relationships are not
affected by disease. Mean score of social relationships is also better than physical and
psychological health scores. Environmental score explains that patients opportunity of
leisure, information, and facilities to services is affected due to hepatitis. If we want to
contrast the affect of all four domains, it is very much apparent that hepatitis firstly
affects the physical life of the patient and secondly environmental factors. To investigate
the range of HRQOL instrument we convert the score of HRQOL instrument in 0-100
ranges. Zero means that patient is living with poorest quality of life along with disease, as
he moves towards 100 his quality of life improves. Our results illustrate that minimum
score of HRQOL instrument (10.53) meaning that the patient is living with poor quality
of life. Mean score also is not showing a good picture, which are only 46.66 (see table 5).
Urban patients are enjoying better HRQOL than the rural patients. In all domains and in
HRQOL instrument urban patients scores are high. Social relationship domain illustrate
that there is no discrepancy among the hepatitis patients of rural and urban areas.
Moreover, mean scores of the urban patients are also high as compared to rural patients
of hepatitis (see table 6).
The physical and psychological health of male patients is relatively better than females
(see for example; Table 7). Again social relationship domain shows the same maximum
score for both male and female. Mean scores of HRQOL domains and HRQOL
instrument highlight that male patients are in better condition as compared to female
patients.
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4.3 Multiple Regression Analysis Results

Table 8 explains the regression analysis results in which HRQOL is the dependant
variable whereas gender, age of the patient, region, disease severity, vaccination and use
of drugs are the independent variables. All the variables are significant. Positive sign of
male shows that male have better HRQOL then female, while negative sign of age of the
patient shows that HRQOL deteriorates with increase in patients age. Positive sign of
region shows that people who are living in urban areas enjoy better HRQOL then people
live in rural areas.
Under medical variables disease severity is negatively significantly related to dependant

variable. Disease severity was obtained by measuring the age of hepatitis disease. When
we interpret this we say that increase in one year in the age of disease, will decrease
patients HRQOL by 2.25 units. The patients who use drugs their HRQOL will decrease
as compared to the patient who does not use any type of drug (smoking etc).
Table 9 explains the impact of economic, physical and psychological variables on the
patients HRQOL. All the signs of the variables are according to expectation. Income is
positively significant with dependant variable. The patients having depression will affect
their HRQOL negatively. Negative sign of depression shows that a patient who faces
depression its HRQOL will decrease but a patient who is free from depression enjoy
better HRQOL. Better sleep, good living condition ands opportunity of leisure are
significantly positively related to patients HRQOL. Negative sign of death threat shows
HRQOL decrease for a patient who faces threat of death as compared to that patient who
has no fear of death.
5. Conclusions
The rationale of this paper is to find out the determinants that affect HRQOL of hepatitis
B and C patients. The study used WHOQOL-BREF questionnaire and 120 patients of
hepatitis are interviewed in the public and private hospitals of the Sargodha district.
Multiple regression results shows that age of the patient, disease severity, use of drug,
pain, depression, financial hindrances and threat of death negatively affect HRQOL of the
hepatitis patient while; vaccination, income, education, sleep, opportunity of leisure and
better living condition affect HRQOL positively. The study gives several suggestions on
the basis of present analysis. With the advancement of medical technologies the treatment
also should focus on those aspects that increase patients HRQOL, like by giving the
opportunity of leisure to patients. Financial assistance from government will also help in
removing their financial hindrances. Government and concerning authorities should focus
on controlling drugs among the people. Death threat and depression may be control by
teaching the patients and by giving them cognitive behavioral therapy.
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References
Atiq, M., Gill, M.L., Khokhar, N. (2004) Quality of life assessment in Pakistani patients
with chronic liver disease. J Pak Med Assoc. 54: 113115.
Bondini, S., Kallman, J., Dan, A., Younoszai, Z., Ramsey, L., Nader, F., Younossi, Z.M.
(2007) Health-related quality of life in patients with chronic hepatitis B. liver
international. 27: 1119-1125
Gallegos-Orozco, J.F., Fuentes, A.P., Gerardo, A. J., et al. (2003) Health-related quality
of life and depression in patients with chronic hepatitis C. Arch Med Res. 34:
124129.
Gutteling, J.J., De Man, R.A., Van Der Plas, S.M., Schalm, S.W., Busschbach, J.J.,
Darlington, A.S. (2006) Determinants of quality of life in chronic liver patients.
Aliment Pharmacol Ther. 23:1629-1635.
Hauser, W., Holtmann, G., Grandt, D. (2004) Determinants of health-related quality of
life in patients with chronic liver diseases. Clin Gastroenterol Hepatol. 2: 157
163.
http://www.who.int
http://www.worldlifeexpectancy.com
Lam, C.L.K. and Lauder, I.J. (2000) The impact of chronic diseases on the health-related
quality of life (HRQOL) of Chinese patients in primary care. Family Practice. 17:
159166.
Awan, M.S., Waqas, M., Ali, M., Aslam, M.A. (2011) Status of Health related Quality of
life between HBV and HCV Patients of Pakistan. International Journal of
Business and Social Science. 2 (2): 213-220.
Awan, M.S, Waqas, M., Aslam, M.A., Sarwar, M. (2011) Measurement of SF-6D Utility
among Patients with Active Tuberculosis. Global Journal of Health Science.
3(1):203-208
Marchesini, G., Bianchi, G., Amodio, P., Salerno, F., Merli, M., Panella, C., Loguercio,
C., Apolone, G., Niero, M., Abbiati, R. (2001) Factors associated with poor
health-related quality of life of patients with cirrhosis. Gastroenterology.
120(1):170-8.
Multiple indicator cluster survey (2007-08), Pakistan.
Sobhonslidsuk, A., Silpakit, C., Kongsakon, R., Satitpornkul, P., Sripetch, C.,
Khanthavit, A. (2006) Factors influencing health-related quality of life in chronic
liver disease. World J Gastroenterol. 28;12(48):7786-91.
The World health organization quality of life-BREF (2004).
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Appendix
Table 1: Descriptive of Demographic variables.
Demographic variables
Gender
Region
Hepatitis
120 Male
66
Female Urban Rural

54
61
59
B
55
C
65
Age of patients
Max.
76
Min.
14
Mean
36.09
Table 2: Descriptive of Medical variables.

Medical variables
Vaccination
Disease severity
120 Max.
8
Min.
0.3
Mean Yes
2.52
89
Type of Drug
No
31
Smoking No
46
74
Table 3: Descriptive of Economic variables.

Economic variables
Income of the house hold
Financial hindrances
120
Max.
50000
Min.
2500
Mean
12725
Yes
107
No
13
Table 4: Descriptive of Physical and Psychosocial variables.
Physical and Psychosocial variables

N
Pain
Depression
Sleep
Death threat
Opportunity of leisure
Living condition
Percentage
120
120
120
120
120
120
93.3
94.4
49.2
76.7
50.8
40
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Table 5: Descriptive of Health related quality of life scores.
Health related quality of life scores
Domains
N
Max.
Min.
120
85.71
0.00
Physical health
120
95.83
4.17
Psychological health
120
100
0.00
Social relationship
120
87.50
3.13
Environmental
120
82.78
10.53
HRQOL instrument
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Mean
39.22
46.18
61.14
40.10
46.66
Table 6: Descriptive of Health related quality of life scores by region.

Health related quality of life scores by region
Rural
Urban
Domains
N
Max.
Min. Mean
N
Max. Min.
59
78.57
0.00
34.62
61
85.71 0.00
Physical health
59 83.33 16.67 42.44
61
95.83 4.17
59 100.00 12.50 59.11
61 100.00 0.00
Social relationship
59 62.50
3.13 32.89
61
87.50 6.25
Environmental
59 74.85 17.82 42.26
61
82.78 10.53
HRQOL instrument
Mean
43.67
49.79
63.11
47.07
50.91
Table 7: Descriptive of Health related quality of life scores by sex.

Health related quality of life scores by sex
Male
Female
Domains
N
Max.
Min.
Mean N
Max. Min. Mean
66
85.71
0.00
41.07 54 78.57
0.00 36.97
Physical health
66
95.83 12.50 47.72 54 83.33
4.17 44.29
66 100.00 16.67 63.25 54 100.00
.00
58.56
Social relationship
66
87.50
6.25 41.28 54 87.50
3.13 38.65
Environmental
66
82.78
10.53
48.33
54
82.40
14.25
44.62
HRQOL instrument
Table 8: Multiple regression results.

Demographic variables Model
Constant
Gender (Male=1, Female=0)
Age of the patient
Region (Urban=1, Rural=0)
R2
66.46**
0.94
-0.68**
8.57**
0.26
10.56
F-Statistics
9.87
SER
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Medical variables Model
Constant
Disease severity
Vaccination (Yes=1, No=0)
Use of drug (Yes=1, No=0)
R2
53.77**
-2.25*
1.58
-6.43*
0.09
10.21
F-Statistics
14.28
SER
Economic variables Model

Constant
Income
Financial hindrances (Yes=1, No=0)
R2
47.72**
0.001**
-9.52*
0.20
16.39
F-Statistics
13.33
SER
Physical and Psychological variables Model
Constant
Pain (Yes=1, No=0)
Depression (Yes=1, No=0)
Sleep (Satisfied=1, Dissatisfied=0)
Living condition (Satisfied=1,
Dissatisfied=0)
Death threat (Yes=1, No=0)
Opportunity of leisure (Yes=1, No=0)
R2
57.32**
-6.06
-11.41*
10.90**
7.97**
-11.19**
11.36**
0.66
9.64
F-Statistics
9.28
SER
**=99% significance level and *= 95% significance level
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Figure 1: District wise hepatitis patients diagnosed in Punjab province.
Source: MICS 2007-08
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Study of Market Efficiency: Facts from Pakistani Market

Abdul Hafeez Qureshi(Corresponding Author)
MS (Finance Scholar)
Iqra University, Islamabad Campus
Dr.Babar Zaheer butt
Iqra University
Umbreen Sharif
MS Scholar
Iqra University
Muhammad Bilal
MS Scholar
Iqra University
Abstract
The main purpose of accounting numbers is to offer the monetary data and financial
information concerning the act of positive impact endeavor to organize and to help the
financiers, managers, and government authorities in formulating the useful decisions.
Furthermore, the objective of accounting research and investigation is to assess the utility
of accounting information and data to financiers and more users. In addition, the main
objective of capital market investigation and research is to observe the connection among
security returns and accounting numbers to scrutinize whether or not accounting
information transmit any data substance to security market, and if so it should be
confiscated in the security price. The conclusion of this study reveals that the security
market reacted with mixed signal on releasing liquidity, profitability and solvency
information as compare with Hadi (2006). The authors expect that the crux of this study
will explore new way handle to security market reaction
Keywords: Efficient market hypothesis, profitability, liquidity, solvency.
Introduction
The essential aim of financial exposure be to give financiers and creditors with functional
information with the intention of facilitate them review the quantity, timing, and timidly
of cash flows to assist them make national investment and credit decisions. In the earlier
period, a noteworthy amount of accounting research has appeared to assess the usefulness
of accounting facts to investors and others by explaining the relationship between the
discharge of accounting numbers and security return. The fundamental hypothesis of
prior studies is suggesting that the efficient markets are the capital markets.
According to Dixon and Holmes (1992) that operational efficiency is advanced and
hurdles to trading on capital markets are decreased when transaction expenditures will be
lowest. Security prices in an efficient market respond immediately unbiased to confiscate
new information in such a way that depart no chance to market partakers to constantly
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make irregular return. Preceding research in accounting and finance literature gives facts
sustaining efficient market hypothesis. The consequences of these studies entail that
accounting information is worth relevant to investors ' decision as they connected with
security returns. Conversely, strong evidence of irregularity in the stock market that
appears to oppose with the EMH.
The purpose of this paper is to analysis firm features of capital market efficiency and it
proposition on accounting numbers with some applications on security market in
Pakistan.
Outstanding of the paper is set as per schedule. Part 1 is observing the definition of
capital market efficiency hypothesis. Part 2 analyze the different forms of efficient
market hypotheses in Pakistan. Part 3 presents models. Part 4 explains the sample
selection and data collection. Part 5 presents research methods. Part 6 gives detail of the
experiential results and part 7 concludes the paper.
Efficient market hypothesis
A basic issue relating to the capital markets is their efficiency. Frimpong, (2008)
illustrate that there are three types of market efficiencies i.e., allocational, operational and
pricing/informational described in the financial markets literature.Muslumuv et al, (2004
examined that capital markets with high informational efficiency retain higher
operational and allocational efficiencies. According to (Ross, 1987) if it is not possible to
create economic returns by trading on the basis of information set which say that market
is efficient. Fama (1970) and samuelson (1965) researched that stock market outlays
ought to show complete sign of all available and relevant information under the EMH and
necessary to follow random walk procedure. As per (Frimpong, 2008) Successive stock
price changes are therefore independently and identically distributed.
Different forms of market efficiency
Fama, (1970) researched three types as weak, semi-strong and strong types of souk
competences based on information includes past returns and prices, the entire unrestricted
data and information, and every data whether private and public respectively.
Weak Form Market Efficiency
This type of competency occurs when prices of stock imitate data concerning the
historical share value chain only. There is another technique to shape this hypothesis
according to demand which is: shareholders who rely entirely on historical sequence of
stock values in choosing their collection cannot always break the similar financiers who
pay money for and hold unsystematic portfolio at the equal risk. Numerous studies
concentrate on the problem of whether stock price performance is a random walk or not.
Osborne & Robert (1959) instituted that stock price faction pursue a random walk. The
hypothesis of the random walk basically shapes that at a specified size, point in time, and
direction of the subsequently price modification is random with admiration to the
knowledge accessible at that point in time. Another few researchers Morse & dyckman,
(1986) stated that stock price transformation is haphazard does not signify that stock
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price amends without any motives; there is a basis for such faction, this is an empirical
research for decade.
Semi-Strong Form of Market Efficiency
This type of competency occurs when the security prices imitate not by the data and
information that includes the historical time series of stock values and prices but this type
of information and data is normally publically available. It concludes that stock values
and prices are regulated quickly and in balanced approach to the entire public
proclamations in journals, annual reports, newspapers, and corporate forecasting. This
type of market efficiency is related to profession of accounting, because profession of
accounting is the major basis of public data and information, all the way through the
concern of financial reporting.
Strong-Form Market Efficiency
This type of market competency or efficiency imitates if the prices of stock replicate all
private and public data and information. This type is the broad case and testing efficient
market hypothesis in strong form is extremely intricate, since private data and
information is complicated to examine. Security Exchange Commission in United States
uses official document which encloses an official synopsis of insider trading, giving a
proof of trading connections by officers, executives and major stockholders by means of
public and private data and information.
Literature Review
Hypothetical perceptive shapes that prices in a proficient market are completely stand for
on behalf of available data and information converse the extensive awareness of what is
proposed by market competency. EMH is supported leading the supposition that equity
prices take up promptly to the invasion of newest information so current prices entirely
imitate total offered information.
Fama, (1965) instituted that announcement is universal and desires to be confirmed;
furthermore, it strain to put up mathematical formulations and models for market stability
which will be used for examining the market competency. Fama, (1970) stated that as a
flaxen competition model the EMH theory which points out that the financiers are
convinced concerning to the existing market price which entirely replicates every one of
existing information concerning to a security.
Another researcher Urrutia, (1995) examined the four American Latin developing stock
market through Random Walk Model. He utilized the monthly index information and
data for the countries Brazil, Mexico, Argentina, and Chile for the era December 1975 to
March 1991. The random walk model hypothesis is rejected by variance ratio test but
another test runs point out that there subsist weak form of efficiency concerning to these
markets. The cause following this state of affairs is that the conjugal financiers are not as
much as necessary capable to devise trading approaches that may allocate them to make
surplus returns.
For Mexico & Brazile, two researchers Reyes & Grieb, (1999) both investigation is for
the support of random walk. There are many other studies related to African market also
favors the random walk model based hypothesis for all the markets (Wydick &
Magnusson, (2000). Ariff et al, (1999) investigated the Asia-pacific region ten countries
to assess the cause of liberalization on market-efficiency. They concludes that several
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measures of market efficiency are unaffected by deregulation. These results for the
international conditions may be explained by the bigger assimilation of international
equity markets but the conjugal observable fact leftovers unknown.
Methods
Sample and data Collection
In the study the sample size was 23 banking firms of Pakistan. The respondents were
selected from different regions of Pakistan. These banking firms were selected for the
data collection due to certain reasons. Here we have easy access to financial data from
different years, easily targeted different financial data and ratios. The target respondents
were the reputed public and private banks of Pakistan.
Measurement
The research models were formed in the light of Review of Capital Market Efficiency:
Some Evidence from Jordanian Market (Hadi, 2006).The models were structured in three
sections. First section included the profitability analysis of the firms. Second Model
included the liquidity measures of the firm. Third model included the insolvency of the
firms. There were total eight variables used in order to know the efficiency of the firms.
The dependent variable is annual returns of the banks while the independent variables are
dividends (DIVID) , Dividend payout(DIVPO) , return on average equity (ROAE),
return on average asset (ROAA), debt ratio (Debt ratio), interest coverage (Int Cov) , and
current ratio (CR).
Procedure
The financial data of the firms were collected through the digital library of the leincaster
university of United Kingdom. The banks that included were Median, NBP, NIB, MCB,
HBL, ABL, UBL, Askari bank, Habib metropolitan, Bank Al Habib, Faysal bank, The
bank of Punjab, Bank Alfalah , Samba bank, JS Bank, Bank of Khyber, My bank, Atlas
bank, Silk bank etc.The total time period that was consumed was three months (June to
August,2010).The data of eight years (2002-2008) were analyzed by descriptive,
correlations and regression analysis.
Five regression equations were used in this analysis. The purpose of this test is to
examine the market reaction to accounting numbers release. The dependent variable is
annual returns of the banks while the independent dividends (DIVID) , return of equity
(ROAE), return on asset (ROAA), debt ratio (Debt ratio), interest coverage (Int Cov) ,
and current ratio (CR).
Pooled regression method (PR) is used to solve the regression equations.
All analysis will be performed at pool 2002-2008.First, tests whether or not profit
information have any impact on returns:
M1
R = + DIVID +e
Where,
R = Annual returns.
DIVID = dividends per share.
e = error term.
= intercept and slope coefficient of the regression equation.
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R = ROE +e
M2
Where,
R = security returns.
ROE= return on equity.
e = error term.
Second, examine whether liquidity information have any impacts on security returns:
M3
R = + ROA +e
Where,
ROA= return on asset.
e = error term.
= intercept and slope coefficient of the regression equation
R = + CR +e
M4
Where,
C.R. = current ratio.
e = error term.
Third, examine whether solvency information have any impacts on security returns:
M5
R = + debt ratio + Int cov +e
Where,
Debt ratio = debt ratio.
Int cov = interest coverage.
e = error term.
Results & Discussions
Statistical Descriptions and Correlations
Table 1 present the statistical description for all the variables, the analysis is performed
by pooled all firms over all years for each variable. It were found that return and dividend
have the highest standard deviation due to the presence of extreme observation and this
can be confirmed from the maximum row in table 1.
Insert table 01 here.
The results in Table 2 reveal the correlation among all variables; it summarizes the values
of Pearson Coefficient of correlation and their significance. It is quite evident from the
results that Return is strongly positively correlated with ROAA as value of Pearson
Correlation Coefficient .544** and the relation is significant at 95% confidence level
(p<.05). The relationship between returns and dividends per share is also strongly
positive and significant as Pearson Correlation Coefficient is .419** and p value is than
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.05. But it is not strong one as Pearson Correlation Coefficient is less than .5 and closer to
0. Returns and Interest coverage is strongly and positively correlated, as the value of
Pearson Correlation Coefficient is .669**. Their relationship is significant as well
(p<.05). So, these three independent variables are positively and significantly correlated
with dependent variable. Other independent variables like debt ratio, ROAE and current
ratio are not strongly correlated. The results of this study are not only consistent with
previous studies they also show the market efficiency of capital market with main focus
on banking sector.
Insert Table 02 here.
Regression Results
The regression results for all the models are presented in tables 3,4 and 5.
For M1, Return on average equity is not good factor in return movements.ROAE
coefficient is statistically insignificant. The R2 equals to .000. This funding is in
consisted of previous research by Hadi (2005 & 2006)
For M2, dividends are significant predictor and can explain the variation in return. The tstatistic is significant at .000 and R2 equals to .176 for M2.These results propose that
dividends can be used an estimate for future return. This result is consisted of previous
research by Hadi and Garrod (1998), Petit (1972), Abeyratana et al (1993), Charest
(1978) and Vickery and Foster (1978).
For M3, return on average assets is highly significant predictor and it is explaining the
variation in returns. The t-statistic is significant at .000 and R2 equals to .292 for M3.
In answering the first question, tests whether or not profit information have any impact
on returns? DIVID, ROAE, and ROAA have impact on returns.
For M4, Current Ratio is also not significant predictor and cannot explain the variation in
return. The t-statistic is insignificant at .42 levels and R2 equals .002 for M4. Previous
results suggest that current ratio can be used an estimate for future return. (Hadi, 2005 &
2006). In answering the second question, whether liquidity information has any impacts
on returns? Current ratio has not impact on returns in Pakistani scenario.
For M5, Int cov is significant predictor and can explain the variation in return. The
tstatistic is significant .001 level and R2 equals .447 for M5. Debt ratio coefficient is
negative which carry negative in information to the market. These results suggest that
Debt and Int cov can be used an estimate for future returns.
In answering the third question, whether solvency information have any impacts on
security returns? solvency information have impact on security returns.
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Conclusion
This paper identified EMH and provided some detail on the types of EMH, as well as
identifying the empirical research that tested weak, semi-strong and strong forms of
market efficiency. Accounting market based research more often assumes that market is
efficient in semi-strong form, and the reason for this is that financial reports are
considered public information once they are released to the market. In this paper
empirical evidence has been provided from Pakistani market, and it shows the security
market reacted with mixed signal on releasing profitability, liquidly, and solvency
information.
The selection of the relevant pricing model is very critical in market-based research.
Brown and
Warner (1980) investigates how different methods performed when some abnormal
performance was present. They conclude that There is no evidence that more
complicated methodology conveys any benefit.(Brown and Warner, 1980). Also, they
argue that using more complicated models will make the researcher worse off.
Furthermore, the use of the market model or even simple models such as mean adjusted
return is better than more complicated models like control portfolio.
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References
Hamid et al, 2010. Testing the Weak form of Efficient Market Hypothesis: Empirical
Evidence from Asia-Pacific Markets. International Research Journal of Finance
and Economics, 58 : 121-133.
Brown, Stephen J., and Jerold B. Warner. 1980. Measuring Security Price Performance.
Journal of Financial Economics. V. 8. pp. 205:258.
Charest, Guy. 1978a. Split Information, Stock Returns and Market Efficiency I. Journal
of Financial Economics. Vol. 6. pp. 265-296.
Charest, Guy. 1978b. Dividend Information, Stock Returns and Market Efficiency II.
Journal of Financial Economics. Vol. 6. pp. 297-330.
Cross, F. 1973. The Behavior of Stock Prices on Friday and Monday. Financial Analysts
Journal. pp 67-69.
Fama, E. 1966. Filter Rules and Stock Market Trading. Journal of Business. pp. 226-241.
Fama, E. 1970. Efficient Capital Markets: A Review of Theory and Empirical Work.
Journal of Finance. pp. 383-417.
Fama, E. 1991. Efficient Capital Markets II. Journal of Finance. Vol. XLVI, No. 5 pp.
1575- 1617.
Hess, Alan C. and Peter A. Frost. 1982. Tests for Price Effects of New Issues of
Seasoned Securities. Journal of Finance. Vol. XXXVI No. 1 pp. 11-25.
Grieb, T. and Reyes, M.(1999) Random Walk Tests for Latin American Equity Indexes
and Individual Firms, Journal of Financial Research, 22, 4, pp. 371-383.
Groenewold, N. and Ariff, M.( 1999). The Effects of De-Regulation on Share Market
Efficiency in the Asia-Pacific, International Economic Journal, 12, 4, , pp. 2347.
Jensen, Michael C. and George A. Benington. 1970. Random Walks and Technical
Theories: Some Additional Evidence. Journal of Finance. pp. 469-481.
Morse, Dale. 1980. Asymmetrical Information in Securities Markets and Trading
Volume. Journal of Financial and Quantitative Analysis. pp. 1129-1148.
Evidence on Autocorrelation in Common Stock Return. Journal of Finance. Vol. XXXII
No. 1.pp. 41-55.
Sharpe, William. 1964. Capital Asset Prices: A Theory of Market Equilibrium under
Conditions of Risk. Journal of Finance. Vol. XIX no. 3 pp. 425-442.
Strong, Norman. 1992. Modelling Abnormal Returns: A Review Article. Journal of
Business Finance and Accounting. V.19 (4) pp. 533:553.
Watts, Ross L. and Jerold L. Zimmerman. 1986. Positive Accounting Theory. Prentice/
Hall international, Inc. pp. 1-111.
Wilson, Peter G. 1987. The Incremental Information Content of the Accrual and Funds
Components of Earnings after Controlling for Earnings. Accounting Review.
V.LXII. No.2 pp. 293-305.
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Annexure
Descriptive Statistics Table 01
N
Minimum
Maximum
Statistic
Statistic
Statistic
Mean
Statistic
Std. Deviation
Std. Error
Statistic
Annual Returns
215
-10085.00
19405.00
2339.8542
266.15496
3902.59784
Return on Average Assets
215
-9.18
5.12
.5547
.13472
1.97535
Return on Average Equity
215
-99.87
3522.45
263.2394
26.43552
387.62086
Dividend per share
215
.00
11464.00
1560.0185
79.89664
1171.51468
Interest Coverage
215
-2.54
9.03
3.4852
.10603
1.55472
Debt Ratio
215
5.75
808.80
53.3675
3.60320
52.83330
Dividend Income
215
1.00
2887.00
423.8298
20.29944
297.64817
Current Ratio
215
1.01
109.00
2.6176
.69974
10.26016
Valid N (listwise)
215
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Table-2: Person correlation matrix for all variables, i.e, R, ROAA, ROAE, D, INT COV,
DR, and Current Ratio. (N=215)
Correlations
PearsonCorrelation
Sig.(2tailed)
N
PearsonCorrelation
Sig.(2tailed)
N
PearsonCorrelation
Sig.(2tailed)
N
IntCov
DebtRatio
CR
PearsonCorrelation
Sig.(2tailed)
N
PearsonCorrelation
Sig.(2tailed)
N
0.419278 0.073883 0.14121
1.46E10 0.280814 0.038566

215
215
215
215
0.668528 0.45757 0.099046 0.304024
3.28E29
1.6E12 0.147788 5.63E06
215
215
215
215
215
PearsonCorrelation
Sig.(2tailed)
N
PearsonCorrelation
Sig.(2tailed)
N
0.05018 0.17252 0.04997 0.006022 0.03064
0.464182 0.011279 0.466032 0.930041 0.655054

215
215
215
215
215
215
0.055783 0.14412 0.03633 0.01006 0.07449 0.019993433
0.415753 0.034687 0.596283 0.883349 0.276848 0.770683161
215
215
215
215
215
215 215
**
*
Correlationissignificantatthe0.01level(2tailed).
Correlationissignificantatthe0.05level(2tailed).
ROAA
ROAE
Debt
Ratio
IntCov
Debt
Ratio
CR
ROAA
ROAE
215
0.543632
6.23E18
215
215
0.017957 0.21312
0.79349 0.001673
215
215
215
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Table3:TheRegressionResultsforM1toM3Profitability
Par
Adjusted
Models Variables Coefficient TRatio Value
FRatio PValue R2
0.07
M1
ROAE
0.18
0.26
0.79
0.79
0.004
0.17
45.43
M2
Dividends
1.40
6.74
0.00
0.00
89.36
0.29
M3
ROAA
1074.03
9.45
0.00
0.00
R= +DIVID+e............................................M2
R= +ROA+e..............................M3
R= +ROE+e...............................................M1
Table4:TheRegressionResultsforM4Liquidity
T
Adjusted
Models Variables
Coefficient Ratio ParValue FRatio PValue R2
M4
CurrentRatio
21.22
0.82
0.42
0.67
0.42
0.002
R= +CR+e...................................................M4.
Table5:TheRegressionResultsforM6Solvency
T
Par
Adjusted
Models Variables
Coefficient Ratio Value
FRatio PValue R2
M5
DebtRatio
3.71 0.73
0.46
0.54
0.46
0.002
InterestCoverage
1678.12 13.12
0.00
172.12
0.00
0.44
R= +debtratio+Intcov+e......................M5
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Analysis of Mergers and Acquisition in Banking Sector of Pakistan
Abdul Hafeez Qureshi (Corresponding Author)
MS (Finance Scholar)
Umbreen Sharif
MS Scholar
Dr.Babar Zaheer Butt
Faculty Member
Muhammad Bilal
MS Scholar
Abstract
This study investigates the effects of mergers and acquisition on the financial
performance of Banks in Pakistan. The operating performance, capital adequacy and
solvency measures were compared for 3-years pre and post-merger from the financial
statements of the HMB (Habib Metropolitan bank) and NIB (National Investment Bank).
The results of the study showed that ROA and ROE of HMB did not indicate significant
improvement but on average it can be concluded that overall performance of the bank
improves as a result of M&A activity. Similarly, the results of the acquisition activity of
PICIC, PICIC Commercial Bank and National Investment Bank also indicates the same
results that ROA and ROE decreased but other financial performance indicators showed
significant improvement during post-merger period.
Keywords: Mergers and Acquisitions (M&As), Profitability, Capital Adequacy, Long
Term Solvency, Pakistan.
INTRODUCTION
Mergers and Acquisitions (M&A) are strategic decisions through which firms combine or
acquire assets. The basic idea in mergers and acquisitions and all other forms of corporate
restructuring is to create value and maximize the existing shareholders wealth. In past
few decades a wave of merger and acquisition has been arisen in the developing
countries. Pakistan is no difference in this case. Banking sector in Pakistan were facing
problems of weak health and low profitability due to various factors i.e. low productivity,
high intermediation cost (high cost deposits), huge expenditures on establishment, over
staffing, large number of loss making branches and mismanagement of funds etc. Owing
to this, banking sector in Pakistan was under great deal of pressure to maintain their
profitability.
Looking at the data of listed companies on Karachi stock exchange (KSE), it is obvious
that in 2001 and onwards the M&As have got momentum. Banking industry in Pakistan
is currently witnessing a growing trend towards mergers and acquisitions (M&As). The
banking industry in Pakistan has been transformed from an indolent, governmentCOPY RIGHT 2011 Institute of Interdisciplinary Business Research
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dominated sector into a much more active, competitive and profitable industry.
The study purpose is to examine the impact of mergers and acquisitions on the financial
performance of banking sector, by analyzing 3-year pre and 3-year post financial ratios of
National Investment Bank (NIB) and Habib Metropolitan Bank (HMB). National
Investment Bank acquired PICIC and PICIC Commercial Bank on 31 December 2007.
Habib Bank AG Zurichs Pakistan was merged into Metropolitan Bank Limited and
became Habib Metropolitan Bank (HMB) on 26 October 2006. The dominant rational
behind this activity is to improve financial performance, by achieving economies of scale,
economies of scope and synergy.
To analyze the impact of mergers and acquisitions on the financial performance of banks
three financial measures; profitability, capital adequacy and solvency are being used.
The objective of the study is to analyze the impact of merger and acquisition activity on
profitability of merged/acquirer firm.It is also important to examine the impact of merger
and acqisition activity on capital adequacy of merged/acquirer firm and to analyze the
effect of merger and acquisition activity on solvency of merged/acquirer firm.And there
is the question that do mergers and acquisiton of banking sector in Pakistan prove to be a
successful strategy?
The study is organized as follows; the section 2 reviews the existing literature on impact
of merger and acquisition on banking sector. Methodology is outlined in section 3.
Section 4 provides an explanation of empirical results and Section 5 concludes the
discussion.
LITERATURE REVIEW
The impact of various mergers and acquisitions has attracted a lot of attention in the last
two decades. Burki and Niazi (2003) investigated the impact of merger and acquisition on
performance of commercial banks over the period of 1991-2000, by using Data
Envelopment Analysis (DEA) to measure performance through cost efficiency. Their
analysis show that banking efficiency has varied overtime from highest efficiency in
1991 to lowest efficiency in 1996. The highest level of efficiency was achieved by
foreign banks followed by private banks while state owned banks achieved least cost
efficiency.
In literature there is a debate that whether or not increased merger and acquisition has
significant impact on efficiency. According to Christopoulos et al. (2002), banks involved
in merger and acquisition activity mostly showed increasing returns to scale, obtain cost
and efficiency gains. An analysis of merger in 67 banks of Italy found that larger firms,
who are less efficient, still tend to engage in merger activity with a view of making
efficiency. The study conducted by Cuesta and Oreia (2002) concludes that merged firms
will be more efficient than non merged firms.
Rizivi (2001) analyzed the productivity of banking sector in Pakistan for the period 19931998 and decomposed the total factor of productivity into its constituent components.
The research show that domestic banks performed slightly better than foreign banks.
Qayyum and Ahmed (2006) estimated the technical and pure technical efficiency of 22
commercial banks of Pakistan for the period of 1991-2000 and found that the government
of Pakistan is successful in improving the efficiency of the domestic commercial banks
through the implementation of financial sector reforms. Akhter (2002) estimated the
efficiency of 40 commercial banks in Pakistan for the year 1998 through DEA technique
and found that overall average efficiency of commercial banks in Pakistan is less than the
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World Mean Efficiency after merger and acquisition.

In contrast, there have been several studies that point, merger and acquisition having
negative impact on efficiency. According to Berger and Mester (2001), merger and
acquisition activity in US banking sector has decreased the efficiency and productivity.
Wheelock and Wilson (1999) observed declining efficiency and productivity in US
banking sector due to merger and acquisition activity. The research conducted by
Khawaja and Din (2007), suggests that ongoing merger wave in the banking sector will
limits the option for the savers, with adverse impact for the interest spread.
According to Khawaja and Din (2007), Banking mergers increase concentration and may
increase efficiency as well. By affecting spreads, mergers carry the potential to speed up
or slow down the change in policy rates of deposit and lending. Woodbridge and
Williams (2003) argue that mergers are undertaken because they increase value, either by
the way of increase in efficiency or increase in bargaining power. Further the authors
suggest that the mergers that promote efficiency should be allowed and those that further
create monopoly power should be restricted. Prager and Hannan (1998) examine the price
effects of US bank mergers and find that deposit rates declined in the market where
merger took place.
According to Ahmed (2004), a number of bank mergers and acquisitions have been
occurring in 2000s. The objective of these activities was to promote financial stability
through economies of scale. The analysis showed that the banks exhibit high productivity
both in terms of investment and advances after merger and acquisition took place. The
results further refer that after 2000 there has been a persistent increase in total factor
productivity suggesting that deregulation framework has enabled these bank to reallocate
their resources efficiently.
Burki and Ahmed (2009), investigates the performance effects of bank governance
reforms in Pakistan. They found that the private banks demonstrate highest level of cost
efficiency, followed by foreign, and then state owned banks. Privatized and restructured
banks suffer from efficiency losses in starting years but improve performance once they
adjusted. Although small and weak banks are selected for merger and acquisition, but
when the ownership change they increase technical efficiency. The winners from the
reforms are privatized banks and banks selected for merger and acquisition who exploit
new profit making opportunities. The study conducted by Nakane and Weintraub (2003)
on the Brazilian bank privatization and productivity exhibited that privatization of state
owned banks has increased the productivity though merger and acquisition activity.
Kaur (2010) conducted a study that examines the cost efficiency of Indian commercial
banks after the merger took place. The findings of this paper suggest that to some extent
merger program has been successful in Indian banking sector. The government should
not promote merger between strong and distressed banks as a way to promote the interest
of the depositors of distressed banks, as it will have adverse effect upon the asset quality
of the stronger banks.
Although several studies have found that merger and acquisition have a significant effect
in bank performance in developing countries, but there is very little research regarding to
banking sector of Pakistan. The present paper is an attempt to fill the gap in the existing
literature regarding to Pakistani banking sector and tries to explore that how the activity
of merger and acquisition effects the financial performance of banks in Pakistan.
Insert Figure 01 here. (Theoretical Framework)
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Hypothesis
H0: The financial performance of banking sector does not improve significantly by
Merger and acquisition activity.
H1: The financial performance of banking sector improves significantly by Merger and
acquisition activity.
Methods
This section includes details about the population, sample and measuring instruments
being used in the research. Study was designed to examine the impact of merger and
acquisition on banking sector of Pakistan.
Sample
The study collected secondary data from banks involved in mergers and acquisions and
analyze the important issues and factors taking part in their decision to merge in another
bank and acquisition of other bank. The issues included in the study were profitability
ratios, capital adequacy ratios and solvency ratios. The sample size for this study was 4
banks. Each of the banks data was screened out properly to avoid any error, incomplete
or missing responses. With the purpose of uniformity and stationary of data, reliability
analysis was computed for every dimension included in the whole instrument. Four banks
were taken as sample in which Habib Metropolitan Bank is an example of merger and
National Investment Bank is an example of acquisition. Secondary data is used to
evaluate the financial performance of banks, taken from the website of respective banks
and Karachi Stock Exchange.
Measures
The data was used to get profitability ratios, capital adequacy ratios and solvency ratios
to analyze the post and pre merger and acquisition analysis of the targeted banks.
Procedure
The annual financial statements of the merged financial institutions were analyzed by
using the profitability, capital adequacy, and long-term solvency measures for pre- and
post-merger three years period. The combined value of the measures for the acquirer and
the acquiree banks were calculated for the three years pre-merger period and compared
with the post-merger three years value by using pared observations (students t
distribution, taking _ = 0.05).
Profitability Measures
Profitability is the most important to the firms total shareholders. Profit serves as
backbone against adverse conditions such as losses on loans, or losses caused by
unexpected changes in interest rates. Ratios that show returns represent the firm's ability
to measure the overall efficiency of the firm in generating returns for its shareholders.
Return on equity (ROE) and return on assets (ROA) are the most commonly applied
ratios used to assess financial performance.
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Capital Adequacy Measures
They relate to the firms overall use of financial leverage. Generally firms with high
financial leverage will experience more volatile earnings behavior. It indicates the extent
to which an institutions capital base covers the risks inherent in its operations. Capital
adequacy ratios are Shareholders equity to total assets and Shareholders equity to total
customer deposits.
Long Term Solvency Measure
Solvency refers to the ability of an enterprise to survive over a long period of time. It is
the same concept as liquidity except that it is for long term rather short term. Total
liabilities to total assets ratio has been used in this study.
Results and discussions
Profitability Ratios:
Table 1 indicates that ROA decreased by 0.1% in 2007, increases by 0.11% in 2008 and
again decreased by 0.55% in 2009 during post-merger period. Similarly ROE of HMB
decreased by 2.47% in 2007 increased by 0.15% in 2008 and again showed a decreasing
trend of 6.85% in 2009.
Post-merger ROA of NIB decreased by 0.61% & 3.9% in 2007-08 respectively but
increased by 4.16% in 2009. ROE for NIB first decreased by 4.5% and 17.89% in 2007
and 08 respectively and then increased by 21.29% in 2009.
Solvency Ratio:
Table 2 indicates that the liabilities of HMB decreased after merger although not very
much significantly but showing a decrease trend in solvency ratio. It decreases by 0.51%
and 0.4% in 2007 and 08 but again increased by 0.32% in 2009.
Table 2 indicates that solvency ratio of NIB decreases as a result of acquisition activity. It
decreases fro 79.29% in 2007 to 77.81% in 2008. But in 2009, there is again an increase
of 2.24% in solvency ratio of NIB.
Capital Adequacy Ratio:
Table 3 indicates that there is no significant change in Shareholders equity to total assets
of HMB after merger but shareholders equity to total customers deposits increased in
post-merger period. Shareholders equity to total assets ratio increased by 0.51% in 2007
and 0.39% in 2008 but decreased by 0.32% in 2009. Whereas, shareholders equity to
total customers deposits increased by 0.57%, 0.51% and 1.48% during 2007-09 in the
post-merger period.
Table 3 indicates that Shareholders equity to total assets and shareholders equity to total
customers deposits ratio increased in the post-merger period. Shareholders equity to
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total assets increased by 11.5% and 1.48% in 2007 & 08 but decreased by 2.24% in 2009.
Shareholders equity to total customers deposits increased by 7.79%, 16.02% and 6.27%
during 2007-09 in the post-merger period.
T-Statistical Analysis for Habib Ag Zurich Bank and Metropolitan Bank Limited
Table 4 indicates an insignificant improvement in ROA and ROE with p-values of 0.778
and 0.338 respectively at significance level of 0.05 during the post-merger period over
the pre-merger years with standard deviation of 0.502 and 6.45 respectively for Habib
Metropolitan Bank. The average of ROA and ROE are decreased by 0.093% and 4.65%
respectively. But values of Shareholders equity to total assets and shareholders equity to
total deposits are indicating the significant impact with p-values 0.059 and 0.01
respectively during the post-merger period over the pre-merger years with standard
deviation of 0.485 and 0.038 respectively. The average of shareholders equity to total
assets increased by 2.25% and the value of shareholders equity to total deposits
decreased by 1.1% at significance level of 0.05% during the post-merger years. Total
liabilities to total assets also showed significant improvement with p-value 0.059 at
significance level of 0.05. The average of total liabilities to total asset decreased by 1.1%
which is indicating a positive impact.
T-Statistical Analysis for Picic, Picic Commercial Bank and Nib
Table 5 indicates an insignificant improvement in ROA and ROE with p-values of 0.297
and 0.208 respectively at significance level of 0.05 during the post-merger period over
the pre-merger years with standard deviation of 2.41 and 11.14 respectively for NIB. The
average of ROA and ROE are decreased by 1.95% and11.81% respectively. But values of
Shareholders equity to total assets and shareholders equity to total deposits are
indicating the significant impact with p-values 0.009 and 0.084 respectively during the
post-merger period over the pre-merger years with standard deviation of 1.72 and 10.46
respectively. The average of shareholders equity to total assets increased by 10.71% and
the value of shareholders equity to total deposits increased by 19.5% at significance
level of 0.05% during the post-merger years. Total liabilities to total assets also showed
significant improvement with p-value 0.008 at significance level of 0.05. The average of
total liabilities to total asset decreased by 10.72% which is indicating a positive impact.
Conclusion:
The study was conducted to evaluate the impact of merger and acquisition activity on the
financial performance of the banks on the basis of the results of three indicators of
financial health i.e., Profitability, Long-term Solvency and Capital Adequacy ratios. The
results of the study showed that ROA and ROE of HMB did not indicate significant
improvement but on average it can be concluded that overall performance of the bank
improves as a result of M&A activity because 3 out of 5 ratios i.e., shareholders equity
to total assets, shareholders equity to total customers deposits and total liabilities to total
assets, are indicating significant improvement to overall financial performance. Similarly,
the results of the acquisition activity of PICIC, PICIC Commercial Bank and National
Investment Bank also indicates the same results that ROA and ROE decreased but
shareholders equity to total assets, shareholders equity to total customers deposits and
total liabilities to total assets showed significant improvement during post-merger period.
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On average financial performance of NIB and HMB improved as a result of M&A

activity, so it could be recommended as a useful financial strategy in order to improve
their financial performance by achieving economies of scale, competitiveness and
increased market share. However, decreasing trend of ROA and ROE could be the result
of managements inability in generating net income from total assets or total equity. So,
while acquiring/merging, organizations must keep in mind the effects on Human
Resource which is the most valuable asset of the organization.
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References:
Khawaja et al, (2007). "Determinants of Interest Spread in Pakistan." The Pakistan
Development Review 46:2, 129-43.
Jaffry et al,(2005). "Regulatory Changes and Productivity of the Banking Sector in the
Indian Sub-continent." The Pakistan Development Review 44:4,1021-047.
Khawaja et al, 2006. "Banking: Interest Spread, Inelastic Deposit Supply and Mergers."
The Pakistan Development Review 45:4,1055-070.
Ahmad & Shabbir,( 2004). "Impact of Deregulation on Productivity and Efficiency: An
Empirical Evidence from Comercial Banks Of Pakistan."
Burki et al,(2008).Corporate Governance Changes in Pakistans Banking Sector: Is
There a Performance Effect?".
Din & Musleh Ud. "Banking: Interest Spread, Inelastic Deposit Supply and Mergers
Kaur et al(2010). "Impact of Mergers on the Cost Efficiency of Indian Commercial
Bank." Eurasian Journal of Business and Economics 27-50.
Obaid et al,(2010). "Post-merger Performance of Atlas Investment and Al-Faysal
Investment Bank Ltd. in Pakistan." International Research Journal of Finance
and Economics 60, 1450-2887.
Collins et al,(2001) 'Sectoral Differences in English Bank Asset Structures and the
Impact of Mergers, 1860-1913', Business History, 43: 4, 1 28
Mon et al,(2005)Can mergers in Europe help banks hedge against macroeconomic
risk?', Applied Financial Economics, 15: 5, 315 326
Akhigbe et al,(2004) 'Bank acquisitions of security firms: the early evidence',Applied
Financial Economics, 14: 7, 485 496
Berg, S.A., and M. Kim (1994) 'Oligopolistic interdependence and the structure of production in banking: an empirical evaluation.' Journal of Money, Credit, and
Banking 26, 309-22
Berger, A.N., and L.J. Mester (1997) 'Inside the black box: what explains differences in
the efficiencies of financial institutions?' Journal of Banking and Finance 21, 895947
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Annexure
Figure 01: THEORETICAL FRAMEWORK:
Mergers &
Acquisitions
Financial
Performance
Profitabilit
Capital
Solvency
Independent Variables:
Financial Performance
Profitability
Capital Adequacy
Solvency
Dependent Variable:
Mergers & Acquisitions
Table-1: Profitability Ratios (Return on Assets & Return on Equity)

Banks
Habib Bank AG Zurich and
National Investment Bank And PICIC &
Metropolitan Bank Limited (HMB)
PICIC Commercial bank Limited
ROA %
Average
ROE %
ROA %
ROE %
Pre-
Post-
Pre-
Post-
Pre-
Post-
Pre-
Post-
Merger
Merger
Merger
Merger
Merger
Merger
Merger
Merger
1.29
1.74
20.21
22.94
0.97
-0.31
9.35
-1.71
2.04
1.85
30.55
23.09
0.43
-4.20
3.72
-19.59
1.84
1.30
25.46
16.24
0.30
0.36
2.76
1.70
1.72
1.63
25.41
20.75
0.57
(1.39)
5.28
(6.54)
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Table-2: Solvency Ratio (Total Liabilities to Total assets)

Banks
Total Liabilities to Total Assets
Total Liabilities to Total Assets
Pre-Merger
Pre-Merger
Average
Post-Merger
Post-Merger
93.72
92.18
91.77
79.29
92.97
91.79
86.85
77.81
92.69
92.11
90.69
80.05
93.13
92.02
89.76
79.05
Table-3: Capital Adequacy Ratios (shareholders equity to Total Assets and

Shareholders equity to Total customers deposits)
Banks
Shareholders
Shareholders
Shareholders
Shareholders
Equity/T.Assets
Equity/T. Deposits
Equity/T.Assets
Equity/T.Deposits
Pre-
Post-
Pre-
Post-
Pre-
Post-
Pre-
Post-
Merger
Merge
Merger
Merger
Merger
Merger
Merger
Merger
Average
6.28
7.82
8.77
11.16
8.24
20.72
12.80
21.94
7.03
8.21
9.86
11.68
13.16
22.19
18.67
37.96
7.31
7.89
10.6
13.15
9.32
19.95
14.15
44.22
6.87
7.98
9.75
12.00
10.24
20.95
15.21
34.71
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Table 4: t-statistical Analysis for HABIB AG Zurich Bank and Metropolitan Bank
Limited
Pre-Merger Post-Merger Paired t-test of HMB
Serial Ratios
PrePostMean
Standard tpNo.
Mean
Mean
Difference Deviation value value
01
02
03
04
05
Return on
assets
Return on
Equity
1.7233
1.63
.09333
.50203
.322
.778
25.406
7
20.756
7
4.65000
6.45157
1.248
.338
Shareholder
equity to
total
6.8733
assets
Shareholder
equity to
total
9.7433
customers
deposits
Total
liabilities
to total
assets
VOL 3, NO 1
Result
Insignifica
nt
Insignifica
nt
-1.10000
.48497
-3.929 .059
7.9733
Significant
-2.25333
.38371
-10.17 .010
11.996
7
Significant
1.10000
93.126
7
MAY 2011
.48497
92.026
7
3.929
.059
Significant
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Table 5: t-statistical Analysis for PICIC, PICIC Commercial Bank and NIB
Pre-Merger Post-Merger Paired t-test of NIB
Serial Ratios
PrePostMean
Standard tpNo.
Mean
Mean
Difference Deviation value value
MAY 2011
VOL 3, NO 1
Result
01
Return on
assets
.5667
-1.383
-1.95000
2.41572
1.398
.297
Insignificant
02
Return on
Equity
5.2767
-6.533
-11.81000
11.14394
1.836
.208
Insignificant
03
Shareholder 10.2400 20.9533

equity to
total
assets
10.7133
1.72651
-10.74
.009
significant
04
Shareholder 15.2067 34.7067 19.5000

equity to
total
customers
deposits
10.46658
-3.227
.084
significant
Total
liabilities
to total
assets
1.72139
10.786 .008
significant
05
89.7700 79.0500 -10.72000
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Relationship Between Population Changes And Poverty:
Evidence From Dera Ismail Khan Khyber
Pakhtunkhwa(Pakistan)
MAY 2011
VOL 3, NO 1
Muhammad Nadeem
Instructor Regional Institute of Teachers Education D.I.Khan.
Shehla Sheikh
Lecturer Institute of Education & Research Gomal University D.I.Khan
Allah Noor Khan
Asstt.Prof. Institute of Education & Research Gomal University D.I.Khan
Fehmida Bibi
Lecturer Institute of Education & Research Gomal University D.I.Khan
Abstract
In this research paper, it is presumed that population dynamics and growth are of the
major causes of distressing increasing poverty. We examined the scenario in Pakistan
where population has been growing unbridled alarming based on evidence from D.I.Khan
(KPK).We examined the hypotheses using Engels law of expenditure that poor family
devotes a major share of income to food consumption because keeping body and small
together is the raisin deters of their lives. We estimated two models, Model One regressed
food expenditure on per income. Model TWO shows the relationship between non food
expenditure and per capita income was determined. Model 1 shows a negative and
significant relationship between food consumption and per capita income. Implying
expenditure devoted to food declines as income rises. Model 2 shows the opposite and
significant relationship between non-food expenditure and per capita income. Both the
models support Engels law of expenditure that is an important determinant of economic
status of a family. In Pakistan cultural and religious factors subsumed in belief of birth
control practices are the most crucial determinants of population growth and many
studies have supported the same that family planning has not been a successful in
Pakistan.(Afzal 2009). The study recommends that population growth and dynamics are
mainly responsible for poverty increase
Key words: Population, Poverty, Food items, Non food items, Engels law,
1. Introduction
Since its founding Pakistan has exhibited a continuously high rate of population growth.
When measured by population size it has moved from the thirteenth largest country in
1950 to the seventh largest country in 1996. Toady Pakistan exhibits the highest rate of
growth among the worlds largest countries, and according to some projections will
become the third most populated country in the world by the year 2050 (United Nations
1998). Given the countrys present resources, this magnitude of population growth has
serious implication for the social and economic well-being of the people of Pakistan.
Population projection issued in 2000 reveals increase of population from 6.1 billion in
2000 to 7.9 billion in 2025 and 9.3 billion in 2050. The highest projection for 2025 is 8.4
billion and lowest is 7.5 billion. The average mortality rate will decline from 1990 level
of 26 per 1000 to 22 per 1000 at the closure of the century and 17.6 per 1000 in 2025.
The average of life expectancy is projected to rise from 65 years in 1990 to 349 million in
2025 and 420 million in 2050. After that the growth would halt and be virtually zero. The
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UN expectations for less developed countries are to have steadily falling rates of growth
rate in population from 1990, growth rate of 2% per year projected to be cut to half by
2025 (Microsoft Encarta 2009).
Population growth in Pakistan continued to rise since 1940s due to reduction in mortality
rate and persistent high birth rate. The population of the country was nearly 33 million in
1947 and it registered sharp increase to about 16 million to date. It is an over five times
increase since independence. Pakistan is at 6th position in the world and 3rd biggest
contributor to world population growth with a young age structure and the large number
of people, who are in the reproductive year. Pakistan has the potential to increase its
growth rate rapidly in the near future despite substantial fall in the fertility rate.
This high growth is responsible for the decline in social and economic progress of the
country during the past decades. The country is the ranked with the low income states
with per capita income of $ 460. Its literacy is about 39% out of which 50 percent are
male and 24 percent female in 1996-97. Child health and other social services are not up
to the mark. Only a few women have access to trained health worker during pregnancy
and child birth. Family planning services are restricted to only the quarter of the
population. Pakistans fertility rate is 5.4 which are considerably higher than any other
large Asian country poor progress in population planning programmer and in other social
sectors has pushed Pakistan for behind many Asian countries on the basic health and
education indicators. It is direly needed to improve population planning efforts and
reduce the fertility rate for curtailing population pressure on countrys physical and
capital resources
(Ali and Zahid 1998).
The greatest challenge confronting the world to day is of pervasive poverty. The start of
21st century witnessed one-fifth of humanity living much bellow the poverty line i-e $1 a
day. 2.7 billion People were maintaining their existence on less than $2 a day. This is
more than half of the developing world. Figure 63% of poverty world wide is the rural
one. More than 900 million people out of 1.2 billion live in rural areas, of which 90%
belong to Asia and pacific (World Bank 2004).The rural poor faced more problematic
situation in terms of personal consumption, education, health, drinking, water, transport,
housing, sanitation etc than those faced by urban poor (IFAD-2002).
Pakistan is confronting major issues of poverty and income disparity among the various
segments of society. Pakistan has scored high economic growth over the last three
decades accompanied with increasing poverty level as in 1960s. It has recorded low
economic growth while witnessing reduction in poverty level as 1970s. Similarly as in
1980s, period of high economic growth level led to decline in poverty, where as poverty
level, were observed increasing in 1990s with the period of low economic growth. During
1980s, the growth rate declined from 61% to 4.2% during 1990s (Amjad 2004).
Poverty cannot be defined in clear terms. Some people put the blame on inadequate
sources on the global level. Land, food and building materials are necessary for the
survival and prosperity of the people. Uneven distributions of these sources are the major
cause of poverty on the international and as well as regional level. It is due to this fact
that some people have much more then they need to live, while many others dont have
so much as to provide for their days two meals.
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Some causes are basic such as suggested by the experts that the world has too many
people, very few jobs and much less to feed on. These basic causes can not be uprooted
with ease. Causes and effects of poverty are inseparable. In most of the cases the primary
factors leading to poverty are (Microsoft Encarta 2009):
(1)
Population explosion.
(2)
Unequal distribution of resources.
(3)
Difficulty in maintenance of high standard.
(4)
Lack of education & dearth of employment opportunities
(5)
Environmental degradation
(6)
Certain economic and demographic trend.
Poverty is the outcome of the many factors of which the prominent is the lack of
education. Education makes a person soundly and with ease. Uneducated person mostly
remain unemployed, so mostly they suffer from poverty. Second cause is the feudalistic
system which is more effective in the rural areas. The feudal have their own vested
interest which urges policy makers keep the people poor and uneducated. The feudal
suffer from superiority complex and want to maintain their dominance. Poverty of the
general public and their lack of education help them.
Third cause of poverty is the high ratio of unemployment; Unemployment makes them
poor the most of the educated and uneducated are poor due to unemployment, the greater
ratio of unemployment greater would be the poverty. The greater would be the poverty.
Our educational system lays stress on the general education and not technical skill, hence
defective which leads to unemployment and indirectly to poverty. The people shirk
manual labor and hard work, which is another cause of unemployment, leads to poverty.
In Pakistan, the main source of income depends on the agriculture; the government is not
concentrating on industrial development. The industries are not being modernized and the
new industries are not being set up. This lack of industries is the major cause of
unemployment and hence the reason of poverty. The people are being deprived of the
source of living and bound to remain on either meager allowance of the government: or
on the charity of rich people. Due to lack of technical education and industrial
development, even the skillful experts and technical hands have not proper facilities and
opportunities to utilize and enhance their skills. Most of them are bound to perform
menial job or to roam unemployed. This factor also increases poverty.
Poor law and order situation prevailing in our country is equally responsible for sharp
increase in poverty. The people are hesitant to embark on the new enterprises and
inverters are reluctant to invest their capital in the country. The foreigners shy away from
the country which results in poverty. Most of the people face unemployment and hence
poverty due to lack of investment.
Poverty is due to lack of education. Pakistan being poor country can not afford too many
technical and professional colleges. There is dearth of school and colleges of
international or even regional standard. The universities are very few and are mostly
substandard. This paucity of sources of spreading education is spreading poverty in our
country.
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1.1 Significance of Study
Studies done on poverty in developing countries including Pakistan have tended to be

over-concerned in measuring and reporting the incidence and magnitude of poverty. With
few exceptions, majority of these studies has not examined the major causes and
workable remedy to alleviate poverty. Furthermore rapid and alarming population growth
has retarded economic development in Pakistan because resources instead of being
devoted to investment and output growth are devoured by the exploding population for
consumption that has made the country desperately dependent on foreign finance whose
negative impact on economic growth and development as well as political autonomy is
self-evident (Afzal 2009).
We examine this relationship in D.I.Khan (KPK, Pakistan) and use Engels law of
expenditure that posits that poor families devote major expenditure on food. This law has
been supported by numerous studies done on family budgets (Nicholson 1989).
Therefore, empirical results based on the said law and the data obtained from families in
D. I. Khan would provide an added measure of poverty and is expected to reveal a
positive relationship between poverty and population growth which is the major premise
of this study. Therefore this study has the following modest objectives:
1. To examinee the relationship between changes in population and poverty its in
Khyber Pakhtunkhwa (Pakistan) based on evidence from D.I.Khan
2. Use Engel's law of expenditure to provide another measure of the incidence of
Poverty.
Table 1
Year
Population
Growth
Rural %
Urban
1911
19.382
1.6
91.3
8.7
1921
21.109
0.9
90.3
9.7
1931
23.542
1.1
88.2
11.8
1951
33.74
1.8
82.2
17.8
1961
42.88
2.4
77.5
22.5
1972
65.309
3.7
74.6
25.4
1981
84.254
3.1
71.7
28.3
1992
115.54
2.6
79.60
35.79
2000
139.96
2.3
93.63
46.13
2004
152.53
101.5
52.41
Source: Afzal (2009b)
The table 1 shows that as on 2004, the total population of Pakistan was 15.25 corers, out
of which 10.15 corers lived in rural areas and 5.24 corer in urban areas .During 20002004, the net addition of population in rural areas was 7.87 lac while in urban areas, it
was 6.28 lac.
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Illiteracy and lack of education are common in poor countries governments of developing
counties often can not afford to provide good public schools, especially in rural areas.
With out education, most people can not find income generating work poor people also
often forego schooling in order to concentrate on making a minimal living. In addition,
developing countries tend to have few employment opportunities; especially for women
as a result, people may see little reason to go to school.
Poor nutrition and physical health problems are due to little income or few resources as a
result of poor nutrition and health problems. Infant mortality rate among the poor are
higher than average, and life expectancies are lower than average. Infectious disease,
mental illness and drug dependence show other effect of poverty. For instance, extended
hunger and lack of employment may lead to depression, which may some times
contribute to criminal behavior.
Nasim (1973) made an analysis of inequality prevalent in consumption of household and
population for the year 1963-64, 1966-67 and 1971-72 on the basis of HIES data. The
study proves that Gini-co-efficient of expenditure and income have marked an increase in
the inequalities for the year 1971-72. Naseems effort was the step in the right direction
but there are many discrepancies in the estimation procedure which made change but
trend of inequality in the country was that specific period. He estimated inequality at the
country level but his data does not represent all the provinces properly. He ignored all
other measure of inequality and dependent only on Gini co-efficient. Moreover the data
of those years was inconsistent.
Mahmood (1978) concentrated on the methodological issues involved in the estimation of

poverty and income inequities. Estimation of Gini-Co-efficient of income or expenditure
for household or population is meaningless because the share in total income or
expenditure of both arranged by per capita income could not be determined. His analysis
was a direct correlation between household income and size of the household that has an
inverse correlation between per capita income and size of household. He reached at
conclusion that Gini-co-efficient judged on the standard of household would be higher
than that estimated on the basis of population.
Kurck and Leewan (1985) examined the incidence of poverty and inequality in Pakistan
during the 1970s by using decomposition techniques. The study used the theil coefficient, the Gini co-efficient, the co-efficient of variation and standard deviation of logs
of income for the measurement of income inequality. Further, the theil co-efficient was
decomposed into various factors. The analysis showed that inequality had increased both
in Urban and in rural areas in Pakistan during 1969-70 and 1979 and that according to all
indicators, inequality had increased both in urban and in rural areas in Pakistan during
1969-70 and 1979 and that according to all indicators, inequality was higher in urban
areas than in rural areas. They concluded that poverty decreased by about 50 percent not
only the percentage of household below the poverty line decreased by 34 percent but also
the average income of remaining poor also went up. Surprisingly, decline in poverty in
this period was also accompanied with in income inequality. The study also observed that
those remittances transmitted migrant worker to their household have a profound impact
on income inequality because it was not spread evenly among household.
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Ahmed and Ludlow (1989) gave their own estimate of inequality for income and
expenditure for household using co-efficient of variation. Logarithmic variance, Gini-Coefficient, Atkinson indices and the Lorenz Curves for 1979 and 1984-85. The study
pointed out that only a little change in income and inequality has occurred during 1979
and 1984-85. The estimate of co-efficient of variation revealed in the presence of very
high income of rural areas of NWFP, Balochistan and Sindh provinces. The study
observed after examination, Atkinson indices that there was sharp increase in its values in
rural districts of Punjab over 1979 and 1984-85. These studies suggest a sharp difference
between the districts. this pattern support the idea that whether played an important role
in the determination of changes in inequality in the rain fed regions than in the irrigated
heat land of the Punjab.
Ali et.al (1965) used the non-food consumption approach to determine the incidence of
poverty, severity of poverty by using HIES data. It was observed that food consumption
share is generally found to be increasing function of real income.
Similarly other researchers used different methodologies for setting poverty threshold,
fixing poverty lines, national poverty line, relative, absolute poverty lines fixing poverty
band to measure the magnitude of poverty only.
However, this study concentrates on the relationship between population and poverty. I
have used primary date collected through a well designed questionnaire by taking the
sample size of 800 households. The data is based on different variable to calculate the
food and non-food expenditure and then finally developed the relation between
population growth and poverty by using the Engles law
2.1 Engels Law
Every human being needs to take minimum amount of food even if he/she has to live
below subsistence level. Food composition and intake by a person is also affected by
many other factors such a household size, people preference and tastes, mainly due to
difference in religion, seasons, location etc, however income plays major role in
determining the type and quantity of consuming food commodities. Generally for poor
persons expenditure on food requires a large share of income. For middle class and rich
people more money is spend on personal services and other non-food items. Engles law
states that the proportion of total expenditure devoted to food declines as income rises
suggesting that food is a necessity whose consumption rises less rapidly than does
income. This hypothesis has come to be known as Engels Law .This has been
supported by numerous studies not only within particular geographic area but also across
countries and continents. Cross country evidence shows that individual on average in
developing countries spend a large percentage of their income on food than do individual
in the industrial economics.
Indeed Engels law appear to be much a consistent empirical findings that some
economists have suggested that the proportion of income spent on food might be useful
indicator of poverty(Nicholson 1989).We therefore use Engels law as an indicator of
poverty. We can express it empirically as follows.
Let C be the total consumption or expenditure on food and non-food items, it is written as
(1)
C = C1 + C2
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Economic theory tells that consumption is a function of number of factors however

disposable income appears to be the principal factor affecting consumption pattern of
individuals and families. Food and non-food consumption function may be written
assuming linear relationship between consumption and income; we concentrate on
income, in order to apply Engels law, beside non availability of accurate date. Another
factors influencing consumption. Mathematically, we can write as
C1 = o+ 1y + 1
C2 = o+ 1y + 2
(2)
(3)
Where C1 is food consumption and C2 is non-food consumption, Y is income, 1 and 2

are error terms that satisfy the classical linear regression assumptions. The expected sign
of the income coefficient is negative based on the assumption that as income increases
the share of income devoted to food expenditure declines.
3. Results and Discussions
Based on the objectives of the study, we designed a Questionnaire given Primary data are
colleted through a well designed questionnaire by taking sample of size 600 households.
Different variables are used such as income per capita (Y) ,consumption on food items
(C1),consumption on non-food items (C2).Using these variables ,we develop the
relationship between population growth and poverty through Engels law of
expenditure.
Model 1 shows the relationship between food consumption and per capita income. In this
model, co-efficient of income per month has negative sign which reveals that
expenditure devoted to food declines as income rises.
3.1 Model I
C1=o+y+
C1=Expenditure on Food
Y= Income per month
= Error term
o, are the regression co-efficient
Variable
Coefficients
P-Value
(Constant)
1401.777
0.00
Income per month
-0.363
0.00
C1 = 1401.777 - 0.363Y
(0.000)
(0.000)
Note: figures in parentheses are P-values
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.Estimation results of model I show that the explanatory variable has the correct negative
and is significant. This equation shows the marginal propensity to income per month is
about -0.363, suggesting that expenditure devoted to food declines as income rises.
The intercept value of about 1401.777.It is often observed that intercept form may not
make much economic sense. Therefore in practice, intercept term may not be very
meaningful. Error term satisfies the classical regression assumptions.
Liner relationship in this situation is not exact because it is difficult or can not precisely
determine the food expenditure. The values of food expenditure are reasonably assumed
to include measurement of random error, therefore this model is called non-deterministic
or probabilistic model. While P-value show that it is highly significant, means that food
expenditure has great affect on income per month.
Model 2 tells the relationship between non-food expenditure and income per month. The
results of model 2 show the opposite and significant relationship between non-food
expenditure and per capita income.
C2 = + 1Y +
3.2 Model-II
Where
C2=Non Food Expenditure
Y= Income per month
= Error term
MODEL 2
C2 = +1 y +
Variable
coefficients
p-value
(Constant)
2934.993
0.014
Income per month
0.407
0.001
C2 = 2934.993 + 0.407y
(0.014)
(0.001)
figures in parentheses are P-values
We see that if income per month increases by 1 rupee, on average expenditure on nonfood items goes up by about 0.41.If total income is zero, the average expenditure on nonfood items would be about 2935 rupees. Such a mechanical interpretation of the intercept
may not be meaningful. There is no exact linear relation ship, because there are so many
factors which disturb the non-food expenditure, there fore it can not be measured
accurately which causes random error. P-values shows that it is highly significant, which
means that there is high impact of income per month on non-food expenditure
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4. Conclusion
Since independence, low mortality rate and consistently increasing birth rate have led to
population growth in Pakistan. Now Pakistan is at 6th position in the ranking of the most
populated countries of the world, while it is the 3rd biggest youth contributor in the world.
Most of people are in the reproductive years. (UNDP) (1991, 2000)
Number of factors is responsible for the population growth that geography, size, climate,
and colonial heritage make its intensity vary from country to country in the developing
world. The population growth rate is represented by the number of dependent children.
Marriageable adults and their educational level, cultural and religious factors can not be
ignored.
In this study we presumed that population growth and dynamics are mainly responsible
for poverty increase; particularly, we have examined it in the Pakistan scenario where
population growth is unbridled and poverty is plummeting alarmingly as is evident
population pressure in Dera Ismail Khan (KPK).
Engels law of expenditure is considered as a standard because it deals with the
proportion of income spent on food which is a useful poverty indicator. According to
this law expenditure on food declines with the rise in income.
Consumption is due to many factors of which disposable income is the principal one.
There is linear relationship between consumption and income depending on food and
non-food items. However our concentration is an income. Engels law maintains that
poor family consumes more income on the food items; there is always negative and
significant relationship between consumption and per capita income. It implies that
expenditure on food declines with income rise.
Significantly contrasting relationship between non-food expenditure and per capita
income are pointed out through the empirical results of model two. It shows per capita
income, educational level, number of
married people and beliefs in birth control
determine the population growth; other variables except income are negative sign. My
study pin point the factor that income co-efficient is negative ,its means that there are
several factors which affect the per capita income of an individual but income is the
primary one, which according to Engels law should spent on the food.
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References
Afzal, M (2009a), Population Growth and Economic Development in Pakistan, Open
Demography journal, 2, 1-7.
Afzal (2009b) Population Dynamics and Poverty Scenario in Pakistan challenges ahead,
paper submitted to journal of social science, Pakistan
Ahmad Ethisam and Stephan Ludlow (1984), poverty, inequality and Growth in Pakistan,
The Pakistan Development Review, 28(4), 831-856.
Amjad, R, and M.Irfan (2004), Poverty in Rural Pakistan. Impact of Return Migration on
Domestic Employment in Pak.
Ali, Salman Syed and s. Zahid (1998), Dynamics of Growth, Poverty and inequality in
Pakistan, the Pakistan Development Review, 34(4), 837-858.
IFAD (2002), Statistical inference and decomposable poverty measures Bulletin of
Economic Research, 47 (4): 329 340.
Kruijk . Han de and Myrena Leeuwan (1985), Changes in Poverty and Income Inequality
In Pakistan during the 1970s, The Pakistan Development Review, 24(3 ) 407-419
Microsoft Encarta program (2009).
Naseem, S. M (1973) Underdevelopment, Poverty and Inequality in Pakistan Islamabad:
Nicholson, Walter (1989) ; Microeconomic theory. Basic principles and extension, the
Dryden press
Retrieved from http://www.creativechange.com/ dated April,2009...
Shaikh and Tallat Mehmood (1991), Food poverty and its Causes in Pakistan, the
Pakistan Development Review, 30(4), 821-834Development Report.
United Nation Development Program (UNDP) (1998) Human Development Report.
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DOES LEARNING OF SCIENCE EDUCATION AT SCHOOL LEVEL

MATTERS?
Dr. Saeed-ul-Hasan Chishti
Assistant Professor
International Islamic University, Islamabad (Pakistan)
Shaheen Ashraf Tahirkheli
Research Associate, Faculty of Education
Allama Iqbal Open University, Islamabad (Pakistan)
Ijaz Mehmood
Lecturer (Education)
Islamia University, Bahawal Pur (Bahawa Nagar Campus)
Shahinshah Babar Khan
Pakistan Atomic Energy Commission Model College, Islamabad (Pakistan)
Abstract
In Pakistan, secondary level is the terminal stage for majority of the students. It is
considered that science education at secondary level is more important for students.
Parents think that there are more job opportunities for those students who have passed
matriculation with science group. The present study tries to find out the importance of
learning science education at secondary level. The sample for the study was the
secondary teachers who are teaching science subjects. A questionnaire was developed on
five point likert scale and each statement was checked by using chi-square. It is found
that science education is more appropriate for the present technological era. Science
education helps in understanding the relationship between common occurrences and rules
behind them.
Keywords: LEARNING , SCIENCE EDUCATION , SCHOOL LEVEL
Introduction
Science has changed the face of the world. The things which were unbelievable in the
past are occurring now. When science started its blooming, people were stunned about its
inventions, and even for a long time they deny the miracles of science. Science proved
its worth in a systemic way and provides answers with logics. Presently, Science brings
the whole world on the palm and can take a man from one corner of the world to the
other corner of the world. It is science that changed old beliefs of life which were
considered as pillars and people follow them blindly. Science differentiates between right
and wrong and provides such tools that are helping mankind in judging each and every
aspect of life and in making decisions on the acquired results.
With a single click, one can search anything from any corner of the world. Now a day,
from a high qualified person to a lay man, all depends on inventions of science with a
belief that these machines will help them in making right decisions. In Pakistan, at
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secondary level, two major streams named humanities group and science group are
offered and majority of the students want to join science group. All most all schools try to
draw some criteria for science group so that only those students may join science group
who have ability and aptitude to science subjects.
Parents also believe that learning of science education helps in understanding the real
life problems and provide solutions to these problems. In Pakistan, due to different
reasons, majority of the students left education after secondary level and join practical
fields to be an earning hand for family.
Trend towards science education is increasing day by day. Peoples believe that only
science education can secure the future of their young children. In Pakistan, it is also a
misconception that a science student even with low marks is better than a student of
humanities. Parents feel that there are more job opportunities for science students and
science education works as a key to open the window to jobs. Rehman and Choudhary
(1998, p. 296) believe that a career in science provides an opportunity of experiencing all
the excitement which is inherent in trying to extend the frontiers of knowledge.
Literature Review
European Commission (2007) defined Science as:
Science, in the broadest sense, refers to any system of knowledge which attempts
to model objective reality. In a more restricted sense, science refers to a system of
acquiring knowledge based on the scientific method, as well as to the organized
body of knowledge gained through such research. In the context of this report the
choice was made to use the word science to refer more precisely to all of
physical sciences, life sciences, computer science and technology, and for the
purposes of this report includes mathematics subjects that are commonly taught
at primary and secondary schools in most European countries. (p. 6)
One can see the miracles of science everywhere in the world. Science is providing
services in all fields of life. To what extent learning of science at school level is
important? Should all the students must learn science at school level? It is very important
question. Obviously, the answer will be no because other subjects are important too.
The Association of Science Education (n. d) claims that
Science is unique among school subjects in that its curriculum aims to create
future scientists rather than the future citizen. This produces a foundation
curriculum whose coherence only becomes clear for those who stay the distance
and with it the value and meaning of the subject. (p. 7)
For a balance society, where doctors, engineers and scientists are at heart of the society,
social scientists have their own role in the society. National Educational policy (1992, p.
39) describes that science and technology are not value neutral. In fact, science and
technology serve to bring about changes in institutions, and individuals life styles; they
generate strains for our values and belief systems.
In Pakistan, the participation rate at secondary level is 31 %, out of 31 %, only 30-40 %
complete this level education (National Education Policy 1998-2010), these figures show
that for majority of the students, this stage is the terminal stage. National Education
policy (2009) narrates that:
Secondary and higher secondary school system prepares young people for life. It
has two important roles in this respect-providing skills to the labour market, as
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many students leave formal schooling at this time and providing input to the
tertiary system, for those who go on to this level of leaning. (p. 37)
National Education policy (2009) criticizes the present educational system and
documented that the system does not provide an adequate base for both these functions.
At secondary level, students are offered two streams of subjects named science group and
humanities. For each group, there are some specific subjects which are taught, there is no
option for students to choose subject of their own choice.
National Education Policy (1998-2010, p. 42) states that the scheme of studies at the
Secondary School Certificate (SSC)/ Higher Secondary School Certificate (HSSC) level
will be replaced by a flexible system where a student would be free to choose any subject
from a comprehensive list of subjects required. Isani and Virk (2005, p.180) highlighted
that the problem with pre university education system in Pakistan is that it leads to very
early specialization from Grade 8 onward and segregates the students into Arts and
Science groups.
After passing Grade 8, students found themselves at a cross road. There are two options
for them, Humanities group or Science Group. Majority of the Parents have urged that
their child must join science group with thinking that there are more opportunities with
science. Some people believe that this is the technological era so only science is the key
to success. There are many technical positions which need basic knowledge of science
subjects. Rehman and Choudhary (1998, p.296) documented that it is necessary to
introduce demanding entrance examinations which test the intelligence, aptitude and
ability of the prospective candidates before admission into scientific fields is allowed.
The objectives of the study were to find:
The reasons for opting science education at secondary level.
The importance of learning science at secondary level.
Research Questions
The present study addresses the following two questions.
Is Science Education more appropriate and for the needs of the present time?
Is Science Education more job oriented?
Is Science Education helps at work places?
Method
Sample
The sample for the study was 125 secondary teachers (50 % male and 50 % female) from
Bahawal Pur and Rawal Pindi Divisions, who are teaching science, subjects
(Mathematics, Physics, Chemistry and Biology) to secondary classes. The reason for
selecting these divisions was that two of the researchers were from Bahawal Pur Division
and two researchers were from Rawal Pindi Division. Convenient sample technique was
used for selecting sample for the study.
Instrument
A questionnaire consisting 10 items, was developed on five point likert scale (Strongly
Agree= SA, Agree= A, Uncertain= UNC, Disagree= DA, Strongly Disagree= SDA), for
knowing the opinion of science teachers about importance of science education at school
level. The researchers personally delivered the questionnaire to the sample teachers. Out
of 125 sample teachers, 98 questionnaires were returned. The response rate was 78 %.
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Chi-square technique was used for calculating the trend of the respondents towards
agreement or disagreement.
Results
Each statement of the questionnaire was checked by applying 2 technique.

Sr #
Statement
Science Education develops the

habits of logical thinking.
Science Education is more
appropriate in the present
technological era.
Science Education prepares
students
for
working
in
challenging environments.
Science Education at secondary
level is helpful for further
learning.
Science Education prepares
students
for
seeing
the
relationship between common
occurrences
and
underlying
reasons.
Science
Education
raises
students
understanding
of
universal laws and patterns in
them.
Science Education produces
constructivism-inquiry approach
among the students.
Science Education produces
constructivism-inquiry approach
among the students.
Science Education answers to
problems systematically and
helps in decisions making.
2
3
4
5
7
8
9
10
SA
UNC
23
70
179.45
41
32
15
54.14
22
65
145.27
19
55
12
85.88
25
69
177.10
25
37
19
12
30.78
27
49
15
74.45
12
62
16
120.57
74
10
191.08
109.04
Science Education offers more 24

58 9
job opportunities.
df=4
table value of 2 = 9.488
DA
SDA
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Discussion
The respondents of the study agreed that science education develops the habit of logical
thinking among the students. When students learn science, its laws and principles, they
want to see its application in the real life. For this, students think how these laws work?
The present age is known as technological age and for better survival in the present age it
is necessary one must have such skills which are need of the time. The respondents
confirm that science education is more appropriate in the present technological era, which
prepare the students for working in the challenging environment. Secondary level
education provides base foundation for the further learning. This is the stage that prepares
the students for higher level learning. The respondents verify that Science Education
prepares students for seeing the relationship between common occurrences and
underlying reasons and science education enable the students to learn the patterns of
different phenomenon. It is science education that inculcates the habit of inquiry among
the students and the helps them in understanding the real life problems and solving these
problems. The respondents agreed that learning of science education offers more job
opportunities.
Findings
Science education develops the habit of logical thinking among the students.
Science education is more suitable for the present era and prepares the students
for working in the challenging environment.
Science Education helps for seeing the relationship between common occurrences
and underlying reasons.
Science Education produces constructivism-inquiry approach among the students
and helps them in solving real life problems.
Learning of Science Education offers more job opportunities in different fields.
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References
The Association of Science Education (n.d). Science Education in Schools: Issues,
evidence and proposals. London: Economic and Social Research Council.
European Commission (2007). Science Education now: A renewed Pedagogy for the
future of Europe. Brussels: Directorate-General for Research.
Government of Pakistan (1992). National Educational policy (1992). Islamabad: Ministry
of Education.
Government of Pakistan (2009). National Education policy (2009). Islamabad: Ministry
of Education.
Rehman , A & Choudhary, I (1998). Scientific Education and Research. In Hoodbhoy, P
(Eds.)
Education and the State: Fifty Years of Pakistan. Karachi: Oxford University Press
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CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN

Shahid Jan
PhD Scholar, Qurtuba University of Science and IT, Peshawar
Qadar Bakhsh Baloch
Assistant Professor, Islamia College University, Peshawar
Abstract
Corporate Social Responsibility (CSR) has become a buzz word that fundamentally
represents a philosophy about the relationship of business and society over time. The
roots of the contemporary idea of corporate social responsibility can be traced back to the
charity principle and stewardship principle. The charity principle requires that have
nots shall be assisted by the have directly or indirectly by the churches and community
social groups. On the other hand, the stewardship principle asks businesses to act as
steward or caretakers of the society. The concept, today, encompasses a wide range of
CSR initiatives including moral and ethical concerns, good governance, socially
responsible investments and inventions, ensuring well being of the society including
environment, care and respect for human rights and affirmative action to law so as to
legitimize their work processes.
Keywords: Corporate Social Responsibility , Pakistan
Introduction
The underlying rational behind the concept of CSR is that, since the business rely on the
society to operate and could not exist or prosper in isolation therefore in recognition of
dependence the business is obliged for rendering mutual benefits to the community as
well. CSR is a value added decision making process of identifying and meeting the needs
and welfare based obligations of the internal and external (direct& indirect) stake holders.
This decision making process of the firm includes not only legal, or economic, social,
ethical, or environmental concerns but also socio-moral concerns of all the stakeholders
and the society on which they are inter dependent. In other words CSR is much more
holistic (but discretionary) perspective that enhances corporate success of the business.
Since the approach is discretionary or voluntary engagement, therefore its companys
choice to select the scope or areas of activities to be included in its CSR strategies and its
obligations towards its stake holders are mostly as follows:
Respecting, conforming and promoting Socio-Cultural norms,

and values
Preservation and protection of socio- geographic environment of
the society around which the business operates.
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Protracted and sustainable use of resources without disturbing the

natural environmental ecology
Good governance and transparency in managerial practices
cements and maintains mutual trust and confidence amongst
managers, other stakeholders and general public.
Ethic driven business practices and cause-related marketing
Sharing government responsibility of people welfare with
community centered policies/ activities.
A glance over the performance of few of the companies operationally
endowed with the policies of CSR reveals that they have not only
improved their stakeholder relationship and investors confidence rather, it
has earned employees loyalties thereby improving internal coordination,
cutting operating costs, and improving compliance. Ensuing debate and
discussion in view one can say that the concept of CSR has acquired such
significance that today it is strategically driven, operationally designed and
tactically practiced in global business environment. The definition of CSR
has been changing with the changing socio- business operating
environment:
According to Bradshaw(1981) fundamental task of any corporate
management is to ensure that the firm holds ability and capacity to
satisfy customers needs by maintaining continuous supply of
quality goods lowest possible cost. And this is only possible
through efficient and sustainable use of resources.
The business concept shall have an overall socially responsible
conduct and contribute positively towards the well being of the
society it traverses.
Incorporation and integration of socio-environmental concerns in
to their commercial undertakings with the aim of strengthening
better relationship with different stakeholders of the business
concern.109
According to Kilcullen & Kolstra (1999) CSR represents a state of
corporate behavior that is influenced by ethical and moral concerns
beyond affirmative action.
According to Lord Holme CSR is the behavioral response of any
business that also besides the attainment of its economic goals also
contribute towards improvement the quality of life at the
workplace, benefits local communities and the society in its totality
(Kazim, 2010).
109
Definition by the European Commission
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Building upon the ensuing debate and discussion on the parameters of CSR the
research offers a new definition that encompasses all aspects referred so far:
The concept of CSR entails unilaterally and voluntarily adoption of socioenvironmental policies of good governance that accommodate sociomoral and ethical concerns.
Ansoff Igor (1979) explored the role of strategic management of complex organizations
in turbulent environment. His strategic paradigm proposed that financial performance of
a firm is optimized when the aggressiveness and management responsiveness of the firm
both match the turbulence in the firms environment (Ansoff 1979). He identified
different environment in which a firm operates in to five distinct turbulence level from
one extreme of total stability to the other rapidly changing. In other words Ansoff
describes a formula for strategic success that aligning of strategic behavior with the
firms environment optimizes firms profitability.
The work of Ansoff was further expanded by R Freeman (1984) in his ground breaking
work Strategic management: A stakeholder approach that established relationship
between the business and society. The Freeman theory stressess upon the ethics and
moral values in managing any organization and lists down a set of social responsibilities
for a business to succeed.
Freeman (2004) contends that managers to be clear about how they want to do business,
and the relationships with their stakeholders.
Freeman et al (2004) in stakeholders theory: the corporate objective revisited gives
following arguments in explaining primacy of creating and maximizing value for
stakeholders suggest:
Pro-stakeholder objective i.e. maximizing of profit.
Maximizing of profit shall deliver incentives for managers as well to reinforce
their behavior in future.
Limited number of objectives
Stakeholders shall have guaranteed legal and contractual arrangements to seek
protection in case of breach of trust or violation of instrument of cooperation.
Over the years there has been increasing interests amongst the businesses on the
concept of CSR on the ground that businesses are part of society and they have
obligations towards its welfare and wellbeing as they survive because of it
((Jones, 1980; Kok et. al, 2001)
Purpose of Research:
Foregoing background in view there is a dire need to
undertake a research investigation to unearth CSR practices of the pharmaceutical
industry in Pakistan with a view to formulate a proper response that is fully socially
driven and leading to the ultimate well being of the society. The research also intends to
recommend Pakistan based pharmaceutical industry a socially driven response that would
certainly help to acquire competitive edge over its competitors.
Statement of the Research Problem
The research study aimed at exploring and describing the level of knowledge, degree of
attitude and practices with regards to corporate social responsibilities and ethics being
practiced by the pharmaceutical industry in Pakistan.
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Methodology
Two functional managers from each firm were administered with questionnaire. Hence
the totals of 48 strategic managers, conveniently sampled out of the 24 sampled firms
were the respondents for this questionnaire. Keeping in view of the more relevance of the
queries of the CSR questionnaire, these functional managers included Human Resource
Managers and the Marketing managers.
The Population & the Sample Frame
2 x Strategic 24
Managers of
sampled firms
48
strategic
managers
48 strategic managers were

Simple
random and served
convenience
method
Questionnaire sought response on the following areas:

9 Does the organization vision and mission call for the firms obligation for
adherence of the corporate social responsibility?
9 Is there any ethical code exists that ensures equality at work place, and
non-discrimination of stakeholders including medical representatives?
9 Does the organization business/ corporate policies meets obligations of
social responsibility?
9 Does the firm keep some portion of the budget reserve for the research of
neglected disease such as; TB, malaria etc.
9 Does the organization reports social responsibility related contributions
and achievements or otherwise?
9 Does the organization structure cater for the performance of its social
responsibility related component of its business strategy?
9 Frequency and effectiveness of the clinical trials conducted and their
relevance to the national/ international quality /& safety standards.
9 Effect of production and marketing activities over communitys sociocultural environment and protection of natural environmental settings.
Findings
Nature of Respondent: Strategic managers
No of Respondents: 48
Response Received: 38
Response Rate:
79.1
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ORGANIZATIONAL MISSION: State of the organizations vision and/ mission

statements that stress for the adherence of the principles of corporate social responsibility
or otherwise:
Observed N
Yes
No
Total
30
Expected N
19.0
Residual
11.0
19.0
-11.0
38
40
30
20
Yes
10
No
Total
-10
-20
Observed Expected Residual
N
N
Test Statistics
Chi-Square(a)
df
Asymp. Sig.
12.737
1
.000
0 Cells (.0%) have expected frequencies less than 5. The minimum expected cell
frequency is 19.
Existence of Ethics/ Moral Code: Does any ethical/ moral code exist in your company
that ensures equality of employees at work place and calls for non-discriminatory work
place?
Observed N
Yes
No
Total
36
Expected N
19.0
Residual
17.0
19.0
-17.0
38
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50%
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2
19
-17
19
17
No
36
0%
Observed N
Expected N
Yes
Residual
Test Statistics
Chi-Square(a)
df
Asymp. Sig.
30.421
1
.000
a 0 cells (.0%) have expected frequencies less than 5. The minimum expected cell
frequency is 19.
ORGANIZATIONAL BUSINESS POLICIES:
Do the organizational corporate planning / strategies cater for meeting the
obligations of corporate social responsibility?
Observed N
Yes
No
Total
30
Expected N
19.0
Residual
11.0
19.0
-11.0
38
No
Residual
Yes
-10
Yes
No
Observed N
-20
No
No
Yes
Expected N
Yes
0
10
20
30
40
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Test Statistics
Chi-Square(a)
df
Asymp. Sig.
12.737
1
.000
0 cells (.0%) have expected frequencies less than 5. The minimum expected cell
frequency is 19.
Does the company have a code of conduct for the procedures of the medical
representatives visiting doctors?
Observed N
Yes
No
Total
37
Expected N
19.0
Residual
18.0
19.0
-18.0
38
100
Res idual
50
0
Yes
Expected N
Obs erved N
No
Total
Test Statistics
34.105
Chi-Square(a)
1
df
.000
Asymp. Sig.
frequency is 19.
Does the organization report on its contributions/ adherence of corporate social

responsibility?
Observed N
Yes
No
Total
29
Expected N
19.0
Residual
10.0
19.0
-10.0
38
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40
20
0
-20
Observ Expecte Residua
Yes
29
19
10
No
19
-10
Total
38
Test Statistics
10.526
Chi-Square(a)
1
df
.001
Asymp. Sig.
frequency is 19.
Organization Structure
Does the organization have a corporate social responsibility structure?
Observed N
Yes
No
Total
17
Expected N
19.0
Residual
-2.0
21
19.0
2.0
38
100%
38
50%
21
17
0%
Observed N
0
19
19
-2
Total
No
Yes
Expected N
Residual
Test Statistics
.421
Chi-Square(a)
1
df
.516
Asymp. Sig.
frequency is 19.
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Is the corporate social responsibility structure in line with the organizations vision
or mission statement?
Observed N
Yes
No
Total
13
Expected N
19.0
Residual
-6.0
25
19.0
6.0
38
40
30
20
Yes
No
10
Total
0
-10
Observed N Expected N
Residual
Test Statistics
3.789
Chi-Square(a)
1
df
.052
Asymp. Sig.
frequency is 19.
Is the structure well placed/ established and functioning?

Observed N
Yes
No
Total
13
Expected N
19.0
Residual
-6.0
25
19.0
6.0
38
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0
Residual
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-6
0
Total
19
19
Expected N
No
38
Observed N
-10
13
0
10
20
Yes
25
30
40
Test Statistics
Chi-Square(a)
df
Asymp. Sig.
3.789
1
.052
frequency is 19.
Does the structure provide inbuilt review system to ensure continuity of its
effectiveness?
Observed N
Yes
No
Total
21
Expected N
19.0
Residual
2.0
17
19.0
-2.0
38
40
35
30
25
20
15
10
5
0
38
17
19
No
Yes
Total
21
Observed N
19
0
0
-2
2
Expected N
Residual
Test Statistics
Chi-Square(a)
df
Asymp. Sig.
.421
1
.516
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frequency is 19.
Did your company contact/ coordinate organizations representing marginalized/
disadvantageous groups while establishing your companys corporate social
responsibility?
Observed N
Yes
No
Total
25
Expected N
19.0
Residual
6.0
13
19.0
-6.0
38
40
30
20
Observed N
Expected N
10
Residual
0
-10
Yes
No
Total
Test Statistics
3.789
Chi-Square(a)
1
df
.052
Asymp. Sig.
frequency is 19.
Action plans and procedure:

Does the organizations annual action plan creating a corporate social responsibility
structure?
Observed N
Yes
No
Total
18
Expected N
19.0
Residual
-1.0
20
19.0
1.0
38
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40
35
30
25
20
15
10
5
0
-5
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38
18
20
Yes
19 19
No
Total
1
0
Observed N
Expected N
-1
Residual
Test Statistics
Chi-Square(a)
df
Asymp. Sig.
.105
1
.746
frequency is 19.
Do the function departments of the company also set their CSR targets with
reference to strategic plan?
Observed N
Yes
No
Dont Know
Total
20
Expected N
12.7
Residual
7.3
14
12.7
1.3
12.7
-8.7
38
40
7.3
30
12.7
20
10
20
1.3
12.7
14
Residual
12.7
4
-8.7
Expected N
Observed N
-10
Yes
No
Dont
Know
Test Statistics
Chi-Square(a)
df
Asymp. Sig.
10.316
2
.006
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frequency is 12.7.
How does the department monitor their performance against these targets?
Observed N
Quarterly review
Annual review
Dont Know
Total
12
Expected N
12.7
Residual
16
12.7
3.3
10
12.7
-2.7
-.7
38
20
15
10
Quarterly review
Annual review
Dont Know
-5
N
N
Test Statistics
Chi-Square(a)
df
Asymp. Sig.
frequency is 12.7.
1.474
2
.479
Does organization assign specific office / responsibility to plan, implement, monitor

and report actions on corporate social responsibility steps?
Observed N
Yes
No
Total
26
Expected N
19.0
Residual
7.0
12
19.0
-7.0
38
100
50
Total
0
No
Obser Expec
Resid
Total
38
No
12
19
-7
Yes
26
19
Yes
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Test Statistics
Chi-Square(a)
df
Asymp. Sig.
frequency is 19.
5.158
1
.023
Is there a proper training system in place in organization to train the management

and employees on corporate social responsibility issues?
Observed N
Yes
No
Dont Know
Total
24
Expected N
12.7
Residual
11.3
10
12.7
-2.7
12.7
-8.7
38
Dont
Know
Observed N
No
Expected N
Residual
Yes
-20
20
40
60
Test Statistics
16.632
Chi-Square(a)
2
df
.000
Asymp. Sig.
frequency is 12.7.
Does your company comply with the quota legislation for the enrolment of disabled
peoples?
Observed N
Yes
No
Dont Know
Total
28
Expected N
12.7
Residual
15.3
12.7
-5.7
12.7
-9.7
38
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100%
50%
3
7
VOL 3, NO 1
12.7
12.7
28
12.7
15.3
Expected N
-5.7
Residual
-9.7
0%
Observed N
-50%
-100%
Yes
No
Dont Know
Test Statistics
28.474
Chi-Square(a)
2
df
.000
Asymp. Sig.
frequency is 12.7.
Does your company comply with the quota legislation for the enrolment of local
peoples?
Observed N
Yes
No
Dont Know
Total
30
Expected N
12.7
Residual
17.3
12.7
-6.7
12.7
-10.7
38
30
20
10
Yes
No
Dont Know
-10
-20
N
N
Test Statistics
36.211
Chi-Square(a)
2
df
.000
Asymp. Sig.
frequency is 12.7.
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Does your company comply with the quota legislation for the enrolment of female?
Observed N
Expected N
Residual
Yes
30
19.0
11.0
No
8
19.0
-11.0
Total
38
40
30
20
Yes
10
No
Total
-10
-20
Observed N Expected N
Residual
Test Statistics
12.737
Chi-Square(a)
1
df
.000
Asymp. Sig.
frequency is 19.
Does your company have proper monitoring and evaluation system to forestall any
violation or discrimination at work?
Observed N
Yes
No
Total
28
Expected N
19.0
Residual
9.0
10
19.0
-9.0
38
40
20
Yes
No
-20
ObservedExpected NResidual
N
Total
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Test Statistics
Chi-Square(a)
df
Asymp. Sig.
frequency is 19.
8.526
1
.004
Does your company, while choosing suppliers and distributor, favours those who
comply with affirmative action in managing diversity/ disadvantageous groups?
Observed N
Yes
No
Total
31
Expected N
19.0
Residual
12.0
19.0
-12.0
38
100
Total
No
50
Yes
0
Observed N
Expected N
Residual
Test Statistics
Chi-Square(a)
df
Asymp. Sig.
15.158
1
.000
frequency is 19.
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Clinical Trials of New Medicines

Do you keep public inform about the all successful and unsuccessful clinical trials of
your company products?
Observed N
Yes
No
Dont know
Total
33
Expected N
12.7
Residual
20.3
12.7
-9.7
12.7
-10.7
38
40
30
20
Yes
10
No
Dont know
-10
-20
N
N
Test Statistics
49.000
Chi-Square(a)
2
df
.000
Asymp. Sig.
frequency is 12.7.
Do the clinical trials of your company conform to the national/ international

standards laid down in this regard?
Observed N
Yes
No
Dont know
Total
33
Expected N
12.7
Residual
20.3
12.7
-9.7
12.7
-10.7
38
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40
30
20
Yes
10
No
Dont know
-10
-20
N
N
Test Statistics
49.000
Chi-Square(a)
2
df
.000
Asymp. Sig.
frequency is 12.7.
Does your company publish post trial or post marketing research publicly?
Observed N
Yes
No
Total
26
Expected N
19.0
Residual
7.0
12
19.0
-7.0
38
Residual
Yes
Expected N
No
Total
Observed N
-50
50
100
Test Statistics
Chi-Square(a)
df
Asymp. Sig.
frequency is 19.
5.158
1
.023
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Do you prefer to test your medicine only in areas where these medicines have their
potential use?
Observed N
Yes
No
Total
21
Expected N
19.0
Residual
2.0
17
19.0
-2.0
38
40
35
30
25
20
15
10
5
0
38
17
19
No
Yes
Total
21
Observed N
19
0
0
-2
2
Expected N
Residual
Test Statistics
.421
Chi-Square(a)
1
df
.516
Asymp. Sig.
frequency is 19.
Is your firm member of Global Compact?

Observed N
Yes
No
Total
13
Expected N
19.0
Residual
-6.0
25
19.0
6.0
38
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0
Residual
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-6
0
Total
19
19
Expected N
No
38
Observed N
-10
13
0
10
20
Yes
25
30
40
Test Statistics
Chi-Square(a)
df
Asymp. Sig.
3.789
1
.052
frequency is 19.
Conclusion
Findings related to the strategic dimensions of the CSR practices are derived from the
responses obtained from the strategic managers of the pharmaceuticals firms operating in
NWFP. The sample was comprised of total of 24 firms which included nine
multinationals and 15 national/ local firms. In each firm two strategic managers were
asked to response the questionnaire; however 38 out of 48 strategic managers responded
to our questionnaire thus making it 79.1 % in total.
79% of the respondents claimed that their firms hold mission or vision which
takes care of some sort CSR in some form or the other. However, these firms
having positive response include 100 % multi nationals and only 40% national/
local firms. Therefore, it was found that CSR does not carry significant
importance amongst local firms in comparison to multinational pharmaceutical
firms.
94.7% pharmacuitical companies in NWFP hold ethical/ or moral code in their
standard operating procedures to ensure non-discriminatory practices and equality
of employees at work place. However, the 6.6% local firms accepted that their
strategic planning process do not give any added value to ensure equality at work
place.
The analyses of the management response and contents analyses of the firms
annual reports (available) reflected that around 21% pharmaceuticals firms are the
signatories of United Nations Global Compact. And these all signatories are from
multinationals and none from local firms. The results of the analyses points
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towards mismatch between firms mission/vision and strategic orientation on the

paper and their practical approach. The state is alarming indicator towards state of
CSR in Pakistan.
79% of the respondents claimed that their firms organizational corporate planning
/ strategies cater for the adherence of CSR obligations in some form or the other.
However, the these firms having positive response include 100 % multi nationals
and only 40% national/ local firms. Therefore, it was found that CSR does not
carry significant importance amongst local firms in comparison to multinational
pharmaceutical firms.
The research finds mismatch between the strategic planning / policies orientation
and the organizational structure because:
79% of the respondents (none amongst the local firms) claim that their firms
organizational corporate planning / strategies cater for the adherence of CSR
obligations in some form or the other. 98% companies have a code of conduct
outlining procedures of their medical representatives visiting doctors for the
promotion of drugs. Only 76% organizations report on their CSR
contributions.
Whereas, only 44% organizations have a corporate social responsibility
structure to plan, coordinate, execute or report their CSR strategies. And 34%
firms claim that their CSR structure in line with their organizations vision or
mission statements whereas 64% confess that dont have any proper CSR
structure that could help translate CSR strategic orientation. 44% of the firms
dont have any inbuilt review system to ensure continuity of their CSR related
practices. The worst state of CSR can be interpreted from the fact that over
34% firms do not have any liaison with the organizations representing
marginalized/ disadvantageous groups and 19% even opely defy complying
with the government quota legislations for the enrolment of disabled peoples.
The research while analysing the corrosponding procedures and plans of the
respondent pharmacueticals firms finds that:
53 % organizations annual action plan were missing any CSR structure and
only 47% have mention of any form of CSR activity(s) in their annual plans.
The situation was found further worsened as the reserch dug in to functional
level. It was found that only 52% function departments of the companies
(having CSR at strategic orientation) set their CSR targets with reference to
strategic plan and 26% departments even dont monitor their performance
against their assigned CSR related targets. Around 32% firms do not have any
specific office / responsible to plan, implement, monitor and report actions on
corporate social responsibility steps and over 26% organization even dont
have any proper training system in place to train the management and
employees on CSR related issues.
Only 79% firms comply with the quota legislation for the enrolment of local
peoples and females. Whereas, 19% of the firms openly defy complying with
the government quota legislations even for the enrolment of disabled peoples.
In contrast to their comliance, 81.5% companies claim that while choosing
suppliers and distributors of their products they favours only those who
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comply with affirmative action in managing diversity/ disadvantageous

groups. Over 26% companies even dont have any proper monitoring and
evaluation system to forestall any violation or discrimination at work.
The research, while conducting the audit of firms standard operating
procedures followed during the clinical trials of new medicines, finds that:
86.8% respondents claim that their firms keep the public informed about the
all successful and unsuccessful clinical trials of their companys products.
Whereas, 8% perceive that their firms dont keep the public informed about
the results of their clinical trials and 5 % were having no knowledge about
such practices. The same pattern of response was found about the companys
compliance to the national/ international standards laid down for the clinical
trials.
Though over 8.6 % firms claimed that they keep the public informed about the
results of their clinical trial conducted but, only 68 % companies publish their
post trial or post marketing research publicly. And 38% do not.
55% companies prefer to test their medicines only in the areas where these
medicines have their potential use whereas, 45% firms have no such
consideration and test their medicine having no regards to any specific area or
their potential use.
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References
Ansoff (1979), Strategic Management, London, Macmillan

Bradshaw Thornton and DavidVogal, (1981), Corporations and their Critics: Issues and
answers to the problems of corporate social responsibility, New York, McGraw Hill
Book Company
Freeman, Wicks, and Parmar, (2004) Stakeholder Theory and The Corporate Objective
Revisited Organization Science, Vol.15(3), pp. 364369,
Freeman, R. E., R. Phillips (2002). Stakeholder theory: A libertarian defense. Business
Ethics Quarterly, Vol.12(3) 331350.
Freeman, R. E., R. Phillips. 2002. Stakeholder theory: A libertarian defense. Business
Ethics Quarterly, Vol.12(3) 331350.
Kazim Sherbano,(2010) CSR: Missing the point in Pakistan, The Daily Mails, ,
online ed. July 3rd
Jones, T. M. (1980). Corporate Social Responsibility Revisited, Redefined, California
Management Review: 59-67.
Kilcullen M, Kolstra (1999) At least do no harm: sources on the changing role of
business ethics and corporate social responsibility, Serv Review, 27(2). P158
Kok, P., Wiele, T. V. D., McKenna, R. and Brown, A. (2001). A Corporate Social
Responsibility: Audit within a Quality Management Framework, Journal of Business
Ethics, 31, 4: 285-297.
Lord Holme and Richard Watts,(2007), "Making Good Business Sense" The World
Business Council for Sustainable Development. See at:
http://www.mallenbaker.net/csr/definition.php (12-2-2010)
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An Empirical study on factors influences the employees towards organizational

commitment in a private sector organization in India
P. Na .KANCHANA (Corresponding Author)
M.A.MPHI..MBA.
JJ COLLEGE OF ENGGINEERING & TECHNOLOGY, TRICHY.
ASSISTANT PROFESSOR (SENIOR GRADE)
Dr. N. Panchanatham,
M.B.A., Ph.D. MICI (USA), SME R&D (ISRAEL) , M.Com., M.Sc.(Zoo),
M.Ed.,M.A.(Psy.)., M.Sc. (Yoga).
Prof & Head, Department of Business Administration, Annamalai University, \
Chidambaram.
Abstract
The purpose of this research article is to introduce organizational commitment and key
research on commitment related factors in private sector organization in India. The
authors conducted a literature search on organizational commitment and interviews with
103 employees. Job satisfaction, intention to stay, motivation, and organizational politics
are connected to commitment. In this study an attempt has been made to identify the
various factors that influence the employees towards organizational commitment. Using
various statistical tools like Factor analysis, multiple regression and correlation some of
the relevant findings were derived that will be significant and relevant to the present
Indian scenario.
Key words: Organizational Commitment, Motivation, Organizational Politics, Job
satisfaction
Introduction
Organizational commitment has received significant attention in studies of the workplace. This is due
to the general recognition that this variable can be the major determinant of organizational
performance (Angle, 1981; Riketta, 2002) and effectiveness (Laschinger, 2001; Miller, 1978). When
employees are dissatisfied at work, they are less committed and will look for other opportunities to
quit. If opportunities are unavailable, they may emotionally or mentally withdraw from the
organization. Thus, organizational commitment is an important attitude in assessing employees
intention to quit and the overall contribution of the employee to the organization. Many scholars have
defined organizational commitment, e.g., Kanter (1968), views organizational commitment as the
willingness of workers to devote energy and loyalty to an organization. According to Porter et al.
(1974) organizational commitment is the relative strength of an individual's identification with and
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involvement in a particular organization. The idea for investigation is based on the conceptualization
of Meyer and Allens (1997) three types of organizational commitment model.
As the above figure shows, Meyer and Allen (1997) identified and represented three forms of
commitment: affective, continuance, and normative. Affective commitment is an individuals
emotional attachment with (i.e. identification with and involvement in), the organization. Continuance
commitment refers to the individuals recognition of the benefits of continued organizational
membership versus the perceived cost of leaving the organization. Finally, normative commitment
refers to the employees feeling of obligation to stay in the organization. All three forms of
commitment affect not only employees willingness to remain with an organization, but their work
related behavior as well.
Review of Literature
Ebru Gunlu, Mehmet Aksarayli et.al(2010) identified the effects of job satisfaction on
organizational commitment for managers in large-scale hotels in the Aegean region of
Turkey and, in addition, to examine whether there is a significant relationship between
the characteristics of the sample, organizational commitment, and job satisfaction. Two
structured questionnaires were administered to large-scale hotel managers in the tourism
industry. The survey instruments were adopted from the validated Minnesota Job
Satisfaction and Organizational Commitment Questionnaire of Meyer-Allen. The data
were analyzed using Statistical Package for Social Sciences version 13.0. The findings
indicate that extrinsic, intrinsic, and general job satisfaction have a significant effect on
normative commitment and affective commitment. In addition, the findings suggest that
the dimensions of job satisfaction do not have a significant effect on continuance
commitment among the managers of large-scale hotels. When the characteristics of the
sample are regarded, age, income level, and education have a significant relationship with
extrinsic job satisfaction whereas income level indirectly affects affective commitment.
Steve McKenna, (2005) in his research work examined using qualitative data from 20
managers in four small Singaporean businesses in the services sector this article explores
the issue of organizational commitment. The findings generally support those in the
positivistic literature on organizational commitment. It also argues, however, that
continuance commitment, largely seen as negative for organizations and performance,
can be both positive and negative in certain circumstances. The article further suggests
that owner/manager style in the businesses may have an important impact on manager
commitment and that the future growth and development of these businesses may be
stunted as a consequence of negative aspects of the entrepreneurial management style.
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Sheldene Simola, (2011), investigated the relationship between dimensions of

commitment to the profession of business, and ascribed importance of various
organisational characteristics to the first full-time job following graduation. Business
administration students (n=446) completed surveys on dimensions of their commitment
to the profession of business and the importance they ascribed to having certain
organizational characteristics in their first full-time job (n=132). Confirmatory factor
analysis of commitment scales, principal component analysis of organizational
characteristics, and canonical correlations were used. Affective occupational commitment
was differentially; positively associated with the importance ascribed to working in an
organization that offers opportunities for professional development. Normative
occupational commitment was differentially, positively associated with the importance
ascribed to working in a reputable organization that is devoted to diversity and social
responsibility. Riccardo Peccei, Antonio Giangreco et.al (2011) this study aims to
contribute to a better understanding of resistance to change (RTC) by examining the role
played by organisational commitment (OC) as a potential predictor and moderator in the
analysis of RTC. First, alternative models of OC were developed, first as a co-predictor
of RTC, and then as a moderator of the relationship between key established antecedents
of RTC and resistance itself. The main established antecedents of RTC examined
included employees' perceptions of the benefits of change (PBC), their involvement in
the change process (IIC), and their overall attitudes towards the change (ATC). The
alternative OC models were tested using data from a sample of over 300 middle
managers from an Italian public sector service provider company undergoing a radical
process of change. Results showed that OC, along with PBC and IIC, had a significant
negative direct and indirect effect on RTC. The indirect effect was mediated by employee
attitudes to the change. Contrary to expectations, however, commitment did not moderate
any of the antecedents-RTC relationships.
To identify the major factors that influence the employees towards
organizational commitment in a private sector organization.
To know the relationship between organisational commitment and Values of
the organisation
To study the relationship among Pay, promotion and regulation of the
organisation
Methodology
The study is a descriptive one. Primary data was collected by the researcher with the help
of structured questionnaire administered to the middle and top level executives of a
Private sector organization in Chennai - Tamilnadu. The method adopted to get the data
was Interview Schedule. 103 employees from that organization constitute the sample
size. Fifteen questionnaires were distributed for the purpose of pre-testing the
questionnaire's contents. A complete questionnaire was developed based on the
comments collected during the pre-testing period. Type of sampling method used was
simple random sampling. Due to various reasons the company name is not being
disclosed in this study.
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The various factors that are taken to measure the organizational commitment are 1)
Job Satisfaction 2) Organizational Politics 3) Motivation 4) Role Clarity and 5)
Intention to stay
Hypotheses
1. There is relationship among the factors that influence employees towards
organizational commitment
2. There exist relationship between Promotions and values of the organisation.
3. Pay, promotion and regulation of the organisation can predict the Employee
commitment towards the organisation
Insert Table-1 Here
An examination had been made from the reliability of the data to check whether random
error causing inconsistency and in turn lower reliability is at a manageable level or not,
by running reliability test. From table 1 it is clear that values of Coefficient alpha
(Cronbachs Alpha) have been obtained, the minimum value of Coefficient alpha
obtained was .818 .This shows data has satisfactory internal consistency reliability.
Statistical Tools Used

Using Statistical Package for Social Sciences (SPSS) the following tools were
administered in this study 1) Factor Analysis 2)Correlation 3) Multiple Regression and
4)Reliability Test.
Factor Analysis
The individual statements on Organizational Commitment was examined using factor

analysis based on 20 individual statements and the reliability of the samples collected
was tested for internal consistency of the grouping of the items.
Insert Table 2 Here
KMO measure of sampling adequacy is an index to examine the appropriateness of factor

analysis. High values between 0.5 and 1.0 indicate factor analysis is appropriate. Values
below 0.5 imply that factor analysis may not be appropriate. From the above table it is
seen that Kaiser Meyer Olkin measure of sampling adequacy index is 0.710 and
hence the factor analysis is appropriate for the given data set. Bartletts Test of Sphericity
is used to examine the hypothesis that the variables are uncorrelated. It is based on chiSquare transformation of the determinant of correlation matrix. A large value of the test
statistic will favor the rejection of the null hypothesis. In turn this would indicate that
factor analysis is appropriate. Bartletts test of Sphericity Chi-square statistics is 2795.966,
that shows the 20 statements are correlated and hence as inferred in KMO, factor analysis
is appropriate for the given data set.
Insert Table 3 Here
Eigen Value represents the total variance explained by each factor. Percentage of the total
variance attributed to each factor. One of the popular methods used in Exploratory Factor
Analysis is Principal Component Analysis, Where the total variance in the data is
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considered to determine the minimum number of factors that will account for maximum
variance of data.
Insert Table 4 Here
Interpretation of factors is facilitated by identifying the statements that have large

loadings in the same factor. The factor can be interpreted in terms of the statement that
loads high on it.
The factors of a study on organisational commitment comprises of 20 individual
statements. Out of 20 variables, 5 individual variables contribute more towards
organisational commitment.
The variables are:
1. .Job Assignment
2. Promotion Related to performance
3. Enhancement of Knowledge and Decision making
4. My values and Organisation values are similar
5. Formal communications channel helps me to perform my job
Insert Table 5 Here
The above model summary table shows R-Square for this model is .946. This
means that 94.6 percent of the variation in overall organisational commitment (dependent
variable) can be explained from the 26 independent variables. The table also shows the
adjusted R-square for the model as .927.
Any time another independent variable is added to a multiple regression model,
the R-square will increase (even if only slightly). Consequently, it becomes difficult to
determine which models do the best job of explaining variation in the same dependent
variable. The adjusted R-Square does just what its name implies. It adjusts the R-square
by the number of predictor variables in the model. This adjustment allows the easy
comparison of the explanatory power of models with different numbers of predictors
variable. It also helps us to decide how many variables to include in our regression
model.
Insert Table 6 Here
To determine if one or more of the independent variables are significant predictors of

overall organisational commitment, we examine the information provided in the
coefficient table. From the above twenty six independent statements 19 independent
statements are not statistically significant. The standardized coefficient beta column
reveals that fairly satisfy with present job has a beta coefficient .077, which is significant
(.005). Work seems like never end has a beta coefficient .059, which is not significant
(.184). Job rather unpleasant has a beta coefficient .057, which is significant (.007). Little
change to leave this organisation has a beta coefficient .252, which is significant (.050).
Choose this organisation to work for others have a beta coefficient .249, which is not
significant (.085). Not much to be gained from this organisation has a beta coefficient
.125, which is significant (.050). Difficult to agree with this organization's policies on
important matters relating to its employees has a beta coefficient .037, which is not
significant (.939). Care about the fate of the organisation has a beta coefficient .202,
which is significant (.030). Values have a beta coefficient .223 which is significant
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(.019). Motivation has a beta coefficient .552, which is significant (.000). Promotion in
this organisation is based on performance has a beta coefficient value .223, which is
significant (.000). So it is clear that there exist relationship between Promotions and
values of the organization.
Insert Table 7 Here
The correlation between the variables promotions and regulations are highly
correlated .926 and was highly significant, Correlation between performance and
promotions are highly correlated .780 and highly significant, correlation between
performance and communications was .774 which was highly significant, correlation
between rewards and merit was .738 which was significant. All the factors of Pay,
promotion and regulation are positively correlated with Organisational Commitment.
Thus Pay, promotion and regulation of the organization can predict the Employee
commitment towards the organization
Conclusion
In the present scenario, identification of employee organizational commitment has
become a crucial element. In this study it found that most of the employees in private
manufacturing companies are influenced towards commitment due to the following
factors such as job assignment, Promotion Related to performance, Enhancement of
Knowledge and Decision making, Formal communications channel and my values and
Organisation values are similar. If organization is going to practice these factors,
organizational commitment is possible.
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REFERENCES
Allen, N.J., & Meyer, J.P. (1996). Affective, Continuance, and Normative commitment to
the organization: An examination of construct validity. Journal of Vocational Behavior,
49, 256-276.
Angle, H. L., & Perry, J. L. (1981). An empirical assessment of organization commitment
and organizational effectiveness. Administrative Science Quarterly, 26, 1-13.
Ebru Gunlu et.al, (2010), Job satisfaction and organizational commitment of hotel
managers in Turkey", International Journal of Contemporary Hospitality Management,
Vol. 22 Iss: 5, pp.693 717
Hall, D. (1977). Organizational identification as a function of career pattern and
organizational type.Administrative Science Quarterly, 17, 340-350.
Koch, J., & Steers, R. (1978). Job attachment, satisfaction, and turnover among public
sector employees. Journal of Vocational Behavior, 12, 119-128.
Luthans, F. (1998). Organisational Behaviour. Boston: Irwin McGraw-Hill.
Meyer, J.P., & Allen, N.J. (1991). A tree-component conceptualization of organizational
commitment.Human Resource Management Review, 1, 61-89.
Meyer, J. P., Allen, N. J., Smith, C. A. (1993). Commitment to organizations and
occupations: Extension and test of a three-component conceptualization. Journal of
Applied Psychology, 78 (4), 538-552.
Steve McKenna, (2005) "Organisational commitment in the small entrepreneurial
business in Singapore", Cross Cultural Management: An International Journal, Vol. 12
Iss: 2, pp.16 37
Sheldene Simola, (2011) "Relationship between occupational commitment and ascribed
importance of organisational characteristics", Education + Training, Vol. 53 Iss: 1, pp.67
81
Riccardo Peccei et.al (2011), The role of organisational commitment in the analysis of
resistance to change: Co-predictor and moderator effects", Personnel Review, Vol. 40 Iss:
2, pp.185 - 204
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Annexure
Table-1
Cronbach's Alpha
N of Items
.818
28
Table 2 KMO and Bartlett's Test

.710
Approx. Chi-Square
2795.966
Df
190
Sig.
.000
Table -3 Total Variance Explained
Component
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Initial Eigenvalues
Extraction Sums of Squared

Rotation Sums of Squared
Loadings
Loadings
Total
% of
Cumulative Total
% of
Cumulative Total
% of
Cumulative
Variance
%
Variance
%
Variance
%
7.278 36.391
36.391
7.278 36.391
3.918 19.588
55.979
3.918 19.588
2.470 12.352
68.331
2.470 12.352
1.988
9.939
78.270
1.988
9.939
1.330
6.651
84.921
1.330
6.651
0.749
3.743
88.663
0.550
2.751
91.414
0.413
2.065
93.479
0.318
1.588
95.067
0.254
1.269
96.336
0.213
1.065
97.401
0.147
0.735
98.136
0.110
0.549
98.686
0.078
0.390
99.076
0.068
0.341
99.417
0.039
0.196
99.613
0.034
0.171
99.784
0.023
0.117
99.901
0.011
0.055
99.957
0.009
0.043
100.000
36.391
55.979
68.331
78.270
84.921
4.683
4.430
3.195
2.437
2.240
23.415
22.151
15.973
12.185
11.198
23.415
45.565
61.538
73.723
84.921
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Table 4 Rotated Component Matrix (a)
Component
1
2
3
Fairly satisfied with my present job
0.191
0.734
0.082
Enthusiastic about my work
0.113
0.216
0.079
Work seems like will never end

Real enjoyment in my work
Job rather unpleasant
Little change in my present circumstances to leave
this Organisation
Am very glad to Choose this Organisation to work for
others considering at the time I joined
Not much to be gained by sticking with this
Organisation indefinitely
Difficult to agree with this Organisation Policies on
related to Employee
Care about the fate of the Organisation
Any type of Job assigns keep work for this
Organisation
My values and Organisation values are similar
Proud to tell others part of the Organisation

Working for a different Organisation as long as the
work was similar
Unclear who has the formal authority to make
decision
Put in great deal of effort to help this Organisation
successful
Promotions are related to emp. performance
Formal communications channel helps me to
perform my job
knowledge and achievement evaluation participated
in decision role
Aware of the system for handling disconnect and feel
encouraged
Rotation Method: Varimax with Kaiser Normalization.
a.Rotation converged in 9 iterations.
VOL 3, NO 1
-0.033
0.218
0.509
0.806
0.035
-0.156
0.553
0.595
0.050
0.341
0.777
-0.066
-0.135
0.283
0.349
-0.073
0.049
-0.180
0.253
-0.006
0.481
-0.313
0.751
0.142
-0.027
0.562
0.418
-0.051
0.049
0.567
0.225
0.061
0.560
-0.312
0.289
0.370
0.521
0.160
0.087
-0.175
0.786
0.429
0.034
0.154
0.171
0.192
0.831
0.840
0.019
0.191
-0.093
0.917
-0.051
0.423
0.860
0.024
0.191
0.019
0.325
-0.330
0.497
0.295
0.243
0.528
0.742
0.228
0.547
0.152
-0.152
0.788
-0.170
0.200
0.474
0.027
0.957
0.066
-0.120
0.070
0.104
0.539
0.789
0.125
-0.083
0.635
-0.026
0.889
-0.046
0.255
-0.038
0.817
0.261
0.331
0.108
-0.175
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Table 5
Multiple Regression
Model
R Square
Adjusted R Square
Std. Error of the

Estimate
.973(a)
.946
.927
.208
a Predictors: (Constant), Rules and policies around here concerning promotion and pay, favoritism rather
than merit determines around here, Difficult to agree with this Organisation. Policies on related to Emp.
Work seems like will never end, Left this Organisation., Just working hard was not enough to get ahead,
Dont speak up for fear of retaliation by others, Enthusiastic about my work, Any type of Job assign. keep
work for this Organisation., Proud to tell others part of the Organisation., Working for a different
Organisation. as long as the work was similar, Job rather unpleasant, knowledge and achievement
evaluation participated in decision role, Not much to be gained by sticking with this Organisation. Indefinitely,
Real enjoyment in my work, Fairly satisfied with my present job, Little change in my present circumstances
to leave this Organisation Care about the fate of the Organisation, Choose this Organisation. to work for
others at the time I joined, Aware of the system for handling disconnect and feel encouraged , Put in great
deal of effort to help this Organisation. Successful, Promotions in this department generally go to top
performance, Unclear who has the formal authority to make decision, My values and Organisation. values
are similar, Influential group in this department that no one ever crosses, Rewards come only to those who
work hard, Formal communications channel helps me to perform my job
Table - 6
Coefficients (a)
Model
Unstandardized
Coefficients
B
1
Standardized
Coefficients
Sig.
0.288
0.774
(Constant)
0.040
Std.
Error
0.140
Fairly satisfied with my present job

Enthusiastic about my work
Work seems like will never end
Real enjoyment in my work
Job rather unpleasant
Little change in my present circumstances
to leave this Organisation
Choose this Organisation to work for others
at the time I joined
Not much to be gained by sticking with this
Organisation indefinitely
Difficult to agree with this Organisation
Policies on related to Employee
Care about the fate of the Organization
Any type of Job assigns keep work for this
Organisation
My values and Organisation values are
similar
Proud to tell others part of the Organisation
Working for a different Organisation as
long as the work was similar
Unclear who has the formal authority to
make decision
Put in great deal of effort to help this
0.059
-0.104
0.044
-0.061
0.152
0.210
0.059
0.047
0.033
0.071
0.088
0.107
0.077
-0.110
0.059
-0.076
0.168
0.252
0.999
-2.206
1.340
-0.860
1.717
1.967
0.005
0.030
0.184
0.393
0.007
0.050
0.170
0.098
0.249
1.746
0.050
0.086
0.043
0.125
1.991
0.050
0.022
0.286
0.037
0.077
0.939
0.139
-0.054
0.063
0.076
0.202
-0.097
2.214
-0.710
0.030
0.480
0.139
0.026
0.223
5.349
0.019
0.041
-0.024
0.229
0.077
0.063
-0.040
0.177
-0.308
0.860
0.759
-0.204
0.290
-0.292
-0.701
0.485
0.356
0.149
0.552
2.393
0.000
Beta
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Organisation successful
Formal communications channel helps me

to perform my job
knowledge and achievement evaluation
participated in decision role
Aware of the system for handling
disconnect and feel encouraged
favoritism rather than merit determines
around here
Influential group in this department that no
one ever crosses
Left this Organisation, Just working hard
was not enough to get ahead
Dont speak up for fear of retaliation by
others
Rewards come only to those who work hard
Promotions in this department generally
go to top performance
Rules and policies around here concerning
promotion and pay
Unstandardized
Coefficients
B
Std.
Error
0.693
0.413
Standardized
Coefficients
Beta
Sig.
1.022
1.677
0.098
0.014
0.273
0.021
0.052
0.959
-0.533
0.447
-0.660
-1.192
0.237
0.335
0.263
0.417
1.275
0.206
-0.655
0.410
-0.835
-1.596
0.115
-0.062
0.048
-0.098
-1.280
0.205
0.052
0.034
0.078
1.537
0.129
0.228
0.414
0.286
0.552
0.583
0.139
0.026
0.223
5.349
0.000
0.061
0.239
0.109
0.253
0.801
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Table - 7
Correlations
favoritism rather than

merit determines around
here
Influential group in this
department that no one
ever crosses
Left this Organisation,
Just working hard was
not enough to get ahead
Dont speak up for fear
of retaliation by others
Rewards come only to
those who work hard
Promotions in this
department generally go
to top performance
Pearson Correlation
Sig. (2-tailed)
N
Pearson Correlation
Sig. (2-tailed)
N
Pearson Correlation
Sig. (2-tailed)
N
Pearson Correlation
Sig. (2-tailed)
N
Pearson Correlation
Sig. (2-tailed)
N
Pearson Correlation
Sig. (2-tailed)
N
Pearson Correlation
Sig. (2-tailed)
N
favoritism
rather than
merit
determines
around here
1
103
.718(**)
Influential
group in this
department
that no one
ever crosses
Left this
Organisation,
Just working
hard was not
enough to get
ahead
Dont speak
up for fear of
retaliation by
others
Rewards
come only to
those who
work hard
Promotions
in this
department
generally go
to top
performance
Rules and
policies around
here
concerning
promotion and
pay are specific
and well
defined
Pay and
promotion
policies are
generally
communicated
this
Organisation
.000
103
.450(**)
.000
103
.331(**)
.001
103
.738(**)
.000
103
.089
.372
103
.006
.952
Rules and policies

around here concerning
promotion and pay are
103
specific and well defined
Pay and promotion
Pearson Correlation
-.169
policies are generally
Sig. (2-tailed)
.088
communicated this
N
103
Organisation
* Correlation is significant at the 0.05 level (2-tailed)
103
.548(**)
.000
103
.264(**)
.007
103
.508(**)
.000
103
.396(**)
.000
103
.532(**)
.000
1
103
.101
.311
103
.156
.117
103
.257(**)
.009
103
.086
.388
1
103
.630(**)
.000
103
.364(**)
.000
103
.349(**)
.000
1
103
.445(**)
.000
103
.325(**)
.001
1
103
.780(**)
.000
103
103
103
103
103
103
.331(**)
.001
.101
.308
.250(*)
.011
.211(*)
.033
.774(**)
.000
.926(**)
.000
103
103
103
103
103
103
103
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Globalization and Effects;

A study on the effects of globalization in the society
Farhad Nezhad Haj Ali Irani (Corresponding Author)
Public Management, PhD
Islamic Azad University, Bonab Branch, Iran
Mohammad Reza Noruzi
EMBA, PhD Student, Policy Making in Public Sector
Islamic Azad University, Bonab Branch, Iran
Young Researchers Club Member, Islamic Azad University, Bonab Branch, Iran
Abstract
Globalization is one of the important factors which every community and society deals with it.
In some countries it has effected good changes but in the other one may be have bad effects.
This paper aims to study some effects of globalization in different era.
Keyword: Globalization, Society, Management, Effects of Globalization
Introduction
For more than 20 years scholars from a variety of fields have been engaged in a vigorous
debate about a new social phenomenon: globalization (Belk, 1996; Featherstone, 1990, 1995;
Ger and Belk, 1996; Liebes and Katz, 1993; Robertson, 1992; Sklair, 2002; Waters, 1995;
Matei, 2006, p.1).Human societies across the globe have established progressively closer
contacts over many centuries, but recently the pace has dramatically increased. Jet airplanes,
cheap telephone service, email, computers, huge oceangoing vessels, instant capital flows, all
these have made the world more interdependent than ever. The global social justice
movement, itself a product of globalization, proposes an alternative path, more responsive to
public needs and intense political disputes will continue over globalization's meaning and its
future direction (Global Policy Froum, 2011).
What is globalization?
Traditionally politics has been undertaken within national political systems. National
governments have been ultimately responsible for maintaining the security and economic
welfare of their citizens, as well as the protection of human rights and the environment within
their borders. With global ecological changes, an ever more integrated global economy, and
other global trends, political activity increasingly takes place at the global level
(Globalization, 2005).
According to Investor Word, (2005), globalization is the name for the process of increasing
and speeding up the connectivity and interdependence of the world's markets and businesses
and other institutions. This process has speeded up dramatically in the last two decades as
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technological advances make it easier for people to travel, communicate, and do business
internationally (investor word, 2005).
Two major recent driving forces in the globalization era
Two major recent driving forces are advances in telecommunications infrastructure and the
rise of the internet. In general, as economies become more connected to other economies, they
have increased opportunity but also increased competition. Thus, as globalization becomes a
more and more common feature of world economics, powerful pro-globalization and antiglobalization lobbies have arisen (investor word, 2005).
The pro-globalization lobby argues that globalization brings about much increased
opportunities for almost everyone, and increased competition is a good thing since it makes
agents of production more efficient.
The anti-globalization group argues that certain groups of people who are deprived in terms of
resources are not currently capable of functioning within the increased competitive pressure
that will be brought about by allowing their economies to be more connected to the rest of the
world (investor word, 2005).
Globalization Effects
Industrial emergence of worldwide production markets and broader access to a range of
foreign products for consumers and companies particularly movement of material and goods
between and within national boundaries International trade in manufactured goods has
increased more than 100 times (from $95 billion to $12 trillion) since 1955(BBC NEWS,
2007). China's trade with Africa rose sevenfold during 200007 alone (Times Online, 2008;
Politzer, 2008). And these are some effects of globalization in the area of rapid changing.
Results and Conclusions
Over many centuries, human societies across the globe have established progressively closer
contacts. Recently, the pace of global integration has dramatically increased. Unprecedented
changes in communications, transportation, and computer technology have given the process
new impetus and made the world more interdependent than ever. Multinational corporations
manufacture products in many countries and sell to consumers around the world. Money,
technology and raw materials move ever more swiftly across national borders. Along with
products and finances, ideas and cultures circulate more freely. As a result, laws, economies,
and social movements are forming at the international level (Globalization, 2005).
Globalization typically refers to the process by which different economies and societies
become more closely integrated, and concurrent with increasing worldwide globalization,
there has been much research into its consequences (Nilson, 2010, p.1191). Also examining
the relationship between three dimensions of globalization and life expectancy, the most
robust finding is a positive relationship between economic globalization and life expectancy.
Multinational corporations manufacture products in many countries and sell to consumers
around the world. Money, technology and raw materials move ever more swiftly across
national borders. Along with products and finances, ideas and cultures circulate more freely.
As a result, laws, economies, and social movements are forming at the international level.
Many politicians, academics, and journalists treat these trends as both inevitable and (on the
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whole) welcome. But for billions of the world's people, business-driven globalization means
uprooting old ways of life and threatening livelihoods and cultures (Global Policy Forum,
2011).
Under globalization, politics can take place above the state through political integration
schemes such as the European Union and through intergovernmental organizations such as the
International Monetary Fund, the World Bank and the World Trade Organization. Political
activity can also transcend national borders through global movements and NGOs. Civil
society organizations act globally by forming alliances with organizations in other countries,
using global communications systems, and lobbying international organizations and other
actors directly, instead of working through their national governments (Globalization, 2005).
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References
BBC News, (2007), "Globalization shakes the world". BBC News. January 21, 2007.
Belk, R.W., 1996. Hyperreality and globalization: culture in the age of Ronald McDonald.
Journal of International Consumer Marketing 8 (34), 2337.
Featherstone, M., 1990. Global Culture: Nationalism, Globalization, and Modernity. Sage
Publications, London.
Featherstone, M., 1995. Undoing Culture: Globalization, Postmodernism and Identity. Sage
Publications, London.
Ger, G., Belk, R.W., 1996. Id like to buy the world a coke: consumptions capes of the less
affluent world. Journal of Consumer Policy 19, 271304.
Global Policy Forum, (2011), available online at:
Globalization, 2005, globalization, available online at: www. Globalization/globalization.html
Globalization, 2005, globalization, available online at: www. Globalization/globalization-ofpolitics.html
http://www.globalpolicy.org/globalization/defining-globalization.html
Investor word, (2005), Globalization, available online at:
http://www.investorwords.com/2182/globalization.html
Liebes, T., 2003. American Dreams, Hebrew Subtitles: Globalization from the Receiving End.
Hampton Press, Cresskill, NJ.
Liebes, T., Katz, E., 1993. The Export of Meaning: Cross-cultural Readings of Dallas, second
ed. Polity Press, Cambridge.
Matei, S.A. / (2006), Globalization and heterogenization: Cultural and civilizational
clustering in telecommunicative space (19891999) Telematics and Informatics 23 (2006)
316331
Nilson, Theresse, (2010), Good for Living? On the Relationship between Globalization and
Life Expectancy, World Development Vol. 38, No. 9, pp. 11911203, 2010
Politzer, Malia, (2008) "China and Africa: Stronger Economic Ties Mean More Migration".
By Malia Politzer, Migration Information Source. August 2008.
Robertson, R., 1992. Globalization: Social Theory and Global Culture. Sage, London.
Sklair, L., 2002. Globalization: Capitalism and Its Alternatives, third ed. Oxford University
Press, Oxford, UK.
Times Online, (2008) "Africa, China's new frontier". Times Online. February 10, 2008.
Waters, M., 1995. Globalization. Routledge, London.
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IMPACT OF MONETARY POLICY ON GROSS DOMESTIC PRODUCT (GDP)

IRFAN HAMEED
PhD. Student, Iqra University, Business administration dept, Karachi
UME-AMEN
Lecturer, PAF-KIET, College of management sciences, Karachi
ABSTRACT
This research article focuses on the impact of Monetary Policy on GDP. GDP no doubt is
affected by the Monetary Policy of the state. The research papers of various authors have been
studied in this regard to prove the Hypothesis and after in depth analysis by applying
Regression Analysis technique it has been observed that the relationship between the two
exists. The data of past 30 years of Pakistan has been used for driving the conclusion. The
study proved that the interest rate has minor relationship with GDP but the Growth in Money
Supply greatly affects the GDP of an economy, obviously various unknown factors also affects
the GDP. Growth in Money Supply has a huge impact on GDP. The Research study can further
be used for developmental projects for the Growth of Economy, Quality improvements,
Household production, the underground economy, Health and life expectancy, the
environment, Political immunity and ethnic justice.
KEY WORDS: MONETARY POLICY, GROSS DOMESTIC PRODUCT, INFLATION,
MONEY SUPPLY.
INTRODUCTION
Monetary policy can be defined as the process by which the government, central bank, or
monetary authority of a country controls (i) the supply of money, (ii) availability of money,
and (iii) cost of money or rate of interest, in order to attain a set of objectives oriented towards
the growth and stability of the economy. Monetary policy rests on the relationship between the
rates of interest in an economy, that is the price at which money can be borrowed, and the
total supply of money. Monetary policy uses a variety of tools to control one or both of these,
to influence outcomes like economic growth, inflation, exchange rates with other currencies
and unemployment.
OBJECTIVES OF MONETARY POLICY
Monetary policy in a country acts as a tool by which the government or central bank,
attain a set of objectives oriented towards the growth and stability of the economy. Ina case of
Pakistan, Monetary policy management and financial sector stability are two primary roles of
State Bank of Pakistan (SBP). Monetary policy and process of its formulation in Pakistan has
undergone changes with the evolving economic dynamics within the country and the
improved empirical and theoretical understanding of the monetary policy across the world.
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One of the important and crucial intermediate target variables of monetary Policy in Pakistan
is money supply. The SBP has been using M2 aggregate (i.e., currency + demand deposits +
time deposits) for policy purposes on the assumption that the demand for M2 function is stable
in Pakistan. Utilizing the estimated money demand function the target rate of growth of M2 is
set (Qayyum, 2002).
Monetary policy of Pakistan now for some years has been largely supportive of the dual
objective of promoting economic growth and price stability. It achieves this goal by targeting
monetary aggregates (broad money supply growth as an intermediate target and reserve
money as an operational target) in accordance with real GDP growth and inflation targets set
by the Government (Shamshad, 2006).
MONETARY POLICY MANAGEMENT IN PAKISTAN OVER THE YEARS
State Bank of Pakistan (SBP) shifted its reliance from an administered monetary
policy regime governed by ad hoc changes in reserve ratios, directed credit and regulated
interest rate policies in mid 1990s to a liberal and market oriented monetary policy
management. (Shamshad, 2007).
Broad money supply growth has to be consistent with the targets of growth in real GDP and
inflation rate. However, if there are excessive demand pressures either because of high fiscal
deficit or because of the excessive foreign inflows money supply grows faster than the growth
in productive sectors and generates demand pressures which manifests itself in rise in inflation
rate. Despite all contests and debates, inflation is primarily a monetary phenomenon. To keep
it under control it is critical that macroeconomic imbalances are kept within the permissible
limits. Fiscal wastefulness in the past has resulted in Governments unlimited recourse to low
and fixed interest rate financing (State Bank of Pakistan, 2006).
Pakistans inflation rate for 2009 financial year is expected to be 20 percent which is 40
percent higher than the last years 12 percent. On the other hand, GDP growth rate of Pakistan
for 2009 and 2010 is projected to be 2.8 percent and 4.0 percent respectively (Asma, 2009).
Thus there is a need to change the ways monetary policy have been used to guide economy for
future.
The Central Bank designs Contractionary policy in order to constrain the growth of money
(i.e. increasing inflation) and credit in the economy. In the present international scenario, due
to hike in inflation internationally, like most of the countries have adopted contractionary
policy, Pakistan recently has also increased interest rate by 0.5 percent and set 10 percent
short-term interest rates. On the other hand Expansionary policy is used as a tool by the
central bank to broaden the monetary base and credit in the economy by reduction in interest
rates and increase in bond prices (Pakistan Defense Forum, 2008).
The State Bank of Pakistan has a main objective of achieving price stability and promotes
growth. In order to contain inflation within the targeted level set by the government, SBP used
money supply as an instrument target. The statistics reveals that Money supply growth
exceeded its target level for four consecutive years 2002-2005. Due to easy monetary policy
stance to support the growth process, however the expansionary monetary policy results in
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rapid inflation reaching double digit in 2005-2006. Inflation tax for the year 2005-2006 is
estimated at Rs. 61928 million or 0.98 percent of GDP.
GROWTH AND MONETARY PHENOMENON
Before 2005-2006 monetary policy was biased towards supporting growth because
inflation was at low level but with the rising inflation from 2005-2006 monetary actions are
towards the containment of inflation (State Bank of Pakistan, 2006).
High rates of inflation cause problems, not just for some individuals, but for aggregate
economic performance. Not only sustained high rates of inflation can adversely affect the real
economic growth in long run but also even moderate level of inflation damage the real
economic growth. However, the relationship between inflation and economic growth is non
linear. For each one percent point increase in inflation, in USA, annual growth rate has
reduced by 0.223% (Smyth, 1992). At low rates of inflation this relationship is negative but
insignificant; however higher rates of inflation have a significantly negative effect on growth.
Inflation not only decreases the growth rate but also induces the uncertainty in economy.
Keeping in view this hazardous nature of inflation, worlds leading central banks have
developed the idea that price stability is the prime function of monetary policy (Blejer, 2000)
and more precisely central banks are aimed to keep the inflation rate low (Friend, 2000). Thus
maintaining price stability is the responsibility of every central bank and it is responsible for
achieving this. It is argued that sufficiently tight monetary policy for longer periods of time
can decrease even the extreme cases of inflation (Friedman, 1963).
Cause of inflation in Pakistan has been estimated by a number of researchers (Khan and
Qasim, 1996) and it has been established that monetary phenomenon are responsible for the
high levels of inflation in long run (Khan, 2006). With persistent high inflation in economy,
economic growth of the country suffers and there is no smooth running of the government
policies under these high inflation rates. In Pakistan, rise in inflation has been found as the
result of excess money supply growth (M2). The money supply growth initially affects the
real GDP and then hits the inflation in Pakistan. This may be due to the loose monetary policy
adopted by State Bank of Pakistan thus for reduction of inflation, tight monetary policy in
Pakistan must be implemented (Qayyum, 2006).
Monetary policy is only one element of overall macroeconomic policy, and can only affect the
production process through its impact on interest rates. Contractionary monetary policy raises
longer-term real interest rates. The nominal interest rate equals the real interest rate plus the
expected inflation rate. If contractionary monetary policy lowers expected inflation or leaves it
unchanged, then evidence that it increases the nominal interest rate implies that it must be
increasing the real interest rate also (Thorbecke and Zhang, 2008).
Hardouvelis and Barnhardt (1989), Frankel (2008) and others have shown that if monetary
policy actions are expected to increase real interest rates they will lower commodity prices
and if they are expected to lower inflation they will also lower commodity prices.
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The main cause of high interest rates is high inflation, through the expected inflation
Premium. Conversely, the best prospect for low interest rates is a stable environment of low
inflation. In this context, the relatively high interest rates that may be necessary to achieve a
desired disinflation represent short-term pain for long term gain. SBP, therefore, has a
current focus on anti-inflation policy which will ensure steady growth in the long run
(Shamshad, 2007).
SCOPE OF STUDY
Present study will attempt to investigate how the changes in the monetary policy
effect, through inflation, the economic growth of Pakistan. Inflation is the most researched
topic in the modern era because it has very serious implications for growth and income
distribution. In case of Pakistan the excess money supply is the main factor responsible for
inflation. The topic here clearly emphasizes the monetary policy have a direct link with
inflation whether this policy is tight or loose because it had to effect in one way or another.
Other monetary phenomenon also impact the overall growth there fore this paper will also
determine whether, and how, GDP in Pakistan would respond to a change in money supply
(M2), the inflation rate, and interest rate in economy.
REVIEW OF LITERATURE
Before proceeding to review what other researchers have found about relationship of
GDP growth and Money supply, interest rate, and Inflation, we first attempt to explain the
importance of monetary policy in light of available literature.
Government policies, including monetary policy, affect the growth of domestic output to the
extent that they affect the quantity and productivity of capital and labor. Monetary policy is
only one element of overall macroeconomic policy, and can only affect the production process
through its impact on interest rates. There are two main channels of monetary policy. One is
through the effect that interest rate changes have on the exchange rate of a currency, and the
other is through the effect that interest rate changes have on demand. Therefore monetary
policy has an impact on economic activity and growth through the workings of foreign and
domestic markets for goods and services (Boweni, 2000)
Although monetary policy is the principal stabilization tool for most economies used by an
independent and credible central bank, still there are economists who see important
stabilization role for fiscal policy working alongside monetary policy. Even there are
economists who say, no matter how independent central bank is, the monetary policy may not
be sufficient for determining the price level and there is role for fiscal policy (Hanif and Arby,
2003).
The instrument of monetary policy ought to be the short term interest rate, that policy should
be focused on the control of inflation, and that inflation can be reduced by increasing short
term interest rates (Alvarez, 2001).
The investigations into the existence and nature of the link between inflation and economic
growth have experienced a long history. Originating in the Latin American context in the
1950s, the issue has generated an enduring debate between structuralists and monetarists. The
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structuralists believe that inflation is essential for economic growth whereas the monetarists
see inflation as detrimental to economic progress. There are two aspects to this debate: (a) the
nature of the relationship if one exists and (b) the direction of causality (Mallik, 2001).
Although economists now widely accept that inflation has a negative effect on economic
growth, researchers did not detect this affect in data from the 1950s and the 1960s (Min,
2005). A series of studies in the IMF Staff Papers around 1960 found no evidence of damage
from inflation (Wai, 1959; Bhatia, 1960; Dorrance, 1963, 1966). Therefore, a popular view in
the 1960s was that the effect of inflation on growth was not particularly important.
This view prevailed until the 1970s, when many countries, mainly in Latin Americans
experienced hyperinflation. Numerous empirical studies were devoted to finding the effects of
inflation in high-inflation countries. These studies repeatedly confirmed that inflation had a
significant negative effect on economic growth, at least at sufficiently high levels of inflation.
Therefore, today, the dominant view regarding the effects of inflation has changed
dramatically. It has been found that in developing countries as the inflation rate exceeds a
specified threshold, it affects the growth rate adversely (Min, 2005).
Monetary policy plays a key role in determining inflation rates. Various studies provide the
empirical evidence on the relationship between inflation and growth. (Lucas, 1973) held that
inflation in any economy induces uncertainty in economy and increased economic uncertainty
negatively affect the output growth. Inflation overall effects the growth of the country, the
financial sector development and the vulnerable poor segment of the population. There is clear
consensus that even moderate levels of inflation, damage real growth.
Kremer et al. (2008) examined the impact of inflation on long-term economic growth for a
panel of 63 industrial and non-industrial countries. Their results revealed that inflation
obstructs growth if it exceeds thresholds of 2% for industrial and 12% for non-industrial
countries. However below these thresholds, effect of inflation on growth remained
significantly positive.
Bruno and Easterly (1998) demonstrated that a number of economies have experienced
sustained inflations of 20 percent to 30 percent without suffering any apparently major
adverse consequences. However, once the rate of inflation exceeds some critical level (which
Bruno and Easterly estimated to be about 40 percent), significant declines occur in the level of
real activity.
Barro (1995) very precisely examined the five-year average data of 100 countries over the
period of 1960-90. His result shows that an increase in average inflation by 10 percentage
points per year would slow the growth rate of the real per capita GDP by 0.2-0.3 percentage
points per year. He argued that although the adverse influence of inflation on growth appeared
small, the long-term effects on standards of living were actually substantial. Nevertheless,
some other empirical and theoretical studies argued that the inflation-growth relationship is
fragile. Maghyereh (2003) also reported that the effect of inflation rate on the economic
growth is strongly negative and statistically significant.
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Mundell (1965) and Tobin (1965) predict a positive relationship between the rate of inflation
and the rate of capital accumulation, which in turn, implies a positive relationship to the rate
of economic growth. They argue that since money and capital are substitutable, an increase in
the rate of inflation increases capital accumulation by shifting portfolio from money to capital,
and thereby, stimulating a higher rate of economic growth (Gregorio, 1996).
Ahmad and Mortaza (2005) evaluated the concept that moderate and stable inflation rates
promote the development process of a country, and hence economic growth. Using annual
data set on real GDP and CPI of Bangladesh for the period of 1980 to 2005, they demonstrate
statistically significant long-run negative relationship between inflation and economic growth
for the country as indicated by a statistically significant long-run negative relationship
between CPI and real GDP. Also as a threshold they suggested 6% of inflation above which
inflation adversely affects economic growth.
However, Johanson (1967) found no conclusive empirical evidence for either a positive or a
negative association between the two variables. Therefore, a popular view in the 1960s was
that the effect of inflation on growth was not particularly important. Also Fischer and
Modigliani (1978) suggest a negative and nonlinear relationship between the rate of inflation
and economic growth through the new growth theory mechanisms (Malla, 1997). They
mention that inflation restricts economic growth largely by reducing the efficiency of
investment rather than its level.
Fisher (1993) also found negative associations between inflation and growth for a large set of
countries.
Dewan and Hussein (2001) found in a sample of 41 middle-income developing countries
including Fiji, that inflation was negatively correlated to growth. While examining
relationship of inflation and growth in Fiji, Dewan (1999) found that changes in the difference
between actual GDP and potential GDP (output gap) had a bearing on Fijis inflation outcome.
Faria and Carneiro (2001) investigated the relationship between inflation and economic
growth in the context of Brazil which has been experiencing persistent high inflation until
recent. Analyzing a bivariate time series model with annual data for the period between 1980
and 1995, they found that although there exist a negative relationship between inflation and
economic growth in the short-run, inflation does not affect economic growth in the long-run.
Mallik (2001) examine the relationship between inflation and GDP growth for four South
Asian countries i.e. Bangladesh, India, Pakistan and Sri Lanka. Their results provided the
evidence of a long-run positive relationship between GDP growth rate and inflation for all
four countries. They also concluded that moderate inflation is helpful to growth, but faster
economic growth feeds back into inflation. Thus, these countries are on a knife-edge.
Kuttner and Mosser (2002) indicated that monetary policy affects the economy through
several transmission mechanisms such as the interest rate channel, the exchange rate channel,
Tobins q theory, the wealth effect, the monetarist channel, and the credit channels including
the bank lending channel and the balance-sheet channel. But mainly monetary policy plays its
role in controlling inflation through money supply and interest rate. Money Supply (M2)
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would affect real GDP positively because an increase in real quantity of money causes the
nominal interest rate to decline and real output to rise (Hsing, 2005). Taylor (1995)
emphasized the importance of the interest rate channel in this regard.
Hsing (2005) examined an annual sample during 1959-2001 to find possible relationships
between real GDP for Venezuela and selected macroeconomic variables. According to his
study more real M2, more government deficit spending, real depreciation, a higher expected
inflation rate, and higher world oil price would help raise real GDP in Venezuela.
Qayyum (2006) investigated the linkage between the excess money supply growth and
inflation in Pakistan. Also he examined that is inflation a monetary phenomenon? His results
from the correlation analysis indicated that there is a positive association between money
growth and inflation. The money supply growth at first-round affects real GDP growth and at
the second round it affects inflation in Pakistan. The important finding from the analysis is
that the excess money supply growth has been an important contributor to the rise in inflation
in Pakistan during the study period. This supports the monetarist proposition that inflation in
Pakistan is a monetary phenomenon.
Mohsin and Axel (2005) concluded an inverse relationship between inflation and real per
capita GDP of Pakistan. When inflation was 8 percent on average during 1978-1991, per
capita growth averaged 3 percent but when inflation rose to 11% during 1992 and 1997 real
per capita growth averaged only 1 percent and it further recovered as inflation fell to 5
percent. Further this study concludes that the direct inflation-growth nexus suggests a
threshold in the range of 4 to 9 percent, while the inflation-financial development nexus
suggests a lower threshold of 36 percent. Based on this, it is further recommended that SBP
adopts an inflation target of 5 percent. Paul, Kearney and Chowdhury (1997) also reported a
negative relationship between economic growth and inflation for Pakistan.
Fry (1988) and Gleb (1989) find, from pooled cross-economy time series data, a consistently
positive and significant relationship between economic growth and the real rate of interest. In
order to separate the effects of inflation and real interest rates on growth, World Bank
conducted a study. This study provides evidence from a sample of twenty countries, for the
impact of the real interest rate and the inflation rate on the growth rate. The real interest rate
has a statistically significant and positive impact on growth. But when inflation is included,
the coefficient for the real interest rate is no longer statistically significant, while the negative
coefficient on the rate of inflation is. This suggests that the positive relation between real rate
of interest and growth was actually reflecting a negative relation between inflation and growth
in financially repressed regimes, where nominal interest rates are kept fixed (World Bank
1993).
Relationship between inflation, interest rate, and growth has been the consideration of
researchers since very long. An examination of this relationship in USA shows that the U.S.
inflation of the 1970s and 80s can be fully accounted for by the corresponding increase in M2
(or M1) growth rates, and the return to relatively low inflation rates in the 1990s can be
explained by the correspondingly low average rate of money supply growth in that decade.
Inflation in the 90s was about 3.5 percentage points lower than its average in the 70s and 80s,
and the growth rate of M2 was about 5 percentage points lower (Alvarez, 2001).
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The statistics reveal that money supply growth exceeded its target levels for four consecutive
years (2002-2005) due to easy monetary policy stance to support the growth process.
However, the expansionary monetary policy resulted in rapid inflation reaching double digit in
2005. Since inflation is a tax on money holdings. Inflation tax for the year 2005 is estimated at
Rs 61928 million or 0.98 percent of GDP. Before 2005 monetary policy was aimed at
supporting growth because inflation was at low level. With the rising inflation from 2005
monetary policy stance has now changed from supporting growth to containing of inflation
(State Bank of Pakistan, 2006).
All of the above discussion shows that there is a non linear relationship between inflation and
economic growth. However inflation does effect economic growth directly. Monetary Policy
variables such as Money Supply M2 and Interest rates along with inflation also effect the
economic growth in economy.
RESEARCH METHODS
This chapter has been divided into three parts. First one discusses the data sources and
nature of data in detail. Second one discusses the model to be applied to find out the results.
And third and last part states the hypothesis to be checked for this study.
DATA COLLECTION
In order to check impact of monetary policy on economic growth of Pakistan, through

inflation, comprehensive data has been gathered for the period 1980-2009. Main data source
in this regard has been the State Bank of Pakistan. Moreover official websites of ministry of
finance and federal statistics bureau has also been visited in this regard. Since data for the
period before 1980, for all the variables under study, is not available, we have considered
maximum number of years for which data for all required variables is available.
VARIABLES
Description for each variable under study is as under:

Gross Domestic Product (GDP)
In economics, GDP is defined as the value of all goods and services produced within
the geographic territory of an economy in a given interval, such as a year. A well known
formula for GDP has been stated as the total market value of all final goods and services
produced in a country in a given year, equal to total consumer, investment and government
spending, plus the value of exports, minus the value of imports.
GDP is the most commonly known measures of national income, output, and growth. GDP is
of two types. Nominal GDP is a measure of money spent. Real GDP corrects the gross
nominal GDP figure for inflation, making real GDP more useful for historical comparison.
Nominal GDP is sometimes called money GDP, and real GDP is sometimes called inflationcorrected GDP or constant price GDP. For purpose of this study data for real GDP for the
period 1980-2008 has been considered.
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In Pakistan, high GDP growth has been observed over last five years only. After a period of
low growth throughout the 1990s, the annual growth figure for Pakistan has been hovering
around the 7 percent level since 2003-04. The current growth momentum of Pakistan's
economy is largely the result of greater financial and trade integration and the good
performance of the services and manufacturing sectors. Recent increase in GDP growth rate
has reduced income-poverty ratio in a significant manner and raised the average living
standards in Pakistan. However rising inequality in income and non-income group have led to
a weaker link between economic growth and poverty reduction in Pakistan. This provides us
the basis to check, by means of this study, the impact of other monetary variables as well on
GDP growth in economy collected for the period 1980-2009.
Money Supply (M2)
Money supply is the total amount of money available in an economy at a particular

point of time. The importance of an appropriate monetary aggregate can hardly be over
emphasized, particularly for those countries that attach their monetary policy to monetary
aggregates. The breakdown of stable relationship between monetary aggregates and
macroeconomic variables due to structural change in financial markets and emergence of new
financial instruments led to frequent changes in the definition of monetary aggregates. In
practice more than one monetary aggregate are usually defined in the hope that multiple
aggregates may collectively provide more information for the conduct of monetary policy and
developments in the economy.
Interest Rate
The term interest rate usually means any bank lending rate. However, the rates dont
always move rapidly because they are driven by different forces. Rates on longer-term loans
are driven by 3 months, 6 months, and 12 months treasury bills in Pakistan. On treasury notes,
like any loan, the interest rates are fixed. However, Treasury notes are auctioned to the highest
bidder. Depending on the demand at auction, the note could cost more or less than face value.
However, at the end of the note's term, the Government pays back full face value to the
bidder. In effect, bidders are loaning the bid amount to the Government. In return, they get the
interest rate and the full face value.
Inflation Rate
Stable inflation is recognized as an integral component of sound macroeconomic

policies. Inflation refers to the persistent rise in general price level. Inflation affects the
distribution of both income and wealth. Nominal incomes of some individuals tend to increase
with inflation, while those of others remain constant thus causing a change in the distribution
of income in favor of the former group. Complex and multidimensional problem of inflation
needs a systematic and scientific understanding, examination, investigation and analysis.
The excess money supply growth and inflation in Pakistan are positively associated with each
other. The money supply growth at first-round affects real GDP growth and at the second
round it affects inflation in Pakistan. The important finding is that the excess money supply
growth has been an important contributor to the rise in inflation (Qayyum, 2006). This
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provides the basis to examine the impact of monetary policy by controlling inflation on
economic growth.
Four different price indices are published in Pakistan: the consumer price index (CPI), the
wholesale price index (WPI), the sensitive price index (SPI) and the GDP deflator. In
Pakistan, the main focus is placed on the CPI as a measure of inflation as it is more
representative with a wider coverage of 375 items in 71 markets of 35 cities around the
country. Also it most closely represents the cost of living. So this study assumes annual CPI
for the period 1980 to 2009 as an indicator of inflation in economy.
HYPOTHESIS
On the basis of literature review, following hypothesis have been devised for the
purpose of this study:
H1: Interest rate has relationship with GDP.
H2: Growth in money supply has relationship with GDP.
This chapter covers the estimation and analysis of data for the period 1980-2009 to
check out the impact of monetary policy through inflation on growth rate of Pakistan.
REGRESSION ANALYSIS
Model Summary (b)
R
Adjusted
Std. Error of
DurbinModel
R
Square
R Square
the Estimate
Watson
1
.900(a)
0.811
0.797
947743.736
0.342
Dependent Variable: Growth in GDP
Independent Variable: Interest Rate, Money Supply
From the results of the SPSS regression model, It has been observed that R was 0.900 that
indicates that the strength of relationship was strong, and the Coefficient of Determination
(R^2) was 0.811 which means that the 81.1 percent of the model was explained & the
remaining was explained by unknown factors. So we reject null hypothesis and the
relationship among the variables exists.
Durbin-Watson test value was 0.342 which was less than 2 which means that the relationship
among the observations does not exists
Coefficients (a)
Model
1
Unstandardized
Coefficients
B
-11172412.15
Std. Error
3169327.
12
1556639.592
145579.6
55
0.907
10.69
0.000
-3187208.635
1148787.
77
-0.235
-2.774
0.010
(Constant)
COMPUTE ln_MS
= LN(moneysupply)
COMPUTE ln_IR =
LN(interestrate)
Standardized
Coefficients
Beta
sig.
-3.525
0.002
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Model: Growth GDP = -11172412 + 1556639.6 (money supply) 3187209 (interest rate)
Interpretation:
Constant was -11172412 which means even when the Interest Rate was Zero still GDP
was -11172412, the B1 was 1556639.6 which indicate that with one unit increase in money
supply the GDP increased by 1556639.6 and vice versa, and the B2 was 3187209 which
indicate that with one unit increase in money supply the GDP increased by 3187209 and
vice versa.
Model Fit Summary
R
Adjusted
Std. Error of
DurbinR
Square R Square
the Estimate
Watson
0.55 0.307
0.227
442226.118
1.060
Furthermore to improve the model, Autocorrelation has been applied on the data and at Final
Iteration 10 the Durbin Watson was improved from 0.342 to 1.060.
CONCLUSION
Monetary policy for any country plays a key role in its overall economic growth. The
institutional framework for monetary policy in Pakistan is set out in the State Bank of Pakistan
Act of 1956 and its subsequent amendments. The Act specifies that the Central Board of
Directors of the State Bank of Pakistan (SBP) shall secure monetary stability and the
soundness of the financial system. Monetary policy of Pakistan now for some years has been
largely supportive of the dual objective of promoting economic growth and price stability. It
achieves this goal by targeting monetary aggregates (broad money supply growth as an
intermediate target and reserve money as an operational target) in accordance with real GDP
growth and inflation targets set by the Government (Shamshad, 2006). In this scenario,
present study is an attempt to discover how much money supply, interest rate and inflation
impact the overall growth of GDP in Pakistan.
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References
Alvarez (2001). Interest Rates & Inflation, Federal Reserve Bank of Minneapolis,
Research Department, Working Paper 609.
Asma (2009). GDP growth rate to increase to four percent by 2010, Asian Development
Bank Outlook 2009.
Barro (1995). Inflation & Economic Growth, NBER Working Paper.
Blejer (2000). Inflation Targeting in Practice: strategic & Operational Issues &
Application
to Emerging Economies, International Monetary Fund.
Boweni (2000). Economic growth, inflation & monetary policy in South Africa, BIS
Review
Bruno & Easterly (1998). Inflation Crisis & Long-Run Growth, JME, 41, 3-26.
Dewan & Hussein (2001). Determinants of Economic Growth, Working Paper, Reserve
Bank of Fiji.
Faria & Carneiro (2001). Does High Inflation Affect Growth in the Long & Short run,
Journal of Applied Economics, 89-105.
Fischer & Modigliani (1978). Towards & Understanding of the Real Effects & Costs of
Inflation, Welt Archive, 810-833.
Frankel (2008). The Effect of Monetary Policy on Real Commodity Prices, Forthcoming
in Asset Prices & Monetary Policy, edited by John Y. Campbell. Chicago, University of
Chicago Press.
Friedman (1963). Inflation: Causes & Consequences, New York: Asia Publishing House.
Friend (2000). Maintaining Low Inflation: Rationale & reality, Inflation Targeting in
Practice: strategic & Operational Issues & Application to Emerging Economies,
International Monetary Fund.
Gleb (1989). Financial Policies, Growth & Efficiency. World Bank, PRE Working Paper.
Gregorio (1996). Inflation, Growth, & Central Banks: Theory & Evidence. World Bank
Policy Research Working Paper 1575.
Hanif & Arby (2003). Monetary & Fiscal Policy Coordination. MPRA.
Hsing (2005), Impact of Monetary Policy, Fiscal Policy, & Currency Depreciation on
Output: The Case of Venezuela, Briefing Notes in Economics.
Johanson (1967). Is Inflation a Retarding Factor in Economic Growth, Fiscal & Monetary
Problems in Developing States, Proceedings of the Third Rehoroth Conference, ed. by
David Krivine, 121-30.
Khan (2006). Inflation in Pakistan: Money or Wheat, IMF Working
Paper.
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Kuttner & Mosser (2002). The Monetary Transmission Mechanism: Some Answers &
Further Questions, Federal Reserve Bank of New York, Economic Policy Review, 1526.
Lucas (1973). Some International Evidence on Output-Inflation Tradeoffs, American
Economic Review, 326-334.
Maghyereh (2003). External Debt & Economic Growth in Jordan: The Threshold Effect,
International Economics.
Malla (1997). Inflation & Economic Growth: Evidence from a Growth Equation, mimeo,
Department of Economics.
Mallik (2001). Inflation & Economic Growth: Evidence from Four South Asian
Countries, Asia Pacific Development Journal.
Min (2005). Inflation & Economic Growth: Threshold Effects & Transmission
Mechanisms, Workign Paper, University of Alberta.
Mohsin (2005). Inflation in Pakistan: Money or Wheat, Paper presented
conference.
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SBP
Mundell (1965). Growth, Stability & Inflationary Finance, Journal of Political Economy,
97-109.
Paul, Kearney & Chowdhury (1997). Inflation & economic growth: a multi-country
empirical analysis, Applied Economics, 1287-1301.
Qayyum (2002). Monetary Conditions Index: A Composite Measure of Monetary Policy
in Pakistan, Pakistan Development Review, 551-566.
Qayyum (2006). Money, Inflation, & Growth in Pakistan, Pakistan Development Review,
203-212.
Shamshad (2007). Monetary Policy in Pakistan, Address at Federation of Pakistan
Chambers of Commerce & Industry.
Shamshad (2006). Perspectives on Pakistans Monetary Policy Developments, Address as
Chief Guest at the Woodrow Wilson Centre, Washington D.C.
Smyth (1992). Inflation & the growth rate in the United States Natural Output, Applied
Economics, 567-570.
State Bank of Pakistan (2006). Monetary Policy Statement, (Islamabad).
State Bank of Pakistan (2004). Monetary Policy Statement, (Islamabad).
Taylor (1995). The Monetary Transmission Mechanism: An Empirical Framework,
Journal of Economic Perspectives, 11-26.
Thorbecke & Zhang (2008). Monetary Policy Surprises & Interest Rates: Choosing
between the Inflation-Revelation & Excess Sensitivity Hypotheses, RIETI Discussion
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Tobin (1965). Money & Economic Growth, Econometrica, 671-684.

Books References:
Fry (1988). Money, Interest, & Banking in Economic Development. Johns Hopkins
Press, Baltimore.
World Bank (1993). The East Asian Miracle, Oxford University Press, New York.
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Public Transport : An Inferior Good-A Case Study of Lahore

Maryam Wasif
Associate Professor of Economics, Lahore College for Women University
Ghias-ul-Haq
Head, Department of Management Studies, FAST-NU, Peshawar
Abstract
Public transport in Lahore is a microcosmic representative of the country at large. The focus
of the present study is the Franchised Bus System (FBS); a partnership between private and
public investors and regulatory authorities to weed out chaotic wagon culture and to introduce
Premium Bus Service to reduce congestion in the city. The aim of this study is to make a
comparison of Franchise buses and wagons and to find out for whom this service is meant.
The data analysis shows that the public transport is mostly chosen by low and lower middle
income groups to meet the daily transportation needs, verifying inverted-U passengers
demand for public transport. This is contrary to the claims made by FBS of providing
premium service and of inducing owners of private vehicles towards Franchise buses for day
to day business. It is found that household expenditure on transport is 15-20 percent. Further,
FBS appears to be a case of policy failure. Had the policy been implemented in letter and
spirit, the grant of exclusive rights to the bus companies would have put some obligation on
the bus operators to satisfy demand and to ensure a certain level of service quality. The
reversion to old system puts no service obligation on operators and signifies that public
transport has come down to zero level.
Keywords: Public Transport , Inferior Good, Case Study , Lahore
1. Introduction:
Transport is one of the basic needs of our economy. It ensures market access, thereby
enhancing productive efficiency through specialization. Generally in urban areas, it is a
critical link between productive and reproductive activities and provides access to education,
health and other facilities. On the other hand, the rapid rate of population growth and
dwindling state of public funds has led to neglect and steady deterioration of transport
infrastructure and public transport. The later is the cause as well as effect of increased
motorization (private as well as small public vehicles), stretching the already deteriorated
roads beyond limits. The Transport sector in Pakistan is typical in this sense. It has always
been assigned secondary importance and the maintenance of transport infrastructure has been
deferred over the years now. It presents a chaotic picture of disorder resulting in congestion,
pollution and accidental deaths.
The focus of present study is on Lahore city, metropolis of the most populated province of
Punjab. This is a microcosmic representative of the public transport of the country at large.
Until 1998, Wagons catered for most of the Urban-transport needs in Lahore. About 5300
Wagons were operating on 48 routes of Lahore city that led to great congestion.110. These
transport facilities were not sufficient for growing needs of the population.
Realizing the fact in 1999, Small and Medium Enterprise Authority (SMEDA, 1999), based
on the recommendations of the World Bank, and developed a vision that later on became an
110
Meakin, Richard. "The Lahore Public Transport Policy & Institutions Study." Final Report. 1998, pp3.
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integral part of Prime Ministers Urban Transport Strategy. The core of the strategy was a
policy shift from Wagons to Franchise Bus Scheme.111
The Franchise Bus System was a partnership between the private investors and regulatory
authorities. The bus operators were promised exclusive route contracts through a
comprehensive bidding process for a period of 7-10 years. This was implemented through
enforcement of Section 69-A (3) of Motor Vehicle Ordinance (MVO). It stated that when a
franchise was granted, all existing stage carriage permits (on these routes) stand cancelled (in
the ratio of five wagons to each bus). However in 2003, Wagon operators took legal actions
against S69-A being discriminatory. Subsequently S69-A was declared null and void by the
Supreme Court in December 2004. In June 2005, a new section 45-A provided that
Government of .Punjab would define certain specific routes based on periodic surveys and
would determine the numbers and specifications of buses to be used on routes. A network of
fifty three high demand routes was specified for buses while 37 secondary routes were
identified as suitable for Wagon operators. 112
Currently, to meet public demand, 783 buses and 1782113 wagons are plying on 90 routes in
Lahore that often overlap. Further, they are charging same fares for similar services from
passengers. While Franchise Bus System did promise premium service at premium fare,
presently the quality of service provided is quite low. The aim of the study is to make a
comparison of Franchised Buses and Wagons and to find out for whom this service is meant.
There are a number of studies dealing with Urban Transport in developing countries. The
studies reviewed here are specifically related to affordability and access of Public transport to
the poor.
Godard and Lvera (2000), emphasize that Physical mobility of the people, within the urban
space and everywhere else, permitted by the transport system seems to be a factor of potential
richness and its deprivation a factor of Poverty. The study discusses the French Experience in
projects of developing cities with French funding. The study concludes that French
Experience achieved in France does not give any direct solution of the problems of developing
cities. However the general lesson that can be learnt is that a transport policy with an objective
to fight against poverty should be able to integrate this objective in a more global policy that
improves the mobility conditions of the poor and gives them access to basic utilities World
Bank, (2002) clearly focused on poverty and accessibility. It emphasizes that urban transport
can contribute to poverty reduction both directly through improved accessibility, and
indirectly through positive effects on the economy of the cities.
It also stresses that urbanization and motorization go in tandem which results in traffic related
problems and increased transport costs for the poor. Moreover, pro-motorization policies and
neglect of public transport further intensifies the sufferings of the poor. Hence a four-prong
strategy is recommended, i.e., structural and Institutional reform, improving operational
efficiency of transport modes and a clear focus on reforms to help the poor.
111
SMEDA National Transport Strategy. Draft. Lahore: Government of Pakistan, 1999.

MVA Asia, Limited. "Lahore rapid Mass Transit System Feasibility Study." Final Report, Volume 1, Main
Report. 2006.
112
113
Statement regarding permit position in respect of urban transport in Lahore city. Information collected from
Regional Transport Authority (RTA).
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Gwilliam (2003), on the basis of some recent World Bank experience highlights
implementation problems in the process of Bus Franchising. The paper classifies these
according to three root causes-lack of commitment to fully fledged reforms, protection of
vested interests and inadequate attention to detail.
Badami et al (2004) analyze access and mobility for the urban poor in India and show that
transport is consuming 18 percent income of the lowest income group, despite their making
half of their trips by walking.
Zhong-Ren Peng (2004), asserts that considering the average daily expenditure on bus travel
in Chinese cities, it comes out to be 40 percent of a poor persons earnings so rather than
spend this much, they prefer Non-Motorized Transport (NMT), i.e., walking and cycling.
But the use of NMT is being reduced due to rapid urbanization and urban sprawl.
Haider/Badami (2004), discuss the high fare of Franchise Bus Service in Greater IslamabadRawalpindi Area (GIRA) that is affordable only for the top quintile income group.
Carruthers et al (2005) have developed an affordability index that can be used as a first
indicator of the affordability of fares in a particular city. The paper uses a sample of 27 cities.
The index is computed for a person on the basis of average income and for a person on the
bottom quintile of income distribution.
Baker et al (2005) discuss the demand for transport services of the poor, the factors affecting
this demand and the inter linkages between transport decisions and other vital decisions such
as where to live and work. The study addresses these goals by conducting a survey of five
thousand households in Mumbai. The goal of the project is to study their travel demand
behavior in the context of residence and work place locations. The study describes the salient
features about travel pattern in Mumbai, the importance of walking and public transport in the
mobility of the poor and the middle classes respectively and the tradeoff between housing
quality and commuting time.
3. Methodology and Data Analysis
Keeping in view the scope of the study, primary as well as secondary data was required. The
secondary data was collected from publications of both national and international agencies.
Primary data was collected through well-structured questionnaires from both male and female
commuters who use buses and wagons as modes of transportation. The questionnaires were
based on their level of satisfaction or inconveniences they face by using these two means of
transportation.
3.1 Sampling procedure:
A representative sample was essential to acquire the meaningful results, which could have
inference with respect to population and could be used to recommend effective policy
measures
3.1.1 Universe of the Study:
The study is confined to urban demarcation of the Lahore city Hence the universe is limited to
the urban area covering all directions (North, South, East and West) up to urban jurisdiction of
Lahore. Hence all the routes, (wagons and buses) and all the members of households (possible
passengers) of these wagons and buses were considered the elementary units for sampling
procedure of the study.
3.1.1.1 Selection of bus routes
The universe was stratified considering the destinations of the routes from two centrally
focused points i.e. Railway Station and General Bus Stand.
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(i) Railway Station (RS) is the central place from the old city as from this starting point,
buses and wagons are considered to run on every possible route, especially at the
time of incoming and outgoing rails
(ii) Most of the bus routes originate from General Bus Stand (GBS) to various directions
in the city.(It is located not far from the Railway Station)
Punjab Weekly Gazette114 provides a list of routes specified under Section 45-A of
Provincial Motor Vehicle Ordinance. According to it, 38 out of a total of 53 routes (72
percent) originate from RS or GBS. Presently, out of the total 53 routes, buses are plying
on 31 routes;115 however the ratio i.e.72 percent, regarding the starting point of buses
remains the same.
Consequently the selection of buses was made as under:
All the franchised bus companies operating in these routes were given
consideration under sampling procedure.
Buses selected randomly from all 31routes were part of the study sample.
The number of respondents was distributed equally among these routes.
Following is the sample size of buses and passengers for the sample routes.
Sr.
#
Table 3.1: Franchised bus routes and their Origin and Destination
Routes Bus companies Origin
Destination
#
Of.
Passengers
New Khan
R.A Bazar
Saanda
48
New Khan
Railway Station
Islampura
40
New Khan
Daewoo AC
General
Bus Wahga
Stand
Railway Station
Defence
Daewoo
General
Stand
Bus Allama
Airport
54
90
Iqbal 60
114
February 01, 2006 pp 523

Anjum, et.al. Study/Policy Planning of Intra City Routes of Four Major Cities in Punjab. University of
Engineering & Technology . Lahore, 2007.
115
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6
Chattha
Brothers
Railway Station
Kahna Nau
77
12
Premier
Railway Station
Youhanna Abad
57
13
Premier
General
Stand
19
Old Ravi Pul
Chungi Amar Sidhu 72
10
20
Chattha
Brothers
Balouch
Old Ravi Pul
Bhaggrian
Bus Allama
Airport
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Iqbal 50
55
(i) Out of 31 routes, 10 were chosen at random that is one third of the total.
(ii) Out of the selected routes,70 percent routes originate either from RS or GBS towards
the four directions: two routes each towards South(routes 9,12), East(routes 5,8) and
West(routes 3,13) as most of the expansion of Lahore is taking place these
directions and one Northwards(route 4)
(iii) The remaining 3 routes (number 1, 19 and 20) were also selected randomly.116
(iv)As per formula (see section 3.2), 550 bus passengers were to be interviewed
so
55 passengers were covered on each route. However to make allowance for the errors and
omissions and incomplete surveys, a far greater number of passengers was interviewed. Last
column of the above table shows the actual number of passengers surveyed on various
routes.
3.1.2.2. Selection of Wagon routes
According to S-45 MVO, 37 secondary routes were assigned to wagons. On most of these
routes, buses and wagons did not overlap and hence passengers had no choice regarding
selection of either mode of transport. However, on some routes there was a considerable
portion where wagon and bus routes overlapped. As those routes provided a
choice/comparison of buses to wagons, those were deemed more appropriate for survey. A
selection of routes posed further problems due to the fact that presently wagons are not
operating on many of the prescribed routes. It is also important to mention that many other
routes are occupied by illegal wagons. Considering these limitations, only a dozen routes were
left where wagons with valid permits were plying and four wagon routes were selected at
random from the routes with overlapped portion. As far as the respondents were concerned,
they were equally divided among these routes.
116
Designated by the Transport Department. They do not originate from RS or GBS
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Table 3.2: Wagon routes and their Origin and Destination
Sr. #
1
2
3
4
Route
7
10
27
52
Origin
Rang Mahal
Railway station
Lohari Gate
Shaukat Khannum
Hospital
Destination
Bakar Mandi
Pakki Thatti
Walton Road
Phattak
Passengers
137
127
143
146
3.2Sample Size of the Passengers

Next important step in sampling is to determine the sample size of passengers Using the
unknown population and guessed variability of the elementary units (the passengers), in the
absence of the required information applying well known statistical formula recommended by
Casley and Kumar117 to have representative sampling with the variability leading to estimation
of maximum sample size. The formula was as under:
n=z2v2/e2
Where z = value of normal variate at 95% level (1.96)
v = guessed variability (50%) for maximum sample size
e = acceptable error margin = 3%
(1.96)2. (0.5)2/ (0.03)2 = 1067
Thus the sample size determined by applying the statistical formula was 1067. Consequently
to minimize the non sampling error, 1156 respondents were interviewed.
Table 3.3: Overview of Sample size
Bus
of 53
Total number
routes
No.of
passengers 603
interviewed
Male
passengers 69
(percentage)
Female passengers 31
(percentage)
Wagon
number of 37
Total
routes
No. of passengers 553
interviewed
Male
passengers 86
(percentage)
Female passengers 14
(percentage)
3.3 Passengers Satisfaction Survey

After the determination of sample size, two separate questionnaires were developed for bus
and wagon passengers (see Annex-A). Realizing that the passengers are the most important
part and actual users of public transport, the study gives due consideration to their preferences.
The study also realizes that the basic purpose of this survey is to gather information about the
117
Casley, Dennis J. and Krishna Kumar. "The Collection, Analysis and Use of Monitoring and Evaluation
Data." (1988).
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satisfaction level of passengers for the transport they use preferably like reliability, safety,
seating capacity, occupancy etc. All important variables that indicate the contentment level of
the passengers (or otherwise) were included in the survey. Other variables included in the
questionnaires were
Personal profile of the passengers (age, sex, status, house-hold income, etc.)
Nature of the trip (origin, destination, walk-in, wait-in time, frequency and purpose of
trip)
Reasons for traveling by bus/wagon (cheaper mode, own mode not available, others
etc.)
Reasons for not preferring the alternative mode i.e. wagon for bus passengers and vice
-versa (poor service, high fare, slower mode etc.)
Passengers suggestions for the improvement of the service in their use (e.g. its
quality, reliability, fare structure etc.).
Questionnaires were filled by enumerators especially trained for this purpose. To save time
and to ensure accuracy, the passengers were briefly explained the nature/purpose of research
and they were expected to provide simple limited response answers to the set of questions
which were noted down by the enumerators.
To make the samples true representatives of the actual situation, the survey was conducted at
different times of the day e.g. peak, off-peak; and in different days e.g. week days and weekends. In this way the opinion of all groups of passengers could be obtained
4 Data Analysis
The data analysis throws light on the categories of passengers, their preferences and their
views about the fare structure and service quality of these two modes of public transport. The
results of the study are shown in Annex.-B (tables 1-16). It reveals that public transport was
mostly chosen by low and lower middle income groups: out of total passengers surveyed, 77
percent of wagon and 72 percent of bus passengers had household income between Rs.500020000 per month (see Table 16). Data analysis also shows that mostly public transport was
used to meet daily transport needs so that 50 percent of wagon and 69 percent of bus
passengers were using these modes for education, work or job related journeys (see table 3).
Also 38 percent of wagon and 61 percent of bus passengers were using these modes on daily
basis (i.e. on six days a week: see table 8). Regarding passengers preferences for these
modes, majority of these passengers surveyed were using these modes on daily basis, and had
many complaints against these modes of public transport. The most important complaints
regarding the bus service were its service quality and reliability On the other hand, most of
the wagon passengers were concerned about its fare structure and service quality and made
suggestions for its improvement (see table 13). Table 9 indicates, bus was a preferred mode
of public transit (viz a viz wagon) for only 71 percent of bus and 43 percent of wagon
passengers. The results also show (Table 10) that the most important reasons, the bus
passengers gave for not preferring wagons over buses was their poor service followed by the
fact that they were overcrowded compared to buses. On the other hand wagon passengers
did not prefer buses over wagons mostly due to their late arrivals. In addition, fare structure
was considered to be on high side as 25 percent of wagon and 14 percent of bus passengers
suggested revision of fares (see Table 13). Furthermore, most of the female passengers
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complained about the lower number of seats kept for females. On average only 3 females were
travelling on wagons and 13 on buses (see Table14).
5 Is Public transport becoming an inferior good?
Above all, results of the study indicate that public transport has indeed become an inferior
good. (Table 16 as discussed above, is quite suggestive here). The same is also shown in
figure-1below. These clearly indicate that at lower levels of income, i.e. between household
income of Rs.5000-20000, the demand for both buses and wagons is fairly high; after
household income of Rs.25000 there is a very steep decline in it thereby verifying the
inverted-U passengers demand for public transport. This is contrary to the claims made by
Franchised Bus Program of providing premium service at premium prices and to induce
owners of private vehicles towards Franchise Buses for day to day business. 118
Figure-1 : Level of Income (Rs.) and Distribution of Passengers
Passengerspercentage
Demandforpublictransport
40
35
30
25
20
15
10
5
0
Bus(%)
Wagon(%)
Household Income
permonth
6 Affordability of Current Transport Users.

As indicated in passengers satisfaction survey, 25 percent of wagon passengers and 14
percent of bus passengers are dissatisfied with the current fare structure (Table 13). It is
imperative here to explore this problem. Secondary data sources i.e., household surveys are
hereby used to assess what proportion of household income is spent on transport fares.
Although there is no general consensus yet most studies on the incidence of poverty in
Pakistan show an increase in poverty during 1990s ; e.g. Malik( 1992), Amjad and Kemal
(1997) and Ali and Tahir (1999) show an increase in poverty in early 1990s and according to
(Qureshi , 2001) this trend continued at the end of the decade. According to this study, in 9899, one-fourth of urban households were below poverty line. This means that with the rising
118
Haider and Badami make a distinction between transport needs of very poor and low income groups. Very
poor households live in informal housing, very close to their employment and do not depend on public transport
(pp 13). It appears the lowest income group in the present study falls in this category.
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poverty level there has been a significant reduction in the purchasing power of poor
households. As most of the households rely on public transit for trips that require motorized
transport, generally public transit is the only viable means of committing access to
employment, education, health and other urban services, In this section, the urban poor and
their mobility needs are discussed. The section relies on household survey conducted in year
2004-05 by the Bureau of Statistics119 to present the state of urban poverty in Pakistan.
Columns 2 and 4 of Table 17 below presents a breakdown for monthly urban household
income and expenditure in quintiles from the source discussed above. According to economic
survey 2007-08, (Table 7.1A),120 general price index for 2007-08 is equal to 155.74 compared
to the same for 2004-05 equal to 121.98 which gives adjustment factor equal to 1.28. Keeping
in view the above mentioned price changes; household consumption and income are adjusted
accordingly in columns 3 and 5.
Table 17
Adjusted Household Income and Consumption Expenditure
Quintiles Consumption
Adjusted
Income
Adjusted Income
Consumption
1
5621
7195
6203
7940
2
6752
8642
7239
9266
3
7994
10232
8549
10943
4
9830
12582
10462
13391
5
17043
21815
19233
24618
Average 12079
15461
13371
17115
Source:
1. House-hold survey (2004-05)
2.Economic survey (2007-08)
In order to find out the affordability of public transit, two sets of assumptions are used with
respect to the trips made by the households on public transport. National Transport Research
Cell (National Transport Reseach Centre) classifies three broad categories of urban travel: (i)
commuters (ii) students (iii) other trips. The study assumes 25 monthly work related return
trips by head of household and the same number of educational trips by one child in the
household by public transport. Then there are shopping trips, once a week and social visits
fortnightly by a family of five members121 that make 14 return trips per month. In all a
household makes 64 return trips per month. Thus total transport expenditure per household per
month at minimum prevailing bus/wagon fare of Rs. 10 comes out Rs. 1280 (64*2*10); it is
Rs.1408 at average wagon fare (Rs.11) and Rs. 1720 at average bus fare (Rs.14) in
Passengers Satisfaction Survey. See table 19 and 20
119
Household Integrated Economic Survey 2004-05

Pakistan Economic survey 2006-07. Islamabad: Government of Pakistan Finance Division Economic
Advisor's Wing, . Table 7.1
120
121
Average household size in Punjab is 6.5. (Household Integrated Economic Survey (HIES) 2004-05, pp3)
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Table 18: Number of House-hold Trips on Public Transport (per month)

Studys Assumptions
Categories of Trips
NTRC Assumptions
Haider et als
Assumptions
Work Related
25
40
50
Educational
25
Others
14
Total
64
40
50
Source:
1. NTRC
2. Haider et al
Table 19
Public Transport Fare
Minimum Fare
Average Fare(Wagon)
Average Fare(Bus)
Rs.10
Rs.11*
Rs.14*
Source:
1. information collected from transport department
2. passengers satisfaction survey
3. * On the basis of Km traveled.
Table 20
Total Household Transport Expenditure per Family per Month

Fare
NTRC
Haider
Present study
Minimum Fare
1280
800
1000
Average Wagon
1408
880
1100
Fare
Average Bus
1792
1120
1400
Fare
Source:
1. NTRC
2. Haider et al
On the basis of these figures, Table21 (considering NTRC assumptions) works out household
transport expenditures (as percentage of household consumption expenditure) which is quite
high (15-20 percent) for the first two quintiles even at minimum fare charged. This means a
considerable portion of household expenditure is spent on transport.
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Table 21: Transport Expenditure as Percentage of Total House-hold Consumption.

Quintiles
Tm
Taw
Tab
1
18
20
25
2
15
16
21
3
13
14
18
4
10
11
14
5
6
6
8
Average
8
9
12
Source: NTRC
1. Tm=transport expenditure at minimum(bus and wagon) fare
2. Taw=transport expenditure at average wagon fare
3. Tab= transport expenditure at average bus fare
Haider et al (2004) have computed transport affordability of different quintiles with different
assumptions. They only consider work related journeys. They assume two earners per urban
household that require work related commuting by public transport while other household
members do not incur transport expenditures. Their study assumes 20 return trips per earner
per month (see table 19). This study, however, finds out that (for work related journeys) most
of the passengers were making trips 6 days a week; hence 20 trips are changed into 25 trips
per month per person. (See Table 18 for comparison of three approaches). On the basis of
these assumptions made in this study, transport expenditure per household per month becomes
Rs.1000 (25*2*2*10) at minimum fare; Rs.1100 at average wagon fare and 1400 at average
bus fare.(See Table 20). Thus household transport expenditure as percentage of household
consumption expenditure of lowest quintile is 14 percent and 15 percent and 19 percent at
minimum and average fare levels discussed above. It is interesting to apply ArmstrongWright maxim here. It states that situations, in which greater than 10 percent of households
spend greater than 15percent of household income on work related journeys, can be regarded
as discriminatory 122 It has often been interpreted as a reasonable rule for determining the
level of politically administered price. This maxim suggests that transport expenses have
become prohibitive for lower income households as the first quintile is spending almost
15percent on work-related journeys even at minimum fares.
7 Franchise Bus Scheme: A Policy Failure
As corollary to the above, the Franchised Bus Scheme appears to be a case of policy failure.
Had the policy implemented in letter and spirit, the grant of exclusive routes to the bus
companies would have put some responsibility on the bus operators to satisfy demand on the
route ensuring a certain level of service quality. The reversion to the old system that puts no
service obligations on operators and had already proved unworkable in the past signifies that
public transport has come down to zero level. There is same disorderly traffic, congestion
and chaos on the roads as was observed by Meakin in 1998 when the idea of Franchised Bus
System was floated by him. There is only a marginalized reduction in wagons as half of the
wagons are unregistered. The growth of bus industry has slowed down to 5 percent as the
122
CITIES ON THE MOVE A World Bank Urban Transport Strategy Review. Study. Washington, D.C.: The
World Bank, 2002., pp 34.
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investors confidence has been affected by successful legal action (section 45-A of MVO) and
erosion of profits by escalation in fuel prices. 123
Currently the public transport fails to cater to the needs of middle income group or the poor,
however the latter are compelled to use it nevertheless as they have no other option.
[Table-1] Distribution of Passengers on the Basis of Sex
(Percent)
Sex
Bus
69
31
Male
Female
Wagon
86
14
Table-2 Distribution of Passengers on the Basis of Status

(Percent)
Status
Student
Government Servent
Business/Private
Household
Unemployed
Other
Bus
30
17
28
7
5
13
Wagon
26
19
35
4
8
9
[Tabel-3] Distribution of Passengers on the Basis of Purpose of Trip (Percent)
Purpose
Educational Purpose
Work/Job Purpose
Market Purpose
Other Purpose
Bus
Wagon
28
41
14
17
26
24
18
32
Table 4: Average Fare

Wagon Fare
Bus Fare
11
14
Table 5: Average Walk in and Wait in Time

Time
Walk Time
Wait Time
Bus Avg.
8
12
Wagon Avg.
7
8
Table 6: Other Mode of Transport

Type of Transport
Car
Motor Cycle
Other
123
Bus(%)
24
65
11
Wagon(%)
12
75
13
Information collected from Transport Department
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Table 7: Reason for Travelling (By Bus or Wagon)

Reason
Cheaper
Used by another
Out of Order
Other
Bus
15
39
12
34
Wagon
9
22
5
63
Table 8: Distribution of Passengers on the Basis of Frequency of Trips*

(Percent)
Days in a Week
Bus
Wagon
7 Days
2
4
6 Days
61
38
5 Days
4
4
4 Days
2
3
3 Days
2
3
2 Days
4
20
1 Days
8
15
Less than 1
17
13
*Return Trips
Table 9: Distribution of Passengers on the Basis of their Preferred Mode of
Transport (Percent)
Preferred Mode
Bus
Wagon
Bus
71
43
Wagon
29
57
Table 10: Distribution of Passengers not Preferring the Alternate Mode
(Percent)
Reasons
Poor Service
High Fare
Late Arrival
Unsafe
Attitude of Crew
Overcrowded
Slower Mode
No. is less
No other Choice
Others
Bus
20
9
10
11
10
17
8
4
7
5
Wagon
13
10
19
5
4
13
13
5
15
3
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Table
11:
Bus/Wagon
Accident
Yes
No
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Accidents
encountered
by
passengers
(Percent)
Bus
21
79
Wagon
14
86
Table 12: Accident Major or Minor as

reported
by
Passengers
(Percent)
Accident
Bus
Wagon
Major
19
18
Minor
81
82
Table 13: Suggestions by Passengers to improve
Bus/Wagon Service (Percent)
Suggestions
Bus
Wagon
Service Quality
25
19
Service Reliable
22
14
Fare Structure
14
25
Safety
10
16
Crew Behavior
8
8
Seating Capacity
19
17
Any Other
2
1
Table 14: Average No. of Female Passengers
Female Passengers
Average
Bus
13
Wagon
3
Table 15: Average No. of Vacant Seats

Vacant Seats in:
Average
Bus
2
Wagon
2
Table 16: Level of Income(Rs.) and distribution of
passengers
(Percent)
Categories
Bus
Wagon
Below 5000
4
3
5000 to 10000
22
16
10001 to 15000
21
34
15001 to 20000
29
27
20001 to 25000
11
17
25001 to 30000
5
2
30001 to 35000
2
1
35001 to 40000
4
1
Above 40000
1
0
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Anjum, et.al. Study/Policy Planning of Intra City Routes of Four Major Cities in Punjab.
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The Effects of Job Satisfaction on Productivity: Orange Telecommunication Company

on Jordan: Case Study
Mohammad. T. Bataineh,
Assistant Professor, Business administration Department,
Jerash Private University, Jordan.
Abstract
Job satisfaction play important role on organizations to be successful so they must
continuously ensure the satisfaction of their employees, the aim of this study is to explore the
effect of job satisfaction on productivity through variables such as occupational level, job
experiences, job congruence and uses of skills, using sample of (163) managers in Orange
company, Results were supported by previous researches revealing that Occupational level,
Job Experience job congruence and uses of skills have significant positive influence on
productivity.
Keywords: Job Satisfaction, Productivity, Orange Telecommunication Company.
1. Introduction
Job satisfaction describes how content an individual is with his or her job. The happier
people are within their job, the more satisfied they are to be. Job satisfaction is not the same as
motivation or attitude, although it is clearly linked. Job design aims to enhance job satisfaction
and productivity; methods include job rotation, job enlargement, experience, uses of skills and
occupational level. Other influences on satisfaction include the management style and culture,
employee involvement, empowerment, job congruence and autonomous work position. Job
satisfaction is a very important attribute which is frequently measured by organizations.
Job satisfaction can also be seen within the broader context of the range of issues which
affect an individual's experience of work, or their quality of working life. Job satisfaction can
be understood in terms of its relationships with other key factors, such as general well-being,
stress at work, control at work, home-work interface, and working conditions.
It is important to note that the literature on the relationship between job satisfaction and
productivity was neither found conclusive nor consistent. However, studies dating back to
(Herzberg's,1957) have shown at least low correlation between high morale and high
productivity.
Job satisfaction has been defined as a pleasurable emotional state resulting from the
appraisal of ones job, an affective reaction to ones job, and an attitude towards ones job,
(Weiss ,2002) has argued that job satisfaction is an attitude but points out that researchers
should clearly distinguish the objects of cognitive evaluation that affect emotion, beliefs and
behaviors, Job satisfaction, as already defined as a worker's sense of achievement and success,
is perceived to lead organizational productivity as well as to personal well-being. Job
satisfaction is a topic of considerable interest to employers since it is likely to influence a
worker's, and hence the firm's, performance. Productivity and profitability are likely to be
higher if workers have a high level of job satisfaction. Job turnover is also likely to be higher
in firms that have a low level of job satisfaction, thereby resulting in higher training costs. It is
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also important for workers to be happy in their work, given the amount of time they have to
devote to it throughout their working lives.( Qadar,2009)
In order for an organization to be successful they must continuously ensure the
satisfaction of their employees. Job satisfaction is defined as "an individual's reaction to the
job experience, there are various components that are considered to be vital to job satisfaction.
These variables are important because they all influence the way a person feels about their
job. These components include the following: pay, promotion, benefits, supervisor, coworkers, work conditions, communication, safety, productivity, and the work itself. Each of
these factors figures into an individual's job satisfaction differently. One might think that pay
is considered to be the most important component in job satisfaction, although this has not
been found to be true. Employees are more concerned with working in an environment they
enjoy (Berry, 1997).
We must go straight to the source when regarding job satisfaction. The employees are
the ones employers should turn to, Employees are the ones that give the necessary feedback in
order for employers to know if people are satisfied with their jobs. How should an employer
measure satisfaction without making the employee feel uncomfortable? It is not considered
tactful to confront an employee in person on how satisfied they are with their job. Thus,
employers measure job satisfaction based on surveys. Satisfaction surveys provide feedback to
the employer which could be beneficial to the company. There are many factors that need to
be resolved in order to provide a helpful survey. But how valid and reliable are these surveys?
One of the largest problems is how the surveys may be interpreted by the employees. The
company must evaluate the questionnaires with certain confounding factors in mind. The
surveys need to either be focused on the organization as a whole or just the components of the
job itself.
Job Satisfaction can be an important indicator of how employees feel about their jobs
and a predictor of work behaviors such as organizational citizenship, absenteeism, and
turnover. Further, job satisfaction can partially mediate the relationship of personality
variables and deviant work behaviors.(wegge,2007).
One common research finding is that job satisfaction is correlated with life satisfaction.
This correlation is reciprocal, meaning people who are satisfied with life tend to be satisfied
with their job and people who are satisfied with their job tend to be satisfied with life.
However, some research has found that job satisfaction is not significantly related to life
satisfaction when other variables such as nonworking satisfaction and core self-evaluations are
taken into account. (Rode,2004).
2-1. The following suggestions can help increasing job satisfaction:
1. Be Clear About Job Requirements: Its nearly impossible to do a good enough job at
your work if you dont know what the requirements are. Unfortunately, sometimes its
difficult to know all of the requirements at a job when those in charge are poor
communicators. Some bosses and supervisors are vague with expectations, assign new tasks
with little advance notice, request new tasks without providing training, and inadvertently set
workers up to fail in other ways.
2. Find Rewards and Recognition: We all need to feel recognized and rewarded for
what we do. If your job doesnt have built-in opportunities for recognition, or if rewards are
infrequent, you may need to add rewards and recognition to your own life.
3. Maintain a Balanced Lifestyle: Keeping balance in your lifestyle is important; if its
all work and no play, you may find your ability to work beginning to wane. In order to
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maintain balance in your lifestyle, the first step is to take an overview of your current lifestyle
and see which areas are out of balance.
4. Think Positive: You can usually change your experience of your current
circumstances by changing your attitude about them. Developing an optimistic point of view
and changing negative self talk patterns can go a long way toward helping you see the glass
half-full, as well as actually making you more productive and less stressed.
5. Know Yourself and Work With Your Personality: Certain features of your
personality make some jobs a better fit for you than others. If youre in a job thats not wellsuited for your personality, you may be putting yourself under unnecessary stress every day
you go to work.
2-2. Means for Increasing Job Satisfaction: (John, 1976)
1. Challenging Work and Its' Relationship to Job Decision Making--Satisfaction comes
from the challenge of running work. This will depend on whether management delegates
enough responsibility and puts enough faith in its people to make those decisions.
2. Effective Field Planning and Management Support--The Superintendent and Foreman
must have enough foresight to make sure they get the equipment and materials they need to
keep the job running smoothly. Management must give support in updating schedule and
delivering the goods when needed.
3. Sharing Cost Information--If the Superintendent and Foremen are given cost
information on a regular basis, they may be helpful to management in achieving profitability.
4. Identification with the Building Physical Structure.
5. Developing Good Crew Relations--This includes relations between a single crew as
well as relations between the trade.
2-3. How to Motivate Staff and Increase Employee Productivity?
Good office management not only ensures that workplace productivity is maintained,
operations run smoothly, and employees work together as a team for the overall good of the
company. It also cultivates a respectful employer employee relationship and knows how to
motivate staff.
One motivational idea proven effective as a way to increase employee job satisfaction
and productivity is to empower employee job performance. This is accomplished by allowing
more worker independence and responsibility. Want to increase overall productivity and the
job performance rating of your work staff? Employees feel as though they were valued and
trusted members of the workforce, allowing them to take the initiative to get things done their
way, and then rewarded them for successes.
Properly implemented and when not abused, this type freedom creates a more
comfortable, congenial work environment. Workers are happier with their jobs; performance
is boosted, and everyone including company bottom line numbers benefits.
2-4. Models of job satisfaction:
1. Affect Theory:
Edwin A. Lockes Range of Affect Theory (1976) is arguably the most famous job
satisfaction model. The main premise of this theory is that satisfaction is determined by a
discrepancy between what one wants in a job and what one has in a job. Further, the theory
states that how much one values a given facet of work (e.g. the degree of autonomy in a
position) moderates how satisfied/dissatisfied one becomes when expectations are/arent met.
When a person values a particular facet of a job, his satisfaction is more greatly impacted both
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positively (when expectations are met) and negatively (when expectations are not met),
compared to one who doesnt value that facet.
2. Dispositional Theory:
Another well-known job satisfaction theory is the Dispositional Theory Template:
Jackson April 2007. It is a very general theory that suggests that people have innate
dispositions that cause them to have tendencies toward a certain level of satisfaction,
regardless of ones job. This approach became a notable explanation of job satisfaction in light
of evidence that job satisfaction tends to be stable over time and across careers and jobs.
Research also indicates that identical twins have similar levels of job satisfaction.
3. Two-Factor Theory (Motivator-Hygiene Theory):
Frederick Herzbergs Two factor theory (also known as Motivator Hygiene Theory)
attempts to explain satisfaction and motivation in the workplace[5] This theory states that
satisfaction and dissatisfaction are driven by different factors motivation and hygiene
factors, respectively. An employees motivation to work is continually related to job
satisfaction of a subordinate. Motivation can be seen as an inner force that drives individuals
to attain personal and organizational goals (Hoskinson, Porter, & Wrench, p. 133). Motivating
factors are those aspects of the job that make people want to perform, and provide people with
satisfaction, for example achievement in work, recognition, promotion opportunities. These
motivating factors are considered to be intrinsic to the job, or the work carried out.[5] Hygiene
factors include aspects of the working environment such as pay, company policies,
supervisory practices, and other working conditions
2.5. Redefine the Employer Employee Relationship:
Administrative office management willing to redefine the relationship between superior
and subordinate are discovering something.
Supporting high performing employees who go out on a limb to discover and
implement ways to make better use of time not only increases productivity and employee
morale. But also helps unleash worker energy that proves contagious to other work staff.
2.6. Try the following:
Encourage employees to take the initiative
Encourage employees to discover ways to make better use of time
Encourage employees to think for themselves, while still working together as a team
Reward successes
In the article written by (Petri, 2010) examines the role of job satisfaction in the
determination of establishment-level productivity. The matched data contain both information
on job satisfaction from the ECHP (European Community Household Panel) and information
on establishment productivity from longitudinal register data that can be linked to the ECHP.
The estimates for the effect of a one point increase in the establishment average level of
employee job satisfaction, on a scale 1-6, on productivity vary depending on the specification
of the model. The preferred estimate, based on the IV estimation that uses satisfaction with
housing conditions as an instrument for job satisfaction, shows that the effect on value added
per hours worked is ~20% in the manufacturing sector. The economic size of this effect is
modest, because the observations are bunched towards the higher end of the satisfaction scale
making it very difficult to increase the average level of job satisfaction in the establishment by
one point.
In the article written by (Emin,2007) reports the effects of job characteristics (physical
efforts and job grade), and working conditions (environmental conditions and hazards) in
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addition to experience and education level on task performance and contextual performance.
A total of 154 employees in 18 teams at a medium-sized metal company participated in this
study. Seven criteria for task performance and 16 for contextual performance were used for
measuring employee performance. The results showed that there were substantial relationships
between employee performance both job grade and environmental conditions. Poor workplace
conditions (physical efforts, environmental conditions, and hazards) result in decreasing
employee performance consisted of following organization rules, quality, cooperating with
coworkers to solve task problems, concentrating the tasks, creativity, and absenteeism.
One of the major concerns of manufacturing companies has focused on improving
worker productivity, which is one of the job satisfaction measures. Some of the common
features of these companies are heavy loadings, adverse environment, poor humanmachine
system design, unpleasant working conditions, etc. Heavy loadings, workplace conditions
such as inclement weather, extreme heat/ cold, chemical smell, noise, poor lighting, vibration,
and dust have direct or indirect effects on employee job satisfaction. These conditions
decrease employee concentration towards tasks which lead to low employee satisfaction such
as low productivity, poor quality, physical and emotional stress, which cause high cost.
Effective applications of ergonomics in working conditions enhance employee job
satisfaction; provide worker safety, physical well-being, and job satisfaction. Many studies in
ergonomic area (Shikdar and Sawaqed, 2003; Yeow and Sen, 2006)
There is a substantial body of research from both sociology and economics that has
revealed the relationship between education, productivity, job satisfaction, and salary
(Groeneveld and Hartog, 2004; Voon and Miller, 2005). Education level required for a job in
the workforce is a persistent problem in all industrialized countries. It is expected that the
higher the level of education the more productive the employee, wherever he or she is
employed. (Posthumas, 2000) finding, that education level is positively associated with
supervisor evaluations of job performance (r 0.24), supported this hypothesis. A major
effect of education is that overall productivity falls short. Education does not guarantee
increased productivity. Indeed, it seems likely that overeducated employees would be more
prone to morale problem, not to be rewarded with higher salary. Higher dissatisfaction
generates lower work effort, which reduces employee productivity.
Job satisfaction was evaluated on several levels: Profits, Job performance, Intrinsic work
values, and, Patient care issues. Profits referred not to personal financial gain, but to the
organizations profits. Many nurses responded feeling "devalued in their job" (Fletcher, 2001)
this paper examines job satisfaction in nursing and the health care field. Once the definition of
job satisfaction is determined, the paper examines how to improve one's personal satisfaction
in the nursing field by examining why someone chooses the nursing profession and why they
choose to stay. Productivity is then examined to determine how it affects job satisfaction, Job
Performance was not only applied to them, but attitudes and performance of coworkers on a
horizontal and vertical plane were also considered.
In the article written by (Smith, 2001) issues of productivity and nonproductively were
investigated. The purpose of this study was to consider "staff nurse views of their productivity
and nonproductively, and factors that increase or decrease their productivity, Smith used semistructured interviews to gather data about, and factors influencing productivity. Recruited
from six different nursing units, 30 staff nurses were used, in an attempt to accurately
represent nurses as a whole. The researchers found that productivity was based on two
categories; quantity, and quality of their work. A third category considered, was personal
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factors that "influence their quantity and quality of work, The findings of this research suggest
that nurses understand the factors pertinent to productivity and lack thereof. And given the
appropriate settings, including quality and quantity of patient care, can improve productivity
in the nursing field.
In the article written by (Shrader, et al, 2001) research was conducted with the purpose
of examining the relationship between work satisfaction, stress, age, cohesion, work schedule
and anticipated turnover. The study used a cross-sectional design in which 241 staff nurses
and five nurses managers from 12 nursing units completed a questionnaire, The basis of the
research was the following four questions: What is the relationship between job stress, group
cohesion, and stability of the schedule and anticipated turnover?, "Which factors are
predictive of anticipated turnover?, What factors predict anticipated turnover for nurses of
different age groups?, and, Is there a relationship between anticipated turnover and actual
turnover? Researchers found that nurses experience moderate levels of job stress, but cohesion
is above average for all nursing units, lower the cohesion, lower the work satisfaction, work
satisfaction, weekend overtime, job stress, and group cohesion were all predictors of the
anticipated turnover rate, This showed a positive correlation between anticipated turnover and
actual turnover,
3. Objectives of the Study
The aim of this study is to explore the effect of job satisfaction on productivity. More
specifically this research has four objectives:
To explore the effect of occupational level on productivity.
To study the effect of job experiences on productivity.
To understand the effect of job congruence on productivity.
To inspect the effect of uses of skills on productivity.
4. Data and Methodology
To examine the impact of occupational level, job experiences, job congruence, uses of
skills on organizational productivity, I selected Orange Telecommunication Company in
Jordan to be my case study in this research.
4.1 Data
Several data collection methods used in research. A questionnaire or sample survey and
case study approaches are the primary tools of data collection. That was divided into five
sections. Section 1 measured the respondents' demographic background. Sections 2 through 6
measured the respondents' views toward the impact of occupational level (6 items), in terms of
job experiences (6 items), job congruence (7 items), uses of skills (8 items), and sources of
productivity (7 items). Each item was measured in terms of a five point rating scale from 1
(strongly disagree) to 5 (strongly agree).
4.2 Methodology
The sample was drawn from three management levels within Orange
Telecommunication Company in Jordan, around (185) questionnaires were randomly
distributed to managers in these three levels. The returned suitable questionnaires were (163)
with (88%) response rate.
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5. Hypotheses
Based on the objectives of the study, the following hypotheses will be tested.
Hypothesis 1: occupational level will have a significant positive influence on the
productivity of the firm.
Hypothesis 2: job experiences will have a significant positive influence on productivity
of the firm
Hypothesis 3: job congruence will have a significant positive effect on the productivity
of the firm.
Hypothesis 4: uses of skills will have a significant positive effect on the productivity of
the firm.
6. Case and Data Analysis
Tables (1) through (5) present the descriptive statistics for the five study variables
(Occupational level, job experiences, job congruence, uses of skills and productivity.
More specifically, statement1 (1-6) represent the Occupational level independent variable;
statements (7-12) represent job experiences independent variable; statements (13-19)represent
the job congruence independent variable, statements (20-27) represent the uses of skills
independent variable, and statements (28-34) represent the productivity dependent variable.
6.1 Occupational level Variable
As shown in table (1) item # 1 had high mean scores (4.55): "Our organization is aware
of the importance of occupational level to enhance productivity" of Occupational level the
dimension, while item # 5: "you like to work as part of a team not independently" scored the
lowest mean (3.28).
N0.
1.
2.
3.
4.
.5.
6.
Table (1) Occupational level Descriptive Statistics (n=163)

Statement
Mean
Our organization is aware of the importance of

occupational level to enhance productivity.
Our organization employs express more positive job
attitudes and feelings
Our organization concern about motivator needs for
employees
Our organization supported challenging and
responsibility
you like to work as part of a team not independently
You have rewards when you complete a project or
complete another month of hard work
Total mean
4.55
Standard
Deviation
0.65
3.89
0.87
4.02
1.09
3.45
0.92
3.28
3.32
0.71
0.57
3.91
6.2 job experiences

The findings presented in table (2) as shown. Item #10: " Your satisfaction appears to
increase after a numbers of years of your experiences " of the job experiences dimension
scored the highest mean (4.26), while the item # 11: "You team up with a supportive friend
and agree to listen to them for more experience" came last and scored lower mean (3.05).
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No.
7
8
9
10
11
12
Table (2) Job Experience Descriptive Statistics (n=163)

Statement
Mean
New workers tend to be satisfied with their jobs in their

organization.
Your period involves the stimulation and challenge of
developing your experiences and abilities
You can usually change your experience of your current
circumstances by changing your attitude about them.
Your satisfaction appears to increase after a numbers of
years of your experiences
You team up with a supportive friend and agree to listen to
them for more experience
Our organization gives you new tasks with providing
training to increase experience.
Total mean
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3.96
Standard
Deviation
0.79
3.14
1.12
4.02
0.70
4.26
1.06
3.05
1.14
3.54
0.56
3.66
6.3. Job congruence:

Table (3) shows the results of the job congruence variable. Again, the means for all
items were either high or very high thus assuring the importance of job congruence on
productivity of the firm. Statement # 16 that says " Communication lines is more willing to
receive positive feedback and high job satisfaction from a subordinate" came first with high
mean (4.76), while statement # 14 that says" Emotions were found to be significantly related
to overall job satisfaction" came last with average mean (3.34).
No.
13.
14.
15.
16.
17.
18.
19.
Table (3) Job congruence Descriptive Statistics (n=163)

Statement
Mean
Employees feel about their jobs and a predictor of work

behaviors
Emotions were found to be significantly related to overall
job satisfaction
Communication is an important influence on job
satisfaction in the workplace.
Communication lines is more willing to receive positive
feedback and high job satisfaction from a subordinate
I feel involved in decisions that affect our organizational
community
My manager cares about me as a person
My coworkers are committed to do their work as teamwork
Total mean
3.46
Standard
Deviation
0.69
3.34
0.88
3.58
0.74
4.76
0.46
4.05
1.24
3.94
4.66
0.59
0.85
3.97
6.4. Uses of skills:

Table (4) reflects the results of the fourth variable of the study. The results again
emphasize the importance of uses of skills on increasing productivity, Statement # 16 that says
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" Communication lines is more willing to receive positive feedback and high job satisfaction
from a subordinate" came first with high mean (4.76), while statement # 14 that says"
Emotions were found to be significantly related to overall job satisfaction" came last with
average mean (3.34).
Table (4) Uses of skills Descriptive Statistics (n=163)
No.
20
21.
22.
23.
24.
25.
26.
27.
Statement
My superior encourages my development and training
I have had opportunities at work to learn and grow
Organization allow me to exercise my skills or apply the

knowledge acquired during my college training
Top management supported worker to adopt our expertise.
Teamwork's help employee to increase their skills during
their work
Top management encourage job rotation to increase
employee skills
The level of opportunity within an organization directly
affects improvement skills
Skills variety increases experienced responsibility for outcomes
Mean
3.46
3.34
3.58
Standard
Deviation
0.69
0.88
0.74
4.76
4.05
0.46
1.24
3.94
0.59
4.66
0.85
3.97
6.5. Productivity variable:

As shown in table (5) the statistical means and standard deviations of the productivity
are shown, , Statement # 30 that says "Provide worker safety, physical well-being, and job
satisfaction increase productivity" came first with high mean (4.58), and there were three
items in high means which are #32,33,34, while statement # 28 that says" Top management
empower employee to increase job productivity" came last with average mean (3.65).The
standard deviation values were medium to low indicating close respondent attitudes towards
the study variables thus holding similar views about the variables.
Table (5) Sources of productivity Descriptive Statistics (n=163)
No.
Statement
Mean Standard
Deviation
28
3.65
0.49
Top management empower employee to increase job
productivity.
29.
3.89
0.53
Management delegates enough responsibility and
puts enough faith in its people to make those decisions.
30.
31.
32.
33.
34.
Provide worker safety, physical well-being, and job

satisfaction increase productivity
Overeducated employees would be more prone to morale
problem, not to be rewarded with higher salary
Top management allowing employee to take the initiative
to get things done their way
Top management rewarded employee for their successes.
Employee know what the requirements are to do their job
4.58
0.81
3.76
0.52
4.05
1.04
4.12
4.14
0.76
1.01
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6.6 Correlations among Variables

Table (6) presents the zero-order correlations and for all of the study variables. Occupational
levels, Job Experience, Job congruence, Uses of skills were significantly and positively
correlated (r > 0.562, p < .01) with Occupational level. Similarly, the Job Experience variable
was also correlated with (r = .674, p < .01). , Job congruence is also highly related to
productivity (r=0.825, p < .01) and, Uses of skills (r=0.627, p < .01).
Table (6) Descriptive Statistics and Correlations
productivity
Correlation
Sig
Occupational Correlation
level
Sig
Correlation
Job
Experience
Sig
Correlation
Job
congruence
Sig
Uses of skills Correlation
Sig
productivity
1.00
0.00
0.562**
0.00
0.674**
0.00
0.825**
0.00
0.627**
0.00
Occupational
level
Job
Experience
Job
congruence
Uses
of
skills
1.00
0.36**
0.00
0.772**
0.00
0.429**
0.00
1.00
0.475**
0.00
0.658**
0.00
1.00
0.375**
1.00
Notes:
Scale: 5-point Likert-type scale.
*p < .10; ** p < .01; *** p < .001.
With regard to the specific hypotheses, we found:

Hypothesis 1, Occupational level have significant positive influence on productivity
was supported.
Hypotheses 2, Job Experience have significant positive influence on productivity were
also supported.
Hypothesis 3, Job congruence have significant positive influence on productivity was
supported.
Hypotheses 4, Uses of skills have significant positive influence on productivity was
supported.
7. Conclusion and Recommendations
According to data analysis I found that there were many results, the most important were;
The higher the occupational level or status levels of a job, the higher the job
1.
satisfaction.
Job satisfaction appears to increase after a numbers of years of experience and to
2.
improve steadily thereafter.
The relationship between job satisfaction and job congruence was positive influence
3.
on productivity.
The study shows that people are happy if they have chances to use their skills at work.
4.
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The following recommendations are suggested:

1. Concentrate on team up with a supportive friend and agree to listen to them for more
experience.
2. Take care more in emotional employee to increase more overall job satisfaction.
3. Encourage employee development and training by their managers for increasing job
satisfaction.
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affective experiences. Human Resource Management Review, 12, 173-194.
Yeow, P.H.P., Sen, R.N., (2006). Productivity and quality improvements, revenue increment,
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Determinants of Firm Growth:

An empirical examination of SMEs in Gujranwala, Gujrat
and Sialkot Districts.
Khizra Safadr Khan(Corresponding author)
Abstract
The objective of the present study is to investigate the importance of SMEs being
an important source of providing employment opportunities. Primary data collected
from a survey of 826 small industrial units is being utilized to empirically test the
important determinants of firm growth. Binomial Logit is employed to find out the
role of firm-specific factors along with owner/manager characteristics,
organizational and commercial capabilities as important determinants of
employment generation. Different problems and obstacles encountered by SMEs in
generating employment activities are also been undertaken in the present analysis.
Firm age, education of owner, boss attitude, family business, networks, new
process, major improvements, market share, on job training and unique know how
are found to be significantly and positively increases the probability of firm growth.
Age of owner, foreign trade regulations, taxes, other regulations, political
instability, inflation and lacking of skilled labor adversely reduces the probability
of firm growth in terms of employment opportunities. Government should device
such policy measures that can help small units to grow and provide employment
opportunities.
Key Words: Firm growth, employment, Logit Model, Owner/manager,
Organizalional and Commercial capabilities.
1. Introduction
The importance of industrialization cannot be denied being a better mean to provide
employment opportunities, its contribution towards economic growth as compared to
traditional agricultural sector, and more foreign exchange earnings through exports of value
added products and optimal utilization of domestic resources by establishing forward and
backward linkages in the economy. In case of developing countries like Pakistan, motivation
behind each development policy is to provide employment opportunities to its accelerated
growth of population along with a considerable increase in their living standard but
establishment of large scale industrialization requires resources in abundance, therefore
alternatively, emphasis should be laid on the establishment of small scale sector in order to
resolve all these problems notevi.
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Small and medium enterprises (SMEs) are considered to be an important source of

generating employment opportunities (Carree & Klomp, 1996). The experience of developed
nations showed that promoting SMEs sector is one of best way to boost up employment
activities and particularly a developing country like Pakistan can provide more employment
opportunities to its growing population by promoting SMEs sector.
Therefore, it is necessary to understand different determinants of firm growth in order to
device such policy options that can facilitate small units growth. The focus on the firm
growth has been intensified in the last two decades. Various disciplines investigated to find
out the determinants of firm growth include innovation, strategy, psychology, economics and
network theory. However, it is observed that information regarding firm growth is quite
inadequate (Davidsson & Wiklund, 2000, Wiklund et.al, 2007) because of the fragmented
nature of existing literature. As research from a psychological point of view asserts on the
entrepreneurial behavior (Begley & Boyd, 1987), investigation regarding firms strategy
focuses on the association among business strategy, environment and growth (McDougall et.al
1992). Where as, research relating to economic conditions concentrate on the relation between
firms growth and its size (Audretsch et.al, 2004). Thus, the existing literature presents more
diverse point of views, with a little attention on more integrated presentation of determinants
that explains the process of firm growth.
Therefore, special attention should be given to identify the major determinants of firm
growth in a more integrated manner. Consequently, in the present study, the determinants of
firm growth are classified into three dimensions including owner/manager characteristics,
firms characteristics along with the major factors that restrict firms growth.
The present study has tried to present a broad prospect regarding major determinants of
firm growth. A detailed data survey on firm growth is being employed for analytical purposes,
conducted by author in the districts of Gujranwala, Gujrat and Sialkot, presenting detailed
information concerning main factors that influence the firm growth. The study has provided
an opportunity to explore different determinants of firm growth in an inclusive manner. It has
tried to identify the most important factors considered responsible for firm growth by
employing a data set comprising of 826 small units.
The study is pioneer in its nature as no empirical study in Gujranwala, Gujrat and Sialkot
districts has so far been conducted to find out the major determinants of firm growth in terms
of employment generating activities in the SME belonging to Light Engineering Sector.
Rapid increase of the population in a developing country like Pakistan asks for the
provision of employment opportunities on the same rate in order to improve their living
standard along with a steady economic growth. SMEs are considered as a better mean for
providing employment opportunities as there are about 3.2 million economic establishments
In Pakistan, 99 percent of these are accorded as SMEs, and accommodate about 80 percent of
non-farm labor force note vii. The role of small and medium enterprises (SMEs) as key source in
providing employment opportunities is now well established. The literature review regarding
role of SMEs in employment generation can be categorized on the basis of the owner/manager
characteristics, firms characteristics and growth barriers that restrict the firm growth.
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2.1 Owner/Manager Characteristics

The growth and development of a small firm depends entirely on the motivation and
ambition of the owner of that unit. Among the prominent features of an entrepreneur that
effects the firm growth involves general background of the owner involving age and education
of the owner along with his growth motivation note viii and management know howix.
2.1.1 General Background
Growth ambition of the owner is influenced by his age factor and this effect is being
investigated by many studies. A significant negative relation between age of the owner and
growth ambition is indicated by different studies (Autere & Autio, 2000, Welter, 2001).
According to literature, the negative relationship can be the result of different factors like the
initial goal of growth perceived by the entrepreneur, or due to a higher motivation to develop
their businessx and compliance of younger entrepreneurs to experiment with their capabilities
in contrast to their older counterparts (Davidsson, 1991, Sapienza & Grimm, 1997, Welter,
2001). According to the literature, firm growth is positively influenced by high levels of
education (Sapienza & Grimm, 1997, Storey, 1994) note xi. But different empirical studies yield
different results as Kolvereid (1992) showed that highly educated entrepreneurs are keen to
grow their businesses. A positive relationship between former level of education and firm
growth was found in ten out of seventeen empirical studies surveyed by Cooper et al. (1992)
note xii
.
2.1.2 Growth motivation
In the literature relating to small businesses, the small business owner and the
entrepreneur are distinctly differentiated. According to Birch (1987) the small business
owners are considered as income substituters as they replace the paid-employment income
with business income note xiii. While, entrepreneurs are considered to be more ambitious to
develop their businesses. A survey of small business start-ups was conducted in Ontario
concluded that nearly half of the new firm owners proposed that their main motive to run the
business is that it would simply generate sufficient income to sustain a certain lifestyle. (Orser
et al., 1996). The importance of personality traits of entrepreneurs is a key factor but they may
not essentially leads towards real firm growth. Personality traits effect the growth motivation
(Delmar, 1996) in a more promising manner. Therefore, it is concluded that both the
willingness and ability of owner along with growth motivation play an important role in
entrepreneurial ventures.
The most important characteristic of an entrepreneur to develop his business is
considered as risk taking propensity. An entrepreneur can be distinguished from simple
business owner as they look for new opportunities, deal with uncertainties in a more
promising manner note xiv. Non risk aversive firms have greater probability to grow (Bager &
Schtt, 2004. The literature suggests an ambiguous role of risk taking propensity towards
entrepreneurial activities (Palich & Bagby, 1995, Babb & Babb, 1992, Low & Macmillan,
1988, Kogan & Wallach, 1964, Litzinger, 1961). Gundry and Welsch (1997) realized that the
commitment to growth is the main factor that differentiates "high" growth from "low" growth
businesses. The internal locus of the control is found to be an important characteristic of
successful owner-managers along with the belief of control over their fate (Brockhaus and
Horwitz, 1986, Caird, 1990, Chell et al., 1991. Perren (2000) found that the desire to be "one's
own boss" was a significant feature in motivating the entrepreneurs to develop their business.
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Glancey (1998) showed that entrepreneurs initially stimulated by being your own boss are
more prone to low growth levels.
The literature suggests that some individuals may have started small businesses because
the pressure of unemployment forced them to do it. This factor makes distinction between
push and pull hypothesis as the individuals have opted to start a small business because they
were left with no other choice (the push hypothesis) and not because they were characterized
by entrepreneurial stance and aptitude (the pull hypothesis) (Zhenxi et al., 1999). Likewise, it
is argued that individuals who are engaged in a parallel paid-employment job have less time
and motivation to invest in the growth of their business. The reason behind this factor is that
some of these owner/mangers are complementing their job with some income from
independent business, so that they can sustain a certain lifestyle (Riding et al., 1998).
2.1.3
Management know-how
The characteristics of management know-how of an entrepreneur are considered as an
important factor in the process of firm growth. Management know-how is the possible
outcome of many factors like having an intergenerational heritage, or having experience of
paid-employment in a similar business, or by having previous management experience being
owner of some other business.
Literature suggests that individuals from families owning a business are more inclined to
start an entrepreneurial venture by developing knowledge of how to run a business. Empirical
evidence suggests that belonging to an entrepreneurial family, augments the probability of
survival (Cooper et al., 1994, Papadaki et al., 2000). However, the empirical results on the
impact of family background on the growth scenario of an entrepreneurial venture are
ambiguous. Empirical evidence suggests that industry specific know-how can have a positive
impact on the success of a business both in terms of growth and survival of the business
(Perren, 2000, Cooper et al., 1994, Bruderl et al., 1992, Bosworth and Jacobs, 1989, Hofer and
Charan, 1984). Firms performance is found to be positively effected by prior entrepreneurial
experience note xv. According to the literature, the related experience contributes positively in
enhancing self-confidence among entrepreneurs (Orser et al., 1998) and leads them to venture
success (Delmar and Shane 2006). Past experiences can help them in both in managing new
venture (Ripsas, 1998, Shepherd et al., 2000) and take advantage of an already established
network of customers, employees, investors and suppliers (Campbell, 1992) playing a crucial
role for the success of a new business.
According to the literature, contact with professional advisors like bankers, accountants,
business associates, customers and suppliers can help small business owners in gaining
knowledge and access to information networks leading to develop more formal joint venture
and alliances. Partnerships and alliances can help both in distributing spread risks and sharing
costs along with opening of new markets and development of new services, products and
processes. The importance of partnerships and coalition has been empirically stated by the
studies of firms with high growth performance (OECD, 2000, Barringer & Greening, 1998).
The impact of use of professional advice from different sources on firms growth yielded
mixed results. According to some studies, the guidance of professional advisors results in
greater success and better firm performance (O'Neil and Duker, 1986, Ciavarella et.al, 2004).
The presence of partners can benefit the firm growth by providing access to capital, functional
know-how and a wider array of management understanding (Eisenhardt and Schoonhoven
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1990, Teach et al., 1986). The business ventures also provide psychological support in
decision making and other major problems faced by the firm (Perren, 2000).
2.2 Firm Characteristics
Individual competencies can be described as the knowledge, abilities or skills mandatory
to execute a particular job. Under firm characteristics, the study has employed different
determinants of firm growth like Individual firms characteristics, its organizational/business
practices note xvi, its technological capabilities and market structure determinants.
2.2.1 Individual Firm
The classical firm features can be referred as firm age and size. The Gibrats law can be
considered as pioneer referring to the discussion on the relationship between firm age/size and
firm growth (Audretsch et al., 2004). The law focuses on the independence of growth and size
note xvii
. According to this law the firms growth is proportional to their size, and the growth of
all firms takes place at the same rate over an interval of time, despite of their initial size
within the same industry note xviii. Researchers investigating firm growth by differentiating
firms with respect to their sizes proposed that Gibrats law of size independence is only
convincing for firms above a specific size threshold (Bigsten & Gebreeyesus, 2007). A
negative relationship is found by an empirical study in US between firm growth, age and size,
as postulated by Jovanovic's model (Variyam et al., 1992, Evans, 1987). A negative effect of
size on firm growth is also indicated incorporating different countries and industries (Calvo,
2006, Bottazzi & Secchi, 2003, Goddard, Wilson & Blandon, 2002, Almus & Nerlinger, 2000,
McPherson, 1996, Dunne & Hughes, 1994).
2.2.2. Organizational/ Business Practice
According to Schumpeterian tradition, growth is positively associated with a company's
capacity to innovate (Nelson and Winter, 1978, 1982). Furthermore, in order to enjoy a steady
growth, firms are required to respond constantly according to the needs of their customers in
new and specific manners. The empirical evidence suggest that more innovative firms in
Canada, the US, and Europe experienced high growth (Baldwin 1994, 1995, OECD, 2000).
Innovativeness being an important component of entrepreneurial orientation note xix refers to the
willingness of a firm to maintain creativeness and experimentation to introduce new
products/services, technological control, and R&D in developing new processes.
According to economic theory it is proposed that firms that cater to their local markets
are able to attain competitive advantages by quickly responding to customers and properly
utilizing networks and community support systems. Dynamic economic theories suggest
strategic flexibility and capacity to modify market focus effects growth positively, which may
require diversification in new products and new markets (Gorman, 1997). On the basis of
resource-based analysis, financial resources and human capital are the termed as most
important resources for the growth of small business (Wiklund et al., 2007). Secured financial
resources are considered as predominantly vital in supporting firm growth note xx because it is
comparatively easy to convert them into other types of resources (Dollinger, 1999). A firm
having sufficient resources is capable of doing experiments, increasing both innovativeness
and chances to pursue new opportunities of firm growth (Castrogiovianni, 1996, Zahra, 1991).
Financial resources of a firm depends mainly on the past financial performance of a
firm, as past profit can be reinvested into the business. Eventually, a firm not only depends on
external funding, but also utilizes its internal resources to finance business. The firms with
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superior financial performance have the chance to grow according to the evolutionary theory
of Survival of the fittest (Coad 2007).
2.2.3. Technological Capabilities
Technological capabilities can be defined as the firms current ability and its future
potential to utilize firm-specific technology to resolve technical problems and to augment the
technical functioning of its production processes along with its finished products .The
essential component of competition is differences in the technology adopted by different
firms; therefore it plays a major role in growth performance of small firms. It involves
diversification in their product mix, number of markets dealing with, presence of unique
know-how along with on job training capacity of the firm.
Literature suggests positive effect of diversification on growth process of firms by
helping them to deal with particular product line demand constraint and creating new growth
opportunities. Diversification into new products is considered not only as an important
medium of competition but also as a major engine to firm growth (Marris and Wood, 1971).
Firm growth was found to be constrained due to absence of product diversification providing
evidence to the argument that less diversified firms performed poorly in terms of growth as
compared to firms that were more diversified (Chen et.al, 1985).
Some researchers suggest that firm location is an important determinant of firm growth
because the local market bound firms (Davidsson ,1989, Storey ,1994). In spite of the support
provided to firm by local market, it not essential that the firm restrain its sales only to the local
market. By utilizing modern means of communication and networks, the firm can diversify its
geographic markets. Therefore, the diversification into different geographic markets like
national and international markets, will lead to a positive impact on firms growth. A positive
correlation between firm growth and diversification into markets was found by Becchetti and
Trovato (2002). Literature concerning determinants of firm growth considers both human
capital and financial resources as most important factors effecting small business growth
(Wiklund et al., 2007). Human capital can be defined as a combination of knowledge,
experience and skills. On the firm level, the experience, skill and knowledge of the total
employees contribute more promisingly as compared to the entrepreneur alone (Chandler &
Hanks, 1994, Birley & Westhead, 1990). Human capital can be measured both in terms of
specific and generic terms. Generic human capital is defined in terms of different levels of
educational attainment by workers. Specific human capital can be measured by employing a
dummy variable indicating whether firm is offering on job training to its workers or not (Lee
et.al, 2005).
Small firms carry out a large number of technological innovations based on their unique
know how approach in an unbalanced manner among industrialized nations and also in newly
industrialized countries like Korea. They play an important role in the diffusion of technology
and their unique know-how is often based on the improvements of general technologies
developed by large firms.
2.2.4. Market Structure
The major force behind a firms growth is considered to be the market structure in which
it operates. The growth process of firm in influenced by the fact that whether the firm is
operating in competitive market conditions or not. An important aspect of an industrys
market structure is whether the firms are able to compete for their products in market or not.
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The market structure comprises of market orientation of the firm, the ability to adapt its price
policy according to market changes and change in its market share over a period of time.
The efficiency with which a firm sells its products and services to the customers
determines its growth establishing market orientation an important determinant of firm
growth. Accordingly, market orientation results in improved satisfaction of customers and
stakeholders leading to the firms growth (Hult, Snow & Kandemir, 2003, Narver & Slater,
1990). Empirical evidence suggests that market orientation is significantly associated to the
overall growth performance of a firm (Jaworski & Kohli, 1993).
Numerous empirical studies have established the significance of market demand for a
firms innovative activities and its growth (Cohen, 1995, Kleinknecht, 1996). The demand of
the product of a firm determines its growth process. The binding expansion of the firms main
product forces the firm to search new customers, diversify into new products and into new
geographic markets. The competitive advantage enjoyed by the firm in producing a certain
good or service results in the increase of the firms market share (Porter, 1980).
The firms ability to adapt its pricing policy according to competitive pressures is
positively associated with the growth of expected sales. Such capacity of firms to change their
market share in response to such pressures helps them to increase their market share
accordingly (Harabi, 2005).
2.3 Growth Barriers
Along with the above mentioned determinants facilitating firms growth, there are also
factors that obstruct the potential growth of the firm named as growth barriers (Davidsson,
1989). Literature suggests that SMEs are mostly hindered by barriers relating to markets
entry and their growth in the early stages of their life span as compared to their large
counterparts. Frequently addressed restrictions for small businesses growth comprises of
institutional barriers, non-institutional barriers and financial barriers.
2.3.1 Institutional Barrriers
Institutional barriers are mainly associated with the firms interaction with government,
comprising of taxation problems, legalization issues, and government support programmes
along with other barriers. Consistent results from both the theoretical and empirical data states
that certain institutions discriminate against the SMEs growth intentionally in the form of unfavorable tax system, complicated rules and regulations and biased policies, thus hampering
firms growth (Davidsson & Henreksson ,2002). The institution barriers employed in the
study to calculate their impact on firms growth comprises of regulation on foreign trade,
level of taxes, other regulations, political instability, inflation and price Instability.
According to the theory, trade promotes productivity growth within industries, leading
weak firms to exit and allowing strong firms to flourish (Bolaky et.al 2006). But specialization
cannot be induced if factor movement is restricted due to strict rules and regulations. In such
economies, strict regulations inhibit free entry and exit of firms and restrict labor to move
freely within sectors and firms. Countries with system of excessive regulations, business
respond to changes in growth opportunities through the expansion of existing firms, while in
countries with moderate regulations, business respond through the creation of new firms
(Fisman & Sarria-Allende, 2004). An unsuitable tax system and a range of biased official
policies correspond to a major factor effecting firms growth (Barlett et.al, 2001). Bribery is
considered to be a consequent out come of over-taxation concerning to a particular sector,
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providing incentives to the firms to influence the taxation authorities having negative impact
on foreign direct investment (Wei,1997).
Complex laws, policies and rules relating to companies can prove to be particularly
harsh to the growth of small firms. Grey economy is considered to be a consequent out come
of over-regulation relating to a particular company sector, providing incentives to the firms to
influence the regulatory authorities in their support, leading to the establishment of culture of
unproductive entrepreneurship (Baumol, 1990). The complexity of government regulations
and legislations, and the inheritance of the background of relations with regulatory authorities,
may support the culture of corruption and bribery. Some suggest that the cumulative effect of
rules and regulations is more problematic for small firm as compared to that of an individual
regulation (Harris, 2002). The collective impact of employment and other regulations is
severely hampering small firms growth (Edwards et. al., 2003).
Political instability is considered as one of the major constraints having a negative
impact on the productivity of manufacturing sector featuring poor business environment
(Elhiraika et.al., 2006). At the aggregate level, a high level of risk factor is attached with the
presence of weak institutions that can in turn lead to political instability with a considerable
negative impact on overall economic growth and even a stronger adverse effect on individual
firms performance (Fosu, 2003, Gyimah-Brempong, 2004).
Inflation is considered to be one of the important factors that cause the disturbance of
business planning leading to an unfavorable consequence to the firms capital investment. It
affects the firms budget by disturbing their cost structure note xxi. In the presence of high and
volatile inflation, the operation of the price mechanism is distorted leading to inefficient
allocation of resources.. If firms are unable to adjust this increase in costs properly, this will
eventually affect their profits leading to some firms closure, or reduction in production and
consequent employment levels note xxii.
2.3.2 Non-institutional barriers
Non-Institutional barriers are mainly associated with the firms internal resources and
capacity utilizations, the scope of market dealing with, different issues relating to human
resource management and problems relating to diversify into new markets (Barlett et.al.
2001).
The importance of market demand for a firms growth is evident from literature (Cohen,
1995, Kleinknecht, 1996). Lack of market demand hinders firm growth. Market demand of a
Firms product determines its pace of growth. Lack of market demand implies shortage in its
production and its consequent impact on the reduction in employment level. Thus, it is
assumed that there exists a negative association between lack of market demand and firm
growth (Harabi, 2005).
In addition to lack of resources and capacity utilizations, a significant barrier to growth
is concerned with human resource management and the conditions relating to employ and
dismissal of workers note xxiii. A major factor inhibiting SMEs growth is the entrepreneurs
inability to branch out the business functions to its managers (Storey 1994). This propensity
can be highlighted by shortage of skilled managers, along with their deficiency of business
expertise in the vicinity of promotion and business expansion (Bartlett et.al 2001). SMEs
mostly experience inadequate market information. They are also unable to adjust themselves
adequately to changing preferences and tastes of customers, leading to a decline in existing
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market shares or fail along with inability to penetrate in new markets (Elhiraika et.al., 2006).
In addition, they face competition from improved quality and reasonably priced imports. In
the presence of all these factors, it can be stated that inability of firms to access new markets
can be considered as a major hindrance to firms growth (Bartlett & Bukvic, 2001).
2.3.3 Financial Barriers
Financial barriers correspond to the lack of financial resources. Credit restriction, equity
capital and lack of external debt are considered to be the main hindrance to the growth of
SMEs (Becchetti & Trovato, 2002, Pissarides, 1998, Riding & Haines, 1998). According to
empirical evidence the financial institutions behave more conservatively while providing
loans to SMEs. SMEs are usually charged comparatively high interest rates along with high
collateral and loan guarantees (Stiglitz & Weiss, 1981).
3. Research Method
3.1 Sources of Data
In the present study, primary data collected through a detailed survey of Light
Engineering sector is being utilized for analytical purposes. The survey has been conducted
in the districts of Gujranwala, Gujrat and Sialkot from Feb, 2009 to Feb, 2010. The format of
the SMEs questionnaire covers broad aspects of firm growth involving different
characteristics of each unit along with its owner/manager along with a detailed profile of
factors that restrict small units to grow further. 826 units were investigated out of which 426
units were found to be experiencing firm growth in terms of employment expansion a total of
400 firms had experienced an employment contraction in the last two years till the survey
time.
3.2 Logit Model for Employment growth
To evaluate the probability of a firm experiencing growth in terms of employment
expansion, logistic regression analysis with maximum likelihood estimation is employed. In
the analysis dependent variable takes the value 1 when the firm is providing more
employment opportunities and 0 when the firm has experienced a reduction in its employed
labor force in the last two years. Explanatory variables in this analysis can be divided into
three main categories as characteristics of the owner/manager and the firm, along with
different factors that restrict a firm to grow in terms of employment growth.
Basic model can be written as
Employment=a0+a1X+e
(3.1)
Where
Employment=1 (if firm is growing in terms of employment)
= 0 (if firm is non-growing in terms of employment)
X= Owner/manager characteristics, firms characteristics, and factors inhibiting firms
growth.
The interpretation of the model in terms of probabilities can be explained as odds ratios.
Odd ratio greater than 1 indicates the increase the probability of experiencing growth while
less than one indicates the decrease in the probability of firm growth.
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The classification of firms on the basis of providing employment opportunities is given
in the table (1). According to the survey statistics, 826 firms note xxiv were surveyed. Out of
these 826 SMEs, 427 were found to be experiencing growth in terms of employing more
labor in the last two years till survey time. While, 400 firms have faced a negative tendency
in their growth in the same time period.
The results of the main firm growth equation 3.1 are being shown in Table (3). Among
the owner/managers characteristics, the age and education of the owner are found to be
positively and overall significant at 99 percent confidence level. Age of the firm has a
positive impact on the firm growth in terms of its employment generation activities. A unit
change in the age of the firm increases the odds of growth in terms of employment by 2.009
units (the probability of growth in terms of employment generation over the probability of
not experiencing any improvements in firm growth). The characteristics of an owner being
his own boss is found to be significant at 99 percent confidence level as one unit increase in
the tendency of the attitude of the owner as boss increases the odds of firm growth by 2.215
units. Risk taking attitude and other interests of the owner are proved to be insignificant in
the present analysis.
Involvement in the family business increases the probability of firm growth as it is
proved to be significant at 95 percent confidence level. Previous experience of an owner in
the same field of engineering increases the probability of firm growth in terms of its
employment generating activities. A unit change in the previous experience of the owner
increases the odds of firm growth by 1.848 units (the probability of firm growth over the
probability of not experiencing any firm growth).
Working of firm through networks increases the probability of firm growth by 1.324
units. Involvement of firm in new process activities increases the probability of firm growth
as a unit change in involvement in new process activities increases the odds of involving in
employment growth activities by 2.071 units. Major improvements in the firms process are
found to be significant at 90 percent confidence level. Variables of diversification and
number of markets dealing with are proved to be insignificant in the present analysis. An
increase in the market share by one unit increases the odds of experiencing firm growth by
1.046 units. The procession of unique know how increases the chances of a firm to grow in
the long run in terms of employment generation as this variable is proved to be significant at
90 percent confidence level.
As far as different obstacles restricting firm growth are concerned, foreign trade
regulations, tax systems complications, political instability, inflation and other factors are
proved to be significantly and negatively effecting firm growth in the present analysis. The
variable of access of a firm to skilled labor is found to be negatively effecting firm growth at
99 percent confidence level. Other determinants of firm growth like market competition,
market demand and access to new markets are found to be insignificantly influencing the
firm growth.
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5. Conclusion
Small and medium enterprises are considered as an important source of
providing employment opportunities. In order to explore the contribution of small
firms toward employment generation, primary data is being employed collected
from a survey of 826 small industrial units. Binomial Logit model is utilized to
find out the contribution of firm-specific factors along with owner/manager
characteristics, organizational and commercial capabilities as important
determinants of employment generation. Different problems and obstacles
encountered by SMEs in generating employment activities are also been
undertaken in the present analysis. Firm age, education of owner, boss attitude,
family business, networks, new process, major improvements, market share, on job
training and unique know how are found to be significantly and positively
increases the probability of firm growth. Age of owner, foreign trade regulations,
taxes, other regulations, political instability, inflation and lacking of skilled labor
adversely reduces the probability of firm growth in terms of employment
opportunities.
Government should provide support to small units so that they can provide
employment opportunities. Education of the owner is proved to be significantly
affecting the probability of firm growth. Such policy measures should be devised
that can help entrepreneurs in their educational training along with the provision of
technical and managerial facilities that can promote firms in terms of employment
growth. Government should support firms to overcome obstacles that restrict
firms growth. Firms growth in terms of employment can yield better outcome if
these small units are provided with basic infrastructural support in terms of
finance, technical and commercial support.
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Refrences
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Notes
____________________
Note 1
Government of Pakistan had estimated a required investment of Rs. 5.2 trillion in large scale sector to
provide employment opportunities to an addition of 16 million persons to the labor force while only Rs. 8 billion
are required in case of small/micro scale sector.(http://www.pakistan.gov.pk/ministries/planninganddevelopment
ministry/mtdf)
Note 2
Economic census of Pakistan 2005.
Note 3
It comprises of risk taking attitude, desire of independence, unemployment push and part time business
approach
Note 4
Management know how involves family business, industry specific knowhow, previous ownership
experience, work through networks and partnerships.
Note 5
The need for additional income can be considered as a major factor that pushes young owner/manager to
expand their business (Davidson 1991).
Note 6
Education is most probably associated with information and skills, inspiration, self assurance, problem
solving aptitude, dedication and control.
Note 7
A Bachelor degree holding entrepreneur was found to have a positive influence on growth and survival of
small firms (Cooper et al. (1994)).
Note 8
Hay (1994) has termed income substitutors as life-stylers" because their goal is to achieve long-term
stability instead of growth, and they use business as an income generating activity adequate to sustain a certain
"life-style."
Note 9
See for example (McCelland, 1961, Timmons et al., 1985, Chell et al., 1991, Morris and Sexton, 1996)
Note 10
A positive relationship was found among entrepreneurs with general business management experience and
their growth ambition (Orser, Hogarth-Scott and Wright 1998).
Note 11
See e.g. Boyatzis, 1982
Note 12
See e.g. Hart and Prais, 1956, Simon and Bonini, 1958, Hymer and Pashigan, 1962
Note 13
Studies yielding negative support to Gibrats Law includes Becchetti & Trovato, 2002.
Note 14
Entrepreneurial orientation is defined as a combination of innovation, proactiveness and risk taking on the
firm level (Miller, 1983).
Note 15
Bamford, Dean & McDougall, 1997, Sexton & Bowman-Upton, 1991
Note 16
http://tutor2u.net/economics/content/topics/inflation/costs_of_inflation.htm
Note 17
http://everything2.com/index.pl?node=The+effects+of+inflation&lastnode_id=1474863
Note 18
Bartlett, W. and V. Bukvic. 2001. Barriers to SME Growth in Slovenia. MOST 11:177-195.
Note 19
Among these 826 small units, 529 were located in Gujranwala, 189 in Gujrat and 45 were found to be
working in Sialkot Districts.
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Annexure
Table 1: Classification of firms on the basis of Employment Growth.
Employment Growth
Increase
Decrease
Total
Gujranwala
307
285
592
Gujrat
98
91
189
Sialkot
21
24
45
Total
426
400
826
Table 2: Determinants of Firm growth

VARIABLES
VARIABLES DISCRIPTION
DEPENDENT VARIABLE
EMPLGROWTH
Growth in the employment in the last two years (1= increase or positive, 2=decrease or
negative)
INDEPENDENT VARIABLES
1.OWNER/MANAGER CHARACTERISTICS
1.
GENERALBACKGROUND
AGEOWNER
Age of the owner in years
EDUOWNER
Education of the owner (0= Illiterate, 5= upto secondary education, 10= upto matric or
college, university education)
1.
GROWTHMOTIVATION
RISK
Risk taking propensity of the owner (1= keen to take risks,0=otherwise)
BOSS
Desire of independence (1= started business to be boss,0=otherwise)
UNEMPPUSH
Unemployment Push (1= started business because of unemployment, 0= otherwise)
PARTTIMEB
Part time business (1= currently employed elsewhere, 0=otherwise)
2.
MANAGEMENTKNOWHOW
FAMILYB
Family Business (1= the current business is your family business,0=otherwise)
INDKNOWHOW
Industry specific knowhow (1= any experience of the same business, 0=otherwise)
PREWOWNER
Previous ownership (1= owned some other business,0=otherwise)
NETWORKS
Work through networks (1=yes, 0=no)
PARTNERSHIP
(1= Business is in partnership, 0=otherwise)
2. FIRM LEVEL CHARACTERISTICS

1.
INDIVIDUALFIRM
SIZE
No. of full time employees working
FIRMAGE
No. of years since establishment
1.
ORGANIZATIONAL/BUSINESSPRACTICES
INNOVATION
NEWPRODUCT
If the firm has introduced new product in the last two years (1=yes,0=no)
NEWPROCESS
If the firm has introduced new process in the production during the last two years
(1=yes, 0=no)
MAJIMPROVEMENTS
If the firm has introduced major improvements in the existing system in the last two
years (1=yes, 0=no)
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LOCALMSALES
Percentage of sales to local markets
FINANCSOURCES
Sources of financing (1=internal, 2=external, 3=both)
2.
TECHNOLOGICALCAPABILITIES
DIVERCIFICATION
Diversified their product mix during last two years (1=yes, 0=no)
MARKETSNO
No. of markets dealing with
ONJOBTRAIN
On job Training (1=yes, 0=no)
UNIQUEKNOWHOW
Presence of unique knowhow (1=yes,0=no)
3.
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MARKETSTRUCTURE
MARORIENTATION
Do the owner has market orientation (1=yes, 0=no)
MARKETSHARE
Share of the firm in the market during last two years (1=increased, 2=decreased,
3=constant)
PRICEADAPT
Easily adapt market prices (1=yes, 0=no)
3.GROWTH BARIERS
1.
NSTITUTIONALBARRIERS
FOREIGNTRADE
Business gets affected by regulations on foreign trade (1=yes, 0=no)
TAXES
Business gets affected by level of taxes (1=yes, 0=no)
OTHERS
Business gets affected by other regulations (1=yes, 0=no)
POLITICALINS
Business gets affected by political instability (1=yes, 0=no)
INFLATION
Business gets affected by inflation and price instability (1=yes, 0=no)
2.
NONINSTITUTIONALBARRIERS
MARKETD
Changes in market demand due to imports or other factors effect business (1=yes,
0=no)
LACKSKILL
Constraint of skilled workers effect business (1=yes, 0=no)
ACCESSNEW
Limitation to access new markets affects (1=yes, 0=no)
3.
FINANCPROB
Financial constraints hinders firms growth (1=yes, 0=no)
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Table 3: Logistic Results Firm Growth
PREDICTORS
COEFFICIENT
Z-STATISTICS
ODD RATIOS
Age of Firm
0.092***
2.14
2.009
Age of owner
-0.104***
-2.3
1.990
Education of owner
0.197***
2.99
1.981
Risk
0.0179
0.12
0.982
Boss
0.1951***
1.94
2.215
-0.469
-0.21
1.954
0.2727**
1.79
1.313
Knowhow
0.0344
0.17
0.966
Previous Experience
0.1645*
1.62
1.848
Networks
0.2810**
1.9
1.324
Partnership
0.0325
0.19
1.033
New product
0.1060
0.58
0.899
New process
0.682**
2.45
2.071
Major improvement
0.253*
1.75
1.289
Diversification
-0.0032
-0.02
0.997
Other interest
Family Business
Market share
0.447*
1.55
1.046
On job training
1.127***
2.51
1.893
Unique knowhow
1.151**
1.85
1.167
No. of markets
0.0262
0.47
0.974
-0.4307***
-2.74
1.538
Taxes
-0.1131*
-1.57
1.120
Others
-0.3184***
-2.27
1.727
Political
-0.926**
-1.63
1.912
Inflation
-0.759*
-1.49
1.927
Competition
0.3381
1.09
0.713
Market demand
0.1935
0.83
1.214
Access new markets
0.0455
0.3
0.956
Lacked skilled labor
-0.713***
-2.49
2.074
-0.1705
-0.22
Foreign trade regulations
Constant
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VOL 3, NO 1
The Determinants of Export Performance:

Evidence from small engineering units in Gujranwala, Gujrat and Sialkot Districts.
Khizra Safadr Khan(Corresponding author)
Abstract
The paper examine the role and importance of firm level characteristics, technological
capabilities, commercial capabilities and factors inhibiting export activities as determinants of
export performance in case of Light Engineering Units of Gujranwala, Gujrat and Sialkot
Districts. Empirical data from a survey of 1201 Light engineering units in Gujranwala, Gujrat
and Sailkot Districts is being employed for analytical purposes out of which 318 units were
found to be involved in export activities. Multinomial regression logistic model has been
utilized to find out the probability of being exporter. Instrumental variable approach is
employed to encompass the role of innovation in the probability of being exporter. The
estimated results of instrumental equation are than incorporated in the basic model to find out
the final estimation results. Results from the logit model represent that all the three measures
of innovation positively improves the probability of being exporter. LnRev/Month, product
mix, manufacturing status of the firm, trade marks, registered trade marks, size of the firm,
availability of information and cost competitiveness are found to be significantly and
positively contributing towards the probability of being exporter. The innovation processes
comprising of new product, new process and major improvements are found to be positive
with high odd ratios exhibiting their importance in the exports of light engineering sector.
Average wage (-ve) means higher the cost of labor less likely is the chance that firm will
export. Non-cooperation of Govt. agencies, financial problems, competition in foreign
markets and expensive foreign visits are negatively and significantly associated probability of
being exporter.
Key Words: Export, SME, Light Engineering Units, Logit, innovation, Gujranwala.
1. Introduction
The idea of international trade being the engine of the growth is very old; its inception
can be found back in the 18th century's industrial revolution in England which later on spread
to the rest of the world in the 20th century. However, during the second half of the 20th
century, the idea lost its popularity. The dominance of protectionist theories in the policy
making of many developing countries persuaded industrialization policies based on a very
limited degree of openness known as import substitution industrialization (ISI) strategies,
which had their source back in the thinking of Prebisch (1950) Note1
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During the 1950s, 1960s and in early 1970s, a large number of development economists
embraced the protectionist view and begin to design planning models depending heavily on
import substitution strategy (Salvatore 2006).
The policy of industrialization through import substitution generally met with limited
success. But growth oriented strategies based on import substitution exhibited their own
limitations i.e., their implementation in many countries failed to address the major problems
like low income earnings, unemployment and poverty (UNIDO 1991). Therefore emphasis
was laid on sectoral restructuring and policy redesigning. In early 1980s, many countries
who earlier followed an ISI ---- began to liberalize trade and adopted EOI Note2 . In addition,
debt crises in 1982 also played an important role in reshaping the policy views.
Thus, the importance of industrialization cannot be denied being an improved strategy to
provide employment opportunities, its contribution towards economic growth as compared to
traditional agricultural sector, more foreign exchange earnings through exports of value
added products and optimal utilization of domestic resources by establishing forward and
backward linkages in the economy. In case of developing countries like Pakistan, motivation
behind each development policy is to provide employment opportunities to its accelerated
growth of population along with a considerable increase in their living standard but
establishment of large scale industrialization requires resources in abundance, therefore
alternatively, emphasis should be laid on the establishment of small scale sector in order to
resolve all these problems Note3.
The extraordinary growth in Pakistans Industry in the later part of 1950s and in 1960s
Note4
suggested that Pakistan might be one of the very few countries at that time which would
join the developed world. However, much of the growth that had been taken place in the first
two decades soon unraveled, with growing income and regional disparities, resulting in the
separation of East Pakistan.
In 1947, Pakistan inherited an undeveloped industrial base. Pakistan followed ISI
initially by default. Industrialization process in Pakistan was initiated with the development
of consumer goods (skill light).Very high rates of effective protection in the range of 100-200
percent or more were common in 1950 and 1960s in Pakistan, India, Argentina and Nigeria
leading to negative value addition (Dollar and Art 2001). 1970s witnessed the board
nationalization wave, while 1980s was a period of de-nationalization and cheap credit
availability for large enterprisesxxv. In 1980s Pakistan also started EOI along with ISI. Overall
industrial and related policies in Pakistan have traditionally neglected or at best remained
impartial towards the development of small and medium enterprises. In spite of the
indifferent attitude of successive governments in Pakistan, the SME sector has made
significant gains over time. It grew at a rate in excess of 7.2 percent in capital formation
growth as against the large scale capital formation growth of -5.02 percent in the 1990s
(SMEDA 2004). A shift in the emphasis from large scale to small scale sector could be
considered as a consequence of poor policy experiences of heavy industrialization or due to
recognition of the inherent strength, vigor and potential scope of the SME sector in Pakistan.
1.2 Role of SMEs Worldwide
From a worldwide perspective, SMEs are recognized as engine of economic growth Note6
because of their dependence on indigenous skills and technology, innovativeness and
expansion of industrial linkages. SMEs are endogenously based enterprises as their linkages
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with the large multinational corporations lead to rapid growth and expansion of SMEs. They
also play a vital role in employment generation Note7 and poverty reduction Note8. In addition
they contribute towards resource mobilization Note9, revenue generation through export
earnings Note10, increase in savings, and equitable distribution of income, promotion of
craftsmanship, egalitarian structure of society and development of an entrepreneurial culture.
SMEs are also instrumental in skill acquisition through a system of informal apprenticeship
and also provide training ground for upgrading and developing skills.
There are 20.5 million enterprises in the European Economic Area (EEA) and
Switzerland out of which 93 percent are SMEs, providing employment for 122 million
people (Competence development in SMEs. 2003, Observatory of European SMEs 2003/1
Eurorean Comission). SMEs are crucial to the UKs economy. Businesses with fewer than
250 employees account for 56% of the UK non-government jobs and 52% of turnover (Small
and Medium Enterprise (SME) Statistics for the UK, 1999 URN 00/92). In OECD SMEs
represent over 95% of enterprises in most countries and generate over half of private sector
employment (OECD: Economic Outlook, No. 65, June 2001). The International Finance
Corporation states that in much of the developing world the private economy is almost
entirely comprised of SMEs' and that they are the only realistic employment opportunity for
millions of poor people throughout the world (Lukacs 2005).
The SMEs constitute more than 99 percent of businesses in Pakistan and all these
activities are handled by the private sector and most of these operate in the informal economy
Note11
. There are about 3.2 million economic establishments In Pakistan, 99 percent of these
are accorded as SMEs, according to the definition of SMEs by SMEDA. Their contribution
towards value addition in manufacturing sector is 35 percent. SMEs contribute 30 percent to
GDP. Their share in manufactured exports is 25 percent. They contribute 99 percent towards
employment generation Note12.
The main objective of this research is to investigate the reasons that how some Light
Engineering Units experience better export performance as compared to others. For this
purpose, the study has employed different factors like Firm level characteristics,
technological and commercial capabilities along with the factors that restrict the export
activities to examine the variations in export performance of under consideration units. The
inclusion of export inhibiting factors among the important determinants of export
performance is an important contribution of the study, as limited work has been done in this
respect to explore the relationship between different types of trade barriers and export
performance of small industrial units.
2. LiteratureReview
The increasing trend of globalization has extended the domain of market and
competition for an enterprise from domestic markets to the international markets. The role of
small and medium enterprises (SMEs) as prominent players in international markets is now
well recognized. The literature review can be categorized on the basis of the firm level
characteristics, technological and commercial capabilities along with the factors affecting the
export performance of firms.
2.1 Firmlevelcharacteristics
The study focuses mainly on the role of firm-specific factors associated with the export
performance. According to the literature, the firm specific factors are crucial both for
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building competitive advantages Note13 and recognizing economic rents Note14. Literature Note15
suggests different reasons for firms differential within industries (Rumelt, 1991) according
to their performance (Cool and Schendel, 1988), the adoption of technological and corporate
policies (Lefebvre et al., 1997), along with the utilization of different technical expertise
(Davies, 1979, Helfat, 1994, Baldwin and Rafiquzzaman, 1998). The firm-level determinants
of export performance have been investigated extensively (Chetty and Hamilton, 1993) and
encompasses a variety of different factors regarding the significance of firms demographics
(Wagner, 1995) and the entrepreneurs organizational perception (Bijmolt and Zwart, 1994).
In the section, firm level characteristics like firm size, age, manufacturing status, trade unions
along with the revenue per month and average wages have been considered along with their
consequent impact on export behavior of firms.
Among the structural factors, the firm size is considered to be the most debated in the
literature. The conventional hypothesis that large firms have greater chances to compete
globally is found to be significant in different studies (Chandler, 1990, Ogbuehi and
Longfellow, 1994) but a number of empirical studies have established a negative or no
relationship between Firm size and exports (Calof, 1993). The difference in the results can be
attributed to the non-linearity of the relationship between two variables (Lefebvre et al.,
1998). As far as the relationship between age of a firm and its export potential is concerned,
it has been frequently investigated in the literature. Empirical results suggest conflicting
results regarding the relationship between firm age and exports. Established firms on the
basis of accumulated knowledge Note16 and strong capabilities have greater chances to
penetrate in the foreign market. On the other hand, mature firms can behave more rigidly
leading to competence traps Note17, while younger firms can act in a more practical,
aggressive and flexible manner (Lefebvre et.al, 2000).
Literature regarding manufacturing status of a firm suggests that more established firms
depend on domestic SMEs for the provision of components and subsystems used as inputs in
their products. It is therefore assumed that contractors will experience more direct exports as
compared to subcontractors (Lefebvre et.al, 2000). The present study is going to investigate
the impact of manufacturing status (contractor vs. subcontractor) on the export performance
of the firm under consideration.
According to the literature concerning with the role of trade unions in the promotion of
export activities suggest that all the SMEs are not associated with any type of trade union but
some have affiliation with different trade unions. Affiliation with trade unions affects the
firms performance as strikes are found to have a negative impact on export performance
(Greenhalgh et al., 1994). The existence of trade unions is not related to the probability of
being exporter (Lefebvre, 2000). In case of Pakistan different types of trade unions are there,
but as far as experience of SMEs is concerned, two types of trade unions are considered to be
important. They can be classified as area wise trade union and product wise trade union.
A bidirectional causal relationship is found to exist between successful export business
and revenue it generates as it provides firms with more resources to invest in R&D and
innovation processes (Huang et.al 2008). Empirical evidence suggest that productivity was
found to be high among export-oriented SMEs as compared with non-exporting SMEs, as
measured by the total revenue per worker per SME and total profit per worker per SME
(Trung et.al 2008). As far as wage bill of a firm reflects the composition of skill of the
workforce, implying that the average wage is a skill composition adjusted wage rate
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(Bhavani. et.al, 2001). Skills (average wage) and the contribution of quality control
manpower in employment affected the exporting of Sri Lankan engineering and clothing
firms (Wignaraja 1998, 2007).
2.2 Technological Capabilities
Literature relating to innovation and learning processes in developing countries
highlights the importance of acquiring technological competence as a major determinant of
firms export potential (Lall, 1992, Bell and Pavitt, 1993). Literature Note18 motivates the
utilization of imported technology affectively with the help of different firm-specific factors
concerned with building technological capabilities. It suggests that in order to utilize
imported technologies productively, firms have to invest in research, engineering and training
(Lefebvre et.al, 2000).
From the view point of theoretical perception acknowledged as firms resource-based
view, firm-level determinants of export performance are examined with special emphasis on
firms innovative capabilities, as the competition in export market is based heavily on
technological advancements, it is anticipated that technological capabilities would play an
important role in firms potential to export (Lefebvre et.al.,2000).
Capabilities can be defined as firms capacity to organize resources, where resources are
referred as stock of existing factors which is owned by a particular firm (Amit and
Schoemaker, 1993). As innovation depends on technological and critical capabilities in areas
of distribution and marketing (Burgelman et al., 1996), it also involves the commercial
dimension.
Technological capabilities can be defined as the firms existing capacity and its future
probability to utilize firm-specific technology to resolve technical problems and develop the
technological functioning of its production process along with its finished products
(Nicholls-Nixon, 1995). Small exporters have capabilities to compete in foreign markets on
the basis of their technological capabilities (Kohn, 1997), but a negative relationship between
technology and exports has been observed (Sriram et al.,1989), while no significant
relationship was found between two variables (Reid ,1987), providing justification for further
research.
Amongst technological capabilities, expenditures on R&D enables firm not only to
innovate, but also facilitate them to incorporate external technological knowledge in an
improved manner (Lefebvre et.al.,2000). R&D is therefore considered as one of the major
factors affecting firms export performance. Positive relationship between exports and R&D
in small firms has been established (Ong and Pearson,1984). Innovation is said to be most
motivating factor driving the exports Note19.
The direction of causation runs from innovation to export (Krugman ,1979). Empirical
results from earlier studies didnt provide any reliable results while investigative the
relationship between innovation and export performances in case of small firms, because the
process of innovation in small firms seems to have imprecise boundaries i.e., a lot of factors
contribute to the process of innovation making it difficult to circumscribed (Nassimbeni,
2001). In case of small firms, specific R&D is mostly exogenous and represents the
modifications of existing products and processes. Therefore, the traditional measure to
evaluate innovative capacity of the firm as R&D expenditures may yield insignificant results.
However, different aspects technological innovation like product innovation, process
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innovation and major improvements in existing products (Nassimbeni, 2001) are taken into
consideration in the present study to analyze their impact on firms export performance.
Investment strategy of a firm involving its different dimensions as investment in capacity
building, in replacing old equipment, for enhancing productivity, in improving quality of
output and investment in producing new product suggested by Nguyen et.al. (2007) has been
employed in the present study to find out the impact of the investment strategy adopted by a
firm on its probability of being an exporter.
Differences in exporter performance can be explained by the variation in degree of
difficulties faced by small firm in their international operations. Entrepreneurs while
initiating a new project may face different problems, for instance, they may face credit access
problems in the financial market. Market acceptance and lacking of skilled labor are also
considered as major problems faced by small firms while starting up new projects, forcing
them to leave the international markets (Alvarez, 2004).
Literature based on the determinants of firm growth considers both human capital and
financial resources as most important factors effecting small business growth (Wiklund et al.,
2007). On the firm level, the experience, skill and knowledge of the total employees
contribute more promisingly as compared to the entrepreneur alone (Chandler & Hanks,
1994, Birley & Westhead, 1990). Human capital can be measured both in terms of specific
and generic terms. Generic human capital is defined in terms of different levels of
educational attainment by workers. Specific human capital can be measured by employing a
dummy variable indicating whether firm is offering on job training to its workers or not (Lee
et.al ,2005).
Small firms carry out a large number of technological innovations based on their unique
know how approach in an unbalanced manner among industrialized nations (Pavitt et al.,
1987, Rothwell, 1988) and also in newly industrialized countries like Korea (Lee, 1995).
They play an important role in the diffusion of technology and their unique know-how is
often based on the improvements of general technologies developed by large firms.
Competitive advantage based on existence of a unique product is significantly related to
firms performance (Julien et al., 1994).
2.3 Commercial Capabilities
Literature suggests that firms market intelligence and marketing capabilities are
considered as basics for entrance and expansion in the process of internationalization. Small
new high technology firms have capability to overcome complications with technology than
with the market (Fontes and Coombs, 1997). As this study was based on a sample of
information technology sector, there are little chances of generalization of these results. The
present study focuses on the contributions of a wider range of commercial capabilities to
export performance, namely diversification, trademarks, use of export promotion bureau
trade fairs, personal visits and use of imported raw materials.
Exporting strategy of SMEs based on diversification of products and product lines have
proved to be successful in export growth (Denis and Depelteau, 1985). In the presence of
diversified products, the expertise and knowledge acquired in the fields of commercial and
competitiveness can be transferred from one sector to others, which are found to be
associated with export success (Cafferata and Mensi, 1995). Mandatory legal measures like
trademark protection is necessary to execute at early stages of firm export process. The
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presence of trademarks can serve as an asset for SMEs working in foreign markets (Lefebvre
et al., 2000).The study is going to analyze the impact of presence of trademarks on the firms
export performance.
Imports of disembodied technology are found to affect firms productivity in a
significantly positive manner (Hasan, 2002). Spending on imported raw materials and capital
goods influences firms productivity considerably (Topalova, 2007). In developing countries,
the productivity enhancing affect of imported intermediaries has also been illustrated in the
context of Chile (Kasahara and Rodrigue, 2004). In the context of present study, which is
dealing with small enterprises, most of the firms are not involved directly in the import
activities but they do utilize imported raw material in their products. Thats why a dummy
variable has been included in the study to analyze the impact of imported raw material on the
export performance of the firms under consideration.
2.4 Export Restricting Factors
Dynamism and willingness of SMEs to engage themselves in international activities is
obstructed by different factors like availability of information, non-cooperation of
Government agencies, and degree of competition in foreign markets, financial difficulties and
problem of cost competitiveness faced by small firms in international markets. These factors
are taken into consideration to analyze their impact on the probability of being exporter.
Firms entering in the export process have to face administrative and customs problems
in both importing and exporting countries (Kedia and Chhokar, 1986). In the consequence of
present wave of globalization, SMEs have to face foreign competition in the home market,
stimulating firms to explore international market along with domestic market (Etemad,
2005). Foreign competition is considered to be the highly rated problem, demonstrating that
this problem is enduring and generic nature (Katsikeas and Morgan, 1994).
In the process of internationalization, small firms face financial constraints and undercapitalization (Buckley, 1997). Financial constraints correspond to the lack of financial
resources. Credit restriction, equity capital and lack of external debt are considered to be the
main hindrance to the growth of SMEs.
Small firms build their networks by associating with foreign companies in target
countries having complementary skills similar to their own firms. For this purpose, the
entrepreneur/manger has to go around and try to formulate a network through personal
contacts, visiting foreign markets and other clients (Coviello et.al, 1998).
3. ResearchMethod
3.1 Sources of Data

In the present study, primary data collected through a detailed survey of Light
Engineering sector is being utilized for analytical purposes. The survey has been conducted
in the districts of Gujranwala, Gujrat and Sialkot from Feb, 2009 to Feb, 2010. The format of
the SMEs questionnaire, covering broad aspects of each units individual characteristics,
commercial and technological capabilities along with a detailed profile of factors that restrict
small units to enter the international market. 1201 units were investigated out of which 318
units were found to be involved in exporting activities.
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3.2 Logit Model for Export

To estimate the probabilities of being involved in export activities, logistic regression
analysis with maximum likelihood estimation is employed. In the analysis dependent variable
takes the value 1 when the household is not exporter and 0 when household is exporter.
Explanatory variables in this model can be divided into four categories as firms
characteristics, technological capabilities, commercial capabilities and export restricting
factors.
Basic model can be written as
Export=a0+a1X+a2Innovation+e
(3.1)
Where
Export=1 (if firm is exporter)
= 0 (if firm is non exporter)
X= firms characteristics, technological capabilities, commercial capabilities and
factors inhibiting export activities.
The interpretation of the model in terms of probabilities can be explained as odds ratios.
Odd ratio greater than 1 indicates the increase the probability of being exporter while less
than one indicates the decrease in the probability of being exporter.
Where innovation can be measured in terms of innovation in new product, in new
process and major improvements in the existing product and e is expressed as error term
Out of the major determinants effecting firms export performance, innovation has found
to have an endogenous relationship with exports. So, the direct estimation of the eq. 3.1
would lead to a biased estimate of causal impact of innovation on exports.
Two approaches can be employed to deal with this problem of endogenity. These
approaches are the instrumental variable approach and simultaneous equation technique.
While in the present study an instrumental variable approach has been employed. In order to
utilize the instrumental variable approach, the first step is to explore those variables that are
highly correlated with innovation but not with exports.
Following specification is used as instrumental variable technique.
Innovation=b1+b2Z+e
(3.2)
Where innovation= 1 (If Firm innovates)
=0 (If Firm does not innovate)
Where Z is the instrumental variable and it comprises of Investment strategy adopted by
a firm, owners perception in starting up new projects, on job training, presence of unique
know how, number of skilled workers in the firm and use of imported raw materials in the
final product.
The specification expressed as 3.2 is then utilized to find out the impact of instrumental
variables on the three components of innovation as
Product Innovation=b1+b2Z+e
(3.2a)
Where Product innovation= 1 (If Firm innovates a new product)
=0 (If Firm does not innovate anew product)
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Process Innovation=b1+b2Z+e
(3.2b)
Where process innovation= 1 (If Firm innovates a new process)
=0 (If Firm does not innovate a new process)
Major improvements =b1+b2Z+e
(3.2c)
Where major improvements = 1 (If Firm undergoes some major improvements)
=0 (If Firm has not made some major improvements)
The fitted values of new product, new process and major improvements after the
estimation of the three innovation equations will be then incorporated in final export equation
of 3.1.
4.
EstimationResults
The results of the instrument equation 3.2a are being shown in Table (2). The investment
strategy is found to be positively and overall significant as all the six components of
investment strategy are found to be significant at 95 and 99 percent confidence level.
Investment in capacity building has a positive impact on the innovation of new product. A
unit change in the investment in capacity building increases the odds of innovation of new
product by 3.162 units (the probability of innovation in new product over the probability of
not experiencing any innovation in new product). Investment in replacing old equipment is
found to be significant at 95 percent confidence level as one unit increase in the investment in
replacing old equipment increases the odds of innovation in new product by 5.248 units. As
far as owners perception regarding new product is concerned all the three components like
financial problems, market acceptance and financial problems are found to be significant and
exert positive influence on the probability of involving in innovation in new product. The
firms having unique know how, number of skilled workers and use of imported raw material
increase the probability of a firm involved in new product innovation activities. The variable
of on job training is found to be insignificant in the present analysis.
The results of the instrument equation 3.2b are being shown in Table (3). The investment
strategy is found to be positively and overall significant as all the six components of
investment strategy are found to be significant at 90, 95 and 99 percent confidence level.
Investment in capacity building has a positive impact on the innovation of new process. A
unit change in the investment in capacity building increases the odds of innovation of new
process by 2.085 units (the probability of innovation in new process over the probability of
not experiencing any innovation in new process). Investment in replacing old equipment is
found to be significant at 95 percent confidence level as one unit increase in the investment in
replacing old equipment increases the odds of innovation in new process by 0.857 units. As
far as owners perception regarding new process is concerned two of the three components
like financial problems and lack of skilled workers are found to be significant and exert
positive influence on the probability of involving in innovation in new process activities. The
firms having number of skilled workers and use of imported raw material increase the
probability of a firm involved in new process innovation activities. The variable of on job
training and unique know how are found to be insignificant in the present analysis.
The results of the instrumental equation 3.2c are being shown in Table (4). The
investment strategy is found to be positively and overall significant as all the six components
of investment strategy are found to be significant at 95 and 99 percent confidence level.
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Investment in capacity building has a positive impact on major improvements in existing

equipment. A unit change in the investment in capacity building increases the odds of
improvements in existing equipment by 2.085 units (the probability of improvements in
existing equipment over the probability of not experiencing any improvements in existing
equipment). Investment in replacing old equipment is found to be significant at 95 percent
confidence level as one unit increase in the investment in replacing old equipment increases
the odds of improvements in existing equipment by 1.006 units. As far as owners perception
regarding new product is concerned one of the three components as market acceptance is
found to have positive influence on the probability of being involved in improvements in
existing equipments while financial problems and lack of skilled workers are found to be
insignificant on the probability of experiencing any major improvements in existing
equipments.. The firms having number of skilled workers and use of imported raw material
and possession of unique know how increase the probability of a firm involved in major
improvements in existing equipments.
The estimated results of the basic export equation 3.1 are being show in the table
(5).Size of a firm is found to be significantly and positively influencing the probability of
being exporter at 95 percent significance level. A unit change in firm size increases the odds
of involving in export activities by 2.73 units (the probability of being exporter over the
probability of not being exporter). Variables like firm age and investment in the start of the
project are proved to be insignificant in the present analysis.
Manufacturing status of the firm being a contractor increase the probability of being an
exporter as a unit change in manufacturing status from sub-contractor to contractor increases
the odds of involving in export activities by 1.02 units. Wage per employee exerts a negative
influence on the probability of being exporter. An increase in the average wage by one unit in
decreases the odds of being an exporter by 1.066 units. All the three imputed components of
innovation like innovation in new product, process and major improvements in the existing
equipments are proved to be significant at 99 percent of confidence level and positively
increase the probability of being an exporter.
Association with the area trade union exerts a positive influence on the attitude of an
entrepreneur to be a exporter. While, association with product wise trade unions and product
mix are proved to be insignificant in the current scenario. The existence of trade marks and
registered trade marks positively increase the probability of being an exporter as a unit
increase in the acquisition of registered trade mark increases the odds of involving in export
activities by 3.837 units (the probability of being exporter over the probability of not being
exporter).
Exposure of a firm to the information regarding export markets increases the probability
of being a exporter by 1.894 units. While non co-operation on the side of Government
agencies, financial problems, competition from the foreign firms and expensive foreign visits
significantly reduces the probability of being an exporter. While a firm producing a product
which is compatible to foreign product in its cost competitiveness induces a firm to engage
itself in export activities as a unit increase in the cost competitiveness increases the odds of
involving in export activities by 12.96 units (the probability of being exporter over the
probability of not being exporter).
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Conclusion
The study has provided a comprehensive view of different factors that differentiate
exporters from non exports. These important factors were classified into four main categories
like Firm level characteristics, technological capabilities and commercial capabilities.
Another important dimension of the present study is that it has also focused those factors that
restrict firms to be involved in exporting activities.
According to the results, Initial investment of firm and its age are not found to be related
to export activities. The affiliation with trade unions as product wise and area wise appeared
to be insignificant implying no affect on export activities. LnRev/Month is significantly
positive implying to increase the probability of being exporter. While, average wage (-ve)
means higher the cost of labor less likely is the chance that firm will export.
Availability of information and cost competitiveness are found to be positively and
significantly associated probability of being exporter. Non-cooperation of Govt. agencies,
financial problems, competition in foreign markets and expensive foreign are negatively and
significantly associated probability of being exporter.
All the three measures of innovation are positively related to the probability of being
exporter. Product mix, manufacturing status, trade marks, registered trade marks and size of
the firm are also significant positively contributing to the probability of being exporter. The
innovation processes comprising of new product, new process and major improvements are
found to be positive with high odd ratios exhibiting their importance in the exports of light
engineering sector.
The estimated results imply some policy implications as it should formulate such
policies that can support small firms in their process of internationalization. It can help them
in with providing information regarding foreign markets, solving their financial problems,
making them more cost competitive as far as their products are concerned and by subsidizing
their visits to foreign markets. All these arrangements can positively help small units to
make themselves more productive in this present era of internationalization.
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Notes
________________________
Note 1 A periodic decline in the export price of raw materials and commodities produced by LDCs resulted in a
widely growing disparity between them and rich countries and in order to decrease that disparity the LDCs had to
protect their newly emerging manufacturing sector.
Note 21 Hong Kong, Korea and Singapore followed Export oriented Industrialization in early 1950s, while Korea
followed ISI with EOI (Salvatore 2006).
Note 31 Government of Pakistan had estimated a required investment of Rs. 5.2 trillion in large scale sector to
provide employment opportunities to an addition of 16 million persons to the labor force while only Rs. 8 billion
are
required
in
case
of
small/micro
scale
sector.(http://www.pakistan.gov.pk/ministries/planninganddevelopment-ministry/mtdf)
Note 41 In the year 1959-60, there were 2758 no. of establishments in Pakistan which was 37.79 percent more as compared to those of 1955-56 (2031 units), while in year
1964-65 total no. of establishments were 3212-- a 58.17 percent increase as compared to last decade of 1950s.(CMI, various issues)
Note 51 PFIS Punjab, 2005

Note 61 See Gebremariam et.al (2004), Beck et.al (2004,2005) and Tambunan (2008)
Note 71 See Birch (1979), Noriyuki et.al (1998) and Osmani (2004).
Note 81 See Mukras (2003), Antonio (2003) and Liu et.al (2008).
Note 91 By organizing money market through banking sector.
Note 101 See Reason et.al (2004), Karadeniz et.al (2007), Nazar et.al (2008).
Note 111 Refers to all economic activities that fall outside the formal economy regulated by state.
Note 121 Economic census of Pakistan 2005.
Note 131 Amit and Schoemaker, 1993
Note 141 Jacobson, 1988; Hansen and Wernerfelt, 1989.
Note 151 The mentioned studies also support the resource based view of the firm (Wernerfelt, 1984; Grant, 1991
and Peteraf, 1993)
Note 161 Baldwin and Rafiquzzaman, 1998.
Note 171 Leonard-Barton, 1992.
Note 181 Pietrobelli, 1997; Ernst et al., 1998; Rasiah, 2004.
Note 191 Suggested by the international trade models developed by Vernon (1966) and Krugman (1979).
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Annexure:
Table 1: Determinants of Export Performance
DETERMINANTS
1.
MEASURE
FIRMSCHARACTERISTICS
Firm Size
Number of full-time employees
Firm Age
Number of years since the foundation of the firm
Manufacturing Status
Subcontractor or contractor
Area-Wise Trade Unions
1 if the firm is affiliated with the trade union, 0 otherwise
Product-Wise Trade Unions
1 if the firm is affiliated with the trade union, 0 otherwise
Lnrev09/Month
Log of firms revenue in 2009
Wage/Emp09
Ratio of total wage to number of employees (Pakistan Rs.)
2. Technological Capabilities
1.
Innovation
Newproduct
1 if firm introduces new product(s), 0 otherwise
Newprocess
1 if firm introduces new production process, 0 otherwise
Modiproduct
1 if firm makes major improvements of existing product(s) or changes

specification, 0 otherwise
2.
InvestmentStrategy
Inv Capacity (Investment Strategy)
1 if firm invests in their capacity, 0 otherwise
Inv Replace (Investment Strategy)
I if firm invests in replacing old equipment, 0 otherwise
Inv Productivity (Investment Strategy)
I if firm invests in improving their productivity, 0 otherwise
Inv Quality (Investment Strategy)
I if firm invests in improving their quality of output, 0 otherwise
Inv New (Investment Strategy)
1 if firm invests in producing new output, 0 otherwise
Inv Other (Investment Strategy)
1 if firms investment is for other purposes, 0 otherwise
3.
OwnersPerceptionInStartingUpNewProjects
Financial Problems
1 if firms owner perceived the importance of lacking finance in

staring up new projects, 0 otherwise
Market Acceptance
1 if firms owner perceived the Importance of lacked market

acceptance in staring up new projects, 0 otherwise
Lack Skilled Worker
1 if firms owner perceived the importance of lacking skilled workers

in staring up new projects, 0 otherwise
4.
5.
6.
OnJobTraining
1 if firm normally trains its existing workers or new workers, 0 otherwise
Presence Of Unique Know 1=yes 0=otherwise

How
SkilledWorkers
Number of skill workers
3.Commercial Capabilities
Diversification (Product Mix)
No of industrial sectors in which the firm operates
Trade Marks
Presence=1 Absence=0
Registered Trade Marks
Presence=1 Absence=0
Export Promotion Bureau Trade Fairs
Yes=1, No=0
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Personal Visits And References
Yes=1, No=0
Import Activities/ Use Of Imported

Raw Material
Yes=1, No=0
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4.Factors Inhibiting Export Activities

Availability Of Information
Yes=1, No=0
Non Cooperation Of Govt. Agencies
Yes=1, No=0
Increased
Markets
Yes=1, No=0
Completion
In
Foreign
Financial Problems
Yes=1, No=0
Cost Competitiveness
Yes=1, No=0
High Cost Of Visiting Foreign Markets
Yes=1, No=0
Table 2: Logistic Results New Product

PREDICTORS
COEFFICIENT
Z-STATISTICS
ODD RATIOS
INVCAP
1.1506
1.80**
3.162
INVREP
2.133
2.28**
5.248
INVPRODY
1.918
2.19***
8.25
INVQUA
1.15
1.99**
2.59
INVNEW
0.871
1.56**
2.09
INVOTHER
1.47
1.95***
3.15
FINPROB
-0.232
-1.89***
1.068
MARACCEP
1.169
2.58***
4.181
LACKSKIL
0.2922
1.91*
0.746
ONJOBT
0.2798
1.38
1.321
UKNOWHOW
1.598
1.88**
3.176
SKILLWORK
0.5166
2.35**
2.60
UIMPRM
0.3494
2.17***
3.03
CONSTANT
40.93
1.76*
Log likelihood=-534.72
-2
Pseudo R = 0.337
No. of observations=1201
LR Chi2 (13)=169.80
Prob.>chi2=0.000
*** indicates that coefficients are significant at 1 percent level
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Table 3: Logistic Results New Process

PREDICTORS
COEFFICIENT
Z-STATISTICS
ODD RATIOS
INVCAP
0.817
1.76**
2.085
INVREP
0.1536
1.90**
0.8576
INVPRODY
0.9249
1.70**
1.911
INVQUA
0.567
2.44***
2.058
INVNEW
0.871
1.56*
1.91
INVOTHER
0.951
1.75*
1.909
FINPROB
-0.595
-1.88**
2.06
MARACCEP
0.1952
1.49
0.822
LACKSKIL
1.953
1.76**
3.9099
ONJOBT
0.1398
0.77
0.8695
UKNOWHOW
0.352
2.22
1.965
SKILLWORK
0.4714
2.53***
1.953
UIMPRM
0.375
2.33***
2.963
CONSTANT
-6.81
-1.45
--
Pseudo R = 0.232
LR Chi2 (13)=136.33
Prob.>chi2=0.000
Table 4: Logistic Results Major Improvements
PREDICTORS
COEFFICIENT
Z-STATISTICS
ODD RATIOS
INVCAP
0.1265
1.90***
1.134
INVREP
0.0058
2.04**
1.006
INVPRODY
0.0273
2.22***
1.027
INVQUA
0.078
1.94**
1.081
INVNEW
0.1908
2.13***
2.019
INVOTHER
0.0409
2.34***
1.041
FINPROB
0.0522
0.39
1.053
MARACCEP
0.180
1.94**
1.197
LACKSKIL
0.0805
0.66
0.922
ONJOBT
0.1599
0.92
1.852
UKNOWHOW
0.293
2.19***
1.971
SKILLWORK
0.119
1.91**
1.129
UIMPRM
0.999
2.09*
3.01
CONSTANT
11.908
2.39**
--
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Pseudo R2= 0.265
LR Chi2 (13)=127.10
Prob.>chi2=0.000
Table 5: Logistic results Exports
PREDICTORS
COEFFICIENT
Z-STATISTICS
ODD RATIOS
SIZE
3.915
2.24**
2.73
AGE
0.0295
0.610
1.029
MSTAT
39.12
1.92*
1.02
INVSTART
0.00012
0.43
1.000
LnREV/MONTH
0.0011
2.13**
0.999
WAGE/EMP
-0.0642
-2.20**
1.066
NPROD
0.5807
3.00***
1.787
NPROCESS
0.635
0.001***
1.887
MIMPPROD
0.528
2.68***
0.589
ATUNION
1.029
3.84***
2.8
PTUNION
0.965
0.57
2.62
PRODMIX
1.265
0.39
1.54
TRADMARK
0.922
4.15***
6.83
RTRADMARK
1.344
5.60***
3.837
INFORM
0.6389
3.46***
1.894
NCGOVTAG
-0.7708
-3.47***
2.161
COMPFM
-1.705
-6.40***
5.505
PROBFIN
-1.416
-5.31***
4.120
COSTCOMP
2.562
1.53***
12.96
EXPVFM
-0.5258
-2.51***
1.691
CONSTANT
-9.83
-11.43***
--
Pseudo R = 0.4194
LR Chi2 (20)=582.24
Prob.>chi2=0.000
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Role of light Engineering Sector in Poverty Reduction amongst its

Employees.
A Case Study of Gujranwala, Gujrat and Sialkot Districts.
Khizra Safadr Khan
Abstract
Poverty is a multifaceted phenomenon relying on a number of different social, economic, social and demographic
aspects. An understanding to the true perspective of nature, intensity, and causes of poverty can be considered as a
prerequisite for effectual course of action to reduce poverty. The present study attempts to investigate the impact of
various socioeconomic and demographic determinants on the poverty status of employees of different light engineering
units, by employing primary data collected from 1201 SMEs working in Gujranwala, Gujrat and Sialkot Districts. To
estimate the probabilities of being poor, an econometric approach of logistic regression analysis with maximum likelihood
estimation has been employed. Household size, age of household head and persons per room in a household are
found to be positively associated with poverty. Education, female labor force participation, gender of the
household head, physical assets like owning the house, structure of the housing unit, availability of services
like electricity and sui gas and skill of the workers significantly reduces the chances of being poor. SMEs are also
found to have a negative impact on the probability of being poor, adding positively to the argument that SMEs is
this case are really contributing to enhance the living standard of its workers.
Keywords: Poverty, SMEs, Light Engineering sector, Gujranwala.
1.
Introduction
Poverty is considered as denial of opportunities and a continuous state of deprivation about basic necessities of
life. Poverty and inequality are strongly interlinked, and recently there appears to be a gradual increase in inequality both
at international and national levels. According to United Nations Development Program, about 80 percent of the worlds
population resides in countries with increasing income inequality. Moreover, the share of poorest 40 percent of the worlds
population in global income is about 5 percent, while richest 20 percent account for 75 percent of world income.
The problem of mass poverty has been a major challenging factor against the pace of development in Pakistan
since her independence. The number of the destitute has increased with the passage of time, expressing the immensity of
this problem. Lack of food, shelter, health and educational facilities, unemployment, uncertainty, powerlessness,
unhygienic living conditions, lack of representation and freedom are considered to be the major determinants of poverty.
Majority of people in Pakistan, particularly in rural areas and also in so called urban areas, are characterized by most of the
factors responsible for poverty described above, representing the dismal situation of socioeconomic and demographic
indicators. According to the World Bank and the United Nations Development Program (UNDP) the poverty rate in
Pakistan ranges in between 25.7 percent and 28.3 percent in contrast to the governments estimates of 23.9 percent notexxvi
(World Bank, 2006). The failure of official planning and the market economy in lessening this problem emphasize the
implication of some new and effective policy measure. The protection of the rights of the vulnerable segment of the
society and participation of whole population are considered somewhat essential for long run economic development of
Pakistan.
The major aspect of economic development model of Pakistan has always been the maximization of output
growth, with little emphasis on the issues of widespread poverty, socioeconomic differentials, and inauspicious
demographic issues. In spite of high rates of economic growth along with steady improvement in major macroeconomic
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indicators, but it has failed to trickle down to the Pakistans poor. Pakistan has experienced economic stagnation and
poverty in 1950s, increasing growth and poverty in the 1960s, stagnant growth along with declining poverty in the 1970s,
increasing growth and declining poverty in the 1980s and, declining growth with increasing poverty [MHCHD/UNDP
(1999)] Notexxvii. The head count ratio of poor was found to be 30.6 percent in 199899, with a high rise of 34.5 percent in
200001, and a gradual decline up to 23.9 percent and 22.3 percent in 200405 and 200506 respectively Notexxviii.
From a worldwide perspective, SMEs are recognized as engine of economic growth Notexxix because of their
dependence on indigenous skills and technology, innovativeness and expansion of industrial linkages. SMEs are
endogenously based enterprises as their linkages with the large multinational corporations lead to rapid growth and
expansion of SMEs. They also play a vital role in employment generation Notexxx and poverty reduction Note xxxi. In addition
they contribute towards resource mobilization Note xxxii, revenue generation through export earnings Note xxxiii, increase in
savings, and equitable distribution of income, promotion of craftsmanship, egalitarian structure of society and
development of an entrepreneurial culture. SMEs are also instrumental in skill acquisition through a system of informal
apprenticeship and also provide training ground for upgrading and developing skills.
The SMEs constitute more than 99 percent of businesses in Pakistan and all these activities are handled by the
private sector and most of these --- operate in the informal economy Notexxxiv. There are about 3.2 million economic
establishments In Pakistan, 99 percent of these are accorded as SMEs, according to the definition of SMEs by SMEDA.
Their contribution towards value addition in manufacturing sector is 35 percent. SMEs contribute 30 percent to GDP.
Their share in manufactured exports is 25 percent. They contribute 99 percent towards employment generation Note xxxv.
With the development and overtime growth of SMEs and their role in foreign exchange earnings, employment
generation and income distribution is of paramount importance Notexxxvi. According to a study conducted by Board of
investment (2007), there are about 2500 registered units of Light Engineering Sector along with a much larger number of
units operational in unorganized sector. Majority of these units are operating in the cities of Karachi, Lahore, Gujranwala,
Gujrat and Sialkot. The study is based on the SMEs (Light engineering Units) in Gujranwala, Gujrat and Sialkot districts
as they account for more than 70 percent of the total light engineering industry in Pakistan Note xxxvii.
Do SMEs really contribute towards poverty reduction? This is the claim made by approximately all the
studies focusing on the role of SMEs along with their positive contribution towards GDP, export earnings and
employment generation. They do play an important role in poverty reduction through employment generation.
As in Pakistan 90 % of the very small establishments accounts for 80% of all non- agricultural sector
employment. (FBS).Thats why it is taken as a fact that SMEs really contribute towards poverty reduction. No
empirical study has yet been undertaken to quantify the extant of poverty in the workers of SMEs to find out
the real contribution of SMEs toward poverty reduction. This study is pioneer in its nature as no empirical
study in these districts has so far been conducted to find out the determinants of poverty of the employees of a
particular sector (Light Engineering Sector).
2.
Literature Review
Considerable work has been done on poverty in the case of Pakistan. The focus of most of the studies Notexxxviii
was to concentrate only counting population below the poverty line at provincial or national level, provincial level or to
find out the impact of different socio-economic variables on the poverty status of the discussed population. However, a
brief review of the work done on the poverty alleviation is discussed below.
Kemal (1995) evaluated different public strategies and policies conducted for poverty alleviation. According to
him, the important mechanisms to reduce poverty includes the introduction of new expertise and promotion of large and
small scale industries, reasonable taxation policy and the improvement in the income equality among poor households by
providing them more earning opportunities. Malik (1996) employed a micro level data set collected from a village of
Punjab village and considered different socio-economic and demographic variables along with factor of land holding in
order to demonstrate their impact on the living standard of rural masses and consequently to alleviate poverty in the rural
areas.
Amjad and Kemal (1997) examined different correlates of poverty by employing different macroeconomic
variables. They also observed the impact of the structural adjustment programs on poverty in case of Pakistan. According
to Malik et al. (2000) the redistribution of land can be considered as an effective policy measure to lessen poverty in rural
areas of Pakistan, as a decline in the concentration of land can augment agricultural growth rates and consequently can
help in alleviating poverty in the rural areas of Punjab.
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Azid et al. (2001) explained the impact of female labor force participation in the cottage industry of cloth
embroidery in poverty alleviation in rural areas of city Multan. According to them, the working hours of female employees
significantly reduces the probability of being poor.
Siddiqui (2001) analyzed the gender differential impact on poverty reduction. The author suggested that an
increase in the female economic involvement in the form of improved human capital formation can exert a positive impact
on the poverty reduction.
Chaudhry (2003) examined the nature, extent and severity of poverty in Bahawalpur district along with the
impact of different correlates and micro determinants of poverty on the probability of being poor. Author has employed
income regression and Logit regression models to identify the factors affecting rural poverty and concluded that increased
agricultural production, efficient economic infrastructure, promotion of non farm rural economic opportunities,
improvement in living standard, health and educational facilities are considered as the required policy measures to
alleviate the problem of poverty in rural areas of Punjab.
Chaudhry et al. (2005) investigated the correlates and poverty profile of the Cholistan in the Southern part of
Punjab and concluded that distribution of land on the basis of equality, development in livestock sector and improvement
in socio-economic and demographic characteristics are considered as important measures for reduction in poverty in
distant areas of Pakistan like Cholistan.
Arif (2006) evaluated the poverty reduction programs implemented at the national level in Pakistan in the form of
microfinance, provision of health facilities and disbursement of zakat Notexxxix by employing data from Pakistan Socioeconomic survey (PSES) for the year of 2000/01. According to the author, zakat distribution program conducted by
government is unable to access all the eligible poor, leaving severe deficiencies in the Public Zakat program. Moreover,
microfinance programs unsuccessfully target the poorest households and health services have not arrived at the most
deprived areas of the Pakistan.
The present study is different in the nature in the sense that it has tried to focus different socio-economic and
demographic characteristics of employees of Light Engineering Sector of Gujranwala, Gujrat and Sialkot Districts. The
present study is going to investigate the estimation of poverty and the analysis of household characteristics with
respect to poverty status along with the determination of the incidence, depth and severity of poverty in the
employees of light Engineering Sector. It is also aimed to find out the causes and determinants of poverty in the
employees of Light engineering sector. At the end it is intended to explore some policy implications relating to
alleviate poverty effectively.
3.
Research Method
3.1 Concept of Poverty

The perseverance of poverty is associated with its multidimensional behavior being a complex, dynamic,
institutionally entrenched, and a location and gender specific phenomenon. The intensity and severity of poverty greatly
differ with respect to various segments of society, periods, localities, and countries. The manner in which poverty is being
discussed and analytically quantified by social scientists is quire ambiguous.
According to the World Bank (2000), poverty is pronounced deprivation in wellbeing. This definition
leads to two different inquiries as, what is meant by well being and against what benchmark, the extent of deprivation
can be measured. According to second approach, the command of people on a specific type of consumption good is
considered as well being as of food, shelter, health care or education. This approach is much broader and encompasses
important social determinants which are crucial for human development in addition to food and non-food items.
The broadest approach to well-being is the one expressed by Amartya Sen (1987); according to him
well-being is the result of potential to function in society. Thus, poverty is the outcome of lacking of key
capabilities by people, and so having insufficient education or income, or poor physical condition, or low selfassurance, or low insecurity, or a sense of helplessness, or the absence of rights as liberty of speech.
The concept of poverty can not be easily expressed, though; it can be defined in terms of absolute poverty as lack
of resources in relation to needs and lack of resources in relation to the resources of others, i.e., relative poverty.
According to the poverty theorists, the concept of absolute poverty is more related to the problems of developing countries
as compared to the relative poverty. Thus, the present study has attempted to estimate and analyze absolute poverty in the
workers of Light Engineering sector of Gujranwala, Gujrat and Sialkot districts.
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After defining poverty, it will be helpful to identify a benchmark to differentiate poor from non poor.
For this purpose, an indicator of welfare as income or consumption per capita is defined. Income defined as consumption
plus change in net worth, is generally employed in developed countries as a measure of welfare, but it tends to be
critically understated in developing countries like Pakistan. Consumption is less inconspicuous and can be used to
measure permanent income to some extant.
The consumption per capita an be considered as most frequently utilizing measure of welfare,
In order to incorporate differentiation in need by age, and economies of scale in consumption, some analysts employ
consumption per adult equivalent scales. The Organization for Economic Co-operation and Development (OECD) scale
Notexl
= (1 + 0.7 (NA Note xli - 1) + 0.5 NCNotexlii) is widely used and also employed in this study.
3.2 Concept of Poverty Lines
A poverty line yields that level of income or expenditure, required by an individual to acquire a minimum basket
of goods and services, which could differentiate him or her from poor. Poverty line varies from country to country because
of differences in the level of income or expenditure. Households or individuals having a per capita income less than this
level are considered as poor, and households with a per capita income greater than this level are considered as non-poor.
Therefore, a poverty line is an income level separating poor from non-poor. Three methods are generally used to construct
poverty lines. These include cost of basic need approach Note xliii, food energy intake method and subjective evaluation
criterion.
In Pakistan, a number of studies have been conducted during the last three decades in order to analyze the nature
and extent of poverty. Most of the studies Notexliv are primarily based on data generated through different Household
Income and Expenditure Surveys (HIES), employing the calorie-intake approach to assess poverty. Whereas, a few recent
studies have utilized the basic-needs approach to assess the severity of poverty.
In the present study, the official poverty line has been utilized after inflating it for the period 2008-09. Planning
Commission of Pakistan has estimated the absolute poverty line of Rs. 673.54 per month per adult equivalent Note xlv, by
employing PIHS 1998-99 data. The Commission then adjusted the poverty line for the 2000/01 period by using Consumer
Price Index as Rs. 723.40 Note xlvi per month per adult equivalent and in 2004/05 it was estimated as Rs. 878.64 per month per
adult equivalent. Amjad et.al (2008) has employed same poverty line suggested by Planning Commission by using the CPI
for the period of 2007and the adjusted poverty line was calculated as Rs. 1023 per month per adult equivalent.
The present study has inflated the poverty line developed by Planning Commission, for the year 2008-09 and a
poverty line of Rs.1398.23 per month per adult equivalent has been utilized for distinguishing poor from non-poor.
3.3 Measurement o f Poverty
After selecting the data collection process, different indicators of poverty and an appropriate measure
to differentiate poor from non-poor, the next step is to explain the analytical techniques employed to find out
the probability of being poor among SMEs employees in the present study. Poverty profile is the most
appropriate manner in order to analyze the correlates of poverty, where household welfare across different
population groups is compared with respect to different characteristics.
T h e F G T N o t e xlvii i n d i c e s b e i n g t h e m o s t c o m m o n l y e m p l o y e d p o v e r t y m e a s u r e s a r e
used to calculate a more detailed poverty profile of the employees of Light Engineering
Sector in Gujranwala, Gujrat and Sialkot Districts. The most frequently utilized FGT
p o v e r t y m e a s u r e s i n c l u d e t h e H e a d C o u n t I n d e x ( P 0 ) N o t e xlviii, P o v e r t y g a p i n d e x ( P 1 ) N o t e xlix
a n d p o v e r t y s e v e r i t y i n d e x ( P 2 ) N o t e lto present a more detailed insight to different dimensions of poverty.
3.4 Scope of the research
The present study will not only help to find out the major determinants of poverty among SMEs
employees but will also facilitate Government to formulate policies to readdress the issue of poverty in a
particular sector. It would be more appropriate to point on this stage that this study is the first one undertaken
to highlight the issue of poverty among the employees of a particular sector of SMEs in Gujranwala, Gujrat and
Sialkot districts.
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3.5 Sources of Data

In the present study, primary data collected through a detailed survey of the employees of Light Engineering
sector, is being utilized for analytical purposes. The survey has been conducted in the districts of Gujranwala, Gujrat and
Sialkot from Feb, 2009 to Feb, 2010. The format of the employee questionnaire, covering broad aspects of each
employees socioeconomic and demographic, characteristics can provide a deep insight to the causes of poverty in the
employees of the Light Engineering sector located in Gujrat, Gujranwala and Sialkot Districts.
3.6 Sampling design
According to a survey conducted by author, the total number of employees working in 1201 units of Light
Engineering were found to be 13021, applying following formula for sample selection, a sample of 2401 was selected for
unknown population.
ss = z 2 * ( p)(1 p) / c 2
Where
z=confidence level (95% or 1.96)
p=percentage picking a choice, expressed as decimal (0.5 used for sample size needed)
c=confidence
(e.g., .02 = 2)
interval,
expressed
as
decimal
ss=2401
Correcting it for the known population of 13021
SS * = ss /{1 + [( ss 1) / POP]}
= 2401/1.1843
SS* = 2025
Finally a sample of 2025 employees was selected from a total of 13021 employees working in 1201 light
engineering units.
The sample of 2025 was further disaggregated by applying two stage stratified sampling technique. In the first
stage, the stratas are formed on the bases of three districts of Gujranwala, Gujrat and Sialkot, while in the second stage,
sample of SMEs employees is selected on the basis of seven categories of light engineering firms which are electric fans,
electric motors, electric goods and parts, electrical machinery, washing machines, parts of washings machines and water
pumps.
At the confidence level of 95% and confidence interval of 2, following formula is being employed for
proportionate stratification for both stages.
nh = [ N h / N ] * n
Where
nh = sample selected for strata h

N h = Total population of strata h
N= Total population
n= Total sample selected for all strata.
Out of the total 8919 employees working in the light engineering units Note li of Gujranwala, 1387 workers Note
were selected on the basis of proportionate stratification. Similarly a sample of 530 Noteliii employees was selected from a
total of 3406 workers engaged in different units of Gujrat and 108Note liv were selected from 696 workers employed in Light
Engineering units of Sialkot District on the basis of same stratification formula. Thus, a sample of total 2025 employees is
selected from all the three districts.
lii
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3.7 Logistic Regression Analysis

To estimate the probabilities of being poor, logistic regression analysis with maximum likelihood estimation is
employed. In the analysis dependent variable takes the value 1 when the household is not poor and 0 when household is
poor. The independent variables are classified into three categories, i.e. economic characteristics of household, social
characteristics of household and demographic characteristics of household. Economic characteristics of household
involves household employment Note lv, household incomes in the form of per capita income, structure of household
consumption expenditures, household property and assets including agricultural income and physical assets. Social
characteristics of the household comprises of health Note lvi, education encompassing gross primary school enrollment rate
and average educational codes per household, shelter including ownership of house, type of housing structure, availability
of electricity, nature of fuel used for cooking and persons per room. Demographic characteristics of household involve
dependency ratio (child and old age dependency ratio), female male ratio, age, gender and education of household head.
The logistic model is defined as :
log
+ +
Here is the probability of being poor, while

of independent variables, are the logistic coefficients.
. (1)
shows the odds ratio.
= constant and
are vector
At times it is easier to interpret the model in terms of probabilities, i.e. odds ratios. A value of odd ratio greater
than 1 indicates the increase the probability of being poor while less than one indicates the decrease in the probability of
being poor.
Estimates of the relative odds (odd ratios) associated with a particular category of a covariate of interest can be
obtained as:
)/
Where
.. (2)
indicates the logistic cumulative distribution function
As equation (2) is non-linear and standard OLS technique cannot be applied, Maximum likelihood estimation has
been employed in order to calculate the coefficients for each independent variable.
3.7.1 Instrumental Variable Approach
Basic model employed for analytical purpose is
Poor=a0+a1X+a2Improvement in living standard +e.. (3)
Where
Poor =1 (if household falls below the poverty line)
= 0 (if household does not fall below poverty line)
X= Economic, social and demographic characteristics of households along with age and gender of household
head.
Improvement in living standard means that whether the said light engineering unit is contributing to improve the
living standard of its employees or not and e is the error term
Out of the above mentioned determinants, the improvement in living standard has an endogenous relationship
with poverty status. Direct estimation would lead to biased estimate of impact of light engineering sector on the poverty
status of its employees. Two approaches can be used to deal with this problem (instrumental variable approach and
simultaneous equation approach). While, in the present study IV approach has been applied.
This approach involves those variables that are highly correlated with improvement in living standard but as
compared to with poverty status. A binomial Logit model is employed to determine the impact of a set of explanatory
variables on improvement in living standard due to working in the Light Engineering Unit.
Imp Note llvii=b1+b2Z+e.(4)
where Z = instrumental variable and it comprises of satisfaction with the job, income dependency on Light
Engineering Sector, no. of years in the present job, income differential of earlier and present job, improvement in level of
skill with the present job and change in consumption pattern Note lviii.
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Impl =0 (if improvement in living standard is negative)

= 1 (if improvement in living standard is positive)
The fitted values of impl, after the estimation of equation (4) will be incorporated in poverty equation to find out
the probability of being poor.
The impact of a particular SME unit on the improvement in the living standard of a worker can be quantified by
considering different factors like satisfaction level, income dependency, working experience along with improvement in
skill and change in consumption pattern. The computed values of all these explanatory variables will then be incorporated
in the eq. (3) to get the impact of SMEs on poverty reduction.
4.
Estimation Results
The FGT indices are being employed to measure the nature, extent and severity of poverty in the
observed sample. The calculated results are being discussed in the table 4.
Table (4) shows contradictory evidences about the nature, extent and severity of poverty among the employees of
light engineering Sector in the three Districts if Gujranwala, Gujrat and Sialkot. According to Headcount Index,
Gujranwala is the most vulnerable to poverty as its 47.2% of employees are below poverty line, followed by Gujrat where
this ratio is 46% and it is 41% in Sialkot. Whereas, poverty Gap index and Poverty Severity Index represents synchronized
results where Gujrat is most vulnerable to poverty, followed by Gujranwala and Gujrat Districts.
As the present study is considerably based on the primary data set collected though a survey of Light Engineering
sector of Gujranwala, Gujrat and Sialkot districts. A maximum likelihood Logit regression model is being employed to
analyze the determinants affecting poverty status of the employees of light engineering sector.
The estimated results of instrumental equation (3) yields results presented in Table (5). According to
the results satisfaction with the present job has a positive impact on the improvement in the living standard. As
a unit change in an satisfaction level increases the odds of improvement in the living standard by 2.085 units (the
probability of improvement in living standard over the probability of not any improvement in living standard), holding all
other independent variables constant. Income dependency on the Light engineering unit has a significant and negative
impact on the improvement in living standard. An increase in the income dependency by one unit leads to decrease the
living standard by 0.85 units. Number of years in the present job implies a positive and significant impact on the living
standard of an employee working in the light engineering unit. Income differential between present and past job exerts a
positive influence on the living standard of an employee working in the Light Engineering Unit as 1 unit increase in the
income differential leads to enhance the odds of living standard by 2.058 units. Improvement in the level of skill of the
employee employs a significant and positive impact on improvement in the living standard of an employee working in a
Light engineering Unit in Gujranwala, Gujrat and Sialkot Districts.
The imputed values of impl (improvement in living standard) are then incorporated in the eq.(4) and the estimated
results regarding probability of being poor are obtained.
The estimated results suggest that the coefficients on AGEH, EDUH, SEXH, HSIZE, FMRW, EDUC, HOWN,
HSTR, PHYAS, PER/P, WAT, ELEC, CFUEL, GPENF, IMPL AND SKILL are found to be significant at 1 percent to 10
percent level.
Household size being the major demographic factor is significant at the 99 percent confidence level and exhibits a
positive influence on the probability of being poor. The estimated result is being supported by the literature Note lix which
suggests that higher household size is positively associated with poverty augmenting factors. It is generally hypothesized
that more educated, healthy and adult individuals in a household adds positively to the income level of household and
reduces the chances of poverty, if members of household are not educated and adult, they increases the chances of poverty
.Therefore a large household size increases the chances of being poor.
Education and training are the most important investments in human capital. Education plays a vital role in
acceleration of economic growth which in turn reduces poverty. In the present study, the variable of average educational
codes is being constructed based on the sum of the points Note lx of a given household divided by the household size of that
household. The estimated results suggest that EDUC has the significant inverse relationship with the probability of being
poor, implying that the higher education of household members are more likely to be associated with greater incomes and
thus, having lesser chances to fall below poverty line Note lxi. It means that higher level of education in a household lowers
the probability of being poor. Similarly, gross primary school enrollment rate is an important indicator of educational
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attainment in a country like Pakistan and is significantly proved to lessen the poverty chances of a household if the number
of children registered in primary schools is high.
Significant association is being observed between probability of being poor and literate household heads. The
negative sign of EDUH indicates that in the presence of a literate household head diminishes the probability of being poor.
Female-male ratio of members of a household is considered as sex ratio is found to be insignificant in the present
context. On the other hand (FMRW) female-male ratio of workers is also considered in the present study to deal with the
issue of female participation rate in labor force. Estimated results represent a significant assertion of the significance of
female labor force participation in districts of Gujranwala, Gujrat and Sialkot. An increase in the ratio of FMRW results in
lowering the poverty probability.
Overall participation rate is found to be insignificant in the analytical process. The possession of physical assets
(like motor cycle, television, refrigerator, property etc.) is significantly and inversely related to the probability of being
poor. Ownership of a housing unit reduces the chances of a household to fall below the poverty line Note lxii. The variable of
HOWN is found to be negatively associated with the probability of being poor. The type of housing structure in terms of
nature of material used, different housing services and utilities are considered as important determinants of poverty both in
rural and urban areas Note lxiii. Variable of nature of housing structure is estimated as a significant variable in the analytical
process employing a negative impact on the probability of being poor if a household is living in a kacha (mud) house.
Access to basic amenities is considered as the major factor distinguishing poor from non-poor. Thats why
variables like access to electricity and type of fuel used for cooking purposes are also included in the present profile of
poverty. Results suggest the access to electricity and Sui gas diminishes the chance of being poor as access to these basic
amenities helps in improving the living standard and thus the productivity of a household. Variables like age of household
head (AGEH) and persons per room (PER/R) are proved to be significant at 95 and 99 percent of confidence level
respectively, suggesting that an increase in both of these factors will intensify the chances of being poor. Differences in the
sources of drinking water give vital clues about the fact that poor have limited access to the safe drinking water. Deprived
access to drinking water supply and proper sanitation system consecutively increases the chances of worse health
condition of poor as compared to non-poor. The theory has been supported by the empirical results as the variable of WAT
is significant at 95 percent confidence level and it reduces the chances of being poor of a household if they have access to
piped and safe drinking water supply.
As the study is related to the employees of light engineering units of Gujranwala, Gujrat and Sialkot districts, the
level of skill is very important in determining their wage scale. The level of skill may be unskilled, semi-skilled and
skilled. Estimated results suggest a significant and negative impact of level of skill on the probability of being poor.
The impact of light Engineering sector on the poverty reduction can be captured by the variable of impl which is
calculated with the help of eq (3), and the imputed values are the incorporated in the basic Logit Model. Estimated value of
impl is found to be significant at 99 percent confidence level implying a negative impact on the probability of being poor.
According to the estimated results, a one unit change in the variable of improvement in living standard leads to change in
the odds of being poor (the probability of being poor over the probability of being non-poor) by 6.14 units, holding all
other independent variables constant. Thus, adding positively to the argument that SMEs are really contributing in
enhancing the living standard of its employees and eventually reducing poverty.
5.
Conclusion
Poverty alleviation policies have been given due considerations to eradicate poverty at all levels in Pakistan along
with reasonable economic growth rate in different time periods. Poverty reduction strategy was launched by the
Government of Pakistan in 2001 in response to the rising trend in poverty during 1990s.Different policies and projects
undertaken by the Government regarding poverty alleviation resulted in declining the extent and severity of poverty in
some areas but not in all the regions of Pakistan. It may be due to lack of micro level policies as compared to the
application of macro level projects. Mega projects to eradicate poverty may result in some immediate and positive
outcomes but low level projects deals with the gross root poverty and result in long term changes in the poverty structure
of masses.
Development of SMEs can be considered as such a policy measure that deals with the poverty at its roots and
produces results that are long lasting in its nature. It not only provides employment opportunities to the poor people but
also make them productive component of the economy through informal training system, as SMEs contribute 30 percent to
GDP and their share in export earnings is about 25 percent.
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The present study can be considered as an attempt to understand the role of SMEs in poverty reduction. The data
consistently shows that poverty is considerably high in employees of Gujranwala as compared to the workers of Gujrat and
Sialkot Districts. In the present study, it is attempted to analyze the different factors affecting poverty status of the
employees of three Districts using Logit Model. The main findings of this empirical analysis are described as
Household size, age of household head and persons per room in a household are found to be strongly
associated with poverty and the presence of these variables increases the probability of being poor.
Education, female labor force participation, gender of the household, physical assets like owning the
house, structure of the housing unit, availability of services like electricity and sui gas and skill of the respondent are the
significant variables and are found to have negative impact on the probability of households poverty.
According to the empirical results, contribution of SMEs towards poverty reduction as a dummy variable
(IMPLS) is significant at 1 percent level implying a negative impact on the probability of being poor. Thus, adding
positively to the argument that SMEs is this case is really contributing to enhance the living standard of its employees.
Emphasis should be given to the issues of increasing employment opportunities through establishment of small
and medium enterprises, health facilities, construction of physical economic infrastructure and implementing new labor
policies to improve the living standard of the above stated 80% of non agricultural labor force working in SMEs.
Government should focus on the development of training centers that could provide basic training to the
employees of the workforce of these small units. Financial assistance along with access to global markets can exert
positive impact on the development of these industrial units and thus on the poverty reduction.
Government should give attention to basic infrastructure, availability of facilities like electricity, Sui gas, safe
drinking water and good governance besides some other socio-economic and demographic variables to alleviate poverty.
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Annexure
Table 1: Sample Selection from the seven categories of Light Engineering Sector
Gujranwala
Gujrat
Sialkot
Total
Categories
Total
Sample
Total
Sample
Total
Sample
Total
Sample
Electric Fans
2345
365
3141
489
5495
855
1681
261
258
40
448
70
2387
371
852
133
44
896
140
Machinery
Washing
17
34
51
Machines
Washing
3327
517
155
24
3489
543
426
66
432
67
Electric goods
and parts
Electric Motors
Electrical
machines and
parts
Water Pumps
Total
271
42
271
42
8919
1387
3406
530
696
108
13021
2025
Source: SME survey conducted by author (2009-10)
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Table 2: List of The Variables Used For Logistic Estimation of Poverty Determinants
Variables
Variables Description
Dependent Variable
POV
0= if the household is poor, 1 =Non poor
Explanatory Variables
AGEH
Age of Household Head (years)
EDUH
Education of Household Head (0= Illiterate, 1= Literate)
SEXH
Sex of Household Head (1=male, 2=female)
HSIZE
Household Size
FMRM
Female male ratio (Members)
FMRW
Female male ratio (Workers)
PARR
Participation Rate
EDUC
Average Educational codes per household member
HOWN
Ownership of Housing Unit (0=not own, 1=own)
HSTR
Structure of Housing unit (0=Kacha,1=packa)
PHYAS
Physical assets (0=no physical assets, 1=has physical assets)
MEDFC
Access to medical facilities (0=no access, 1=has access)
PER/R
Persons per room
WAT
Drinking water facility (1=piped drinking water, 2=through hand pump

0=otherwise)
ELEC
Access to electricity (0=no access,1=has access)
CFUEL
Nature of fuel used for cooking (1=sui gas/wood, 0=otherwise)
GPENR
Gross primary school enrollment rate
IMPLS
Improvement in the living standard due to present job
SKILL
Level of Skill of the respondent (1=unskilled, 2=semi skilled, 3=
skilled)
Table 3: List of the Variables Used For Binomial Logistic Estimation of Improvement in
Standard due to present job.
Variables
Living
Variables Description
Dependent Variable
IMPL
(0= improvement in living standard is negative,1= improvement in living standard

is positive)
Explanatory Variables
SATS
Satisfaction with the present job (0=not satisfied,1=satisfied)
IDEP
income dependency on Light Engineering Sector (percentage share)
YEARS
No. of years in the present job
YDIFF
Income differential of earlier and present job (Percentage Change)
IMPLS
Improvement in level of skill with the present job (Yes=1,No= 0)
CONSP
change in consumption pattern (Improvement=1,not improved=0)
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Table 4: Poverty Indices Based on Calculated Poverty Line

District
Poverty Gap Index
Headcount Index P = P 100
1
P1 =
N
Poverty
1
P2 =
N
Gi
i =1 z
Households
Population
Gujranwala
47.2%
55 %
0.136
0.046
Gujrat
46 %
52.8%
0.149
0.054
Sialkot
41%
50.9%
0.080
0.019
Total
46.5%
54.2%
0.136
0.047
Severity
Gi

i =1 z
N
Source: Calculated from the SME survey by author, 2010

Table 5: Results of the Instrument Variable Equation
PREDICTORS
COEFFICIENT
Z-STATISTICS
ODD RATIOS
SATS
0.817
1.76**
2.085
IDEP
-0.1536
-1.90**
0.8576
YEARS
0.9249
1.70**
1.911
YDIFF
0.567
2.44***
2.058
IMPLS
0.871
1.56*
1.91
CONSP
0.951
1.75*
1.909
CONSTANT
-6.81
-1.45
-2
Pseudo R = 0.232
LR Chi2 (6)=136.33
Prob.>chi2=0.000
1446

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