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Journal of Business and Retail Management Research (JBRMR)
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Journal of Business and Retail Management Research (JBRMR), Vol. 13 Issue 1 October 2018
The Journal of
Business and
Retail Management
Research
Volume 13 Issue 1 October 2018
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www.jbrmr.com A Journal of the Academy of Business and Retail Management (ABRM) i

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Academy of Business and Retail Management (ABRM)
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Mission Statement
Journal of Business and Retail Management (JBRMR)
ISSN: 1751-8202 (Print) ISSN: 2056-6271 (Online)
The mission of this journal is primarily to publish empirical research that tests, extends or builds
retail business management theory and contributes to retail management practice. All empirical
methods including qualitative, quantitative, field and combination methods are welcome. In
addition, we also accept research that is theoretical, conceptual and case study focused. In order
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field. Thus, preference is given to submissions that test, extend or build strong empirical and
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management theory and practice.
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Journal of Business & Retail Management Research (JBRMR)

Editors and Editorial Board
Editor –in-Chief
Dr P. R. Datta
Academy of Business & Retail Management, UK
Editorial Board Members
Dr. Justin Henley Beneke Professor Evelyn Germinah Chilone-Tsoka

University of Winchester, UK University of South Africa, South Africa
Prof. Fabrizio Pezzani Prof. Jennifer Bowerman
Bocconi University, Milano, Italy MacEwan University, Canada
Prof. Hanaa Abdelaty Hasan Esmail, Prof. Wallace Ford
Jazan University, KSA Medgar Evers College, NY, USA
JP Spencer Prof. Slava Shavshukoff
Cape Peninsula University of Technology, Souh Africa Saint Petersburg State University, Russia
Prof. Juan Carlos Botello Prof. Srini R Srinivasan
Universidad Popular Autónoma del Estado de Puebla, Jamnalal Bajaj Institute of Management Studies
Mexico (JBIMS)University of Mumbai, India
Prof. Ong Fon Sim Professor Eman Mohamed Abd-El-Salam
The University of Nottingham Business School, Arab Academy for Science and Technology and
Malaysia Maritime Transport, Egypt
Prof. Warren Mathews Prof. Evangelia Fragouli
Belhaven University, USA University of Dundee, UK
Prof. Gairik Das Prof. Rahul Gupta Choudhury
IISWBM, Kolkata, India IFIM Business School, Bangalore, India
Prof. Khatira Huseynova Prof. Salil Sen
the Academy of Public Administration under the NIDA Business School, Thailand
President of the Republic of Azerbaijan
Prof. Imbarine Bujang Dr Rachael English
Universiti Teknologi MARA, Malaysia De Montfort University, UK
Prof. Juliette Brathwaite Prof. Wincenty Kulpa
University of the West Indies, Barbados University of Rzeszów, Poland
Dr. Sudaporn Sawmong Prof. Małgorzata Magdalena Hybka

King Mongkut's Institute of Technology Ladkrabang, Poznań University of Economics and Business,
Thailand Poland
Dr. Eleni Aravopoulou Prof. A.C. Pandey
St Mary’s University, UK H.N.B Garhwal Central University, Srinagar, India
Prof. Srinivas Sampalli Prof. Noha Bendary
Dalhousie University, Halifax, CANADA The British University in Egypt, Egypt
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ISSN 1751-8202 (Print) ISSN 2056-6271 (Online)
Statement of Editorial Policy

The JBRMR is a scholarly and refereed journal that provides an authoritative source of
information for scholars, academics, professionals and practitioners in the field of retail business
management. The journal promotes the advancement, understanding, and practice of retailing.
Manuscripts offering theoretical, conceptual, empirical and case studies contributions are
encouraged
Aims & Objectives

The aim of the journal is to disseminate knowledge; provide a learned reference in the field; and
provide meaningful insights into an everchanging sector.
The first objective of the Journal is to attract and publish robust theoretical, conceptual, and
empirical manuscripts from international academics and professionals regarding a wide range
of contemporary issues in business and retail management.
Secondly, the be a means to provide meaningful insight and contribute to the body of
knowledge and understanding about the theory and practice about retail business management.
Readership
The readership for this journal includes academics, researchers, professionals, and executives
engaged in business and retailing.
A statement about open access

JBRMR is an open access journal which means that all content is freely available without charge to the user or
his/her institution. Users are allowed to read, download, copy, distribute, print, search, or link to the full texts of the
articles in this journal without asking prior permission from the publisher or the author. JBRMR is committed to
publish all full text articles online for immediate open access to readers and there is no charge to download articles
and editorial comments for their own scholarly use.
www.jbrmr.com A Journal of the Academy of Business and Retail Management (ABRM) iv
Journal of Business and Retail Management Research (JBRMR)

Contents
Articles
The effect of talent management and emotional intelligence on organizational performance: 1

Applied study on pharmaceutical industry in Jordan
Marzouq Ayed Al-Qeed; Amineh Abdul Halim Khaddam; Zeyad Faisal Al-Azzam; Khalid Abd
El Fattah Atieh
Factors that influence Malay students in purchasing skincare products in Malaysia 15
Nazatul Shima Abdul Rani; K. Sarojani Devi Krishnan
Antecedents towards employees’ harmonious habitation of the environment and workplace 22
environment-friendly behaviour: a case of Johannesburg employees within small and medium
enterprises (SMES)
Eugine Tafadzwa Maziriri; Musawenkosi Donia Saurombe
Is service fairness influencing customers’ satisfaction and intention to pay insurance premium? A 38
case in BPJS Kesehatan Indonesia
Diena Dwidienawati; Mts Arief; Sri Bramantoro Abdinagoro
Integrated marketing communication model for creating brand loyalty to Japanese cars in Thailand 49
Sudaporn Sawmong
Burnout, Organizational Commitment and Turnover Intention 62
Arif Lukman Santoso; Sahbuddin Abdi Sitompul; Agus Budiatmanto
The effect of good corporate governance on financial performance and net working capital turnover 70
as a mediation variable: evidence from Indonesia Stock Exchange (IDX)
Rico Wijaya. Z; Abdul Rohman; Zulaikha
The effects of an IT-related curriculum based on hybrid-style problem-based learning on career 81
decision-making self-efficacy of women’s University students in Korea
Hee Yeong Kim; June-Suh Cho
Are cooperative relationships a viable option for accessing resources for female informal traders in 89
South Africa?
Albertina Jere; Mlenga Jere; Roger B Mason
Consumer purchase regret: how personality influences outcome regret and process regret 100
Zulkarnain; Ferry Novliadi; Siti Zahreni; Lila M. Iskandar
The impact of financial accessibility constraints and government regulations on the organisational 108
performance of small-and-medium-sized enterprises
Zaid AbdulKarim Jaradat; Roshaiza Binti Taha; Rosliza Binti Mat Zin; Wan Zuriati Wan Zakaria
Determining shopping malls customers’ satisfaction and loyalty 121
Makgopa, SS
Customers’ repurchase decision in the culinary industry: Do the Big-Five personality types matter? 131
Muhammad Ichwan Musa; Muhammad Ilham Wardhana Haeruddin; M. Ikhwan Maulana
Haeruddin
The relationships among leadership styles, communication skills, and employee satisfaction: A 138
study on equal employment opportunity in leadership
Tri Wikaningrum; Udin; Ahyar Yuniawan
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Forecasting the tendencies of the Russian vegetables market development 148

Natalia V. Bannikova; Olga N. Onezhkina; Ekaterina G. Agalarova; Alexander V. Tenishchev
Internal audit quality dimensions and organizational performance in Nigerian federal universities: 156
the role of top management support
Suleiman Mohammed Bello; Ayoib Che Ahmad; Nor Zalina Mohamad Yusof
Does the spin-off policy can accelerate the deposit funds in the Indonesian Islamic banking 171
industry?
M Nur Rianto Al Arif
Impact of motivational factors on knowledge sharing behaviour of managers in Ready Made 179
Garments (RMG) Industry of Bangladesh
Md Asadul Islam; Amer Hamzah Jantan; Arif Md Khan; Md Habibur Rahman; Osman Monshi
The optimum refurbishment time of shopping centres 190
M Mushirivindi; D A Prinsloo; C E Cloete
Moderated-mediation investigation on internet marketing and export market growth in the 200
Jordanian export sector
Mohammad Fahmi Al-Zyoud
Influence of leadership style, training, role of ambiguity on employee performance of higher 213
education of Saudi Arabia (KSA)
Abdullahi Hassan Gorondutse ; Shahmir Sivaraj Abdullah; Fais Bin Ahmad; Waleed bin Rashed
al sherry; Halilu Bello Rogo
Performance model development for assessing maintenance service providers using the Kano 225
model
Moses Laksono Singgih; Putu Dana Karningsih; Mokh Suef; Primahasmi Dalulia
Optimal board size in the Jordanian banks: Empirical evidence based on accounting performance 232
Mohammad Ahid Ghabayen; Zaid Jaradat; Ahmad Hardan; Mohannad Obeid Al-Shbail
The roles of internal audit quality on the relationship between narcissistic CEOs and real earnings 241
management
Jasman Jasman; Etty Murwaningsari
The impact of corporate social responsibility on customer loyalty in the Qatari telecommunication 253
sector
Ghaith M. Al-Abdallah; Ragy S. Ahmed
Corporate Governance Practices in the Banking and Finance Sector: Perspectives from Bangladesh 269
Md. Nazmul Hossain; Raju Mohammad Kamrul Alam; Palto Datta; Mark T. Jones
www.jbrmr.com A Journal of the Academy of Business and Retail Management (ABRM) vi

The effect of talent management and emotional intelligence on

organizational performance: Applied study
on pharmaceutical industry in Jordan
Marzouq Ayed Al-Qeed
The World Islamic Science & Education University, Amman, Jordan
Amineh Abdul Halim Khaddam
Amman Arab University, Jordan
Zeyad Faisal Al-Azzam
Education Malaysia Jordan, Embassy of Malaysia, Jordan
Khalid Abd El Fattah Atieh
Arab American University, Palestine
Keywords
Talent Management; Emotional Intelligence; Performance; Pharmaceutical Industry; Jordan
Abstract
This paper studies the impact of talent management on organizational performance in Jordanian
pharmaceutical companies and evaluates the mediating role of emotional intelligence in the relationship
between talent management and organizational performance. A survey was distributed among managers of
pharmaceutical companies in Jordan, and 1125 responses were collected. The respondent sample was
constructed using random stratified sampling. The PLS-SEM was used to test the hypothesized relationships
of the model. The study result revealed positive relationships between (1) talent management and
organizational performance, (2) talent management and emotional intelligence, and (3) emotional intelligence
and organizational performance. Employing PLS path modelling to evaluate the structural model is highly
original. The paper emphasizes the importance of emotional intelligence as a mediator of the relationship
between talent management and organizational performance in the pharmaceutical industry of Jordan.
Corresponding author: Marzouq Ayed Al-Qeed

Email addresses for corresponding author: dr_marzouq@yahoo.com
First submission received: 3rd January 2018
Revised submission received: 11th February 2018
Accepted: 5th March 2018
DOI: https://doi.org/10.24052/JBRMR/V13IS01/ART-01
1. Introduction
Successive technological developments and global economic systems forced organizations to
diversify their resources to accommodate and adapt to new challenges in which public and private
organizations create their survival and growth strategies in a hyper competitive environment. Human
resources now have a vital role in helping organizations compete and achieve their goals; effective and
efficient employees are considered a competitive advantage. Firms that want to survive, grow, and sustain
their competitive advantage will work to attract, hire, cultivate, develop, and retain employees, especially
those with extraordinary talents, to create value (Horváthová, 2011). Two points of view about talent
arose: the first is that talented individuals expend extraordinary efforts and have potential that affect
organizations effectiveness; the second view is that all employees represent talent through their
contributions to achieve the organization’s objectives (Kehinde, 2012). In other words, a talented employee
has the highest performance and high potential to do so.
However, authors see talent as belonging to individuals possessing a triangle of knowledge, skills,
and capabilities, along with showing high potential to perform efficiently and effectively. This study
hypothesizes that the main task of human resource departments in today's organizations is to search for,
discover, develop, and preserve talent. Noteworthy, talent and talent management strategies cannot
www.jbrmr.com A Journal of the Academy of Business and Retail Management (ABRM) 1

achieve the desired results without integrating employee engagement in organizations’ strategies
(Payambarpour & Hooi, 2015; Hanif & Yunfei, 2013).
Recent studies show that organizations will face major challenges now and in the future related to
talented employees, which might affect their organizational growth and development. Clearly, the
foundation of every organization’s potential for future success ultimately depends on the strength of its
talent. Thus, effective talent management has become so crucial to business growth and economic
progress that it is forcing organizations to re-examine how they attract, develop, retain, and engage
employees (Tajuddin, Hassan, Syed, & Ali, 2016).
In the context of Arab business organizations, similar to other public and private organization of
the world, Jordanian public and private organizations suffer from both shortages of skilful and talented
employees and low performance. These organizations are facing migrating and depleting talents because
they are in high demand. However, public and private organizations in Jordan have not realized the
importance of dealing with their talents or discovering hidden ones. Other studies conducted in the Arab
context have obviously proved that many Arab and Jordanian organizations solely attract talents
expecting to perform higher and achieve much more without giving special attention to who are those
talents. Lately, the pharmaceutical industry in Jordan has started suffering from talent migration or
depletion. Hence, talented individuals who are distinguished by their abilities, skills, knowledge and
distinctive competencies are being attracted by other global competitors. Therefore, this study aims to
examine the effect of talent management on organizational performance at pharmaceutical industry in
Jordan.
2. Literature review and research model
2.1. Talent management and organizational performance
In today’s knowledge economy, talents are becoming not only important but also scarce. Scholars
believed that talent was always inherited and predetermined by genes. Others believed that when a
person is born, he will have an innate readiness for being talented. According to Clake and Winkler (2006)
and Elegbe (2010), talents can be developed through the environment that would shape his/her
behaviour; otherwise, he will remain invisible. This talent can be divided into the following types; general
talent is expressed by general intelligence, where intelligence is the main measure of talent, and special
ability, which may be in the specific field, and a person with it performs a certain work with a high degree
of creativity and innovation. Thus, talent is intelligence with effort. Jyoti and Rani (2014) define talent as
high performers and high potential employees, who have a sharp strategic mindset, managerial,
communication, and functional skills, experience, commitment and contribution behaviour that results in
outstanding performance. The term “War of Talent” was launched in 1998 by McKinsey & Company and
proclaimed that “the better talent is worth fighting for”. Thus, McKinsey defines talent as “the sum of a
person's abilities- his or her intrinsic gifts, skills, knowledge, experience, intelligence, judgement, attitude,
character and drive, it also includes his or her ability to learn and grow” (Michaels, Jones, & Axelrod,
2001: xii; Schiemann, 2014). Moreover, talent can be defined as the person who consistently shows
outstanding performance in any field with cognitive or valuable abilities (Cooke, Saini, & Wang, 2014).
Daveis and Daveis (2010) have a different perspective of talent management. They considered it as
systematic and ongoing processes that include certain processes such identifying, developing and
retaining talents.
Indeed, certain factors might be impacting the war for talent, such as global demographics,
economic trends, increasing mobility, diversity, and transformational changes. Different factors affecting
talent management are explicitly listed, such as corporate culture, work environment, top management
commitment, financial allocations to talent management and communications (Abdul-Kareem, 2016). To
address the gap of knowing-doing in talent management that is imposed on organizations, they should
eliminate traditional business models and scarcity mindsets and adopt new approaches to finding,
nurturing, stimulating, motivating, and retaining global talents (Haines, 2013). These are innovative,
integrated and strategic responses, rather than tactical battles, to create more cooperative and generative
talent approaches (Beechler & Woodward, 2009). However, too many studies have focused on the
expected results of investigating talent management, such as motivation, competitive advantage, human
resource practices and commitment (Vaiman, Scullion & Collings, 2012; Stahl et al., 2012; Cappelli &
Keller, 2014). However, the definition of talent is still debatable between scholars and authors
(Thunnissen, Boselie & Fruytie, 2013; Gallardo-Gallardo, Dries & Gonzalez-Cruz, 2012; Tansley, 2011;
Lewis & Heckman, 2006).
Therefore, in the early 1990s, the term talent management emerged and was popularized by many
researchers and practitioners as hyper competition dominated. According to researchers and practitioners,
the term is still young and evolving (Collings, Scullion & Vaiman, 2011), as well as contributing to
bridging the gap between talent demand and talent supply by considering the flow of talent through an
organization that will certainly align individual goals to organizational goals and workforce strategies to
business strategies (Jyoti & Rani, 2014; Hilal, 2012; Iles, 2008). Moreover, others defined talent
management as organizational procedures related to analysing, identifying, selecting, training,
developing, motivating, and retaining the higher performers and high potential employees to ultimately
achieve organizational strategic goals (Valverde, Scullion & Ryan, 2013; Nankervis, 2013; Bano, Khan,
Rehman & Humayoun, 2010; Silzer & Church, 2010).
In other perspectives, some authors viewed talent management as a new technique in human
resource management focused on recruitment, retention, developing leadership competencies, career
path, succession planning, and more (Kaur, 2013; Piansoongnern, Anurit & Kuiyawattananonta, 2011;
Thunnissen, et al., 2013; Collings & Mellahi, 2009; Vaiman, Haslberger & Vance, 2015; Gallardo-Gallardo,
Nijs, Dries & Gallo, 2015). Meanwhile, others urge that talent management is future-oriented and fulfils
strategic goals (Vaiman & Collings, 2013; Lewis & Heckman, 2006; Schweyer, 2004; Anwar, Nisar, Khan &
Sana, 2014). Therefore, organizations started to seek and nurture those talents inside and outside its
boundaries. Based on the foremost contributions, the authors can define talent management as a set of
organizational activities to attract, hire, train, develop, motivate and retain talents to meet the current and
future organizations’ objectives and seek a sustainable futuristic leadership (Sart, 2014).
Generally, most scholars and practitioners symmetrically agree on the following four components
of talent management strategies that organizations should implement: talent attraction, talent
development, talent retention and succession planning (Irtaimeh, Al-Azzam & Khaddam, 2016). In fact,
too many models based on talent management are still considering talents as the ability of a person to
perform high, which increases success and leads to better results (Ross, 2013; Latukha & Selivanovskikh,
2016; Latukha, 2016). Numerous studies have been conducted to determine the relationship between
human resources or talent management and organizational performance in different contextual
environments. Thus, they have proclaimed that a positive relationship exists either between human
resource practices or talent management and organizational performance (Arif & Uddin, 2016; Maya &
Thamilselvan, 2013; Ibidunni, Osibanjo, Adeniji, Salau & Falola, 2016; Davies & Davies, 2010; Ingram,
2016; Al-Azzam, Irtaimeh & Khaddam, 2017). Hence, we hypothesize that
Hypothesis 1: There is a positive relationship between talent management and organizational performance.
2.2. Talent management and emotional intelligence
Interrelationships have attracted much attention where emotional intelligence plays a critical role in
aligning employees with their can-do-attitude. Furthermore, they will be engaged and perform highly to
achieve organizational strategic goals set out by their leaders. Employees will feel valued, trusted,
respected and appreciated if they are properly emotionally treated. Darwin’s contributions gave more
insights into emotion intelligence. Anecdotal studies have proved that leaders are more intelligent than
others in the organization since they are a critical factor of success. Emotional intelligence originated in the
1920s when Thorndike first proposed classifying EI into abstract intelligence, mechanical intelligence and
social intelligence (Asrar-ul-Haq, Anwar & Hassan, 2017). Gardner (1983) suggested the following two
new classification of EI: intra-emotions and inter-emotions (Calik & Birgili, 2013; Gardner & Hatch, 1989).
Several scholars made extra contributions regarding EI. Emotional intelligence theory was developed by
Mayor and Salovey in 1990. They defined it as the ability to understand one’s and others’ emotions and to
build an emotionally based relationship with others to emotionally adapt to the changing environment,
changing circumstances and changing needs (Mayer & Salovey, 1990 & 1997). Subsequently, Goleman
built his contributions based on Mayor’s and Salovey’s theory of EI. He defined EI as the one’s ability to
utilize his/her skills to catch up their state of consciousness, improve self-management, and understand

their own and others’ feelings (empathy) by running strong relationships (Shayanipour, Imani &
Karimzadeh, 2017; Srivastava, 2013). Another definition of EI refers to the ability to recognize, manipulate
and influence one’s and others’ emotions (Keating, Harper & Glew, 2013).
According to Mayor and Salovey (1997), emotional intelligence is divided into the following four
areas; Perceiving emotions means recognizing the nonverbal or expression emotions of others that appear
through any means of contact. Using emotions to facilitate thoughts assists individual thinking regarding
developing knowledge-based experiences to guide ones’ behaviour. Understanding emotions after
recognizing ones’ emotions, analysing these emotions and anticipating the results of these emotions is the
main idea of understanding how emotions works. Finally, managing emotions reflects the ability of
individuals to use their personality traits to handle these emotions based on their own knowledge and
social awareness (Mayor, Salovey & Caruso, 2004). Symmetrically, Wong & Law (2004) propounded that
EI consists of the following four dimensions: self-emotional appraisal, others-emotional appraisal, the
regulation of emotions, and the use of emotions. Additionally, Goleman and Boyatzis (2008) classified EI
into the following four clusters: self-awareness, self-management, social awareness and relationship
management (Al-Azzam, 2015).
Therefore, the current factors encourage organizations to adapt and implement talent management
strategies to confront strategic surprises in a massive turbulent environment. However, neither attracting
nor retaining talent will be useful without considering talent development. Talent development includes
learning and building strong knowledge to effectively solve organizational problems in conjunction with
dealing with others. Notwithstanding, talent development means engaging employees with all related
strategic planning and goals of organization, so they can feel part of the solution. Palmer & Gignac (2012)
found that emotionally intelligent leadership was correlated with employee engagement. Moreover,
Hakkak, Nazarpoori, Mousavi & Ghodsi. (2015) found that emotional intelligence has a positive effect on
social-mental factors of human resources. Further studies show that emotional intelligence has a great
impact on organizations and motivating human activity (Agnello, Ryan & Yusko, 2015; Brouwers &
Vijver, 2015; Schneider & Newman, 2015; Fagan & Ployhart, 2015; Scherbaum & Goldstein, 2015). It means
that EI is highly significant in the development of human potential, teamwork, effective leadership, stress
reduction, creativity and innovation (Chopra & Kanji, 2010). Thus, emotionally intelligent employees
exhibit better skills (Antonakis, Ashkanasy & Dasborough, 2009; Njoroge & Yazdanifard, 2014). They will
be able to enhance employees’ efficiency and performance in a group through increasing their cooperation
and reducing conflicts, especially when their positive emotions are developed between employees in a
group (Mayer, Roberts & Barsade, 2008). Al Jarrah and Abu-Doleh (2015) investigated applying talent
management strategies to organizational affiliations at Jordanian universities. They revealed a significant
and extrusive correlation with the application of talent management strategies at the level of
organizational affiliation. Therefore, we hypothesize that:
Hypothesis 2: There is a positive relationship between talent management and emotional intelligence.
2.3. Emotional Intelligence and Organizational Performance
The development of emotional intelligence has occurred since the first models were developed by
Slaovey and later Goleman. The models proposed that individuals with higher intelligence quotient (IQ)
have better abilities to listen, learn and understand than those with lower scores. This finding indicates
that people with higher levels of emotional intelligence have better job performance, strong personal
relationships, more effective leadership skills and are healthier than those with low emotional intelligence
(Cooper, 1997). Since then, many studies have been conducted to examine the reciprocal relationship
between emotional intelligence and business organizations’ performance. Lyons and Schneider (2005)
examined the relationship of ability-based EI facets with performance under stress. Their study revealed
that high levels of EI would promote challenge appraisals and better performance, whereas low EI levels
would foster threat appraisals and worse performance. Certain dimensions of EI were related to more
challenges and enhanced performance. Some EI dimensions were related to performance after controlling
for cognitive ability and demonstrating incremental validity. This pattern of findings differed somewhat
for males and females. O'Boyle, Humphrey, Pollack, Hawver & Story (2011) conducted a meta-analysis
study that examined the relationship between emotional intelligence and job performance and put

emotional intelligence into the following three streams of emotional competencies: ability-based, self-
reported (peer-reported) and mixed models. They concluded that all three streams are differently
correlated with cognitive abilities and with neuroticism, extraversion, openness, agreeableness, and
conscientiousness that are differently associated with job performance. Moreover, Mohamad and Jais
(2016) found that emotional intelligence and its four dimensions (self-awareness, self-regulation, self-
motivation, empathy, and social skills) have a greater impact on teachers’ job performance.
Likewise, recent studies uncovered a strong linkage between emotional intelligence and job &
organizational performance (Pekaar, Linden, Bakker & Born, 2017; Abraham, 2004; Jorfi, Jorfi &
Moghadam, 2010; Higgs, 2004; Codier, Kamikawa, Kooker & Shoultz, 2009; Gutiérrez-Cobo, Cabello &
Fernández-Berrocal, 2017; Gutiérrez-Cobo, Cabello & Fernández-Berrocal, 2017; Arribas-Galarraga, Saies,
Cecchini, Arruza & Cos, 2017; Chaudhry & Usman, 2011). Emotional intelligence equips individuals with
the skills to anticipate their performance, especially in teamwork (Offermann, Bailey, Vasilopoulos, Seal &
Sass, 2004). Daneshfard, Rajaei, Bilondi & Banihashemi (2016) examined the effect of organizational
intelligence and talent management. They defined organizational intelligence as a combination of human
intelligence and machine intelligence and discovered the effect of each component. Their study revealed
that organizational intelligence has a direct and positive effect on talent management which, in turn,
impacted the productivity of organizations’ human resources. Others have conducted studies in the field
of nursing and uncovered that there is no significant relationship between emotional intelligence and
nurses’ perceived job performance (Vahidi, Areshtanab & Bostanabad, 2016; Talarico, Metro, Patel,
Carney & Wetmore, 2008; Healy, El-Atroush, Abol-Enein & El-Sayed, 2013; Golparvar & Khaksar, 2010).
This finding was obscure and suspicious to the current researcher. Thus, the researcher proposes the
following hypothesis:
Hypothesis 3: There is a positive relationship between emotional intelligence and organizational performance.
Despite the agreement between most studies regarding the relationships between talent
management and organizational performance, talent management and emotional intelligence and
emotional intelligence and organizational performance, none of these studies have examined the role of
emotional intelligence as a mediator in the relationship between talent management and organizational
performance. Based on the literature review, emotional intelligence is expected to reinforce talent
management competencies, which in turn is likely to affect (positively or negatively) organizational
performance. The direction of this effect (±) can be identified using empirical analysis where our
argument is going to be empirically tested. Typically, in this regard, the current research will examine the
effect of emotional intelligence in the relationship between talent management and organizational
performance as is depicted in the research model (Figure 1). Therefore, the researcher hypothesizes the
following.
Hypothesis 4: Emotional intelligence mediates the relationship between talent management and organizational
performance.
3. Conceptual framework
In the contemporary business environment, globalization and competitiveness are overall
predominant. These integration trends imposed on all organizations to develop its own standards so as
apparently to acquire better competitive level. Thus, turning toward talent management is becoming the
valuable strategic choice that eventually boosts the organization’s performance and that is why talent
management is gaining popularity nowadays. Talent management is a process which consists of four
strategies namely; talent attraction, talent development, talent retention and talent succession, which is
used to boost organizational performance through a dynamic interrelationship between them. However,
intelligent organizations have employed emotional intelligence as a methodology to come close with its
employees to motivate them to enhance their productivity and performance. Therefore, most of the
studies suggested that talent management can influence both individual and organizational performance.
Several studies have identified emotional intelligence as EI or EQ, which fall into two categories
that each have two sub-categories: personal competence; consists of self-awareness and self-management,
and social competence; consists of social awareness and relationship management. The latter, relationship

management, is tied to the ones’ ability to read other emotions by using own awareness to build
relationships, communicate, and navigate interactions with others successfully. The major conceptual
models of emotional intelligence are divided into three models; (1) the Salovey-Mayer model; (2) the
Goleman model; and (3) the Bar-On model. Even though other study proved the effect of emotional
intelligence on organizational performance (Rahim & Malik, 2010), it still energizes behaviour needed and
implies rational thinking, especially during the tough situations. Therefore, this study comes to
investigate the role of emotional intelligence as a mediator in the relationship between talent management
and organizational performance (figure 1 illustrates the study conceptual framework) where the
employees’ emotional intelligence is the core investigation of this study contrary to previous studies
which were carried on the leadership emotional intelligence in business organizations.
Figure 1: Research model: TM – EI – OP relationship (developed by authors)

4. Methodology
Generally, previous studies have proven the positive and significant relationships of talent
management with organizational performance, talent management with emotional intelligence and
emotional intelligence with organizational performance (Shemi, Mohsen & Mahboobeh, 2013; Mensah,
2015). Therefore, the main objective of the current research is to examine the effect of emotional
intelligence (EI) as a mediator on the relationship between talent management (TM) and organizational
performance (OP) in the Jordanian pharmaceutical industry, which has never been studied. Therefore, a
quantitative methodology has been employed between the research variables.
4.1. Population and Sampling
The population of the current research consists of 15 pharmaceutical companies working in the
Jordanian market. The sample was chosen using random stratification of the 15 of pharmaceutical
companies operating in Jordan. A total of 1125 questionnaires were distributed to employees working in
these pharmaceutical companies, and only 985 questionnaires were returned. Reviewing these
questionnaires uncovered that only 969 questionnaires were valid for statistical analysis, resulting in an
effective response rate of 86.1%.
4.2. Measurement
Based on the literature review, a structured in-depth questionnaire was administered to collect the
data. A survey instrument adopted from Irtaimeh et al. (2016) & Al-Azzam et al. (2017) was developed to
separately uncover the talent management dimensions such as attraction, development, retention and
succession planning; the emotional intelligence dimensions such as self-awareness, self-management, the
social relationship and awareness management adopted from Goleman (1995); and the organizational
performance dimensions. These items were measured by respondents using a Five Point-Likert type scale
that ranged from 1, strongly agree, to 5, strongly disagree.
4.3. Validity and Reliability
This instrument has undergone face validity through academicians and experts in the field of talent
management and emotional intelligence to check whether the instrument was properly constructed to
measure the variables. The inter-correlations of the questionnaire items can provide a measure of internal
consistency (reliability). Therefore, the researcher conducted a standard internal consistency check of
questionnaire items using Cronbach’s Alpha, where its values range from 0 – 1.0. Consequently, the
coefficient value should be at least 0.70 or higher, although a value from 0.60 to 0.70 is considered

acceptable (Hair, Black, Babin, Anderson & Tatham, 2010). Table 1 illustrates the results of this test with
the means and standard deviations.
Table 1. Cronbach’s alpha of research variables
Variables Means Standard Deviation Cronbach’s Alpha
Talent Management Strategies 4.13 0.701 0.942
Talent Attraction 3.97 0.675 0.846
Talent Development 4.01 0.732 0.881
Talent Retention 3.78 0.770 0.918
Succession Planning 3.86 0.794 0.879
Emotional Intelligence 3.98 0.837 0.895
Self-Awareness 3.73 0.728 0.734
Self-Management 3.67 0.689 0.896
Social Awareness 3.65 0.871 0.799
Relationship Management 4.15 0.703 0.801
Organizational Performance 4.52 0.822 0.913
Operational Performance 3.89 0.698 0.788
Financial Performance 4.10 0.823 0.897
Technical Performance 3.93 0.765 0.945
5. Results
In this section, the researcher adopted the approach proposed by Baron and Kenny (1986) that
includes four steps to test the mediational hypothesis and show the causal chain. Several regression
analyses should be conducted, and the significance of the coefficients should be examined at each step. In
the first simple regression analysis step, the independent variable should predict the dependent variable.
In the second simple regression analysis step, the independent variable should predict the mediator. In
the third simple regression analysis, the mediator should predict the dependent variable. In the last step, a
multiple regression analysis should be conducted with the independent variable and the mediator
predicting dependent variable. However, two problems may arise. First, if the effect of the independent
variable is no longer significant while controlling for the mediator, the findings will support the full
mediation. If the effect of the independent variable is decreased but still significant, then the findings
support a partial mediation.
In the first step, a simple regression analysis conducted, and the independent variable talent
management was significantly correlated with dependent variable organizational performance (β= 0.623, p<
0.001). Hence, this finding supports the first hypothesis (H 01) that “there is a positive relationship between
talent management and organizational performance”. Therefore, the null hypothesis is rejected. Table 2
shows the result of regression analysis for the mediation of the effect of talent management on
organizational performance through emotional intelligence.
Table 2. Regression analysis for mediation of the effect of talent management on organizational performance
through emotional intelligence
Step 1 Step 2 Step 3 Step 4
Variables Organizational Emotional Organizational Organizational
Performance Intelligence Performance Performance
Constant 4.284*** 3.593*** 4.072*** 4.638**
Talent Management 0.623*** 0.497*** 0.581***
Emotional Intelligence 0.504*** 0.310***
R 0.623 0.497 0.504 0.611
R2 0.388 0.247 0.254 0.373
Adj. R2 0.384 0.241 0.250 0.368
F-value 110.183*** 92.469*** 97.739*** 90.223***
*** P ≤ 0.01

In the second step, a simple regression analysis was conducted that assessed model 2. The
independent variable talent management was significantly correlated with the mediator emotional
intelligence (β= 0.497, p< 0.001). Thus, the results support the second hypothesis (H 02) that “there is a
positive relationship between talent management and emotional intelligence”. In the third step, the
mediator emotional intelligence was significantly correlated with the dependent variable organizational
performance (β= 0.504, p< 0.001). By this finding, the researcher strongly rejects the null hypothesis and
accepts the third hypothesis (H03) that “there is a positive relationship between emotional intelligence and
organizational performance”. In the fourth step, according to Baron and Kenny (1986), a multiple
regression analysis was conducted where both the independent variable talent management and the
mediator emotional intelligence were regressed together to predict the dependent variable organizational
performance. The results in table 2 show that the direct effect of talent management on organizational
performance of the first regression model (β= 0.623, p< 0.001) was reduced in the fourth regression model,
but it was still significant (β= 0.581, p< 0.001). This conveys that partial mediation may exist.
The potential problem with the approach used is that it never tests the significance of the indirect
effect. Therefore, an alternative, and the strongest, approach is to calculate the indirect effect and its
significance. Thus, to calculate the indirect effect and its significance, the researcher implemented the
suggested method of Sobel (1982) that considers multiplying the two regression coefficients of step 3 and
step 2. It can be summarized as follows:
Bindirect = (Regression coefficient of step 3) (Regression coefficient of step 2)
Bindirect = (0.504) (0.497)
Bindirect = 0.251
To ensure the significance of the indirect effect of talent management on organizational performance
through emotional intelligence, the Sobel test is recommended. The Sobel test equation consists of the
following (MacKinnon & Dwyer, 1993; MacKinnon, Warsi, & Dwyer, 1995):
Z-value=a*b / SQRT (b2*sa2 + a2*sb2)
Preacher & Hayes (2008) developed an interactive calculation tool for the mediation test (Sobel test),
as shown in figure 2.
a = raw (unstandardized) regression coefficient for the association between the IV and the mediator.
sa = standard error of a.
b = raw coefficient for the association between the mediator and the DV (when the IV is also a predictor
of the DV).
sb = standard error of b.
Figure 2. Sobel Test
To run this program, the unstandardized coefficient and the standard error of the independent
variable talent management on the mediator emotional intelligence and the unstandardized coefficient and
the standard error of independent variable talent management on the mediator emotional intelligence as
predictors of the dependent variable organizational performance must be the inputs of this model. Table 3
summarizes the results of the unstandardized coefficients and standard errors.

Table 3. Unstandardized coefficients and standard errors of the 4 models implemented

Step 1 OP Step 2 EI Step 3 OP Step 4 OP
Variable Unstandardized Standard Unstandardized Standard Unstandardized Standard Unstandardized Standard
Coefficient Error Coefficient Error Coefficient Error Coefficient Error
Talent
0.467 0.059 0.482 0.060 0.438 0.071
Management
Emotional
0.518 0.043
Intelligence
The results of Sobel test show that emotional intelligence significantly mediated the effect of talent
management on organizational performance (Z-value=3.657, p≤ 0.01). Therefore, the researcher
conclusively accepts hypothesis four (H04) that “emotional intelligence mediates the effect relationship between
talent management and organizational performance”. Figures 3 and 4 illustrate the direct and indirect effects of
the study variables, while table 4 recapitulates the study’s tested hypotheses.
Figure 3. Direct effect of Talent Management on Organizational Performance

*** p≤ 0.01
Figure 4. Effect of Talent Management on Organizational Performance through Emotional Intelligence

*** p≤ 0.01
Table 4. Epitomizing results

Hypothesis Path Effect Result
H 01 TM OP 0.623*** Accepted
H 02 TM EI 0.497*** Accepted
H 03 EI OP 0.504*** Accepted
H 04 TM EI OP 0.251*** (indirect) Accepted
*** p≤ 0.001
6. Discussion and conclusion

This study explored the extent to which emotional intelligence can predict the effects of talent
management on organizational performance in the Jordanian pharmaceutical industry. An integrated
approach that studies the effects of emotional intelligence in the relationship between the effects of talent
management on organizational performance was not found in previous studies because most of these
studies, especially current ones, overlooked the important role of the psychological interactions among
workers. However, this study highlights the role of emotionally talented workers over low emotionally
talented workers as a predictor of high-performance achievements. Thus, the study’s findings supported
all four hypotheses.

Talent management plays an important role in business organizations and has important
implications for organizational performance. Talented workers who possess high skills, competencies,
knowledge, and capabilities can perform higher and have higher potential that is reflected in higher
efficiency and effectiveness of both individuals and organizational performance. Therefore,
pharmaceutical companies should always properly look to attract new talented employees, develop
current and new onboard talented employees, and effectively retain them. Additionally, talent
management is positively and significantly associated with organizational performance. Moreover, the
study’s results revealed that talent management has a positive and significant influence on emotional
intelligence, while emotional intelligence has a positive and significant effect on organizational
performance. Thus, in this respect, there is a consensus between scholars and academicians that the
transition stage of development requires strong interpersonal leadership skills (leaders who
interpersonally aware of social benevolence) as well as a high collaboration among individuals themselves
is mandatory to ensure the sustainability of organizations. In other words, the ability to recognize and
understand others’ emotions can harmonize all talented workers to fuel their interactions in negatively
emotionally charged situations such as customer relations. Thus, emotional intelligence is most important
when forming teams and building work groups that require unifying all efforts and bringing individuals
together to solve critical issues.
Talents’ emotional intelligence is appropriate during stressful times to evaluate their own feelings
and emotions and construct new strategies to cope with each other, either individually or in team.
However, the study’s findings revealed that emotional intelligence mediates the effect of talent
management on organizational performance in the Jordanian pharmaceutical industry. Innately,
emotional intelligence is inherited in every human being and is intangible. It affects every aspect of
behaviour and how we responsively think and act. EI is made up of two core competencies; personal
competence, which is focused more on individual personality than interactions with others, and on being
aware of individual emotions and managing one’s own behaviours and tendencies. Meanwhile, social
competence focuses on understanding others’ emotions and seeing the big picture around you. Emotional
intelligence will definitely develop if an individual is continually learning new skills. Too many studies
have proved that emotional intelligence is a good predictor of organizational performance. The
pharmaceutical industry of Jordan is becoming competitive, global reaching and international, especially
in the Middle East and North Africa (MENA). Thus, a corporate growth strategy was traced that required
talented workers equipped with high potential, competencies, full understanding, high qualifications and
knowledge combined with experience to sustainably achieve the strategic target (Martin, 2014; Al-Jallad,
2017).
6.1. Practical implications
The current research study is focused on the pharmaceutical industry of Jordan. This study
employed the Goleman scale of emotional intelligence as a mediator of this research. Future studies can
use the same variables of this study in other sectors and examine the effects of emotional intelligence on
leadership powers to drive expansion strategies. In the current study, emotional intelligence and talent
management are analysed with organizational performance. Future studies should consider other
dependent variables, such as strategic agility, vigilance and business intelligence. Eventually, some of the
contextual variables, such as employee engagement, can be added to the theoretical framework, and a
mediator can also be employed.
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Factors that influence Malay students

in purchasing skincare products in Malaysia
Nazatul Shima Abdul Rani
K. Sarojani Devi Krishnan
Universiti Kuala Lumpur, Business School
Kuala Lumpur, Malaysia
Keywords
HALAL, brand, safety, quality, price, Malay
Abstract
Skincare products have had a huge impact on the skin of users either positively or negatively. Most
people are becoming more concerned about the harmful effects of chemicals used in skincare products. In
Malaysia, most of the users are Malays who are generally Muslims. As Muslims, they use Halal products
that are free of porcine or animal substances that are not being processed according to Islamic principles.
Hence, this study aims to explore the main factors which are taken into consideration when Malay students
purchase skincare products. A total of 100 questionnaires were distributed to Malay students in Kuala
Lumpur, Malaysia to gain feedback on the factors that influenced them to buy skincare products. The findings
show that most Malay students considered Halal, product safety, brand, price and quality as being the most
important factors when purchasing skincare products. This paper highlights that most
Malay university students in Malaysia preferred to purchase skincare products that are Halal, safe, of high
quality and reputable brands. They were even willing to pay more for high quality skincare products that
fulfil the above criteria. Thus, the findings of this study have an implication on appropriate marketing
strategies to be implemented for future skincare products to boost sales and profits in the Malaysian market.
Corresponding author: Nazatul Shima Abdul Rani

Email addresses for corresponding author: shima.rani@unikl.edu.my
First submission received: 5th December 2017
1.0 Introduction
Cosmetics-related business in Malaysia is growing rapidly and gaining much attention among
industry players (Hashim and Musa, 2014). As reported by Hassali Al-Tamimi, Dawood, Verma and
Saleem, (2015), Malaysian consumers spent around US407 million on cosmetics and toiletry products
alone in 2013. In fact, skincare products are one of the main key drivers of the cosmetics markets that is
worth US$229 million. Although, skincare products are gaining much demand in Malaysia, several
studies show that most cosmetic users are exposed to dangerous side effects caused by skincare or
cosmetic products, yet they are still using these products to satisfy their egoistic needs (Ayenimo, Yusuf,
Adekunle, & Makinde, 2010; Mansor, Ali & Yaacob, 2010). Generally, users assume that skincare products
are safer and pose no risks to human health. In fact, some consumers do not read the labels for useful
information to identify the ingredients contained in the cosmetic products before they decide to use them;
they are not very concerned about the implications of using cosmetics especially to their health and body
(Mansor, Ali & Yaacob, 2010; Amasa, Santiago, Mekonen, & Ambelu, 2012; Ayenimo et al., 2010). Since
most of the Malaysian population comprise Malays who are mostly Muslims, the demand for halal
skincare products are gaining much attention. Several studies have been conducted by other researchers
on marketing of these products (Kaur & Mutty, 2016), halal cosmetics (Hashim & Musa, 2014; Musa, 2014),
and halal brands (Kordnaeij, Askaripoor, & Bakhshizadeh, 2013). The purpose of this research is to explore
the most important factors considered by Malay university students when purchasing skincare products
in Malaysia. The findings of the study will have implications for manufacturers and marketers before

they market Halal skincare products in Malaysia.

2.0 Literature Review
2.1 Skin care Products
Skincare is defined as the method one uses to keep his or her skin in the best condition, and skin
care products are defined as all products used for cleansing, massaging, moisturizing, and others for face
and hands (Khan & Khan, 2013). Skin care products include cleansers, facial masks, toners, moisturizers,
tanning salts and lotion, skin lighteners, serums, sunscreen and exfoliating products (Khan & Khan, 2013).
2.2 Main Factors influencing the Purchase of Skin Care Products
Due to lack of research focusing on the preference to purchase skin care products by the Muslim
Malay community in Malaysia, this study investigated factors that were considered essential in
purchasing skin care products among them. Since the number of millennia or generation Y is increasing
and most of them are studying in institutions of higher learning, thus this study focused
on Malaysian university students’ behaviour in purchasing skin care products. This group of market
segment will be the future targeted market. The factors that were identified included Halal status of
products, brand, safety, price, and quality.
2.2.1 Halal
Generally, Halal for Muslims is defined as a living concept centred on cleanliness, integrity, and
self-restrain (Khattak, 2009; Kaur and Mutty, 2016). Cosmetics and personal care products must comply
with the Malaysian Standard MS 2200:2008 requirements of halal certification. In producing goods and
services, a person must uphold ‘halalan thoyibban’ which is a practice to comply with the quality
standards, safety, and wholesomeness as required in Islam (Man, Bojei, Abdullah, & Latif, 2007). In fact,
Halal cosmetics can be defined as sources of ingredients of halal cosmetic products that include halal
animals (land and aquatic), plants, microorganism, alcohol, chemicals, soil, and water as long as they are
not hazardous and najs according to the Malaysian Standard, MS2200 (2008).
Halal certification is regarded as an official recognition that a product is manufactured in
compliance with the principles of the Islamic Shariah law (reuters.com, 2016). Halal products including
cosmetic products have the potential of being offered not only to Muslims, but to the world at large
(Khattak, 2009). Jabatan Kemajuan Islam Malaysia (JAKIM) is an important body for regulating and
certification of halal products including cosmetics and customers are advised to look for the halal logo
which affirms that the product is halal before purchase. According to Hunter (2012), halal awareness has
become widespread and this started with the concern on meat-based products a decade ago to a wide
range of products today. Muslim consumers are now seeking for Halal trustworthiness of processed
foods, beverages, pharmaceuticals, insurance, travel, leather products, and even entertainment. Although
commonly associated with food and beverages, halal in fact applies to all aspects of life for practitioners of
Islam, including items such as pharmaceuticals, personal care, skincare, and hair care products. In
conclusion, the term “halal” in skincare products means the product must be free from food of animal
origin such as pigs and dogs. It also includes food of plant origin that contains intoxicating and hazardous
elements present in the product which are also prohibited (Ali, Halim, & Ahmad, 2016). As such
hypothesis 1 is proposed:
H1: Malay students prefer HALAL skin care products.
2.2.2 Brand
The customer is also influenced by the branding of the product when it comes to skincare. They
tend to buy products that are well-known while following the trend or popularity of the products without
referring to health experts. Businesses that embrace their brands fully are the ones that people will
remember (Foster, Haltiwanger, & Syverson, 2016). Hence, to build a successful brand, businesses need to
have strong marketing strategies. About 75% of Americans think that companies whose brands are
popular should implement better strategies in order to encourage brand loyalty (Foster, Haltiwanger, &
Syverson, 2016). Despite this, most advertisements related to a brand, most often than not attempt to build
a strong image of the brand by getting across the fact that the brand can be trusted, and customers can
rely on them. Thus, branding can turn a commodity into something more valuable by fostering preference

and loyalty, leading to repeat purchases and often increased profit margins. As such hypothesis 2 is
proposed:
H2: Malay students prefer branded skin care products.
2.2.3 Product Safety
When it comes to purity and cleanliness of the product, customers must be careful about the
originality and safety of the skin care products they use. Most chemicals are added to cosmetic products
in the form of preservatives and fragrances that might be toxic and might cause cancer, mutation,
reproductive toxicity, and endocrine disruption (Amasa et al., 2012). Heavy metals are also incorporated
into beauty products for many purposes. In a study that was conducted by Ayenimo, et al., (2010), they
stated that the toxicity of heavy metals is well-documented and can cause damage to the internal body
organs of animals and humans. Other than that, the perception of some skin care users is that brands and
quality of skincare products make them ignorant of the ingredients contained in the products that might
not be safe for them to use and this is becoming a major issue (Mansor, Ali, & Yaacob, 2010). According to
the New Strait Times (May 2017), the Health Ministry's National Pharmaceutical Regulatory Department
(NPRA) has named seven cosmetic products that contain scheduled poison which can be harmful to
health. These cosmetics if absorbed by the body can cause damage to the kidney and nervous system. It
can also affect the development of a child's brain. Cosmetic products must not contain any ingredients
listed as banned substances or substances used beyond its allowable conditions such as restricted
concentrations and uses.
Information on banning ingredients with specific conditions of uses and concentrations are
available in the Guidelines for Control of Cosmetic Products in Malaysia (National Pharmaceutical
Regulatory Agency Ministry of Health Malaysia). All notified products marketed in Malaysia must be
manufactured in a premise that conforms to the requirements of Good Practice in Malaysia. Thus, safety
of skincare products requires that the products conform to health and safety standards to reduce health
hazards they may cause to consumers. These hazards may not occur during short term but may have long
term effects after continuous use of the products. As such, hypothesis 3 is proposed:
H3: Malay students prefer safe skin care products.
2.2.4 Price
Consumers have always wanted the right price for every purchase of products and services. If the
price set does not reflect the value of a product, the customer may not be satisfied. Pricing is important
because it leads to goods or services used by or rendered to consumers. Prices are often associated with
quality (Kotler & Keller, 2009). According to Alfred (2013), no matter what type of product it may be,
some people will not pay more than a particular price, while others may purchase it. A product must
reach the desired level of performance to attract people to purchase it. Certain types of products with high
prices are regarded as of high quality and vice versa. As stated by Ralston (2003), perception is important
as an external factor and is a form of available information for customers during decision making before a
product is purchased. In conclusion, price is used as an indicator of product quality; if a product exceeds
expectations it will lead to higher satisfaction (Alfred, 2013, Kotler & Keller, 2009; Ralston, 2003). As such,
H4: Malay students prefer expensive skin care products.
2.2.5 Product Quality
According to Kharim (2011), product quality includes features and characteristics of a product or
service with the ability to satisfy stated or implied expectations of the consumer. Product quality can be
defined as the degree of how well the product specification meets or exceeds the customer’s expectation
(Thomas & Alex, 2011). According to Khan and Noor (2012), quality is the realization of the consumer’s
needs. Thus, quality is a continuous process to make and retain satisfaction of needs, both affirmed and
required. Quality assurance plays an important role in skincare products. Quality assurance is a
guaranteed offer by the product or service provider to meet a certain quality level. All notified cosmetic
products must comply with the requirements stipulated in the Guidelines for Control of Cosmetic
Products in Malaysia. As stated in the guidelines the product has to be ensured that it is safe for use and
of good quality. Cosmetic products must not contain any ingredients listed as banned substances or
substances used beyond its allowable conditions such as restricted concentrations and uses. As such,
H5: Malay students prefer high quality skin care products.
The conceptual framework for this study is shown in Figure 1 below.
Independent Variable
Halal H1
Safety H2
Brand H3
PURCHASE
Pricing DECISION
H4 Dependent Variable
Quality
H5
Figure 1: Conceptual Framework
3.0 Methodology
3.1 Scope of study
Our research focused on Malay students aged 18 and above, including both male and female
students. The population of the study was categorized into three main age groups: from 18 to 20, 21 to 23,
24 years old and above. The target sample for this study consisted of Malay students around Kuala
Lumpur or Klang Valley, and for this study, 100 students were chosen randomly.
3.4 Population and Sample Size
According to Sekaran and Bougie (2013), the population refers to the entire group of people, events
or things of interest that the researcher wishes to investigate. The sample of this study consisted of 100
respondents randomly selected from Malay students around Kuala Lumpur. The sample selected were
willing to participate in the research.
3.6 Questionnaires
The questionnaire consists of two parts: Part A and Part B. In Part A, the questions asked were
regarding student’s background such as age, gender, type of institutions and education level. Part B
contains items on HALAL, brand, safety, price and quality.
4.0 Findings and Discussion
Detailed discussion on the findings is summarised below.
4.1 Students’ Profile
Most of the students are females, aged between 21 and 23 years old and were pursuing bachelor’s
degrees in private universities as shown in Table 1 below.
Table 1: Respondents Profile
Items Frequency % Items Frequency %
Gender Institution
Male 19 19.0 IPTS 89 89.0
Female 81 81.0 IPTA 11 11.0
Total 100 100.0 Total 100 100.0
Items Frequency % Items Frequency %
Age Education
18-20 years old 8 8.0 Diploma/Certificate 8 8.0
21-23 years old 71 71.0 Bachelor 92 92.0
24 and above 21 21.0 Master/PHD 0 0
Total 100 100.0 Total 100 100.0

4.2 Reliability Analysis

The Cronbach Alpha value for each feature of skincare products is high, that is above 0.700, and
only one (1) item if deleted for the Halal dimension would increase the reliability of the dimension as
shown in Table 2.
Table 2: Reliability Analysis
Factors Number of Number of Items Total Number of Cronbach’s Alpha
Items Deleted Items
Halal 4 1 3 0.735
Brand 4 0 4 0.873
Safety 5 0 5 0.884
Price 5 0 5 0.842
Quality 4 0 4 0.774
4.4 Findings and Hypothesis Test

All hypotheses are significant and accepted as shown in Tables 3 and 4.
4.4.1 Hypothesis1: Malay students prefer HALAL skin care products.
Hypothesis 1 is accepted (ƿ = 0.000) and the mean = 4.4167). Most of the students agreed that they
preferred to purchase skin care products that were non-animal based (mean = 4.4600), free from alcohol
(mean = 4.4300) and JAKIM certified products (mean = 4.3600). As for halal, all the three items which non-
alcohol were based, non-animal based, and JAKIM certified skincare products had influenced Malays
students’ decision in purchasing skincare products. It shows that most Malay students preferred HALAL
skincare products.
4.4.2 Hypothesis 2: Malay students prefer branded skincare products.
Hypothesis 2 is accepted (ƿ = 0.000) and the mean = 4.0200. Most of the students agreed that they
preferred to purchase branded skincare products because they can be trusted (mean=4.1300), effective
(mean= 4.0200), trusted brand (mean= 4.0100), and international brand (mean=3.9200). Thus, brand is
important for Malay students in making decisions on purchasing skincare products. Decisions on brand
includes brand image that is well-known for effectiveness, trusted brand or brand reputation and
international brands which are perceived as of superior quality as compared to local brands.
4.4.3 Hypothesis 3: Malay students prefer safe skin care products.
Hypothesis 3 is accepted (ƿ = 0.000) and the mean = 4.3600. Most of the students agreed that they
purchased safe skincare products that contain safe ingredients (mean = 4.4300), have no side effects on
skin (mean = 4.400), skincare products that are suitable for their skin (mean = 4.4100), certified by KKM or
Ministry of Health, (mean= 4.3900), and have identified chemical ingredients in the skincare products
(mean = 4.1700). Hence, most Malay students are concerned about product safety that include safe
ingredients, no side effects, product suitability, certification from Ministry of Health, and were aware of
chemical ingredients when making decisions prior to purchase.
4.4.4 Hypothesis 4: Malay students prefer expensive price skin care products.
Hypothesis 4 is accepted (ƿ = 0.000; mean = 3.9340). Most of the respondents agreed that they
purchased skin care products although they were expensive (mean = 4.0600), purchased HALAL skincare
products although expensive (mean = 4.0300), purchased reputable skincare products although expensive
(mean = 3.9900), willing to spend more for healthy skin (mean = 3.9400), and willing to purchase
expensive skincare products as they are more effective (mean = 3.6500). In short, price has no impact on
students’ choice of skincare products. Most of the Malay students were willing to pay more for Halal,
product safety, brand reputation, product effectiveness, and skin health.
4.4.5 Hypothesis 5: Malay students prefer high quality skin care products.
Hypothesis 5 is accepted (ƿ = 0.000; mean = 3.9075). Most of the students agreed that they
purchased high quality skincare products (mean = 4.1300), reputable brands that are known for high
quality (mean = 3.9000), international brands that are known for high quality (mean = 3.8800), and quality
skincare products that are highly recommended in the media (mean = 3.7200). This indicates that most
Malay students preferred to purchase high quality skincare products, although they were expensive.

Table 3: Hypothesis Test – One-Sample T-test

One Sample Statistics
Factor N Mean Std. Deviation Std. Error Mean
HALAL 100 4.4167 0.66393 0.06639
BRAND 100 4.0200 0.79509 0.07951
SAFETY 100 4.3600 0.70381 0.07038
PRICE 100 3.9340 0.77541 0.07754
QUALITY 100 3.9075 0.71036 0.07104
One Sample Test
Test Value = 3
t df Sig. (2-tailed) Mean 95% confidence interval of
Difference the difference
Lower Upper
HALAL 21.338 99 0.000 1.41667 1.2849 1.5484
BRAND 12.829 99 0.000 1.02000 0.8622 1.1778
SAFETY 19.323 99 0.000 1.36000 1.2203 1.4997
PRICE 12.045 99 0.000 0.93400 0.7801 1.0879
QUALITY 12.775 99 0.000 0.90750 0.7665 1.0484
Table 4: Hypothesis for purchase decision of skin care products
Hypothesis N Mean Std. Dev Sig. (2-tailed) Accept/Reject
H1: Malay students prefer HALAL 100 4.4167 0.66393 0.000 Accept
skincare products.
H2: Malay students prefer branded 100 4.0200 0.79509 0.000 Accept
skincare products.
H3: Malay students prefer safe skin 100 4.3600 0.70381 0.000 Accept
care products.
H4: Malay students prefer expensive 100 3.9340 0.77541 0.000 Accept
price skin care products.
H5: Malay students prefer high 100 3.9075 0.71036 0.000 Accept
quality skincare products.
5.0 Recommendations
5.1 Manufacturers and Retailers
Most of the Malay students were willing to purchase skincare products with features such as
product safety and high quality. This indicates that branding can have an impact on students’ choice of
products to purchase. As a result, this study suggests that retailers develop effective marketing strategies
that focus on product safety and product effectiveness of Halal products to provide satisfaction to
potential consumers. It was also identified that most Malay students were concerned about facial skincare
products, thus it is recommended that manufacturers provide information on Halal ingredients to
promote their products. Other critical information on skincare products should be included such as being
non-animal based (except for aquatic and land), non-alcohol, product benefits, and Halal logo to indicate
halal status. This information should be highlighted in the advertisements and product labels. In
conclusion, these efforts can bring benefits to the manufacturer and indirectly increase sales as consumers
gain their trust in their skincare products.
6.0 Conclusion
The results have shown that the five independent variables investigated in the study namely,
Halal status, safety, branding, pricing and quality of skincare products have a significant relationship with
the decision to purchase skincare products. Perceived value plays a vital role in consumer decision-
making (Thomas & Alex, 2011). Therefore, if manufacturers can understand consumers’ perceptions of the
value of skincare products in advance, this would will help them to modify their products or improve
their marketing strategies to increase sales (Kordnaeij, Askaripoor, & Bakhshizadeh, 2013). The findings
may provide manufacturers with a direction to understand consumers’ opinions and perceptions of skin
care products, thus, suggesting a future viable marketing strategy to be implemented to promote
consumers’ purchase decision and further leading to boost in sales and increased profit margins.
Acknowledgement: Special appreciation goes to Nurfadzira Md. Ridzwan, Nurul Farhana Zolkeflei, Nik Amilin
Aimi Nik Adnan, Nabilah Arfah Mohd. Yunus, and Nur Amirah Khalid for data collection.
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Antecedents towards employees’ harmonious habitation of the

environment and workplace environment-friendly behaviour: a case of
Johannesburg employees within small and medium enterprises (SMES)
Eugine Tafadzwa Maziriri
School of Economic and Business Sciences
University of the Witwatersrand, Johannesburg, South Africa
Musawenkosi Donia Saurombe
Department of Industrial Psychology,
North-West University, Mafikeng Campus, South Africa
Keywords
Workplace environment, environment friendly behaviour, intellectual capital, natural resource,
green transformation
Abstract
Despite the increasing research on green issues within the workplace environment, there is a dearth of
studies that have investigated the impact that elements of green intellectual capital and green
transformational leadership have on the harmonious habitation of the environment and workplace
environment-friendly behaviour. Therefore, this study examines the relationships using a data set of 150
employees working with SMEs in Gauteng Province of South Africa. Seven research hypotheses were
postulated, and the hypotheses were empirically tested using sample data from the SME sector in South
Africa’s Gauteng Province. The collected data was analysed by means of Structural Equation Modelling
using Partial Least Squares. The results indicated that the relationship between green human capital, green
structural capital, green relational capital, green transformation leadership and employees’ harmonious
habitation of the environment is positive in a significant way. However, green transformation leadership
emerged to have a negative and an insignificant impact on workplace environment friendly behavior. Lastly
the findings suggested that employees’ harmonious habitation of the environment has a positive and a
significant impact on workplace environment friendly behavior. The research paper discusses both academic
and managerial implications of the results and future research directions are suggested.
Corresponding author: Eugine Tafadzwa Maziriri

Email addresses for corresponding author: eugine.maziriri@wits.ac.za
First submission received: 17th January 2018
Revised submission received: 15th March 2018
1. Introduction
With the burgeoning defective impact that the environments we inhabit endure, it has become
an increasing cause for concern for organisations to positively influence the behaviours of employees
towards their work and external environments (Chiras, 2013). While it is imperative that the
dissemination of information among employees takes place to afford them a better environmental
acumen, it is even more imperative for those at the reins of driving such initiatives to be vigilant in their
execution and implementation of these initiatives (Filho, 2016). Although there have been significant
suggestions thus far, on measures that may be employed when confronting the issue of encouraging
environment-friendly attitudes and behaviours in employees (Sell & Bryan, 2011; Chandrasekar, 2011;
Lee & Brand, 2005), it is essential that each organisation fully understands its own organisational fibre in
terms of how best to promote or induce such behaviours. This study therefore seeks to determine how
positive attitudes towards the environment can be induced in the employees of the specific
organisation(s) under investigation, by adopting a unique approach and methods of inquiry, most
pertinent to the organisation.
In the subsequent sections of this paper, the authors outline the main objective and specific objectives of
the study as well as research questions, the theoretical framework of this study, a delineation of
pragmatic literature sourced from the work of authors who have conducted similar investigations, a
conceptualised model customised for this study including hypotheses, the research methods and
approach adopted by the study and a discussion of the findings that are unearthed through the process
of investigation.
2. Primary objective
According to Perneger and Hudelson (2004) a good research paper addresses a specific research
question and the research question or study objective, or main research hypothesis is the central
organizing principle of the paper. Therefore, the subsequent section pinpoints the primary objective of the
current study.
2.1 Primary objective
To determine the impact that elements of green intellectual capital (green human capital, green
structural capital, green relational capital) and green transformational leadership have on the harmonious
habitation of the environment and workplace environment-friendly behaviour.
3. Theoretical framework
In this part of the paper, the fundamental theory on which the study is based is critically analysed
and delineated. The main theories highlighted in this paper are Human Capital Theory, the Natural
Resource based review theory and the Green Theory.
3.1. Intellectual Capital Theory
An understanding of the working definition of intellectual capital is also imperative in the
understanding of intellectual capital theory as a whole. Kamarudding and Abeysekera (2013), postulate
that intellectual capital is information which can translate into value or intellectual worth, towards the
creation of organisational wealth or affluence. A more profound analysis of intellectual capital reveals that
authors have dissenting views on how to encapsulate the concept of knowledge (Abeysekera, 2007), thus,
such conceptualisations emerging from the literature should be viewed as basic meanings that merely
allow a better understanding of intellectual property.
According to Cunha, Cunha, Matos and Thomaz (2015), the world currently operates mainly on a
knowledge-based economy and there is a perpetual revolutionizing of information technology and other
factors like innovation and telecommunication. The authors also imply that this contemporary economy,
founded on information and knowledge has resulted in a growing inquisitiveness concerning intellectual
capital theory. If management is to successfully address the challenges surrounding the management of
intellectual property, they should initially determine the factors that incumbent in realizing the
organisation’s competitive advantage and which contribute to the organisation’s present and imminent or
ongoing value generation (Burton-Jones & Spender, 2011). Cunha, Cunha, Matos and Thomaz (2015)
pointed out that there are various research operations that entail intellectual capital theory as well as
information technology and the analysis of how these concepts have on performance and innovation. This
study uses a similar approach by investigating the influence that green intellectual capital would have on
the pleasant habitation of employees in their working environment and their attitude or behaviour
towards their environment.
3.2 Natural Resource based view theory
A better comprehension of the natural resource-based view theory is dependent upon
understanding the working definition of natural resource-based view theory. According to Akkucuk
(2015), this theory is characterised by the association between organisational resources, capabilities and
competitive advantages, while encouraging the internal discovery of sources of organisational competitive
advantage than external, by finding the most competitive environment for it. Prior to the emergence or
establishment of the Natural Resource-based Theory, the mere Resource-based Theory (RBT) was
prominent. This RBT highlights the essence of a resource being precious, not easy to come by,
unparalleled, and backed by agile abilities or socially intricate organisational processes, in order for it to
offer perpetual competitive advantage (Barney, 1991). An observation by Hart (1995) later unearthed the
possibility of the existing RBT being deficient. This view was in consequence of the theory disregarding
the association between an organisation and the natural environment in which it exists, although it
addressed an array of other noteworthy resources and could more logically be argued in terms of
competitive advantage as opposed to prior attempts to do so. (Hart & Dowell, 2011) contend that while it
may have been easier to disregard this previously, by 1995 it was already unequivocal what kind of an
impact ignoring the natural environment could have on the on-going competitive advantage of the
organisation, an oversight that has become even more difficult to make in present day, as suggested then
by Hart (1995: 991) who predicted that “it is likely that strategy and competitive advantage in the coming
years will be rooted in capabilities that facilitate environmentally sustainable economic activity - a
natural-resource-based view of the firm”.
The Natural Resource-based Theory contends that there are three pivotal elements namely,
pollution avoidance, product custodianship, and maintainable development, each of which has unique
environmental motivations, is founded on various fundamental resources and has a diverse source of
competitive advantage (Hart & Dowell, 2011). Pollution avoidance, which aims to curtail waste and
discharges as opposed to cleaning after them once the process is done, translates into lower costs; product
custodianship broadens the horizon of pollution avoidance in order to accommodate the whole lifecycle of
the organisation’s product processes; and maintainable development strategy has a dual detectable
disparity from pollution avoidance or product custodianship strategies. Initially, a maintainable
development strategy will not simply attempt to cause less damage to the environment but to create in a
manner than can be sustained on a perpetual basis. Secondly, maintainable development, in line with its
definition, is not reduced to alarms concerning the environment, but also entails emphasis on economic
and social alarms (Hart & Dowell, 2011).
4. Empirical literature
While theories are greatly essential for the sake of establishing where different concepts or phenomena
emanate, it is even more imperative for observation of these phenomena in order to determine the extent
to which these theories are applicable and also to allow for pragmatic evidence to emerge from
investigation and observation, thus possibly giving rise to new theories or additions to existing ones. The
sections that ensue therefore delineate the views and findings obtained from research conducted by
various scholars in a similar context, to better inform the current investigation and offer a point of
reference or comparison with what this research unravels.
4.1 Green Human Capital
Ahmad (2015) explains the latest notable growing consciousness among business sectors
regarding the importance of going green and embracing different environment management mechanisms.
To ensure more conducive workplace surrounding environments, it is important that the employees or
human capital of an organisation have a deeper acumen of green systems, and to actively participate in
them. Empirical research previously conducted revealed that individual enabling has an optimistic effect
on productivity as well as performance, while also aiding self-regulation, individual rational, and
problem-rectifying abilities (Renwick, 2008; Wee & Quazi, 2005). A compelling way to promote human
capital participation within the firm is the identification of entrepreneurs internally, who have a social or
ecological mindset thus characterizing them as eco-entrepreneurs (Mandip, 2012).
4.2 Green Structural Capital
Green structural capital with regards to organisational culture, organisational image, systems
pertaining to knowledge management, information technology systems and databases in which important
data pertaining to the environment are stored – for instance, records indicating pollution, as well as the
use of water and energy) are integrated in organisational endowment that maintain the management of
the organisation’s environment and the activity of devising environmental strategies (Salvadó, de Castro,
López, Verde, 2013). Chen (2008) conducted an investigation which brought out results indicating that
green structural capital has a positive influence on the competitive advantage of organisations.
4.3 Green Relational Capital
Green relational capital has a pivotal duty in the management of an organisation’s environment,
considering that the dissemination of environmental responsibility is one of the Natural Resource-based
View’s keys aims. The advantage of such relationships is depicted by product custodianship mechanisms
in which the way the product is designed as well as the cooperation of concerned parties through its chain
of significance could result in the organisation’s competitive advantage (Salvadó, de Castro, López, Verde,
2013). Investigation by scholars (Rezaei, Izadi, Jokar, Rezaei, 2016; Ribiere & Worasinchai, 2015) showed
that there is a positive, though insignificant association between green relational capital and
organisational competitive advantage.
4.4 Green Transformational Leadership
Literature suggests that several organisations are still attempting to determine how viable going
green would be in their businesses, while others are considering the attractiveness of embracing a green
strategy in their organisations. Before the human resources division can even think of going green and
integrating green systems in their organisational policies and talent development initiatives, a deliberate
and calculated decision to include a green approach to the organisation’s anticipated business results
must first be taken, through alterations to the internal and outside value chain that significantly influences
the ultimate outcomes of the business (Ahmad, 2015). Moreover, Chen and Chang (2013) have opined that
green transformational leadership assesses the sustainability of business structures as well as eco-
creativity in the worldwide economy. They described or defined green transformational leadership as a
group of behavioural tendencies of business leaders when it comes to encouraging their human capital to
cultivate and produce environmental-friendly ideas and influence groups to go beyond the
environmental-innovation expectation.
4.5 Employees’ Harmonious habitation of the environment
In order for employees to harmoniously inhabit the environments in which they operate, it is
necessary for environmental awareness or consciousness to be inculcated in them. Evidence implies that
consumers in developed countries have a greater sense of environmental responsibility compared to those
in developing countries (Paul, Modi & Patel, 2016). Despite this, to avoid greater environmental damage
than has already been done, it is pertinent for further research to be undertaken so that there is heightened
understanding of Green Product consumer tendencies in less developed nations which exhibit less
environmental concern, belief, and dispositions compared to their global equivalents (Singh and Gupta,
2013). The upsurge of worldwide environmental codes of practice and prevalent environmentalism could
result in substantial positive influence on organisations globally (Chen, Lai & Wen, 2006).
4.6 Workplace Environment-friendly Behavior
The theory of planned behavior is one of the models that delineate the formation of behavioural
intents (Sanchez-Medina, Romero-Quintero, & Sosa-Cabrera, 2014). This theory states that intention or
willingness to perform is the greatest determining factor of behaviour. Van der Hoek, Hunink, Vellema
and Droogers (2011) point out organizations that are introducing sustainability policies to promote
environmentally friendly behaviors. According to Paillé and Mejía-Morelos, (2014) if the employee knows
that environmental protection is an essential objective of the employer, and if she feels supported by their
organization, she is more likely to engage in pro-environmental behaviors in order to reciprocate the
benefits that she receives. Therefore, if the employee’s environmental values are congruent with those of
the organization, reciprocity may play a role, since an employee’s environmental workplace behaviors
might also help the organization’s environmental efforts (Ciocirlan, 2017). Russel and McIntosh (2011)
propose that instead installing technology employees of the organization should be trained and motivate
to behave in environment friendly manners which are a more prominent approach for sustainable and
healthy environment. Environmental behaviors might not always create value for the organization, but
create value for the natural environment (Ciocirlan, 2017).
5. Conceptual model and hypothesis development
Figure 1 shows the seven hypothesized relationships in this paper. green human capital, green
structural capital, green relational capital and green transformation leadership are the predictor variables,
while employees’ harmonious habitation of the environment is the mediator, and workplace
environmental-friendly behavior is the outcome variable.

Figure 1: Conceptual Model
Hypothesis development
Elements of green intellectual capital and employees’ harmonious habitation of the environment
It is imperative to discuss the relationship that exists between the elements of green intellectual
capital and employees’ harmonious habitation of the environment. Rezaei, Izadi, Jokar and Rezaei (2016)
elucidates that green human capital is a set of knowledge, skill, capability, experience, tendency, wisdom,
acreativity and commitment of employees to protect the environment or green innovation. Paillé, Chen,
Boiral, and Jin (2014) points to the importance of human capital in enabling the implementation of a firm-
specific strategy toward the environment. For instance, training, appraisal, and rewards contribute to
develop employees’ motivation to endorse the firm’s environmental concerns, enabling it to be more
competitive and to reach environmental standards (Paillé, Chen, Boiral, & Jin 2014; Govindarajulu and
Daily 2004).
Firms must be able to rely on employees who, on the one hand, accept the responsibility to act for
the good of the environment beyond the demands of the job task, and who, on the other hand, are
convinced of the importance of environmental issues (Molina-Azorıń et al., 2009). Thus, motivated
employees willing to go the extra mile can be a source of competitive advantage for firms involved in
protecting the environment (Paillé, et al., 2014). In their, their study entitled the role of green intellectual
capital on business sustainability, Omar and Yusoff (2017) emphasized that green structural capital has a
positive relationship business sustainability, whereby a sustainable enterprise, is an organization that has
got employees which supports and engages in minimizing the negative impact on the environment. In
addition, Chen and Hung (2014) explained that structural capital offers opportunities for
exchanging green knowledge and resources through the structural environment mechanism. Thus, the
presence of green structural capital enables employees’ harmonious habitation of the environment
because there is supportive infrastructure, processes, and databases of the organisation that enable human
capital to function in an environmental conscious way. It is also of significance to assess the relationship
that exists between green relational capital and employees’ harmonious habitation of the environment.
Green relational capital refers to the employees, customers, suppliers, and business partners
associated with environmental management (Huang & Kung, 2011). In this study, the authors argue
that green relational capital may affect employees’ harmonious habitation of the environment since
employees will be networking with employees from other organizations on the issue of environment
management. Green relational capital may reduce organizational costs in many ways, for example, the

higher level of green relational capital will result in better planning, problem solving and troubleshooting,
all of which most likely increase production and service delivery efficiencies and, thereby, reduce
organizational costs (Kijek & Kijek 2007; Youndt & Snell, 2004). Hence, greater relational capital among
employee within small and medium enterprises would facilitate the sharing of green knowledge as
trusting relationships build and ultimately this will lead to employees’ harmonious habitation of the
environment. Therefore, inferring from the literature and the empirical evidence above, it is hypothesized
that:
H1: Green human capital has a positive impact on employees’ harmonious habitation of the environment
H2: Green structural capital has a positive impact on employees’ harmonious habitation of the
environment
H3: Green relational capital has positive impact on employees’ harmonious habitation of the
environment
Green transformational leadership and employees’ harmonious habitation of the environment
It is essential to note the important impact that green transformational leadership has on
employees’ harmonious habitation of the environment. According to Zafar, Nisar, Shoukat and Ikram
(2017) in order to increase the green performance of an organization green transformational leadership is
very important. In their study entitled, “greening organizations through leaders' influence on employees'
pro-environmental behaviors”, Robertson and Barling, (2013) found out that environmentally-specific
transformational leadership predicted employees’ harmonious environmental passion. On the basis of the
recent studies (Gebauer, 2011; Wang, Tsai, & Tsai 2014; Mittal & Dhar, 2016) it is observed that green
transformational leaders promote harmonious habitation of the environment to their subordinates.
Precisely, green transformational leadership promotes green creativity among employees, whereby green
creativity involves coming up with an idea that is uncommon, creative and having value driven strategies
that enhance environment habitation (Mittal & Dhar, 2016; Chang, & Chen, 2013). Based on the above
positions on the relationship between green transformational leadership and employees’ harmonious
habitation of the environment, the following hypothesis is posited:
H4: Green transformation leadership has a positive impact on employees’ harmonious habitation of the
environment
Green human capital and workplace environment friendly behaviour
According to Yahya, Arshad and Kamaluddin (2015) effective management of human capital is
critical success determining factors for all organisations. This may involve investiments in the knowledge
and skills of employees and empowering them with the information they need to make decisions on the
organization’s behalf (Suraj & Bontis 2012). Green human capital is the summation of employees’
knowledge, skills, capabilities, experience, attitudes, wisdom, creativity, and commitments, etc., about
environmental management and environmental concerns (Chen, 2008). Therefore, companies should hire
high potential employees and develop their competences in environmental protection to achieve the strict
environmental standard (Chang, 2016). In addition, Arulrajah, Opatha, & Nawaratne, (2015) argues that
the greening of human resources management functions will reduce negative environmental impacts of
the organisation and improve the positive environmental impacts of the organisation. Drawing from the
aforementioned expositions it can be noted that if employees within small and medium enterprises are
well equipped with competences in environmental protection this will ultimately leads to workplace
environment friendly behaviour because there will be delighted by being provided with full employee
support in terms of knowledge and skill in making the workplace environment friendly. In nutshell this
study argues that green human capital positively affects workplace environment friendly behaviour and
implies the following hypothesis.
H5: Green human capital has a positive impact on workplace environment friendly behaviour
Employees’ harmonious habitation of the environment and workplace environment friendly behaviour
It is also vital to discuss on the relationship between employees’ harmonious habitation of the
environment and workplace environment friendly behaviour. According to Kellert, (2012) a moralistic

and spiritual perspective encourages and motivates people to protect and conserve nature. Afsar, Badir,
and Kiani (2016) proved that the interaction of individuals’ senses of responsibility and concern about the
results of their activities with their senses of community membership and meaningfulness in life can
activate their moral obligations and result in pro-environmental behavior. Moreover, numerous studies
have indicated that when employees are aware of environmental problems, they are more likely to exhibit
eco-friendly behaviors (Crossman, 2011; Zilahy, 2004). Moreover, Viljoen (2016) conducted a study which
aimed at determining the antecedents of organisational citizenship behaviour towards the environment
and found out that environmental concern and awareness are important constructs to promote workplace
environment-friendly behavior. Deducing from the aforementioned explications it can be stated that if
employees are harmoniously protecting their workplace environment this will ultimately nourishes
workplace environment friendly behaviours. It is also imperative to note that by means of some literature
search and to the best knowledge of the researchers, previous studies did less work on the effect of
employees’ harmonious habitation of the environment on workplace environment friendly behaviour so
in this current study the authors strive develop a framework in order to cover this gap. Hence it can be
hypothesised that:
H6: Employees’ harmonious habitation of the environment has a positive impact on workplace environment friendly
behaviour
Green transformation leadership and workplace environment friendly behaviour
According to Zafar, Nisar, Shoukat and Ikram (2017) green transformational leadership entails the
characteristic of leader to encourage his colleagues to attain environmental goals and motivate them to
behave above the environmental expected performance. Therefore, deducing from Zafar, Nisar, Shoukat
and Ikram’s definition it is crystal clear that green transformational leadership enhances workplace
environment friendly behaviour because the leader is determined in encouraging as well as motivating
other employees to behave above the environmental expected performance. Hence this ultimate
contributes to workplace environment friendly behaviour. Transformational leadership also helps in
introducing new thoughts by delivering inspiration, rational motivation and visualization (Mumford,
2000). In addition, transformational leadership also help individuals to see their position as a worker in an
organization more attentive and superior perspective (Vogues & Sutcliffe, 2012). Inferring from the
aforementioned explanations and taking in to account that previous studies pay less attention to the effect
of green transformation leadership on workplace environment friendly behaviour. It can be hypothesised
that:
H7: Green transformation leadership has a positive impact on workplace environment friendly behaviour
6. Research methodology
The study used a quantitative research design using a structured questionnaire. In quantitative
research, data are quantified to apply statistical techniques in order to gain meaningful insights into
relationships (Dhurup, Mafini & Dumasi 2014). Furthermore, the design was suitable to solicit the
required information relating to elements of green intellectual capital and green transformational
leadership, employees’ harmonious habitation of the environment and Workplace Environment-friendly
Behavior. Moreover, the researchers opted for a quantitative research approach for this study, because it
enhances the accuracy of results through statistics analysis (Berndt & Petzer 2011) and avoids the elements
of subjectivity associated with the qualitative approach (Du Plessis & Rosseau 2007).
6.1 Data collection
Berndt and Petzer (2011) notes that data collection comprises the actual collection of responses
from the identified sample. Therefore, Data for this research was collected from employees working
within SMEs located in Johannesburg, which is located within the Gauteng province of South Africa. Of
the total of 170 questionnaires distributed, 150 usable questionnaires were retrieved for the final data
analysis, representing a response rate of 89 percent. To eliminate differences in response patterns due to
different reference points, all respondents were prompted to answer the questionnaire with reference to
elements of green intellectual capital and green transformational leadership, employees’ harmonious
habitation of the environment and workplace environment-friendly behavior.

6.2 Questionnaire design

The survey approach was used for this study. A questionnaire is a form of survey and is a very
traditional approach to employ when conducting research. Surveys are more commonly appropriate in
describing reality through non-experimental descriptive research designs and this approach is often used
as an instrument to collect data on attitudes and behaviour (Mathers, Fox, & Hunn, 2007). A questionnaire
is defined as a set of questions that are used to collect specific data whereby questions can either be
closed-ended or open-ended and can be administered online, face-to-face, telephonically or by self-
completion (Mathers, Fox, & Hunn, 2007). For the purpose of this study, a self-administered questionnaire
designed in an ethical manner was used. The questionnaire was structured and based on a five-point
Likert scale using a combination of closed ended questions to get a quick, honest response from the
participants.
7. Research variables measurement instrument, scale and source
The research independent variables undertaken as part of this study are: Green human capital,
green structural capital, green relational capital and green transformation leadership. The dependent
variables used in this study are employees’ harmonious habitation of the environment and workplace
environment friendly behaviour. Section B, C, D, E, F and G of the questionnaire were related to data
gathering in terms of the variables used in the study whereby each variable had separate instruments that
was adapted or adopted from similar studies.
The measurement of green human capital includes five items which were adapted from Chang
and Chen (2012). In addition, green structural capital was also measured using six items which were
adapted from Chang and Chen (2012). Furthermore, green relational capital was measured through the
adaptation of Chang and Chen (2012) green relational capital scale which had three items. Green
transformation leadership was measured using a six-item scale adapted from Chen, Chang and Lin,
(2014). Employees’ harmonious habitation of the environment was measured using a ten-item scale
adapted from Robertson and Barling (2013). Moreover, workplace environment friendly behavior was
measured using a seven-item instrument adapted from Robertson and Barling (2013).
8. Respondent profile
The respondents were asked to report their demographic information on gender, age, marital
status and participants working experience. The respondents were predominantly females (n=87; 58%).
The median age group of the respondents was that of less than 30 years (n=82; 54.6%). Most of the
respondents indicated that they are married representing (n=90; 60%) of the total sample and the
remainder (n=60; 40%) indicated that they are single. Almost half of the participants had less than 5 years
working experience (n=71; 47.3%), more than a quarter of the participants had 5-10 years working
experience (n=59; 39.3%), and less than a quarter had above 10 years working experience (n=18; 12.1%).
9. Data analysis and results
A Microsoft Excel spread sheet was used to enter all the data and in order to make inferences of
the data obtained, the Statistical Packages for Social Sciences (SPSS) and the Smart PLS software for
Structural Equation Modeling (SEM) technique was used to code data and to run the statistical analysis.
Smart PLS has emerged as a powerful approach to study casual models involving multiple constructs
with multiple indicators (Chinomona & Dubihlela 2014). According to Hsia and Tseng (2015) PLS is more
appropriate in research areas where theory is not as well developed as that demanded by LISREL. In
addition, Smart PLS supports both exploratory and confirmatory research, is robust to deviations for
multivariate normal distributions, and is good for small sample size (Hair, Ringle & Sarstedt 2013). Since
the current study sample size is relatively small (150) Smart PLS was found more appropriate and
befitting the purpose of the current study.
10. Reliability analysis
The statistical measures of accuracy tests shown in Table 2 specify the different measures that
were used to assess the reliability and validity of the constructs for the study. Precisely, the table depicts
means and standard deviations, Item to Total correlations, Cronbach alpha values Average variance
extracted (AVE), Composite Reliability (CR) and Factor Loadings.

Table 2: Accuracy analysis statistics

On green transformation leadership 1 item was deleted which was gtl1 and on workplace environment
friendly behavior 1 item was deleted which is wefb2 because the items factor loadings were less than 0.500
which means they explained less than 50% of the variance and did not meet the threshold of equal to or
above 0.500. The lowest item to total loading observed was GRC3 with 0.518 and the highest was GHC5
with 0.895. The lowest factor loading observed was 0.611 and the highest is 0.894. This shows that the
measurement instruments are valid. In addition, table 2 shows that the item-total correlation value lies
between 0.518 and 0.895which is above the cut-off point of 0.5 as recommended by Anderson and Gerbing
(1988:411). The higher inter-item correlations reveal convergence among the measured items. In addition,
the Cronbach’s coefficient alpha was used to assess the internal consistency of each construct employed in
the study. The closer the co-efficient is to 1.00, the greater is the internal consistency of the items in the
scale (Malhotra 2010:724). All alpha values ranged from 0.758 to 0.895, they exceeded the recommended
threshold of 7.0 suggesting that all the items in the scale tap into the same underlying constructs (Hair et
al., 2010:44) and this also shows that the constructs are very reliable and are explaining more that 50% of
the variance. The results of composite reliability are shown in Table 2. The results yielded CR indexes
between 0.818 and 0.919. The exhibited CR level exceeded the estimated criteria of greater than 0.70,
which is recommended as adequate for internal consistency of the constructs (Nunnally 1978:247; Chin
1988:320), thus finding support for the scales satisfactory composite reliability. Moreover, convergent
validity of the study was determined by computing AVE values. AVE is the average of communalities for
each latent factor in a reflective model. According to Malhotra (2010) the AVE values should be at least
0.50, which means that the construct explains at least half of the variance of its observed variables. Chin
(1998) also points out that AVE values below 0.50 indicate error variance levels that surpass the explained
variance. Thus, the AVE values reported in this study were within the acceptable range
(0.582≤AVE≤0.736), implying that more of the variance along each indicator variable was shared with its
respective construct.
Table 3: Inter - Construct Correlation Matrix
11. Inter-construct correlation matrix

Nunnally and Bernstein (1994) proves that one of the methods used to check on the discriminant
validity of the research constructs was the evaluation of whether the correlations among latent constructs
were less than 0.60. A correlation value of less than 0.60 is recommended in the empirical literature to
confirm the existence of discriminant validity (Nunnally & Bernstein 1994). As can be seen all the
correlations are below the standard level of 0.60 which indicate the existence of discriminant validity. As
shown in Table 3, the inter-construct correlation values ranged from 0.347 to 0. 0.594 Below the rule of
thumb of 0.8 (Fraering & Minor, 2006), indicating the attainment of discriminant validity. Therefore, table
3, above shows that the results further validate the existence of discriminant validity.
12. Assessment of the goodness of fit (GoF)
Overall, R² for habitual brand loyalty and impulsive and careless buying in Figure 2, indicate that
the research model explains 60.1% and 44.5% respectively of the variance in the endogenous variables.
Following formulae provided by Tenenhaus, Vinzi, Chatelin & Lauro, (2005), the global goodness-of-fit
(GoF) statistic for the research model was calculated using the equation:
Goodness of Fit = 2√ (average of all AVEs values* average of all R2)
= 2√ 0.675*0.201
= 0.37

Where AVE represent the average of all AVE values for the research variables while R² represents the
average of all R² values in the full path model the calculated global goodness of fit (GoF) is 0.37, which
exceed the threshold of GoF>0.36 suggested by Wetzels, Odekerken-Schröder & van Oppen (2009).
Therefore, this study concludes that the research model has a good overall fit.
13. Path model results and factor loadings
The PLS estimation results for the structural model as well as the item loadings for the research constructs
are shown in Figure 2.
Figure 2: Path Modelling and Factor Loading Results
Table 4: Results of structural equation model analysis

14. Outcome of hypotheses testing

In this study testing of the hypothesis will be determined by the path coefficient values as well as
the t-values for the structural model obtained from the bootstrapping algorithm. According to Beneke and
Blampied (2012) T-values indicate whether a significant relationship exists between variables within the
model and path coefficients demonstrate the strength of the relationships in the model. Two tailed t-tests
were conducted at the five percent significance level.
Outcome of Hypotheses Testing Hypothesis 1: Green human capital has a positive impact on with
employees’ harmonious habitation of the environment
In this study, this hypothesis was supported. It can be observed in Figure 2 and Table 4 that green
human capital exerted a positive impact (β =0.074) and was statistically insignificant (t=1.987) in
predicting employees’ harmonious habitation of the environment. This result suggests that green human
capital positively influence employees’ harmonious habitation of the environment in a significant way.
Outcome of Hypotheses Testing 2: Green structural capital has a positive impact on employees’
harmonious habitation of the environment
In this study, this hypothesis was supported. It can be observed in Figure 2 and Table 4 that green
structural capital exerted a positive impact (β =0.153) and was statistically significant (t=2.614) in
predicting employees’ harmonious habitation of the environment. This result implies that green structural
capital directly influences employees’ harmonious habitation of the environment in a positive and
significant fashion. Therefore, it can be noted that the more a company capitalizes in having
supportive infrastructure and processes about environmental protection or green innovation within a
company it ultimately leads to employees’ harmonious habitation of the environment.
Outcome of Hypotheses Testing 3: Green relational capital has positive impact on employees’
harmonious habitation of the environment
Hypothesis 3 posited a positive association between green relational capital and employees’
harmonious habitation of the environment. Consistent with Hypothesis 2, results indicated that higher
levels of green relational capital will lead to higher levels of employees’ harmonious habitation of the
environment (β = 0.105; t = 2.254). Therefore, H3 is accepted since the relationship between Green
relational capital and employees’ harmonious habitation of the environment was positive and significant.
Thus, it can be noted that if the management of SMEs capitalises in building strong rapports (centered on
green innovation or environmental management) among employees as well as other stake holders this
would ultimately lead to employees’ harmonious habitation of the environment.
Outcome of Hypotheses Testing 4: Green transformation leadership has a positive impact on
employees’ harmonious habitation of the environment
The fourth hypothesis proposed that green transformation leadership has a positive impact on
employees’ harmonious habitation of the environment. This hypothesis was reinforced in this study.
Figure 2 and Table 4 indicate that Green transformation leadership and employees’ harmonious habitation
of the environment are supported. Green transformation leadership exerted a positive influence (β =
0.584) on employees’ harmonious habitation of the environment and was statistically substantial (t=
8.943). This result signifies that green transformation leadership is related positively and meaningfully to
employees’ harmonious habitation of the environment. Thus, higher levels of green transformation
leadership will lead to higher levels of employees’ harmonious habitation of the environment.
Outcome of Hypotheses Testing 5: Green human capital has a positive impact on workplace
environment friendly behaviour
In addition, the fifth hypothesis proposed that green human capital has a positive impact on
workplace environment friendly behaviour. This hypothesis was reinforced in this study. Figure 2 and
Table 4 indicate that green human capital and workplace environment friendly behaviour were
supported. Green human capital exerted a positive impact (β = 0.217) on workplace environment friendly
behaviour (t=3.124). This result signifies that green human capital is related positively and meaningfully
to workplace environment friendly behaviour. Thus, higher levels of green human capital will lead to
higher levels of workplace environment friendly behaviour.

Outcome of Hypotheses Testing 6: Employees’ harmonious habitation of the environment has a

positive impact on workplace environment friendly behaviour
It is depicted in Figure 2 and Table 4 that H6 is supported significantly. The t-statistics is 6.887.
The strength of the relationship is indicated by the path coefficient of 0.711. This finding suggests that
Employees’ harmonious habitation of the environment has a positive impact on workplace environment
friendly behaviour. So, the more employees are engaged in harmonious habitation of their environment, it
is the more the incite workplace environment friendly behaviour among employees.
Outcome of Hypotheses Testing 7: Green transformation leadership has a positive impact on
workplace environment friendly behaviour
Moreover, Hypothesis 7 posited a positive relationship between green transformation leadership
and workplace environment friendly behaviour. However, the result in Table 4 and Figure 2, indicates
that they are a negative (β = -0.150) but insignificant (t = 1.438) relation between procedural justice and
work locus of control. Therefore, H2 is rejected since the relationship between green transformation
leadership and workplace environment friendly behaviour was negative and insignificant.
15. Academic, practical and policy implications for the study
The present study offers implications for academicians. For example, an investigation of the
research findings indicates that green transformation leadership → employees’ harmonious habitation
of the environment has the strongest influence on each other as indicated by a path coefficient of
(β=0.584). Therefore, for academicians in the field of green work practice as well as small business
management, this finding enhances their understanding of the relationship between green transformation
leadership and employees’ harmonious habitation of the environment as this is a useful contribution to
existing literature on these two variables.
On the practitioners’ side, this study therefore submits that SMEs’ managers can benefit from the
implications of these findings. For example, given the robust relationship between employees’
harmonious habitation of the environment and workplace environment friendly behaviour (β=0.711),
SMEs’ managers are ought to pay attention or they should put more emphasis on finding ways that makes
their employees to dwell harmoniously in their environment and this will ultimately incite workplace
environment friendly behaviors among employees.
Moreover, the present study offers implications for policy makers who have been developing
green work practices policies that enhance employees’ harmonious habitation of the environment and
workplace environment friendly behaviour. Precisely; policies which exist in various small and medium
enterprises can be modified to inaugurate employees’ harmonious habitation of the environment and
workplace environment friendly behaviour. Thus, the results which have been obtained from this study
may be used to generate new policies and revision of the existing policies.
16. Limitations and future research suggestions

Although the present study offers valuable insights pertaining to the antecedents towards
employees’ harmonious habitation of the environment and workplace environment-friendly Behavior, it is
prone to limitations that offer avenues for future research. The results of this study are based on a sample
of 150 respondents which is not a bigger sample and the study was conducted only in Johannesburg and
findings may not be generalized to the whole of South Africa. Therefore, future studies, should take into
consideration other areas of South Africa. This will eventually offer more insight and accurate research
findings into the understanding of antecedents towards employees’ harmonious habitation of the
environment and workplace environment-friendly Behavior. Furthermore, the study only made use of a
quantitative research approach. Future research may consider using a mixed-method approach that
includes both a qualitative and quantitative research design, where a quantitative design technique could
be more reliable and objective because of the use of statistics to generalize the findings.
17. Conclusion
This study was conducted with the intent to investigate the way optimistic dispositions towards
the environment can be encouraged among the employees of the specific organisation(s) under
investigation, by embracing a unique approach and methods of inquiry that are most relevant to the

organisation(s). From the literature consulted for this study, the importance of organisations
understanding their own specific environment to establish the best practices and environmental
awareness promotion mechanisms among employees, emerged prevalently. Establishing the conditions
for optimum environmental awareness campaigns among employees within the organisation(s) was
therefore a main point of investigation. The findings showed that the association between green human
capital, green structural capital, green relational capital, green transformation leadership and employees’
harmonious habitation of the environment is positive in a significant way. However, green transformation
leadership emerged to have a negative and an insignificant impact on workplace environment friendly
behavior. Lastly the findings suggested that employees’ harmonious habitation of the environment has a
positive and a significant impact on workplace environment friendly behavior.
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Is service fairness influencing customers’ satisfaction and intention to

pay insurance premium? A case in BPJS Kesehatan Indonesia
Diena Dwidienawati
Mts Arief
Sri Bramantoro Abdinagoro
Bina Nusantara University (BINUS), Indonesia
Keywords
BPJS Kesehatan, Intention to pay, Satisfaction, Service Fairness, BPJS Kesehatan
Abstract
This study discusses the importance of service fairness variables – Interactional Fairness, Procedural
Fairness, and Distributive Fairness – toward customer satisfaction, which further leads to customer intention
to pay. There is limited previous empirical research on the effect of service fairness to service delivery,
particularly in the healthcare industry. The authors hypothesised that there was a positive influence from
three variables of service fairness, from customer satisfaction, to customer satisfaction, to intention to pay.
Using the descriptive quantitative method, this pilot study was conducted to review the service delivery of
BPJS Kesehatan service providers in various cities in Indonesia, with BPJS Kesehatan members as
respondents. Data analysis was analysed with PLS-SEM with SmartPLS software. The study showed that
there was a positive impact of Interactional Fairness and Distributive Fairness on customer satisfaction, and
customer satisfaction on intention to pay. However, this study failed to show the relationship between
Procedural Fairness to customer satisfaction. This study strengthens the building evidence of service fairness
to customer satisfaction, specifically in-service delivery and in healthcare industry.
Corresponding author: Diena Dwidienawati

Email addresses for corresponding author: diena.tjiptadi@gmail.com
Introduction
Studies have found that besides quality evaluation, fairness is another important factor which
influences satisfaction (Oliver, 2015). Oliver and Swan (1988), in Vinagre & Neves (2010), confirm that as
disconfirmation of expectation, fairness is considered as an important predictor of satisfaction. It is
assumed that patients are satisfied when they perceive treatment is fair.
Previous studies review fairness in various industries, including retail banking (Chebat &
Slusarczyk, 2005), air travel, restaurants, auto repair, dental (Goodwin & Ross, 1992), hotels, and the
retail-wholesaler relationship (Brown et. al., 2006). However, the issues covered by fairness studies are
mostly service recovery (Goudarzi, Borges, & Charles, 2013; Mattila, Cho, & Cheyenne, 2011a; Mccoll-
kennedy, Sparks, & Nguyen, 2011; Noone, 2012; Prasongsukarn, Patterson, & Patterson, 2012; Ro & Olson,
2014; Sharifi & Aghazadeh, 2016; Yilmaz, Varnali, & Tari, 2016c), organisational behaviour (Beugre &
Baron, 2001; Chan & Lai, 2017; J. B. DeConinck, 2010b; W. M. Hur, Park, & Moon, 2014; Karkoulian,
Assaker, & Hallak, 2016) and price fairness (Fernandes & Calamote, 2016; Homburg, Totzek, & Krämer,
2014; Malc, Mumel, & Pisnik, 2016). There are still a few studies reviewing fairness in service delivery and
its impact on satisfaction. Furthermore, the author only found two studies done in the healthcare industry
(Ramsaran-Fowdar, 2008; Vinagre & Neves, 2010).
Most fairness studies are conducted with an experimental design (Goudarzi et al., 2013; Homburg
et al., 2014; Malc et al., 2016; Ro & Olson, 2014; Sharifi & Aghazadeh, 2016). The experimental design
might give high internal validity, but there is a trade off with external validity (Sekaran & Bougie, 2016).
Only a few studies, especially in service delivery, are conducted with a survey design.

Besides commitment, trust, positive emotion, and attitude are known to be the antecedents of
behaviour intention (Abubakar, Ilkan, Meshall Al-Tal, & Eluwole, 2017; Fernet, Trépanier, Demers, &
Austin, 2017; Gan & Li, 2018; Hussein, Oon, & Fikry, 2017; Liang, Choi, & Joppe, 2018), customer
satisfaction is one of the most studied antecedents of behaviour intention. Customer experience is
considered a critical influence on proceeding behaviour in product purchase (Joo, Park, & Shin, 2017).
Indonesia is one of the low and middle-income countries aiming to improve their health financing
system and to implement universal health coverage (UHC). Starting just in January 2014, and within less
than three years, BPJS Kesehatan has successfully had a large coverage. In January 2017, BPJS Kesehatan
has 172.97 million members, according to BPJS official website. It is considered the biggest single payer
institution of Universal Health Coverage program in the world (Teh, 2015). The target is to reach 100%
coverage in 2019 (Presiden Republik Indonesia, 2004). The rapid expansion of insurance coverage has
created a demand which cannot be met by the current healthcare system (Bredenkamp et al., 2015).
Furthermore, Bredenkamp et al. (2015) state that the sudden increase of demand will disrupt the delivery
of service, especially in the public hospitals. The disruption of service, consequently, will influence the
satisfaction level. The Center for Health Economic and Policies Study from the University of Indonesia
showed that the satisfaction level of hospital service is 54%. The satisfaction level of doctor service is 44%
(Thabrany, 2016). In one of descriptive study done by Dwidienawati & Abdinagoro (2017), reasons like
long queues, long waiting times, poor service, discrimination in procedure, and treatment procedures are
the most common patient complaints. The results of the study seem confirm Oliver (2015)’s statement
that fairness is another principal factor influencing satisfaction, besides quality.
This study is a pilot study aiming to see the impact of three variables of service fairness on
customer satisfaction and how it will impact intention to pay or continuance of insurance premium
payment.
Literature Review
Service Fairness
The terminology “justice” and “fairness” have been used interchangeably in many studies. There
is no specific reason why some authors use “justice” and others use “fairness”. Considering that this study
deals more with the principle of equality rather than liberty, the terminology “fairness” is chosen instead
of “justice” in this writing. Su & Hsu (2013b) state that in justice theory, a customer evaluates a service
encounter as either just or unjust. Service quality and service fairness are distinctive concepts. It is said
that individuals are motivated by comparison to others. Carr (2007) states that no matter how good the
service, one will be more satisfied if he or she gets the same level of services as other customers. Service
fairness is a customer’s perception of the degree of justice in a service firm’s behaviour (Su & Hsu, 2013b).
Researchers have found that besides quality evaluation, fairness is another important factor which
influences satisfaction (Oliver, 2015). Oliver and Swan (1988), in Vinagre & Neves (2010), confirm that as
disconfirmation of expectation, fairness has been considered an important predictor of satisfaction. In
general, it is assumed that patients are satisfied when they perceive treatment as fair (Oliver, 2015).
There are three variables of service fairness. The first one is distributive fairness (DF). DF is
concerned with how the outcomes are distributed equitably (Kandul, 2016). The second variable of service
fairness is procedural fairness (PF). PF refers to the process and procedures by which allocation decisions
are made (Folger and Greenberg, 1985; Thibault and Walker, 1975), as stated in J. B. DeConinck (2010b).
PF reflects a transparency system that signals that all customers will be treated fairly (Kashyap & Sivadas,
2012). The last variable is interactional fairness (IF). IF is the way the customer is treated in terms of
respect, politeness, and appreciation of other thoughts (Kashyap & Sivadas, 2012). IF refers to the
interpersonal treatment within the organisation (Bies and Moag, 1986), as stated in J. B. DeConinck
(2010b) . It focuses on the fairness of interactional communication and procedures (Karkoulian et al.,
2016). IF is a perceived fairness of treatment (Yilmaz et al., 2016c). It includes interpersonal, such as
courtesies and politeness, and informational, such as delivering all the related information well (Jung,
Brown, & Zablah, 2017).
DF, PF, and IF all have significant contributions to satisfaction. Some studies considered IF, PF,
and DF as individual variables having a direct influence on satisfaction (Chebat & Slusarczyk, 2005;
Kashyap & Sivadas, 2012; Poujol, Siadou-martin, Vidal, & Pellat, 2013; Sparks & Mccoll-kennedy, 2001a;

Vinagre & Neves, 2010). Other studies considered IF, PF, and DF as dimensions of overall fairness (Carr,
2007; Su & Hsu, 2013a; Zhu & Chen, 2012). Beugre & Baron (2001) call the overall fairness, which consists
of IF, DF, and PF, as systemic fairness in the study in organisational fairness. Su & Hsu (2013a), in their
study on the tourism industry, call the overall fairness service fairness. This study will consider IF, PF,
and DF as variables of service fairness. This study reviews individual variables of service fairness, because
the impact of each variable on satisfaction might not be similar.
Satisfaction
Oliver (2015) defines satisfaction as “the consumer’s fulfilment response”, a post consumption
judgment by the consumer that a service provides a pleasing level of consumption-related fulfilment,
including under- or over-fulfilment. Satisfaction is a consumer positive affective response to a relationship
exchange (Kashyap & Sivadas, 2012). Consumer satisfaction is at the very core of marketing theory and
practice (Newsome & Wright, 1999). Since retaining customers may be more profitable than attracting
new ones, dissatisfied customers may lead to unfavourable behaviour intentions, such as negative word of
mouth, doing less business, or switching to an alternative service provider (Ramsaran-Fowdar, 2008).
Patients’ satisfaction is an important indicator to evaluate the achievement of the public service
system (Roberts & Reich, 2002). Investigating public satisfaction is the most common way to confirm
public opinion and needs for policy innovation. Greater involvement of consumers is needed in the health
care process, partly because of the link demonstrated to exist between satisfaction and patient compliance
in areas like appointment keeping, intentions to comply with recommended treatments, and medication
use. Since high quality clinical outcome depends on compliance, which indirectly depends on patients’
satisfaction, the latter has become a legitimate healthcare goal and, therefore, a prerequisite of quality care
(Newsome & Wright, 1999). Patients’ satisfaction is also important to improve treatment outcomes (Gill &
White, 2013). Patients’ satisfaction affects healthcare providers financially through referrals and
reimbursement. Patients’ satisfaction has also been linked to unsolicited complaints and medical
malpractice lawsuits (Stelfox, Gandhi, Orav, & Gustafson, 2005).
Intention
Retaining customers may be more profitable than attracting them. Clancy and Schulman (1994), in
Ramsaran-Fowdar (2008), calculated that the cost of attracting new customers is approximately five times
that of keeping current customers happy. Customer loyalty is an important goal in the consumer
marketing community, as it is a key component for long-term viability and sustainability (Su & Hsu,
2013). Customer loyalty refers to “the customers’ willingness to continue patronising a business over the
long-term, purchasing and using its goods and services on a repeated and preferably exclusive basis, and
voluntarily recommending the firm’s products to friends and associates” (Lovelock & Wirtz, 2011).
Zeithaml, Berry, & Parasuraman (1996) suggested that one favourable behavioural intention is associated
with a service provider’s ability to get customers to spend more money with them. Loyalty is a construct
comprising several dimensions. Repurchase intention and re-patronising intention represent the most
common variables in existing empirical studies (Söderlund & Colliander, 2015). Customer intention is the
willingness of the customer to perform specific behaviour (Amoroso & Lim, 2017).
Hypothesis
Previous studies show that satisfaction is the common outcome of fairness (Fernandes & Calamote,
2016; Poujol et al., 2013; Ramsaran-Fowdar, 2008; Söderlund & Colliander, 2015). The relationship of
fairness to intention mostly is mediated by satisfaction (Fernandes & Calamote, 2016; Poujol et al., 2013;
Ramsaran-Fowdar, 2008; Söderlund & Colliander, 2015; Su & Hsu, 2013a). IF is sensitive to the amount of
personal interaction in the transaction (Oliver, 2015). In the service or organisational process where
personal interaction is key, there is a strong influence of interactional fairness on satisfaction. In retail
banking, Chebat and Slusarczyk (2005) show the influence of interactional fairness and distributive
fairness on satisfaction in service recovery is stronger than procedural fairness. They even show a direct
influence of interactional fairness to loyalty. In healthcare, Neves (2010) show the strong influence of
interactional fairness on satisfaction. The evidences of the strong influence of IF are supported by the
studies from Jung et al. (2017), Deconinck & Bachmann (2005), Kashyap & Sivadas (2012), Mattila et al.
(2011), Bradley & Sparks (2012), Hui & Au (2001), and Karkoulian et al. (2016).

Health care service involves strong personal interaction; therefore, a strong influence of
interactional fairness on satisfaction is expected.
H1: Interactional Fairness positively influences Customer Satisfaction
Procedural Fairness (PF) will become important in a situation where people judge the process on
delivered outcome. In organisational behaviour studies, for service recovery and business relationships,
PF is an important variable to outcomes. In an organisation behaviour study on performance appraisal by
Karkoulian et al. (2016), a study on quota setting by Brashear et al. (2004), and a study on franchise-
franchisee relationships (Kashyap & Sivadas, 2012), all concur that having a perceived transparent process
increases satisfaction, trust, and commitment. Service recovery and price fairness studies (Bechwati,
Sisodia, & Sheth, 2009; J. DeConinck & Bachmann, 2005; Goudarzi et al., 2013; Gustafsson, 2009; Homburg
et al., 2014; Malc et al., 2016; Ro & Olson, 2014; Sharifi & Aghazadeh, 2016; Yilmaz, Varnali, & Tari, 2016b;
Yilmaz et al., 2016c) show that quick responses, simple processes, and no-hassle processes increase
outcomes. Complicated procedures are one of the most complained about item by BPJS Kesehatan
Patients. It is therefore assumed that PF will have an influence on satisfaction delivery.
H2: Procedural Fairness positively influences Customer Satisfaction
The review of studies on fairness reveals that studies which show a strong influence of Distributive
Fairness (DF) to outcomes are studies where customers or employees compare what they gain with what
they have contributed. Employees are willing to help others (give extra miles) if employees perceived fair
reward relocation (Chan & Lai, 2017). In the emotionally exhausted working environment, perceived
fairness in reward relocation strongly influences employee loyalty (J. C. Hur & Jang, 2016). When
customers feel the ‘loss’ (service is not as good as they expected), tangible compensation (DF) is important
for post-complaint satisfaction (Hui & Au, 2001; Noone, 2012; Sparks & Mccoll-kennedy, 2001b; Yilmaz et
al., 2016c). Not all BPJS Kesehatan members are using the services; in other words, some are contributing
but never use the service or only use the service a few times. In this case, DF will be one of the factors
influencing satisfaction.
H3: Distributive Fairness positively influences Customer Satisfaction
Customers develop attitudes towards products or services if they have consumed or experienced
those products or services. Previous consumption and experiences will develop the like or dislike of the
products and services. Therefore, satisfaction plays significant role in the behaviour post-consumption,
such as repurchase intention (Oliver, 2015). The intimate relationship connecting satisfaction to loyalty is
widely acknowledged in the marketing literature. Studies show that satisfied customers are more likely to
be loyal than dissatisfied ones (Fornell, 1992; Fornell and Wernefelt, 1987; Parasuraman et al., 1991;
Reichheld and Sasser, 1990), in (Poujol et al., 2013). Indeed, satisfaction has proven to be a major
antecedent to loyalty (Bitner, 1990; Dick and Basu, 1994; Fornell et al., 1996), in (Poujol et al., 2013).
Satisfaction has been suggested as direct antecedent of behavioural intentions in studies from various
industries (Cho, Rutherford, & Park, 2013; Gao & Mattila, 2014; Hosany & Prayag, 2013; Su & Hsu, 2013a),
or mediated by trust (Han & Sean, 2015).
The relationship between customer satisfaction and intention is proposed as:
H4: Customer Satisfaction positively influences Intention to Pay the BPJS insurance premium
Figure 1. Research Framework (Dwidienawati & Pradipto, 2017)

Method
The study is a descriptive quantitative study. Research unit analysis is the individual member of
BPJS Kesehatan Mandiri (a member who contributes by paying an insurance premium on a monthly
base). Therefore, the population of this study is all BPJS Kesehatan Mandiri members, which total
approximately 61 million. Data for statistical analysis were gathered through an online survey of BPJS
Kesehatan Mandiri members in November 2017.
The survey was administered in five big cities on Java Island, Indonesia. The survey was designed
to elicit items for the constructs in the model and focused on service fairness judgement (IF, PF, and DF) of
BPJS Kesehatan providers (medical professionals and hospital staff), customer satisfaction, and intention
to pay the insurance premium of BPJS Kesehatan. This is a pilot study; therefore, only a total of 58
questionnaires were used to test the model. Sample collection used the convenience sample collection
method, due to time and resource limitations.
Measures
The survey explored respondents’ judgments of the service fairness, customer satisfaction, and
intention to pay the insurance premium. In the survey, respondents were asked to rate their level of
agreement with items using a 6-point Likert scale anchored with strongly disagree and strongly agree.
Mid-point is omitted to avoid social desirability bias.
IF was measured using four indicators modified from Carr (2007) and Shafiri & Aghazadeh (2016),
taping the respondent evaluation on service providers’ politeness, courtesy, and empathy. PF was
measured using three indicators modified from Carr (2007), Poujol (2013), and Vinagre & Neves (2010),
taping the respondent evaluation on process and procedure delivered by service providers. DF was
measured using three indicators modified from Poujol (2013) and Vinagre & Neves (2010), taping
respondent judgment on whether input/output of the process relative to other customers is fair.
Satisfaction was measured using three indicators modified from Carr (2007) and Kasyap &Sivadas (2012),
taping the respondent evaluation on satisfaction of interaction, support, and service. Intention to pay was
measured using three indicators modified from Su and Hsu (2013) and Carr (2007), taping the respondent
evaluation on intention of continuance of payment, paying more, and helping the program.
Measurement model
Due to the small number of samples, PLS-SEM was used with SMART-PLS software. PLS-SEM was
chosen because of its advantages over covariance-based modelling, and because it produces robust results
for small sample sizes (Hair, Hult, Ringle, & Sarstedt, 2017). The model was evaluated for measurement
and structural evaluation and, finally, hypotheses testing. From 58 questionnaires distributed, 30
questionnaires were returned (51%) and eligible to be analysed. Statistical analysis confirms that the
measurement model is reliable and valid (Table 1). There is one indicator with a convergent less than 0.7.
According to Hulland (1999), in Hair et al. (2017), the convergent validity for social science can be less
than 0.7.
If the convergent validity is between 0.4 - 0.7, the indicator is deleted, and composite reliability
increases, the indicator should be retained. The composite reliability increased when that indicator was
deleted; therefore, the indicator was retained. Based on the results of statistical analysis of the
measurement model, it is concluded that the indicators are fit to the assigned construct.

Table 1. Summary of Measurement Model

Latent Indicator Covergent Internal Discriminant
Variable Validity Consistency Validity
Reliability
Loading Indicator AVE Composite Cronbach's

Reliability Reliability Alpha
>0.7 >0.5 >0.5 0.6-0.9 0.6-0.9 HTMT
Convidence
Interval does not
include 1
INF01 0.893
INF02 0.908
INF 0.939 0.838 YES YES YES
INF03 0.874
INF04 0.929
PCF01 0.792
PCF PCF02 0.838 0.823 0.620 YES YES YES
PCF03 0.735
DTF01 0.518
DTF DTF02 0.889 0.829 0.619 YES YES YES
DTF03 0.897
SAT01 0.821
SAT SAT02 0.958 0.945 0.812 YES YES YES
SAT03 0.96
INT01 0.844
INT INT02 0.746 0.831 0.622 YES YES YES
INT03 0.767
Results
From total 58 questionnaires distributed, 51 questionnaires were returned (88%). After assessing the
completeness of questionnaires and deleting the duplications, 30 questionnaires (52%) were eligible for
statistical analysis. Demographics of the respondents can be seen in Table 2. Most of the respondents have
been BPJS member since 2014/2015, or the first and second years of the BPJS Kesehatan launch. Most of
them have encountered BPJS Kesehatan providers in private hospitals.
Table 2. Respondent Demographics
Age 25-35 33%
35-45 33%
45-55 33%
Education Background High School 10%
Bachelor 80%
Master 10%
Member BPJS Since 2014/2015 80%
2016 13%
2017 7%
Encounter with BPJS Private
Kesehatan Provider Hospital 43%
Public
Hospital 23%
Both 23%
Statistical analysis for evaluating the structural model showed that the R 2 of IF, PF, and DF to
Customer Satisfaction is 0.658, where the R2 Customer Satisfaction to Intention to Pay is 0.361. Hair (2011)
and Henseler et al. (2009), in Hair et al. (2017), stated that within the scholarly research on marketing
issues, R2 values of 0.75, 0.5, or 0.25 for endogenous variables can be described as substantial, moderate, or
weak. Therefore, based on R2, the endogenous variables in the model can explain moderately their
exogenous variables. In addition to evaluating R2, f2 was also evaluated and the results are shown in Table
3.
Table 3. f2 Measurement Results
Customer Intention to
Satisfaction Pay
Customer Satisfaction 0.564
Distributive Fairness 0.376
Intention to Pay
Interactional Fairness 0.295
Procedural Fairness 0.005
Referring to Cohen (1998) and Hair et al. (2017), only the f 2 from PF to Customer Satisfaction is
considered small (<0.02). Looking at the path coefficient value, the path coefficient from PF to Customer
Satisfaction is very low, at 0.0049. The size effect of DF and IF is large and medium.
Table 4. Path Coefficient

Standard
Original Sample Mean T Statistics
Deviation P Values
Sample (O) (M) (|O/STDEV|)
(STDEV)
Customer Satisfaction ->
Intention to Pay 0.601 0.641 0.079 7.647 0.000
Distributive Fairness ->
Customer Satisfaction 0.447 0.458 0.128 3.494 0.001
Interactional Fairness ->
Procedural Fairness ->
Table 4 shows that PF is not significant in influencing Customer Satisfaction (P Value=0.731). The
other two variables, DF and PF, are significant in influencing Customer Satisfaction. Customer Satisfaction
is confirmed to have a positive relationship with Intention to Pay. Thus, hypotheses 1, 3, and 4 are
accepted, while hypothesis 2 is rejected.
Discussion
Patients’ satisfaction is the principal factor in evaluating a public service program. Moreover,
patients’ satisfaction also plays a role in improving patient’s treatment outcome (Gill & White, 2013;
Roberts & Reich, 2002). Different treatments and complicated procedures are the most common
complaints about BPJS Kesehatan. Therefore, understanding whether DF, PF, and IF judgments influence
satisfaction in BPJS Kesehatan service delivery is important.
Assorted studies show that the magnitude of influence of individual variables of Service Fairness to
Satisfaction is not similar. The impact is different from one study to another. Ro & Olson (2014), Kashyap
& Sivadas (2012), and Sparks & Mccoll-kennedy (2001) argue that all three variables of fairness are equally
important in influencing satisfaction. DF was found dominant in the studies from Yilmaz, Varnali, & Tari
(2016), Chan & Lai (2017), and Hui & Au (2001). Yilmaz et al. (2016), Shahin & Aghazadeh (2016),
Homburg et al., (2014), Gustafsson (2009), and Karkoulian, Assaker, & Hallak (2016) argue that PF has a
strong influence on satisfaction, loyalty, and trust. IF is reported to have a dominant influence by
Deconinck & Bachmann (2005), Bradley & Sparks (2012), and Karkoulian et al. (2016).
Healthcare service is a credence business. Patients have no ability to assess the service’s technical
reliability. Donabedian (1997) states that since patients, most of the time, are in no position to assess the
technical quality of the care process, they are sensitive to interpersonal relationships. Studies on the
SERVQUAL influence on satisfaction in healthcare show that the most important variable of service
influencing satisfaction are ones which involve interpersonal elements. These are empathy and
attentiveness. Those two variables involve staff communication, physician behaviour, staff demeanour,
and interpersonal skills (Boquiren et al, 2015; Devija et al., 2012; Park et al., 2016; Saeed et al., 2013).
Similarly, with the service fairness variable in the health care industry, IF will play a significant role in
influencing Customer Satisfaction.
IF is sensitive to the amount of personal interaction within the transaction (Oliver, 2015). In the
service or organisational process where personal interaction is key, there is a strong influence of
interactional fairness to satisfaction. In retail banking, Chebat and Slusarczyk (2005) show the influence of
interactional fairness and distributive fairness to satisfaction in service recovery is stronger than
procedural fairness. Karkoulian et al. (2016) show that in performance appraisal, how the supervisor treats
subordinates will influence employees’ satisfaction. Hui & Au (2001) show that culture influences which
variable of fairness is important in-service recovery. Service delivery in healthcare involves many
interpersonal interactions. Furthermore, patients usually require more empathy and care; therefore, they
are quite sensitive to how service providers treat them. This study confirms the previous studies on
SERQUAL and Service Fairness, that when interpersonal interaction is involved, variables related to
interactional, in this case IF, will have a strong influence on satisfaction (Boquiren et al., 2015; Devija et al.,
2012; Park et al., 2016; Saeed et al., 2013; Neves, 2010)
In a society where social behaviour is still collectivist, values respect, status, and face (Asian
culture in general), personal interaction and politeness are important factors for increasing the satisfaction
level. Mattila et al. (2011) argue that in online service recovery, tangible compensation and apology via
email is not enough. Human connection may be needed to ensure satisfaction. Indonesia, just like any
other Asian country, has a collectivist, saving face, and value respect type of culture. Therefore, how
medical professionals and hospital staff treat patients fairly will influence their judgement of satisfaction.
This study also confirms that DF influences Customer Satisfaction. Previous studies revealed that a
strong influence of DF on Satisfaction occurs when customers or employees compare what they gain with
what they have contributed (Hui & Au, 2001; Noone, 2012; Sparks & Mccoll-kennedy, 2001b; Yilmaz et al.,
2016a). A study from Chan and Lai (2017) shows that when employees perceive being rewarded fairly,
they will feel satisfied, and even go extra miles. BPJS Kesehatan members might consider that their
contribution is comparable with what they get. So even though they contribute by paying a premium
every month, the value might be too insignificant compared to the perceived return; therefore, they
consider the input and outcome distribution are fair and satisfying.
PF will become important in a situation when people judge the process on the delivered outcome.
Having a perceived transparent process will increase satisfaction, trust, and commitment (Kashyap &
Sivadas, 2012). In this study, even though the respondents admit that there are different processes and
procedures, only some of the respondents comment that they understand why the process is different
with regular patients. They do understand that for an insurance patient, the process and procedure is
different compared to regular patients. Therefore, they don’t consider different processes and procedures
unfair. This study further confirms the intimate relationship connecting satisfaction to intention, as
reported by Fornell (1992), Fornell and Wernefelt (1987), Parasuraman et al. (1991), and Reichheld and
Sasser (1990), in Poujol et al. (2013). This study strengthens satisfaction as a major antecedent to loyalty
(Bitner, 1990; Dick and Basu, 1994; Fornell et al., 1996), in Poujol et al. (2013).
Conclusion
This study strengthened the empirical evidences of the impact of IF and DF on customer
satisfaction. Considering the high interaction between patients, medical professionals, and hospital staff,
IF showed a positive impact on customer satisfaction. DF influences customer satisfaction positively also,
since BPJS Kesehatan members considered what they gained was relatively fair or better than what they
had contributed. However, this study failed to prove the relationship between PF and customer
satisfaction. Patients understood that BPJS Kesehatan processes and procedures were different for them
compared to regular patients. Therefore, they did not consider different process and procedure as unfair.
This study also further confirmed the intimate relationship connecting satisfaction to intention. This
study strengthened satisfaction as a major antecedent to loyalty. The limitation of this study is that this
study is a pilot study with a small sample size. Further studies with larger sample sizes, with a mix

method design, should be conducted to have a generalisation and gain more understanding on the
reasons why patients do not mind having different procedures, but do mind having different treatment.
This study contributes to the body of evidence on the relationship or service fairness to satisfaction
and, indirectly, to intention to pay, specifically in the service delivery within the healthcare industry.
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Integrated marketing communication model for

creating brand loyalty to Japanese cars in Thailand
Sudaporn Sawmong
Faculty of Business and Administration
King Mongkut’s Institute of Technology, Ladkrabang, Bangkok, Thailand
Keywords
Integrated marketing communication model, Brand loyalty, Japanese cars, Thailand
Abstract
Thailand automobile market has experienced growth for several years due to worldwide economic
growth. The proposed policies present great opportunities for Japanese car companies who have such
technologies and willing to invest in an emerging markets region. This research aimed to find the integrated
marketing communication model for creating brand loyalty to Japanese cars in Thailand. The quantitative
data was collected via questionnaire survey to 460 Japanese car customers in Thailand. The sampling method
used the simple random sampling at the department of Land Transport, Bangkok, Thailand. The descriptive
statistics applied in this research consist of mean average, percentage and frequency, whereas inferential
statistics consisted of confirmatory factor analysis, path analysis and Structural Equation Modeling. The
study found that the integrated marketing communication model for creating brand loyalty to Japanese cars
in Thailand consisted of car factors, customer psychological factors, integrated marketing communication
tools, and brand loyalty. The constructed model developed by this research is consistent with the empirical
data and showed the ability to predict value perception to an acceptable degree with a multiple correlation’s
squares ( of 87 %, GFI = 0.96, AGFI = 0.93, Chi-Square = 114.91, DF = 94, P-Value = 0.089, and RMSEA =
0.022. These finding were achieved through better understanding and addressing the Japanese car producer on
integrated marketing communication model for creating brand loyalty in Thailand. The practical implication
model has been suggested in this paper
Corresponding author: Sudaporn Sawmong

Email addresses for corresponding author: sudaporn.sa@kmitl.ac.th
First submission received: 10th June 2018
Revised submission received: 7th September 2018
Accepted: 21st September 2018
Introduction
Thailand automobile industry is one of the key major players in the industrial sector in ASEAN
country and contributes heavily to the nation’s economy. In 2017, Thailand automotive industry was the
largest in Southeast Asia and the 12 th largest in the world. Most of the vehicles built in Thailand are
developed and licensed by producers, mainly Japanese, Europe and American (Thai Automotive industry
Association, 2017). The Industry employs more than 300,000 people and generator on average percent of
the national gross domestic product (GDP) and create a number of service and support out fits, plastic to
steel making, repair and maintenance and engine software design accounting for approximately 11% of
the Thai GDP (Ernst & and Young, 2017 and Wikipedia 2018). In 2017, the automobile industry shares a
large part of the country’s export in come with annual capacity of 1.8 million units of which half is the
destined for export (Ministry of Commerce Thailand, 2017), while the total import value of automobile
and related parts accounted for 3 % of the total national import value of 156,990 million baht ($4,757)
(Ministry of Commerce Thailand MOC, 2017). Table 1 shows the passenger car by unit’s sales market
share and growth of passenger car by units in 2017.

Table1 Passenger Car unit sold Thailand by Maker/Brand and Growth year 2017 and Market Share
(Ministry of Commerce Thailand, 2017)
The sales figures in Table 1 clearly show the domination of Japanese Car manufacturers in
Thailand’s passenger car market. The information indicated that the top five brand passenger car maker
were Japanese cars followed by European and other Asian automobile companies in Thailand in 2017. The
figure clearly identifies that automobile factories from Japan can utilize their production capacities much
better than the others. The top five car brands Toyota, Isuzu, Honda, Mitsubishi, and Nissan have already
attained brand reputation and customer’ base in Thailand. Thus, the five brands are the main significance
for this study because of the success in creating brand loyalty for Japanese Cars.
Kotler & Keller (2016) and Shiffman & Kanuk, (2015) stated that the element to classify those products or
services of the cooperate to the brand loyalty are product factors, customer’s psychological factors and
integrated marketing communication tool, this study will be focused on brand loyalty to the car business
in Thailand.
This research aims to find the integrated marketing communication model for creating brand
loyalty to Japanese cars in Thailand by answering the following questions. What are the components of
the car factors, Thai customer’s psychological factor and integrated marketing communication tools, and
the brand loyalty of Japanese cars in Thailand? Do the car factors, Thai customer’s psychological factors
and the integrated marketing communication tools have any effects on the brand loyalty of Japanese cars
in Thailand. Finally what is the effective integrated marketing communication model to create brand
loyalty for Japanese car brands in Thailand.
Objectives of the Research
The objective of the research is to find the integrated marketing communication model for creating
brand loyalty to Japanese cars in Thailand.
Contributions to the Research
This research aims to investigate the integrated marketing communication tools that will enable
the Japanese car business in Thailand to improve their brand loyalty. The major contributions of this
research Japanese car investors as well as attracting the new investors to invest in Thailand. Customers of
Japanese cars will benefit from the research due to the improvement of the brand loyalty building
programs of the Japanese car companies which will lead to optimum customer satisfaction. The finding
will also be beneficial to researchers and the public as they can use the research results as a guideline for
future research.
Literature Review and research Conceptual Framework
This research has utilized the theory and previous research that are relevant to the variables of car
factors. The variables consist of car factors (country of origin, quality, price, and brand reputation),
psychological factors (motivation, attitude, and personality), the integrated marketing communication
(IMC) tools (public relations, sponsorship, advertising, direct marketing, sales promotion, exhibitions,
personal selling, and customer relationship management (CRM), and brand loyalty (satisfaction, image,
repeat purchase, and word-of-mouth) as following.

Shiffman & Kanuk, (2015) define consumer behaviour as the behaviour that consumers display in
searching for, purchasing, using, evaluating, and disposing of products, services, and ideas. While Kotler
& Keller (2016) said that the successful marketers are those who carefully cultivate satisfaction and
loyalty. Hence consumer purchases are influenced strongly by psychological characteristics of motivation,
personality and attitude (Kotler and Armstrong, 2016). The important question of marketers is how
consumers respond to various marketing efforts the company might use, for example, the IMC tool
including public relations, sponsorship, advertising, direct marketing, sales promotion, exhibitions,
personal selling, and CRM. The company that really understands how consumers will respond to
different quality of products, country of origin, prices, and brand reputation has a great advantage over its
competitors (Belch, 2004). This can be extended to create the customer relationship management (CRM)
and build brand loyalty from the brand image satisfaction customer repeat purchase and, finally, the
customer will action word of mouth; as Kotler & Keller (2016) stated that the successful marketers are who
carefully cultivate satisfaction and loyalty.
The previous research into CRM strategies in relation to the motor industry suggested that (Sophie
2014) CRM strategies in enhancing customer loyalty in the motor industry in Zimbabwe. The motor
industry is facing intense competition both locally and internationally. The paper analyses trust and
commitment as antecedents of customer loyalty, the benefits of database marketing and key account
management, categories of loyalty, as well as challenges affecting the effective implementation of
database marketing and key account management. The research design was descriptive and exploratory.
A sample size of 297 respondents was used. The major finding was that trust and commitment have a role
to play as they led to customer loyalty. It was therefore concluded that CRM contributes significantly
towards customer loyalty in the motor industry, thus it was recommended that the motor industry could
make optimum use of information technology in order to fully implement CRM strategies.
The previous research into Dimensions of Service Quality Models (Emeil 2014). The objective is to
measuring service quality and service quality dimensions. This study focused on the service quality
models. The methodology of this study was to review the existing service quality models in chronologic
order. The dimensions of the models were examined and three main groups that consist of service quality
dimensions were obtained. They were associated with the three elements of services marketing mix (7P)
such as product price place promotion people process and physical environment. It was advised that
practitioners should pay attention the services marketing tools and 7P to increase the quality of their
services offered.
The previous research into The National Safety Council (NSC), Albert (2015) studied on estimated
that over 35,000 people died in U.S. traffic accidents. About 3.8 million traffic crash injuries requiring
medical attention occurred in2013, and the number of deaths was about the same over the last 5 years. The
NSC found that product recalls, car repairs, injuries, and deaths were due to unsafe product designs or
inferior product quality. These statistics underscore the challenge of producing quality vehicles while
satisfying customers. Data was collected from a random sample (N = 77) of U.S. automobile users and
analysed via simple and multiple linear regression, which showed a significant statistical relationship
between product quality and customer satisfaction. However, neither the product safety nor product cost
helped mediate the relationship between product quality and customer satisfaction. Building high-quality
cars leads to fewer injuries and deaths associated with vehicular accidents, thus promoting positive social
change for both U.S. automobile buyers and sellers.
The previous research into the analysis of archetypal characteristics of socialcustomer relationship
management Social Customer Relationship Management (SCRM) Karol and June (2015) is a relatively new
concept in contemporary marketing studies. Although its general understanding seems to be rather
intuitive and simple within business managerial environments, as the sole name of it induces the usage of
social media (SM) and data that it contains and constantly produces in company’s CRM strategies,
scholars still struggle to create its holistic definition or even one unified description and a general list of
characteristics. In this paper, we discuss and find deficiencies and incoherencies among researched works
and detecting a group of characteristics archetypal to contemporary SCRM.
Recently research into an empirical approach to consumer buying behaviour in Indian automobile
sector Prateek, Nitin and Anoop (2017). The study purpose of this paper is to understand the relationship

between advertisement effectiveness and consumer buying behaviour for major automobile companies of
central India. Research design has adopted a judicious mix of qualitative data by focus group and Delphi
technique and quantitative data used structured questionnaire survey. Research findings found that for
the automobile sector, effective advertisements have a positive impact on consumer buying behaviour. It
suggests that customer’s attitude can be shaped favourably through effective advertising. Automobile
companies must arrange special training sessions and learning programs for their sales force to ensure
supportive customer purchasing behaviour.
Recently research into the effect of corporate brand reputation on brand attachment and brand
loyalty: automobile sector (Loureiro, Sarmento, & Bellego 2017). The study aims to analyse the effect of
corporate brand reputation on brand attachment and brand loyalty considering the automotive sector and
the brands Tesla, Toyota, and Volvo in Portugal. A sample of 327 participants, members of car brand
communities, collaborates in a survey. Overall findings reveal that the perception of corporate brand
reputation is more effective on enhancing brand loyalty than brand attachment. However, the effect could
depend on the car brand strategy. The researcher claimed that customer citizen helping others is one of
the most important corporate attributes perceived by customers of the three brands
Recently research into a mediated model of relationship quality factors affecting behavioural
intention at a luxury motor vehicle dealership (Estelle 2017). The aim of this study is to determine whether
customer satisfaction, trust and commitment as relationship quality factors can be valuable to a luxury
motor vehicle dealership in generating favourable behavioural intentions concerning post-purchase
service and repair offerings. A descriptive research design was followed, and self-administered
questionnaires were fielded among customers of the luxury motor vehicle dealership. A total of 301
questionnaires were returned and the interrelationships between the constructs were examined using
structural equation modelling. Research findings found that, it was discovered that customers who trust
the dealership may be more committed, and commitment may strengthen the relationship between
customer satisfaction and a favourable behavioural intention towards the dealership.
An exploration of the previous research related to Integrated Marketing Communication Model for
Creating Brand Loyalty to Japanese Cars in Thailand. An information can be classified into 3 dimensions
for creating brand loyalty which were car factors, psychological factor, IMC tool factor from Belch (2004),
Emil (2014), Sophie (2014) Albert (2015), Karol, Hoffman & Karuk (2015), Karol & June (2015), Kotler &
Armstrong, (2016), Kotler & Keller (2016), Pratik, Nitin & Snoop (2017), Estelle (2017), Lourier Sarmento &
Bellego (2017) and the related theories; such as, consumer behaviour theory, attitude theory, and
concepts; including integrated marketing communication concept, customer relationship management
concept, brand loyalty concept, quality concept, country of origin effect concept, price concept, brand
concept and previous researches, specifically for brand loyalty, car factors, psychological factors,
integrated marketing communication tools, the research conceptual framework has been constructed as
displayed in Figure 1
The Components of Variables
This research is the study of the casual effect among 4 latent variables, two of them are
independent variables, and the rest are intervening and dependent variables. As identified in Figure 1, the
independent variables consist of car factors; country of origin, quality, price, and brand reputation.
Psychological factors are; motivation, attitude, and personality. The intervening variable is the integrated
marketing communication tools of public relations, sponsorship, advertising, direct marketing, sales
promotion, exhibitions, personal selling, and CRM. The dependent variable is brand loyalty of
satisfaction, image, repeat purchase, and word-of-mouth.

Figure 1 Research conceptual framework entitles "Integrated Marketing

Communication Model for Creating Brand Loyalty to Japanese Cars in Thailand"
Research Hypotheses
Regarding the literature from many resources in the marketing field such as Belch (2004), Hoffman
& Karuk, (2015), Karol & June (2015), Kotler & Armstrong (2016), Kotler & Keller (2016), Flourier et al
(2017), Estelle (2017) and Pratik & Snoop (2017), these theories, concepts and findings are very relevant
and supported this research hypothesis. The two main research hypotheses were set up from the
integrated of their findings as follow.
Research hypothesis one (H1): There are direct and indirect effects between car factors, integrated
marketing communication tools, and brand loyalty. This hypothesis supported by Belch (2004), Emeil
(2014), Siphiwe (2014), Albert (2015), Karol & June (2015), Estelle (2017) and Prateek, Nitin & Anoop
(2017).
H1a: There are direct effects between car factors and integrated marketing communication tools.
H1b: There are direct effects between car factors and brand loyalty.
H1C: There are indirect effects between car factors and brand loyalty through integrated marketing
communication tools.
Research hypothesis two (H2): There are direct and indirect effects between customer's
psychological factors, integrated marketing communication tools, and brand loyalty. This hypothesis
supported by Emeil (2014), Siphiwe (2014), Karol & June (2015) Shiffman & Kanuk, (2015), Kotler & Keller
(2016), Kotler & Armstrong (2016), Loureiro et al (2017) and Prateek, Nitin & Anoop (2017).
H2a: There are direct effects between customer's psychological factors and integrated marketing
communication tools.
H2b: There are direct effects between customer's psychological factors and brand loyalty.
H2c: There are indirect effects between customer's psychological factors and brand loyalty through
integrated marketing communication tool
Research Design
The research design in the study use quantitative research methodology, the detail of procedures
necessary for obtaining information needed for the research are outlined as population, sample, sampling
method, research tool, data collection, as well as statistical and data analysis outlined below
Quantitative Research
The objective of the quantitative research was to analyse the variables appropriate for generating
loyalty and to find the effective integrated marketing communication model affecting the loyalty of Thai
consumers to Japanese cars in Thailand. The previous chapter introduced the literature related to all latent
and observed variables. In this section, the population and sample, sampling method, research tools and
the process of questionnaire construction, data collection, data collection, and data analysis method are
explained.
Population and Sample
According to the Department of Land Transport, more than 70% of Japanese car sales are in
Bangkok, the survey was undertaken in Bangkok. The population in this study has focusing on the group
of car buyers of top five Japanese brands; Toyota, Isuzu, Honda, Mitsubishi, and Nissan in the year 2017
which were 657,315 car owners (Table 2). These five brands have obtained the total passenger car unit sold
in 2017 as shown in Table 1, in previous section. The purpose for selecting the year above was because the
car buyers have had experiences with the current integrated marketing communication tools, loyalty
building campaign, and latest products. The sample was calculated by proportion to size, to meet the
minimum requirement for the use of structural equation modeling (SEM), in this research which was 20
times of the study variables. The sums of observed and latent variables were 23; then the sample size
must have at least 460 samples, as showed in Table2 (Hair, Black, Babin and Anderson 2010).
Table 2 Population and Simple of Japanese Passenger car Owners in 2017

Research Tools
The questionnaire design consisted of 68 questions, which were divided into five parts
commencing with personal factors, and consequently followed by car factors, customer’ psychological
factors, IMC tools, and brand loyalty. The testing of validity was undertaken by an Item Objective
Congruence (IOC) by three academician experts or determining the content validity, which every item
have validity more than 0.66.
The questionnaire was sent to a test sampling of 30 participants of similar homogeneity to the selected
population. A Cronbach Alpha Coefficient has been tested to determine the overall reliability of 0.95 in
this study.
Data Collection
The data collection was conducted during the period of January 2018- April 2018 at the department
of Land Transport, Bangkok, Thailand. The Systematic simple random sampling was applied for the data
collection. The sampling was done brand by brand with same method while the owners of the car drive
through the line for car checking in every 5 cars. The questionnaire was handed and collected each case
within 40 minutes. The researcher provided one bottle of drinking water to the respondents.
Statistical and Data Analysis
The research was analysed by the descriptive statistics consists of mean average, percentage and
frequency, whereas inferential statistics consisted of confirmatory factor analysis, path analysis and
structural equation modeling.
Conclusion and Discussion
The Discussion and conclusion have been divided in to three parts: 1) results of the factor loading
of car factors, customer’s psychological factors, integrated marketing communication tools, and brand

loyalty 2) Hypotheses testing results and 3) the results of the integrated marketing communication model
for creating brand loyalty to Japanese cars in Thailand.
Part1: Results of the factor loading of car factors, customer’s psychological factors, integrated
marketing communication tools, and brand loyalty
This section displays the Model for Creating Brand Loyalty to Japanese Cars in Thailand, the factor
loading values ranging from the most important 10 the least important factor in regards with the method
of completely standardized solution of the model of the Integrated Marketing Communication Model for
Creating Brand Loyalty to Japanese Cars in Thailand reordering by factor loading showed in figure2.
Figure 2 Factors Loading Estimated Value of Integrated Marketing Communication Model for Creating
Brand Loyalty to Japanese Cars in Thailand. (Sawmong, 2018)
In car factors, highest factor loading is quality with the value of 0.79, follow by brand reputation
with 0.71, country of origin 0.57 and price with 0.56 respectively.
In the customer’s psychological factors Personality has the highest factor loading in with the value
of 0.84, follow by attitude with 0.73, and motivation with 0.67 respectively. The new ranking order from
most important variable to the least important is personality, attitude and motivation.
Integrated marketing communication tools; public relations have the highest factor loading value of 0.87,
follow by personal selling with 0.85, advertising with 0.83, sponsorships with 0.77, direct marketing with
0.74, exhibition and trade show with 0.65, customer relationship management with 0.55, and sales
promotion with 0.50 respectively. The new ranking order from most important variable to the least
important is public relations, personal selling, advertising, sponsorships, direct marketing, exhibition and
trade show, customer relationship management, and sales promotion.
In the brand loyalty, the highest factor loading value is satisfaction with the value of 0.76, follow by word
of mouth with 0.71, repeat purchase with 0.70, and image with 0.62 respectively. The new ranking order
from most important variable to the least important is satisfaction, word of mouth, repeat purchase and
image.
The values of factor loadings for all variables in "Integrated Marketing Communication Model for
Creating Brand Loyalty to Japanese Cars in Thailand " in completely standardized solution method shows
the statistical value ranking in order of importance of all' variables concerned in the constructed model in
relation to each other. The new ranking in order is illustrated in Figure 2

Part2: Hypotheses testing results

This section indicates the analysis of the directions of the direct and indirect effects among the latent
variables of car factors, customer’s psychological factors, integrated marketing communication tools, and
brand loyalty, the conclusion of the hypotheses testing is showed in Table 3 and Table 4
Table 3 Results of the Path Analysis

The conclusion, of the hypotheses testing of the research “Integrated Marketing Communication
Model for Creating Brand Loyalty to Japanese Cars in Thailand”, was that car factors have direct positive
effect on integrated marketing communication tools as well as brand loyalty and have indirect positive
effects on brand loyalty through integrated marketing communication tools. Customer’s psychological
factors do not have direct effects on integrated marketing communication tools do not have indirect
effects on brand loyalty through integrated marketing communication tools; however, there are direct
positive effects on brand loyalty. The conclusion of the hypotheses testing is showed in Table 4.
Table 4 Conclusion of the hypotheses testing

Car factors and Integrated Marketing Communication Tools

The path coefficient shows that there are direct positive effects (DE) between car factors and
integrated marketing communication tools with the value of 0.53 at the significance level of 0.01 The result
implies that when car factors are increased, integrated marketing communication tools should be
implemented to convey the attributes of the car, quality of the brand, reputation of the brand to a greater
number of potential consumers. Quality concept suggested that loyalty can be created if a consumer is
satisfied with the product or service-received. Satisfaction occurs when the product or service performed
their function well in the mind of the consumers by meeting or exceeding their expectation. This notion is
supported by the studies of Belch (2004), Emeil (2014), Siphiwe (2014), Albert (2015), Karol & June (2015),
Estelle (2017) and Prateek, Nitin & Anoop (2017).
Car Factors and Brand Loyalty
The path coefficient demonstrated that there are direct positive effects (DE) between car factors and
brand loyalty of Japanese cars with the value of 0.54 at the significance level of 0.11 The result implies that
when car factors increase, the level of the brand loyalty to Japanese car’s brand will develop positive
attitude toward the brand if the consumer is satisfied with the quality of the product or service as well as
the image they received. The motivating the consumer to refer the brand to others and repurchase the
brand in the future. The notion is supported by the studies of Belch (2004) Albert (2015), Kotler & Keller
(2016), Kotler & Armstrong (2016), Estelle (2017) and Loureiro (2017))
Car Factors, Brand Loyalty, and Integrated Marketing Communication Tools
The path coefficient shows that there are indirect positive effects (IE) between car factors and
brand loyalty through integrated marketing communication tools with the value of 0.11 at the significance
level of 0.01 between the tested variables. This implies that the communication on car factors through
integrated marketing communication tools will result in the increase in level of brand loyalty.
The research result is supported by the studies of Estell 2017 and Loureiro (2017)) and Kotler & Keller
(2016), Kotler & Armstrong (2016) that the decision to buy an automobile comes from the active
information from direct and indirect sources; such as, company’s own advertising or social network. The
information received will create the preference towards a brand and magnify the willingness to purchase
from the brand, if it happens to be on the same track and answers the needs of the potential prospects.
Customer’s Psychological Factors and Integrated Marketing Communication Tools
This research shows that there are no direct effects (DE) between customer’s psychological factors
and integrated marketing communication tools. The finding is in line with Emel (2014), Siphiwe (2014),
Karol & June (2015) Shiffman & Kanuk, (2015), Kotler & Keller (2016), Kotler & Armstrong (2016),
Loureiro (2017) and Prateek, Nitin & Anoop (2017). Those researchers found the major customer’s
psychological factors enticing purchases did not come from marketing communications from the car
companies. Customers are motivated to buy because of the urge to express their life achievement through
materialism, and the Japanese cars brand images can answer their needs. The prestigious images of
Japanese brands are learnt since childhood and through peer pressure in the high societies, rather than
from marketing communications. Personalities are not relevant to purchases decision, utilitarian customer
often purchases Japanese car to fit himself into his social norms
Customer’s Psychological Factors and Brand Loyalty
The path coefficient shows that there are direct positive effects (DE) between customer’s
psychological factors and brand loyalty with the value of 0.32 at the significance level of 0.01. The result
suggests that when the customer’s psychological factors increase, the level of brand loyalty will also be
increased. This finding is concurrent to consumer behavior theory of Schiffman & Kanuk (2010) stated that
in general a buyer prefers to buy a brand that matches his/her personality. A customer is motivated to
become an advocate of a car’s brand, if he/she develops favourable attitude about the brand after having
satisfactory experiences. This finding also supports Kotler & Keller (2016), Kotler & Armstrong (2016) as
they stated that image, satisfaction, repeat purchase and word of mouth are linked to brand loyalty

Customer’s Psychological Factors Integrated Marketing Communication Tools and Brand Loyalty
The path coefficient shows that there are indirect effects (IE) between customer’s psychological
factors IMC tool and brand loyalty with the value of 0.17 at the significance level of 0.11. Between the
tested variables this finding contrasts with Shiffman & Kanuk, (2015), who identified that consumer
behaviour as the behaviour that consumers display in searching for, purchasing, using, evaluating, and
disposing of products, services, and ideas. Kotler & Keller (2016) said that the successful marketers are
who carefully cultivate satisfaction and loyalty. Hence consumer purchases are influenced strongly by
psychology characteristics motivation personality and attitude (Kotler & Armstrong, 2016). The
important question of marketers is how consumers respond to various marketing efforts the company
might use IMC tool such as public relations, sponsorship, advertising, direct marketing, sales promotion,
exhibitions, personal selling, and CRM. This may be because consumer behaviour in the aftermath of
2000 has something to do and marketers should find out why that is.
Part3: Results of the Integrated Marketing Communication Model for Creating Brand Loyalty to
Japanese Cars in Thailand
This part showed the result of the analysis of Goodness of Fit for the Integrated Marketing
Communication Model for Creating Brand Loyalty to Japanese cars in Thailand. The initial scales resulted
in a Chi-Square of 114.91, degrees of freedom of 94, Chi-Square/df = 1.222, P = 0.009, a Goodness of Fit Index
(GFI) of 0.98, Adjusted Goodness of Fit Index (AGFI) of 0.95, and Root Mean Square Residual (RMR) of 0.037
indicating a good fit of model. The Root Mean Square Error of Approximation (RMSEA) of 0.020 and
Critical N (CN) of 532.16 also support this conclusion. A Goodness of Fit Index (GFI) represents the overall
degree of fit that predicted by the proposed model ranging in value from 0 (poor fit) to 10 (perfect fit).
Higher values indicate better fit. The Adjusted Goodness of F it Index (AGFI) is an extension of the GFI that
recommends the acceptance level at the value greater than or equal to 0.90 (Hair, Black, Babin & Anderson
2010). Initial scales for proposed model provide AGF I of 0.95 that is higher than the recommended
acceptance level of 0.90. This statistic shows support that the results of this study fit to the proposed
model. Table 5 shows all the relevant statistical measurement values indicating that the constructed model
fit to the empirical factual data.
According to the analysis of the model which consists of four latent variables of car factors,
customer’s psychological factors, integrated marketing communication tools, and brand loyalty display
results as follows: Car factors consist of four observed variables: country of origin has a factor loading of
0.57; quality has a factor loading of 0.79; price has a factor loading of 0.56; and brand reputation has a
factor loading of 0.71 at the significance level 0.01. The results indicate that country of origin; quality,
price, and brand reputation have positive relationships with car factors in the same direction. Customer’s
psychological factors consist of three observed variables: personality has a factor loading of 0.84 attitude
has a factor loading of 0.73 motivation has a factor loading of 0.67 and at the significance level 0.01. The
results indicate that personality, attitude and motivation have positive relationships with the customer’s
psychological factors in the same direction. Integrated marketing communication tools consist of eight
observed variables: public relations, personal selling, advertising, sponsorships, direct marketing,
exhibition and trade show, CRM, and sale promotion has a factor loading of 0.87, 0.85, 0.83, 0.77, 0.74,
0.65, 0.59, and 0.50 respectively at the significance level 0.01. The results indicate that public relations,
sponsorships, advertising, direct marketing, sales promotions, exhibition and trade show, personal selling,
and customer relationship management have positive relationships with integrated marketing
communication tools in the same direction
Brand loyalty consists of four observed variables: satisfaction, word of mouth, repeat purchase and
image has factor loading 0.76, 0.71, 0.70, and 0.62 respectively at the significance level 0.01. The results
indicate that, the factor loading estimated value shows the direct and indirect effect value of all variables
and hypothesis testing of each latent variable which will test how the empirical data fit with the
constructed model.

Table 5 the relevant statistical measurement values indicating that the constructed model fit to the
empirical factual data
The analysis of the model reveals that car factors have direct positive effects with integrated
marketing communication tools (0.53) as well as brand loyalty (0.54) and have indirect positive effects
with the brand loyalty through integrated marketing communication tools (0.17). The analysis arrives at
the conclusion that the higher level of car factors and integrated marketing communication tools will
result in higher level of brand loyalty. The analysis of the model states that customer’s psychological
factors do not have direct effects with integrated marketing communication tools and do not have indirect
effect with brand loyalty through integrated marketing communication tools but have direct and positive
effects with brand loyalty. The analysis arrives to the conclusion that the higher level of customer’s
psychological factors will result in higher level of brand only as shown in Factor Loading Estimated Value
of Integrated Marketing Communication Model for Creating Brand Loyalty to Japanese Cars in Thailand
in Figure 3.
Figure 3 Integrated Marketing Communication Model for Creating Brand Loyalty to Japanese Cars in
Thailand (Sawmong, 2018)
Conclusion
The important result of Integrated Marketing Communication Model for Creating Brand Loyalty
to Japanese Cars in Thailand found that car factors have direct and indirect effects on integrated
marketing communication tools, and brand loyalty. This integrated marketing communication programs
have been concurrent with Schiffman & Kanuk (2015) Kotler & Keller (2016) definition of consumer
behaviour as the behaviour that consumers display in searching for, purchasing, using, evaluating, and
disposing of products, services, and ideas. The important question of marketers is how consumers
respond to various marketing efforts the company might use IMC tool such as public relations,
sponsorship, advertising, direct marketing, sales promotion, exhibitions, personal selling, and CRM. The
company that really understands how consumers will respond to different quality of product, country of
origin, prices, and brand reputation has a great advantage over its competitors (Belch, 2004). In relation to
brand loyalty in dimension of image satisfaction repeat purchase and word of mouth, the findings are
concurrent with Estelle (2017) that the strength of the car factors are linked to brand loyalty. Automobile
corporations operate in an industry that possesses substantial profit potentials and each customer is worth
more than only the sales price for a car. The Integrated Marketing Communication Tools (IMC) is one of
the best arsenals that have been proven to be effective in creating customer loyalty. Each tool may serve
different strategic purposes which together resulting in establishing and enhancing brand loyalty. On the
other hand, the finding found that there are no direct effects between customer's psychological factors and
integrated marketing communication tools (H2a) and there are no indirect effects between customer’s
psychological factors and brand loyalty through integrated marketing communication tools (H2c). The
findings from this research show Thai customer psychology pays low attention to IMC Tools. The
meaning of this situation can explain that Japanese companies must work harder to create strategy to be
actively involved with motivation, personality and attitude of Thai customer by setting many activities as
stated by Kotler and Armstrong, (2016) and research finding of Siphiwe (2014), Emeil (2014), Albert (2015),
Karol & June (2015), Loureiro et al (2017), Estelle (2017) and Prateek, Nitin & Anoop (2017).
Research limitations and direction further research
In order to extend the understanding of consumer behaviour, a qualitative research to Japanese
car customers concerning integrated marketing communication tools that will affect their psychological
factors resulting in enhancing their brand loyalty is recommended.
The comparison study on government policy concerning import tax rate with new emerging Asian
countries are recommended because it has direct association with the cost structure and pricing policy of
the company. People in the country that have low car import tax rate are free to choose and enjoy the
quality of the car than the one in the country that have high import tax rate. This is one of the barriers for
creating brand loyalty in high-ended car market.
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Burnout, Organizational Commitment and Turnover Intention

Arif Lukman Santoso
Faculty of Economics and Business
Sebelas Maret University, Indonesia
Sahbuddin Abdi Sitompul
The Audit Board of the Republic of Indonesia
Agus Budiatmanto
Faculty of Economics and Business
Sebelas Maret University, Indonesia
Keywords
burnout, organizational commitment, turnover intention
Abstract
The purpose of this study is to examine the effect of burnout and organizational commitment on
turnover intentions. The respondents in this study were auditors of the Audit Board of Republic of Indonesia
(BPK) and The Finance and Development Supervisory Agency (BPKP). This study used convenience
sampling method; the number of samples used in this study amounted to 326 auditors, consisting of 194 BPK
auditors and 132 BPKP auditors. The methods used in data collection were the primary method of data
collection, using questionnaires filled out directly by the survey respondents, while the data processing
methods used was multiple linear regressions analysis. The result showed that burnout had positive effect on
auditor turnover intention and organizational commitment had negative effect on auditor turnover intention.
Corresponding author: Arif Lukman Santoso

Email addresses for corresponding author: ariflukmans@staff.uns.ac.id
First submission received: 30th November 2017
Revised submission received: 1st February 2018
1. Introduction
Auditor is one of the professions that have high levels of job switching (Suwandi and Indriantoro,
1999). Not only auditors who work on Public Accounting Firm, auditors working in government agencies
such as the Audit Board of Indonesia (BPK) and the Financial and Development Supervisory Agency
(BPKP) also have labor turnover intentions. Public Accounting Firms can conduct employee turnover
easily and quickly if there are employees who relocate. Meanwhile, at BPK and BPKP, shifting employee
can be a difficult problem since the status of the auditors in BPK and BPKP are the State Civil Apparatus.
BPK and BPKP cannot directly recruit a replacement for outgoing auditor. Recruitment policy is not the
absolute authority of BPK and BPKP, but it must get approval from the central government through the
Ministry of Administrative Reform. If there has been approval from the Ministry of Administrative
Reform to recruit employees, the time required to perform the selection of employees is also very long.
Not to mention the time of education and training for new employees who have passed the selection to be
auditor.
Every year BPK loses a lot of auditors because there are the auditors who retired, died and
resigned. The number of BPK auditors who resigned is relatively high. The data obtained from BPK
internal human resources information system (sisdm.bpk.go.id), over the last ten years (until February
2016) there were at least 145 BPK auditors who resigned. To replace the retired, died and resigned
auditors, BPK should recruit new auditors. However due to the civil servant recruitment moratorium
policy which was issued by the Central Government, BPK RI could not recruit new auditors. In
Government Performance Reports (LAKIP) BPK RI in 2014, one of the challenges that hinder BPK in
achieving predetermined performance targets is that the demand and expectations of the stakeholders on

BPK assessment continues to rise, but it is not followed by an increase in BPK human resources
significantly due to the civil servant’s recruitment moratorium set by the government.
To prevent the decrease in BPK auditors, the desire of the auditors to switch job should be
minimized. The high rate of employee turnover can be predicted by how much the desire owned by
employees to switch job is. Unlike the factors of the auditors who retired and died that cannot be
prevented and the civil servant recruitment moratorium which cannot be predicted when it would be
repealed by the central government, hence the desire to switch job of the auditors can be predicted and
prevented by the leaders of BPK and BPKP. There are many reasons why the auditors have a desire to
switch job, one of which is the issue of burnout. Burnout is defined as a syndrome of emotional
exhaustion, depersonalization and low sense of self accomplishment that leads to a decrease in
effectiveness of the work (Maslach and Jackson, 1981). A research conducted by Herda (2012) states that
the demands of the job can create burnout on auditors and a high level of turnover intention.
Another factor that can influence the auditors to have a desire to switch job is the organizational
commitment. Moynihan and Pandey (2007) argue that organizational commitment is a variable that is
often tested in the study of turnover intention because the organization's commitment signifies a real
relationship between the employee and the company. In addition, Meyer and Allen (1991) states that an
employee who has a strong commitment is a person who has the least desire to switch job.
2. Literature review and hypothesis development
2.1 Burnout
Burnout is a syndrome of emotional exhaustion and cynicism that often occurs among people who
work (Maslach and Jackson, 1981). Maslach, Leiter and Schaufeli (2008) states that burnout has three main
dimensions in response to interpersonal stress namely: (1) Emotional Fatigue (Emotional Exhaution),
which is a major aspect of the syndrome of burnout, is an increase in emotional exhaustion which leads to
a sense of overextend and physical and emotional exhaustion. (2) Depersonalization is a representation of
the interpersonal context of burnout. Depersonalization leads to negative feelings toward others, do not
have the feeling/ lack of respect towards others or too often provide a response to all aspects of the work.
(3) Decline in Work Performance (Lack of accomplishment), is a representation of self-evaluation
dimension of burnout. This dimension gives the tendency to evaluate themselves negatively. The decline
in job performance leads to feelings of incompetent and achievement and productivity decline in work.
According to Pines and Aronson (1988), the cause of burnout are among others: (1) an excessive
workload, (2) lack of feedback from superiors, (3) a bad relationship with peers and superiors and (4) no
opportunity to develop themselves. The symptoms of someone suffering from burnout according to Pines
and Aronson (1988) are as follows: (1) feel very tired and lethargic, (2) a decrease in enthusiasm both
within and outside the work environment, (3) the increasing reliance on food and medicines containing
excessive alcohol and compulsive, (4) Limiting oneself from family and friends, (5) The tendency to dream
about an escape to eliminate the unpleasant situation and fantasize about a place that can give you
satisfaction and peace. (6) The increasing impatience, (7) Deteriorating health.
According to Maslach and Jackson (1981), burnout has serious potential implications for staff,
clients and institutions in which they interact. The research on this syndrome leads to a decrease in quality
of care or services provided by the staff. This can be a factor causing employee turnover, absenteeism, and
low morale. Further it is said that burnout seems to be correlated with various indices associated with
personal distress, including physical fatigue, insomnia, increased use of alcohol and drugs, marital and
family problems. The same thing was concluded by Burke (1987) on the impact that can be caused by
burnout among others, large symptoms of psychosomatic, excessive negative feelings, decreasing job
satisfaction, great conflicts of work and non-work, high desire to switch job, less healthy life style (e.g.
alcohol, caffeine, and rarely exercise) and symptoms of deteriorating health (ego, high blood pressure,
absence due to illness, on medication).
2.2 Organizational Commitment
Porter, Steers and Boulian (1974) defines organizational commitment as an individual identification
force against one's involvement in a particular organization, which is generally characterized by at least

three factors: (1) a strong belief in accepting goals and values of the organization, (2) the desire to exert
every effort for the sake of the organization; (3) a strong desire to maintain the organization membership.
Meyer and Allen (1991) divide the organizational commitment into 3 types: (1) Affective
Commitment, an organizational commitment that arises because of the emotional attachment, desire of
employees to engage and identify themselves with the company because of the value suitability in the
company. In this case the employee resides in an organization because of his own will. (2) Continuance
commitment, a commitment to organization based on considerations about what must be sacrificed when
one is leaving the organization or their fears of losing outstanding benefits in the company where he
works. In this case the employee decides to stay in the organization because he considers it as a
fulfillment. (3) Normative Commitment, an organizational commitment in the form of employee beliefs
about his responsibilities to the company. This commitment arises because the employees feel obligated to
stay at the company. The obligation to be loyal to the company making the employees chose to remain in
the company.
2.3 Switching Desire
The desire to switch job is the intention of employees to stop working in the company (Zeffane,
1994). Robbins and Judge (2015) explain that the desire to switch job is a voluntary or involuntary
withdrawal from an organization. Voluntary turnover is an employee's decision to leave the organization
voluntarily caused by a factor of how interesting the current work is, and the availability of other
employment alternatives. Conversely, involuntary turnover or dismissal illustrates the employer's
decision to terminate the employment relationship and is uncontrollable for employees who experience it.
Turnover intention brings a lot of negative effects for the company. Newstrom (2013) explains that
excessive employee turnover can have some negative effects on the organization, including: (1) the rising
employee termination costs in the form of interview cost of employees who want to quit and employee
severance payments, (2) the increase in training costs for new employees in the form of skills development
in both formal and informal, (3) the increased costs incurred as a result of vacancies in the organization, in
the form of temporary assistance and overtime costs. The temporary vacancy can also result in
productivity lost and disruption of service, (4) the rising costs for employees replacement, in the form of
fees for recruiting, interviewing and placement of new employees, (5) the existence of a moral effect, for
the employees left, could be loss of companionship and for the organization may be changes in disrupted
work patterns until a replacement for the leaving employee is found. Another negative impact on the
organization if many employees resigned is that the organization's reputation can be damaged in society.
3. Hypothesis development
3.1 Influence of burnout on turnover intentions
The results of the study of Lin et al. (2013) states that burnout is associated with various forms of
withdrawal from work such as absenteeism, desire to leave the job and then switch job. Goodman and
Boss (2012) states that employees who changed jobs had significantly higher burnout dimension scores
than that of the employees who remain in the organization. Based on the above presentation, burnout
effect on turnover intentions can be formulated into the following hypothesis:
H1: Burnout has a positive effect on turnover intentions
3.2 The influence of organizational commitment on turnover intentions
The result of Hollingworth and Valentine (2013) research states that organizational commitment
and turnover intentions have a strong negative relationship. Schwepker, Jr. (1999) states that employees
with a lower organizational commitment have a greater turnover intention. Based on the above
presentation, the effect of organizational commitment on turnover intentions can be formulated into the
following hypothesis:
H2: Organizational commitment negatively affects turnover intentions
3.3. Research Model
Based on the formulation of the hypotheses that have been outlined, then the model of this study is as
follows:

Independent Variable Dependent Variable
Burnout H1 (+)
Organizational Commitment H2 (-)

Turnover intention
Control Variables
Gender
Age
Marital Status
Years of service
Past Education
Live far apart from family
4. Methods
4.1 Collecting Data Method
In this study, primary data were used as the data source. The method used in the collection of
primary data in this study was survey method. The data were obtained by distributing questionnaires
directly to the respondents, the BPK and BPKP auditors. The data sources in this research were the score
of each variable indicator obtained from questionnaires filled out by the BPK and BPKP auditors.
The population and the sample were the auditors who worked at BPK and BPKP both who served
at headquarters and in offices. The minimum number of samples to be examined for each group of
respondents was 30 people. The samples in this study were selected by using convenience sampling
technique.
4.2 Operational Definition and Measurement of Variables
4.2.1 Independent Variable
Independent variables used in this study were:
4.2.1.1 Burnout
Burnout is a syndrome of emotional exhaustion and cynicism that often occurs among people
who work (Maslach and Jackson, 1981). Burnout was measured using the Maslach Burnout Inventory
(MBI) developed by Maslach (1981). MBI used in this study consists of 22 questions consisting of 14
positive questions and 8 negative questions. Questions with positive value are contained in Question
1,2,3,5,6,8,10,11,13,14,15,16,20 and 22 while the negative questions are contained in questions number
4,7,9,12, 17,18,19 and 21.
4.2.1.2 Organizational Commitment
Organizational commitment is a psychological condition that binds employees to an organization
so as to reduce the desire to move (Meyer and Allen, 1991). Organizational commitment Instruments
consists of seven items of questions with 7 Likert points scale adopted from Utami and Bonussyeani
(2009). Respondents were asked to choose the alternative answers on a scale of 1 (strongly disagree) to 7
(strongly agree at all). From the seven of these questions, there are three positive questions, they are
questions number 3.5 and 7, and there are four negative questions, namely the questions number 1,2,4 and
6.

4.2.2 Dependent Variable

The dependent variable in this research is the turnover intention. The turnover intention is the
intention of employees to stop working in the company (Zeffane, 1994). The turnover intention was
measured with the instrument of Utami and Bonussyeani (2009), which consists of eleven items of
questions with a 7-point Likert scale. Respondents were asked to choose the alternative answers on a scale
of 1 (strongly disagree) to 7(strongly agree at all). From eleven of these questions, there is one negative
question, namely question number 9.
4.2.3 Control Variables
Control variables in this study were gender, age, marital status, past education, years of service
and live far away from the family.
4.3 Data Analysis Method
The technique of the data testing in this research was multiple linear regression analysis, with the
form of the following equation:
KB = a + bBO + bKO + bJK + bU + bSP + bPT + bMK + bTBK + e
Description:
KB : Turnover intention JK : Gender
U : Age SP : Marital Status
PT : Last Education MK : Years of service
TBK : Live with family a : Constant
BO : Burnout KO : Organizational Commitment
e : confounding variables (Error
Before doing the regression analysis, data quality testing (validity and reliability), data normality test and
classical assumption were conducted first.
5. Results and discussion
5.1 Results of Data Collection
The research data were collected through questionnaires directly distributed by visiting the
respondents and also through an online questionnaire that were distributed directly to the respondents
via whatsapp, also through whatsapp group, facebook or e-mail. The questionnaire distribution and
retrieval were conducted for approximately 2.5 months that from February 1, 2016 until April 15, 2016.
The complete respondents' data can be seen in Table 5.1
Table 5.1-Questionnaires Description
Respondent’s Returned Damaged Used Usable Data (%)
Work unit Questionnaires Questionnaires Questionnaires
BPK 194 0 194 100
BPKP 132 4 128 97
Total 326 4 322 98
Source: Processed Primary Data
5.2 Descriptive statistics
The description of the variables is shown in Table 5.2 as follows:
Table 5.2-Descriptive statistics
N Minimum Maximum Mean Deviation Std
Burnout 322 1,00 4,05 2,540 0,419
Organizational 322 2,14 7,00 4,786 0,824
Commitment
Turnover Intention 322 1,09 6,09 3,059 0.840
5.3 Hypothesis testing
The technique for testing the hypothesis in this study is multiple linear regression analysis. The
data used in the regression analysis has passed data quality tests both the validity test and reliability test.
Regression analysis in this study has met the normality test and was free from classical assumption of
multicollinearity, autocorrelation and heteroscedasticity test. The results of regression testing are shown
in Table 5.3 below:
Table 5.3-Multiple Linear Regression Testing Results
Sample Model B Sig.
BPK and BPKP Constant 3,953 0.000
U 7.347 0,996
JK -0,114 0,164
SP -0,020 0,811
PT 0,096 0,106
MK 0,000 0,985
TBK -0,198 0,016*
BO 0,531 0,000**
KO -0,476 0,000**
Adj. R2 0,437
F Value 32,135 0,000**
BPK Constant 2.897 0,000
U 0,013 0,410
JK -0,113 0,227
SP -0,013 0,904
PT 0,196 0,011*
MK -0,010 0,536
TBK -0,166 0,089
BO 0,632 0,000**
KO -0,431 0,000**
Adj. R2 0,430
F Value 19,235 0,000**
BPKP Constant 5,290 0,000
U -0,025 0,542
JK -0,005 0,977
SP -0,007 0,960
PT -0,009 0,948
MK 0,028 0,449
TBK -0,266 0,088
BO 0,389 0,018*
KO -0,534 0,000**
Adj. R2 0,437
F Value 13,317 0,000**
Information: **= significant at the 1%, *= significant at the 5%
For the combined sample of the BPK and BPKP auditors, Table 5 shows that the adjusted R-square
is 0.437. This shows that the turnover intention of the BPK and BPKP auditors can be explained by
burnout variable and organizational commitment amounted to 43.7%, while the remaining 46.3% is
explained by other variables outside the equation model in this study. Simultaneous test results can be
seen from the F value of 32.135 with a probability value of 0.000. The probability test value which is less
than 5% indicates that the research model is fit. For partial test, burnout had a significant positive
influence on turnover intentions, while the organizational commitment and living far apart from the
family has a significant negative impact on turnover intentions. It can be seen from the probability values
of the variables which are less than 5%.
For the BPK samples, Table 5.3 shows that the adjusted R-square is 0.430. This shows that the
turnover intention of the BPK and BPKP auditors can be explained by burnout variable and
organizational commitment by 43%, while the remaining 47% is explained by other variables outside the
equation model in this study. Simultaneous test results can be seen from the F value of 19.235 with a
probability value of 0.000. The probability test value which is less than 5% indicates that the research
model is fit. For partial test, burnout and last education have a significant positive influence on turnover
intentions, while the organizational commitment has a negative significant impact on turnover intentions.
For the BPKP samples, Table 5.3 shows that the adjusted R-square is 0.437. This shows that the
turnover intention of the BPK and BPKP auditors can be explained by burnout and organizational
commitment by 43.7%, while the remaining 46.3% is explained by other variables outside the equation
model in this study. Simultaneous test results can be seen from the F value of 13.317 with a probability
value of 0.000. The probability test value is less than 5% indicates that the research model is fit. For partial
test, burnout has a significant positive influence on turnover intentions, while the organizations
commitment has a significant negative impact on turnover intentions.
5.4 Discussion
Based on the results of statistical tests that have been described previously, further discussion of each of
these hypotheses is described in more detail as follows:
5.4.1 The influence of burnout on turnover intentions
Based on the multiple regression test model, it is obtained that in this study, burnout has a
significance level below 5% both in the combined samples of the BPK and BPKP auditors and in the BPK
or BPKP auditor samples only. This means that the first hypothesis is accepted. Burnout has a positive
effect on turnover intentions, either on the BPK or BPKP auditors.
This study is consistent with the results of a research conducted by Herda (2012) which shows
that burnout can produce a great desire to switch job for the auditors. In addition, a research by Mansor
(2012) which shows that burnout has a significant impact on the auditor's turnover intentions.
5.4.1 The influence of organizational commitment on turnover intentions
Based on the regression test model result in this study, the organizational commitment has a level
of significance below 5% both on the combined samples of the BPK and BPKP auditors and the BPK or
BPKP auditor samples only. This means that the second hypothesis is accepted. Organizational
commitment negatively affects the auditors’ desire to switch job, both on the BPK and BPKP auditors.
This study is consistent with the results of a research conducted by Hollingworth and Valentine (2013)
and by Sow (2015), each of which shows that organizational commitment has negative effect on turnover
intentions.
6. Conclusions and limitations
This study examined the effect of burnout and organizational commitment on turnover intentions
of auditors. The findings of this research show that Burnout has positive effect on turnover intentions.
This research also finds that organizational commitment has negative effect on turnover intentions.
The limitation of this study is only using burnout and organizational commitment variables to predict
turnover intention behavior. While there are other variables that may affect the auditors’ intentions to
switch job like job satisfaction, work conflict, role ambiguity, leadership behaviors, organization culture,
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intention.
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The effect of good corporate governance on financial

performance and net working capital turnover as a mediation
variable: evidence from Indonesia Stock Exchange (IDX)
Rico Wijaya. Z
Abdul Rohman
Zulaikha
Diponegoro University, Indonesia
Keywords
Corporate Governance, financial performance, Institutional Share Ownership, Net Working Capital
Turnover, Return on Equity, Indonesia Stock Exchange
Abstract
The purpose of this study is to test empirically and analyze the relationship of good corporate
governance principles in proxies with total institutional shareholdings (INSTITUSI), number of
commissioners (KOMISARIS), number of joint meetings of board of commissioners (RAPAT), and number of
company committees (KOMITE) against Return on equity (ROE) and analyze the role of mediating the
concept of net working capital turnover (NWCT). This research was conducted in Indonesia Stock Exchange
period (2010-2014) at manufacturing companies. The calculation of total samples obtained is 185 samples of
company data (for 5 years) in the manufacturing period (2010-2014). After evaluating the outlier data, there
are seventeen (17) outlier data issued based on outlier evaluation, the number of samples from 185 to 168
data.
In general, there are three main results of the study. First, the results show that INSTITUSI, RAPAT,
and KOMITE have a significant positive effect on NWCT; only KOMISARIS variable is not proven. Second,
based on the result of research, INSTITUSI, KOMITE and NWCT variables have a significant positive effect
on ROE, while RAPAT and KOMISARIS are not proven. Thirdly, based on the result of mediation test by
using Sobel test result, only NWCT is proven to mediate RAPAT relation to ROE, while in the other
variables, mediations are not proven.
Corresponding author: Rico Wijaya. Z

Email addresses for corresponding author: ricowijaya1981@yahoo.com
First submission received: 22nd October 2017
Revised submission received: 19th January 2018
1. Introduction
Financial performance is an analysis conducted to see the extent to which a company has
implemented and use the rules of financial implementation properly and correctly. Financial performance
can be analyzed with financial ratios. Horne and Wachowicz (2012) stated that the financial ratios and
financial performance of companies have interrelated relationships, where to assess the condition and
financial performance of the company can be used ratio which is the ratio of the numbers contained in the
accounts of financial statements.
Implementation of good corporate governance in Indonesia is still relatively weak, it can be seen
from the results of a survey on the implementation of good corporate governance in the Asian region
conducted by institutions such as the ACGA (Asian Corporate Governance Association) and CLSA
(Credit Lyonnais Securities Asia). Asian Corporate Governance Association (ACGA) is a non-profit,
independent membership organization dedicated to working with investors, corporations and regulators
in implementing effective corporate governance practices throughout Asia. Survey results from 2010 to
2014 can be seen in Table 1. below:
Tabel 1

Scores Implementation of Corporate Governance in Asian Countries Period of 2010-2014

Year
No Country 2010 2012 2014
1 Singapura 67 69 64
2 Hongkong 65 66 65
3 Jepang 57 55 60
4 Thailand 55 58 58
5 Malaysia 52 55 58
6 Taiwan 55 53 56
7 India 48 51 54
8 Korea 45 49 49
9 China 49 45 45
10 Filipina 37 41 40
11 Indonesia 40 37 39
Based on the results of CLSA and ACGA surveys, it can be concluded that Indonesia has the
lowest corporate governance score compared to other Asian countries. The company's financial
performance cannot be separated from the implementation of good corporate governance. In this era of
global competition, where the boundaries of the country no longer become a barrier to compete, only
companies that implement good corporate governance (GCG) are able to win the competition. Good
corporate governance is a supervisory activity monitoring conducted by the company from the aspect
legal, operational, cultural, financial and others Going Concern aims at the company (Zarkasyi,
2008). Implementation of working capital is very important in the company. The availability of working
capital immediately applicable to operations, depending on the type or nature of current assets, such as
cash, accounts receivable and inventories. Working capital must be sufficient in number, in the sense, to
be able to finance the expenses or operations of the company every day. Because, with sufficient working
capital will benefit the company operating economically and efficiently, and not experiencing financial
difficulties (Brigham and Houston, 2006).
In relation to the implementation of working capital management, the company's leaders must
also maintain that the amount of working capital is appropriate, not too large and not too small. Working
capital that is too large or too small will have a negative impact for the company. To that end, the
company as a profit-oriented organization requires the efficiency of working capital to be able to improve
the company's financial performance (Sartono, 2010). The success of the concept of good corporate
governance is not only based on external and internal factors. The most strategic aspect of supporting
GCG implementation effectively is the quality, skill, credibility, and integrity of the various parties that
drive the company. Implementation of the principles and aspects of good corporate governance should
not be ignored, because indirectly it can be a strength and strategy in running the company in accordance
with company goals.
The design of this study has differences in the development of a working capital management
research model, as measured in the perspective of net working capital turnover, in which the ratio of
turnover between net working capital to the operating cash flow of the company. This research model is
developed from the previous research model which is examined by Afrifa (2016). The result of his
research shows that decision making in company liquidity is not only seen from the side of working
capital, but it must also be seen from the side of cash flow, in particular, cash flow from company’s
operational activities, viewed from the ability to generate cash from the company's operational activities.
Instead, when the company decides to raise capital through corporate debt, the two components must be
considered first.
In the previous studies, almost all of the working capital management variables are represented by
a cash conversion cycle or using net working capital. In contrast to previous research, this study design
uses a net working capital turnover, where the net working capital turnover is a comparative rotation
between net working capital to the company's operating cash flow. It is expected that the use of net
working capital turnover can be one of the benchmarks in corporate decision making, in particular, about

the company's liquidity. Net working capital turnover in this research design is as a mediation variable
between the implementation of good corporate governance to the financial performance of the company.
2. Literature Review and Hypotheses Development
2.1. Institutional Share Ownership (INSTITUSI) relationship with NWCT
An organization is inseparable from the interests of the owner of the company. In a public company
there is a structure of company ownership, the ownership structure is a proportion of ownership of shares
owned by the manager of the company (managerial ownership), the institution (institutional ownership),
the individual (individual ownership), the public or society (public ownership), and the government
(government ownership). One that has an important role in the company is institutional ownership.
Institutional ownership is the proportion of shares held by the institution at the end of the year as
measured in percentage (Listyani, 2003).
Research conducted by Aghajari et al. (2015) also examined the impact of good corporate
governance represented by the tenure of CEO, CEO double positions, and institutional ownership, which
have an influence on working capital management, which is represented by a cash conversion cycle. The
results show that institutional ownership has a positive effect on the cash conversion cycle. Supervision by
institutional firms can result in effective working capital policies (Jamalinesari and Soheil, 2015). Based on
previous research, the first hypothesis is as follows:
H1: Institutional shareholdings (INSTITUSI) have a positive effect on net working capital turnover
(NWCT)
2.2. Number of Commissioners (KOMISARIS) relationship with NWCT
The management of a limited liability company in Indonesia, there are two subsidiaries (two-board
system), namely board of commissioners and board of directors who have clear authority and
responsibility in accordance with their respective functions as mandated in the articles of association and
fiduciary responsibility. Board of commissioners is basically a party who perform full supervision in the
management of the company in order to achieve company goals (Sutedi, 2012). The essence of systematic
good corporate governance is the creation of an effective check and balance mechanism within the
company.
Research conducted by Kajananthan and Achchuthan (2013) on the application of corporate
governance to management of working capital management showed that there was a positive influence
between corporate governance in proxy with the number of boards of commissioners, share ownership
structure owned by commissioners, number of board of commissioners meeting to cash conversion cycle.
Based on previous research, the second hypothesis is formulated as follows:
H2: The number of influential corporate commissioners (KOMISARIS) is positive against net working
capital turnover (NWCT).
2.3. Number of Joint Meetings of Board of Commissioners (RAPAT) relationship with NWCT
Meeting activities conducted by the board of commissioners are very important for the company.
Board of Commissioners' meetings are not merely seen as meeting the resolution of the policies of the
board of directors, but it is really a decision-making meeting for the interests of the company. The joint
meetings conducted by the board of commissioners are coordination activities, as well as accessing
information about the company (Daniri, 2014). Good communication can support the implementation of
good corporate governance. The implementation of good governance is reflected in the frequent meetings
of joint companies in discussing the strategic policy of the company (Hanggraeni, 2015).
Previous research conducted by Torea et al. (2016) showed that the effectiveness of the board of
commissioners of the company through the size of the board of commissioners, the activities of the audit
committee, board of commissioner meeting activities will produce optimal policies, especially about the
company's operations so as to improve the company's performance. Based on the results of previous
research, the third hypothesis is formulated as follows:
H3: The number of joint meetings of the board of commissioners (RAPAT) has a positive effect on net
working capital turnover (NWCT).

2.4. Number of Company Committees (KOMITE) relationship with NWCT

Board of commissioners in performing their duties is assisted by committees within the company.
At glance, the company committee is like creating multiple organs within the company. However, in the
view of investors and creditors, the existence of the committee actually has the potential to make
corporate governance more effective. Company committees are required to support the work of the board
of commissioners. Therefore, it is not surprising that the Indonesia Stock Exchange requires that listed
companies have at least an audit committee, and in accordance with the needs of the company (Daniri,
2014).
The Kamau and Basweti’s (2013) study aims to examine the relationships of corporate governance
and the efficiency of working capital management. Their research proves that there is no statistically
significant relationship to corporate governance (number of board meetings, number of board size,
number of audit committee members, CEO's term, number of remuneration committee members) to the
cash conversion cycle. Gill et al. (2015) undertook research to analyze the impact of independent
commissioners, the number of boards of commissioners, multiple CEOs, CEO tenure, number of audit
committees to the cash conversion cycle. The result states that the number of boards of commissioners, the
term of CEO, the number of audit committee members influence the cash conversion cycle. Based on
previous research, the fourth hypothesis is formulated as follows:
H4: The number of corporate committees (KOMITE) has a positive effect on net working capital turnover.
2.5. Institutional Share Ownership (INSTITUSI)relationship with ROE
The emergence of issues regarding the weakness of corporate governance is also caused by the
separation between ownership and control of the company. One of the most important and controversial
issues regarding corporate governance is the share ownership structure associated with improving
corporate performance. The likelihood that a company is in a position of financial pressure is also heavily
influenced by its ownership structure. The ownership structure explains the commitment of the owner to
save the company (Wardhani, 2006). The agency relationship occurs when one or more individuals
referred to as a principal hire another individual or organization, called an agent, to perform a number of
services and delegate authority to make decisions on the agent (Brigham and Houston, 2006).
Research conducted by Navissi and Naiker (2006) showed that institutional ownership positively
affects firm value. Shleifer and Vishny (1986) examined the institutional ownership structure that is
divided into several types, namely: small, medium, and large investors to the value of the company. The
result is that institutional ownership of large investors will have a positive effect on market value, which
represents the market to book value of the firm because it has strong oversight and good reputation.
Based on previous research, the fifth hypothesis is formulated as follows:
H5: The number of institutional shares (INSTITUSI) has a positive effect on return on equity
2.6. Number of Commissioners (KOMISARIS) relationship with ROE
Board of commissioners is an organ that has duty to conduct supervision in general and in
particular, in accordance with the articles of association, and give advice to the directors. The Board of
Commissioners oversees the board of directors in conducting the company's activities and provides
suggestion and advice to the directors in the policies issued by the directors (Zarkasyi, 2008). The
implementation of good corporate governance is reflected in the company's financial statements, where all
the policies and decisions of financial companies will be reflected in the financial statements. Based on the
concept of finance, the financial statements are needed to measure the results of business and
development from time to time and to know the extent to which the company achieved the goal. Analysis
of financial performance so far should be done when the company will take a very important and
coordinated decision in all involved and responsible in the company (Hery, 2015).
Hassan and Halbouni (2013) examined the role of good corporate governance. The results showed
that corporate governance disclosures, multiple CEOs, the number of boards of commissioners had a
positive effect on ROE. Coordination of direction directed by board of commissioner proved being able to
improve financial performance (Belkhir, 2009). Abor and Biekpe (2007) conducted research on good
corporate governance. The result of their research is that the number of commissioners, commissioner

composition, management ability, CEO managerial position, managerial ownership, family ownership
and foreign ownership has positive effect on return on assets, while commissioner ability negatively
affects return on assets. Based on the previous research, the sixth hypothesis is formulated as follows:
H6: The number of boards of commissioners (KOMISARIS) has a positive effect on return on equity.
2.7. Number of Joint Meetings of Board of Commissioners (RAPAT) relationship with ROE
A company according to Hanggraeni (2015) may be described as two separate parts of its duties,
first, a board of directors and a management team consisting of managers and employees, and the second
shareholder consisting of a general meeting of shareholders and board of commissioners tasked with
overseeing the performance of the board of directors. The two parts essentially assign value to the
company. The creation of effective value in the company, one of them, lies in good communication
between the two parts, the manager of the company and the owner of the company. Effective
communication will be reflected in the results of policies and decisions that result in the company.
Research conducted by Arora and Sharma (2016) examined the role of good corporate governance
in India. The results show that the number of board meetings has a positive effect on ROA, and the
number of board of commissioners has a positive effect on Tobin's Q, while other variables have a
negative effect. Implementation of good corporate in India is less proven to improve the company's
financial performance. Brick and Chidambaran (2010) examined the role of board of commissioners'
meetings and the role of committees within the company on financial performance. The results of the
board of commissioners meeting represented by meetings of commissioners, shareholders meetings, joint
meetings between commissioners and shareholders proved to affect the financial performance of
companies represented by Tobin's Q. Based on the previous research, the seventh is hypothesis
formulated as follows:
H7: The number of joint meetings of the board of commissioners (RAPAT) has a positive effect on return
on equity.
2.8. Number of Company Committees (KOMITE)relationship with ROE
Given the many duties of the board of commissioners in conducting supervisory duties within the
company, the board of commissioners is assisted by the board of committees. In general, the company
committee board is responsible for assisting and providing input to the board of commissioners in
formulating company policy. Principle in performing its duties, the board of commissioners may form a
committee. The proposals of the committee are submitted to the board of commissioners for consideration
in decision-making. For a company whose shares are listed on the stock exchange must have at least a
committee, at least an audit committee. In general, there are a number of committees owned by companies
such as audit committee, nomination and remuneration committee, risk policy committee, corporate
governance policy committee, basically company committee formed according to company requirement
(Zarkasyi, 2008).
Research conducted by Akbar et al. (2016) examined the relationship between corporate
governance and corporate performance. In the UK, the result is the role of the board of commissioners'
indices and the role of the committee board influence the financial performance as measured by Tobin's Q
and return on assets. Gupta and Sharma (2014) conducted research by comparing good corporate
governance in India and Korea. The result is the board of commissioner structure, the role of corporate
committee, and information disclosure have a positive effect on return on assets and return on equity in
India and in South Korea. Based on previous research, the eighth hypothesis is formulated as follows:
H8: The number of corporate committees (KOMITE) has a positive effect on return on equity.
2.9. Net working capital turnover (NWCT) relationship withROE
Working capital management activities have an interest in investment decisions on current assets
and current liabilities, especially regarding their use in risk analysis. Working capital is required by the
company to finance the company's operational activities. There are two terms of working capital, the first
of which is gross working capital, which is the total of current assets, while the notion of net working
capital is the surplus of current assets over current liabilities. Effective working capital management
becomes crucial for long-term corporate growth (Sartono, 2010).
Effectiveness in working capital management within the company is expected to impact on

improving the company's financial performance. Vahid et al. (2012) examined the working capital
management relationship represented by the average collection period, inventory turnover in days, the
average payment period, the cash conversion cycle, and the net trade cycle on the profitability of the firm
represented by net operating profitability. As a result, only the cash conversion cycle has a positive effect
on net operating profitability, while other variables negatively affect net operating profitability. Research
conducted by Yazdanfar and Ohman (2014) examined the relationship of working capital management to
the profitability of firms in the SME industry in Sweden. The results provide empirical evidence that the
cash conversion cycle (CCC) significantly affects the profitability represented by return on assets. Based
on previous research, the ninth hypothesis is formulated as follows:
H9: Net working capital turnover (NWCT) has a positive effect on return on equity
3. Research Design
3.1. Population and Sample
The population in this study is all manufacturing companies listed in the Indonesia Stock
Exchange period 2010-2014. The sampling technique used in this study is purposive sampling, i.e. the
ways of sampling using criteria that have been established in accordance with the purpose of research
(Sekaran, 2006). The criteria of purposive sampling in this research are as follows: (1) Companies that are
positive on the company's cash flow especially cash flow operations during the years 2010-2014 in a row;
(2) Company data information taken is a company that has positive value, related to research data about
current assets, current liabilities, net working capital, operating cash flow, return on equity. The
calculation of total samples obtained is 185 samples of company data (for 5 years) in the manufacturing
period 2010-2014, where there are 37 companies each year in accordance with the study criteria.
Technique in analyzing data in this study uses Analysis of Moment Structure (AMOS) version 21.
3.2. Operational Variables
Based on the operational definition of the variable, in this study consists of several variables:
independent variable, dependent variable and mediation variable. The operational definition of the
variables is presented in Table 2 below
Table 2: Definitions of Operational Variables
Variables Measuring Tools
Institutional Share Ownership (INSTITUSI) variables
The measurement of institutional stock (INSTITUSI)
INSTIRUSI = Number of institutional shares X100%
Total shares of the company
Independent Number of Commissioners (KOMISARIS) variables
Variables Measured by the large number of members of the board of commissioners owned by the
company in managing the company.
Number of Joint Meetings of Board of Commissioners (RAPAT) variables
The joint meeting is measured by the number of joint meetings of the board of
commissioners and the board of directors in managing the company conducted within
one year.
Number of Company Committees (KOMITE) variables
Company committees are measured by the large number of committee councils owned by
the company.
Mediation Net Working Capital Turnover (NWCT) variables
Variables The formula in Net Working Capital Turnover (NWCT)
NWCT = Net Working Capital
Cash Flows From Operating Activities
Net working capital turnover is measured in units of time
Net working capital = Current assets - Current liabilities
Where :
Current assets = The amount of assets owned by the company can be changed in cash
within a short period of time.

Current Liabilities = Liabilities of the Company to be repaid in full

Operating cash flow (operational cash flow)
Cash Flow Operational =Number Cash Flows From Operating Activities within one year
Return On Equity (ROE) variables
The formula used to calculate return on equity (ROE) is:
Dependent ROE = EAT X 100%
Variables Equity
Return on equity (ROE) measured by the percentage unit where :
ROE= The ability of companies to generate profits with their own capital
EAT = Earnings after tax
Equity = Own capital owned by the company
4. Data Analysis
4.1. Normality Test Results
After evaluating the outlier data, there are seventeen (17) outlier data issued based on outlier evaluation.
The data issued as many as seventeen (17) are the p1 and p2 values in the observation farthest from the
centroid (Mahalanobis distance) <0.05. The data can be concluded to have a normal distribution if the
critical ratio (CR) value of skewness value is below absolute value 2.58, and if there is abnormal data, the
data can be disposed by using outlier evaluation (Ghozali, 2013). The number of samples from 185 to 168.
The result of normality test after outlier is discarded as Table 3 below.
Table 3: Normality test after Revision
Variable min max skew c.r. kurtosis c.r.
Komite 1,000 5,000 1,741 9,215 2,113 5,590
Rapat 1,000 6,000 0,227 1,203 -1,018 -2,693
Komisaris 2,000 12,000 0,793 4,195 0,216 0,570
Institusi 32,220 99,000 0,235 1,242 -1,018 -2,692
NWCT 0,140 5,650 0,399 2,111 0,157 0,414
ROE 0,650 49,530 0,551 2,918 0,080 0,212
Multivariate 0,935 0,618
Normality test results from Table 3 above shows the critical ratio level of 0.618 which can be interpreted
that the overall normal distribution occurs.
4.2. Test Result Model estimation
Estimates can be made using the AMOS program available with the default model used is
maximum likehood. The results of AMOS processing can be seen in Figure 1 below:
Figure 1 Estimation
Goodness-of-Fit

In general, based on Figure 1 above, it can be concluded that the role of good corporate
governance, represented by the number of institutional shareholdings, the number of members of the
board of commissioners, the number of joint meetings of the board of commissioners, the number of
corporate committees have influence on net working capital turnover of 22%, while 78% is influenced by
other variables. In addition, the variable number of institutional share ownership, the number of members
of the board of commissioners, the number of joint meetings of the board of commissioners, the number of
corporate committees, and net working capital turnover influence return on equity of 18%, while 82% is
influenced by other variables.
4.3. Analysis of path coefficients (path coefficients)
The analysis of path coefficients was analyzed by the significance of regression weight of the
model as presented in Table 4. Below
Table 4: Analysis of the Path Coefficients
Hypothesis Causality Relationship Koef. β Koef. β S.E. C.R. P Remark
Unstand
H1 NWCT <--- Institusi 0,016 0,252 0,004 3,670 0,000 H1 accepted
H2 NWCT <--- Komisaris -0,035 -0,071 0,036 -0,976 0,329 H2 rejected
H3 NWCT <--- Rapat 0,277 0,320 0,062 4,492 0,000 H3 accepted
H4 NWCT <--- Komite 0,168 0,174 0,069 2,428 0,015 H4 accepted
H5 ROE <--- Institusi 0,129 0,216 0,044 2,944 0,003 H5 accepted
H6 ROE <--- Komisaris -0,571 -0,123 0,347 -1,646 0,100 H6 rejected
H7 ROE <--- Rapat 0,848 0,105 0.625 1,358 0,175 H7 rejected
H8 ROE <--- Komite 1,533 0,171 0,671 2,283 0,022 H8 accepted
H9 ROE <--- NWCT 1,657 0,178 0,740 2,240 0.025 H9 accepted
Hypothesis test used is the test of individual significance (t-test) to test the significance of
independent variables contained in the regression equation individually which affects the value of the
dependent variable (Ghozali, 2014). The criteria used are: If the number CR count> t table (1.96) and
significant <= 0.05 then the hypothesis is accepted and if the number CR count <t table (1.96) and
significant> 0.05 then the hypothesis is rejected. The design of this study uses alpha level of 5% or P-value
0.005 with the direction of the hypothesis is one tailed. Referring to the results of the above research, it can
be seen that there are six paths of hypothesis accepted and three rejected hypotheses.
4.4. Mediation Test Results
The results of the calculations online at http://www.danielsoper.com are presented in Table 5
below:
Table 5: Calculation Result Online
Causality Relationship Estimate S.E. Sobel Test Remark
Result
NWCT <--- Institusi (a) 0,016 (SEa) 0,004 1,953 No Mediation
NWCT <--- Komisaris (a) -0,035 (SEa) 0,036 -0,891 No Mediation
NWCT <--- Rapat (a) 0,277 (SEa) 0,062 2,001 Mediation
NWCT <--- Komite (a) 0,168 (SEa) 0,069 1,648 No Mediation
ROE <--- NWCT (b) 1.657 (SEb) 0,740
This study uses a Sobel test where the calculation is online at http://www.danielsoper.com. A
mediation variable can be said to have full mediation if the value of the significance of the independent
variable to the dependent variable through the mediating variable must have Sobel test value of ≥ 1.96
compared with the direct influence of the independent variable to the dependent variable, it can be
concluded that the mediation effect occurs (Ghozali, 2013). Based on the results of Table 5 above, it is
proven that net working capital turnover is a mediation variable of the relationship between the joint
meetings of the board of commissioners against return on equity, while net working capital turnover is
not proven to mediate the relationship of institutional share ownership, the number of board of
commissioners and the committee of the company to return on equity.

5. Discussion and Conclusion

Overall, this study has three main research outcomes. First, the result of research on good
corporate governance relationship measured by number of institutional share ownership, number of joint
meetings of the board of commissioners, the number of corporate committees had a significant positive
effect on NWCT, only the number of corporate commissioner’s variable had a negative effect on NWCT.
This study supports research conducted by Aghajari et al. (2015) who examined the relationship between
good corporate governance represented by the variable of tenure of the company's CEO, multiple CEO
and institutional share ownership of the working capital management represented by net working capital
turnover. The result shows that institutional share ownership positively affects the net working capital
turnover. It is consistent with research conducted by Jamalinesari and Soheil (2015) that institutional share
ownership positively affects the effectiveness of working capital management.
The results of this study are in accordance with research conducted by Gill and Biger (2013) that
corporate governance can improve the efficiency of working capital management company. This study
essentially states that the principle of good corporate governance through the implementation of joint
meetings of board of commissioners with board of directors is expected to impact on the effective
management of the concept of net working capital turnover that cannot be separated from the analysis of
operating cash flow of the company. It is contrast with research conducted by Kajananthan and
Achchuthan (2013) on the application of corporate governance to the management of working capital
management. The results showed that there is a significant influence of the number of boards of
commissioners to the management of working capital which is represented by net working capital
turnover. The results of this study indicate that the implementation of good corporate governance
through the large number of board of commissioners in the company does not affect the effective
management of working capital; it is inseparable from the many interests of the parties within the
company. In general, the results of this study can be concluded that the monitoring and direction activities
conducted by institutional shareholders, joint meeting activities, as well as input from the company
committee to the board of commissioners proved to produce net working capital turnover policy in
accordance with the needs of the company
Second, the result of research on good corporate governance relationship measured by number of
institutional share ownership, the number of company committees and net working capital turnover
variables have a significant positive effect on ROE, while the variable the number of board of
commissioners has a negative influence on ROE, but on the other hand the number of joint meetings of the
board of commissioners variable has no significant positive effect on ROE. Consistent with the results of
previous research conducted by Navissi and Naiker (2006), Shleifer and Vishny (1986), the result is that
the company's institutional ownership has a positive effect on the financial performance of the firm
because it has strong oversight and good reputation.
In contrast to previous research conducted by Hassan and Halbouni (2013), the results of his
research that the number of boards of commissioners have a positive effect on return on equity. The
company is expected to procure more tightened board of commissioner selection, so the company can
have a reliable board of commissioners. It is consistent with results of research conducted by Akbar et al.
(2016) that the index role of the committee has a positive effect on financial performance, which is
represented by Tobin's Q and return on assets. It is also similar to research conducted by Gupta and
Sharma (2014) and Lam and Lee (2012) which indicate that the role of company-owned committees
positively affects return on assets.
The results of this study are consistent with the results of research conducted by Ukaegbu (2014),
Yazdanfar and Ohman (2014) and Pais and Gama (2015) in general that the working capital management
policy has a positive effect on financial performance. Overall, the results of this study indicate that
supervisory activities conducted by the institutional, the performance of the committee owned by the
company, and the management of net working capital turnover can tie the financial performance,
especially the performance of return on equity of the company.
Third, the result of net working capital turnover variable test in mediating the relationship of
number of institutional share ownership, number of corporate commissioners, number of joint meetings
of the board of commissioners, the number of corporate committees to ROE by using Sobel test online at

http://www.danielsoper.com proved net working capital turnover mediates, number of joint meetings of
the board of commissioners relationship to ROE, while in other variables, mediation is not proven to
occur. Based on the result of the research, it can be concluded that the joint meeting activity conducted by
the board of commissioners with directors conducted intensively directly can result in the virtue of
managing net working capital turnover in accordance with the needs of the company and can improve
financial performance especially return on equity.
6. Research Limitations
a) Researchers only used the data within the time span of 5 years. Measurement of good corporate
governance only relationship of number of institutional share ownership, number of corporate
commissioners, number of joint meetings of the board of commissioners, the number of corporate
committees.
b) The researchers have limitation in taking the research variables. good corporate governance
relationship measured by the number of institutional shareholdings, the number of members of
the board of commissioners, the number of joint meetings of the board of commissioners, the
number of corporate committees have influence on net working capital turnover of 22%, while
78% is influenced by other variables. In addition, the variable number of institutional share
ownership, the number of members of the board of commissioners, the number of joint meetings
of the board of commissioners, the number of corporate committees, and net working capital
turnover influence return on equity of 18%, while 82% is influenced by other variables
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The effects of an IT-related curriculum based on hybrid-style problem-

based learning on career decision-making self-efficacy of women’s
University students in Korea
Hee Yeong Kim
June-Suh Cho
Hankuk University of Foreign Studies, Seoul, Korea
Keywords
Problem-Based Learning; Career Decision-Making Self-Efficacy; Women’s University Students;
Information Technology Related Curriculum
Abstract
The unemployment of university students has been emerging as a significant social issue in South
Korea, making it more necessary for students to have the attitude and confidence needed to explore their
future options. This study examines whether women’s university students are actively committed to making
decisions and having confidence in their career choices when applying Problem-Based Learning (PBL) to the
Information Technology Curriculum. For the design of this study, two women’s universities were selected:
group A consisted of ‘A University’ students given hybrid-style PBL and group B consisted of ‘B University’
students given traditional lectures and practices. A Nonequivalent Control Group Pretest-Posttest Design
was used to analyze the experimental group and the control group with pretest questionnaires at the
beginning of a semester and posttest questionnaires at the end of the semester.
The study results confirmed that PBL improves the Career Decision Making Self-Efficacy of women’s
university students in giving them confidence in their ability to collect career information, awareness of
career objectives, belief in planning and doing, and self-assessment for choosing suitable careers for
themselves. This study suggests that more problem-based learning curricula need to apply PBL to future IT-
related curricula to help students make their own career decisions.
Corresponding author: June-Suh Cho

Email addresses for corresponding author: jscho@hufs.ac.kr
Acknowledgement
This study was supported by Hankuk University of Foreign Studies Research Fund of 2018
Introduction
The problem of university student unemployment is becoming a social issue in Korea. The
Statistical Yearbook (the Korean Educational Development Institute) shows that the employment rate of
university students has declined sharply since 2010, as shown in Table 1, and has not recovered to date in
2017. The issue that university students aged 20-24 years old worried about is career relating to
occupations1. The area relating to ‘career’ represents the highest 30% in the student consultation results of
the Student Counseling Center of Dong-A University in Korea for the period of 2008 to 2010.
To the problem of youth unemployment, the Korean government is implementing various policies.
Universities have also been developing and implementing a variety of programs to increase the
employment rate of graduates. However, the companies that hope to employ university graduates are in a
dilemma, because it is not easy for them to find good workers. Most graduates are not ready to work
immediately in the field when employed. They need new education and training to achieve productivity
1 Statistics Korea, http://www.kostat.go.kr, accessed 10 January 2016.

in industry. The companies have no money and time to spend for new employees and tend to strongly
favor the experienced2.
<Table 1> Employment rate of University graduates [Unit: %]
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
*Entire institutions of
74.1 75.4 75.8 76.7 76.4 55 58.6 59.5 59.3 58.6
higher education
Technical Universities 83.7 84.2 85.2 85.6 86.5 55.6 60.7 60.8 61.2 61.4
Universities 65 67.3 68 68.9 68.2 51.9 54.5 56.2 55.6 54.8
* includes technical universities, universities, graduate schools, etc.
On the other hand, job seekers find it is not easy to decide what companies would be good to join.
University graduates often quit their jobs, even when employment did not come to them easily, without
working long enough. One of the biggest reasons is job mismatching, which is very serious in Korea.
There are many factors to be matched, such as region, technology, school level, age, and wage (Kim and
Kim, 2015). The job mismatch of a youth’s beginning career can have a negative effect throughout his or
her lifetime, and avoiding it is very important (Liu and Chen, 2014). Students during their school days
have to investigate job and company information deeply in order to avoid job mismatching, and some
subjects have to help them do so. Learning how to choose a job that suits them and how to improve their
decision-making ability is an essential process for prospective university graduates; and it will be of great
help if they can acquire this ability through the university curriculum.
The employability of university students will be further increased if they explore careers or prepare
themselves to be equipped with the necessary knowledge, attitudes, and skills to make the right career
decisions. Applying Problem-Based Learning (hereinafter referred to as PBL) to class operation is an
ongoing effort. PBL is an educational approach that enables learners to find and learn by themselves by
dealing with problems derived from lives or jobs in unstructured form. As the problems presented in the
study are similar to the situations that learners will experience, the learners will be more interested in
facing such challenges in learning. The role of teachers in PBL is not to simply inject or transfer
knowledge, but to guide and help the learners solve problems by themselves. In South Korea, where
employment is emerging as a significant social issue, efforts to identify and use the problems to be applied
to classes in conjunction with employment can be of help to a student's career decisions. That is, when
conducting a class as a process for students to solve problems, studying what effects PBL has on career
choice and decisions of students, especially women’s university students, is a meaningful effort to find a
solution for youth unemployment. Determination would help solve the mismatching problems of the
students.
The purpose of this study examines what effects applying PBL to IT-related courses will have on
the career decision-making efficacy of women’s university students. The experiments applying PBL to
them are necessary for more effective use of PBL in the future; the implications to be derived from the
results of the studies should provide a vital basis for the development of future curricula.
Theoretical Background
Career Decision-Making Self-Efficacy (CDMSE)
Career decision making, and career preparation are affected by cognitive variables, such as the
self-efficacy of each person (Lent et al., 2002). Self-efficacy is a belief in one’s ability to organize and carry
out a series of acts required to conduct a certain task (Bandura, 1977); career decision-making self-efficacy
is a concept related to how much confidence a student has in making a career decision for employment
(Vinokur et al., 1991). Hackett & Betz (1981) defined career decision-making self-efficacy as an individual’s
belief in his/her ability to successfully conduct tasks related to career decision-making.
The career decision-making self-efficacy exerts an important influence on the choice of occupation
or career path, effective decision-making, and continual execution of plans, and can be explained as an
important variable in decisions about desired achievements, career decision-making, and success in career
2 Asia News Agency, Recruiting managers favor the experienced, 2014.12.2.

(Luzzo, 1996). Career decision-making self-efficacy was shown to develop social-cognitive skills needed
for jobs at employment preparation time and to affect the possibility of employment (McArdle et al.,
2007). It was confirmed that career decision-making self-efficacy is an important variable in explaining the
career choice process (Restbog et al., 2010).; many studies on career decision-making self-efficacy have
shown that students tend to actively do what is needed to achieve higher self-efficacy concerning career
decision-making (Betz et al., 1996; Taylor & Betz, 1983).
Problem-Based Learning (PBL)
PBL is a pedagogical method designed to teach students how to gain knowledge and experience
by seeking solutions and finding answers by themselves through practical applications, as opposed to the
educational method of simply delivering knowledge to students through lectures by professors. PBL can
thus be said to be a learning method in which learners think about how to solve problems and prepare
solutions in collaboration with each other by forming small groups with fellow students and conducting
collaborative learning (Barrows, 1996). According to studies from 1970 to 1992 analyzing the effects of
PBL, students were observed to do self-directed learning in PBL-style classes, and positive effects were
observed in interests, motivation, attitude, class attendance, etc. (Vernon & Blake, 1993). PBL began to be
introduced in South Korea in the 1990s, and since then, related studies, such as comparisons with
traditional lecture-type classes, have begun to appear (Lee, 2013).
Despite the positive results of studies of PBL in many aspects, it is not without difficulties in being
applied to real classes. Vernon & Hosokawa (1996) conducted a questionnaire survey about PBL classes
with professors who had participated in PBL classes and with professors who had not. The results
suggested that PBL classes can have a positive effect on creating students' interests and motivation,
reasoning abilities, clinical preparation, and self-directed learning, but it might not improve class
efficiency, acquisition of basic scientific knowledge, or hours spent. Limitations of the class hours, the
discomfort of teachers and students unfamiliar with the PBL approach, etc., are obstacles in conducting
PBL classes (Torp & Sage, 2002).
PBL is characterized by the problems presented to students. Problems should not have a fixed
answer and should not be ill-structured and complex situations. Learners need to be able to collect
information from a variety of sources, conduct discussions among themselves, and prepare presentations
on solutions. Though they are not sure of finding correct answers while preparing presentations, they can
experience the process of exploring best decision-making by means of these activities (Stepien &
Gallagher, 1993). Professors participate in the discussions, serve as mentors and guides (Barrows, 1996),
facilitate learning, and perform the evaluation. The issues that are covered in PBL approximate real-world
situations, necessitating an integrated approach to solving them (Delisle, 1997). The effects of PBL on
nursing students are more positive than traditional lectures in Korea (Choi, Lindquist, and Song, 2014).
Critical thinking skills and overall metacognitive awareness scores increased significantly after using PBL
(Gholami et al., 2016).
While although some studies have stated that PBL has positive effects on problem-solving
abilities, self-directed learning skills, participation improvement, IT-related processes, analytical skills,
learning ability, communication skills, etc. (Shin & You, 2014), there are also other studies showing
different results (Hung, 2009). Hung was concerned about excessive application of PBL without sufficient
consideration of theoretical concepts (Hung, 2011). He showed that the hybrid class methods combining
traditional methods and PBL can be applied easily to students unfamiliar with PBL.
Barrows & Myers (1993) suggested a process of five steps to design PBL classes: Class
progression, Presentation problems, Stages after problems, Presentation, Conclusion, and Post-solution
issues. They designed classes to proceed in a hybrid format combining regular teaching curricula and
PBL. The hybrid approach refers to the concurrent adoption of both the traditional process of knowledge
delivery through lectures by professors and the process of solving problems by students themselves.
It is not easy to develop well-structured problems for PBL, and there are not enough classes to
which PBL can be applied. Classes designed in a hybrid approach are not yet familiar enough to both
learners and instructors for the complete conversion of existing class methods to PBL. Professors asked
learners to investigate either enterprise cases or solutions using information technologies. Students had to
investigate the information needed for job opportunities. Professors provided the necessary knowledge in

the curriculum by traditional methods like lecturing. The companies investigated were ones that learners
were willing to work for, and learners were allowed to choose the companies themselves.
The advantage of a hybrid approach was to make it possible to deliver, test, and objectively grade
the necessary knowledge required by the regular curricula of the schools, but at the same time to make
efforts for solving problems and to prepare for the presentation of the results.
Methods
Study Design and Objects
This study elucidates how a hybrid class applying PBL affected the career decision-making self-
efficacy of women’s university students. Before starting the study, we selected, as a control group,
students at B University who were demographically similar to the A university students; all were taking
IT- related courses. The curriculum that the students of A university would take was a ‘Software
Engineering’ course, which was designed as a hybrid-style class. The curriculum that the students at B
university would take included 'ERP', 'Management and Computers', and 'Office Automation (word
processor)' courses; it was confirmed that the courses were administered in a computer lab. To verify the
existence of a significant difference in career decision-making self-efficacy between the experimental
group and the control group, we applied a nonequivalent control-group pretest-posttest design using
pretests and posttests, as shown in Table 2.
<Table 2> Pretests and posttests of the experimental group and control group
Applying Problem-
Pretests Posttests
Based Learning
A Women’s University Career decision-making Career decision-making self-
O
(experimental group) self-efficacy tests efficacy tests
B Women’s University Career decision-making Career decision-making self-

(comparison group) self-efficacy tests efficacy tests
Tools
This study used a Career Decision-Making Self-Efficacy Scale as a tool for measuring the confidence level
of the students in career decision-making. Taylor & Betz (1983) developed a Career Decision-Making Self-
Efficacy Scale that could measure the confidence of individuals in their ability to successfully complete the
tasks needed for deciding on their careers in general. This study used the revised version of Lee’s adjusted
‘The Short Form of Career Decision-Making Self-Efficacy Scale’ applied by Taylor & Betz (1983)
themselves to the situation of South Korea (Lee, 2001). As shown in Table 3, the scale consisted of 5 sub-
factors (career information, setting goals, planning, solving problems, self-assessment) and a total of 25
items.
<Table 3> Career Decision-Making Self-Efficacy Scale
Number of
Factors Details
questions
Career The confidence that they can find a career in which they are interested
5
information and explore conditions required by the career specifically
Setting goals The confidence that they can decide on their academic and career path
5
with confidence and no regret
Planning The belief that they can plan and do the plan on the higher education or
5
career pathways.
Solving The will that they will be able to cope with obstacles by themselves when
5
problems facing obstacles on the course.
Self-assessment The confidence that they can clearly assess their abilities, values, desires
5
and choose their careers that suit them
Total 25
Data Collection and Analysis Methods
This study was conducted for a total of 16 weeks on the students of A Women’ University (the
experimental group; PBL applied) and the students of B Women’ University (the comparison group; PBL

not applied). To conduct PBL class with both lectures and computer labs, each team of 2 or 3 persons
performed assignments for solving problems. The students in the comparison group totaled 109, divided
into 4 classes, where the teaching method consisted of general lectures and practices. To test career
decision-making self-efficacy on the students at the two universities during the same period, the pretests
and the posttests were used the same questionnaire
First, the study examined the demographic characteristics of the students and verified their
homogeneity by using frequency and statistical analysis. Second, the study carried out an exploratory
factor analysis and Cronbach's Alpha values to confirm the validity and reliability of the measuring
instruments for career decision-making self-efficacy. Third, the study analyzed pre-post differences of the
experimental group and of the control group for hypothesis testing. The analysis used a paired sample t-
test, which examined whether there was a mean difference between the experimental group and the
comparison group in the pre-post point differences about career information, setting goals, planning,
solving problems, and self-assessment.
Evaluation
Homogeneity of Study Objects
Both the experimental group and the control group were derived from women’s university students in
South Korea. Ages ranged from 19 to 24; grades consisted of 2nd grade and 3rd grade (Table 4). Students
took courses from an IT-related curriculum (Software Engineering, ERP, Management and Computers,
Office Automation, etc.); classes were conducted in the classrooms where computer training facilities
(personal computer units and a desk for the computers, beam projectors, lab software installation, etc.)
were offered.
Table 4. Comparison of homogeneity between the experimental group and the control group
Experimental group (A) Control group (B) Total
Variables Standard Standard Standard
Mean Mean Mean
Deviation Deviation Deviation
Age 20.91 0.97 20.40 0.94 20.64 0.99
Grades 3.00 0.00 2.68 0.47 2.83 0.38
Validity and Reliability Analysis

For the criterion for the reliability of the details in the questions about problem-solving abilities
used in this study, the coefficient of Cronbach's Alpha was set to a value greater than 0.7, given that, if the
alpha coefficient is above 0.7 in the analysis level of the general organizational units, the reliability of the
measurement is known to have no problems (Nunnally, 1978). For the alpha coefficient of career
information, setting goals, planning, solving problems, and self-assessment as the specific measurement
items of career decision-making self-efficacy used in this study, pre-education values and post-education
values were shown as in Table 5. There exists confidence between the measurement items, which are
aggregated into factors, though some do not meet the criteria.
Principal component analysis and Varimax methods of orthogonal rotation were used for factor
analysis. In this study, loading factors more than 0.3 were considered to meet goodness of fit, and some
measured parameters below 0.3 have been removed.
Table 5. Validity and Reliability Analysis
Loading Factor Cronbach’s Alpha
Measurement Remarks
Factors Experiment Control Experiment Control
Variables
Pre Post Pre Post Pre Post Pre Post
Information on .415 .689 .684 .591
career of interests Removed 1
Career
Employment .682 .755 .648 .511 variable
informatio
tendency .704 .803 .683 .790 (information
n
Salary .687 .746 .468 .609 on graduate
(factor 1)
Personal networks .699 .669 .320 .837 school)
in interested areas
Setting Majors .520 .594 .574 .409 .834 .791 .809 .885

goals Occupation .702 .627 .673 .792

(factor 2) Lifestyle .450 .444 .694 .737
No regret .680 .442 .514 .535
Selectable .490 .707 .726 .753
Resume .814 .836 .705 .814 Removed 2
Company suited .380 .338 .518 .332 variables
Planning the aptitude (5 years plan)
.699 .750 .771 .841
(factor 3) Employment .804 .765 .756 .636 (choosing
procedure graduate
school)
Changing the .787 .842 .737 .711 Removed 2
choice variables
Solving Adjusting the .769 .824 .753 .809 (changing
problems career path .756 .799 .741 .780 graduate
(factor 4) Preparing .827 .821 .616 .779 school)
alternatives (overcoming
obstacles)
Evaluating abilities .778 .769 .700 .399
Ideal occupation .424 .809 .812 .660
Self-
Value priority .798 .544 .763 .769
assessment .815 .872 .870 .849
Sacrifice and .672 .507 .757 .622
(factor 5)
selection
Lifestyle .721 .618 .758 .549
The removed measurement variables were the ones related to pursuing an academic career path
directly upon graduation or going to graduate school; the variables were not meaningful to most of the
students, who wanted to get jobs. In addition, the questionnaire variables were not appropriate in terms of
the standard of the loading factors. The measurement item of ‘5-year plan’ was also removed from
planning; it was the question about whether students were able to plan out the coming 5 years. The item
of ‘overcoming obstacles’ was removed from the factors of solving problems because it did not meet the
standard of the loading factor; it was the question about whether students continued to work toward
goals in difficult situations.
4.3 Hypothesis Testing
The results of the comparison of the details between the PBL-applied experimental group and the
control group were as shown in Table 6.
First, although the hypothesis that students who participated in PBL classes could improve their
confidence about their ability to search for career information showed a significant difference in the
experimental group (t = -2.16, p = 0.033), the hypothesis did not show any significance in the control
group (t = 1.39, p = 0.168). Therefore, the hypothesis was supported. Second, for the hypothesis about
confidence in setting goals, the experimental group showed a significant difference between before PBL-
application and after PBL-application (t = -2.20, p = 0.030); the control group showed the opposite result (t
= 2.08, p = 0.040). In other words, in the tests conducted at the beginning and the end of the semester, the
control group showed less confidence in setting goals (p < 0.05) at the end of the semester than they had at
the beginning. This result suggests that the confidence in setting goals was decreasing with time. Third,
for the belief about planning and doing, the experimental group showed a significant difference (t = -2.36,
p = 0.020); the control group showed an insignificant change. Fourth, the conviction that students could
solve problems by themselves showed a slightly improved value in the mean, but both the experimental
group and the control group showed insignificant change. Fifth, for the confidence that students could
evaluate the occupations that suited themselves, the experimental group showed a significant difference
even though it was not conspicuous (t = -1.97, p = 0.052), but the control group showed insignificant
change.

<Table 6> Comparison between pretest and posttest by the t-test

Pretest Posttest Difference analysis
Group Standard
Factors Standard Standard t p
classification Mean Mean Mean Deviatio
Deviation Deviation
n
Career Experiment 4.15 0.98 4.47 1.09 -0.32 -0.11 -2.16 0.033
information Control 4.45 0.93 4.27 0.99 0.18 -0.06 1.39 0.168
Experiment 4.55 1.04 4.85 1.01 -0.30 0.03 -2.20 0.030
Setting goals
Control 4.85 0.94 4.59 4.59 0.26 -3.65 2.08 0.040
Experiment 3.89 0.97 4.21 1.06 -0.32 -0.09 -2.36 0.020
Planning
Control 4.35 0.95 4.24 1.00 0.11 -0.05 0.92 0.358
Solving Experiment 4.51 1.08 4.87 0.87 -0.36 0.21 -0.29 0.839
problems Control 4.57 0.95 4.61 0.95 -0.04 0.00 -0.28 0.781
Self- Experiment 4.87 0.87 5.13 0.91 -0.26 -0.04 -1.97 0.052
assessment Control 4.93 0.95 4.78 0.91 0.15 0.04 1.32 0.189
The results of this study indicated that students who took PBL-applied classes showed a
significant difference in the mean value of the abilities before education versus after education in terms of
the factors of career information, setting goals, planning, and self-assessment more than did students who
took general-lecture-centric classes. However, the study did not prove that self-conviction would improve
in the factor of solving problems.
Concluding Remarks
This study designed and carried out PBL-applied classes to examine the effects of PBL on career
decision-making self-efficacy of women’s university students. It was shown that, after applying PBL, the
students of the experimental group could improve their confidence in their ability to to find information
on job opportunities and the career that they wanted, perhaps because the problems (or tasks) assigned to
them during class hours were to investigate IT solutions that the companies where they would want to
work were using as management tools; and in the process, the salary levels and the working conditions of
the companies could be identified simultaneously.
Women’s universities that want to increase the employment rate of university graduates need to
actively consider using PBL in an IT-related Curriculum. Although every university has a variety of
employment support programs in operation, the most important curricula and class methods are not
changing that much. PBL can be an alternative for improving current ways of class operation and can be
expected to enable students to take the initiative in their career decisions.
The results showed that the confidence with which students evaluated their abilities more clearly
and selected an occupation to meet their expectations was improved through PBL. The most important
element in their career choice may be to know what they are interested in and what they can do best. We
suggest that PBL enables students to improve their confidence in self-assessment and to evaluate their
abilities and values properly.
Will and confidence in solving problems are somewhat different from problem-solving abilities;
this study measured both will and confidence, focusing on self-efficacy. If students do not face difficulties
or obstacles in the process of solving problems, it is not easy to measure whether will and confidence in
solving problems are improved or not. The self-efficacy of students differs from the abilities of students;
so, it is necessary to develop a new PBL-applied class design in a way that enables students to improve
their self-efficacy as well as their problem-solving abilities. The topic of whether PBL classes can improve
problem-solving abilities requires additional studies in the future.
This study has a limitation in that it assumed that higher career decision-making self-efficacy
would lead to higher employability. There is a need to empirically analyze whether students who
obtained higher self-efficacy would have a higher employment rate upon graduation. Job mismatching is
not an easy problem to solve, but a new study is needed to find out whether the higher career decision-
making self-efficacy affects collaborative research in universities and companies.

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Are cooperative relationships a viable option for accessing resources for

female informal traders in South Africa?
Albertina Jere
Department of Retail Business Management
Cape Peninsula University of Technology, South Africa
Mlenga Jere
Graduate School of Business, University of Cape Town, South Africa
Roger B Mason
Cape Peninsula University of Technology, South Africa
Key words
Female-owned business, informal trade, cooperative relationships, social capital, business
sustainability
Abstract
Even though the number of female-owned businesses is rising at a fast rate, in emerging and
developing markets they tend to operate in the informal sector concentrated in less attractive survivalist
businesses. This study investigates the use of cooperative relationships (CRs) to improve the sustainability of
female-owned informal retail businesses. It is important because women account for about 70% of the world’s
poor and yet are more likely to use a higher proportion of their income on the wellbeing of their families. To
investigate the use of and the factors that influence CRs amongst female informal traders, a convenience
sample of 173 informal female traders was surveyed. Data analysis was done using Pearson Product-
moment correlation. The findings show that CRs of most female informal traders focused on financial
security, social and spiritual wellbeing of the respondents and their families. CRs with family and other
traders were common but the latter were more widespread and perceived to be more beneficial to the business
than the former in facilitating access to diverse business resources. The study concluded that the
implementation of formal support for traders’ CRs could contribute to business sustainability through
improved access to resources.
Corresponding author: Albertina Jere

Email addresses for corresponding author: jerea@cput.ac.za
1. Introduction
1.1 Women’s economic participation in the informal sector
Women account for about half of the population in many countries. According to a World Bank
report, in 2014 they accounted for 50.9% of the population in South Africa. Women also constitute 70% of
the world’s poor (World Bank, 2017). Gender inequalities primarily stemming from prevailing socio-
cultural norms and practices have contributed significantly to women’s limited access to resources and
opportunities thus inhibiting their ability to lift themselves out of poverty (Wrigley-Asante, 2013).
However, there is an increasing awareness of the impact of development policies on women, their
empowerment and meaningful involvement in economic activities. Efforts to enhance the well-being of
women are critical for reasons of economic development especially since they play an important role in
the welfare of their families (Mathew, 2010). Studies in various countries including China, Bangladesh,
Brazil, India and the United Kingdom have found that a higher level of domestic autonomy, domestic
involvement in decision-making, education, financial autonomy and access to start-up capital among
women are positively correlated to the well-being of their families (World Bank, 2017). Other studies

indicate that women are more likely to spend a higher proportion of their income on their families than
men (Hanson, 2009).
Brush, de Bruin and Welter (2009) suggest that female entrepreneurship is growing at a faster rate
than male entrepreneurship as more women are starting their own businesses (Chant & Pedwell, 2008;
Jere, 2014). However, proportionately there are still fewer female-owned businesses compared to male-
owned ones (Chen, Tan & Tu, 2015). In most countries, particularly less developed ones, most female-
owned businesses are in the informal sector. It is estimated that between 30% and 50% of all informal
businesses are owned and/or operated by women and provide the only source of support for their
families (Chant & Pedwell, 2008; Hanson, 2009). Almost 70% of the women in India and Mali are reported
to work in the informal sector (Chant & Pedwell, 2008). The informal sector in South Africa reflects similar
characteristics to the global trend and is a significant part of the national economy contributing an
estimated 28% towards the country’s GDP. An estimated 79% of the South African informal sector consists
of retail trade (Siqwana-Ndulo, 2013).
Male-owned and female-owned businesses are different in many ways including size, the number
of employees, revenue and profits, as well as slow growth rate in favour of the former (Magidimisha &
Gordon, 2015). Most women are involved in less lucrative activities and operate survivalist businesses.
These differences have been amplified by rising unemployment which pushes more men into the higher
income earning informal business activities consequently relegating most female informal sector operators
to the lower ranks of the sector (Chant & Pedwell, 2008). Market trading, street vending and provision of
services are among the most common activities among women (Magidimisha & Gordon, 2015; Hanson,
2009). The informal sector is attractive due to low entry barriers including low skills and start-up capital
requirements. The flexibility that self-employment offers to women who need to combine their productive
and reproductive roles makes the informal sector particularly attractive to women (Wrigley-Asante, 2013).
Additionally, despite the meagre revenue generated from informal trading, it supports the family care
burden of women because it provides a regular income stream to meet the daily family needs (Wrigley-
Asante, 2013). To increase the chances of success and move their businesses beyond survivalist status, the
use of cooperative relationships by women is suggested.
1.2 Research context
The study was conducted in Khayelitsha, a township established in 1983 in Cape Town. It is the
newest and fastest growing township in South Africa (South African History Online, 2013). According to
the 2011 census, females make up 52% of the population in this township. At 38%, the unemployment rate
in the township was higher than the national average of 29.8% in 2011 (Clarke, 2015; Statssa, 2011). With
rising unemployment in the country, this situation is unlikely to have changed apart from change in the
specific figures. Khayelitsha is said to have the largest concentration of informal settlements with their
attendant challenges of high unemployment, poverty, crime and gender violence (Seekings, 2013).
1.3 Cooperative relationships
Research shows that cooperative relationships (CRs) and action amongst individuals help
communities to achieve their goals better than when individuals work alone. CRs are important because
individuals as economic agents operate in imperfect markets where not everybody has access to the same
market information. CRs help to distribute resources such as information, financial, material and
emotional support to members. Collectively these resources are alternately referred to as social capital (SC).
SC is “the ability to secure benefits through membership in networks and other social structures” (Portes,
1998:8). It can also be viewed as the sum of resources that are available and can be mobilised through
one’s formal and/or informal social networks and relationships (Aldrich & Meyer, 2015; Kim & Sherraden
2014). These benefits or resources can lead to economic efficiency in general. CRs are part of social
networks that form the context within which SC exists and can be mobilised (Kim & Sherraden, 2014). SC
is shaped by social institutions such as family, church and schools. Evidence shows that there is a linkage
between SC and positive collective outcomes in society, hence the contention that cooperative
relationships can be beneficial for the members and their community (Fukuyama, 1995).

Strong civic engagements or networks enable social capital by encouraging cooperation amongst
individuals (Putnam, 1996). Therefore, memberships to associations such as church, trader associations
and stokvels are important for building social capital. This is particularly so in the context of the informal
sector where in the absence of formal contracts, CRs help to reduce the risks associated with business
transactions as network members impose sanctions on non-compliant and reward compliant members.
The benefits of network membership include, for example, extension of credit to and delivery
prioritisation for members (Macchiavello & Morjaria, 2012). In addition to network membership, factors
such as entrepreneurial orientation (Dickson & Weaver, 1997), inter-personal trust (Brehm & Rahn, 1997),
business outlook, and business growth may influence informal business sustainability.
1.4 Research objectives
Based on the foregoing, this paper argues that CRs through which social capital flows can propel
informal female retail businesses to sustainability because they provide access to important resources. As
traders in the informal sector are generally not well resourced, it is argued that the use of CRs can increase
their chances of success and sustainability. This study therefore sought to investigate the extent to which
CRs exist amongst female-owned informal retail businesses in Khayelitsha (Cape Town) and the potential
of CRs to contribute to business sustainability. More specifically, the study sought to:
a) Describe the nature of CRs;
b) Describe the extent to which CRs are used by female entrepreneurs
c) Describe the type of support received and sought from CRs by female entrepreneurs; and
d) Examine the relationships between influencing factors and the sustainability of female owned retail
businesses in the informal sector.
2. Literature review
2.1 Women’s CRs
Considerable research links social relationships and enterprise performance, e.g., Sheng and
Mendez-Da-Silva (2014) on Guanxi, a common type of networks in some Confucius societies and Rooks,
Klyver and Sserwaga (2016) on social capital in Uganda. However, research focusing on women in the
informal sector is limited despite the evidence that women predominate in the sector (Chant & Pedwell,
2008; Hanson, 2009) and are more relational oriented than men (McGowan, Cooper, Durkin & O’Kane,
2015). Women view their businesses as a collection of relationships while men perceive theirs more as
commercial undertakings (Loscocco & Bird, 2012).
Women’s networks have been characterised as smaller, comprising of more family and kin ties
compared to those of their male counterparts (Chen, Tan & Tu, 2015; Kim & Sherraden, 2014). Gender
segregated roles that assign family care responsibilities to women encourage them to nurture social
networks that revolve around family and are characterised by strong ties (Granovetter, 1973). Women with
young children face time constraints and potential isolation as they balance childcare and other family
responsibilities (Chen, Tan & Tu, 2015). Consequently, family and kinship-based networks are more
significant for female small business owners than their male counterparts (Chen, Tan & Tu, 2015). While
small networks and those comprising a high proportion of kin members provide access to readily
available resources they have also been shown to provide access to redundant resources thereby
delivering less benefit to members and their economic activities (Chen, Tan & Tu, 2015). Weak ties
(Granovetter, 1973s), linking agents to contacts beyond their primary network have been found to provide
access to more varied resources supporting business competitiveness (Fafchamps & Minten, 2002).
2.2 CRs and business performance
In emerging markets, the use of CRs and other informal institutions is particularly important due
to differing levels of “uncertainty and instability, weak formal contractual enforcement and insecure
property rights” (Ghani & Reed, 2015:3). In their study of agricultural traders in Madagascar, Fafchamps
and Minten (2002) found that SC made it possible for traders to trust each other and therefore extend
credit to each other, exchange price information and economise on quality inspections. Therefore, trader
productivity was enhanced due to reduced transaction costs. Consequently, SC had a strong positive
effect on trader performance. The effect of SC on performance was stronger than that of human capital
factors such as years of schooling, years of experience as a trader and the ability to speak more than one
language. These findings suggest that SC may be equally and, in some cases, more important than human
capital (Fafchamps & Minten, 2001).
Different types of CRs are used in South Africa with research undertaken highlighting the
positive impact of the relationships in society generally and on business performance. In their study of
spaza shops in Delft township in Cape Town, Charman, Petersen and Piper (2012) established that spaza
shop owners who failed to cooperate in aspects of their business operations did not do well. On the other
hand, other spaza shop owners, mostly of Somali origin who cooperated largely in stock procurement
operated successful businesses. Chebelyon-Dalizu et al. (2010) made similar findings in Monwabisi Park
in Cape Town. Stokvels are another ubiquitous form of CR in South Africa. Stokvels have been found to
be supportive of employment creation and micro-entrepreneurship. Other South African CRs include
traders’ associations and burial societies. Since traders’ associations and stokvels comprise links
connecting agents with contacts beyond their immediate family and close friends, they are sources of
bridging social capital. This type of social capital has been found to provide access to diverse and unique
resources which support business performance (Aldrich & Meyer, 2015). Due to their capability to
mobilise, social groupings such as traders’ associations can promote access to linking social capital which
enables agents to mobilise resources through structures with vertical dimensions such as governmental
and non-governmental organisations and hierarchically based relationships (Baruah, 2004)
2.3 Theoretical framework
At business or firm level, transaction cost theory (TCT) and resource dependency theory (RDT)
are known to influence the use of CRs. TCT and RDT are rational choice theories that assume that
decisions are primarily driven by the search for economic efficiency (Dickson & Weaver, 1997). TCT
suggests that inter-firm cooperation is sought to maximise economic and psychological benefits while
RDT holds that the primary motive for inter-firm cooperation is the access to resources it provides the
participants with; which in turn leads to competitive advantages in the market (Pfeffer & Salamak, 1978).
These inter-firm relationships are however affected by individual-level factors since it is the individuals
that run businesses and enter relationships on behalf of the firms. These individual level factors include
Entrepreneurial Orientation (EO) (Dickson & Weaver, 1997) and inter-personal trust (Brehm & Rahn,
1997). This paper investigates these factors at the level of individual female entrepreneurs because they
are important determinants of business sustainability.
2.4 Entrepreneurship, business performance and CRs
Entrepreneurship is essential for both start-ups and existing businesses because it drives economic
growth. Entrepreneurial orientation (EO) refers to “the process, practices, and decision-making activities
that lead to new entry” (Lumpkin & Dess, 1996:136). Its key dimensions are innovativeness, proactiveness
and risk taking. EO is a major predictor of success, but how the three dimensions predict successful new
entry is influenced by environmental and organisational factors. Some studies have found that EO is
strongly and positively related to business performance (Wiklund & Shepherd, 2005), even though it does
not guarantee success. EO has been known to drive business growth (Lumpkin & Dess, 1996) and other
business performance indicators such as sales (Green, Covin & Slevin, 2008).
CRs in business are important because they create access to resources and support the realisation
of business goals (Quintana-García & Benavides-Velasco, 2004). Since CRs require working with other
people and businesses, it is important for their success that there is inter-personal trust between the
parties involved. Trust is “the willingness of a party to be vulnerable to the actions of another party based
on the expectation that the other will perform a particular action important to the trustor, irrespective of
the ability to monitor or control that other party” (Mayer, Davis, & Schoorman, 1995:712). It is an
important condition for the success of CRs irrespective of whether the CRs are based on formal
(contractual) or informal (non-contractual) arrangements. Hadjielias and Poutziouris (2015) argue that it is
the informal norms such as trust that form the glue that holds CRs together. Trust is an important
determinant of behaviour in CRs as people are more likely to enter CRs with people they can trust.
Though trust is a non-contractual element of CRs, it is known to impact on the success of CRs because it
influences the partners’ willingness to share resources (Hadjielias & Poutziouris, 2015).

3. Methodology
3.1 Participants and procedures
The study adopted a quantitative approach with survey questionnaire being used to collect data.
Due to lack of a sampling frame, a convenience sample of 186 female-owned informal businesses were
selected to participate in the study of which 173 resulted in usable questionnaires. All participants were
informed about the purpose of the study and the fact that participation was voluntary. In all instances, the
researcher was responsible for asking the questions and completing the questionnaire. This was deemed
necessary because of the expected lower levels of education amongst the respondents. Data collection took
place at places where the businesses were operated. Prior to the commencement of the study, ethical
clearance was sought from and granted by the Cape Peninsula University of Technology’s Research Ethics
Committee (Clearance Certificate No: 2015FBREC331).
3.2 Measures (measurement strategy)
Data was collected on the following variables of interest: CRs, EO, business sustainability (years in
business), business growth, business outlook and interpersonal trust. In addition to identifying specific
types of civic and other groups that they belonged to, respondents were asked to indicate the number of
both CRs with both family and friends (strong ties) and CRs with other informal business people (weak
ties). For EO, the 8-item questionnaire by Covin and Slevin (1989) was employed for the study. Business
sustainability, business growth and business outlook were estimated by determining the number of years
the business had been in operation, the respondents’ perceptions of business growth over the preceding 12
months and the respondents’ perceptions of the likelihood of the business being in operation in the next
12 months respectively. Interpersonal trust was measured by using three items adapted from Putnam
(2000). In addition to the foregoing, the respondents were asked the type of resources they received and
sought from both family and friends’ networks and from their informal business networks. Finally, the
respondents were asked about demographic data relating to age, education, and marital status. Prior to
data analysis using descriptive statistics and Pearson product-moment correlations to determine the
relationship between variables, we accounted for construct validity by ensuring that the variables and
measurements employed are grounded in theory and have been validated in prior studies.
4. Findings
4.1 Profile of respondents
The total number of usable questionnaires in the study was 173. Over 53% of the respondents
were aged between 30 and 49 years old with only 10.4% being under 30 years old. About 51% were
married. In terms of education, the majority (45.7%) had not completed their high school education
(matriculation) and just about 3% reported having a degree level education.
4.2 Business and owner characteristics
4.2.1 Business sustainability: Over half (52%) of the respondents indicated that their businesses had been
operating for over 5 years at the time of the study. In the data analysis, business sustainability was
dichotomised into 1-5 years and over 5 years.
4.2.2 Business growth: To assess whether the informal businesses were growing or not, respondents
were asked to indicate their sale trends over the preceding 12 months using the question “on a scale of 1
(False) to 5 (True), are you selling more now than you did twelve months ago?” Only 20.3% answered
‘true’ while 50.9% answered ‘false (Mean=2.7, SD=1.036).
4.2.3 Outlook for next 12 months: The respondents were also asked to share their outlook for their
businesses for the 12 months ahead using the question “On a scale of 1 (Very unlikely) to 5 (Very likely),
how likely is it that you will still be running this business in the next 12 months?” The overwhelming
majority were very positive about the outlook with 92.5% indicating that they were likely to be running
the business in the next 12 months (Mean=4.5, SD=.635).
4.2.4 Entrepreneurial orientation: The respondents’ EO was assessed as described in the methodology
section and determined to just above average on a scale of 1 to 5 (Mean=3.25, SD=.457).

4.2.5 Interpersonal trust: The levels of interpersonal trust amongst the respondents were way above
average (Mean=3.81, SD=.642).
4.3 The nature of cooperative relationships amongst women
The most popular social networks (civic organisation memberships) that the respondents
participated in were stokvels (79.8%) and church affiliated groups (55.5%) (See Table 1). Only 3.5% of the
respondents reported belonging to a business association while 52.6% reported being members of various
localised associations such as funeral societies. Most of the memberships were non-business related but
more focused on personal and family financial security (stokvels) and social/spiritual wellbeing (church
affiliated groups).
Table 1: Civic organisation memberships
Civic organisation membership Frequency Percentage
Church affiliated groups 96 55.5
Parent-teacher associations 0 0.0
Stokvels 138 79.8
Sports groups 7 4.0
Business association 6 3.5
Other groups 91 52.6
Do not belong to any 16 9.2
4.4 The extent of use of cooperative relationships and types of support

4.4.1 Family cooperative relationships
A total of 130 (75.2%) of the respondents reported receiving assistance from a close family
member or friend in the preceding 12 months. The number of family members and friends that provided
assistance ranged from 0 to 16 people (Mean=2.8, SD=2.7) while the most frequently cited number (i.e., the
mode) was 3 people (reported by 48 respondents representing 27.7%). On a scale of 1 (Not at all) to 5
(Very much), the respondents rated the extent to which family and friend relationships helped in the
achievement of business goals as being above average (Mean=3.7, SD=.967).
The type of resources that were received the most from family members and friends were finance
(48.6%) and free labour (48.0%). The others included supplies (7.5%) and tools and machinery (5.8%). On
the other hand, the resources sought the most were reported as premises (19.1%), supplies and stock
(15.6%) and tools and machinery (14.5%).
4.4.2 Trader cooperative relationships
A total of 154 (89%) of the respondents reported receiving assistance from other traders in the 12
months prior to the study. The average number of traders that provided assistance ranged from 0 to 30
(Mean=5.1, SD=4.00). The most reported number of traders that provided assistance (i.e., the mode) was 3
(24.3%) while the majority (45.1%) of the respondents reported receiving assistance from 5 or more other
traders as highlighted in Table 2. On a scale of 1(Not at all) to 5 (Very much), the respondents rated the
extent to which relationships with other traders helped in the achievement of business goals as being
above average (Mean=3.7, SD=.997). In addition to the current cooperative relationships, the traders
identified other traders they could potentially establish CRs with, the most frequent of which was 3
traders (44.5%) (Table 2). On the same 5-point scale, the respondents agreed (Mean=3.6, SD=.994) that
cooperative relationships with other traders are more beneficial than those with family members.
Table 2: Number of other traders that assist in the business
Current Potential
Number of traders Frequency Percentage Frequency Percentage
0 8 4.6 6 3.5
1 7 4.0 15 8.7
2 27 15.6 44 25.4
3 42 24.3 77 44.5

4 11 6.4 8 4.6
≥5 76 45.1 22 12.8
Total 173 100.0 173 100.0
The types of resources received most from other traders were finance (60.7%), supplies (stock)
(46.8%), and free labour (16.2%). On the other hand, the types of resources most sought from other traders
were premises (28.3%), free labour (19.7%), and finance (14.5%).
4.5 Using cooperative relationships for business support
To understand how the factors, influence the sustainability of female-owned informal businesses,
the relationships between sustainability (measured by years in business) and the influencing factors
namely EO, interpersonal trust, business growth and business outlook were explored. Pearson product-
moment correlation coefficients (r) were determined as presented in Table 3 and used in the analysis. Four
of the possible 10 bivariate correlations were positive and statistically significant; namely Outlook-
Growth, EO-Growth, EO-Outlook and Sustainability -Outlook. Respondents that experienced sales
growth (Growth) in the 12 months before the interviews were more positive about their business
(Outlook) still being operational in the next 12 months (r=.213, n=173, p<.01). EO was positively
associated with both Growth (r=.271, n=173, p<.01) and Outlook (r=.183, n=173, p<.05). Finally,
Sustainability (Years in business) was positively associated with the respondents Outlook (r=.215, n=172,
p<.01). According to guidelines, the correlations between the four variables are small despite their
statistical significance. To sum up, the only factor that has a statistically significant positive relationship,
albeit small according to Cohen (1988), with Sustainability is Outlook.
Table 3: Pearson-product moment correlations between variables
1 2 3 4 5
Growth*** 1
Outlook *** .213** 1
Entrepreneurial orientation (EO) *** .271** .183* 1
Trust **** -.058 -.045 .055 1
Years in business (Sustainability) .033 .215** .123 .023 1
(≤5 years or >5 years)
*. Correlation is significant at the 0.05 level (2-tailed).
**. Correlation is significant at the 0.01 level (2-tailed).
***. N=173
****. N=172
To estimate the percentage of shared variance between the variables in each of the four sets of
statistically significant correlations, the coefficients of determination (i.e., r squared as a percentage) were
calculated. The coefficients of determination were 4.5% for Outlook- Growth, 7.3% for EO-Growth, 3.3%
for EO-Outlook, and 4.6% for Sustainability (Years in business)-Outlook.
5. Discussion, conclusion and recommendations
5.1 The respondents
Findings show that almost 90% of the respondents were 29 and above years old with more than
half of them being married or widowed. These characteristics suggest that the respondents most likely
had family responsibilities. Taken together with their relatively lower levels of education, it is evident
that formal employment was not a feasible option for most of them, hence their participation in these
mainly survivalist informal business.
5.2 Business and owner characteristics
Contrary to the expectation that most of the business will have been operating for only a few
years, more than half of the businesses whose owners were interviewed had been in operation for over
five years at the time of the study. Given that business sustainability was measured by the numbers of
years that a business has been in operation, it is reasonable based on the findings to conclude that most of
the informal business are sustainable; and could be more sustainable with appropriate support.
To assess business growth, self-reported scores were employed to overcome the expected absence
of and reluctance to share financial records. Only 20% of the respondents agreed that their businesses
were selling more at the time of the interview than they did 12 months prior. On the other hand, the
business owners’ business outlook showed great optimism with 92.5% indicating that they expected their
business to be still operational in the following 12 months. Considering the respondents’ disagreement
that they were selling more now than they did 12 months before, one explanation for the observed
optimism or “positive outlook” could be that being survivalist, the business women had no option but to
continue their business operations to support themselves and their families.
Individual level characteristics, namely EO and interpersonal trust were measured and found to
be just above average for EO and high for trust. It is not surprising that the measurement for EO is not
higher given the argument that some informal traders were in business out of necessity. The high
measurement for trust was not unexpected considering women entrepreneurs’ tendency to nurture social
networks involving family and close friends supporting. This is in line with the findings of other studies
(Chen, Tan & Tu, 2015; Loscocco & Bird, 2012).
5.3 The nature of cooperative relationships
The most popular social networks that the respondents belonged to were stokvels (79.8%) and
church affiliated groups (55.5%). The others included various groups such as funeral societies. Most of
these networks are non-business related and focused on the financial, social and spiritual wellbeing of the
members. Further, these reflect weaker ties to the extent that they deal with contacts outside the family
and close friends. This suggests an understanding amongst the respondents that to obtain some resources,
they must transcend family and friend networks. These CRs are a source of bridging social capital which
is more diverse and has potential for business competitiveness (Aldrich & Meyer, 2015). There is clearly a
gap for formalised business focussed CRs to enhance bridging social capital that would offer access to a
more diverse resource pool. Formalised CRs would also facilitate mobilisation of the women informal
traders opening the door for easier access to linking social capital available through government and NGO
agencies (Baruah, 2004). Given the respondents’ experiences with existing CRs, these would not be a
completely novel idea to introduce.
5.4 The extent and use of cooperative relationships
There was indication of extensive use of both family and friends CRs (strong ties) and traders CRs
(weak ties) to obtain resources in the 12 months preceding the study. These CRs were both highly rated
by the respondents although the traders CRs were perceived to be more significant for meeting business
goals. Compared to those who obtained resources from family and friends, the percentages of
respondents who obtained resources from other traders was higher for finance, tools and machinery,
supplies (stock) and premises; underlining the extent of use and importance of CRs with other traders for
business operations. This suggests that the need for traders CRs is an important gap. It is also in line with
extant literature which highlights that although both strong and weak ties are useful for resources weak
ties provide access to more diverse and unique resources (Aldrich & Meyer, 2015; Chen, Tan & Tu, 2015).
5.5 Type of support received and sought through CRs
Resources accessed through the CRs included finances, free labour, supplies/stock and premises
in that order of importance. It appears that family and traders CRs are used to access resources
differentially as 60.7% compared to only 48.2% of the respondents obtained finances from traders
compared to family CRs respectively. Inversely 16.2% compared to 48% obtained free labour from traders
compared to family CRs. This finding supports the suggestion by Aldrich and Meyer (2015) that different
networks or CRs, and related intensity of ties, serve to provide different types of resources.
That the women use CRs extensively to access resources points to a need for more resources in the
course of running their business. It also suggests that they may be facing challenges obtaining the
resources from other sources, confirming findings from other studies (Chen, Tan & Tu, 2015:
Magidimisha, & Gordon, 2015).

5.6 Effect of CRs on business sustainability

Business sustainability measured by the number of years in business operation, was evident for
52% of the businesses. It was also found that CRs were extensively used by the respondents to obtain
resources, primarily finances, labour and supplies (75.2% family CRs and 89% traders CRs). Respondents
rated the contribution of family and traders CRs towards achievement of business goals above average.
Considering these findings, it is proposed that the resources accessed through CRs do contribute to female
owned informal business sustainability. Of significance is the flow of a variety of resources facilitated by
the CRs which would otherwise be unavailable to the respondents and without which business operations
might be near impossible.
6. Conclusions and recommendations
The study concluded that CRs related to family and friends and other traders were commonly
used by the respondents. Though both were deemed very significant for business operations, CRs with
other traders were more valued. Both types of CRs were widely used with finance, free labour and
supplies being the most common resources obtained. Thus, it is concluded that CRs contribute to
sustainability of informal retail businesses in the study area as they facilitate access to resources which
might otherwise not be available to the business owners.
Flowing from the discussion above the recommendations below are made with emphasis on
interventions that must recognise the challenges faced by women. These challenges include time
constraints due to women combined productive and reproductive roles.
The first recommendation is that stakeholders such as relevant local and national government
departments and NGOs engage in activities aimed at supporting the creation as well as extension of
existing CRs among female informal retail business owners. Supporting existing and/or creating formal
CRs such as traders’ associations and business focused stokvels would extend the traders current
networks and possible CRs. This could contribute to improving not only the depth but variety of traders’
sources of resources and potential income. While CRs with family and friends cannot be formalised,
improved earnings may enable them to be better able to reciprocate. This could enhance their chances to
benefit more from these CRs. Formalised CRs would also help to build capacity amongst the traders and
improve not only business sustainability, but profitability as well.
It is also recommended that these stakeholders provide business and skills training to female
informal retailers to enhance efficient and effective resource utilisation. The importance of this suggestion
becomes more apparent when the low levels of education and EO are considered. As mentioned above,
such an initiative needs to be deliberately and carefully designed to address women specific limitations
including timing and place of delivery to encourage maximum participation.
7. Limitations
A limitation of this study is that it was a cross sectional as opposed to a longitudinal examination
of the women’s CRs. Consequently, it may not give a nuanced understanding of the dynamics within the
CRs. This is a gap for further research including an examination of the circumstances in which women
informal traders use specific types of CRs for resource mobilisation.
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Consumer purchase regret: how personality influences

outcome regret and process regret
Zulkarnain
Ferry Novliadi
Siti Zahreni
Lila M. Iskandar
Faculty of Psychology, Universitas Sumatera Utara, Medan, Indonesia
Keywords
consumer, purchase, outcome regret, process regret, personality, neuroticism
Abstract
Consumers will evaluate the products they have purchased, whether the product meets their need. The
discrepancy between what they want and what they have purchased may lead consumers in purchase regret.
Personality plays an important role in determining of consumer purchase regret. The aims of this study are to
investigate personality influences toward consumer post purchase regret. This study was quantitative and
involved 207 undergraduate students at state University in Medan, Indonesia. The statistical analysis
showed that Big Five personality traits; extraversion, agreeableness, conscientiousness, neuroticism, and
openness to experience were related to post purchase regret, even outcome regret or process regret. The result
confirms that anticipated regret is proved to lead to increased levels of effort, when consumer executes his/her
behavioural intentions. Behavioural intentions are more likely to motivate and energize the target behaviour
when they embodied with anticipated regret. These findings indicate that it is important for managers to focus
on the antecedents of regret and to mitigate its consequences.
Corresponding author: Zulkarnain

Email addresses for corresponding author: Zulkarnain3@usu.ac.id
Introduction
In competitive world market, it is important to understand consumers feeling after purchase
including their satisfaction, regret and negative emotions (Bui, et al 2011). Consumers often make
purchase decisions while uninformed about their true valuations for a product or service. Such decisions
have emotional consequences once uncertainties are resolved, and consumers learn if they have made, in
hindsight, the wrong choice. Consumers face excessive information and difficult to process all product or
service information, before making a choice. This condition leads consumers to receive unexpected results
relating to a brand they are not aware of and not considered, after a purchase has made (Lin, 2006).
In recent years, students from many different disciplines realized that regret is not only an
affective reaction to bad decision outcomes or processes, but also that it is a powerful force in motivating
and giving direction to behaviour (Zeelenberg & Pieters 2007). After purchase a product, consumers will
evaluate the products they purchased, whether the product is in accordance with the purpose or the
product can meet their needs (Hawkins, et al., 2007). In purchase decisions, consumers often regret the
choices they have made. The consequences of regret are costly for companies because they lost costumer.
Regret is omnipresent and only few of us are free from regrets (and this comes at a very high price).
Regret is the emotion that we experience when realizing or imagining that our current situation would
have been better, if only we had decided differently (Zeelenberg & Pieters 2007). Regret is a specific
emotion that has a profound impact on decision-making. It guides behaviours since people often tend to
avoid it (M’Barek & Gharbi, 2012). Regret is motivated consumers to avoid, suppress, deny, and regulate
should they experience it (Lee & Cotte, 2009). When they compare a product and found that, the product
is less favorable or products that have different, it is referred to as the outcome regret (Zeelenberg &
Pieters, 2007).
According to Lee and Cotte (2009), post-purchase outcome regret is a comparison between what
has bought and what could have bought. Regret is evoked when consumers compare their inferior
decision process to a better alternative decision process. They feel regret if the foregone outcome is, or is
perceived to be, better than the current outcome (Lee & Cotte, 2009). Consumer will choice foregone
alternative when they purchase a product.
Lee and Cotte (2009) also explain that instead of comparing the outcomes, consumer regret due to
process, when they compare the decision processes. A sense of regret emerges through the process of
comparing the value of the product by comparing the product to purchase with the products that have
purchased by consumers. Consumers can regret if they feel that they have failed to implement the
decision process as they intended (Lee & Cotte, 2009). Some studies also suggest that the process of regret
related to the quality of the decision-making process of the purchases made by consumers (Connolly &
Zeelenberg, 2002).
Zeelenberg and Pieters (2007) state that there are two components in the process of repentance is
remorse happens when lack of consideration and regret occurs when too many considerations in buying a
product. The first component may occur due to two things, the sense of failure to carry out the decision-
making process for their inconsistent behaviour (for example; the desire to buy clothes because the quality
is good, but there is another dress that caught the attention of the colour but not the quality) and the belief
that they still need information to make good decisions (for example, when consumers want to buy
clothes, they do not find good information about these clothes).
Thus, the core of this component focuses on how consumers can do many things in order to
change the decision to get a better result. The second component is the regret of too many considerations
in buying a product. This condition causes consumers less able to maximize purchase based on amount of
information. Consumer feels regret when they intended to do was not executed properly (Lee & Cotte,
2009).
Regarding to regret, Creyer and Ross (1999) suggested that personality characteristics as factors of
regret. Personality characteristics can lead to a predisposition in the decision to make a purchase (McElroy
& Dowd, 2007). Big Five Personality consists of five personality traits. These five basics are used to
describe differences in cognitive, behavioural, affective, and social. These five basic dimensions often
interpreted as a model of the Big Five Personality and tend to be stable over the life span. McCrae, Robert
and Costa (2008) identified big five personality as Extraversion, associated with being outgoing, social
able, confident and enthusiastic; conscientiousness associated with being responsible, ambitious,
industrious and thorough; Openness to experience, associated with being broad-minded, imaginative,
original and curious; Agreeableness, associated with being cooperative, good-natured, forgiving and
generous; and neuroticism associated with being moody, worrying, insecure and inhibited.
The aim of this study is to investigate the influence of personality toward post purchase regret and.
Furthermore, Big Five personality is examined in order to determine post purchase outcome regret and
post purchase process regret. Finally, we detail and discuss the conclusions drawn from this study.
Literature Review
Regret is the emotion that has received the most attention from decision theorists (Michenaud,
2008). The experience of regret is more intense when the unfavourable outcomes are the result of action
rather than of inaction, consumer experiences more regret over negative outcomes that stem from actions
taken than from identical outcomes that result from actions foregone. Lee and Cotte (2009) explained that
there were two dimensions of outcome regret, namely regret due to foregone alternatives and regret due
to a change in significance. Regret due to foregone alternatives is that consumers compare their chosen
alternative to the known foregone alternative and/or unknown foregone alternative.
Meanwhile, regret due to a change caused by consumer’s perception of diminished product utility
from the time of the purchase to a certain point in time after the purchase. Lee and Cotte (2009) also
explained that that there were two dimensions of process regret. Regret due to under-Consideration
(when individuals feel regret due to under-consideration, regardless of the purchase outcome, they are
sceptical of the heuristic processing that led them to the purchase) and regret due to over-consideration
(when individuals regret due to over-consideration, regardless of the outcome, they are regretting that
they have put too much time and effort into the buying process)
Connolly and Zeelenberg (2002) proposed two core components of regret as 1) the upwards,
between-option counterfactual comparison, which they term “outcome regret‟ and 2) an intense feeling of
responsibility and self-blame, which is based on the justifiability of the decision or decision process. In the
context of consumer purchase decisions, the choice is often between selecting an option that appears safer
given the available information (e.g., a well-known brand) and a riskier option (an unknown but cheaper
brand).
When consumer perceives that their decision was unreasonable or inexplicable, they tend to feel
responsible for making the poor decision. Decisions can become unpleasant when consumers feel they
have made an incorrect choice. The intensity of regret in the context of consumption may increase
depending on the characteristics of the situation and personality (Delacroix & Jourdan, 2007). Thus, it
proposes:
H1: personality positively related to post purchase regret
In literature of Big Five personality, neuroticism trait expressed as opposed to emotional stability.
Neuroticism has special characteristics, which have irritability, low self-esteem, social anxiety, feelings of
fear, it is easy to worry, anxiety and inconsistent (McCrae, Robert & Costa, 2008). It also can affect the way
consumers in the purchase of a product and regret after purchase the product (Zeelenberg & Pieters,
2007). It has concluded that neuroticism is positively associated with post-purchase regret.
Consumer with neuroticism trait will be susceptible to regret. Meanwhile, openness to experience
refers to how individuals are willing to make adjustments with an idea or a new situation (Iskandar &
Zulkarnain, 2013). Openness to experience have the feature is tolerant, high capacity to absorb
information, focused, and able to be aware of the feelings and thoughts (McCrae, Robert & Costa, 2008).
Zeelenberg and Pieters (2007) proposed that consumers with less consideration or too much consideration
in making a purchase could also experience post-purchase regret. Openness to experience associated with
post-purchase regret because individuals with these traits tend to be a lot of consideration to the product
to be bought. The scale of the NEO-PI-R reflects the tendency of their act of contrition because of the
negative effects of which on the scale are in the phase of impulsiveness, which are not directly part of the
trait openness to experience (Whiteside & Lynam, 2001). It can be concluded that openness to experience
tend to experience post-purchase regret.
In agreeableness trait, indicates that the individual has a good adaptation skills and lead to a
friendly nature, the tendency to always give in, avoid conflict, and tends to follow others or conformity
(McCrae, Robert & Costa, 2008). Meanwhile, post-purchase remorse can occur when consumer do not
think about or do not pay sufficient attention to the products to be purchased (Zeelenberg & Pieters, 2007).
Related to this, it could predict that individuals who have a dominant trait agreeableness will tend to
perform conformity or follow others in making a purchase. So, when buying products, consumers may
experience post-purchase regret to alternative products that not selected or regret for the sudden change
of attitude. It concluded that agreeableness positively correlated with post-purchase regret.
Conscientiousness characterized by individual self-control of the social environment, think before
act, delay gratification, follow the rules and norms, planned, organized, and conscientious (McCrae,
Robert & Costa, 2008). According to Joanna (2007), individuals who have dominant conscientiousness trait
generally have high self-control in purchasing or seeking information about a product to purchase. Lee
and Cotte (2009) explain that the post-purchase regret tends to be greater when consumer has excessive
control to decisions than individuals who have little control over the decision. Thus, conscientiousness
associated with post-purchase regret.
Individual with extraversion, characterized by attitudes such as having a high enthusiasm; love to
hang out, have a positive emotional, energetic, interested in many things, ambitious, friendly towards
others, have a high level of motivation, establish relationships with others, dominant in the environment,
and can predict the development of social relationships (McCrae, Robert & Costa, 2008). Post-purchase
remorse is a cognitive emotion in which consumers deny, avoid, and arrange experiences that cannot
happen again during the process of selecting and purchasing a product (Zeelenberg & Pieters, 2007).
Furthermore, Zeelenberg and Pieters (2007) also said that the regret may occur if consumers spend too
much time and too much to consider looking for information about a product to be purchased. Regret
may even manifest itself in situations when consumers are satisfied with their present selections. When
comparing two alternatives and their respective outcomes, the satisfaction felt with a current selection is
not necessarily important; instead, the determinant factor is whether the chosen alternative leads to a
better or worse outcome than other available options (Bui, et al 2011).
H2: There is a positive relationship between a) neuroticism, b) openness to experience, c) agreeableness, d)
conscientiousness, e) extraversion with outcome regret.
H3: There is a positive relationship between a) neuroticism, b) openness to experience, c) agreeableness, d)
conscientiousness, e) extraversion with process regret.
Research Method
In this study, two hundred and fifty-seven questionnaires distributed to undergraduate students
at one of state university in Medan, Indonesia. Two hundred and seven questionnaires returned with
complete answers. The response rate of this study was 81%. The validity of the measurement tools
measured by constructs validity that designed to measure whether certain factors can fulfil their
functions.
Items in Post Purchase Regret Scale developed according to two-dimensions of purchase regret.
Those dimensions are outcome regret and process regret (Lee & Cotte, 2009). This scale used the Likert
model with five answer choices. Factor analysis of post purchase regret scale showed that (1) Loading
factor value for outcome regret ranges from 0.504 to 0.847; (2) the loading factor value for process regret
ranges from 0.530 to 0.808; The Alpha Cronbach coefficient of reliability of outcome regret (α = 0. 819) and
process regret (α = 0.824).
The Big Five Inventory scale is consisted neuroticism, openness to experience, agreeableness,
conscientiousness, and extraversion (McCrae, Robert & Costa, 2008). Respondent are requested to
respond using five-point scaled response options. The factor analysis of Big Five Inventory showed that
(1) Loading factor value for neuroticism ranges from 0.501 to 0.788; (2) The loading factor value for
openness to experience ranges from 0.572 to 0.789; (3) The loading factors value for agreeableness ranges
from 0.639 to 0.802. (2) The loading factor value for conscientiousness ranges from 0.501 to 0.768; (3)
Loading factors value for extraversion were 0.648 to 0.848. The Alpha Cronbach coefficient of reliability of
neuroticism (α = 0.730), openness to experience (α = 0.723), agreeableness (α = 0.701), conscientiousness (α
= 0.744), and extraversion (α = 0.794).
Result
This study involved Two hundred and seven undergraduate students. Their ages ranged from 17–
21 years and the average were 19.38 years (SD = 1.29). Majority of participants, 54.1% was female. The
result of Pearson correlation analysis showed that neuroticism, openness to experience, agreeableness,
conscientiousness, and extraversion significantly correlated with post purchase regret, outcome regret and
process regret. Result depicted in Table 1.
Variables Mean SD 1 2 3 4 5 6 7 8
1. Post purchase regret 28.70 4.65 1
2. Outcome regret 14.75 2.54 0.819** 1
3. Process regret 13.95 2.95 0.869** 0.429** 1
4. Neuroticism 17.65 2.48 0.288** 0.254** 0.235** 1
5. Openness to experience 17.07 2.85 0.236** 0.211** 0.190** 0.531** 1
6. Agreeableness 17.97 2.52 0.265** 0.251** 0.202 0.447** 0.579** 1
7. Conscientiousness 21.65 3.28 0.255** 0.240** 0.194** 0.414** 0.484** 0.615** 1
8. Extraversion 13.64 1.94 0.247** 0.225** 0.195** 0.474** 0.425** 0.399** 0.531** 1
**p < 0.01
Table 1. Correlation coefficients and significant levels among selected variables
Table 2 Showed that results of stepwise multiple regression analysis summarized into two major steps.
Step 1 showed that neuroticism positively and significantly correlated with post purchase regret (ß
neuroticism = 0.288; p<0.01). The inclusion of this variable had explained 8.3 per cent of post purchase
regret. In Step 2, neuroticism and Agreeableness significantly correlated with post purchase regret (ß
neuroticism = 0.212; ß agreeableness = 0.170; p<0.01).
Variables B SE B β R2 ΔR2 F
Post Purchase regret
Step 1
Constant 19.176 2.230 0.083 0.083 18.611**
neuroticism 0.540 0.125 0.288**
Step 2
Constant 16.059 2.589 0.106 0.098 5.293**
neuroticism 0.397 0.138 0.212**
Agreeableness 0.313 0.136 0.170**
**p<0.01
Table 2. Results for stepwise regression analysis post purchase regret
Regarding to variable outcome regret, in step 1, it showed that neuroticism positively and
significantly correlated with outcome regret (ß neuroticism = 0.254; p<0.01). In Step 2, it found that
neuroticism and Agreeableness significantly correlated with outcome regret (ß neuroticism = 0.178; ß
agreeableness = 0.171; p<0.01). This result confirms that neuroticism and Agreeableness contributed to
outcome regret. Meanwhile, in variable process regret showed that neuroticism positively and
significantly correlated with process regret (ß neuroticism = 0.235; p<0.01). This result confirms that only
neuroticism contributed to process regret. Result depicted in Table 3.
Variables B SE B β R2 ΔR2 F
Outcome regret
Step 1
Constant 10.159 1.232
neuroticism 0.260 0.069 0.254** 0.065 0.065 14.163**
Step 2
Constant 8.444 1.431 0.088 0.023 5.249**
neuroticism 0.182 0.076 0.178**
Agreeableness 0.172 0.075 0.171**
Process regret
Constant 9.017 1.437 0.055 0.055 12.028**
Neuroticism 0.280 0.081 0.235**
**p<0.01
Table 3. Results for stepwise regression analysis of outcome and process regret
Discussion
The results showed that all dimensions of the Big Five Personality correlated with post-purchase
regret. It demonstrated that Big Five Personality is an important construct of study when explaining
consumers post purchase regret. According to Creyer and Ross (1999), regret caused by a lack of effort in
seeking information about a product to be purchased and the presence of previous or antecedent factors.
Remorse after buying emerges due to personality factors from within the individual. Creyer and Ross
(1999) suggested that personality characteristics can lead to a predisposition in decision-making is based
on the wealth of experience of regret purchase (McElroy & Dowd, 2007). On the dimension of the Big Five
Personality explained that within the individual personality consists of five dimensions. Fifth dimension
is used to describe differences in cognitive behavioural, affective, and social.
This study found that a positive correlation between the dimensions of openness to experience
with post-purchase regret. Openness to experience refers to how individuals are willing to make
adjustments on an idea or a new situation. Openness to experience having easy tolerance characteristics
has the capacity to absorb information, and acting impulsively (McCrae, Robert & Costa, 2008). Customer
with openness to experience (have the capacity to absorb information and act impulsively) would be very
likely to suffer remorse for not paying attention or are looking for more information on the products to be
purchased for individuals to buy products that are not planned. Consumer will reduce cognitive
evaluation in buying a product and act notice the consequences that will come after bought the product.
At the time of purchasing a product, individual with openness to experience not consider things before
deciding on when to buy and Regret for their alternative was not selected or do not know enough
information about the product to be purchased (Zeelenberg & Pieters, 2007).
The results showed that a relationship between conscientiousness with post-purchase regret.
Conscientiousness dimension described thinking before acting, delayed gratification, follow the rules and
norms, have the self-control of the social environment, and conscientious (McCrae, Robert & Costa, 2008).
Ali and Asrori (2008) suggested individuals who have high self-control in the purchase of a product
would get as much information about the product. Instead of self-control is low in purchasing a product
will cause less people searching for information about the product to buy. Conscientiousness trait
described as individuals who have self-control against the environment (Zulkarnain et al., 2015). Post
purchase regret is impact of low self-control against a purchase. Individuals with low self-control less
attention to the proper ways to behave in a situation that is varied and less able to change their behaviour
in accordance with the demand of social situations. Low self-control of the purchase may result in an
adverse impact.
Another founding showed that a relationship between extraversion trait with post purchase
regret. Extraversion trait characterized by a positive attitude as having a high enthusiasm, like to hang
out, have a positive emotional, energetic, interested in many things, ambitious, friendly towards others,
have a high level of motivation in the mix, establish relationships with others, and dominant in its
environment and can predict the development of social relationships (McCrae, Robert & Costa, 2008). It
can be concluded that individuals with extraversion to be more searching for information about the
product to be purchased. Creyer and Ross (1999) states that the factors affecting regret is individual
involved in the purchasing process.
The results showed a relationship between agreeableness trait with post-purchase regret.
Agreeableness trait was described as friendly people, tend to have a personality that always give in, avoid
conflicts and to follow others or conformity (McCrae, Robert & Costa, 2008). Post-purchase regret can
occur when consumer do not think about or do not pay sufficient attention to the products to be bought.
In other words, post-purchase regret arising from lack of consideration for the product to purchased so
that the individual can expose to negative consequences or regret later (Zeelenberg & Pieters, 2007). The
tendency to follow others or conformity at the time of buying the product can cause the individual
concerned did not pay attention to the need for the product, do not notice the quality, and did not find out
about the products to be purchased so that these individuals may experience regret after buying.
Individuals with dimension of agreeableness may experience regret for the lack of consideration when
buying a product because of the encouragement of those who ultimately will affect the behaviour to
switch to another option.
This study also showed that a relationship between neuroticism with post-purchase regret.
According to McCrae, Robert and Costa (2008), neuroticism trait can be classified into personality that has
irritability, low self-esteem, social anxiety, feelings of fear, it is very easy to worry, anxiety and
inconsistent. In some of, neuroticism is the opposite of emotional stability (McCrae, Robert & Costa, 2008).
Zeelenberg and Pieters (2007) states that the regret may occur caused of the lack of consideration of a
product and inconsistent behaviour when purchasing the product. Inconsistent behaviour is the nature of
the individual with neuroticism trait.
McElroy and Dowd (2007) states that regret is inconsistency of consumer behaviour during the
selection process of purchasing the product. Lin (2006) also found that individuals who are in a negative
emotional state would be more likely to take risks in decision-making processes than individuals who are
in a positive emotional state. The more negative emotions felt by the consumer, the worse the purchasing
decisions they make, so that consumers are likely to experience post-purchase regret.
The result of stepwise regression analysis, we found that neuroticism and agreeableness
influenced to post purchase regret and outcome regret. Meanwhile, only neuroticism influenced to
process regret. It obviously that neuroticism is predictor of regret even outcome or process. Individuals
with neuroticism, tend to experience unpleasant and disturbing emotions and emotional instability more
likely to experience stress in daily life than those who have low level of neuroticism. Regret is associated
with feelings of self-blame, a drive to correct one’s mistake, and a tendency to ruminate and focus on past
events. It is an unpleasant feeling, coupled with a clear sense of self-blame concerning its causes and
strong wishes to undo the current situation. Roese et al., (2007) investigated about negative emotions such
as anger, anxiety, boredom, fear, guilt, and sadness and found that regret rated as being the most intense
of these negative emotions. It could conclude that neuroticism is associated with regret.
Conclusion
The study has a number of limitations, participants answered a survey and data based on self-
reported answers. Results may affect by social desirability and recall bias. The generalizability may apply
to those who decided to participate in the study. The study examined the impact of personality on
consumer regret. The big five personality variables, neuroticism had the strongest influence on outcome
regret and process regret, while openness to experience had the least influence. Therefore, future studies
can investigate other variables that might be associated with both post-purchase regret (outcome and
process) and their relationship antecedents. After the consumer has purchased the product, the consumer
will evaluate the satisfaction level. If the consumer feels regret, expectations towards the product have not
been met. In order to experience regret, individuals must also be able to construct alternative scenarios
other than the current state. Anticipated regret proved to lead to increased levels of effort, when consumer
executes his/her behavioural intentions. This suggests that behavioural intentions are more likely to
motivate and energize the target behaviour when they embodied with anticipated regret. Present study
could be regarded trying to concentrate on the role of personality in anticipated-regret in consumers’
decisions, and implicitly depicting the possible useful effects of it, for the consumer. An ability to
externally shift responsibility for bad choices can reduce aversive feelings of regret. Consumers are regret
adverse; therefore, their choices are made based on what they believe will result in minimal amounts of
future regret. To prevent future regret, consumer may try to improve the quality of the decision process
and outcomes, for instance, by increased internal (memory) or external information search.
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The impact of financial accessibility constraints and government

regulations on the organisational performance
of small-and-medium-sized enterprises
Zaid AbdulKarim Jaradat
Roshaiza Binti Taha
Rosliza Binti Mat Zin
Wan Zuriati Wan Zakaria
School of Maritime Business and Management
University Malaysia Terengganu, Malaysia
Keyword
Financial accessibility constraints, government regulations, organisational performance, SMEs,
manufacturing, Jordan.
Abstract
This paper seeks to investigate the impact of financial accessibility constraints and government
regulations on organisational performance of small and medium-sized enterprises (SME). On the basis of a
literature review covering works specialising in financial accessibility constraints, government regulations
and organisational performance, a quantitative study was carried out in Jordan using a sample composed by
291 Jordanian SMEs. Information was gathered by applying surveys addressed to the heads of accounting
departments / financial managers in SMEs. The data collected using the questionnaire shows 159 usable
questionnaires were received, which gives 54.6% response rate. The findings reveal that financial accessibility
constraints negatively influence organisational performance, while government regulations are not
significantly linked with organisational performance. In order to reduce the negative impact of financial
accessibility constraints on SMEs performance, the government of Jordan and financial institutions should
facilitate access to finance for SMEs as a critical factor influencing their performance. Further, the
government of Jordan must legislate new regulations to improve performance and continue removing
unnecessary burdens that may effect SMEs. Through study outcomes, the interested bodies including the
government of Jordan, financial institutions, to name a few, could be assisted in formulating the policies
associated with SMEs that are evidence-based. Aside from adding important knowledge to the body of the
organisational performance of SMEs, this study can be a starting point for further investigation and analysis
of organisational performance among SMEs.
Corresponding author: Zaid Abdulkarim Jaradat

Email address for corresponding author: z.jaradat@yahoo.com
1. Introduction
Small-and-Medium-sized Enterprises (SMEs) have received significant attention from scholars in
the various areas of business management and economics. Bai et al. (2017), Cowling et al. (2018), Marri et
al. (2007) and Wang et al. (2016) are among the researchers who highlighted the important role of SMEs
towards ensuring growth stability. In the context of global economy, SMEs are viewed to have the
capacity to provide more opportunities for jobs, growth and progress in comparison to the large
manufacturing sector (Dogan et al., 2017; Kuhn et al., 2016; Hijzen et al., 2010).
In general, based on the context of the manufacturing sector, the SMEs form the core of economic
development and such enterprises comprise the economic development model, with emphasis on its
contribution to domestic production, export earnings, low requirements for investment and job creation
(Garengo and Sharma, 2014; Mahmud and Hilmi, 2014; OECD, 2017). In this regard, SMEs are the
predominant form of enterprise in the organisation for economic co-operation and development (OECD)
area, accounting for approximately 99% of all firms. They provide the main source of employment,
accounting for about 70% of jobs on average, and are major contributors to value creation, generating
between 50% and 60% of value added on average. In emerging economies, SMEs contribute up to 45% of
total employment and 33% of GDP. When taking the contribution of informal businesses into account,
SMEs contribute to more than half of employment and GDP in most countries irrespective of income
levels (OECD, 2017).
Within the Jordanian context, as reported in JCI (2015), SMEs constitute 98% of the manufacturing
sector. This sector also significantly contributes in promoting the Jordanian dinar exchange rate
considering their stability by supporting the Jordanian foreign currency reserves with over $8 billion
annually. The market share of the sector represents 60% of the total investments that benefit from
investment law, and the sector also contributes to the achievement of financial stability through its
provision of over $1.4 billion to the treasury every year via direct and indirect taxes. Although they seem
as important, Ando and Kimura (2017), Cowling et al. (2015) and Mahmood and Hanafi (2013) identified
that SMEs in many countries exhibit a low level of performance. Focusing on developing countries, SMEs
are still lagging behind in terms of their business growth and performance, which has resulted in the
inability to provide optimum benefits to both society and economy (Ngek, 2014; Olatunji, 2013; Solanke et
al., 2015).
A similar problem was also found in Jordan whose economy relies heavily on the performance of
manufacturing SMEs (JCI, 2015). In the midst of the declining performance of most sectors in Jordan
(Almajali et al., 2012; ECIJ, 2014), large numbers of SMEs in Jordan are struggling to survive in today’s
competitive environment, since most SMEs are faced with a number of challenges in their search for
competitiveness and sustainability (Al-Hyari, 2013; Al-Hyari et al., 2012; Sami El-Khasawneh, 2012).
In fact, SMEs globally, not only in Jordan, are now facing various issues, including the finance
related issues (see Irwin and Scott, 2010; Okpara, 2011; Mina et al., 2013; Lee et al., 2015; Al-Hyari et al.,
2012; Cowling et al., 2018; Madrid-Guijarro et al., 2016), as well as issues that arise from government rules
(see Al-Hyari et al., 2012; Madrid‐Guijarro et al., 2009; Siaw and Rani, 2012; Strobel and Kratzer, 2017; Gill
and Biger, 2012).
Majority of previous studies regarding the impact of influence factors on performance were
focused on the large manufacturing companies. In the case of Jordan as developing country, previous
studies focused on performance in the large manufacturing companies, with obvious neglect of SMEs.
Further, there is a need to promote the manufacturing sector which continues to pose challenges among
developing countries (Ijirshar, 2015; Sami El-Khasawneh, 2012). Considering this, the vital role played by
these sectors must not be neglected by both the developed or developing countries. The declining
performance of manufacturing SMEs in Jordan is an issue of serious concern and is worth investigating.
Considering the remarkable contribution of manufacturing SMEs in Jordanian economy, this sector has
been selected so that some reasonable and plausible solutions could be recommended to enhance the
performance of SME manufacturing sector and develop the economy of Jordan.
2. Theoretical Review
Every country’s economic growth largely hinges on the performance of its organisations in
various sectors with the inclusion of the manufacturing sector as evidenced by Tassey (2014) and Yu et al.
(2017). The SMEs performance is linked with the country’s performance in the manufacturing sector
(Valmohammadi, 2011; Demirbag et al., 2006). Similar to many definitions, Rhodes et al. (2008) claimed
that the organisational performance begins from a specific position and reaches an aim that covers target
points like profit, cost reduction, market share, sale volume, customer satisfaction and rate of product
development. Similarly, Richard et al. (2009) regarded organisational performance as one of the essential
constructs in attaining organisation goals. Recently, Nazarian et al. (2017) indicate performance as an
evaluation of the level of success. This is consistent with the previous discussion by Selden and Sowa
(2004) where they described the organisational performance of the organisation’s actual outcomes being
gauged through its goals and objectives; in other words, organisational performance indicates the
capability of the organisation to effectively realise its goals and objectives.
In contrast, there are obstacles that inhibit firms’ growth and considered as growth barriers
(Davidsson, 1991; Patanakul and Pinto, 2014). Environment-related obstacles that face firms include
government regulations and bureaucracy (Hadjimanolis, 1999; Strobel and Kratzer, 2017). Specifically,
government regulation can dampen the entrance and daily functioning of firms (North, 1990) but can also
ease entrepreneurship activity, for instance, the setting up of new business (Sathe, 2007). Therefore,
government regulation is among the external factors that can substantially affect the performance of the
organisation, directly and indirectly (Kitching, 2006).
In a similar context, financial constraints are firms’ inability in obtaining funds for profitable
investment projects, such inability causes inefficient resources allocation and diminishes firm performance
(Banerjee et al., 2015). It is clear that financial constraints significantly affect the capacity of the firm in
expanding and sustaining in the market (Fraser et al., 2015; Mina et al., 2013). Also, the likelihood of firm
survival is highly determined by financial constraints (van der Schans, 2015).
2.1 Research Model
The establishment of the theoretical framework is an instrumental step within a research
methodology, owing to the fact that the theoretical framework clarifies the study’s directions and
contributions. As such, the theoretical framework offers a model that explains logical connections among
numerous ascertained factors pertinent to the research problem (Cavana et al., 2001).
Financial accessibility constraints refer to the extent to which relevant parties believe that various
financial obstructions restrict performance, and these obstructions include collateral requirements,
unfavourable interest rates, insufficient firm-retained earnings, local banks having insufficient resources,
as well as access to a non-bank equity investor (Martin et al., 2007). For SMEs, Cowling et al. (2016) and
Fraser et al. (2015) believed that the access to financial services enhances business performance.
Government regulations can affect productivity and competitiveness of the firms because of the increased
operating cost burden (Patanakul and Pinto, 2014). Furthermore, Huggins (2000) and Mag and
Varothayan (2015) reported government regulation as an outside factor effecting the performance of
SMEs.
This research used institutional theory to support the research model. Institutional theory
concentrates on the resilience aspects of the social structure; this includes rules, norms, and routines
deemed as an influential guiding principle for social behaviour (Scott, 1987). The institutional theory
posits that the survival of the organisation to attain an efficient level of production necessitates
compliance with the social norms of acceptable behaviour (Hussain and Gunasekaran, 2002).
Institutional theory calls particular attention to the role of government and professional
associations in an organisation's institutional environment and their potentially profound influence on the
organisation's performance (Scott, 1987; Zucker, 1987). Furthermore, the institutional theory has emerged
as a powerful explanation to account for the influence of external institutional factors on organisational
decision-making and outcomes (DiMaggio and Powell, 2000; Mizruchi and Fein, 1999). Thus, this study
attempts to offer a better understanding of organisational performance. As such, the institutional
framework was employed to examine the linkage between financial accessibility constraints and
government regulations as independent variables, with organisational performance as the dependent
variable as shown in Figure 1.
Financial Accessibility
Constraints H1
Organisational Performance
H2
Government Regulations
Figure.1: Research Model
2.2 Hypotheses development

Access to finance is very important in assuring the growth of firm (Cowling et al., 2018). A strong
positive link between financial status and the economic growth of a country has in fact been reported by a
number of studies. Kerr and Nanda (2009), Smolarski and Kut (2011) and Tsoukas (2011) affirmed that the
probability of investment and employment is increased by financial status. In Jordan as well as in other
developing countries, SMEs are plagued by numerous growth constraints aside from possessing less
access to formal sources of external finance including banks (Hassanein and Adly, 2008; Al-Hyari et al.,
2012; Al-Hyari, 2013). According to Abdesamed and Wahab (2014), the proportion of SMEs indicating
access to finance as their most pressing problem is substantial and broad, whereas only 10% of large firms
consider access to finance as their most pressing issue.
Beck et al. (2006) indicated financial access as a crucial determinant of the enterprises’
performance due to the working capital that the access provides; it also promotes better firm innovation
and dynamism, improves entrepreneurship, stimulates asset allocation that is more efficient and gives the
firm better capacity in exploiting growth opportunities. Poor access to finance among firms is caused by
the information problems, weaknesses in financial and legal systems, high default risk and insufficient
financial facilities (De Maeseneire and Claeys, 2012; Beck, 2007).
Looking into the factors that impact SMEs’ survival and performance, Harash et al. (2014) and
Shariff et al. (2010) reported the strong influence of access to finance on business performance. In other
words, enterprises with access to finance should demonstrate superior performance in comparison to
those without. This is in line with the viewpoint of Cowling et al. (2016) and Fraser et al. (2015), where
they claimed that the firms could improve their performance when they have access to finance, while
Zhou (2015) concluded that the constraints in access to finance adversely impacted the performances of
Chinese SMEs. Therefore, this leads to the below hypothesis:
H1: There is a negative relationship between financial accessibility constraints and organisational performance of
SMEs.
Government regulations can put needless burdens on SMEs. As such, start-up, investment,
innovation as well as employment growth of SMEs can be impeded. This can consequently impact the
national economic performance on the whole (Fiori et al., 2012). Freeman and Reid (2006) found that
government regulations and bureaucracy were a key constraint facing small firms in Europe. Also, in
investigating the impact of regulation on the performance of small firms, Kitching (2006) reported that
regulation has both direct and indirect significant impact on organisational performance. SMEs are
suffering from the adverse impact of government regulations aside from being victimised by the
unintentional consequences of regulations for large companies (Baldwin et al., 2012). Moreover, other
studies including the works of Huggins (2000) and Mag and Varothayan (2015) reported government
regulation as an outside factor affecting the performance of SMEs.
Specifically, government regulations can have a negative effect on productivity and
competitiveness of the firms because of the increased operating cost burden. This was evident in several
European industrial sectors, where there were increased worries about the decline in competitiveness of a
number of European industries compared to those of the US and Asian countries (Patanakul and Pinto,
2014). Moreover, Gill and Biger (2012) found that the regulatory issues and rules have adverse effect on
small business growth in Canada. In Jordan, the results show that government regulations have a
significant negative relationship with the export performance of SMEs (Al-Hyari et al., 2012).
On the other hand, organisations need government regulations because regulations assure best
practices at all stages. This leads to the assurance of risk management, and businesses have assured the
preservation of public interest, thereby assuring business’s success and progression. In a similar context,
in a market economy, it is suggested that the government take maximum advantage of modern
regulations and incentives and employ them to create effective market economy (Dai et al., 2009).
Therefore, this leads to the below hypothesis:
H2: There is a significant relationship between government regulations and organisational performance of SMEs.
3. Research Methodology
A questionnaire was used for the purpose of investigating the impact of financial accessibility
constraints and government regulations on organisational performance. The population for this study
comprised the Jordanian manufacturing SMEs. SMEs, as defined by OECD (2017), are firms that employ
10-249 workers. Sample composed of 291 firms was randomly drawn from two subsets; small and
medium manufacturing firms. The questionnaires were distributed to heads of accounting departments
/financial managers.
The questionnaire was developed after an extensive review of the literature related to financial
accessibility constraints, government regulations, and organisational performance. The researchers
adapted items for financial accessibility constraints from the measurement instruments of Martin et al.
(2007). We adapted items for government regulations from the studies of Yu and Cannella (2007). Finally,
we adapted items for organisational performance from the past studies of many researchers (e.g., Baines
and Langfield-Smith, 2003; Chenhall and Langfield-Smith, 1998; Jusoh and Parnell, 2008).
A five-point Likert scale was used for the items that measured the financial accessibility
constraints and government regulations; the scales range from S1 which is indicating “strongly disagree”
and S5 which is denoting “strongly agree.” Regarding the organisational performance, the instrument
employed to measure organisational performance is based on six items. The perceptions of financial
managers or heads of accounting departments about increase/decrease organisational performance for
their firms were assessed using the non-financial and financial indicators. The respondents were asked to
rate their company within the period of the past three to five years by indicating the degree of perceived
performance represented by six items using a five-point Likert scale; the scales range from S1 which is
indicating “decreased significantly” and S5 which is denoting “increased significantly.” The data collected
using the questionnaire over the period of five months from June 2016 to November 2016 shows 159
usable questionnaires were received, which gives 54.6% response rate.
4. Results and Discussion
4.1 Background Information about the Responding Companies
In the survey phase, respondents were asked to provide background information of their
companies. The summary of the key characteristics of their companies, such as company age,
manufacturing activities, number of employees, annual sales, and type of ownership are provided in
Table 1: Background information of responding companies
Years of Operation Frequency Percentage Cumulative Percentage
6-10 years 19 12 0
11- 15 years 38 24 12
More than 15 years 102 64 36
Total 159 100 100
Manufacturing Activities Frequency Percentage Cumulative Percentage
Food and beverages 38 24 0
Electronic 19 12 24
Leathers and clothing 24 15 36
Pharmaceutical and medical 19 12 51
Chemical 54 34 63
Other 5 3 97
Total 159 100 100
Number of Employees Frequency Percentage Cumulative Percentage
10-49 43 27 0
50- 249 116 73 27
Total 159 100 100
Annual Sales Turnover Frequency Percentage Cumulative Percentage
1- 3 million JD 49 30.8 0
More than 3 million JD 110 69.2 30.8
Total 159 100 100
Type of Ownership Frequency Percentage Cumulative Percentage
Government-owned company 10 6.3 0
Private company 114 71.7 6.3
Shared between private sector and foreign 22 13.8 78
partner
Shared between government and private sector 13 8.2 91.8
Total 159 100 100
Note: Jordanian Dinar (JD) = 1.41 US Dollar ($)
4.2 Data Analysis
This section reports the results of factor analysis. The construct measures are evaluated in this
study in terms of reliability and validity. The unidimensionality of the study variables is implied by the
outer model, in the meaning of factor analysis. Following the affirmation of the construct measure’s
reliability and validity, the structural models were evaluated, and the linkages between the latent
variables were studied. The assessment of the outer model and inner model was the step that followed the
data checking and screening (Hair et al., 2013, Vinzi et al., 2010). The evaluation of the outer model
(measurement model) and the inner model (structural model) in this study were performed using the
PLS-SEM.
4.2.1 Measurement Model
First, the PLS-SEM evaluated the measurement model (outer loadings). The outer model includes
the component measurement; it ascertains how well the indicators (items) theoretically load and relate
with the corresponding constructs. Thus, based on the analysis of the outer model, the survey items
indeed measure the constructs they were created to measure. In other words, the items are reliable and
valid.
The two key criteria employed in PLS-SEM analysis in the evaluation of the outer model are
reliability and validity (Hulland, 1999). The deduction made about the relationship nature among
constructs (inner model) is dictated by the measures’ reliability and validity. The outer model’s suitability
is assessable by scrutinising the individual items reliabilities, convergent validity of the measures and
discriminant validity. The reliabilities of individual item comprise indicator reliability and internal
consistency reliability with the use of composite reliability (CR), whereas the measures’ convergent
validity is linked with individual constructs with the use of average variance extracted (AVE), while the
discriminant validity employs the criterion of Heterotrait-Monotrait ratio (HTMT). Researchers generally
refer to the guidelines by Hair et al. (2011) and Götz et al. (2010) when evaluating the reflective
measurement items.
Table 2: Convergent validity analysis
Construct Items Loadings Cronbach's Alpha CR AVE
FAC 0.866 0.908 0.713
FAC1 0.850
FAC2 0.877
FAC3 0.752
FAC4 0.892
GR 0.857 0.909 0.771
GR1 0.773
GR2 0.952
GR3 0.900
OP 0.935 0.949 0.756
OP1 0.920
OP2 0.722
OP3 0.902
OP4 0.891
OP5 0.882
OP6 0.885
Note: FAC= Financial Accessibility Constraints, GR= Government Regulation, OP= Organizational
Performance
The CR and Cronbach’s alpha values for each construct were inspected in this study, and the
results are shown in Table 2. As can be seen from the table, all values of CR and Cronbach’s alpha are
higher than the proposed threshold value of 0.70 by scholars (e.g., Hair et al., 2013; Henseler et al., 2009;
Wong, 2013). In particular, this study shows (CR) values ranging from 0.908 to 0.949 which affirms the
measurement model’s reliability. Convergent validity is about the extent to which measures of the same
theoretically linked constructs are related (Henseler et al., 2009). Convergent validity thus demonstrates
the correlation level among the measures of the same construct (Hair et al., 2013).
Further, the identification of an element of convergence in the construct’s measurements employs
the AVE with a threshold value of 0.50 and higher (Henseler et al., 2009; Hair et al., 2012). AVE value of
0.50 means there is sufficient convergent validity. This means that the latent construct describes 50% of the
variance of its indicators and shows sufficient convergent validity (Hair et al., 2013). In this study, the
evaluation of convergent validity is through the examination of AVE values, where the researcher has
applied the method of bootstrapping of a certain number of subsamples (e.g., 5,000) in a random manner
with the initial dataset used for replacement. As highlighted in Table 2, the value of AVE of all the
constructs lies between 0.713 and 0.771, which is higher than the threshold value of 0.50. Thus, convergent
validity is established in this study.
Heterotrait-Monotrait ratio (HTMT) is a new approach to the evaluation of construct’s
discriminant validity (Henseler et al., 2015). During this stage, the HTMT method was employed as a
more stringent criterion as opposed to the conventional approach. Using the PLS-SEM software, the
HTMT criterion of correlations in this study was computed. In this study, HTMT values were all smaller
than 0.85 for each latent variable and were within the range of 0.099 to 0.599. Based on HTMT values in
this study, there is discriminant validity, as mentioned by (Hair et al., 2016). Table 3 presents the results of
HTMT criterion for each variable in more detail.
Table 3: Discriminant validity based on HTMT criteria
HTMT criterion
FAC GR OP
FAC
GR 0.099
OP 0.599 0.110
Performance
4.2.2 Structural Model
In PLS-SEM path modelling, the structural model (inner loadings) is assessed by estimating the
path coefficients along with the R² value. While path coefficients show the strength of the associations
among the predictor and criterion constructs, the R² value is a scale of the predictive intensity of a model
for the criterion (dependent) constructs (Chin et al., 2003). The significance of path coefficients in the
model lends support for hypothesised associations (Chin, 2010). Smart-PLS included the use a bootstrap
resampling method (5000 resamples) to determine the significance of the paths within the structural
model. As evidenced in the literature on multivariate data analysis, the structural model is assessable
through R² value, R-Square Adjusted and the cross-validated redundancy; all will be elaborated in Table
4.
Table 4: Predictive quality of the model
Variable Variable type R2 R2 adjusted Q2
OP Endogenous 0.322 0.314 0.222
OP= Organizational Performance.
Coefficient of determination (R²) of endogenous latent variables is among the most typically
employed criteria in structural model assessment (Hair et al., 2013). Specifically, R square value at or
larger than 0.67 is deemed substantial, at 0.33 is deemed moderate and at 0.19 is deemed weak (Chin,
1998). R² values larger than 0.10 are also deemed substantial (Falk and Miller, 1992). Based on the criteria
mentioned, the R² of the endogenous variable which is organisational performance are at 0.322. These
values are deemed moderate which reflect the sufficiency of the established model.
Stone-Geisser’s Q-test is another fit indicator of the model. It determines the model’s capacity in
making a prediction of the parameter estimation. Using the blindfolding routine, the Q test value was
obtained via PLS software. For each endogenous latent variable, the cross-validated redundancy value
attained is greater than zero. In particular, the value attained is 0.222 for organisational performance. As
evidenced by the estimated outcomes, the structural model has the capacity of predicting the associated
estimations because the construction of the values was good (Chin, 1998; Hair et al., 2013; Henseler et al.,
2016; Henseler et al., 2009).
4.2.3 Hypotheses Testing
The determination of the goodness of the outer model is followed by the testing of hypothesised
linkages among the constructs. With the application of PLS-SEM 3.0, the test was performed on the
hypothesised model using the algorithm of PLS-SEM. Then, the path coefficients were created (see Figure
2 and Figure 3).
Figure 2: Path coefficient and R² values for the research model
Figure 3: PLS bootstrapping (t-values) for the research model

Table 5: Results of the inner structural model
No Hypotheses Path coefficient S\D T Statistics P-Values Decision
H1 FAC -> OP -0.560 0.044 12.589 0.000 Supported
H2 GR -> OP 0.058 0.074 0.759 0.448 Not Supported
Performance.
4.3 Discussion of Results

The results of the study demonstrate a negative relationship between financial accessibility
constraints and organisational performance. This result supports the hypothesis of the study, H1. This
result is consistent with previous studies conducted by Zhou (2015) and Mutuku et al. (2016), who
concluded that constraints to finance access adversely impact the performance of SMEs. In addition, the
results of the study are consistent with studies that support a negative relationship between financial
accessibility constraints and performance such as Mbogo (2011), who claimed that insufficient financing
and inaccessible finance are critical factors or constraints that have an adverse impact on the performance
of SMEs. Also, the study results are in line with the viewpoint of Cowling et al. (2016) and Fraser et al.
(2015), who claimed that the firms could improve their performance when they have access to finance.
Furthermore, this result is also consistent with institutional theory, which asserts the impact of
institutional factors on the outcomes of organisation (DiMaggio and Powell, 2000; Mizruchi and Fein,
1999). Based on the above, financial accessibility constraints seem the critical factor that has an adverse
impact on the organisational performance in the context of SMEs.
The result of the study has not found enough evidence to support a significant relationship
between government regulations and organisational performance of SMEs. This result does not support
the hypothesis of the study, H2. However, this finding is inconsistent with the viewpoints of researchers
such as Al-Hyari et al. (2012), Freeman and Reid (2006), Huggins (2000), Kitching (2006) and Mag and
Varothayan (2015), who reported that government regulations are an outside factor affecting firm
performance. Furthermore, the result is inconsistent with an institutional theory which assumes the
impact of government and professional associations on the outcomes of organisation (DiMaggio and
Powell, 2000; Mizruchi and Fein, 1999).
The researchers believe that this difference may be due to the fact that the Jordanian government
tries to remove needless burdens that may effect SMEs, and this is part of the national economic
performance overall. As well, government regulations for SMEs vary from country to country and from
developed countries to developing countries due to differences in culture, industrialisation, and business.
5. Conclusions and Recommendation
This study investigates the impact of financial accessibility constraints and government
regulations on organisational performance of SME in the context of Jordan. The results demonstrated that
the financial accessibility constraints negatively influence organisational performance, while government
regulations are not significantly linked with organisational performance. Considering the study findings,
the government of Jordan and financial institutions should facilitate access to finance for SMEs as a critical
factor influencing their performance. Furthermore, the government of Jordan must legislate new
regulations to improve performance and continue removing unnecessary burdens that may effect SMEs.
This study is providing the knowledge on organisational performance in SMEs in a developing
country like Jordan. Through study outcomes, the interested bodies including the government of Jordan,
financial institutions, just to name a few, could be assisted in formulating the policies associated with
SMEs that are evidence-based. Moreover, by understanding factors that impact organisational
performance, the professional bodies could enrich knowledge of Jordanian SMEs about the factors that
have an impact on their performance. This could be attained with the use of workshops, professional
training, conferences and educational programs. The study can be a starting point for further investigation
and analysis about organisational performance among SMEs in the context of Jordan.
The sample of the study was restricted to a limited number of variables, which may cause some
significant variables to be missed. In other words, being aware of the impact of other factors on SMEs
performance would be crucial; these factors include tax regulations and policy instability. Furthermore, a
sample of the study was limited to Jordanian manufacturing SMEs only. As such, the findings are not
generalizable to other organisations in other industries. Concentrating on other sectors including the
service sector may be beneficial. Then, a comparison should be made between the outcomes from both
sectors. This way, the possibility of generalising the outcomes would be increased.
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Determining shopping malls customers’

satisfaction and loyalty
Makgopa, SS
University of South Africa, South Africa
Keywords
shopping mall, customers satisfaction, customer loyalty, quantitative research, descriptive analysis
Abstract
The shopping mall retailers are operating in a highly competitive retail environment which requires
effective management in order to satisfy the customers and achieve customers’ loyalty. The primary purpose
of this paper was to determine the satisfaction and loyalty among shopping mall customers about the shopping
malls. Secondly, this study aimed to determine whether statistically significant differences exist between the
means of the shopping mall customers considering their age groups and gender. A quantitative research
approach was followed to achieve research objectives. Self-administered questionnaires were used during data
collection at the Kolonnade Shopping Centre in Gauteng Province, South Africa. Descriptive statistics and
parametric tests, in the form of independent samples t-tests and One-way ANOVAs, were used to determine
significant differences between different age groups. SPSS Version 23 software was used for analysing
quantitative data. Internal consistency reliability of the measurement scales measuring shopping mall
customers’ shopping motives were assessed by calculating Cronbach’s alpha values. The results of the study
uncovered that the satisfaction level amongst the shopping mall customers tend to be high. The results further
provided an important understanding of the relationship of demographics (age and gender) on customers’
satisfaction levels and loyalty at the shopping mall. This study contributes to the current literature and
provides valuable information to retailers and shopping mall developers in general, with regard to marketing
communications and marketing strategies that aim to attract shopping mall customers. Suggestions for future
research are provided.
Corresponding author: Makgopa S S

Email address for corresponding author: makgoss@unisa.ac.za
Accepted: 3rd April 2018 DOI: https://doi.org/10.24052/JBRMR/V13IS01/ART-12
1. Introduction
The shopping is an important activity of consumers’ lives and it is continually changing, making
the investigation and understanding of this field important in order to create a pleasant shopping
experience and achieve customers’ satisfaction. The study of consumer behaviour is not recent. Since the
1950s, the rational and emotional contexts of consumption have been studied. Several shopping
classifications were proposed, shaping a number of motives into two forms, namely, hedonic and
utilitarian shopping motivations. Shopping motivations have been researched in consumer shopping
behaviour over the past decades (Wagner & Rudolph, 2010). Shopping mall customers visit shopping
malls not only to search for products, but they also view these shopping mall visits as an entertainment
activity that provides fun and pleasure (Kim, Lee & Kim, 2011). Shopping mall customers tend to engage
in various activities when visiting shopping malls (Farrag, El Sayed and Belk, 2010). According to Kim,
Lee and Suh (2015) today’s customers tend to purchase products while spending time in a shopping mall,
which includes a combination of shopping and culture, rather than just going to a mall for the sole
purpose of purchasing goods, and this has already become a lifestyle. Hunneman, Verhoef and Sloot
(2017) added that consumers tend to assess store attributes differently depending on the type of shopping
trip. In this paper the focus is on customer satisfaction and loyalty at a shopping mall from South African
context due to limited studies on the topic.
The next section outlines the research purpose of this paper in detail.
2. Research purpose
The competition in the retail environment requires shopping mall managers to find better ways to attract
shopping mall customers. To achieve this goal, it is necessary to determine the shopping malls customers’
satisfaction level and their level of loyalty towards the mall. The study focused at one of regional
shopping malls located in South Africa, in the City of Tshwane, namely, Kolonnade Shopping Centre.
The next section presents theoretical background and literature review on previous studies on shopping
malls.
3. Theoretical background and literature review
This section focuses on the previous literature on shopping malls starting with the background on
shopping mall, particularly, the definition of shopping mall, and followed by different shopping
motivations that motivate shopping mall customers to visit shopping malls are also revised. Secondly,
previous studies that investigated significant differences between demographic characteristics of
shopping mall customers and hedonic and utilitarian motivation are reviewed. Finally, previous studies
that determined the shopping mall customers’ satisfaction and loyalty levels towards shopping malls and
the importance in shaping shopping mall customers’ behaviour are also reviewed.
3.1 The definition of shopping malls
Shopping malls are characterised as venues that enable a comfortable shopping experience and
have turned into social centres and recreational facilities for various activities (Telci, 2013). At the
beginning of their life cycle, shopping malls were primarily economic entities that provide shopping mall
customers with a wide selection of stores and merchandise at a single location. Shopping malls have
adapted to new designs and tenant varieties to meet the changes in consumers’ needs, desires, values, and
lifestyles. This view on shopping malls is also supported by Farrag et al. (2010) that shopping malls have
shifted from involving just a traditional shopping activity to retail-entertainment complexes and
community centres for social and recreational activities. In addition, according to Farrag et al. (2010)
shopping mall customers visit these shopping malls for various motivations.
There are different types of shopping malls, namely, convenience shopping mall, neighbourhood
shopping mall, community shopping mall, regional shopping mall and super-regional shopping mall. In
this study, regional shopping malls were of the primary focus. Regional shopping mall is defined by
having two or four major tenant stores in a building and with the floor area between 250,000 to 800,000
square feet. This shopping mall offers business products, domestic appliances, a variety of services and
entertaining equipment (Juhari, Ali & Khair, 2012).
3.2 Shopping mall customers’ shopping motivations
Shopping mall customers visit shopping malls not only for searching for products, but they also
view these visits as an entertainment activity that provides fun and pleasure from the shopping
experience (Kim et al., 2011). Shopping mall customers tend to engage in numerous activities when
visiting shopping malls (Farrag et al., 2010). This is further supported by Gilboa (2009) who identified
activities and grouped them according to the following categories:
3.2.1 Consumption activities by shopping mall customers
Consumption activities are activities that involve visiting coffee-shops/restaurants, gaining new
knowledge regarding new products and trends, and window shopping. Farrag et al. (2010) indicated that
window shopping involves a situation where a shopping mall customer browses or goes through window
displays to feel part of shopping mall culture and environment. This browsing on window displays allows
shopping mall customers to keep track of fashions and keep themselves informed of the latest changes in
the retail market. Shopping mall customers also visit restaurants and coffee shops at the shopping mall
just to have a cup of coffee or for lunch. In addition, family members can also go to these restaurants
together for family bonding (Farrag et al., 2010). Kuruvilla and Joshi (2010) added that within a shopping
mall, shopping mall customers may be categorised into groups that differ in their shopping reasons such
as browsing, purchasing clothing, shoes, accessories and gifts.
Kuruvilla and Joshi (2010) pointed that different shopping mall customers patronise the shopping
mall and can have interest in different groups of products. Some may have purposeful shopping activities
like having refreshments or watching a movie while others may visit the shopping mall for window
shopping with no firm objective of buying.
3.2.2 Participation in shopping mall-initiated activities by shopping mall customers
According to Gilboa (2009), shopping mall customers can visit shopping malls to participate in
mall-initiated activities as part of entertainment. These entertainment activities include children’s
programs and cultural events. This is backed by Farrag et al. (2010) indicating that shopping mall
customers can visit shopping malls to attend fashion shows. In addition, when family members visit these
shopping malls, it can present children with an opportunity to play around at various entertainment
arenas.
3.2.3 The use of the shopping mall facilities by shopping mall customers
Shopping mall customers can visit the shopping mall to access primary services offered by the
shopping mall, such as visiting the gym, post office and banks (Gilboa, 2009).
3.2.4 Social activities
Social activities are activities that involve human interaction and include strolling; social
meetings, sitting in public places, speaking with strangers and watching others shop (Gilboa, 2009).
Shopping mall customers indulge in consumption of experiences and shopping malls have become
important meeting places, especially for young people (Kuruvilla & Joshi, 2010).
3.2.5 Entertainment
Shopping mall customers can visit shopping malls to watch movies at movie theatres and watch
soccer matches at different restaurants (Gilboa, 2009; Farrag et al., 2010; Kim et al., 2011).
3.5.6 Shopping mall customers’ satisfaction and loyalty
Juhari et al. (2012) pointed that an evaluation of the shopping mall needs to be carried out that
includes the management of shopping mall’s service scape, physical environment, or the service scape of
the shopping mall. This service scape dimensions can help to identify a specific item or area that need. The
argument of this paper is that a comprehensive, attractive and well-functioning shopping mall, with a
variety of facilities and services is necessary to satisfy the customer. Satisfaction is a degree of meeting the
needs at the end of a purchase (Puccinelli, Goodstein, Grewal, Price, Raghubir & Stewart, 2009). Fornell
(1992) viewed a customer satisfaction as a function of pre-sale expectations and post-purchase perceived
performance. Customers evaluate their purchase decisions during the post-purchase stage to analyse how
much the retailer has met their expectations. This comparison of expectation and performance in post-
purchase stage determines the satisfaction level of customers.
In a study conducted by Ryu, Han and Jang (2009) it was revealed that the internal and external
factors significantly influence customer satisfaction, and customer satisfaction has a significant influence
on behavioural intentions. Hui, Zhang and Zheng (2013) analysed the shopping mall facilities service
dimensions that affect customer satisfaction. The findings revealed that management and maintenance of
communal facilities such as rest rooms, shopping mall’s cleanliness, promotional events and security
services at the shopping mall influence the overall shopping mall customers’ satisfaction. Chebat, Michon,
Haj-Salem and Oliveira (2014) determined whether shopping mall design has a direct impact on shopping
mall customers’ perceptions regarding the shopping mall and an indirect impact on shopping mall
customers’ hedonic and utilitarian values and satisfaction. The findings revealed that the hedonic values
contribute more to shopping mall customers’ satisfaction than the utilitarian values. In an article by
Chebat, El Hedhli and Sirgy (2009) the main objective was to determine whether the shopping mall
customers’ loyalty towards a shopping mall is significantly predicted by shopping mall customers’
positive awareness of the shopping mall attributes such as the quality of the products and services offered
at the shopping mall. According to Chebat et al. (2014) the hedonic shopping value accounts for the
emotions associated with customer shopping; the pleasure of shopping, escape from daily routine, being
occupied in exciting new products, and spending time in an entertaining way.
In another study, Kotzé, North, Stols, and Venter (2012) investigated gender differences focusing
on the sources of shopping enjoyment which includes hedonic shopping motivations. The findings
revealed that males and females who enjoy and are satisfied in shopping show positive intentions to
revisit the shopping mall in the future. In a recent study, El-Adly and Eid (2017) investigated through
structural equation modelling (SEM) the relationships between the shopping environment, customer
perceived value, customer satisfaction, and customer loyalty in regard to malls in the United Arab
Emirates (UAE). The main results of El-Adly and Eid (2017) showed that the shopping mall environment
is an antecedent of the customer perceived value of malls and customer satisfaction. To understand the
role of satisfaction, Juhari et al. (2012) argue that satisfaction is linked to loyalty, with the customers
returning for a particular product or service from the same supplier on a continuous basis. However,
Chang and Fang (2012) argue that hedonic value has greater effect on satisfaction and word-of-mouth
than utilitarian shopping value. In another study, Babin, Gonzalez and Watts (2007) revealed a contrasting
result that utilitarian shopping value has greater effect on customers’ satisfaction than hedonic shopping
using gift shopping as an example.
3.3 Previous studies on shopping malls
The research suggests that shopping mall customers consider shopping mall attributes when
selecting which shopping mall to visit (Jackson, Stoel and Brantley, 2011). Jackson et al. (2011) discovered
the way in which shopping mall customers’ attitudes towards shopping mall attributes and shopping
value derived from a shopping mall visit vary across gender and generational cohorts. The results of
survey indicated that there were no differences in hedonic and utilitarian shopping motivations by
generational cohort, but generational differences in attitude towards mall hygiene factors, locational
convenience and entertainment features tend to exist. In addition, the study discovered that females
experience greater levels of hedonic shopping value from visiting the shopping mall and also display
more positive attitudes towards shopping mall hygiene factors and entertainment activities in comparison
to males’ counterparts. There was no difference in utilitarian shopping value and attitude toward
locational convenience found between gender differences. El-Adly (2007) investigated the attractiveness
factors of United Arab Emirates shopping malls from customers’ perspective. The results of this study
uncovered that comfort, entertainment, diversity, shopping mall essence, mall convenience, and luxury to
be decisive shopping attributes that can be used for segmentation of customers and to satisfy customers’
needs.
In another study, Chebat, Sirgy and Grzekowiak (2010) examined shopping mall attributes
namely: access to the shopping mall, shopping mall image and store atmosphere that may be used to
draw shopping mall customers to shopping malls. The findings of the study confirmed that the shopping
mall image has a positive relation to shopping mall attitude, shopping mall patronage, and word-of-
mouth communications. Khare (2011) adds that research suggests that convenience as a shopping mall
attribute has the largest impact on selecting which shopping mall to visit. The availability of a wide
selection of products at the shopping malls can reduce the perceived costs (for example, travel time and
effort taken) associated with each shopping trip and ease the shopping task. According to Farrag et al.
(2010) shopping mall customers may visit the shopping mall as they consider it to be a safe place because
of security measures. Farrag et al. (2010) added that shopping mall customers may perceive a shopping
mall to be convenient in terms of having various products and services under one roof.
Kuruvilla and Joshi (2010) point out that shopping mall attributes determine the shopping mall
customers’ attitude towards shopping malls. According to Kuruvilla and Joshi (2010) shopping mall
attributes that influence shopping mall customers’ attitude towards shopping malls also include the
shopping mall location, variety of stores at shopping mall, availability of parking, shopping mall
employee behaviour, price of products and services, quality of products and serves, customer service,
promotional activities, shopping mall ambiance, shopping mall facilities, food, refreshments and
shopping mall safety. On the other hand, Wagner and Rudolph (2010) examined the moderating impact of
the shopping by demonstrating in which way the relationship between activity and demand-specific
motivation impacts on consumer shopping behaviour. In a recent study, El-Adly and Eid (2017)
determined the customers’ perceived value constructs of shopping malls from the Muslim customers’
perspective. The results of this study revealed that Muslims customers in malls assess the shopping
experience through both cognitive and affective values aligned to the Islamic value of the mall.
Considering the growing numbers of shopping malls, shopping mall customers tend to be more
selective in selecting which shopping mall to visit. Shopping mall customers may visit shopping malls
that appear to be more attractive and with a variety of stores, product and services that are congruent to
their needs and preferences. Shopping malls should meet customers’ needs in a satisfactory way, in order
to achieve or secure return visits behavior (Anselmsson, 2016). Therefore, it is important for shopping
mall managers to determine shopping mall customers’ satisfaction level and loyalty towards shopping
malls such as Kolonnade Shopping Centre in order to improve performance where there is a shortfall and
remain competitive.
4. Contributions of the study
In reviewing the secondary literature available on shopping malls, it was apparent that studies on
consumers’ satisfaction and loyalty towards shopping malls is not widely covered in literature. This paper
contributes to the literature on the topic by highlighting that there is no significant differences amongst
customers’ satisfaction and loyalty towards shopping malls in terms of age and gender in a developing
economy such as that of South Africa. This paper further benefits shopping mall managers and retailers
by providing recommendations on how to best satisfy customers’ needs and achieve customers’
satisfaction and loyalty at their respective shopping malls. In addition, this paper provides directions for
future research.
The positivist research philosophy was followed in this study. Positivist has a long history in
philosophy of science and it arose from the nine-teeth century by Frenchman (1798-1857). Positivist
researchers seek rigorous exact measures and objective research, test hypotheses often use experiments,
surveys, and statistics (Neuman, 2011:82). This implies that positivist favours quantitative research. The
study was quantitative in nature in collecting the primary data to address research objectives. This study
was conducted from the 10th of May 2015 and the 30th of June 2015 among customers at the Kolonnade
Shopping Centre in Gauteng Province, South Africa during shopping hours on weekdays and over the
weekends. The self-administered questionnaires had to be completed in not more than 20 minutes. No
incentives were offered to respondents to participate in the study. The target population in the study
consisted of adult shopping mall customers at the Kolonnade Shopping Centre in City of Tshwane, South
Africa. One hundred and one adult customers participated in this study. For the purpose of this study,
adults were defined as male and female individuals, aged 18 years and older, and of all cultural and racial
backgrounds who visited the mentioned shopping mall at least once a month. Customers who visited
Kolonnade Shopping Centre served as the respondents in completing a self-administered questionnaire in
this study. A non-probability quota sampling plan was used in the study with quotas being filled based
on convenience and the personal judgement of researchers at the shopping mall. The first stage of the
quota sampling involved compiling the demographic characteristics of respondents in terms of age and
gender. The second stage of the quota sampling involves convenience sampling. A convenience sampling
method was used in this study as the method is less expensive, less time-consuming, and because there
was no available sample frame.
In order to compile a scale of measurement for shopping mall customers’ perceptions on their
satisfaction and loyalty towards the shopping mall, questionnaire items were adapted from previous
study Kursunluoglu (2014) which is frequently used and a reliable measure. A five-point Likert scale was
used on the statements to measure shopping mall customers’ satisfaction and loyalty levels and the
measurement scale is interval in nature. Respondents indicated the extent to which they agreed with the
statements on a five-items scale ranging from strongly agree to strongly disagree. The respondents were
also requested to provide demographic data regarding age and gender. The draft questionnaire was pre-
tested with twelve respondents using a convenience sample at the shopping mall. It was considered
unnecessary to make major changes on the draft questionnaire except for minor adaptations on wording
as respondents reported no problems with the questionnaire. Descriptive statistics and parametric tests
were used in this study to analyse the primary data on demographic variables of shopping mall
customers, and shopping mall customers’ perception on their satisfaction and loyalty towards the mall.
The Statistical Package for Social Science (SPSS version 23) was used to automatically capture and analyse
data on handheld devices. An Independent samples t-test was conducted to discover whether a
statistically significant difference exists between the means of shopping mall customers’ groups in terms
of their age and gender with respect to their satisfaction and loyalty towards the shopping mall they
visited. A One-way ANOVA was conducted to determine whether statistically significant differences exist
between the means of the different age groups with respect to their utilitarian and hedonic shopping
motives. In addition, the reliability of the measurement scales was assessed by measuring internal
consistency using Cronbach’s alpha values. Cronbach alpha is used to measure the internal consistency
reliability, which is the average of all possible split-half coefficients resulting from different splittings of
scale items (Malhotra, 2010). The validity of the measurement scales was assessed looking at face or
content validity and used scales that proved to be previously valid.
In line with the overall research objectives of the study, table 1 below depicts the variables (age,
gender, customers’ satisfaction and loyalty analysed during the data analysis.
Table 1: Variables used in the data analysis
Variable name Level of measurement Univariate descriptive statistics
Age Nominal scale Percentages, mode

Gender Nominal scale Percentages, mode
Customer satisfaction Interval scale Range, mean, standard deviation
Loyalty Interval scale Range, mean, standard deviation
The next section presents the results of this study.
6. Results
This section presents the results of the current study starting with demographic profiles followed
by results on shopping mall customers’ satisfaction and loyalty.
6.1 Demographic profile of respondents in the quantitative phase
This section presents the demographic profiles of respondents in terms of gender and age group.
Table 2: Demographic profile of respondents
Demographic variable Kolonnade Shopping Centre
Gender N %
Male 51 50.5
Female 50 49.5
Total 101 100
Age group N %
18 to 24 years 11 10.9
25 to 34 years 31 30.7
35 to 49 years 30 29.7
50 years and older 29 28.7
Consumers participate in the current study were 51 males and 50 females. The respondents within
the age group 18 to 24 years were 10.9%, respondents with the age group 25 to 34 years were 30.7%,
respondents within the age group 35 to 49 years were 29.7%, and respondents within the age group 50
years and older were 28.7%.
6.2 Customers satisfaction and loyalty
This section provides the findings regarding the respondents’ satisfaction and loyalty levels
towards the Kolonnade Shopping Centre. Table 3 depicts the mean scores and standard deviations to
question statement used to determine respondents’ satisfaction and loyalty levels towards the Kolonnade
Shopping Centre.
Table 3: Shopper satisfaction and loyalty
Kolonnade Shopping
Satisfaction Centre
M SD
I am satisfied with what this shopping mall/centre offers 4.31 0.34
The offerings at this shopping mall/centre are better than I expected 3.64 0.986
The offerings of this shopping mall/centre are ideal 3.67 0.939
Kolonnade Shopping
Satisfaction
Centre
Kolonnade Shopping
Loyalty Centre
M SD
I do most of my shopping at this shopping mall/centre 3.77 1.028
I recommend this shopping mall/centre to others 3.92 1.036
I will shop at this shopping mall/centre in future 4.38 0.823
Table 3 indicates the satisfaction and loyalty levels respondents have towards Kolonnade
Shopping Centre. Respondents at Kolonnade Shopping Centre agree the most with the statement “I will
shop at this shopping mall/centre in future” (mean=4.38) and followed by “I am satisfied with what this
shopping mall/centre offers” (mean = 4.31), and agree the least with the statement “The offerings at this
shopping mall/centre are better than expected” (mean = 3.64). For Kolonnade Shopping Centre, the
standard deviation (SD) for the three statements for shopping mall satisfaction range between 0.34 and
0.986, and the standard deviation (SD) for the three statements for shopping mall loyalty range between
0.823 and 1.036.
6.2.1 Satisfaction
Table 4 provides the results for the significant testing undertaken to reveal statistically significant
differences between groups based on gender, age, and shopping mall satisfaction.
Table 4: Significant differences between groups with respect to satisfaction
Variable Category Mean p-value
Male 3.80
Gender 0.351
Female 3.86
18 to 24 years 3.95
25 to 34 years 3.78
Age 0.351
35 to 49 years 3.79
50 years and older 3.86
*indicates statistically significant difference between the means of the groups (p-value equal or less than
0.05)
Satisfaction and gender: An Independent samples t-test was conducted to discover whether a
statistically significant difference exists between the means of males (3.80) and females (3.86) with respect
to their levels of satisfaction with the shopping mall they were visiting. A p-value of 0.351 signifies that a
statistically significant difference between the means of males and females with respect to satisfaction is
not evident.
Satisfaction and age: A One-way ANOVA was conducted to determine whether statistically
significant differences exist between the means of the different age groups with respect to their levels of
satisfaction with the shopping mall they were visiting. A p-value of 0.351 point out that a statistically
significant difference between the means of the different age groups with respect to satisfaction is not
evident.
6.2.2 Loyalty
Table 5 provides the results for the significant testing undertaken to uncover statistically
significant difference between groups based upon gender, age, and shopping mall loyalty.
Table 5: Significant differences between groups with respect to loyalty
Variable Category Mean p-value
Male 3.92
Gender 0.118
Female 4.03
18 to 24 years 3.94
25 to 34 years 3.97
Age 0.256
35 to 49 years 3.91
50 years and older 4.08
*indicates statistically significant difference between the means of the groups (p-value equal or less than
0.05)
Loyalty and gender: An Independent samples t-test was conducted to discover whether a
statistically significant difference exists between the means of males (3.92) and females (4.03) with respect
to their loyalty with the shopping mall they were visiting. A p-value of 0.118 signifies that a statistically
significant difference between the means of males and females with respect to loyalty is not evident.
Loyalty and age: A One-way ANOVA was conducted to determine whether statistically significant
differences exist between the means of the different age groups with respect to their loyalty with the
shopping mall they were visiting. A p-value of 0.256 point out that a statistically significant difference
between the means of the different age groups with respect to loyalty is not evident.
6.2.3 Validity and reliability
This sub section shows that the internal consistency reliability of the measurement scales
measuring customers’ satisfaction and loyalty which were assessed by calculating Cronbach’s alpha
values. Cronbach’s alpha value of 0.6 or higher indicates that the measurement scale is reliable (Malhotra,
2007). Table 6 below briefly presents the Cronbach’s alpha values for each variable measured. All
Cronbach’s alpha values exceeding 0.6 indicate internal consistency reliability and validity for all
measurement scales.
Table 6: Internal consistency reliability of measurement scales
Measurement scale Number of items Cronbach’s alpha value
Customers’ satisfaction 3 0.780
Loyalty 3 0.715
The next section provides the conclusions and discussions derived from the results of this study.
7. Conclusions and discussions
The purpose of this study was to determine the shopping malls customers’ satisfaction level and
their level of loyalty towards the shopping mall, particularly, Kolonnade Shopping Centre. The results of
this study uncovered that there is no significant difference between loyalty and gender, loyalty and age.
The findings of the current study agree with the findings of the study by Kotze et al. (2012:421) in that
males and females who enjoy shopping show positive intentions to revisit the shopping mall in the future.
There is no significant difference between satisfaction and gender, between satisfaction and age. This
finding disputes the findings by Farrag et al. (2010:112) and Kotze et al. (2012:420) in that females carry out
most shopping for the benefit of other household members and that females tend to enjoy shopping at
shopping malls than male counterparts. These results imply the context and the economic level of the
country can serve as a decisive factor in determining the significant differences amongst consumers with
regard to their shopping behaviour, satisfaction and loyalty levels at shopping malls.
The next two sections outline recommendations to stakeholders and future research implications of the
current study.
8. Implications
The shopping mall managers and retail managers could develop marketing strategies that cater
for different types of customers considering their demographic characteristics particularly age and
gender. Shopping mall retailers can attract customers by using promotional activities that emphasise new
fashion trends and technological innovations in order to cate for needs of idea shoppers. In order to cater
for adventurous needs of shopping mall customers and ensures customer satisfaction, shopping mall
managers could develop promotional programmes that would make customers perceive the shopping
malls as unique and stimulating. In order to achieve customer loyalty, the mall developers could develop
the malls with an environment that fosters social activities with unique features that can serve as
differentiated attributes from other competing malls in the area. Therefore, the paper’s significance and
implications can be found in the explanation that the shopping mall attributes has an effect on the
customers’ loyalty towards the shopping mall visited through the satisfaction derived from the shopping
experience at shopping mall.
9. Limitations and future research

The study was conducted in Gauteng province, South Africa at one shopping centre based in the
City of Tshwane, Pretoria, and further study should include large number of shopping malls in Gauteng
province. In addition, a future study including other shopping malls in other provinces of South Africa is
recommended. Ethnographic research is recommended to gain a deeper understanding of stores visited
by these shopping mall customers. Focusing more on the store as a unit of analysis could potentially
enhance the findings of this study. Furthermore, research on the specific days or times of the month could
also provide deeper understanding to the main reasons of visiting the shopping malls and why shopping
malls are mainly crowded on specific occasions such as Christmas and Easter. Lastly, future research
could investigate the role of customers’ personality, religious belief and other demographic variables such
as education level and income level on customers’ satisfaction and loyalty at the shopping malls in other
parts of the world.
The last two sections provide acknowledgement and reference list of sources consulted in writing this
paper.
Acknowledgements
The assistance with data analysis by Professor Danie Petzer is hereby acknowledged.
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Customers’ repurchase decision in the culinary industry: Do the Big-Five

personality types matter?
Muhammad Ichwan Musa
Muhammad Ilham Wardhana Haeruddin
M. Ikhwan Maulana Haeruddin
Universitas Negeri Makassar, Indonesia
Keywords
The Big-Five personality types, repurchasing decision, social media, social status, qualitative
method
Abstract
This paper aims to explore the Big-Five (5) personality types on customers’ purchase decisions, as it is
regarded within the phenomenon of customers’ experienced meaning, which would shape how a person’s
personality would define their meaning of perceptions toward an experience in repurchasing decisions. A
qualitative study with semi-structured interviews was employed in order to answer the research objectives by
interviewing 84 customers in café and restaurants in Makassar city. In this paper it was discovered that
participants whose high level of personality traits such as Openness, Conscientiousness and Agreeableness
are the ones who will tend to make repurchase decision in the culinary industry. Moreover, those with low
level in dimension of Neuroticism show a substantial relationship in making repurchase decision toward
service/goods in culinary industry merely for identity making, particularly their social status in social media.
Based on the research findings, there are several factors (themes) identified in exploring the relationship
between the big-five personality types (Extraversion, Agreeableness, Conscientiousness, Neuroticism, and
Openness to Experience) and repurchase decision in the culinary context. These are: 1) word of mouth and
social status; and 2) price. This paper offers original contributions as this paper acknowledges the importance
of a qualitative study in exploring the relationship between personality types and customers repurchase
decision.
Corresponding author: Muhammad Ichwan Musa

Email address for corresponding author: m.ichwan.musa@unm.ac.id
Accepted: 25th March 2018 DOI: https://doi.org/10.24052/JBRMR/V13IS01/ART-13
Introduction
One of the characteristics of middle-class customers in marketing studies is marked by the
shifting of consumption patterns. As the customers getting richer and well educated, then their patterns of
consumption also begin to shift from ‘goods-based consumption’ to ‘experience-based consumption’
(Back, 2005). Experience-based consumption may include but not limited to: holiday vacation, staying at
hotel, eating and hanging out at cafe/restaurant, watching movie/music concert, karaoke, gym, and
wellness. These activities are strongly perceived will significantly influence their social status level. It is
argued that the more positive experience that consumer’s experience, the greater tendency for consumers
to make repurchase decision. Customers repurchase decision topic has been widely discussed in the
extant literatures (Fang, Chiu, & Wang, 2011; Han & Ryu, 2012; Kim & Gupta, 2009; Seiders, Voss, Grewal,
& Godfrey, 2005), which not only covered issue on green marketing awareness effect on repurchase
decision (Suki, 2013), on the word of mouth processes (Bansal & Voyer, 2000), how male consumers’
repurchase intention on cosmetic brands in South Africa context (Chinomona & Maziriri, 2017), but also in
gender differences on repurchase decision (Frank, Enkawa, & Schvaneveldt, 2014). However, until now
there are lacks literature that specifically discusses the relationship between customers’ personality types
and repurchase decision in a qualitative method context. A close attempt has been conducted by Barkhi &
Wallace (2007) and Bellamy & Becker (2015). These studies explore the impact of personality type on
purchasing decisions in virtual stores contexts by employing quantitative method. Why this study chooses
qualitative stance? Because this paper aims to explore the personality type on customers’ purchase
decisions, as it is regarded within the phenomenon of customers’ experienced meaning (Saunders et al.,
2012), which would shape how a person’s personality would define their meaning of perceptions toward
an experience in purchasing decisions (Creswell, 2013).
Literature Review
Customer’s Repurchase intention
Customer’s repurchase intention is defined as the customer’s preference and probability in
consuming the previous service again in the future (Kotler, 2012). Once a costumer has considered all the
choices and generates buying intention, it is argued that there could be only two factors that may
influence the decision of the costumer of buying the service or product. Firstly, the perception and
feedback of other costumers toward the similar service or product and secondly, it can be in the form of
motivation level to comply or accept the feedback (Kotler et al., 2009). Along similar lines repurchase
intention is understood as the repetitive process of purchasing services and goods from a particular seller
(Hellier et al., 2003), in order to experience the post-shopping values. Furthermore, those two factors
(Kotler et al., 2009) are argued significantly related with an individual’s personality (Barkhi & Wallace,
2007; Bellamy & Becker, 2015; Haeruddin, 2017).
Also, customers’ experiences in virtual transaction may differ with those in traditional
transaction, particularly in-service sector. Customers may perceive that they should be present in situ to
experience the service themselves, which also relates with to-see and to-be-seen customers’ experiences
(Marwick & Boyd, 2011; Pine & Gilmore, 1998). Therefore, based on the explanations, it is fair to argue
that the customer’s personality shapes their repurchase intention, which likely tend to influence how the
customers will repurchase services/goods in the future.
The Big Five Personality
Personality defined as a set of stable traits (McShane, Olekalns, & Travaglione, 2012), whereas the
Big Five personality types are understood as the broad categories which have been widely explored in the
literatures, particularly in psychology, management, and organization studies (Haeruddin & Natsir, 2016;
Gosling, Rentfrow, & Swann, 2003; Barrick & Mount, 1991). The Big Five personality traits are a hierarchal
organization of personality traits which combined in to particular segment as proposed by McCrae & John
(1992) and developed by Wayne, Musisca, & Fleeson (2004). According to Wayne, Musisca, & Fleeson
(2004), those traits are:
Openness (O) to Experience/Intellect is a dimension that measures a person's adaptability rate. If a
person’s openness to experience level is high, then it can be perceived that this person tends to be open to
new ideas, easy to tolerate change, and is happy with new experiences. On the other hand, if a person’s
openness to experience level is low, then this person can be categorized into Closed-Minded clusters,
which are likely to be closed with new ideas. Conscientiousness (C) is a personality dimension that
measures a person's prudential level. If your Conscientiousness value is high, then you tend to do
something with caution. People with Conscientiousness are tending to be organized and disciplined
because of their caution. If your Conscientiousness value is low, then you go into the disorganized
category that means it tends to be irregular or erratic.
Extraversion (E) is a personality dimension that measures a person's level of openness. Ever heard
of Extrovert and Introvert? This dimension is the dimension that discusses it. If your Extraversion score is
high, then you are a person who has a high social level, easy going, happy to interact, and be friendly. In
contrast, the low Extraversion value indicates that the person is entering introverted category where this
person tends to be calm and does not have a high level of motivation in mingling in his/her social life.
Agreeableness (A) is a dimension that measures the level of one's friendliness. People with high
Agreeableness values are usually described with someone who is helpful, forgiving, and compassionate.
The low value of Agreeableness indicates that the person belongs to the Disagreeable group; the person
with this type is the person who likes to give criticism, hard to cooperate because of the critical nature.
Neuroticism (N) is a dimension that measures an individual's anxiety level. People with high
values of Neuroticism tend to be more easily worried in their lives, emotionally unstable and easily feel
insecure and because of this fear, people like this often have difficulty in relationships and commitments.
Low values of Neuroticism enter the Calm / Relaxed class that makes people of this type tend to be
happier and satisfied with life than people with high Neuroticism because they have a calm and relaxed
nature.
A relevant study from Mulyanegara, Tsarenko, & Anderson (2009) which focused on the Big Five
dimensions in the context of fashion products discovered that several dimensions of these personality
types are central in shaping preferences on particular dimensions of brand personality. This paper aims to
extend their research findings by exploring the relationship between the 5 personality types and
customer’s repurchasing decision, particularly in the culinary industry.
Research Methodology and Context
This study employs qualitative method with interpretative stance. In order to obtain optimal data,
authors employed a semi-structured interview and interviewed 84 customers who visited several
prominent café and restaurant in the city of Makassar, Indonesia. Moreover, semi-structured interviews
include an element of storytelling, where participants are asked to describe some specific moments,
incidents, and activities in their personal purchasing experiences and the factors which motivating them
to make a repurchase decision. Criteria of inclusion are those who are made repetitive purchase in a
particular merchant (café & restaurant) at least once. A qualitative research design was employed as it
was significantly match with the research question and also to comprehend lived experiences and an
understanding of the meanings of customers repurchase decision experiences. In average, the length of
interview sessions is around 1.5 to 2 hours. The collected data are grouped into different themes and
analyzed the data. In analyzing data, the authors were assigned to read and re-read the data in order to
identify potential emerging themes. All of the authors came up with the similar emerging themes and
collectively discussed on it whether to include the themes or not. While reading these various emerged
themes, data saturation is reached on 84 participants, when there are no more emerging new themes or
new information (Saunders et al., 2012).
The process of data analysis and emergence of themes was iterative. The data were coded and
thematically analyzed using the Decision Explorer Software and NVivo computer software.
Predominantly, participants are college students and employees on lower to middle management level,
whose leisure budget average start from IDR 1.000.000 – 3.000.000 per month. Furthermore, most of them
are women aged 17-25 years (early adult). Hailed as the largest city and as the gate of Eastern part in
Indonesia, Makassar’s economy depends on the service sector, which makes up approximately 70% of
activity (Hasyim & Unde, 2016). It is found that culinary industry and hotel services are the largest
contributor (29.14%), whereas transportation and communication’ contribution is around 14.86%, trading
for 14.86, and finance around 10.58% (Wardoyo & Reza, 2016; Hasyim & Unde, 2016). Along with the rise
of social media and Internet usage in the last couple of years, modern life style in Makassar city has
thrived particularly in culinary industry sector (Setiawan, Andjarwirawan, & Handojo, 2013). It can be
seen from the mushrooming café and restaurants in the city, which offered value-added through
distinctive menus, tastes, concepts and themes, to attract customers (Jefry & Aldianto, 2012).
Results
Based on the research findings, there are several factors (themes) identified in exploring the
relationship between the big five personality types (Extraversion, Agreeableness, Conscientiousness,
Neuroticism, and Openness to Experience) and repurchase decision in culinary context. These are: 1)
Social media and social status; and 2) price. These factors will be elaborated in the following section.
Social media and Social status
Word of mouth is perceived as significant in influencing the repurchase decision among our
participants. As most of our participants are categorized as early adult (17-25 years old), the power of peer
in generating repurchase decision is dominant. For those in high level of Openness to experience, social
media is the key in making repurchase decision as exemplified by the following quotes:
You know what? This famous artist is the brand ambassador of this restaurant. She posts everything related to this
restaurant in Instagram and she is very attractive, I think I will keep coming back to this restaurant because she is
my idol (HIL, female, 22 yo, Part-time project officer).
This café used to be unknown to the city, but it became viral since the visit of the President of Indonesia to this café.
Now everyone wants to go there, either just taking selfies, posting check-in, hashtagging, or just enjoy the view. Café
life style is the current trend and I need to be able to keep updated so my friends won’t call me outdated (PLF, male,
24 yo, Bank officer).
The power of viral and buzz marketing creates the word of mouth in the social media and it also
creates peer pressure among participants. This would relate to the usage of social media in influencing
their social status. According to the findings, participants with personality type of high level of
Conscientiousness, high level of Extraversion, high level of Openness to Experience, high level of
Agreeableness – exclusion for those whose low level of Neuroticism - mentioned that social status is key
reason in doing repurchase decision in particular merchant. An interesting finding is found on those who
are categorized as introvert (as opposite of extrovert, who are open to new experiences, easy going, and
easy to interact) who also admit that social status is important in making repurchase decision. Despite the
characteristics of the introvert persons is those who does not have high level in mingling in their social
life, introvert customers are found being able to place themselves in a social place (café and restaurant) in
order to “heighten our social status in social media” (RSF, female, 25 yo, Bank Officer). The power of social
media is also holding a key role in this theme. All customers use social media platforms as Facebook, Path,
and Instagram in order to post their activities (repurchase decision). By checking-in, posting pictures,
hashtagging, and taking selfie/wefie with friends are perceived as the activities that would increase their
social status in their social life as mentioned as follows:
I have my own hashtag with my gang, so every time we come back to this café we use the same hashtag to let
everyone aware of our existence (JYU, female, 19 yo, college student).
Participants with low level of Neuroticism mentioned that they were not doing repurchase
decision for the social status, but tend to be for personal satisfaction reason (inner peace & being
sentimental), as exemplified by the following quote:
Those people spend their money in this place just to get like on their Facebook and Instagram, (just) to get famous.
Well, I am not that kind of people. I always come back to this place because it feels peace whenever I am here (UNF,
female, 25 yo, middle manager).
Their food is junk, I did not come here for the food; I just came for check-in in this restaurant. I just order for the
mineral water and that is my favorite menu in this place. I come here just to cherish my past memories with my late
parents (FGY, female, 18 yo, college student).
An interesting finding also discovered in this research, as mentioned by FGY above, that the taste
of the foods and drinks nor the social status did not have any influence in their repurchasing decision. It is
should be highlighted that FGY is categorized under Introvert, low level of Openness to experience, and
low level of Neuroticism.
Price
Furthermore, according to the analysis, price level of the services/goods is also contributing in
making them repurchase decision. Despite most of our participants mentioned that their leisure budget
ranges from IDR 1.000.000 – 3.000.000 per month, their choice of café and restaurant are irrational. Why
irrational? Because some of them would spend more than their monthly budget in order to make them
repurchase decision. For those categorized in high level of Openness to experience, they are willing to
spend more money (mostly by using their credit cards), in making purchase decision. However, it should
be noted that participants in this category are tends to be not loyal in particular brand because they are
eager in seeking new experiences as exemplified by the following quote:
I know I spent more than I can earn. But you know what, you only live once. So, I just want to enjoy my life while I
can even though I have to spend more of my budget and using my credit cards and get valuable experiences from
many purchased services and goods (ESL, female, 24 yo, entrepreneur).
In contrast, those who are categorized in low level of Openness to experience admitted that they
are more cautious in spending their budget, because they only would like to spend their money to
particular brand, therefore they are more loyal and tend to make repurchase decision.
I work hard to get money, so I won’t waste it on the services and goods you do not know well. I only spent my money
on stuffs I really know; even though their price is increased I won’t mind spending my money here again. (CDL,
female, 22 yo, Bank Officer).
Similarly, participants who fall into high level of conscientiousness mostly tend to be selective in
making repurchase decision regarding price level. In contrast, those who are in low level of
conscientiousness tend to be economically in their purchasing decision; they tend to be not loyal on the
services and goods that are expensive and exceed their monthly budget, therefore repurchasing decision
is not likely to happen.
Discussion
Due to the intensive use of Internet and social media, viral and buzz marketing are significant key
factors in influencing our participants in this study in making repurchase decision. This is in line with the
previous research (Van Vaerenbergh, Larivière, & Vermeir, 2012; Spreng, Harrell, & Mackoy, 1995;
Vázquez-Casielles, Iglesias, & Varela-Neira, 2017). Viral marketing is creating word of mouth and
eventually lead to the social status among participants. However, there is lack of effort in connecting
relationship between personality type and repurchase decision-making. In this study, in regard to social
status, it was found that participants whose high level of personality traits such as Openness,
Conscientiousness and Agreeableness are the ones that will tend to make repurchase decision in the
culinary industry. Moreover, those with low level in dimension of Neuroticism show a substantial
relationship in making repurchase decision toward particular service/goods in culinary industry, just to
crafting their social status in social media. An exception is for those with low level of Neuroticism because
they tend to be calm and have a relaxed nature. Additionally, in regard to the price, it was found that
participants, regardless of their personality type, were irrational in their economic behavior, because some
of them would spend more than their monthly budget in order to make their repurchase decision. For
those categorized in high level of Openness to experience, they are willing to spend more money (mostly
by using their credit cards), in making repurchase decision. However, it should be noted that participants
in this category are tends to be not loyal in particular brand because they are eager in seeking new
experiences.
On the other hand, those who are categorized in low level of Openness to experience admitted
that they are more cautious in spending their budget, because they only would like to spend their money
to particular brand, therefore they are more loyal and tend to make repurchase decision. This finding is
different with Vázquez-Casielles, Iglesias, & Varela-Neira’s work (2017). Similarly, participants who fall
into high level of conscientiousness mostly tend to be selective in making repurchase decision in regard to
price level. In contrast, those who are in low level of conscientiousness tend to be economically in their
repurchasing decision; they tend to be not loyal on the services and goods that are expensive and exceed
their monthly budget, therefore repurchasing decision is not likely to happen. An intriguing finding is
also discovered that most of the participants are women aged 17-25 years (early adult). This age group
tend to be seeking new experiences and at the same time try to establish their identity by creating a sense
of stability. This sense of stability can be characterized by their repurchase decision toward
services/goods in the culinary industry.
Implications
The present study offers implications, both practical and theoretical. Firstly, for practical
implications there will be affect on how personality type shape customers repurchase decision. It was
found that most of the participants tend to make repurchase decision due to the social status and the
influence of the social media. However, it is also found that the taste/menu of the foods & drinks are not
significant factor in making repurchasing decision. In order to tackle this matter, marketers or brand
marketers should be aware on this issue, whether to improve the menu or offer such value added for
customers. Brand marketers also should acknowledge the difference in personality type since their
customers are varied in terms of personality. For theoretical implications, it should be addressed that
personality has significant influence in shaping customers repurchase decision.
Limitations and Future Research Suggestions
Despite of the contributions, this paper acknowledges limitations. Firstly, the research was limited
to the big-five personality type and omits the other personality type. Secondly, the results were based on
particular city, which is Makassar. It is difficult to generalize our findings, but as this study was only
sought for an in-depth understanding for customers’ meaning in their experience of repurchase decision-
making. Future research may explore the other available types and may conduct similar research in any
other city or cultural settings, as Indonesia is a scattered island nation. Therefore, future efforts may focus
in how particular cultural contexts altogether with personality type can shape customers repurchases
decisions. Also, future research can explore the irrationality made by the customers in their repurchase
decisions, which based on their personality types.
Conclusion
The purpose of this study was to explore the personality type on customers’ purchase decisions
toward an experience in repurchasing decisions. There are several factors (themes) identified in this
research. They are: 1) word of mouth and social status; and 2) price. It was discovered that participants
whose high level of personality traits such as Openness, Conscientiousness and Agreeableness are the
ones that will tend to make repurchase decision in the culinary industry. Moreover, those with low level
in dimension of Neuroticism show a substantial relationship in making repurchase decision toward
service/goods in culinary industry, just to crafting their identity/social status in social media. This paper
offers original contribution in the current literature as this paper acknowledges the importance of a
qualitative study in exploring the relationship between personality types and customers repurchase
decision.
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The relationships among leadership styles, communication skills, and

employee satisfaction: A study on equal employment opportunity in
leadership
Tri Wikaningrum
Diponegoro University/ Universitas Islam Sultan Agung, Indonesia
Udin
Ahyar Yuniawan
Diponegoro University, Indonesia
Keywords
Leadership styles, communication skills, employee satisfaction, equal employment opportunity
Abstract
This study attempted to analyze the relationships among leadership styles, communication skills, and
employee satisfaction. This study also examined the potential of women in leadership to support the practice of
equal employment opportunities from gender side in organization. Data were collected from 200 self-
administered survey using questionnaires completed by employees at private Islamic universities in
Semarang city, Indonesia. Regression analysis was used to test the hypotheses. The results showed that
leadership styles and communication skills have a significant effect on employee satisfaction. However, based
on employees’ perceptions, this study revealed no significant difference between leadership styles and
communication skills of male and female leaders.
Corresponding author: Udin

Email address for corresponding author: udin_labuan@yahoo.com
Revised submission received: 22nd January 2018
Introduction
There are many expert opinions on the importance of communication in leadership. According to
Holladay and Coombs (1993), leadership is a behavior carried out by communication, in which
communication clarifies perceptions of a leader's charisma. This is clarified by Hall & Lord’s idea (1995),
saying that the leader message conveys affective and cognitive strategies. When the leader effectively
communicates his/her vision, he/she is more likely to gain the employees’ trust, which eventually affects
communicating satisfaction between the leader and the followers (Madlock, 2008).
Shaw (2005) stressed that in order to be perceived as competent communicators, leaders must
share and respond to information on time, pay attention to others' points of view, communicate clearly
and concisely to all levels of organization, and use all existing communication channels and various
communicative resources such as language, gestures, and sounds. Communication skills also play an
important role in influencing attitudes, such as employees’ satisfaction. It is not only about satisfaction in
terms of communication with leaders, but also satisfaction with their jobs. Effective leadership should not
only be seen from how far the leaders’ organizational unit succeeds in accomplishing the task of achieving
their goals. Equally important is the process of leadership itself which then affects the employees’
perception on the leadership styles of their leaders. Employees perceive their leaders’ behavior, mainly
based on two categories (i.e., related to the purpose of the tasks and related to interpersonal relationships).
Employees are most satisfied when they perceive their direct leaders run both behaviors (Madlock, 2008).
Judged from the leadership styles, female leaders run their task-oriented leadership without
ignoring good relationship with their employees, as the conclusion which can be drawn from the article of
Psychological Bulletin Vol. 129 No. 3 reviewed in Sinar Harapan Daily, on the advantages of female
leaders. Numerous studies show that men and women respond to aspects of social relations differently
(Eagly, 2007; Koenig, Eagly, Mitchell, & Ristikari, 2011). Compared to men, women are more prominent in
the communal dimension, which is personal-oriented relationships and cares for the well-being of others
(Eagly, 2009; Girdauskiene & Eyvazzade, 2015). Nevertheless, Eagly’s study showed no gender differences
in terms of orientation dimensions in the assignment and assertive behavior such as ambitious,
dominating, and competitive (Eagly, Johannesen-Schmidt, & van Engen, 2003) on men and women in
leadership roles. However, the fact shows that there is still a lot of differentiating positions for different
genders. Women often gain a lower position than male counterparts do, and they do not get equal
opportunities in career development (Hastuti, 2005).
Although more than half of Indonesia's population is women, their underdevelopment conditions
may illustrate injustice and inequalities between men and women (Soemartoyo, 2002). In organizational
scope, the opportunity for female employees to occupy managerial positions or to become a structural
leader in an organizational unit is relatively lower than male employees do, despite the technical skills
required. Surely, the things which will be studied in this study are more on the organizational subjective
and objective obstacles, regardless of cultural and social problems.
Literature Review
Leadership Style
Most researchers evaluate the effectiveness of leadership based on the consequences of leaders’
actions for their followers and other components within the organization. The most widely used
measurement is how far the organizational unit of leaders succeeds in accomplishing tasks of achieving its
goals, both objectively and subjectively. The selection of appropriate criteria also depends on the purpose
and the values made by the person conducting the evaluation, while everyone has different values (Yukl,
2009). Michigan Leadership Study proposed effective leadership behaviors which was different from
those previous studies. Employees view their supervisors’ behavior mainly based on two categories, one
of which related to task purposes and the other related to interpersonal relationships.
1. Task-oriented behavior
Effective managers use their time and efforts to concentrate on task or job-oriented functions
different from their employees, such as planning and coordinating their employees’ activities, helping
their employees to set high but realistic performance goals.
2. Relationship-oriented behavior
For effective managers, task-oriented behavior does not mean sacrificing attention to human
relationships. The leaders’ behaviors supporting this idea, among others are, showing trust and
credibility, acting friendly and caring, seeking to understand the employees’ issues, showing appreciation
of the employees’ ideas, and giving recognition to their contributions and achievements.
In large organizations, the effectiveness of managers depends on the strength of their influence on
the leaders and colleagues and their employees. That means, influencing is the essence of leadership.
Various leadership functions can be run by different people who give influence on what groups do, how
to do it, and how group members relate to one another. This interactive process, of course, involves many
people influencing each other. The problem is not just who uses the influence, but also the kind of
influence used and what the outcomes are. There are conflicting points of view, in which the definition of
leadership is limited using influence resulting in high commitment from employees regardless of
discontent or unwillingness to obey the leadership. Another contradictory view is that one who uses
control over rewards and punishments for manipulating or forcing followers is not really "leading" them
and unethical because it is an abuse of power. Thus, the first view can eliminate some of the influencing
processes which are important to understand why a manager is effective or not in certain situations. The
same kind of influence can give different results depending on the nature of the situation, and the same
leadership outcomes can be achieved by different influencing methods.
Communication
Good communication in organization has a variety of important roles. First, communication is the
key to efforts to coordinate activities within the organization. Second, communication plays a role to share
information in putting forward facts, data, instructions, direction between units within the organization.
Third, communication is essential for developing friendships and building trust and acceptance of the
message receivers. In this case, their role deals with building social relationships within the organization.
What people say and how to say it can have an impact on others. Therefore, in order to create a pleasant
interpersonal atmosphere in the workplace, the organization members should pay attention to the
communication factors. Eventually, the role which is much more important, especially for a leader as a
communicator, is the role of communication in decision-making.
Every individual has differences in his/her communication styles, which is not only influenced by
his/her personal communication styles, but also by gender and cross-cultural differences. It is important
to understand that all these styles can be learned and applied. Each style has its strengths and weaknesses,
there is no single style that works best among others. Generally, individuals tend to use one style.
Effective communication begins by recognizing one-self’s communication style and then that of others.
Therefore, when someone meets and interacts with others, it is better to try to understand and then, as
much as possible, to adjust the other person's style.
Men and women, one another, are often misconstrued because they use different ways of
communicating. It is the difference that makes them address the problem differently. Men tend to be good
speakers, emphasizing and strengthening their status when speaking, unlike women do. While women
focus on creating positive social relationships, tending to listen to others, and being more emotional. It
would be wise for a manager or leader to appreciate and accept the differences. Getting a better
understanding that everyone has a different way of speaking in terms of putting forward meanings, it is
more likely to gain benefits from a variety of potential employees with different communication styles.
Communication within groups or organizations has 4 main functions (Halim & Razak, 2014),
namely:
Control: Through communication, a leader can determine whether an employee is doing the job
according to the organizations’ needs, or whether a problem related to his job occurs.
Motivation: Communication becomes a motivation through an explanation of what role an employee
should play, what achievement they have done so far, and what can be done to improve it.
Emotional expression: For some employees, work-group is a major source of social interaction.
Communication provides a freedom to express feelings and fulfillment of social needs.
Information: Each member of an organization needs information to make decision by identifying and
evaluating alternative options. With the competitive pressures faced by the organization today, strategy
formulation, decision making, motivation, team building, and negotiation then require a leader’s abilities
to communicate effectively.
Communication skills
Communication is defined as a process by which a sender conveys various types of information to
a receiver. Everyone can be a communicator or run a communication process. However, the quality of
communication can vary depending on how good a communicator is able to communicate effectively. Not
only is delivered, accepted, understood by the recipient of the message, but also effectively achieving the
communication purposes, punctual and situational, and on target.
Individuals who are competent in communication are not only seen from how far the message
communicated reaches its goal, but not less important is, how it is done properly. From the internal side
of the individual concerned, his/her communication skills are constructs including the elements of
knowledge, motivation, skills, behavior, and effectiveness (Berman & Hellweg, 1989). Communicative
individuals have abilities to use communicative resources (such as gestures, language, and voice)
effectively in achieving social goals (Stohl, 1985). Then Larson, Backlund, Redmond, and Barbour (1978)
stated that communication skill is an individual ability to demonstrate knowledge about appropriate
communication behavior in certain situations. This statement is reaffirmed by McCroskey (1982), saying
that the point is the proper communicative behavior, whereas from the subject side, competent
communicators are those who are effective in achieving their goals or maximizing the goals’
accomplishment through communication.
Motivating language
Motivating Language Theory (ML) predicts that intentional use in the way a leader speaks can
significantly improve employees’ attitudes and several outcomes such as job satisfaction, performance,
and innovation (Mayfield & Mayfield, 2006). Initially, this theory was conceptualized by Sullivan (1988)
to encourage employees’ motivation which then formed the employees’ speaking behavior which
encouraged the organizational goals. According to Sullivan, there are 3 types of speech, namely:
Direction-giving language occurs when the leader explains goals to his/her employees and alleviates
organizational uncertainty. For example, a manager uses this type when helping employees prioritize the
interests of each project in various assignments.
Empathetic language used when the leader speaks with a compassionate understanding to his/her
employees. The manager uses this empathetic language when he/she offers enthusiasm or
encouragement.
Meaning-making language, occurs when the leader conveys the rules of an organizational culture to their
employees. For example, a manager uses this way of speaking when he/she gives political advice to
his/her employees to produce a corporate buy-in on a project. Cooke and Rousseau (1988) observed that
the meaning-making language is often delivered indirectly in the form of a story or organization’s history.
Barriers to female leadership
Obstacles to Female leadership are related to 2 (two) things, namely:
Objective conditions or institutionalized mistreatment on women. For example, getting a lower
salary than men do, not getting a chance on a work or organization, and a contract bond for not getting
married for a certain time.
Subjective conditions or stereotyped assumptions about women. For example, the assumption
that woman is weaker than man, skilled in the kitchen but bad drivers, or the assumption that women are
soft, warm, but lacking power, slow, and unintelligent. Objective conditions appear to be supported by
discriminative laws, practices and traditions on female workers. If this happens, then this becomes an
external obstacle in women's leadership. Women are not given the opportunity to perform certain tasks,
nor encouraged to achieve higher positions/levels (job promotion), and – compared to men- relatively
and rarely get training opportunities which support their career development.
In contrast to the objective conditions above, subjective conditions are the attitudes of others
towards women based on misinformation about women, and acceptance of the inequality of opportunity
for women as stated earlier. This condition is an internal barrier in women's leadership. Both internal and
external barriers must be eliminated. One constraint cannot be eliminated without eliminating other
barriers, it must be done simultaneously.
Research Hypotheses
Leadership in an organization requires a leader figure who can direct, motivating, mobilizing
human resources, and communicating his/her visions effectively so that his/her employees will
experience high levels of satisfaction. As Pavitt remarked, when leaders effectively communicate their
visions, they are more likely to gain their employees’ trust, which eventually affect communicating
satisfaction between leaders and their followers (Madlock, 2008). Communication skills lead to
individuals’ abilities to demonstrate their competence, which is not only to communicate the message
verbally, but also abilities to listen to other people's messages and to negotiate. In order to persuade
employees to follow their visions, leaders need to communicate effectively by involving the followers’ the
interests. A Study conducted by Berman and Hellweg (1989) found out that leaders’ communication skills
perceived by their employees related to the employees’ satisfaction with their bosses.
Previous studies have shown that interpersonal interactions involving information exchange and
affected among colleagues and between employees and their managers directly result in significant
impacts on working attitudes, such as job satisfaction, organizational commitment and burnout (Pincus,
1986; Postmes, Tanis, & de Wit, 2001; Ray & Miller, 1994). Therefore, the hypotheses can be formulated as
follows:
H1a: Leaders’ communication skills had a positive effect on employees’ communication
satisfaction
H1b: Leaders’ communication skills had a positive effect on employees’ job satisfaction.
The effectiveness of communication is broadly associated with leadership effectiveness (Klauss &
Bass, 1982), and this is reflected in several measurements of leadership behavior and communication
styles in leadership literatures. Likewise, Locke and his colleagues (1991) argued that effective personal
communication skills enable leaders to create and disseminate their visions to followers.
The conceptualization of communicating satisfaction is presented by Crino and White (1981), who
argued that organizational communicating satisfaction includes individual satisfaction regarding various
aspects of communication within an organization, as quoted by Putti, Aryee, and Phua (1990) in their
study, indicating that the communicating satisfaction of organization members is related with the amount
of information available to them. Effective communication between leaders and followers can create a
positive impression and increase perceptions about the leaders’ performance (Conger & Kanungo, 1998;
Gardner & Martinko, 1988; Rao, et al. 1995). Anderson and Martin (1995) found that employees interact in
communication with colleagues and managers satisfy interpersonal needs. Thus, the following hypotheses
can be formulated:
H2a: Task-oriented leadership style had a positive effect on employees’ communicating
satisfaction.
H2b: Task-oriented leadership style had a positive effect on employees’ job satisfaction.
H3a: Relationship-oriented leadership style had a positive effect on employees’ communicating
satisfaction.
H3b: Relationship-oriented leadership style had a positive effect on employees’ job satisfaction.
As Stanford's statement, Oates and Flores (1995) characterized female leaders as someone who has
a high level of involvement with employees. Women run effective communication based on mutual
respect and trust with their employees, motivating, and inspiring. Compared to men, women have higher
interpersonal skills. This is driven by women's belief that people will perform best when they feel
themselves and work well and try to create situations which reinforce those feelings (Alimo-Metcalfe,
2010). Similarly, Evans (2014) argued that women tend to be more effective in terms of interpersonal skills,
empathy, emotion and relationship handling. Such female characters support their abilities to
communicate different approaches to men.
Research Methods
Sample and Data Collection
The population of the study was all employees at private Islamic universities in Semarang city,
Indonesia. The samples were selected using purposive sampling technique. Based on the criteria and by
considering the need of the fulfillment of respondents with male and female leaders, the number of
samples was 200 respondents. Data further were collected using structured questionaires.
Measurement
Communication skills were measured using 12 items which adopted from Communicator
Competence Questionnaire (Berman & Hellweg, 1989). All items were measured using a 5-point Likert
scales where 1 = strongly disagree and 5 = strongly agree. Job satisfaction was measured using 20 items
which adopted from Minnesota Satisfaction Questionnaire (MSQ) (Weiss, Dawis, England, & Lofquist,
1967). Communication ssatisfaction was measured using 19 items which adopted from Interpersonal
Communication Satisfaction Inventory (ICSI) (Hecht, 1978). Leadership Styles were measured using 20
items which adopted from Leadership Style Questionnaire (Northouse, 2001).
Result and Discussion
The questionnaires given in the scene were 275 pieces for the respondents. Out of these, not all
questionnaires could be used to analyze. Among the returned questionnaires, only 200 questionnaires
could further be processed.
Validity and reliability test results
Validity refers to the extent to which a test can measure what we really wanted to measure. The
test in this study was done by using factor analysis, which aimed to ensure that each question item was
classified in predetermined variables. Table 1 showed that all question items used in this study were
valid, because the loading factor was greater than 0.4.
Table 1. Summary of Validity Test Results

Relationship-
Communication Job Communicating Task-Oriented
Oriented
Skills Satisfaction Satisfaction Leadership Style
Leadership Style
CK1 ,560
CK2 ,606
CK3 ,658
CK4 ,533
CK5 ,526
CK6 ,495
CK7 ,601
CK8 ,653
CK9 ,676
CK10 ,532
CK11 ,764
CK12 ,765
KJ1 ,813
KJ2 ,835
KJ3 ,802
KJ4 ,652
KJ5 ,684
KJ6 ,677
KJ7 ,499
KJ8 ,653
KJ9 ,610
KJ10 ,634
KJ11 ,656
KJ12 ,749
KJ13 ,762
KJ14 ,842
KJ15 ,852
KJ16 ,852
KJ17 ,690
KJ18 ,593
KJ19 ,712
KJ20 ,615
PK1 ,757
PK2 ,573
PK3 ,628
PK4 ,775
PK5 ,596
PK6 ,884
PK7 ,747
PK8 ,821
PK9 ,685
PK10 ,733
PK11 ,796
PK12 ,769
PK13 ,778
PK14 ,822
PK15 ,795
PK16 ,799
PK17 ,805
PK18 ,632
PK19 ,700
GKT1 ,603
GKT2 ,617
GKT3 ,578
GKT4 ,672
GKT5 ,556
GKT6 ,763
GKT7 ,734
GKT8 ,693
GKH1 ,591
GKH2 ,742
GKH3 ,485
GKH4 ,711
GKH5 ,526
GKH6 ,620
GKH7 ,671
GKH8 ,497
GKH9 ,697
GKH10 ,512
GKH11 ,599
GKH12 ,665
This study used Cronbach's Alpha method to measure the reliability. Score values between 0.8 - 1
were categorized as good reliability, alpha values 0.6 - 0.79 were categorized as acceptable reliability, and
alpha values less than 0.6 were categorized as poor (Sekaran, 1992).
Table 2. Summary of Validity Test Results
Variables Cronbach’s Alpha Category
Communication Skills 0,877 Good
Job satisfaction 0,699 Acceptable
Communicating Satisfaction 0,883 Good
Task-Oriented Leadership Style 0,866 Good
Relationship-Oriented Leadership 0,941 Good
Style
In this study, the hypotheses testing was done by using simple regression test and independent
samples T test. Simple regression analysis was done to test the hypotheses proposed, while independent
samples T test was conducted to examine differences in communication skills and leadership styles of
male and female leaders, based on employees’ perceptions. A summary of the overall findings of the
analysis can be read from Table 3 to Table 4.
Table 3. Summary of hypotheses testing results
Variables Beta Sig. Adj R2 F Results
CK → PK 0,766 0,000* 0,584 280,546* Supported
CK → KJ 0,570 0,000* 0,321 95,245* Supported
GKT → PK 0,632 0,000* 0,396 131,397* Supported
GKT → KJ 0,376 0,000* 0,137 32,521* Supported
GKH → PK 0,801 0,000* 0,639 353,888* Supported
GKH→ KJ 0,594 0,000* 0,349 107,696* Supported
Note: CK= Communication Skills, PK= Communicating Satisfaction, KJ= Job Satisfaction, GKT= Task-Oriented
Leadership Style, GKH= Relationship-Oriented Leadership Style
* Significant on p < 0.05
Table 4. The Result of Regression Analysis
Variables Beta Sig. Mean Difference
CK → sex -0,091 0,927 -0,00679
GK → sex -0,820 0,413 -0,05379
Note: sex: Leaders’ gender being assessed
* Significant on p < 0.05
Hypothesis 1a testing using regression analysis showed that the leaders’ communication ability
had a positive and significant effect on the employees’ communicating satisfaction (b = 0.766; p = 0,000).
Therefore, it is proven that the hypothesis was supported. It could be understood if the communication
skills affected the employees’ satisfaction on the communication with the direct leaders. It is because
leaders cannot be separated from their roles as communicators. Submission of instructions, information,
duties and responsibilities of employees absolutely covers clarity on all of things which did not only
benefit the organization, but also the employees. So, when a leader can be an effective information
conveyor, a good listener, and sensitive to the needs and aspiration of the bottom, the employees who are
under his/her command will be more satisfied with the communication needs.
From the results of hypothesis testing, it is proved that the leaders’ communication skills had a
positive and significant impact on the employees’ job satisfaction (b = 0,570; p = 0,000). The
communication skills were significantly able to explain 32.1% variation in job satisfaction variables (Adj
R2 = 0.321; F = 95.245; p = 0,000). The competence of the leaders’ communication determined how much
they can direct and giving encouragement in achieving organization goals. All of them were run through
directing and controlling mechanisms which were undoubtedly supported by the leaders’ communication
skills concerned as it has been known that a leader as manager is a representation of a organization. So,
how effective managers perform the integration function will determine the perception of their employees
about the amount of organizational supports that affect their job satisfaction.
Hypothesis 2a stated that the managers’ leadership style which was task-oriented positively
influenced the employees’ communicating satisfaction. The test results with regression analysis showed
that the coefficient of determination was 0.396. This means that 39.6% of variation in communicating
satisfaction variables could be explained by the task leadership style, and their effect on communicating
satisfaction was significant (b = 0.632; p = 0,000). The support of this hypothesis further reinforced the
findings of the previous studies, as described in the bibliography reviews in the previous chapter.
From the testing result on hypothesis 2b using regression analysis, it can be concluded that the
task-oriented leadership style had a direct and significant effect on the employees’ job satisfaction (b =
0.376; p = 0,000), and the leadership style could explain 13,7% variation in the dependent variable (Adj R2
= 0,137; F = 32,521; p = 0,000). The support of this hypothesis reinforced Anderson and Martin’s (1995)
findings, pointing out that the clarity of job duties would contribute to the employees’ satisfaction. The
clear set and communicated performance standards, the clarity of each employee’s responsibility, and the
encouragement of qualified job as the characteristics of task-oriented leadership style significantly
determined the employees’ job satisfaction.
The result of hypothesis 3a testing with regression analysis showed that the relationship-oriented
leadership style explained the variation of employees’ communicating satisfaction equal to 63,9% (Adj R2
= 0,639; F = 353,888; p = 0,000) and proved to have significant positive effect (b = 0,801; p = 0,000). The
support of this hypothesis reinforced the findings of the previous studies (Anderson & Martin, 1995),
stating that the interaction of employees’ communication with leaders who satisfied their interpersonal
needs would contribute to the employees’ communicating satisfaction.
The result of hypothesis 3b testing showed that relationship-oriented leadership style explained
significantly variation in the job satisfaction variable (Adj R2 = 0,349; F = 107,696; p = 0,000). It had
positive and significant influence on the dependent variable (b = 0,594; p = 0,000). This was acceptable,
considering the leaders’ friendly attitudes, fair behavior, personal attention, supporting the employees’
efforts, both individually and in teams, was not only important in the job execution, but also caused
pleasure in working. It was not surprising that such leadership style could effectively improve the
employees’ job satisfaction.
The result of hypothesis 4 and 5 testing as shown in Table 4 showed that there was no difference
in communication skills in male and female leaders. Similarly, male-to-female leadership styles showed
no significant differences, based on their employees’ assessment. This was the evident from the test results
where the significance was 0.927 and 0.413. Moreover, the mean difference between male and female
leaders was very small, less than 0.1 (mean difference = -0.00679 and -0.05379). The unsupported
hypotheses 4 and 5 related to the subjects in this study who were the employees in private companies.
Policies in human resource management in private companies were clearly different from governmental
companies. Related to policy on promotional positions, determination of compensation, bureaucracy,
formalities of interaction between leaders and employees, were very different. Performance base became
the basis of policy determination for private companies, unlike governmental companies which tend to be
formal, rigid, and seniority prioritization. This made the employees, who occupied the leader position in
private companies, had been considered in terms of their competence including the ability to
communicate and leadership, regardless of whether the person was male or female. As Appelbaum,
Audet and Miller’s (2003) research findings, stating that men could learn about women's leadership styles
and applied them effectively. In other words, an effective leadership style was not a specific exclusive
gender domain, and both could learn from each other.
Conclusion
Either communication skills or task and relationship-oriented leadership styles play an important
role in determining employees’ working attitudes, especially their satisfaction with the growing
communication relationships with their direct leaders and their satisfaction with the work they are doing.
Interestingly, refer to male and female leaders, this study found there is no significant difference in
communication skills and leadership styles.
Further studies related to communication and leadership need to explore and examine more
deeply with different settings. In order to assess the differences in communication and leadership
capabilities between male and female, the next studies should not be limited to private universities, but it
more expanded to other types of organizations. In addition, direct interviews with organization
management can also support a descriptive explanation on existing quantitative analysis.
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Forecasting the tendencies of the Russian

vegetables market development
Natalia V. Bannikova
Olga N. Onezhkina
Ekaterina G. Agalarova
Alexander V. Tenishchev
Stavropol State Agrarian University, Stavropol, Russia
Key words
Vegetables market and its infrastructure, imitation model, scenario forecast, production and
consumption of vegetable production in Russia.
Abstract
The article is devoted to studying the alternatives of development of the Russian vegetables market
from the point of view of change of the level and structure of production and consumption of vegetables. The
main objectives of the research are to collect and analyze data of the Russian market of vegetable production,
modeling and scenario forecasting vegetables market, a substantiation of directions of development of the
market under study. The methodological basis of the research is developing the combined economic &
mathematical imitation model that is based on creation of the differential equations system. As any qualitative
and quantitative changes of market factors lead to shifts in consumer behavior and the structure of consumed
products, the scenario variants of development of the situation at the Russian vegetables market was analyzed
depending on foreign trade limitations, level of development of infrastructure, and pricing factors of the
market. As a result of the research, the volume of consumption of various types of vegetables is predicted for
the variants of the forecasts, as well as consequences of the change of the situation for the Russian vegetable
sphere on the whole.
Corresponding author: Natalia V. Bannikova

Email address for corresponding author: nbannikova@mail.ru
Introduction
Vegetables perform an important role in the food ration of modern humans. They are a source of
vitamins and minerals, necessary for correct functioning of the organism. Increase of the world population
and development of technologies lead to the sustainable tendency of growth of the world production of
vegetables. The world growth of consumption of vegetables is stimulated by increase of the living
standards of population of the developed countries and the information campaigns on healthy food. The
global market of vegetable products is characterized as highly dynamic: a double increase of production
has been observed since 1993 by means of application of intensive technologies and high-quality seed
material. The character of vegetable trade was changed in the part of enlargement of the trade flow
through wholesale prices.
The Russian market of vegetables is peculiar for stable growth of production and investment
activity in the vegetable sector, aimed at improvement of infrastructure: construction of greenhouses,
vegetable storages, wholesale distribution centers, and selection and seed centers. However, the volumes
of production are insufficient for year-round provision of the country’s population with vegetables
according to the norms of consumption (124 kg per capita), as dependence on import is not yet solved,
and the infrastructure and logistics of the sub-complex is not yet developed. With foreign trade limitations
(food embargo) in 2014, Russia received a unique possibility to replace part of the imported products with
domestic vegetables. On the other hand, there has been reduction of Russian population’s income since
2014. These factors form a tendency for reduction of quality of consumed vegetables, which takes the form
of consumption of cheaper products and reduction of consumption of these food products. The situation
in the Russian economy does not allow counting on quick restoration of demand at food markets, which
could be the basis for further shift of demand in favor of cheaper segment and restoration of large non-
commodity production in population’s economies for personal consumption (Food embargo: results of
2015. Analytical report, 2015). Such changes of the market situation lead to the necessity for evaluating the
influence of the embargo regime on the state and further development of market vegetables, changes of
the structure of consumption, and the forecast in part of improvement of infrastructure. The research of
the Russian vegetable market is useful because of combination of economic, political, social and other
factors. The study of this situation is useful both from the point of view of the theory of functioning of
food markets, and from the point of view of developing practical recommendations.
The issues of vegetables markets are studied in a lot of works. The market of vegetable products is
a complex system of interconnection between manufacturers and consumers of agricultural products. The
researchers note the common peculiarities of vegetables market in various countries: asynchronous
character of production and consumption (Yang and Hu, 2013), importance of ecological aspects of
production in vegetable growing (Subić and Jeločnik, M. 2013), (My et al., 2017), labor intensity of the
sphere, high dependence on imported products, incomplete information provision and low level of
elaboration of the issues of consumption, capital-output ratio, importance of investments assessment
(Nzaku and Houston, 2009), (Subić, Jeločnik and Ivanović, 2011), perishable character of vegetable
products, special mechanism of trade and high volatility of prices (Shukla and Jharkharia, 2011), (Xu and
Liu, 2013) and (Rajkumar, 2014). The scientific society agrees on the decisive influence of the level of
development of infrastructure on the state of the market and effectiveness of work in the sphere of
vegetable production (Rachmina D. et al., 2014), (Shukla and Jharkharia, 2011). Besides, an important
factor of effective work of vegetable growers is usage of marketing approaches (Singh, Jha and Singh,
2011), (Popkova et al., 2013), (Kosorukov, 2012) (Soboleva and Parshutina, 2015) for filling the most
perspective market niches.
In this research, we will try to evaluate the structural shifts in consumption of vegetables in
Russia depending on the influence of exogenous factors, according to the market specifics. Specifics of the
Russian vegetables market is related to concentration (67% of gross production of all vegetables) of
production in secondary husbandries of the population, insufficient level of development of
infrastructure, active expansion of imported products, and limited assortment of vegetables consumption
vegetables. These factors, which influence the processes of production, processing, and storage of
vegetable products and its movement to consumer, also influence the character of consumption of
vegetable products.
The purpose of the research is to evaluate the variants of development of Russian market of
vegetable products, to analyze the structure, tendencies, and perspectives of consumption of vegetable
products in various conditions. In the context of forecasting, some limitations of the study should be
noted. Thus, an important characteristic of the development of the vegetable market is the assortment of
their consumption, the detailed study of which is difficult due to the lack of detailed data. Therefore, the
study identified only 8 groups of vegetables. The results could be useful for manufacturers for making
timely and justified decisions as to expedience of investing into development of company’s infrastructure,
planning the assortment of grown products, etc.
Methodology
The overview of scientific literature, which contains studies in the sphere of forecasting the
parameters of market of vegetable products, allows for the conclusion on certain one-sided character of
the research. Most of them are concentrated on forecasting of prices (Yoo, 2015), (Xu and Liu, 2013), (Yang
and Hu, 2013), and (Lagi et al., 2015) or forecasting of demand at the total level (Shukla and Jharkharia,
2011). Besides, the researchers usually study all vegetables as a single commodity without typological
division (Mutuc et al., 2007). The dominating part of the researchers focused on creation of economic and
mathematical models of the market class Auto Regressive Integrated Moving (ARIMA) (Shukla and
Jharkharia, 2011), (Yang and Hu, 2013). The ARIMA model is linear (Robledo, 2002), and complexity of
market vegetables as an object of research and forecasting requires using more complex methods. These
methods include the models of systemic dynamics (Dynamic Simultaneous Equations Models), which
allow modeling complex systems with hundreds of endogenous variables with dozens of feedbacks at the
long-term horizon of planning. Dynamic models are widely used for forecasting of parameters of complex
and strategically significant agri-food markets: grain market in the USA (Robledo, 2002), rice market in
Japan (Sakurai et al., 2017), meat market in Europe (Põldaru et al., 2008) and (Jarkko and Niemi, 2011).
The methods of systemic dynamics for modeling the vegetables market were used in the works (Nzaku
and Houston, 2009) in part of demand for imported vegetables in the USA (Rajkumar, 2014) and in part of
analyzing the sales of vegetables in India. The issues of consumption in view of the typological structure
of vegetables are not studied sufficiently.
The PowerSim Studio 7 platform was selected as a program product for conducting this research.
The PowerSim Studio package was created and distributed by Powersim Software AS (Norway). The used
methodology is based on classic methods of systemic dynamics, created by J. Forrester. The package has
certain advantages over its analogs (AnyLogic, iTHINK, and GPSS World), which include: blocks of
analysis of risks and optimization of business processes, accounting of time lags, accounting of
probabilities and risks, automatized accounting of limitations, presence of cross references, possibilities of
simulation run various scenarios, and response to external factors.
The dynamic model, which is implemented in the PowerSim system, is a system of differential
equations in the Cauchy form of first degree, which describe the processes of the real world. The
Powersim model operates in the so-called "compressed" time mode, allowing the user to “instantly”
conduct a rapid analysis of the system's response to certain scenario conditions and external influences
(Akopov, 2014).
The stages of creation of the systemic and dynamic model were conducted in several stages.
1.Analysis of statistical data. Identification of causal connections.
2.Cognitive modeling – development of the map of causal connections.
3.Development of the mathematical model presented in the form of the dynamic system of simultaneous
equations. Calculation of the model’s coefficients with the usage of statistical packages.
4.Implementation of the mathematical model on the platform of imitation modeling, which supports the
methods of systemic dynamic.
5.Integration of the imitation model with the sources of data (MS Excel, data bases).
6. Conducting numerical experiments. Calibration of the model. Verification of the model for historical
data (confirming the model’s adequacy) (Akopov, 2014).
The model used the statistical data from the sources of the Federal State Statistics Service
(https://www.fedstat.ru/, http://cbsd.gks.ru/), the Ministry of Agriculture of the RF (http://mcx.ru/),
and foreign trade statistics of the FAO (http://comtrade.un.org/).
The research was performed with the typological structure of vegetables, namely eight types of
vegetables: cucumbers, tomatoes, beet, carrot, cabbage, bulb onion, garlic, and other vegetables (marrow,
eggplant, pepper, radish, green cultures). We grouped these types of vegetables, distinguishing the group
of “seasonal” (cucumbers, tomatoes, and other vegetables) and “traditional” (beet, carrot, cabbage, bulb
onion, and garlic), which are in large demand in Russia. Consumption of seasonal vegetables in Russia is
insufficient (-35% of the norm), while consumption of traditional vegetables exceeds the norm’s threshold
(+22%). Thus, we developed eight systems of differential equations for each type of vegetable. In the
general form, the system of differential equations, which described the level of consumption of vegetable
products, is presented in the following form:
where,
i – numbers corresponding to each type of vegetable products;
yi – resulting variable for the i-th function (consumption of the i-th type of vegetables);
speed of change of consumption of the i-th type of vegetable;
t – time;
yi0 – value of i-th resulting variable for i-th function of development in the initial moment of time t = 0;
bi1, …bi9, di1…di6 – coefficients during factor variables;
xi1– production of i-th type of vegetable;
xi2 – import of i-th type of vegetable;
xi3 – export of i-th type of vegetable;
xi4 – domestic price of i-th type of vegetable;
xi5 – import price of i-th type of vegetable;
xi6 – export price of i-th type of vegetable;
xi7 – storage capacities of vegetables;
xi8 – area of greenhouses;
xi9 – Russian population’s income per capita.
Equations (1) of each of 8 systems of differential equations create a mathematical model of consumption of
vegetable products on the whole and are presented in formula (3)
The second block, which consists of equations (2) of each system of differential equations, characterizes
the pricing component and contains eight differential equations which are presented by formula (4)
In the process of mathematical modeling each indicator that characterizes the situation in the
market of vegetable products was described in dynamics for the period of 2005 – 2015, for which the
dynamic rows were built, presented in Appendix 1. The obtained mathematically described trends allow
to draw a conclusion about the positive dynamics of development of production, foreign trade indicators
in the context of the investigated types of vegetables (with the exception of the onion imports due to its
internal overproduction), as well as infrastructure indicators.
For implementation of the model in the PowerSim Studio system, quantitative and qualitative
interconnections of variables were set. PowerSim Studio allows modeling various variants of
development of the system depending on the set parameters. For the purpose of modeling the alternatives
of development of market, the conditions of further development of the situations were set and imitation
experiments for 3 scenarios of market development were performed.
Figure 1. Fragment of the imitation model of development of vegetables market

Scenario I (scenario “removal of limitations for competition”) has the following conditions:
decision on removal of all foreign trade limitations for vegetable products will lead to mass return to the
Russian market of cheap imported products, which may negatively influence the competitiveness of
domestic vegetables and profitability of infrastructure development.
Scenario II (scenario “development on the basis of limiting the internal market”) is based on the
idea of preservation of embargo with the EU countries and with the key supplier – Turkey – and usage of
this period for a large leap in development of the infrastructure, and, therefore, creation of possibilities for
growth of internal production.
Scenario III (scenario “unused possibilities”) supposes preservation of existing tendencies,
determined during creation of trend models. In the conditions of preservation of the embargo, but with
lack of assets for development of infrastructure, and, therefore, limited internal production (as to
assortment, quantity, and other characteristics).
Results
With execution of the conditions of Scenario I (scenario “removal of limitations on competition”),
the growth of the level of consumption of vegetable products is predicted, as well as qualitative and
quantitative change of the structure of consumption in favor of increase of the share of seasonal
vegetables, which will diversify the ration and will allow a part of husbandries to refuse from growing
vegetables on their backyards.
Scenario I supposes improvement of the situation for consumers, which is a positive tendency –
however, this scenario is negative for domestic vegetable growing, if the existing possibilities for quick
development of infrastructure and technological restoration are not used in full, and further development
of the sphere takes place in more complex conditions.
Within Scenario II (scenario “development on the basis of limiting internal market”), insignificant
structural changes of consumption of vegetable products are expected with large growth of the level of
consumption of vegetables on the whole. Scenario II could be considered more “protectionist” that the
first one and more preferable – from the point of view of domestic manufacturers. Development of the
situation with Scenario III (scenario “unused possibilities”) will ensure the tendency for growth of prices
for imported, all-season vegetables. There will be certain reduction of the level of consumption and the
change of its structure in the part of growth of the share of traditional vegetables. This scenario could be
determined as pessimistic, as negative influence on consumption of vegetable products and development
of the domestic market of vegetable products is expected.
The quickest growth of consumption of vegetables on the whole and of seasonal vegetables, for
which the largest underrun from the physiological norm is observed, is seen during removal of foreign
trade limitations within scenario I (scenario “removal of limitations on competition”). However,
slowdown of the growth rates of own production is expected (on average, by 1.3% per year), which will
negatively influence the level of food security.
According to scenario II (scenario “development on the basis of limitation of internal market”),
despite small underrun in the level of consumption, development of domestic vegetable production is
expected (growth by 4.7 % per year). In case of increase of the population’s income, this growth could be
even higher, as well as strengthening of positions of the Russian agricultural products’ manufacturers.
According to our calculations, this scenario supposes execution of the indicators of the National program
of development of vegetable production of closed soil (1,208 hectares).
Scenario III (scenario “unused possibilities”) shows that lost possibilities negatively influence all
participants of the market – manufacturers and consumers. Growth of domestic production is established
at the level of 2.6% per year.
Table 1. Forecasting scenarios of change of consumption of vegetables in Russia
Indicators, kg per capita 2017 2018 2019 2020 2021 2022
Scenario I - “Removal of limitations on competition”

Consumption of all types of vegetables, including 125.6 128.9 132.5 136.2 140.1 145.1
consumption of seasonal vegetables, including 71.3 73.1 74.9 76.9 79.1 81.6
consumption of cucumbers 9.3 9.5 9.8 10.2 10.5 10.9
consumption of tomatoes 24.3 25.7 27.1 28.6 30.2 31.9
consumption of other vegetables 37.7 37.9 38.0 38.2 38.5 38.8
consumption of “traditional” vegetables including 54.3 55.9 57.5 59.3 61.3 63.5
consumption of beet 7.0 7.1 7.3 7.4 7.6 7.8

consumption of carrot 8.6 8.7 8.7 8.8 8.9 9.1
consumption of cabbage 29.9 31.3 32.9 34.4 36.1 37.8
consumption of bulb onion 7.2 7.0 6.9 6.8 6.8 7.0
consumption of garlic 1.7 1.7 1.8 1.8 1.8 1.9
Scenario II - “Development on the basis of limiting the domestic market”
Scenario III - “Unused possibilities”
Conclusions/Recommendations
The results of the research show a small difference in the level of consumption with different
scenarios. This fact is explained by several reasons. In particular, there are various violations of the
embargo regime (e.g., import of vegetables of Turkish origin with documents of other countries, etc.),
which reduces its protectionism effect. Besides, authenticity of the research is determined by the character
of the data used, so it is necessary to increase the precision of statistical studies of the indicators of
vegetable products market and to expand the list of tracked indicators.
A large difference is observed as to scenarios for the indicator of production – while in Scenario I
we see decline of production, Scenarios II and II predict growth of vegetables production in Russia. Thus,
the results of imitation modeling confirm the thesis that one of the key factors of development of
vegetable products market is creation of a powerful infrastructural basis inside the country. In other
words, manufacturers’ investing into construction of greenhouse complexes and wholesale distribution
centers in the short-term and long-term will perform a decisive influence on competitiveness and
profitability of production of vegetables. Stimulation of development of infrastructure is necessary for
overcoming the existing inertia tendencies of vegetable market in Russia at present and in future, increase
of own production, and reduction of the share of import of in domestic consumption. Further one, with
positive development of the situation, it is possible for domestic vegetable growers to enter the world
market, as the policy of export orientation is viewed as one of the perspective goals of the Russian
economy (Popkova and Sukhodolov, 2017).
In our opinion, there’s necessity for additional research in the sphere of seasonality of
consumption of the typological structure of vegetables and evaluation of the influence of the country of
origin of imported products on the level and structure of vegetables consumption for full study of the
factors that determine the consumption structure.
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Appendix 1: Trends of factor variables
production of cucumbers tons x1 = 54.061t + 1,099
production of tomatoes, tons x2 = 89.687t + 1,990.2
production of beet, tons x3 = 27.693t + 785.4
production of carrot, tons x4 = 43.206t + 1,258.1
production of cabbage, tons x5 = 85.383t + 2,649.2
production of bulb onion, tons x6 = 97.397t + 1,134
production of garlic, tons x7 = 0.9848t + 232.01
production of other vegetables, tons x8 =64.765t + 916.97
import of cucumbers, tons x11 = 13,456t + 79,264
import of tomatoes, tons x12 = 40.960t + 416.074
import of beet, tons x13 = 1.613.6t + 48,203
import of carrot, tons x14 = 10,288t + 131,520
import of cabbage, tons x15 = 3,056.4t + 175,302
import of bulb onion, tons x16 = -30,730t + 597,273
import of garlic, tons x17 = 1,542.1t + 37,131
import of other vegetables, tons x18 = 25,641t + 165,634
export of cucumbers, tons x19 = 319.94t – 1,174.7
export of tomatoes, tons x20 = 19.159t – 7.8678
export of beet, tons x21 = 142.31t – 22.83
export of carrot, tons x22 = 372.12t – 1,274.5
export of cabbage, tons x23 = -131.53t + 1,508.8
export of bulb onion, tons x24 = 689.47t + 4,863.6
export of garlic, tons x25 = 21.269t – 33.317
export of other vegetables, tons x26 = 83,770t – 104.152
import price of cucumbers, RUB/kg x27 = 4.4987t + 5.3254
import price of tomatoes, RUB/kg x28 = 3.7192t + 10.991
import price of beet, RUB/kg x29 = 3.1472t + 0.9257
import price of carrot, RUB/kg x30 = 1.5634t + 4.947
import price of cabbage, RUB/kg x31 = 1.4777t + 4.2184
import price of bulb onion x32 = 1.7731t + 2.1287
import price of garlic, RUB/kg x33 = 5.9303t – 4.0923
import price of other vegetables, RUB/kg x34 = 3.3392 t + 15.203
export price of cucumbers, RUB/kg x35 = 2.4107t + 22.44
export price of tomatoes, RUB/kg x36= 1.0761t + 39.785
export price of beet, RUB/kg x37 = 2.0275t – 1.0969
export price of carrot, RUB/kg x38 = 0.6588t + 20.977
export price of cabbage, RUB/kg x39 = 1.4139t + 1.0507
export price of bulb onion, RUB/kg x40 = 1.5213t – 0.6736
export price of garlic, RUB/kg x41 = 3.9529t + 4.6282
export price of other vegetables, RUB/kg x42 = 0.8361 t + 7.5652
domestic price of cucumbers, RUB/kg x43 = 5.3267t + 44.999
domestic price of tomatoes, RUB/kg x44 = 5.3913t + 57.028
domestic price of beet, RUB/kg x45 = 1.4566t + 13.279
domestic price of carrot, RUB/kg x46= 2.0437t + 14.404
domestic price of cabbage, RUB/kg x47 = 1.3028t + 11.92
domestic price of bulb onion, RUB/kg x48 = 1.3762t + 13.887
domestic price of garlic, RUB/kg x49 = 10.195t + 34.401
domestic price of other vegetables, RUB/kg x50=4.0643t + 35.334
number of populations, million people x51 = 0.1464t + 142.5
income per capita, RUB x52 = 3,001.3t – 4,062.8
expenditures per capita, RUB x53 = 1,124.7t + 3,242.4
capacities of vegetables storage, thousand tons x54 = 18.885t + 2,552.6
area of greenhouses, hectares x55 = 81.064t + 6,652.5
Internal audit quality dimensions and organizational performance in

Nigerian federal universities: the role of top management support
Suleiman Mohammed Bello
Ayoib Che Ahmad
Nor Zalina Mohamad Yusof
Tunku Puteri Intan Safinaz School of Accountancy
Universiti Utara Malaysia, Malaysia
Keywords
Internal audit dimensions, top management support, organizational performance, Nigerian federal
universities.
Abstract
The study examines the moderating effects of top management support in the relationship between
internal quality dimensions and organizational performance in Nigerian federal universities. The study
employed a sample of internal audit staff at senior level from 40 federally owned universities in Nigeria where
400 samples have been drawn for the analysis. Questionnaire instrument was used in generating the data
having subjected to Exploratory Factor Analysis (EFA) and Confirmatory Factor Analysis (CFA) aimed at
establishing underlying dimensions. The data was collected and analysed using inferential statistics and the
findings revealed that interaction of internal audit competence, internal audit independence, and internal
audit size, with top management support significantly and positively influence organization performance of
Nigerian federal universities. The findings provide ground for new policy initiatives to strengthen internal
audit and enriched the literature by providing the moderating effect of top management support as
instrumental to organizational performance. It is therefore recommended that internal audit competence
internal audit independence and internal audit size should be given more attention and mechanism through
which these qualities can be employed and sustained for more internal audit service delivery and efficiency in
Nigerian federal universities.
Corresponding author: Suleiman Mohammed Bello

Email address for corresponding author: sbellorano@gmail.com
First submission received: 26th October 2017
Accepted: 8th March 2018 https://doi.org/10.24052/JBRMR/V13IS01/ART-16
1. Introduction
Efficiency and effectiveness regarding the use of public funds being expanded to education
especially higher educational institution is receiving adequate attention. Authorities are aware that high
quality financial and non-financial management of its resources will lead to the success of its programme
and activities (Okechuku & Kida, 2011).To enhance this credibility, agencies have been established with
the task and responsibilities as an internal control mechanism to look into the financial and non-financial
operations in order to realize the value for the money expanded on various governmental programmes
and activities.
This brought about the existence of Internal Audit (IA) department in institutions to assist in
reviewing organizational processes and control procedures that can provide measurable assurance that
public funds are being utilized in a most efficient and effective manner (Achua & Ogunjoboun, 2014). To
support government programmes and activities, the regulatory agencies such as National Universities
Commission (NUC), Federal Ministry of Education and Office of the Accountant General of the
Federation (AGF) and other professional groups such as Institute of Internal Auditors (IIA), International
Standard for the Professional Practice of Internal Audit (ISPPIA), Statement of Auditing Standard (SAS),
Institute of Chartered Accountants of Nigeria (ICAN), Association of National Accountants of Nigeria
(ANAN), and many other professional groups establishes standards, codes and ethics to enhance internal
audit towards the realization of organizational performance.
The public sector managers require to pay more attention to the improvement of public
organizations (Okechuku & Kida, (2011). Today, government in Nigeria controls the largest business
transactions which by the nature of its expenditure through its ministries and agencies improve
significantly to financial and non-financial activities (Enofe, Mgbame & Ethiorobo, 2013). Therefore, the
need to have a quality internal audit function towards the realization of organizational objectives cannot
be over emphasized, especially in a situation where public sectors managers find themselves operating at
a complex and challenging environment due to the current economic crises (Unegbu & Kida, 2011).
The present study is timely and very essential during the period of economic recession. In
addition, knowledge about the Nigeria federal universities performance efficiency will guide the
managers of those institutions to recognize the financial and non-financial short-comings, while the
federal government on the other hand being the sole funder can use the research in managing its scarce
resources effectively through its policy formulation and review of the existing rule and regulations (Inua
& Maduabum, 2014).
The need to focus on the performance of Nigerian federal universities is equally timely as they are
among the major users of the nation’s resources. This seeks to determine the extent to which internal audit
quality would contribute to the performance of Nigeria federal universities via top management support.
The top management of Nigerian federal universities consist of the Vice-Chancellor, who is the chief
executive officer of the institution, the two deputies for Vice-Chancellor, who assists the Vice-Chancellor
for academic and administrative functions, the Registrar, the university Librarian and the Bursar as the
chief financial officer of the institution. Other functional organs of the university consist among others, the
Deans, Directors and head of departments.
2. Literature Review
2.1 Organizational Performance
Organizational performance is considered to be among the critical factors and very useful variable
in Management and accounting research (Richard, et al, 2008). It has become an indicator of wellbeing of
organization (Gavrea, et al, 2011). The concept of organizational performance is used commonly among
researches and academic literature; however, its definition is often difficult because of many meanings
(Gavrea, et al, 2011). Organizational performance comprises the actual output or result of an
organizational operation as measured against the intended output of the organization. Kaplan and Norton
(1996), considered the variables of financial perspective, stakeholder’s perspective, internal processes and
learning and growth as the determinant factors for measuring organizational performance. What matters
most for organizational stakeholders is the performance of their organization.
Universities being public organizations are expected to increase the quality of their services,
efficiency and effectiveness in the utilization of their resources. Federal universities in Nigeria experience
a lot of changes and reforms for effective management and reaching the stakeholders expectations. The
increasing call for accountability and transference call for internal control mechanisms, government
wanted university’s resources to be properly safe guarded and be utilized efficiently, effectively and
economically. Therefore, both the government and the university managers need to do more on internal
control and performance measure for effective utilization of the scare’s recourses.
Early literatures (Amstrong, 2000) posited that organizational performances are based on the clear
understanding of organizational mission and vision and the strategic goals. They further explained that
effectiveness, efficiency and economy are the basic three parameters that are used to measure
organizational performance). In addition, Kaplan and Norton (1996) provided additional definition which
is commonly use in literature as, performance is an indicator of reliable information on financial and non-
financial operations. Buregeya (2007) argued that organizational performance is the ability for
organization to be efficient in producing output that meets the users and stakeholders’ expectations. In
other words, it is the process of which organization utilizes its scares resource efficiently, effectively and
economically to produce output that are consistent with organization mission and vision.
March and Sutton (1997) earlier contended that organizations are instrument of purpose. They
were regarded as coordinated activities through intentions and goals. Therefore, pointing at the purpose
of organizations and evaluating comparative organizational achievements or failure in fulfilling those
purposes is quite conspicuous. Part of conventional discourse from this statement, it can be deduced that
private firms are normally measured their performance in terms of profit, and return on investment (ROI),
while public organizations like Universities, performance are compared using research productivity,
academic programmes, student intake, ranking by popular agency or by a university regulating body. For
example, the Nigerian federal universities are being assessed and ranked by the National Universities
Commission and other profession groups.
Successful organization represent key ingredient for national development. They have to be
assessed and managed effectively because they are the ingredient for developing economy especially
under the current economic crises. Knowing the determinants such as internal audit quality and utilizing
them for the effectiveness of an organization is very crucial. Internal auditors have a great role to play and
contribute towards an organization through its understanding and knowledge of the organizational risk
elements and control processes (Buregeya, 2007). Management realizes that an organization achieved its
desired objectives or goals when there is effectiveness, efficiency and relevant to the mission and vision of
the organization were realized.
Internal audit quality perfects and complete its functions and add value based on an
understanding of how contemporary organizations function. The roles of internal audit is not only to
detects insufficient processes and procedures but also to suggest way to improve organizational practices
in order to help the organizations to achieved the desired objectives especially in risk management (Achua
& Ogunjoboun, 2014).
Several attempts were made to evaluate or measure the performance of Nigerian federal
universities using different models such as performance efficiency measure, data envelopment techniques
and balance score cards (Abdukareem & Oyeniran, 2011). The fact that this study is on the Nigerian
federal universities, it is important to review the impact of internal audit quality in Nigerian federal
universities and also to review some existing literature in order to determine the level of its contribution
to the performance of those Universities.
2.2 Internal Audit Quality (IAQ)
Research on IAQ has received considerable attention in literature (Chen et al, 2005). In this paper,
IAQ is characterized by IA competence, IA independence and IA size, referred in this paper as IAQ
dimensions. IA is a function of highly experienced, knowledgeable and expertise staff; reasonable size of
audit staff; independence and objectivity that represent the IAQ which significantly influenced
organizational performance (Enofe et al, 2013).
The Statement of Auditing Standard (SAS 65) explained IAQ characteristics as involved
competence that is educational level, certification and experience; objectivity which comprises elements
such as sincere reporting and effective communication and quality of work performance involving
adequacy of audit programme. In another development the Institute of Internal Auditors (IIA) 2002
standards 1210 as cited by Hutchinson and Zain, (2009) internal auditor’s proficiency indicated that
internal auditors acquire the necessary, knowledge and the competency elements required to conduct
audit to ensure effectiveness. In this paper, element of IAQ such as internal audit competency, internal
audit independence and internal audit size are to be considered.
IAQ has significant role in maintaining and contributing to organizational performance under the
attribute of an independent IA, IA competence and adequate size of IA (Zaire, 2014). External auditors
perform effectively with high quality IA which can improve and promote appropriate accounting and
auditing standards by ensuring that the financial information is true and fair and can serve the
organization effectively, thus giving the organization a sense of confidence (Zaire 2014).
The Public Company Accounting Oversight Board (PCAOB), stated that many factors contribute
or directly influence the internal audit quality. Among the prominent ones are the IA competency which
consists of experience, knowledge, skills and proficiency of internal auditor; and the rigor of the audit
methodology developed under “the Audit Quality Framework” (PCAOB, 2013).
The insincerity in financial reporting raises serious concern not only in USA, Italy and New Zealand but
also in Nigeria where the world over witnessed the celebrated collapse of giant companies such as
WorldCom, Enron (USA), Parmalat (Italy), Nationwide finance (New Zealand), Cadbury, Afribank plc,
Intercontinental Bank plc (Nigeria), (Demakis, 2011; Norwani et al, 2011; Lianne, 2011). Countries around
the world have set out code of best practice as guideline to address such mischievous act, like Sarbanes
Oxley Act (SOX) in USA, Cadbury report in Nigeria, Dev report in Canada, Kings Report in South Africa
and many others with aim of improving the corporate governance (Bhagat & Bolton, 2009).
Upon all the intervention by regulatory agencies, the challenges for determining credible financial
and non – financial reporting in both private and public sectors are still prevalent. These and many other
factors necessitate having in depth research on elements affecting internal audit quality considering its
importance and relevance in organizational performance (Demakis, 2011). This effort is not only limited to
private organization but certainly in public sectors where the prime motive is non – profit but generally
directed to social services. Therefore, this paper intends to determine the relationship of IAQ and
organizational performance under the dimension of IA competencies, independence of IA and IA size in
order to find out the extent to which they contribute to wellbeing of organization. Having discussed on
IAQ, the paper will now consider organizational performance as the main focus of the study.
2.3 Top Management Support
Top management support has for quite a long time been considered as a determinant factor for a
successful IAQ. Management attitude towards the activities of IA has significant influence on
organizational performance (Alzeban & Gwilliams, 2014). Several studies (Cohen & Sayag, 2010; Mahzan
& Hassan, 2015) indicated that management support is linked to provision of efficient resources to IA in
the area of staff training, recruitment and professional development to improve on their competency
auditor and having an independent IA department. In this study, top management support is employed
as moderating variable between the independent variable of internal audit quality with the dimensions of
IA competency, independence and size; and the dependent variable of organizational performance.
The idea of employing top management support to serve as moderating variable in this study is
supported by Baron and Kenny (1986) which emphasized that a moderator strengthens the relationship
between the predicting variable and criterion variable. Sekaran (2003) further, states that moderating
variable performs the function of independent variable by strengthen other independent variables
towards achieving the dependent variable. Moderating variable therefore, affects the connection between
the predicting variables and the criterion variable. Sekaran (2003) also, re-affirmed that a moderator has
necessarily have significant effect on the independent – dependent variable relationship and its presence
modifies the original relationship between the predicting and criterion variables. Among the studies that
employed a moderating variable in the area of internal audit quality, consist of Endayah and Hanefah
(2013); Christopher (2014); Baharud-din et al. (2014).
Management support is one of the most crucial factors for ensuring effectiveness of IA which in
turn impacted positively to overall organizational performance. Cohen and Sayag (2010) indicated that
the effect of management support is in consistent with private or public organization effectiveness in their
exploratory studies. The study further stated that even those determinants of IAQ such as competency,
independence, size of internal audit is derived from the support of top management, given independence
of IA, career development, hiring qualified and experienced staff and allocating of enough resources to
internal audit department are all the result of decision made by top management.
In a related study, Christopher (2014) who employed agency theory, some relevant literature and
best audit practice guidelines developed a framework which was used to determine if IA is structured to
enhance good governance in Australian public universities sector, indicated that many of public
universities in Australian internal audit function were carried out under dynamic structure and
operational arrangement to realized good governance. Among the dimension the study examined include
organization member’s support which shows a significant significance relationship between
organizational members support to internal auditors, the university Council, management and external
stakeholders; and overall performance of the University especially in area of functional reporting
relationship, staff development, internal audit independence and resourcing internal audit department.
Baharud-din et al. (2014) stated that top management contributes to the variation of internal audit
quality and is obviously very significant in influencing organizational performance, because any negative
change in the factors that affects those elements will give a significant negative change in the IAQ. This
shows that the variable of IAQ such as competency, independence, size and quality of work performed by
IA may not be strong enough to have any significant influence to the overall effectiveness of IAQ which in
turn contributes to the overall efficiency of organizational performance without top management support.
Badara and Saidin (2013) in their conceptual study on internal IA effectiveness in public organizations,
suggests for further research to validate their study by employing a moderating or mediating variable in
order to strengthen the relationship between the two constructs.
The idea of employing top management support was also supported by the study conducted by
Endayah and Hanefah (2013) on proposition to develop the theoretical frame on IA effectiveness where
they argued that IAQ is directly impacted by organizational members support. The result of their study
indicated that organizational member support which was employed as moderating variable is
significantly related with IAQ.
This paper demonstrates that employing a moderating variable of top management support
between the independent variable of IAQ and dependent variable of organizational performance in
Nigerian federal universities will result to positive impact to organizational performance. Other similar
studies with similar opinion are among others Badara and Saidin (2014) and Alzeban and Gwilliams
(2014) further indicated that the factors of IA independence, competency, size only, cannot guarantee IAQ,
therefore, the application top management support as moderating variable in this paper will be relevant
in realizing effective organizational performance.
The paper will now examine top management support as moderating variable on those
dimensions of IAQ with organizational performance from the existing literature.
2.4 IA Competency and Organizational Performance
IA competency apparently consists the development of specialized expertise that improve the
IAQ. It comprises IA experience, skills, knowledge and professional proficiency (Mahzan & Hassan, 2015).
IA competency represents one of the most essential elements in determining IAQ which improve the
auditors’ role towards organizational performance. The IIA, as prominent standards setters of IA
highlight the importance of having essential knowledge, skills, experience and professional qualification
by internal auditors to operate more effectively (ISPPIA).
Previous studies indicated on the need to conduct studies in internal auditing and its contribution
to public sector organization (Alzeban & Gwillian, 2014; Vijayakumar & Nagaraja, 2012; Radu, 2012;
Badara & Saidin, 2013). The Institute of Internal Auditors (IIA) practice advisory 1210 – 1 state that IA
should possess required knowledge, qualification, experience and other competencies for them to perform
effectively. There is certainly a need to have and apply new ideas, approaches and techniques in order to
improve and add value to organization (Buregeya, 2007).
2.5 IA Independence and Organizational Performance
IA independence is one of the most critical factors for achieving IAQ dimensions. It is seen as a
key driver of the IAF (Alzeban & Gwilliams, 2014). According to Institute of Internal Auditors (IIA)
Practice Advisory Board is an instrument that allows IA department to function and conduct its
responsibilities without interference.
The internal auditor’s ability to exercise their responsibilities with a certain degree of
independence is very critical to the profession and this challenge is typically the requirement by the
corporate governance codes which indicated that IA should channel their report functionally to the audit
committee (AC) of the board or council and administratively to the chief executive officer (CEO) (Ahmad
and Tylor, 2009). This unique role of assurance services to organization and consultancy services to top
management placed IA in a conflict situation (Stewart & Subramaniam, 2010). The effect of IA
independence an organizational performance has a wide range of literature (Mohammad, 2012; Yasin &
Nelson, 2012; Cristopher, 2014; Alwala & Biroari, 2015).
2.6 IA Size and Organizational Performance
IA size is another important element in achieving internal audit quality which in turns stimulates
the organizational performance. International Standards for the Professional Practice of Internal Auditors
(ISPPIA) indicated IA to function more effectively it has to be sufficiently resourced (ISPPIA – Practice
Advisory-2003).
Several studies suggest that the quality of IA works successfully and reliable when there is
sufficient number of audit members. Alzeban and Gwilliams (2014) in their study on factors affecting the
internal audit effectiveness: A survey of the Saudi Arabia public sector show a significant relationship
between IA size and IAQ. Faruk and Hassan, (2014) found that the size of IAQ is positively related with
financial performance of quoted cement companies in Nigeria, after applying multiple regression analysis.
Miettinen (2011); Anderson (2012) and Bouaziz (2012) examined this relationship between IA size and
firm performance and found a significant correlation.
2.7 Top Management Support and IA Competency
Top management support represents a key factor for the success of almost all programmes and
process within organizations including internal audit. Management acceptance of and support for IAF is
considered as a critical success factor to IAQ (Cohen and Sayag, 2010).
For efficient and effective internal auditing, there should be a strong management support which
will ensure internal auditors possess appropriate skills, knowledge and experience (Al-Zeban and
Gwilliams (2014). The level of training, education and experience as well as the level of professional
qualification influences the IAQ (Al-Twaijry et al, 2004). These attributes are accorded with the support of
top management for maintaining appropriate responsibilities and service delivery capabilities. A
competent internal auditor could be an asset for ensuring public confidence in the entire organization
(Omar and Abu Bakar, 2012; Radu, 2012; and Badara and Swaidin, 2013).
Several studies were conducted to examine the relationship of top management support and IA
effectiveness (Ussahawaritchakit and Intakhan, 2011). On the study conducted by Alzeban and Sawan,
(2013) on the role of IA function in the public sector context in Saudi Arabia, stated that management
support for IA departments, can secure efficient staff and provide them with training and development to
meet the required competency needed by the organization. And the findings of the study indicated a
positive and significant relationship with top management support and IA competency. This indicates
that management support is highly needed for achieving internal audit quality which complements
organizational performance.
2.8 Top Management Support and IA Independence
The evolving and expanding role of internal auditing in organizations represent a key
organizational governance mechanism and consulting services. This unique role of risk management and
consultancy services to management has placed internal auditor in a conflict situation which their ability
to exercise true independent and objectivity raised a lot of questions (Christopher, 2014). In addition, IA is
also expected to assist management to achieve accountability and integrity and to improve on the
implementation of organizational operations. It is also expected to develop confidence among the
stakeholder. To achieve these fundamental attributes, IA must be independent from all decision’s factors
involved in the organization (Christopher, 2014). Internal audit should be allowed to exercise its
responsibility without management interference.
“Internal audit independence is the freedom from condition that threaten the ability of the internal audit activity to
carry out internal audit responsibility in an unbiased manner. To achieve the degree of independence necessary to
efficiently carry out responsibility of the internal audit activity, the chief audit executive has direct and unrestricted
access to senior management and the board. This can be achieved through dual – reporting relationship” (IIA, 2012).
Under this scenario, this study attempts to examine the moderating effect of top management
support with IA independence for organizational performance. Previous studies were conducted to
examine this relationship (Alzeban and Gwilliams, 2014; Alzeban and Sawan, 2013; Badara and Saidin,
2013; and Baharud-din et al, 2014). In the study conducted by Alzeban and Gwilliams, (2014) indicated
that top management support is very vital determinant of IAQ and has a great and positive impact to IA
independence.
Independence is very essential for any professional who provides professional services and
professional judgement. Without independent of mind and appearance, the IA loses its value and
credibility and their opinion becomes meaningless (Endayah and Hanefah, 2013). This suggest that from
support top management to IA function provides signal of the role and value of internal auditing in the
organization. Managerial support empowers IA department to discharge its responsibilities efficiently
(Alzeban & Gwilliams, 2014).
In the recent study conducted by Baharud-din et al. (2014) on the factors that contribute to the
effectiveness of IA in public sector, after employing cross-sectional survey to analyze the variables of IA
competency, IA independence and management support shows a positive and significant relationship.
They indicate that successful IA department generally depends on management support strength.
Management style and organizational structure determine the independent IA which provides the
assurance services and consultations to the organization for effective and efficient utilization of
organizational resources (Baharud-din et al, (2014). Thus, management set out the overall policy setting
that enable IA to gain authority and independence in the organization and at the same time gain auditees’
acceptability (Mihret, 2010).
2.9 Top Management Support and IA Size
As the size of organizations differs in their vision and mission, equally the IA size varies.
Therefore, comparing the IA size with one and another in an organization in determining IAQ can be
misleading (IIARF, 2004). In another perspective, top management consider variety of factors in
determining the size of IA department in their organization on whether the investment, example,
resourcing the department yield positive result? There is no doubt IA function need to be properly
equipped with enough human and material resources to enable it carry out the required responsibilities
for organizational effectiveness (Alzeban & Gwilliams, 2014).
Previous studies suggest that IAQ is likely to be higher where there is enough number of IA staff
(Arenne and Azzone, 2009; Ahmad et al, 2009; and Obeid, 2010). For instance, the study conducted by Ali
et al. (2007) on internal audit in the State and Local Government of Malaysia indicated that major
problems hindering effective internal audit performance is the severe shortage of internal audit staff.
Ahmad et al. (2009) shows that limited number of IA staff is among the reasons for ineffective
performance in Malaysian public sector. The study further found that with the support from top
management, both staffing and resource allocation would be improved. The two studies above could have
improved on their finds by employing a variable of top management support.
Arena and Azzone (2009) stated that the primary condition for IAQ to enable it to fulfil its
responsibilities is to acquire enough and well-equipped professional audit staff. Alice and Rusjan (2011)
supported the study by indicating that sufficient number of IA employee participation is a stronger
indicator of organizational objectives. Alzeban and Gwilliams (2014) states that management support
empowers IA department through the provision of sufficient resources to enable it carry out its duties
efficiently. And with management support, IA department can secure available staff and have access to
training and development (Alzeban and Sawan, 2013).
Alzeban and Gwilliams (2014) further, indicated that top management support has significance
influence on internal audit size, from the survey they conducted on 203 internal auditors in Saudi Arabia
public sector organizations. IA required to acquire the right number of qualified members of staff. This
can only be achieved by support of top management (Cohen and Sayag, 2010). Al-Twaijry (2003) indicated
that management support to internal audit in terms of resourcing and budgetary allocation is so
significant in determining IAQ. Management support for IA is so vital for ensuring that IA have resources
needed to meet their responsibilities (Christopher, 2014). Ejoh and Ejom (2014) revealed that the activities
and other operation in the colleges they analyzed were initiated by top management. Therefore,
management have great influence on IA activities. However, the quality of IA is not effective. The study
found that IA department is not sufficiently resourced in terms of staff and does not perform their duty
independently. Overall finding revealed that IA in the institutions they analyzed has no significance
contribution. Under this situation, top management intervention is very critical.
Top management support has for quite a long time been considered as a determinant factor for a
successful IAQ dimension. Management attitude towards the activities of IA has significant influence on
organizational performance (Alzeban & Gwilliams, 2014). Several studies (Alzeban & Sawan, 2013;
Mahzan & Hassan, 2015) indicated that management support is linked to provision of efficient resources
to IA in the area of staff training, recruitment and professional development to improve on their
competency auditor and having an independent IA department.
Conceptual Framework
Independent Variables (IV)
Dependent Variable (DV)
Internal Audit Quality

Organizational
Internal Audit Competency
Performance
Internal Audit Independence
Internal audit Size
Moderating Variable (MV)
Top Management support
A conceptual research framework showing the relationship between independent variable, dependent variable
and moderating variable
Underpinning theory
Stewardship theory is a framework which argues that people are intrinsically motivated to
work for others or for organization to accomplish the task and responsibilities which they have
been entrusted. It argues that people are collective minded and pro-organization rather than
individualistic and therefore works towards the attainment of organizational, group or social goals
because doing so gives them high level of satisfactions. Stewardship theory therefore provides one
framework for characterizing the motivational behaviour in various types of organizations. It
considers that from the beginning, organization serve a wider social purpose than ordinary profit
making or maximizing the fortunes of shareholders. It holds that organizations are social entities
that are concern with welfare of stakeholders having relationship with the organization and are
affected by the achievement or performance of that organization (Donaldson & Preston, 1995). The
choice of this theory in this study is based on its prominence in public organizations, as this study
focuses on public institutions, (Nigerian Federal Universities). It serves as an alternative to agency
theory and offers opposing predictions about the structuring effective board. Its model is based on
as “stewards” rather than what is call self-interested “agency”. Although, agency theory can
equally be useful in this study by showing the existence of internal audit in organization, however,
stewardship theory is much appropriate and would be considered in this study.
Hypotheses Development
Base on the framework, the paper seeks to examine relationship between IAQ with dimensions
of internal audit competency, independence, size and organizational performance. Therefore, seven
hypotheses were formulated comprising of the followings:
H1: There is significant relationship between IA competency and organizational performance.
H2: There is significant relationship between IA independence and organizational performance.
H3: There is significant relationship between IA size and organizational performance.
H4: There is significant relationship between Top management support and organizational
performance.
H5: Top management support moderates the relationship between IA competency and
H6: Top management support moderates the relationship between IA independence and
H7: Top management support moderates the relationship between IA size and organizational
performance.
3. Methodology
3.1 Research Design
In this study, the descriptive design is to be considered in order to describe the features of the
designated variable in a given circumstance (Sekaran & Bongie, 2010). In this regard, the study will focus
on the IAQ as the predicting variable and organizational performance as the criterion variable, the survey
method will be more suitable to achieve the desired goal. Therefore, the research setting is going to be
cross – sectional, which involved collecting data at one time to be able to meet the requirement of the
study’s objectives (Cavana, Dalahaye & Sekaran, 2001).
3.2 Population and sample size
The entire group of people, or things that researchers found interesting to study is what is termed
population (Sekaran and Bougie, 2010). In this paper, IA staff at senior level in the Audit department of
Nigerian federal universities constitutes the population for this study because federal universities in
Nigeria are unique in their services and operations. They have common funding, constitution and laws
establishing them, likewise their policy, structure and functions. The National Universities Commission
(NUC), as Nigerian universities regulatory and supervising agency, stated that there are forty (40) federal
universities across Nigeria (NUC, Official bulletin, 2017).
The Nigerian federal universities were considered on the ground that Creswell, (2003) describe population
as a group of individual or organizations who have the same characteristics and other common features
that the researcher can identify and study. Therefore, the population used in this satisfied the
requirement. The whole population of forty (40) Nigerian federal universities were considered as the
population of the study in order to have comprehensive and much wider responses. Further to this, the
scope of the study can be appropriately managed in the data collection process using personal contact and
electronic medium.
A sample is a set of participants derived from group or individual of whole population for the
purpose of conducting a survey (Shehu, 2014). That is, it is subset of the population for the research
process. It represents part of the entire population of interest to be studied (Shehu, 2014). It can further be
referred to as a sub – collection that is picked from the population of interest. Therefore, sampling is the
process through which group of representative elements or individual are selected from a given
population (Shehu, 2014).
3.3 Sample Technique
Purposive sampling was employed in the data collection process since audit personnel that
occupy senior position and have satisfactory level of experience in audit functions were considered in the
sample. In each of the forty 40 federal universities ten (10) most senior internal auditors with salary scale
ranges from consolidated salary structure of 07-15 were selected from each of the university as
respondents. This makes a total of four hundred (400) respondents.
4. Measures
The study adopts measures from previous studies. The instrument has passed through ideal
process of validation. The items of the instrument were generated from various sources and it has been
subjected to Exploratory Factor Analysis (EFA) in order to establish the underlying factors and reduce the
number of items. Construct validity and Confirmatory Factor Analysis was carried out in order to
ascertain the underlying factors.
The final version of the instrument ended up with 23 items that cut across the five factors. The
factors loadings, communalities, rotated component matrix have all exceeded the cut-off point of .5. The
variance explained is above .70, indicating that the instrument has satisfactory validity indicators. The
internal consistency of the instrument is adequate with .95 alpha coefficient, while individual constructs
has .70 for competence, .70 for independence, .81 for size, .74 for management support and .84 for
organizational performance
The researcher collects data through distribution of questionnaire to respondents (Directors, Chief
Internal auditors, Assistant Chief Internal Auditors, Principal Internal Auditors and Senior Internal
Auditors) from the Nigerian federal universities. In order to have the completed questionnaires return
within shortest possible time, hand delivery and electronic mail system were used as they suite the
peculiarity of Nigerian university System.
Hand delivery and use of electronic media are considered most appropriate in order to avoid long
time consumption (Sekaran & Bougie, 2010). Research assistants were employed to assist in questionnaires
distribution and follow - up through physical contacts. Telephone and e-mail were employed to fast –
track the collection processes from the selected sample. One of the advantages of this method other than
the quick response is that the researcher gives additional explanation on items that needs clarification by
the respondent.
5. Result and Discussions
5.1 Result
5.1.1Multiple Regression and Hypotheses Testing
Multiple regression analysis was employed to test the research hypotheses. The analysis intends
to examine the relationship between the predicting variables and the criterion variable. Hair et al, (2010),
asserted that for the conduct of regression analysis, large number of samples is required and considered
appropriate, and that the underlying assumptions of multiple regression analysis were fulfilled. The
assumption includes among others, normality, linearity, multicollinearity, homoscedasticity which are
normally investigated through the scatter plots and the normality probability plot in the regression
standardized residuals.
The assumptions were thoroughly examined, and the result indicated that none of the assumption
was violated in the study, therefore, making the conduct of multiple regression analysis possible.
5.1.2 Direct Relationship
Table 5.1.2 showing the result for direct relationship
Regression Results for Direct Relationship
Unstandardized Standardized
Coefficients Coefficients t-stat p-value
Std.
Coefficient Error Beta
Constant 1.729 0.150 11.549 0.00
IA Comp. 0.065 0.030 0.096 2.159 0.03* Supported
IA Independ. 0.055 0.046 0.070 1.203 0.23 Not Supported
IA Size 0.075 0.052 0.089 1.047 0.19 Not Supported
Top Mgt
Support 0.319 0.043 0.461 7.388 0.00** Supported
R² 0.496 Adj.R2 .487
Prob. 0.000
F-Stats 50.29
Obs 313
* indicates statistical significance at 1%
* *indicates statistical significance at 5%
Dependent Variable: Organizational Performance.
H1: There is significant relationship between Internal Audit competency and organizational performance.
The result for the relationship between internal audit competence and organizational performance
is significant at (β = 0.096, t =2.159, p =0.03), hence the hypothesis which states that there is significant
relationship between IA competence and organizational performance is supported.
H2: There is significant relationship between IA independence and organizational performance.
The result for the relationship between IA independence and organizational performance is significant at
(β = 0.070, t =1.203, p =0.23), hence the hypothesis which states that there is significant relationship
between IA independence and organizational performance is not supported.
H3: There is significant relationship between IA size and organizational performance.
The result for the relationship between IA size and organizational performance is not significant at (β =
0.089, t = 1.047, p =0.19), hence the hypothesis which states that there is significant relationship between
IA size and organizational performance is not supported.
H4: There is significant relationship between top management support and organizational performance.
The result for the relationship between top management support and organizational performance is
significant at (β = 0.461, t = 7.388, p =0.00), hence the hypothesis which states that there is significant
relationship between top management support and organizational performance is supported.
5.1.3 Moderating Effects
Top management support moderates the relationship between IA competency, IA independence,
IA and size and the organizational performance. The moderating variable is expected to strengthen the
relationship between the predicting variables and the criterion variable for maximum effectiveness (Baron
& Kenny, 1986) as shown below
Table 5.1.3 showing regression result of moderating relationship
Regression Results for the Moderating Relationship
Standardized
Unstandardized Coefficients Coefficients t-stat p-value
Coefficient Std. Error Beta
Constant 1.077 0.524 2.056 0.04
IA Compet. 0.538 0.158 0.792 3.397 0.00** Supported
IA ndepend. 0.420 0.141 0.531 2.972 0.02* Supported
IA Size -0.091 0.149 -0.161 -0.609 0.54 Not Supported
Top Mgt.
Support 0.512 0.172 0.739 2.971 0.00** Supported
IAC*TMS 0.152 0.047 1.246 3.231 0.00** Supported
IAI*TMS 0.156 0.042 1.310 3.670 0.00** Supported
IAS*TMS 0.552 0.401 0.554 2.296 0.023* Supported
R² 0.55 Adj. R2 .54
Prob. 0.000
F-Stats 33.73
Obs. 313
* indicates statistical significance at 1%
* *indicates statistical significance at 5%
Dependent Variable: Organizational Performance.
H5: Top management support moderates the relationship between IA competence and organizational performance
The result for regression analysis indicates that interaction of IA competence and top
management support has significantly makes impact on organizational performance (β = 1.246, t = 3.231,
p =0.00), hence the hypothesis which states that there is significant relationship between interaction of IA
competence and top management support and organizational performance is supported.
H6: Top management support moderates the relationship between IA independence and organizational performance
The result for regression analysis indicates that interaction of IA independence and top
management support is positively and significantly makes impact on organizational performance (β =
1.310, t = 3.670, p =.000), hence the hypothesis which states that there is significant relationship between
interaction of top management support and independence and organizational performance is supported.
H7: Top management support moderates the relationship between IA size and organizational performance
The result for regression analysis indicates that interaction of IA size and top management
support is positively and significantly makes impact on organizational performance (β = 0.554, t = 2.296, p
=0.023), hence the hypothesis which states that there is significant relationship between interaction of IA
size and top management support and organizational performance is supported.
6.0 Discussions
Top management support appears to be an important moderator in the relationship between
internal audit factors comprising of competence, size; independence and organizational performance in
the federally owned universities in Nigeria. The moderating effect of top management support appears to
be important indicator towards a tremendous increase in the level of efficiency and effectiveness for the
performance of Nigerian federal universities.
The findings of the study revealed that interaction of IA independence and top management
support was found to have the most important followed by interaction of IA competence. The importance
of IAQ factors demonstrated their growing relevance and demand for IAQ service in all organisations
whether public or private. The findings of the study illustrate the importance of top management support
in the performance of federal universities in Nigeria. The regression analysis shows a very strong effect of
internal audit competence, independence and size on organisational performance.
The significance of top management support’s intervention in this study justifies the extent to
which top management support remains a crucial factor in the attainment of IA objectives and
performance of federal universities in Nigeria. The findings indicate that the influence of top management
support is strong and consistent regardless of whether the organisation is private, or public taken into
consideration of the findings of this study. Cohen and Sayag (2010),
The finding is also consistent with Albrecht and Travaglione (2003) who discovered that
management support was important factor to the success of internal audit function in organizations. The
findings of the study also reveal that support of management is almost crucial to the operation and
success of IA departments in Nigerian universities. Top management support remains important
determinant of organisational effectiveness which is derive from the support of top management by
providing adequate manpower requirement to meet the required size, promote independence as well as
enhancing competences of staff through training and retraining of audit staff. All these achieved through
decisions of top management.
The result of the regression analysis for IA competency is consistence with previous studies
(Alzeban & Gwilliams, 2014; Cohen & Sayag, 2010; Alzeban & Sawan, 2013; Mihret & Yismaw, 2007;
Mahzan & Hassan, 2015) which indicated that management support is linked to provision of efficient
resources to IA in the area of staff training, recruitment and professional development to improve on their
competency and having an independent IA department.
The independence of IA remains crucial in providing a better result to the organizations. This
paper established that independence of IA department affects the performance of Nigerian universities to
a certain extent. The finding indicates that an internal audit department must be independent in terms of
personnel and operational activities of an organization. The initial result for regression analysis for testing
the direct relationship between IA independence and organizational performance indicated insignificant
relationship with organizational performance. However, with the interaction of moderating variable of
top management support, the result indicated significant and positive relationship with organizational
performance. This shows the effect of top management support in improving the effectiveness and
efficiency of an organization. Therefore, top management support remains a precondition for the
attainment of mandate and effectiveness of Nigerian federal universities.
The result in the interaction between IA size and top management support indicated a positive
and significant relationship with involvement of top management of the institution. Therefore, the study
is in conformity with the findings of Kiabel (2012), Faruk and Hassan (2014) and Christopher (2014). Like
in the recent study conducted by George et al, (2015) shows that top management is associated with the IA
size and IAQ is significantly related with organizational performance. The result for regression analysis
for testing the direct relationship between IA size and organizational performance indicated insignificant
relationship with organizational performance. However, with the interaction of moderating variable of
top management support, the result indicated significant and positive relationship with organizational
performance. This shows the effect of top management support in improving the effectiveness and
efficiency of an organization. Therefore, top management support remains a precondition for the
attainment of mandate and effectiveness of Nigerian federal universities.
7. Conclusions and Recommendations
7.1 Conclusion
The study identified the interaction of the IAQ dimensions and top management support in
influencing organisational performance. Theoretically, the paper has succeeded in making the theory of
Stewardship theory as universal and relevant to all organisations irrespective of ownership and nature.
Equally, the paper has contributed by providing additional literature involving the relationship between
IAQ and organisational performance to the existing body of knowledge
The findings of the study demonstrate the IAQ dimensions influence the performance of the
Nigerian federal universities. It is therefore recommended that the significant IAQ dimensions comprising
IA competence, IA independence and IA size should be given more attention and mechanism through
which these qualities can be sustained and be employed for more IA service efficiency and delivery in
Nigerian federal universities. Further to these, university top management should always encourage IA
competence by promoting knowledge and skills of the audit personnel through in-service training,
workshops and seminars and ensure their independence.
Considering the outcome of the direct relation of IA competence, independence and size and
moderating effects of top management support in the relationships with IA competence, independence
and size and organizational performance, it is concluded that the Nigerian federal universities would
have effective and reliable IA department capable of helping the universities to achieve high level of
performance if given the necessary support that they required by top management.
Limitation of the study is that, even though there are several controlled variables under this
model that can measure the organizational performance, yet this study only measured the dimensions of
IA competency, IA independence, IA size, IA reporting line and timeliness of IA report. Apart from the
demography of the respondents, other control variables which the study failed to measure consist of IA
objectivity, communication, motivation, audit committee, quality of work performed by internal auditors
and many others. This is since bringing all of them under the model of the study would be cumbersome.
Some of them were discussed by other researches. Moreover, result from few variables is often more
realistic and can easily be analyse and interpret.
7.2 Recommendation
Based on the finding of the study, it is recommended that IAQ dimensions consisting of IA
competence, independence and size should be given more attention and mechanism through which these
qualities can be sustained and be employed for more IA service efficiency and delivery in Nigerian federal
universities by the top management of Nigerian federal universities.
The regulatory agencies of Nigerian federal universities, such as National Universities
Commission, federal ministry of education, office of the Accountant General of the federation and office of
the Auditor General for the federation should consider the review of IA policy issues regarding IA
independence for efficiency and effectiveness in Nigerian federal universities. In this study, quantitative
research design was employed. Future research can employ qualitative or mixed design. For instance,
qualitative interview should be carried out, where the respondents may give a better understanding or
response on the relationship between the constructs of the study.
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Does the spin-off policy can accelerate the deposit funds in the
Indonesian Islamic banking industry?
M Nur Rianto Al Arif
Universitas Islam Negeri Syarif Hidayatullah, Indonesia
Keywords
spin-off; deposit fund; panel regression; Islamic banks
Abstract
The purpose of this paper is to analyze the impact of spin-off policy that based on Islamic Banking Act
No. 21/2008 to the deposit fund growth of Islamic banking industry in Indonesia. This research used panel
regression with fixed effect. The variable used in this paper is spin-off variable that used as a dummy variable,
and also included the internal factor of industry such as deposit margin, and efficiency ratio (measured by
BOPO). Besides the internal element, this research also added the external factor such as economic growth
rate, and net interest margin from conventional banking. The result showed that the dummy spin-off variable,
operational efficiency ratio (BOPO) and growth rate had an impact on the deposit funds in four Islamic
banks. The implication of this result is spin-off policy had a good effect on the growth of deposit funds in
Indonesian Islamic banking industry. Spin-off decision is one of the business strategies from Islamic banks
and not the goal of Islamic banking industry.
Corresponding author: M Nur Rianto Al Arif

Email address for corresponding author: nur.rianto@uinjkt.ac.id
First submission received: 1st November 2017
Introduction
This study found that there is a difference in deposit funds at the spin-off’s banks between before
and after the spin-off. This research is consistent with Al Arif (2014) that also found that there is a
difference in deposit funds at Islamic banking industry between before and after the spin-off. The
differences between these studies with previous research are on the object of study. This study uses the
object on spin-offs' banks, whereas previous studies focused on data at the industry level. But, this
research is different with Al Arif et al. (2017) that found that there is no impact of spin-off policy on the
deposit funds.
Islamic economic development in Indonesia characterized by the presence of Bank of Muamalat
Indonesia as the first Islamic bank in Indonesia in 1992 and then followed by the presence of various
Islamic financial institutions. Market share of Islamic banking in Indonesia today is still relatively small,
only 5% of total bank assets national. The number of Islamic bank customer today just about 3 million
people, though the number of Muslims to be potential consumers Islamic banks more than 100 million
people. Thus, the majority of Muslims have not associated with Islamic banks. Table 1 shows the growth
of Islamic banking industry in Indonesia, until the end of 2016, there are 13 Islamic full-pledge banks, 21
Islamic business units, and 166 Islamic rural banks. From 13 Islamic full-pledge banks, five banks are the
result of spin-off decision, either by acquisition and merger or pure spin-off.
Table 1. Islamic banking network
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Islamic banking
Islamic commercial bank 3 5 6 11 11 11 11 12 12 13
Islamic business unit 26 27 25 23 23 24 23 22 22 21
Islamic rural bank 114 131 138 150 154 158 163 163 163 166
Source: Islamic banking statistics, Bank of Indonesia
In 2008, has passed Act No. 21 of 2008 concerning Islamic Banking. This Act provides the legal
basis of Indonesian Islamic banking industry, and also to encourage the development of Islamic banking
industry. One of the crucial issues in this regulation related to the obligation of Islamic business units to
separate (spin-off) if the asset Islamic business unit reached 50% of the parent bank's assets or 15 years
after the Act No. 21 of 2008 applied.
There are several reasons about the proposed of spin-off policy, such as: first, to accelerate the
growth of the Islamic banking industry; second, to increase the performance of Islamic banks; third, it will
increase the independence of Islamic banks; fourth, the Sharia compliance. After the enactment of Act No.
21 of 2008, there appeared a new trend establishment of Islamic banks. Implementation can do through
three approaches, namely: First, conventional commercial banks already had Islamic banking unit
acquires a relatively small bank then convert it into full Islamic banking and release as well as
incorporating Islamic banking unit with the newly converted bank. Second, conventional commercial
banks do not have Islamic banking unit, acquired a relatively small bank and turn it into an Islamic full-
fledge bank. Third, conventional bank separation (spin-off) and used as a separate Islamic Banks
Table 2 shows the development of deposit funds, financing, and asset in Indonesian Islamic
banking industry. The data shows that there are the increasing of deposit funds, financing, and asset from
the Islamic banking industry. But, if we see the growth, the data shows that since 2012 there is declining
growth in Islamic banking growth either in deposit funds, financing, and asset. In 2014, the growth was
below 8%; the data implies that the spin-off policy that imposed by the regulator still don't have an impact
on Indonesian Islamic banking industry growth.
Tabel 2. The Development of Deposit, Financing, and Asset
(on billion rupiahs)
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Deposit fund 28.011 36,852 52,271 76,036 115,415 147,512 174,018 186,608 231,175 279,335
Growth (%) 35,50 31.56 41.84 45.46 51.80 27.81 17.97 7.23 23.88 20.83
Financing 27.944 38,194 46,886 68,181 102,655 147,505 179,284 187,886 212,996 248,007
Growth (%) 36,69 36.68 22.76 45.42 50.56 43.69 21.54 4.80 13.36 16.44
Asset 36.537 49,555 66,090 97,519 145,467 195,018 229,557 244,197 296,262 356,504
Growth (%) 36,73 35.63 33.37 47.55 49.17 34.06 17.71 6.38 21.32 20.33
Source: Islamic Banking Statistics, Bank of Indonesia
Novarini (2009), Pramuka (2011), and Endri (2011) found that the more significant part of Islamic
business unit is not efficient regarding profits. The level of efficiency of Islamic full pledge banks is higher
than Islamic business units. The spin-off will undoubtedly lead to potential new problems in the Islamic
Business Unit, which will split. When the time becomes, Islamic business unit is inefficient how if it
decides Islamic business unit convert into Islamic Banks should be able to carry out banking operations
independently and is no longer dependent on the Conventional Commercial Bank became the parent. Al
Arif (2015) shows that the spin-off policy has increased the operational inefficiency of Indonesian Islamic
banking industry.
Based on the data, it appears that the spin-off policy still raises several problems. Therefore, this
research seeks to examine the impact of spin-off policies on deposit funds in spin-offs' banks. The
discussion on this article will consist of several sections. In the first part will attempt to explain the gaps
contained in this study. Then in the second part explains the literature review of spin-offs in the Islamic
banking industry. The third section describes the analytical techniques used in this study. In the fourth
chapter will explain the empirical findings obtained in this study.
Literature Review
There had been some researchers associated with the spin-off in Islamic banks. The spin-off of
Islamic banks only first practiced in Indonesia. Therefore, theories or models of the spin-off will do with
the model of spin-offs are applied to industry in general. Al Arif et al. (2017) and Haribowo (2017) stated
that the spin-off policy should evaluate.
Nasuha (2012) conducted a study about the performance difference on Islamic banking unit that decided
to the spin-off, such as BNI Sharia, BRI Sharia, BJB Sharia, BSB and Victoria Sharia. The result showed that
only asset, financing and deposit funds that indicated a difference between before and after spin-off
policies on that five banks. Otherwise for other variables such as CAR, FDR, ROA, and ROE showed that
there was no difference between pre and post spin-off. Kiswono (2012) conducted a study of strategy
formulation to Islamic business unit's spin-off. This research shows that only several spin-off roadmaps
that reasonable to be realized, such as Bank of Permata, Bank of BTN, Bank of CIMB Niaga, and Bank of
Danamon. Several strategies can do by the Islamic business unit, such as a pure spin-off, merger,
acquisition, and conversion.
Al Arif (2014) researches the impact of spin-off policy on deposit fund in Islamic banking industry
using the data on Islamic banking industry statistics. The result shows that all the independent variables
such as dummy variable of the spin-off, one-month time deposit margin, operational efficiency ratio
(BOPO), and profitability ratio (ROA) had an impact on the growth of deposit funds on Islamic banking
industry. Siswantoro (2014) analyze the performance and the strategy of Islamic bank after the spinoff
decision, most Islamic banks that have converted in the full-pledge scheme could optimize some source of
funding such as capital injection and increasing temporary investment deposit. Ramdani (2015) and
Hamid (2015) found that there is a difference in profit between before and after spin-off policy. Ramdani
(2015) focused on the study at Bank of BNI Sharia and Hamid (2015) targeted at Indonesian Islamic
banking industry.
Al Arif (2015) analyzes the relationship between spin-off policies on the financing growth of
Indonesian Islamic banking industry. This research using the panel regression with fixed effect model.
The variables that used in this paper are dummy variable spin-off, deposit funds, efficiency ratio, inflation
rate, economic growth rate, and interest rate. The result showed that only deposit funds and the interest
rate that has an impact on the financing growth in spin-off banks. This result implies that the spin-off
policy that imposed by the regulator didn't affect financing Islamic banking financing growth.
According to Elfring and Foss (1997), there are two types of the spin-off, namely: first, regarding its parent
company, in which the parent company for some reason is not able or not able to exploit the opportunities
that come. The second type is related to organizational units as an individual, which the subsidiary is not
the same as its parent company. Christo and Falk (2006) showed that the critical factor of the spin-off is
the focused of the industry. From these results and we related to this research, we can state that the spin-
off decision that had been done by several Islamic banking units can give a value for the parent's company
and also for the shareholders. Because the parent's company can focus on his primary business, and the
subsidiary company can concentrate to develop.
Method
This study uses regression analysis to panel data. The data used are quarterly data from 2005 to
2016, by including four Islamic banks spinoff (such as Bank of BNI Sharia, Bank of BRI Sharia, Bank of
Bukopin Sharia, and Bank of BJB Sharia). The reason why only uses these four banks are: (1) these four
banks are quite long enough as Islamic business unit, i.e., more than five years; (2) these four banks had
already done the spinoff, i.e., more than five years; (3) the availability of data. This study does not include
all Islamic banks because of the focus of this research only on spin-offs' banks.
Statistical data comes from Bank Indonesia Islamic banking and Islamic commercial bank's
financial statements results of the spin-off, which is the object of research. To examine the effect of spin-off
policy on deposit fund is using panel regression. The mathematical equation proposed in this research is:
Ln_Depit = α + β1Dit + β2 Marginit + β3 BOPOit + β4 Interestt + β5 Growtht + εit
where:
Ln_Dept = log natural of deposit funds;
Dt =Dummy variable for spin-off
Which is: 0 before spin-off, 1 after spin-off
Margin = three-month deposit’s margin
BOPO = operational efficiency ratio
Interest = net interest margin from conventional banks
Growth = economic growth of Indonesia
To estimate the parameter of the model using panel data regression. Several techniques can be
used, such as First, ordinary least square. Second, fixed effect model. Third, random effect model. On this
research is using panel regression with fixed effect model, because we assume that the intercept is not
constant. There are several steps in this research, such as: first, run the estimation using fixed-effect
model. Second, do the Chow-test to choose between pooled ordinary least square or fixed effect model.
Third, do the Hausman-test to select between fixed effect model and random effect model.
Result
The first step in this research we estimate using fixed-effect model. After that using the Chow-test
we can see that we reject the null hypothesis which stated that intercept is constant in i and t, so the best
model is fixed effect model. We can see the Chow-test result in Table 3. The next step we estimate the
equation with random effect model. After that using the using the Hausman-test, we can see that we reject
the null hypothesis which stated the random effect model is consistent, so the best model that chose on
this research is fixed effect model. We can see the Hausman-test result in Table 4. The estimation result
from panel regression with fixed effect shown that the variables that affect the deposit fund on Islamic
banks result from spin-off is dummy variable of spin-off, operational efficiency ratio (BOPO), interest rate,
and growth rate variables. Dummy variable spin-off has a positive influence on the growth of deposit
funds in four Islamic banks are becoming observation. This result suggests that the decision to separate
Islamic banking unit into Islamic commercial bank can improve deposit funds in Islamic banks.
The results that obtained from this paper is consistent with that research that done by Al Arif
(2014). In previous studies trying to look at the impact of spin-off policy towards the Islamic banking
industry in general by using Islamic banking data from Islamic Banking Statistics from Bank Indonesia. In
a previous study using the independent variable in the form of a dummy variable separation, the level of
financing problems (NPF), a margin deposit one month, the value of the efficiency ratio (ROA), and the
level of profitability (ROA). The results showed that all independent variables have a significant impact
on deposit funds in the Islamic banking industry in Indonesia.
Table 3. Chow-Test Result
Redundant Fixed Effects Tests
Equation: HASIL_REV_FE
Test cross-section fixed effects
Effects Test Statistic d.f. Prob.
Cross-section F 53.045298 (3,146) 0.0000
Cross-section fixed effects test equation:
Dependent Variable: DPK
Method: Panel EGLS (Cross-section weights)
Total panel (balanced) observations: 192
Use pre-specified GLS weights
White cross-section standard errors & covariance (d.f. corrected)
Variable Coefficient Std. Error t-Statistic Prob.
C 16602961 1556168. 10.66913 0.0000
D_SPINOFF 2367796. 446909.4 5.298157 0.0000
MARJIN -135472.4 196442.4 -0.689629 0.4915
BOPO -7790.772 7195.877 -1.082672 0.2807
INTEREST -2810861. 278523.2 -10.09202 0.0000
GROWTH 353849.1 163512.0 2.164056 0.0321
Weighted Statistics
R-squared 0.417427 Mean dependent var 3292868.
Adjusted R-squared 0.393968 S.D. dependent var 3668132.
S.E. of regression 3009774. Sum squared resid 1.35E+15
F-statistic 17.79364 Durbin-Watson stat 0.159298
Prob(F-statistic) 0.000000
Unweighted Statistics
Sum squared resid 1.43E+15 Durbin-Watson stat 0.106752
Similar results obtained by Nasuha (2012). Which conducts research related to differences in the
performance of Islamic business unit who decided to split (Bank of BNI Sharia, Bank of BRI Sharia, Bank
of BJB Sharia, Bank of Sharia Bukopin, and Bank of Victoria Sharia) one year before and one year after
spin-off by using the Wilcoxon Match Pairs test. The result shows that there were the differences between
before and after the spin-off on three variables, such as assets, financing, and deposit fund.
The time-deposit margin shown that didn't have an impact on deposit funds in four spin-off
banks. This result is different with Andriyanti and Wasilah (2010); Kasri (2010). Andriyanti and Wasilah
(2010); Kasri (2010) found that the higher return of Islamic banks will increase the deposit funds growth.
The difference established by the different data and method that used in this paper and previous research.
The last study using the one-month time deposit margin, this article is using three-month time deposit
margin. The preceding analysis using the ordinary least square regression, this paper used the panel
regression with fixed effect model.
Operational efficiency ratio that measured by BOPO had a negative impact on deposit funds. This
result shows that the more efficient indicated Islamic banks increasingly smaller values ROA ratio, the
deposit funds will increase. It means that if the bank customer noticed that the more efficient Islamic
banks, it would further enhance customer interest in putting their resources into Islamic banks. Variable
net interest margin gives a negative influence on deposit fund; it shows that customers of Islamic banks in
deciding to put their funds in Islamic banks still consider the interest rate offered by conventional banks.
This result indicates that customers of Islamic banks are always rational customers, i.e., customers who
always take into account Islamic banks give the rate of return compared to the conventional bank interest
rate. This result is same as the research that done by Kasri (2010) and also by Andriyanti and Wasilah
(2010), the interest rate also influences the growth of deposit funds. The higher of interest rate will
decrease the deposit funds growth because there will be a customer's movement from Islamic banks into
conventional banks.
Table 4. Hausman-test Result
Correlated Random Effects - Hausman Test
Equation: Untitled
Test period random effects
Test Summary Chi-Sq. Statistic Chi-Sq. d.f. Prob.
Period random 37.382641 3 0.0000
Variable Fixed Random Var(Diff.) Prob.
D_SPINOFF -3468824.9851 3251553.6319 1446247364766.32 0.0000
MARJIN 1317322.2108 176131.88685 44781681048.899 0.0000
BOPO -3503.5630 -14357.842722 39373426.3357 0.0837
Period random effects test equation:
Dependent Variable: DPK
Method: Panel Least Squares
C -4220648. 2029439. -2.079712 0.0398
D_SPINOFF -3468825. 1348153. -2.573020 0.0114
MARJIN 1317322. 308267.7 4.273305 0.0000
BOPO -3503.563 10740.78 -0.326193 0.7449
INTEREST NA NA NA NA
GROWTH NA NA NA NA
Effects Specification
Period fixed (dummy variables)
S.E. of regression 2787887. Akaike info criterion 32.74427
Sum squared resid 8.86E+14 Schwarz criterion 33.56539
Log likelihood -2512.053 Hannan-Quinn criter. 33.07777
The value of determination coefficient shows the amount of R2 0.7212 and the importance of
adjusted R2 0.7041. This result indicates that fixed effect model can explain the model in about 70.41% and
29.59% explain by other variables outside the model. The values of F statistics show the significant result
so that it can say that simultaneously all variables affect the dependent variable of deposit funds in
Islamic banks.
Discussion
The result from the result shows that the spin-off policy had an impact on deposit funds at four
spin-off banks. Empirically the spin-off decision that made by four banks can increase the nominal of
deposit funds, but if we see from Table 4, the spin-off decision didn't have an impact on deposit funds
growth. This result implies that the increase of deposit funds caused by other factors besides the spin-off
decision. The questioner result shows that although most of the respondents have known that the banks
had already spin-off, the saving behavior of the respondent still not change. It means that the spin-off
decision from the banks can't influence the saving behavior of the customers.
Table 5. Estimation With Fixed Effect Model
Dependent Variable: Ln_DPK
Method: Panel EGLS (Cross-section weights)
Sample: 2005Q1 2016Q4
Periods included: 48
Cross-sections included: 4
C 16845792 1541576. 10.92764 0.0000
D_SPINOFF 2700308. 406353.9 6.645212 0.0000
MARGIN -45596.41 142887.6 -0.319107 0.7501
BOPO -14006.42 5418.081 -2.585126 0.0107
INTEREST -2771424. 277657.1 -9.981466 0.0000
GROWTH 333139.4 160470.5 2.076017 0.0396
Effects Specification
Cross-section fixed (dummy variables)
Weighted Statistics
S.E. of regression 2103199. Sum squared resid 6.46E+14
Unweighted Statistics
Sum squared resid 8.19E+14 Durbin-Watson stat 0.192211
Table 6 shows that in the earlier period of spin-off decision the growth of deposit funds was
increasing. This fact demonstrated by Bank of BRI Sharia and Bank of Bukopin Sharia that can achieve the
deposit funds growth above 200 percent after the spin-off decision. Bank of BNI Sharia that has the stable
growth after spin-off decision shows the different trend; the highest growth from Bank of BNI Sharia was
before spin-off in 2008 that can achieve 69.07%. Bank of BJB Sharia shows the declining growth after the
spin-off decision. The highest growth is in 2009 that can reach 124.73%, and this growth also stable in the
spin-off's year (in 2010) that can achieve 124.07%. From the data, we can see that the nominal deposit
funds are always increasing, but the growth is declining.
Table 6. The Growth of Deposit Funds at Spin-offs’ Banks (%)
Bank 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
BNIS 31.25 60.02 69.07 37.19 22.96* 31.66 32.91 27.93 36.24 18.94 25.34
BRIS 43.88 107.93 -24.26* 278.57 167.91 71.90 20.62 20.09 11.76 18.74 9.42
BJBS 91.01 26.92 43.64 124.73 124.07* 70.43 51.55 10.13 13.50 -10.21 15.97
BSB 70.96 9.34 -54.59* 553.31 27.52 41.30 24.39 14.78 22.08 19.06 14.43
Source: data processing
*) Spin-off year
This thing implies that the spin-off decision still can't accelerate the growth of four spin-off banks.
From the questioner result, show that there are a lot of things that become the reason why customer
choose the Islamic banks, such as product, location, services, etc. So, if the Islamic banks are going to
increase the growth of deposit funds, the Islamic banks must increase several things, such as the service
quality, product quality, product innovation, etc. Sharia reason is only one reason from the customer why
they choose the Islamic banks (Usman, 2015; Sari et al., 2015; Soma et al, 2017), but not the dominant
factors. So, the spin-off decision that imposed by the regulator because of the Sharia reason is not indeed
correct. The Sharia compliance is not because of the Islamic business unit form, but, comes from the
Islamic bank's operations. The Islamic bank also had to increase the service quality; it will increase the
loyalty of the customers (Suryani and Hendryadi, 2015; Hidayat et al., 2015).
Tübke (2004) said several factors affect the spin-off process. First, the business activity factor, such
as the company size and the business orientation of the subsidiaries. Second, the organization and
management factor. Third, the relationships and support element. There are three patterns of
relationships, namely the market-relatedness, the product-relatedness, and the technology-relatedness.
Fourth, transfer consideration or transfer such transfer of experience from the parent company to its
subsidiaries. Fifth, the motivation factor. Sixth, the business environment factor.
Actually, besides the spin-off policy, other strategies can be done to accelerate the growth of
Islamic banking industry, i.e., merger. Miftah and Wibowo (2017) said that the merger would optimize the
acceleration of Indonesian Islamic banking industry. Besides that, five alternatives are feasible considering
when doing the merger, i.e., internal aspect and external aspect.
Conclusion
From the research that has done by using a fixed effects model showed that the policy of
separation has a positive influence on deposit funds in Islamic banks separation results. Based on the
estimates indicate that the fixed effects model (fixed effect) gives the highest determination coefficient
compared to the OLS model and a random-effects model (random effect). Internal factor that influence is
the level of operational efficiency (measured by BOPO), while the external factors that affect the interest
rate are of conventional banks and economic growth.
These findings have several implications for the growth of Islamic banks in Indonesia. First,
policy spin-offs that have been carried out by four banks proved to increase deposit funds. Second,
Islamic business units should be given incentives to immediately want to take a spin-off policy before 15
years after the law is applied. Third, the internal factors and external factors also contribute an element
that can improve deposit funds in Islamic banks.
The policy implications of this research are: first, the spin-off decision is one of the business
strategies from Islamic banks and not a goal of Islamic banking industry. Second, the Islamic banks should
still increase the bank's product quality. Third, the Islamic banks should always make the innovation of
the product. Fourth, the parent's banks should support the operation of the subsidiaries.
The limitation of this research is the data that only focus on the spin-off’s banks. The future
research should also add the non-spin-offs’ banks, to enrich the result and policy implication for the
policymakers. By entering the non-spin-offs’ banks, the effect of spin-off policy on deposit funds will be
seen clearly.
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Impact of motivational factors on knowledge sharing behaviour of

managers in Ready Made Garments (RMG) Industry of Bangladesh
Md Asadul Islam
Amer Hamzah Jantan
Arif Md Khan
Faculty of Economics and Management
Universiti Putra Malaysia, Malaysia
Md Habibur Rahman
Faculty of Engineering and Technology
Liverpool John Moores University, United Kingdom
Osman Monshi
Faculty of Business and Enterprise
University of the West of Scotland, United Kingdom
Keywords
Motivational factors, Knowledge sharing, RMG, Bangladesh
Abstract
The study aimed to examine the impact of motivational factors on the knowledge sharing behaviour of
managers in the Ready-Made Garments (RMG) industry of Bangladesh. Everyone has knowledge and can be
part of knowledge sharing specially in organizations where employees need knowledge from the seniors or
other personnel to perform better. However, barriers in the knowledge sharing process are common while some
motivators could be effective to overcome those barriers and motivate individuals to share their knowledge
with others in the organisations. This study integrates motivational perspectives into the Theory of Planned
Behaviour (TPB) to examine the impact of both intrinsic and extrinsic motivators on managers’ knowledge
sharing behaviour in selected organisational contexts. The study used a quantitative strategy and a cross-
sectional survey method for data collection from 110 respondents comprising general managers, product
managers, shift managers, quality managers and line managers from randomly selected top 30 RMG
organizations in Dhaka, Bangladesh. The results showed that among the selected motivational factors,
enjoyment in helping others was highly associated with knowledge sharing behaviour of managers in RMG
organizations. However, expected organizational rewards, reciprocal benefits and knowledge self-efficacy have
a moderate level of impact on managers’ knowledge sharing behaviour.
Corresponding author: Md Asadul Islam

Email address for corresponding author: asadul.uos@gmail.com
Accepted: 23rd April 2018 DOI: https://doi.org/10.24052/JBRMR/V13IS01/ART-18
1. Introduction
Sharing of knowledge plays a significant role on employees to work together and facilitates the
exchange of information and knowledge to improve both individual and organisational performance
(George and Brief, 1996; Green 2004; Van, 2005). Knowledge sharing can be simply defined as the process
of sharing knowledge between at least two people or group of people either physically or from remote
areas using communication devices and processes such as mobiles, emails, audio-videoconferences etc.
(Fernie, Green, Weller & Newcombe, 2003; Cabrera & Cabrera, 2005; Fayard and Metiu 2014). In an
organisation, knowledge sharing includes, unifies, transfers and reuses practical knowledge gained from
organisational functions while it remains within the organisations for the usage by current and future
employees (Chow and Chan 2008; Van den Hooff, Schouten, and Simonovski, 2012). Thus, knowledge
sharing is substantial to improve productivity, usage and also retention of intellectual property even after
the departure of employees from organizations (Lin, 2007; Foss, Husted, and Michailova, 2010; Hung,
Lien, Yang, Wu and Kuo, 2011).
Knowledge sharing succeeds the knowledge management practices in organisations regardless of
the industry nature and geography including the Ready-Made Garments industry of Bangladesh. Lin,
(2007) outlined that knowledge sharing is an interacting process that includes the exchange of employee
knowledge, skills and experiences throughout the entire organisation in any sector. Thus, it supports
organisations to improve employees’ knowledge, attitude and confidence on different complicated issues,
which are challenging but very important to manage. Making the organisational positions sustainable and
to be able to come up with new designs, products or ideas etc. entirely depend on the knowledge sharing
perspective of the organisations. In addition, knowledge sharing also facilitates to create a co-operative
and friendly work-environment at the workplace (Sajeva, 2007; Quigley, Tesluk, Locke, & Bartol, 2007).
Therefore, it is believed that the knowledge residing among managers in the organizations should be
shared for greater individual and organisational achievement and sustainability. To some extent,
knowledge-sharing activities are similarly significant for the Ready-Made Garments (RMG) organizations
in Bangladesh.
The industry has been undergoing rapid growth and expansion due to local and foreign direct
investments (Naomi, 2011; Rahman and Siddique, 2015, BGMEA, 2017). However, regular unexpected
incidents such as strikes, conflicts between managers and employees etc. create significant barriers for the
expected growth of the industry, which earned more than $28 billion in 2016 for Bangladesh, making it a
major exporting sector for the country. According to de Vries, (2006); Lin, (2007), knowledge sharing
behaviour of managers could contribute to the development of employee relationships, dissemination of
information throughout organisational internal stakeholders, reduction of employee turnover, increase of
organisational productivity and reduction of employee turbulences. However, knowledge sharing does
not come from the managers or other individuals naturally. Individuals with experience or qualifications
in organisations fear of losing knowledge power if they share their knowledge with colleagues
(Devenport 1997, as cited in Mansor and Saparudin, (2015). McDermott and O’Dell (2001) identified the
failures of many well-organised knowledge management efforts caused by the non-supportive beliefs
among employees in many organisations. Therefore, it is urgent for the management of organisations to
identify the best antecedents, which could impact the knowledge sharing behaviour of managers
positively to share their knowledge with colleagues and others in their organisations. According to Lin
(2007), there is a lack of empirical research that evaluates and presents the impact of motivational factors
such as intrinsic and extrinsic motivational factors on the knowledge sharing behaviour of the employees
specially managers in organisations. Therefore, most of the organisations are not able to maximise the use
of knowledge created in the organisations and to be able to enhance both efficiency and productivity of
both employees and organizations.
However, many studies have been done relating to the motivational factors and knowledge
sharing behaviour of managers but most of them are done in relation to western and other countries.
Thus, the impact of motivational factors on the managers’ behaviour to share their knowledge with
internal stakeholders in the Ready-Made Garments (RMG) industry of Bangladesh has not been
empirically tested. Bangladesh is one of the Next Eleven (N-11) countries with high potential to become
one of the major economies in the 21st century within 2041 due to its promising outlook for investment
and growth (Goldman Sachs, 2007; Kuepper, 2016). In this country, the Ready-Made Garments (RMG)
industry is the highest earner of foreign currency through the export of produced cloths. It earned more
than $28 billion in 2016 while it aims to earn more than $50 billion by 2021 (Ovi, 2017; BGMEA, 2017).
However, the country is going under a rapid economic, technological and social transformation along
with global and domestic business challenges. These challenges have placed increased pressure on the
business planners and owners of the industry to build an excellent relationship with employees and
maintain their organizations to remain productive in the hyper-competitive business world. Therefore, the
phenomenon of knowledge sharing behaviour of managers in the RMG organisations in Bangladesh is
very significant to research. This would help to identify the most effective motivational factor to inspire
managers to share their knowledge with colleagues for greater individual and organisational benefits.
Thus, the purpose of the study is to examine the role of motivational factors in the knowledge sharing
behaviour of managers in the Ready-Made Garments (RMG) industry of Bangladesh.
2. Literature review and hypotheses development
2.1 Knowledge sharing
Knowledge is the prerequisite for employees to execute functions for the timely and standard
production of products and services according to the demands of buyers and gain a competitive
advantage over competitors as well as strengthening a sustainable position in the market (Spender, 1996;
Stenmark, 2001). However, this knowledge resides within individuals, who should share, transfer,
archive, create and apply it while performing duties (Lin, 2007). In this regard, when there is a transfer of
knowledge between individuals in organisations for different purposes, the knowledge sharing (KS) takes
place. According to Lin (2007), as cited in Mansor and Saparudin (2015), knowledge sharing aims to
accomplish something significant/useful that requires knowledge. According to Stenmark (2001), KS can
be examined in two dimensions: one manages existing knowledge by developing knowledge repositories
such as reports, memos and articles while another includes knowledge compilations by managing
knowledge-specific functions such as knowledge achieving, creating, sharing, distributing,
communicating and applying.
According to Fengjie, Fei, & Xin. (2004), the process of KS includes firstly one person, who
contributes some knowledge from his or her experience or skill so that others can learn or know the
knowledge, then, the receiving persons of the particular knowledge can add their own understandings
and disseminate the knowledge into their own knowledge. In this process, the willingness of the
individuals is required. KS is particularly significant for organizations to build teams with relevant
knowledge to meet the knowledge-based competitive requirements in the markets (Davenport & Prusak,
1998; Dyer & Nobeoka, 2000). Therefore, it is significant for the organisations to ensure that knowledge
residing within employees is transferred to others so that its use and reproduction can be possible for
receivers.
Even though KS is identified and acknowledged by individuals in the organisations as a positive
force for survival in the competitive and challenging environment, the factors, which encourage or
discourage knowledge sharing behaviour in the organisational context is poorly understood due to the
lack of empirical studies. Therefore, it is not surprising for us when we identify individuals, who are
reluctant to share their knowledge with colleagues in organisations. Consequently, it signifies the
inevitability of doing research to understand when the employees would be enthusiastic to share their
knowledge and how the organisations can facilitate the process of knowledge sharing among employees
at different levels. Managers in ready-made garments (RMG) organizations possess tacit knowledge due
to their long-term work experience in their respective fields. Therefore, these organizations can be
excellent places to practice knowledge management approaches that will benefit everyone.
2.2 Factors contributing to knowledge sharing behaviour
Many previous studies relating to knowledge sharing adopted the theory of planned behaviour
(TPB) (Wang, Yen, and Tseng, 2015, 2015; Mansor & Saparudin, 2015; Razak et al, 2016), in which
intentions “are assumed to capture the motivational factors that influence a behaviour” (Ajzen, 1991). In
this regard, three factors, which influence individual intentions include attitude toward the behaviour,
social norms regarding the behaviour and beliefs about one’s control over the behaviour. However, the
attitude here indicates the degree to which individuals evaluate the behaviour positively or negatively
(Ajzen, 1991, as cited in Mansor and Saparudin, 2015). According to Devenport & Prusak (1998), human
tendencies or behaviour restrained KS in organisations while Hoof & Ridder (2004) suggested employees
would be more enthusiastic to share their knowledge if they are given organisational recognition for their
contributions.
On the other hand, the simplicity of knowledge sharing is a significant factor that influences on
human behaviour or the willingness to share. According to Gagne (2009), if the nature of knowledge
sharing process is easier, people will share their knowledge while the value of the knowledge will
influence employees’ motivations to share. According to Lin (2007), motivation either intrinsic or extrinsic
influences individual attitude and willingness to share his or her knowledge with others. Lin (2007)
identified reciprocal benefits and expected organisational rewards as extrinsic motivators, which have
influence in knowledge sharing of employees in an organisation. On the other hand, self-efficacy and
enjoyment in helping others are identified as intrinsic motivators, which have significant influence in
knowledge sharing behaviour of employees in an organisation. These results are also supported by the
research findings of Wasko & Faraj, (2005) and Susantri & Wood (2011). However, knowledge sharing is
not free from barriers that are acknowledged in many previous studies, for example, Riege (2005) stated
three levels of barriers in knowledge sharing processes of organizations. The levels have been outlined in
Table 1: Barriers at different levels that hinder KS
Levels Determinants
Lack of communication skills
Individual level Lack of social networks
Differences in national culture
Differences in position status
Lack of time and trust
Organisational level Lack of infrastructure or support environment
Technological level Unwillingness among people to use different
systems and applications
Source: Riege, (2005)
Thus, the study aims to examine the impact of intrinsic (enjoyment in helping others and
knowledge self-efficacy) and extrinsic (reciprocal benefits and expected organisational rewards)
motivators on knowledge sharing behaviour of managers to create a knowledge sharing environment in
the organisations.
2.3 Research hypotheses and conceptual framework
2.3.1 Conceptual framework
Figure 1: Conceptual framework
Extrinsic motivation
Expected organisational
rewards
Reciprocal benefits
Knowledge sharing
behaviour
Intrinsic motivation
Self-efficacy
Enjoyment in helping others
Source: Adapted from Lin, 2007.

The framework for this study has been adapted from Lin, (2007) as shown in Figure 1. The model
outlines motivational factors such as (extrinsic factors (reciprocal benefits and expected organisational
rewards and intrinsic factors self-efficacy and enjoyment in helping others) and the impact on
organisational knowledge sharing behaviour.
2.3.2 Research hypotheses
According to Susantri and Wood (2011), employees need to be motivated to increase their
engagement in KS activities assuming that their action will ensure either they lose or win. However, Bock
& Kim (2002) suggested some economic benefits for example bonuses, increased pay, career development
or job security to ensure the involvement of the employees in KS activities in the organizations. Hence, it
is hypothesised that:
H1: Expected organisational rewards have a positive relationship with KS behaviour
According to Wasko & Faraj, (2005); Lin, (2007); Lin, Lee, & Wang, (2008); Olatokun & Nwafor,
(2012) employees in organisations are intrinsically motivated to share their knowledge when he or she
examined it is useful and interesting in helping colleagues to solve significant problems that arise due to
their lack of knowledge on a particular problem. Reciprocity behaviour has been identified as the
significant motivating factor to facilitate the process of KS in organisations (Bock, Zmud, Kim, & Lee,
2005; Lin, (2007; Lin et al. 2008; Olatokun & Nwafor, 2012; Islam, 2017). This behaviour creates a
perception of shared liability among employees to share their knowledge with others when they
examined the availability of extrinsic benefits for information disbursement in the organisations. Hence, it
is hypothesised that:
H2: Reciprocal benefits have a positive relationship with KS behaviour
According to Bandura, (1982); Wasko & Faraj, (2005) Bock et al. (2005); Olatokun & Nwafor,
(2012), self-efficacy can intrinsically motivate employees to share their knowledge with colleagues at the
workplace. In this regard, knowledge self-efficacy means the employees’ awareness of their own
capability to give knowledge to others, who need it to execute certain tasks to meet both individual and
organisational performance goals. Thus, the employees feel assertive regarding the significance of their
knowledge for the development of organisational performance and become motivated to share their
knowledge with colleagues as well as become active to gain new knowledge for their own usage and
sharing in the future. Therefore, the study creates the third hypothesis as:
H3: Self-efficacy has a positive relationship with KS behaviour
According to Wasko & Faraj, (2005) employees become motivated to share their knowledge when
they realise their sharing of knowledge help others to solve certain problems and perform better. It gives
the employees a feeling of enjoyment that always motivates them to share their intellectual knowledge.
Therefore, based on this insight, it is hypothesised that:
H4: Enjoyment in helping others has a positive relationship with KS behaviour
According to Susantri & Wood, (2011) intrinsic motivation plays a bigger role to motivate
employees to share their knowledge with their colleagues than extrinsic motivation. However, they
argued both forms of motivation influence individual knowledge sharing behaviour at the workplace. The
result is also supported by the research findings of Mansor & Saparudin (2015) that intrinsic motivation
has a greater effect on KS behaviour than extrinsic behaviour. Thus, it is hypothesised that:
H5: Intrinsic motivation influences KS behaviour more than extrinsic motivation.
3. Methodology
The study was conducted using a quantitative research strategy while a cross-sectional survey
was carried to collect data. A correlational analysis is used to measure the relationships between the
variables of the study. Correlations have been used to examine the directions of the linear correlations
between reciprocal benefits, expected organisational rewards, knowledge self-efficacy, enjoyment in
helping others, efficacies and KS behaviour of managers in RMG organisations. A correlation presents
whether two variables (for example expected organisational rewards and knowledge sharing behaviour)
are related or not, if yes, how strongly are they related. Based on the statistical terms the relationship
between the variables in the study is presented by the correlation coefficient that is a number between 0
and 1.0. Here, if there is no relationship between two or more variables being investigated, the correlation
coefficient will be 0. In contrast, if the relationship between the variables increases or the value of the
correlation coefficient is 1 then it will be a perfect relationship (Hinkle, Wiersma & Jurs, 2003). Generally,
the higher correlation coefficient denotes a stronger relationship. The rules of thumb by Hinklen et al.
(2003) are illustrated in Table 2 for greater understanding of the size of a correlation coefficient.
Table 2: Rule of Thumb for Understanding Size of Correlation Coefficient

Size of Correlation Interpretation
.90 to 1.00 (-.90 to –1.00) Very high positive (negative) correlation
.70 to .90 (-.70 to -.90) High positive (negative) correlation
. 50 to .70 (-.50 to -.70) Moderate positive (negative) correlation
.30 to .50 (-.30 to -.50) Low positive (negative) correlation
.00 to .30 (.00 to -.30) Little if any correlation
Source: Hinklen et al, 2003
A questionnaire with 24 items that is divided into six sections was adapted and modified from
Kankanhalli, Kwok & Bernard, (2005) and Nwafor (2012). Section A was aimed at obtaining information
on the socio-economic and demographic status of the respondents. Section B was made up 4 items to
collect respondents’ opinion relating to their explications of non-monetary or monetary rewards from
organisations for knowledge sharing. Section C comprised 4 items to collect respondents’ expectation on
reciprocal benefits for knowledge sharing with others. Section D contained 4 items on knowledge self-
efficacy to collect respondents’ perceptions on the value that they place on the knowledge they share.
Section E was made up of 4 items on enjoyment in helping others to collect respondents’ perception
regarding whether sharing knowledge is related to the enjoyment of helping others in solving problems in
organisations. Finally, section F comprised 4 items to understand the behaviour of respondents towards
Knowledge Sharing.
The population of interest of the study were the managers (i.e. General Managers, Product
Managers, Shift Managers, Quality Managers and Line managers) working in ready-made garments
(RMG) organisations in Dhaka, Bangladesh. The managerial positions have been selected based on the
idea that managers in these positions possess tacit knowledge due to their long-term tenure in
organisations. Therefore, they would generate a more realistic overview of how knowledge sharing is
applied in RMG organisations of Bangladesh. 300 questionnaires were randomly distributed among the
selected managerial personnel from the top 30 RMG organisations listed in the Bangladesh Garments
Manufacturing and Exporting Association (BGMEA) located in Dhaka, where more than 1000 RMG
organisations are operating (Zamir, 2016; BGMEA, 2017). Out of the 300 distributed questionnaires, only
127 questionnaires were returned by the respondents after the one and half month data collection period.
Of this total, only 110 questionnaires were used for the data analysis because 17 returned questionnaires
were incomplete.
4. Results
4.1 Reliability
To examine the reliability of the collected data, a reliability test for the variables included in the
study was conducted using Cronbach’s Alpha. The reliability test results are presented in Table 3 below.
Table 3: Reliability table
Variables Items Cronbach’s Alpha
Expected Organisational Reward 4 0.934
Reciprocal Relationship 4 0.796
Self-Efficacy 4 0.813
Enjoyment in Helping Others 4 0.794
Knowledge Sharing Behaviour 4 0.913
4.2 Respondents’ profile:

The demographic profile of participants who participated in the research are presented in Table 4 below.
Table 4: Demographic profile of participants of the study
Respondents’ demographics Categories Frequency Percentage (%)
Male 89 80.90
Gender Female 21 19.10
Married 97 88.18
Marital status Unmarried 13 11.82
20-25 0 0
26-30 23 20.90
Age 31-35 28 25.44

36-50 48 43.66
51 and above 11 10
General Manager 36 32.72
Product Manager 24 21.83
Designation Shift Manager 22 20.00
Quality Managers 12 10.90
Line Managers 16 14.55
Less than 6 years 18 16.36
6-10 years 37 33.64
Working experience 11-15 years 26 23.64
16-20 years 19 17.27
21 years or more 10 9.09
4.3 Hypotheses test results
Hypothesis 1: Expected organisational rewards have a positive relationship with KS behaviour
Table 5: Correlation between KS Behaviour and Expected Organisational Behaviour
Expected Knowledge
Organisational Sharing Behaviour
Behaviour
Expected Organisational Pearson correlation 1 0.535**
Behaviour Sig. (2-tailed) 0.000
N 100 100
KS Behaviour Pearson correlation 0.535** 1
Sig. (2-tailed) 0.000
N 100 100
**. Correlation is significant at 0.01 level (2-tailed)
The findings in Table 5 show the correlation between the KS Behaviour and Expected
Organisational Behaviour which is is 0.535 while the significance level is 0.000. Thus, it shows that there is
moderate relationship according to the rules of the thumb. Therefore, hypothesis 1 (H1) is accepted.
Hypothesis 2: Reciprocal benefits have a positive relationship with KS behaviour
Table 6: Correlation between Reciprocal Benefits and KS behaviour
Reciprocal Benefits Knowledge
Sharing Behaviour
Reciprocal Benefits Pearson correlation 1 0.545**
N 100 100
N 100 100
The above Table 6 shows that the correlation between Reciprocal Benefits and KS behaviour
which is 0.545 while the significance level is 0.000. The correlation between the two variables is positive
and the relationship shows a moderate. Therefore, the H2 is accepted.
Hypothesis 3: Self-efficacy has a positive relationship with KS behaviour.
Table 7 Correlation between Self-efficacy and KS behaviour
Knowledge Self- Knowledge
Efficacy Sharing Behaviour
Self-efficacy Pearson correlation 1 0.645**
N 100 100
N 100 100

According to Table 7, the hypothesis 3 is also accepted because the correlation between Self-
efficacy and KS behaviour is 0.645 with the significance level at 0.000. There is a moderate level of
relationship between Self-efficacy and KS behaviour.
Hypothesis 4: Enjoyment in helping others has a positive relationship with KS behaviour.
Table 8 Correlation between enjoyment in helping others and KS behaviour

Enjoyment in helping Knowledge
others sharing behaviour
Enjoyment in helping others Pearson correlation 1 0.748**
N 100 100
N 100 100
The above table 7 shows the correlation between the enjoyment in helping others and Knowledge
Sharing behaviour which is 0.748 with a significance level of 0.000. Therefore, the relationship between the
two variables is high and hypothesis 4 is accepted.
Hypothesis 5: Intrinsic motivation influences KS behaviour more than extrinsic motivation.
A regression analysis was applied to examine whether intrinsic motivation (i.e. enjoying helping
others and self-efficacy) or extrinsic motivation (i.e. reciprocal benefits and expected organisational
rewards) have a greater impact on knowledge sharing behaviour among the managers in the ready-made
garments (RMG) organisations in Bangladesh. According to the results, the R-value for intrinsic
motivation is 0.826 while the R-value for extrinsic motivation is 0.562. This shows the greater impact of
intrinsic motivation on the knowledge sharing behaviour of managers as compared to the extrinsic
motivation. Thus, the hypothesis is accepted.
5. Discussion
The primary purpose of the study was to identify motivational factors impacting the knowledge
sharing behaviour of managers in Ready-Made Garments (RMG) organisations of Bangladesh. Findings of
the study provide several significant insights most of which are consistent with previous researches while
a few of them contrast against previous research findings. The inconsistency of the respective results with
previous studies could be the result of differences of the industry and the people, who are participants in
the study.
Firstly, the acceptance of hypothesis 1 on expected organisational behaviour is not consistent with
the findings of the Sandhu, Kishore & Ahmad, (2011) and Mansor & Saparundin (2015) who found the
insignificance of the relationship between KS behaviour and expected organisational rewards while this
study finds a moderate level of relationship between the two variables. Previous studies suggested that
there is no effect of the current organisational rewards (monetary or non-monetary) on the knowledge
behaviour of respondents (Sandhu et al. 2011; Mansor & Saparundin 2015). However, this study suggests
that rewards given to managers, who share their knowledge with others in the organizations would
motivate the managers to share their knowledge with others. The second hypothesis on reciprocal benefits
is also accepted. This is consistent with previous researches by Kankanhalli et al. (2005); Wasko and Faraj
(2005) and Mansor & Saparundin (2015). The result recommends RMG organisations to arrange for
reciprocal benefits, for example, on-going support, long-term mutual co-operation that can motivate
managers to take part in knowledge sharing activities.
The third hypothesis is accepted since it shows a moderate level of the correlation between Self-
efficacy and KS behaviour. This result is consistent with Lin (2007) and Mansor & Saparundin (2015).
Thus, it can be suggested that the managers in the RMG organizations believe that they have the ability to
share their knowledge with others and they have confidence regarding the value of their knowledge,
which would contribute to gain better performance in terms of responsibilities and tasks of the employees,
who receive the knowledge. Hypothesis 4 is also accepted and consistent with previous studies by
Olatokun and Nwafor (2012) and Mansor & Saparundin (2015). The result indicates that the managers in
the RMG organizations enjoy sharing their knowledge with others because they believe that sharing
knowledge would support individuals in solving problems and acquiring new knowledge.
Finally, the result from the regression analysis on hypothesis 5 shows that intrinsic motivation has
a greater relationship with knowledge sharing behaviour than extrinsic motivation in the RMG industry.
It is supported by results of previous studies and consistent with Lin, (2007) and Mansor & Saparundin
(2015). Therefore, the study concludes that intrinsic motivation is more effective than extrinsic motivation
to create the willingness among managers to share their knowledge in organisations.
6. Conclusion
The study presents the relationship between intrinsic and extrinsic motivation regarding the
knowledge sharing behaviour of managers in ready-made garments (RMG) organisations in Bangladesh.
The study primarily aimed to recognise what motivates managers in the RMG organizations to share their
knowledge. The results suggest that the managers in RMG organisations have a positive attitude in
sharing their knowledge with others and they believe it is a useful activity for both individuals and
organisations. The study found extrinsic motivation has less influence than intrinsic motivation on
managers’ knowledge sharing behaviour. However, interestingly, the study identified that the expected
organisational rewards have a moderate level of impact on the knowledge sharing behaviour of managers
in the RMG organizations context. Therefore, the study suggests organizations to provide some monetary
or non-monetary rewards to managers to motivate them to share knowledge with different individuals.
Finally, the study reveals all the variables have a relationship with knowledge sharing behaviour of the
managers working in RMG organizations of Bangladesh while enjoyment in helping others is identified as
the most significant variable, which has a high impact on knowledge sharing behaviour of managers.
Therefore, the study suggests organisations to create opportunities and programs for making the
knowledge sharing processes as common practice at every level and department.
7. Limitations of the study and suggestions for future research
This study utilised a survey based on only two main variables i.e. extrinsic motivation and
intrinsic motivation while other predictors for example culture, attitude etc. were not included. Therefore,
in future studies, these predictors could be included. On the other hand, a qualitative approach could be
used in future researches relating to the KS behaviour of the managers to gain more information for
example eagerness, readiness and willingness to participate in knowledge sharing activities. This is
because qualitative approach uses interviews to collect the data that will contribute to gain deeper insights
from participants based on discussions and explanations.
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The optimum refurbishment time of shopping centres

M Mushirivindi
D A Prinsloo
C E Cloete
Department of Construction Economics
University of Pretoria, South Africa
Key words
Refurbishment, shopping centre, renewal, redevelopment, life cycle, revamp, maintenance, asset
enhancement, renovation, demolish.
Abstract
The optimum time in the life cycle of a shopping centre when refurbishment must be undertaken was
investigated, based upon the analysis of three shopping centres in Durban, South Africa, which were older
than thirty years and where refurbishment had not taken place for at least twelve years. To determine the
impact of age on the centres' performance, data was gathered from shoppers, tenants and the landlords.
The results indicate that the life cycle stage, rather than physical age, plays a dominant role in
determining the requirement to refurbish. Respondents prefer shorter periods (seven to ten years) between
revamps to ensure that the shopping centre remains attractive to tenants and shoppers and rewarding in
terms of financial returns to investors. The findings further indicated that the timing for refurbishment is
moderated by internal factors such as management competency, investor strategy and feasibility of the
refurbishment project as well as by external factors such as competition, market, social and technological
environment. It has also been established that refurbishment must meet certain expected financial returns in
order for it to be undertaken.
This paper demonstrates the importance of understanding the stage of the shopping centre in the
product life cycle and ensuring that refurbishment is undertaken when it is due before loss of competitiveness
and financial returns occur.
Corresponding author: C. E Cloete

Email address for corresponding author: chris.cloete@up.ac.za
1. Introduction
A shopping centre is “...a group of architecturally unified commercial establishments built on a
site which is planned, developed, owned and managed as an operating unit related to its location, size
and type of shops to the trade area that the unit serves…” (Cloete. 2015: 118). The Australian Property
Institute (2016:57) mentions that “a building that was functionally adequate at the time of construction can
become inadequate or less appealing as design standards, mechanical systems and construction materials
change over time”. The physical state of the shopping centre plays a significant role in meeting the
demands of space users, shoppers and achievement of investor’s objectives. It is therefore integral for
facilities to remain relevant in meeting the dynamic needs of users. This is mostly achieved by long term
maintenance in form of refurbishment. Increases in dwell time, visits and money spent of between twenty
percent (20%) and forty percent (40%) have been found to occur after a major revamp (Prinsloo 2016:1)
In South Africa, many of the shopping centres are over ten (10) years old and signs of age in the
planning, tenant mix and building services are evident (Cloete 2015:495). The age and refurbishment
requirements of three shopping centres selected for study were investigated, to establish their ability to
meet the needs of the shoppers, tenants and objectives of owners. This research was confined to shopping
centres older than thirty years and without having undergone a major revamp during the last twelve or
more years, in Durban, KwaZuluNatal in South Africa. These older shopping centres which were built in
the 1970s and 1980s, if not revamped, are characterised by older and outdated store layouts, a tenant mix
designed around older market requirements whose demographics have changed and are tired looking
because of wear and tear and possess a lot of functional and external obsolescence. In addition, most of
these shopping centres are either in their maturity or declining stages of their life cycle and therefore
require initiatives to initiate a new life cycle. The life cycle concept will be explained later. Failure by
shopping centre owners to revamp these older shopping centres will lead to them losing customers and to
the centers being classified as “dead malls”.
2. Property Life Cycle
According to Cloete (2016: 57, 60), a property is a product like any other product and therefore
exhibits the stages of the product life cycle viz. inception, development, maturity and scrapping/recycling.
As a centre ages, physical, functional and external obsolescence sets in. (The Australian Property Institute
2015: 300). This depreciation, which may arise from physical ageing and changes in market and economic
factors, competition and technology, causes the property to move from one stage to another in its life
cycle. According to Nicoleta and Cristian (2009: 536) the life cycle concept provides possible explanation
for the decline and emergence of different shopping centre formats.
As a property becomes older, it reaches maturity and ageing, with some properties reaching this
stage sooner than others depending on wear and tear. Property income or rent will normally follow
market trends and inflation, but eventually as the building ages and obsolescence sets in, rentals fall
below market. The costs of maintenance also follow the same pattern of being below inflation initially but
eventually tending to exceed inflation. Administration costs always follow inflationary trends. The net
effect is that the property specific cash flows initially increase at a faster rate than inflation and eventually
peaks and then declines (Cloete 2016: 60).
To avoid declining cash flows because of ageing, the building requires renewal or refurbishment.
According to Nicoleta and Cristian (2009: 536) the life cycle concept provides possible explanation for the
decline and emergence of different shopping centre formats e.g. in the United States of America where
emphasis has been on life style centres
An explanation on the comparative effect of refurbishment on a shopping centre is illustrated in
Figure 1 below:
Figure 1 The comparative effect of refurbishment (Pugh 1992:40)

Figure 1 shows that as the property ages, operating costs tend to increase whilst rents fall.
Refurbishment renews the building, resulting in a reduction in operating costs and an increase in rent.
Refurbishment also extends that economic age of the building from Z0 to Z1.
3. The refurbishment concept
The University of Glasgow (2010: 2) defines refurbishment as “the work of renovating or renewal
with an emphasis on upgrading”. “Refurbishment of an aged building can enhance its market value
because it can restore and improve the building condition functionally and economically” (Yau 2012: 5, cf.
Chebat et al. 2014: 610)
Refurbishment can be proactive (aggressive refurbishment) or reactive (defensive refurbishment) (Davis

Langdon and Everest 1998: 3). Austrup (2015) emphasizes that “investors are looking to future proof
outdated shopping centres and generate values in the second life cycle of established retail destinations”.
This research was executed through a mixture of quantitative and qualitative approaches. To
understand the importance of refurbishment, the study obtained the opinion of shoppers, tenants and
centre management regarding aged shopping centres. Since shoppers and tenants are the users of
shopping facilities, understanding their feelings towards the shopping centre through their conscious or
sub-conscious actions and mind-set is vital in order to ensure the relevance of the shopping centre in
meeting customer needs and objectives of the owners.
To complement and validate the qualitative data, visual data was used. This comprise images
obtained from visual inspections, aerial photographs and building drawings. Themes and patterns were
drawn based on these images and relevant data obtained through other data collection instruments.
Data collected from the sample of three shopping centres was analysed and conclusions applied
on the shopping centre industry although within the limitations of this research.
4.1 Sampling
In this study a purposive or judgmental/convenience sample of three shopping centres in
eThekwini Municipality region in KwaZuluNatal in South Africa which were older than thirty years and
have not had any revamp in the last twelve years prior to commencement of this research was used. This
means that generalisations will not be accurately applied to shopping centres that are not comparable in
terms of size, age, location, or function.
This method involves the researcher using own judgement in choosing who can provide best
information to achieve the research objectives. In so doing, the researcher requested opinion from
representatives of role players in the success of a shopping centre, that is tenants, shoppers and
landlords/shopping centre management as indicated Table 1.
The opinions of a total of forty-eight respondents were solicited (Table 1).
Respondent group Questionnaires Interviews

Landlord 3
Tenants 15
Customers 30
Total 48
Table 1 Total Sample Size Respondent group
4.2 Data collection
Primary data for this study was obtained from landlords (property managers/ facilities managers,
asset managers), tenants and shoppers. Typical information requested include current perceptions about
the centre, previous refurbishment work, age of buildings, stage in property life cycle, suggested/planned
improvements, and challenges. In order to obtain primary data, a mixture of face-to-face interviews, semi-
structured questionnaire administered by email or hand delivery was employed. Although this was a
time-consuming exercise, the advantage of the personal administration at the shopping centre was to
ensure that the researcher could personally request participation, explain the objective of the research and
also to allow high response rate. In addition, the questionnaire is a less expensive instrument to use than
interviews and it offers greater anonymity, especially where there is no face-to-face interaction.
In this research, however, these disadvantages were limited by using a more personal
administration of the questionnaire, in which respondents could respond and return to the researcher
without leaving the questionnaire and allowed supplementary information by ensuring that the
questionnaire contained both closed and open-ended questions. Further clarifications were done by e-
mail, where necessary.
Secondary data was collected from data sources such as the SACSC Directory, text books, journals articles,
previous researches, newspaper articles and the internet. Typical data obtained include property sizes,
property ownership, age, location and refurbishment history.
In addition to the above, observations and visual data were obtained. The observations were
mainly based on assessing the condition of the centres and taking pictures and checking any other existing
images of the shopping centres.
The research did not assess the technical and structural maintenance condition assessments in
detail. Only visible structural maintenance requirements were noted. Specialist structural, architectural or
any other professional assessments although important, were not part of this study.
5. Results
5.1 Age and refurbishment history
The age and refurbishment history of the shopping centres as provided by the three landlords for
the three shopping centres are indicated in Figure 2. All the three centres are all over thirty years of age.
One of the centres has not been refurbished since it has been built and a second centre has not been
refurbished in the previous 32 years. Respondents were asked to comment about the stage of the centre in
its life cycle. The life cycle stage was ascertained from the performance indicators as indicated in Table 3
below. These indicators led to the landlords suggesting the life cycle stage of their centres to be as
indicated in Table 4.
The results indicate the following:
A mature centre as exhibited by trends for Centre 1 is characterised by stabilised rentals and
property net income. This is attributed to shopper loyalty, but the growth could be hampered by new and
emerging centres within the catchment area as highlighted by the landlord for Centre 1.
A centre in the decline stage as exhibited by Centres 1 and 2 experiences stagnant to declining
property net income and tenant turnover shows a declining trend whilst the shopper visit frequency
remained the same. Similarly, centres in this stage may be witnessing stagnant growth because of newer
shopping centre formats as indicated by the landlord.
Figure 2 Age and refurbishment history
Life cycle indicator Centre 1 Centre 2 Centre 3

Net income trend Increasing Declining Increasing (cost cuts)
Pedestrian foot count Increasing Stagnant/declining Declining
Tenant turnover trend Stable/increasing Declining Declining
Table 2 Life cycle indicators for the 3 centres
Shopping centre Age (years) Years since last revamp Stage in life cycle
Centre 1 42 13 Maturity
Centre 2 38 32 Decline
Centre 3 34 34 Decline
Table 3 Age of building vs Life cycle stage
Consolidation of the above indicates that Centre 1 in this research is in maturity and Centres 2
and 3 are in decline life cycle stages. Management actions based on each centre’s position in the life cycle
are therefore warranted. Whilst the above time periods cannot be generalised as shopping centres are
unique products which differ because of various market and physical factors, the above indicates that
shopping centre performance does change from each life cycle stage to another. In the case of a maturing
centre which has reached its peak performance, the next stage is decline and actions to extend this stage
are required. In the case of centres already in decline stage, management actions must bring in a new life
cycle can be done through a major revamp and re-tenanting.
To evaluate the necessity for revamping, the respondents were further asked of their opinion
regarding current condition of the centre (Table 4).
Respondent group Maturity stage Decline stage

Landlords Outdated Outdated
Shoppers Fairly modern Fairly outdated
Tenant Moderate Outdated
Table 4 Shopping Centre Condition Assessment
It can be noted that a mature centre is viewed differently, showing a positive rating compared to a
declining centre which is viewed mainly as outdated. While shoppers and tenants’ ratings are consistent
for similar life cycle stages, the landlord’s rating for Centre 1 rating is not consistent with that of shoppers
and tenants. This can be attributed to the in-depth knowledge he has about the centre, and its potential
within the market.
Based on the opinion of the landlord, refurbishment plans for Centre 1 are in line with one of the
College of Estate Management (2014:34) reasons for refurbishment, which is to stay ahead and exceed
customer expectations. In addition, as mentioned above, Centre 1 is already in maturity stage, hence the
landlord will desire to extend the maturity period through a refurbishment. The results for Centre 2 and 3
show that all respondents generally agree that the centres are outdated and in the declining stage. This
can be explained by the fact that investors are looking into future-proofing outdated shopping centres and
generate values in the second life cycle (Austrap 2015). A newer life cycle is required for shopping centres
that are already in the decline stage. This new life cycle can only be initiated through a refurbishment. For
a centre that is in the maturity stage, it is noted that the centre needs to concentrate on the following to
avoid decline:
• Continuous preventive maintenance of existing facilities
• Plan refurbishment as the centre advances in the maturity stage and
• Refurbish in order to perpetually stay in this stage and avoid decline. This is an aggressive
refurbishment which seeks to retain tenants and maintain tenants (Davis Langdon and Everest
1998:3).
For a centre which is in the decline stage, centre management efforts must be to:
• refurbish in order to return the centre back to the maturity stage.
• commence a new cycle through revamp actions such as expansion, reconfiguration,
refurbishment, demolish and redevelop
5.2 Timing and reasons for previous refurbishments
The only centre that had been refurbished regularly was Centre 1. The landlord explained that the
centre had been revamped about eight times in forty-two years, which translates to about every 5.2 years.
Four of the eight were major revamps which were conducted every ten years. The last revamp for Centre
1 was done in 2003.
It can be noted that this is in line with Chebat et al. (2014: 610) who states that a shopping mall
starts to decline after fifteen years in the absence of substantial renovation. It also further aligns with
Cloete (2016:60) who stated that maturity is normally reached after fifteen years of operation. However,
this research has established that the life cycle of shopping centres vary depending on location,
management competencies and the market environment. The life cycle of the centre induces the need for
refurbishment whilst a satisfactory return on investment gives the stimulus to undertake refurbishment.
The absence of this stimuli during the late maturity life cycle stage is a possible reason that leads
to extended periods without revamps and resulting in the so called “dead malls” or “white elephants”.
Landlords will therefore have to consider other actions such disposal, demolish and redevelop and
change usage. Age therefore plays a less dominant role.
5.2 Timing and reasons for possible future refurbishments
In addition to previous revamps, an assessment of any planned revamps was undertaken to
ascertain the criteria for revamp decisions which will help to establish the correct criteria for scheduling a
revamp.
Shopping centre Revamp due
Centre 1 2018/2019
Centre 2 2017
Centre 3 Unknown
Table 5 Timing of planned refurbishment
It was noted that the mature centre had undergone a planned refurbishment which had been
necessitated by market growth of the area as well as competitive pressure from new emerging centres and
another redeveloped centre.
The above factors are indicators which provide guidance for forecasting the performance of the
centre and which, if nothing is done, can lead to the mature centre to move from maturity to decline.
The one centre that was in decline had a planned refurbishment which was necessitated by:
• declining net property income as pressure from newer shopping centre models is increasing. The
outlook and feel of the centre therefore must be renewed.
• changes in shopping centre formats which makes hypermarkets to no longer be favoured, as their
role and function is taken over by value centres.
• The third centre, that is in a decline stage, has no planned revamp despite declining performance
indicators. It is worth noting that if a centre which is in a decline stage is not revamped, the cost of
any attempted refurbishment will be much higher: “…if repairs are not done, then renewal or
refurbishment expenses can reach five times the cost of repair…” (Vanier 2001: 7). Failure to
undertake refurbishment will lead to what this research suggests as the fifth life cycle stage of
shopping centres which is a “dead mall”.
From the above, it can also be noted that a revamp must be planned at maturity stage of the shopping
centre in order to extend the maturity stage infinitely. Shopping centres 2 and 3 required a revamp to
move them back to the maturity stage. If not, continual periods of non-action may require that they are
demolished and rebuilt to commence a new life cycle.
5.3 Constraints on future refurbishment projects.
The research also asked landlords about any challenges which may affect their intention to
undertake a revamp when its due. Financial reasons were cited as the main reason for this. Further
probing of respondents indicated that the motivation for a revamp is mainly based on expectancy of a
return on investment. Without justifying the need through getting a satisfactory return on investment
would result in failure to motivate funding for any refurbishment efforts. In addition, other financial
aspects such as gearing and associated factors such as access to funds and interest rates also play a role in
determining the financial feasibility of a revamp. It therefore means any refurb must be supported by a
feasibility which must justify the financial sense of a revamp. A market study is also required to ascertain
if the market will support the refurbished centre through analysing demographics, shopping behaviours
and needs. Failure to meet this will lead to other options such as selling the building.
5.4 Changes in spending vs age of shopping centre
Shoppers spending behaviour has been analysed under objective 1 as it moves in harmony with
the life cycle stage which affects the timing of refurbishment. It can be noted that for declining centres, the
shopper spend reduces as shopper needs will no longer be met by the existing centre whilst newer and
competing centres which are still in the inception and growth stages will attract more shopper spend.
Again, it is worth noting that age is a secondary factor whilst life cycle stage provides better guideline
regarding refurbishment.
5.4 Summary of findings
The above discussion clearly shows that the life cycle concept plays a dominant role in
determining the optimum time for refurbishment rather than the physical age of the centre alone.
Management actions should therefore be guided by the performance of the centre during the various
stages of the shopping centre’s life cycle. It has also been noted that an extended period of decline results
in a “fifth life cycle stage”, which is a phenomenon prevalent mostly in first world economies called “dead
malls”. An optimum refurbishment time takes advantage of the knowledge of the life cycle stage to reap
optimum benefits from the shopping centre which would satisfy the tenants, the shoppers as well as the
landlord. The ideal is to ensure that a centre does not get to the decline stage. Actions have also been
suggested should the centre go beyond the maturity stage.
6. Conclusions
Two research questions guided this research. The first question sought to determine the
importance of refurbishing aged shopping centres. From the research findings and available literature, the
importance of refurbishment is as below:
• To cure obsolescence - aged shopping centres which have not been revamped are characterised by
depreciation of physical building fabric and amenities. Refurbishment cures this and renew the
building.
• To increase accessibility from main roads. Because of new developments around older centre
which creates new traffic routes, older centres may become difficult to access. Refurbishment can
improve this access. This is however not easily physically possible for existing centres because of
restrictive town planning regulations and cost of the project. The owner must however do all
within their power to make the centre as accessible as possible.
• To improve signage and visibility. Older centres were built when there was not much competition
for shop space. The pressure for competitive positioning would not be as severe back then
compared to current levels for most centres. Refurbishment is required through rebranding
activities such as better and modern signage as well as designs that allow the centre to stand out.
• To compete with new shopping centres. As newer centres are built in the surrounding trade area,
tenants tend not to renew their leases in older centres if they do not accommodate modern shop
designs as well as modern facilities and amenities. To attract new and better tenants, the centre
needs to be revamped to become attractive again. In addition, when demographics change in the
trade area, the centre’s offering must be aligned with new trends. For example, certain areas
which have changed in terms of demographics may require new tenants and new facilities such as
children play areas, gymnasium, movie houses or sports facilities.
• To expand the GLA in line with changing demographics and increasing demand. Refurbishment
or expansion ensures that the centre can meet the demand for shop space.
• Improve design and building outlook. Design and layout of older buildings may appear old, dull
and boring and need to be modernised so that the centre becomes an attractive shopping
destination.
• Overall refurbishment results in financial gains arising from operating cost decline and improved
income generating capacity of the centre. This will lead to increased property yield and capital
value.
The second research question sought to ascertain the correct time to do a revamp. It was
established that the timing of a revamp is dependent on the performance of the shopping centre which is
mainly deduced from
• property net income trend
• tenant turnover trend
• foot traffic counts
• vacancies and time, it takes to fill vacancies.

These factors will lead to determination of the stage of the shopping centre in the property life cycle. A
suggested rule of thumb for defensive refurbishment is to undertake a revamp during the late maturity
stage of the shopping centre to extend the maturity stage, or during early decline in order to return the
centre to the maturity stage. Extended delays will result in a dead mall which requires extensive
refurbishment or demolishing and rebuilding to begin a new life cycle. Aggressive refurbishments can be
undertaken at any stage in the centre’s life cycle, depending on the motivation for the refurbishment.
Literature has shown that a refurbishment can be defensive to retain tenants and maintain market
share. This is typically done at maturity stage of the shopping centre. Refurbishments can also be
aggressive aimed at increasing market share and rent levels by expanding the centre and improving
tenant mix. This can be done at any stage of the life cycle before the decline stage. The research has noted
that some of the centres that had been investigated are already in the decline stage. It was noted that these
centres need revamps to start a new life cycle although it may be costlier. A framework for revamp is
presented in Figure 3 as a guideline for determining optimum refurbishment time of shopping centres.
This research also established that a revamp must be justified by ensuring a satisfactory return on
invested funds. The returns depend on different investors. This research did not establish an acceptable
rate of return to use as a rule of thumb in the current South African market environment.
There is consensus between extant literature and this research that a revamp is required when the
centre is in its late maturity phase. This research gave a broad indication of refurbishment being required
every seven to ten years. It is critical to once again highlight that the life cycle stage is the main indicator
of the requirement for refurbishment, with the physical age playing a secondary role. In addition, the
execution of the revamp decision is impacted by moderating factors such as indicated in Table 6 regarding
the framework for refurbishment of centre.
Figure 3 illustrates a suggested framework for the timing of a revamp in a shopping centre:
Figure 3 Framework for shopping centre refurbishment
The suggested framework above points out that the life cycle plays a dominant role to determine
optimum refurbishment time and is moderated by internal and external factors.
To use this framework, the guideline processes below are important:
• Ascertain the life cycle stage of the shopping centre
• Understand the investment strategy of the shopping centre
• Plan for refurbishment when shopping centre reaches maturity
• Perform a market and feasibility studies for refurbishment/redevelopment
• Undertake most feasible option based on life cycle stage, feasibility study and available options as
per landlord strategy.
• Undertake refurbishment when centre reaches late maturity stage to extend the maturity stage
into perpetuity, or
• Undertake revamp/redevelopment after reaching decline stage to commence a new life cycle.
• Consider disposal or demolish, redevelop and change use when the centre has reached dead mall
status.
It has been noted in the literature and in this research conducted with three shopping centers that
there is a direct relationship between the requirement for revamp and the stage in the property life cycle.
The timing of refurbishment can be different for different centres but the findings at this stage indicated
that most refurbishment is required to prolong the maturity stage of the centre or start a new life cycle if
centre has passed decline stage. Respondents felt that intervals between refurbishment should be between
seven and ten-years although most shopping centres reach maturity only after about fifteen years (Cloete
2016). The exact timing is moderated by external and internal factors as in Table 6 below. Shopping centre
owners/managers must understand the stage of their shopping centres in the life cycle to position
themselves through refurbishment. This is supported by Nicoletta and Cristian (2009:536) who found that
the life cycle concept provides possible explanation to the decline of shopping centres and emergence of
new shopping centres.
This research, whilst not exhaustive, contributes valuable information to the existing body of
knowledge for shopping centre refurbishment. Complemented by further research and existing literature,
it is an important toolkit to be used by asset managers and other property management professionals to
enhance property returns.
External Factors Internal factors
Technological changes make building facilities and Availability of equity to undertake a revamp also
amenities become obsolete and requiring renovation affects the timing.
such as green building, online shopping
Competition from new centres in the trade area affect Competition from new centres in the trade area affect
performance of the centre and need for refurb to retain performance of the centre and need for refurb to
market share retain market share
The market environment such as demographics in the Investors strategy and philosophy also affects the
trade area affects demand and supply and requirement timing/decision for revamp. Ownership holding
to match changing demographics. period influences the decision to refurbish or dispose
at maturity.
The economic environment affects the availability and Legal, physical, and financial feasibility tests must be
cost of capital hence funding for refurbishments passed for a revamp to be conducted. If expected
return is not possible then a revamp may be delayed
or not done at all.
A location that offers opportunity for growth incentives Level of tenant satisfaction with premises and
refurbishment whilst a poor location may not justify facilities which is mainly a function of management
commitment of financial resources action affects centre performance and timing for
refurbishment.
Table 6 Moderating factors affecting timing of revamp
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Moderated-mediation investigation on internet marketing and export

market growth in the Jordanian export sector
Mohammad Fahmi Al-Zyoud
Department Marketing
Al-Ahliyya Amman University, Jordan
Keywords
Internet marketing, marketing, export markets, economic growth
Abstract
This quantitative research study set out to replicate and extend Bianchi & Mathew’s (2015) findings
on the relationship between Internet marketing capabilities and export market growth. In particular, it
examined the mediating effect of the availability of export information as well as international business
network relationships on the primary relationship within the context of the Jordanian export sector. In
addition, the study examined the moderating effect of economic and spending growth of target foreign
markets. Structural equation modeling was used to investigate the model as it is most suited for predicting
changes in the outcome variables in complex conceptual models with multiple independent and dependent
variables measured on multiple dimensions (Emeagwali, 2015). The population of the study consisted of
Jordanian export firms. A total of 313 online surveys were collected establishing the data to be analyzed for
the study. SPPS statistical software version 21 was used to verify the model and the hypotheses of the
research study. Findings revealed that while Internet marketing has no direct influence on export market
growth, it does have a direct influence on the availability of export information, which in turn has an
influence on export market growth. Findings also showed that Internet marketing capabilities had no
significant effect on business network relationships. However, the availability of export information had a
strong and significant effect on the ability of the companies under study to develop and nurture business
network relationships even though business network relationships was found to have a weak but significant
effect on export market growth. A key contribution of this study is the finding that economic and spending
growth were both observed to strengthen the mediating effects of availability of export information on export
market growth as well as the mediating effect of business network relationships on export market growth.
Corresponding author: Mohammad Fahmi Al-Zyoud

Email address for corresponding author: Dr.m.alzyoud@gmail.com
Introduction
The influence of the deployment of the Internet on international marketing activities of
international firms has been an area of research interest many scholars within the international marketing
and international business domain ranging from investigations into the impact of Internet deployment on
international activities and international expansion to international market growth of firms (Bianchi &
Mathews, 2015; Moen, Madsen & Aspelund, 2008; Loane, 2005; Lu & Julian, 2008; Mathews & Healy,
2008). Findings from literature (especially on developed countries) reveal Internet deployment to have a
positive impact on the availability of export information, nurture of business network relationships in
foreign markets and increasing the holistic performance of export companies (Bianchi & Mathews, 2015;
Bianchi, 2014; Teo & Choo, 2001). However, as Bianchi & Mathews, (2015) notes, most of the existing body
of literature on Internet marketing and export market growth are conceptual in nature and thus there is a
lack of empirical findings to hypothesize and test these conceptual propositions empirically validating or
refuting them. Furthermore, due to the collectivist nature of most developing countries, especially in the
Middle East, and the accompanying economic disparities, it may not be appropriate to generalize findings
from the bulk of literature from individualistic developed countries to these developing countries.
Consequently, research is needed to provide findings that accurately depict the support or lack of the
conceptual framework in developing regions of the world especially the Middle East.
Upon a review of existing literature, it is the position of this study that the deployment of the
Internet to international marketing activities such as digital marketing, market research and after sales
support, leads to the development of Internet marketing capabilities which impact export market growth
as measured by monetary amount of export in existing and new foreign markets (Bianchi & Mathews,
2015). Prasad, Ramamurthy & Naidu (2001) are also of the opinion that the deployment of Internet
marketing capabilities strengthens marketing activities as it provides a means of seamlessly connecting
with customers and suppliers.
The study conceptual framework is an extended version of a conceptual framework adopted from
Bianchi & Mathews (2015). The primary component of this conceptual model is its position that there is a
relationship between Internet marketing capabilities and export market growth as mediated by two other
firm-based capabilities: availability of export information and the development of business network
relationships.
The Problem Statement
This research study investigates answering several questions related to the relationship and
impact among the deployment of Internet marketing activities, the availability of export information,
business network relationships, and country characteristics in terms of rate of economic growth and
spending growth in Middle Eastern export firms. Specifically, the research investigates answering the
question of whether the deployment and utilization of Internet marketing activities and processes
increases the availability of export information. Consequently, determining if the availability of export
information lead to an increase in export market growth.
In addition, the research study answers the question of whether Internet marketing activities and
processes have a positive impact on international business network relationships and accordingly a
positive one on the growth of export markets. Finally, the research investigates the mediating effect on the
availability of export information on the observed relationship between business network relationship
and export market growth through the rate of economic growth and the rate of spending growth of the
target foreign market.
Motivation for the Research
This research study contributes to the literature through introducing foreign market
characteristics as a moderating variable on the relationships between the mediators and export market
growth. These foreign market characteristics include (a) economic growth rate and (b) spending growth
rate. These two moderators included into the conceptual model are derived from previous research
(Aspelund, 2008; Loane, 2005) that showed that the economic conditions of a foreign market can impact
export market growth. In addition, this study represents an addition to the empirical research on Internet
marketing capabilities and export market growth in general and in the Middle Eastern region in specific.
Literature Review
Internet Marketing Capabilities
The Internet has been identified as one of the key marketing resources through which marketing
departments in most organizations derive a key capability (Calantone & Griffith, 2007; Bianchi &
Mathews, 2015). This capability is most often derived and measured by examining the effective
deployment of Internet based application and technologies such as online sales, advertising, customer
relationship management, purchasing or procurement and market research among others (Trainor et al.,
2010; Aspelund & Moen, 2004).
The position of literature is that capabilities obtained from the effective deployment of Internet
marketing techniques across traditional marketing functional areas has an indirect positive influence on
the growth of export markets due to the availability of export information obtained through market
research and active development of business network relationship (Bianchi & Mathews 2015; Aspelund &
Moen, 2004). In addition, numerous literatures suggest that the deployment of Internet marketing
activities not only ensures the creation and nurturing of marketing capabilities, but also enhances the
quality of decisions made across the organization and overall organizational performance (Moon & Jain,
2007; Gibbs & Kraemer, 2004; White & Daniel, 2004; Prasad et al., 2001; Teo & Choo, 2001).
Availability of Export Information
The Internet is indispensable to the survival of most businesses. A review of literature reveals that
in addition to providing businesses an easy way to reach and feel the pulse of their customer base, it also
serves as a channel through which organizations access quality information about the markets they serve
locally or internationally (Hamill, 1997). Furthermore, research reveals that the Internet increases the
amount of market information available to business people (Hamill, 1997). In fact, numerous scholars
(Hamill, 1997; Quelch & Klein, 1996; Brock & YU, 2005; Hamill & Gregory, 1997; Cronin & McKim, 1996)
pointed to the positive impact of the Internet on the availability and ubiquity of information about
international markets through the facilitation of primary and secondary data collection such as online
questionnaire and access to online databases and repositories. This ubiquity of market information
coupled with the low cost of Internet access contributed to equal opportunities among firms of unequal
sizes, and firms operating in advantaged versus disadvantaged geographic and economic regions (Wright
et al., 2005; Aspelund & Moen, 2004; Arnott & Bridgewater, 2002; Teo & Choo, 2001; Bennett, 1997).
A review of literature (Morgan, 2012; Piercy et al., 1998; Samiee, 1998; Li & Calantone, 1998;
Cronin & McKim, 1996; Day, 1994; Hart, Webb & Marian, 1994) shows that efficiency and effectiveness in
the identification, sourcing, organizing, dissemination and storage of export market information is a
marketing capability that enables firms to grow internationally. This international growth is achieved
through the revelation of new international market opportunities driving a motivation to engage while
also providing information about international industry conditions such as international suppliers,
distributors, customers, competitors and substitute products. Such information is crucial in guiding key
marketing functions such as the development of new or existing products and the tuning of pricing
strategies to better reflect or take advantage of conditions in the international export industry
Business Network Relationships
The importance of quality business relationships and networks to the success of local and
international business activities has been clearly evident for over the past two decades. First of all, notable
studies (Bianchi & Mathews, 2015; Bianchi, 2014; Filatotchev et al., 2009; Pan & Park, 2008) found that
organizations with high predisposition towards international exports, usually are competence in the
development, nurturing and maintenance of international business networks. Secondly, several research
(Bianchi & Mathews, 2015; Musten, Francis & Datta, 2010; Loane & Bell, 2006; Lohrke et al., 2006; Wu et
al., 2003 Coviello & Munro, 1995) have established the rising number of business networks relationships
and the increased dependency of organizations on them due to faster, cheaper and easier networking
avenues made possible by the advent of the Internet. Thus, implying a relationship between Internet
marketing capabilities and the development of business networks. Thirdly, in addition to establishing a
relationship between quality business networks and export performance as well as a relationship between
Internet marketing capabilities and business networks, numerous research (Bianchi & Mathews, 2015;
Bianchi, 2014; Bauer et al., 2002; Piercy et al., 1998) went further to show that Internet marketing
capabilities lead to the availability of adequate export information, which in turn facilitates the
development of meaningful business relationships.
While most of the empirical research (Bianchi & Mathews, 2015; Ural & Hallumoglu, 2017; and
Prasad et al, 2001) that tested and established the relationship correlation between business networks and
export performance are based on data drawn from developing countries, Bianchi & Mathews (2015) study
is the only one tried to replicate and investigate the relationship in an emerging Latin American country.
Bianchi & Mathews (2015) further suggested that it is needed for other researchers to replicate and
investigate the relationship in other emerging economies to provide evidence of the generalizability of the
position that a relationship does exist between business network relationships and export market growth.
Consequently, this study investigated the relationship using data drawn from the Middle Eastern Region
(Jordan in particular). Going a step further than a mere replication and investigation of the above
relationships as established by literature, this study contributes by examining the moderating effect of two
country characteristics (economic growth and spending growth) on the mediating effects of the
availability of export information on export market growth on one hand and business network
relationships and export market growth on the other hand.
The introduction of both moderators to the conceptual model although not empirically suggested
or tested in extant literature is however implied in a few extant literatures and in practice. For instance,
Rahman, (2010) in studying factors which influence Bangladesh’s export, noted that the total quantity of
import demand from partner countries affect the volume of exports made by Bangladesh. This finding
implies that economic conditions in a target foreign market influences the volume of exports and hence
export market growth of a country. It is this paper’s position that economic conditions in a target foreign
market both reflects the economic and spending growth conditions in that market, which in turn affects
the volume of imports demanded by importer’s in that foreign market. Hence it is appropriate that any
investigation into the antecedents or determinants of export market growth should explore the
moderating role of the economic conditions in target foreign markets. Therefore, in this study we seek to
extend extant literature by examining the moderating effect of economic and spending growths on the
mediating effects of both availability of export information and business network relationships on export
market growth.
Research Hypotheses and Conceptual Model
Upon the review of literature, the research deducted and aimed at testing the hypotheses stated hereafter:
H1: There is a positive impact of Internet marketing capabilities on export market growth.
H2: There is a positive impact of Internet marketing capabilities on the availability of export information.
H3: There is a positive impact of the availability of export information on export market growth.
H4: There is a positive impact of international business network relationships on the growth of export
markets.
H5: There is a positive impact of Internet marketing capabilities on business networks.
H6: There is a positive relationship of the availability of export information on international business
network relationships.
H7a: The mediating effect of the availability of export information on the observed relationship between
Internet marketing capabilities and export market growth, is significantly moderated by the rate of
economic growth of the target foreign market.
H7b: The mediating effect of the availability of export information on the observed relationship between
Internet marketing capabilities and export market growth, is significantly moderated by the rate of
spending growth of the target foreign market.
H8a: The mediating effect of the availability of export information on the observed relationship between
business network relationship and export market growth, is significantly moderated by the rate of
economic growth of the target foreign market.
H8b: The mediating effect of the availability of export information on the observed relationship between
business network relationship and export market growth, is significantly moderated by the rate of
spending growth of the target foreign market.
To empirically test these hypotheses, the following enhanced conceptual model was developed:
Figure 1: The Research Conceptual Model

Source: The model was adapted from Bianchi & Mathews, 2015; Ural & Hallumoglu, 2017; and Prasad et
al, 2001)
Research Methodology
To verify the hypotheses stated above, a quantitative analysis was performed as detailed
hereafter. SPSS Statistical software version 21 was used to perform both descriptive and statistical data
analysis as explained hereafter
Study Population
The population of the study consisted of Jordanian export firms accessed through the Jordan
Chamber of Commerce website (www.jocc.org.jo). The hypotheses stated above, were tested using firms
as the fundamental unit of analysis (Morgan-Thomas & Bridgewater, 2004; Melewar & Stead, 2002;
Bianchi & Mathews, 2015). In those concerned firms, only employees involved in and conversant with the
organizations export activities were approached to participate in the study. Thus, international marketers
and decision makers in the targeted firms formed the primary target population.
Data Collection and Study Sample
Data for the study was collected using an online survey between October and December 2016. An
online survey more economical and more practical to administer as well as faster and easier to respond to
by participants. The initial approach in the data collection process involved sending out detailed email
invitations to the participants outlining the purpose and procedure for completing the survey as well as a
link to the online survey. At the end of the response solicitation period, a total of 320 questionnaires were
received representing a 22% response rate. Four survey instruments had unengaged responses, while
three had a great amount of missing data whose nonexistence was not at random. Hence, there were 313
usable survey instruments whose data was used in carrying out the analysis of this research study.
Study Instrument
Seven-point Likert scale questionnaires were used to measure internet marketing capabilities, the
availability of export information, business network relationships and export market growth (Bianchi &
Mathews, 2015; Gibbs & Kraemer, 2004; Wu et al., 2003; Petersen et al., 2002; De la Torre & Moxon, 2001;
Hamill, 1997 and Ansoff, 1965). A seven-point likert scale questionnaire was used as using more scale
points is believed to provide more insightful results and returns driven by the more presented options it
utilizes (Nunnally 1978).]
In particular, the extent to which firms deployed internet-based tools to the marketing functions
were specifically used to measure internet marketing capabilities (Gibbs & Kraemer, 2004: Hamill, 1997).
Participants’ response was relevant to their perception of the extent to which they perceive the growth or
increase of new clients and customers in new and existing foreign markets as well as the retention of
existing customers in existing foreign markets. These perceptions were measured on a scale of 1
(significantly decreased) to 7 (significantly increased) to indicate which export market growth led to an
increase or a decrease in sales in the past year (Gibbs & Kraemer, 2004; Ansoff, 1965).
As for Business network relationship, the instrument prompted respondents to record their
perceptions of the degree to which their organizations rely on business networks to maintain, sustain, and
strengthen their existing foreign customer relationships as well as enable the acquisition of new foreign
customer base. Similarly, the questionnaire was used to measure the availability of export information
(Bianchi & Mathews 2015; Petersen et al., 2002; De la Torre & Moxon, 2001; Hamill & Gregory, 1997).
Respondents’ rate from 1 to 7 the quantity of information available and managed by their organizations
on foreign competitors, foreign markets, foreign clients and foreign suppliers. To measure the two
moderating variables: target country growth (high or low growth) and target country consumer spending
growth, we rely on publicly available data from the Jordan Chamber of Commerce (www.jocc.org.jo).
In developing and administering the research instrument, the survey items were first of all
codified in English and then translated to Arabic after which it was back-translated to English; while at
the pre-administration phase, a pilot study was conducted using a convenience sample of four randomly
selected Jordanian export companies. As the instruments were administered together and in a cross-
sectional manner, steps recommended by Podasakoff et al. (2003) such as the use of a seven-point likert
scale, the use of sematic differentials as well as the incorporation of a mix of positively and negatively
worded items were taken to minimize common method bias.
After conducting the pilot study mentioned in the previous section, very minor changes were
made to the questionnaires and bordered entirely around semantics. Also, the test for common method
bias using Podsakoff et al. (2003) approach revealed that no single factor accounted for the majority of
variance explained in the variables under study indicating no common method bias issues.
Structural equation modeling
Structural equation modeling (SEM) is a series of statistical methods that allow complex
relationships between one or more independent variables and one or more dependent variables (Kaplan,
2007). Though there are many ways to describe SEM, it is most commonly thought of as a hybrid between
some form of analysis of variance (ANOVA)/regression and some form of factor analysis (Kaplan, 2007).
In general, it can be remarked that SEM allows one to perform some type of multilevel
regression/ANOVA on factors.
Descriptive Data Analysis Results
Descriptive results of data collected of the study sample showed that the average participating
firm employed fewer than 200 employees, putting all of them in the category of small and medium scale
enterprises according to the European Union (EU) and Mediterranean Middle East and North Africa
(MENA) definitions. Participating firms have in their employment an average of 142.4 employees. The
participating firms consisted of service firms (24%) and manufacturing firms (76%). Respondents
consisted of top management executives, including individuals who held the positions of general manager
(33%), International marketing managers (26%), managing directors and chief executive officers (17%),
and administrative staff involved in decisions related to foreign market operations (24%).
The average company age was about 25.7 years and representative respondents had an average
age of 43.2 years and had on the average 15years of experience with their organizations. The respondents
recorded combined annual revenue of US$23.3 million for their firms and indicated that on average their
organizations exported to six foreign markets with a majority (89%) recording more than three export
markets. Also, respondents indicated that on an average 60% of their firm’s total sales were made of
exports to foreign markets. The common export markets recorded by respondents include the USA, India,
Saudi Arabia, Iraq and Syria.
With regard to the use and deployment of the Internet for marketing related functions, descriptive
results show that most (92%) of the surveyed organizations relied on the Internet for most of their
communication needs. Of these 92% that utilized Internet related marketing activities, (88%) used emails,
(21%) used social media and 8% used their company website for marketing related activities. These online
activites the surveyed companies used varied between online advertising to prospective and existing
foreign clients (86%), international market research (88%), online sales to existing and new foreign clients
(60%), international procurements and purchasing activities (85%) and coordination of after-sale services
(90%).
Statistical Analysis Results
The statistical method of choice in analyzing the conceptual model is structural equation
modeling (SEM) which according to Emeagwali (2015), is most suited for predicting changes in the
outcome variables in complex conceptual models that entail multiple independent and dependent
variables, or dependent variables measured on multiple dimensions. It is also a robust covariance based
analytic process which facilitates the simultaneous conduct of global and local tests of the structural
model as a whole and its hypothesized paths (Emeagwali, 2015; Hair et al., 2010).
The Measurement Model (Confirmatory Factor Analysis)

As is the tradition with most structural equation models prior to the identification, specification
and testing of the hypothesized paths in the structural model, specification, identification and estimation
of the measurement model must be conducted (Hair, et al. 2010). This is typically done through the
conduct of a confirmatory factor analysis (CFA). Results of the global test of the CFA conducted reveals
that the measurement had an acceptable model fit (X2/CMIN/DF = 1.803; CFI = .942; RMSEA = .051;
SRMR = 0.320). All of the items loaded to their constructs at levels above 0.50, while all of the constructs
exhibited high internal consistencies as evidenced by Cronbach’s alpha values above .70 (see Table 1).
Table1: Outline of variable measures and CFA outcomes.
Std. Std. Std.
Est. Est. Est.
Internet Marketing Capabilities Availability of Export Importation Business Network Relationships
(α = .82) (α = .85) (α = .97)
Adapted from Bianchi and Mathews (2015); Adapted from Bianchi and Mathews Adapted from Bianchi and Mathews
Aspelund and Moen (2004); Gibbs and Kraemer (2015); Hamill and Gregory (1997); (2015); Wu et al. (2003)
(2004) De la Torre and Moxon (2001); and
Petersen et al. (2002)
Market Research .60 Available information in our firm: Maintain international business .91
relationships
Online advertising .72 Information about foreign markets .92 Strengthen existing business .96
relationships
Purchasing .66 Information about foreign .83 Develop longer-lasting business .93
competitors relationships
Online sales .71 Information about foreign .87 Acquire new international customer .88
customers relationships
Online after-sales service and support .83 Information about foreign .61
suppliers
Export Market Growth Target Country Growth Rate Target Country Consumer Spending
(α = .96) (Secondary data) Growth
(Secondary data)
Adapted from Bianchi and Mathews (2015);
Ansoff (1965)
Growth of…. High growth rate High spending growth
New customers in new international markets .84 Low growth rate Low spending growth
New customers in existing international markets .95 Stable growth rate Stable spending growth
Existing customers in existing international .89 Declining growth rate Declining spending growth
markets
In addition, the validity of the measurement model was established as the average variance explained
(AVE) was above 0.50, while all values of maximum shared variance fell below AVE values, implying
construct validity (Gaskin, 2016). More on the validity of the variables as well as the correlation matrix are
presented in Table 2.
Table 2: Validity, Reliability and Correlation Matrix for Study

Variables
CR AVE MSV IMC AEI BNR EMG
IMC 0.833 0.631 0.607 0.892
AEI 0.960 0.801 0.782 0.525 0.990
BNR 0.982 0.650 0.634 0.511 0.922 0.934
EMG 0.881 0.782 0.712 0.672 0.901 0.557 0.871
Structural Model Analysis Results
First of all, results of the structural model revealed a good model fit as seen in Table 3. It also
revealed that for Jordanian export companies, there is no direct impact of Internet marketing capabilities
on export market growth (β = .06, p = .74). This finding leads us to accept the null hypothesis for
hypothesis 1 thus showing no support for the alternative hypothesis 1.
Table 3: The Structural Model: Overall Model fit (Global tests) and Hypothesis Testing (Local tests)
Model Global tests P > .05
Overall fit indices
X2/CMIN DF CFI RMSEA SRMR
Structural Model 1.736/91 .953 0.38 0.254 .000
(proposed)
Local tests
Stated Hypotheses Estimated paths Std. CR P Findings
Estimates
Hypothesis 1 IMC→EMG .06 0.53 .74 Not
supported
Hypothesis 2 IMC→AEI .52 6.40 *** Supported
Hypothesis 3 AEI→EMG .42 4.55 *** Supported
Hypothesis 4 IMC→BNR .08 0.68 .35 Not
supported
Hypothesis 5 BNR→EMG .24 2.10 .042 Supported
Hypothesis 6 AEI→BNR .56 5.42 *** Supported
Hypothesis 7a AEI_X_EG→EMG .53 3.42 *** Supported
Hypothesis 7b BNR_X_EG→EMG .31 2.66 .033 Supported
Hypothesis 8a AEI_X_SG→EMG .57 3.34 *** Supported
Hypothesis 8b BNR_X_SG→EMG .28 2.52 .038 Supported
However, results show that Internet marketing capabilities does have a positive and strong
influence on the availability of export information (β = .52, p < .001), thus rejecting the null hypothesis and
showing support for the alternative hypothesis 2. Furthermore, findings revealed a moderate influence of
availability of export information on export market growth (β = .42, p < .001), supporting the expectations
of hypothesis 3.
These findings for the first arm of the model (Internet Marketing Capabilities (IMG) →Availability
of Export Information (AEI) →Export Market Growth (EMG)) revealed that while Internet marketing has
no direct influence on export market growth, it does have a direct influence on the availability of export
information, which in turn has an influence on export market growth.
On the second arm of the model, findings revealed that Internet marketing capabilities had no significant
effect on business network relationships (β = .08, p = .35), showing no support for hypothesis 4. However,
business network relationships was found to have a weak but significant effect on export market growth
(β = .24, p < .05) showing support for hypothesis 5.
Interestingly the results revealed that the availability of export information had a strong and
significant effect on the ability of the companies under study to develop and nurture business network
relationships (β = .56, p < .001), rejecting the null hypothesis and showing support for the alternate
hypothesis 6. Results of the first hypothesized moderating effect show that the rate of economic growth in
the foreign markets targeted by Jordanian export companies strengthened the observed effect of the
availability of export information on export market growth (β = .53, p < .001), showing support for
hypothesis 7a. Likewise, the rate of economic growth in the foreign markets targeted by Jordanian export
companies also strengthened the effect of business network relationships on export market growth (β =
.31, p < .05) rejecting the null hypothesis and showing support for the alternate hypothesis 7b.
Results of the second hypothesized moderating effect revealed that the rate of spending growth in the
foreign markets targeted by Jordanian export companies strengthened the effect of the availability of
export information on export market growth (β = .57, p < .001), showing support for hypothesis 8a.
Similarly, the rate of spending growth was found to strengthen the positive effect of business network
relationships on export market growth (β = .28, p < .05), showing support for hypothesis 8b.
Discussion and Conclusion
While the research into the influence of Internet marketing capabilities on export market growth
is still promising, this study extends the existing body of literature by examining the relationships
contextually, from the Middle Eastern context especially through the lens of Jordanian export companies.
Methodologically, it also extends current literature in observing how country characteristics (economic
growth rate and spending growth rate) influence the relationships between the mediators (availability of
export information and business network relationships) and export market growth. Theoretically, this
study is based on the core competencies (Prahalad and Hamel, 1990), resource based view (Barney, 1991)
and capabilities (Teece, 2007; Teece et al., 1997) paradigms.
Findings from this study provide support on two levels for the position of current literature as it
first established that the deployment of the Internet positively influences a corporation’s marketing
activities in foreign markets (Loane & Bell, 2006; Petersen et al., 2002; Quelch & Klein, 1996; Hamill &
Gregory, 1997). Secondly it agrees with the work of Bianchi & Mathews (2015) which sought to explain
how the Internet affects foreign marketing activities by specifically demonstrating that Internet marketing
capabilities had a positive influence on the availability of export information, and the development and
nurturing of foreign business network relationships, both of which acting as mediators then directly
influence export market growth.
Furthermore, the findings of this study specifically indicated that the development of Internet
marketing capabilities by itself does not have any significant impact on export market growth supporting
the position of the literature that while functional capabilities such as Internet marketing capabilities are
necessary in enabling organizations to take advantage of opportunities in foreign markets, they do not
necessary guarantee that the deploying organizations would directly derive some competitive advantage
from such capabilities (Bianchi & Mathews, 2015; Reuber & Fischer, 2011; Barney et al., 2001).
Our findings revealed that for Internet marketing capabilities to enable export companies to be
able to take advantage of opportunities in foreign markets, they have to be indirectly focused on other key
and more specific firm activities, processes and capabilities. These activities and processes should be
conducted in a manner that directly have implications on the acquisition of competitive advantage that
can then be leveraged to positively influence the performance of export companies in foreign markets
(Bianchi & Mathews, 2015; Tippins & Sohi, 2003; Li & Ye, 1999; Booth & Philip, 1998; Barney, 2001; Powell
& Dent-Micallef, 1997).
Also, this study found that Internet marketing capabilities had a strong effect on the availability of
export information which in turn had a positive effect on export market growth. This finding supports the
position of literature (Bianchi & Mathews, 2015; Mathews et al., 2012; Morgan-Thomas & Bridgewater,
2004; Petersen et al., 2002; Hamill & Gregory, 1997) and implies that in foreign market contexts the
deployment of Internet marketing capabilities positively affects the amount and richness of relevant
foreign market information useful to exporters consequently leading to increased market growth. In
particular, this research backs previous studies by showing support for the importance of the
development of Internet marketing capabilities on the availability of key information from a Middle
Eastern context and through the lens of Jordanian export companies. Also similar to the Chilean context
(Bianchi & Mathews, 2015), this study found that Internet marketing capabilities alone does not have an
influence on export market growth, but only has one, when the availability of export information
mediates the path. This study’s findings thus further strengthen findings from the Latin American context
by showing that this position is similarly supported in the Middle Eastern context.
Moreover, similar to findings from the Latin American context (Bianchi & Mathews, 2015, Bianchi,
2014; Hewett et al., 2006), this study also found that Internet marketing capabilities had no significant
impact on the development of business network relationships, but rather had a significant impact on
export market growth. This implies that in the Middle Eastern context, the ability to build relevant
business network relationships relies more on direct social contacts. This is justified by the fact that the
Middle East is a region with more of a collectivist orientation (Hofstede, 2001) where loyalties lie along
family and community ties and relationships, hence, the dependence on the Internet for the development
of networks is not feasible. Having that said, in the Middle Eastern context, when such business network
relationships are developed through physical social contacts, they have a positive effect on export market
growth.
Finally, while all findings presented in this study from a Middle Eastern perspective, supported
and hence strengthened the position of literature, findings on the moderating effect of country
characteristics (economic growth rate and spending growth rate of target foreign markets), provided an
entirely novel information regarding the influence of Internet marketing capabilities on export market
growth as mediated by the availability of export information and the development of business network
relationships. Findings show that while the availability of export information and business network
relationships each have a significantly positive effect on export market growth, the economic growth rate
and spending growth rates of their primary target foreign markets strengthen the observed effects on
export market growth. In other words, the availability of export information will have a stronger influence
on export market growth when the economic growth rate and spending growth rate in foreign markets is
high. Similarly, the effect of business network relationships on export market growth is stronger when the
economic growth rate and spending growth rate in the targeted foreign market is high. This also implies
that within the Middle Eastern context, the impact of Internet marketing capabilities on export market
growth as mediated by the availability of export information will be stronger when the economic and
spending growth rates of the target foreign market are high.
Contributions of the Study
Theoretically, this study makes three main contributions. First of all, it extends extant literature on
the effect of the deployment of Internet marketing on export market growth by providing new evidence
from the Middle Eastern region. Most extant research had previously tested these paths using developed
countries as the primary context and this is the first time that this path is been tested in the Middle Eastern
context, findings reveal that exporters in the Middle East, especially Jordan, deploy the Internet
extensively especially in their marketing related activities.
Secondly from an empirical perspective, this study replicates the conceptual model previously
tested in developed countries and Latin America, in the Middle East, further validating the primary
model. The replication of this conceptual model in the Middle East, however provided support for the
findings of Bianchi & Mathews (2015) that Internet marketing capabilities do not have an impact on export
market growth or business network relationships as the majority of extant studies conducted in first
world countries suggested (Lu & Julian, 2008; Samiee, 1998; Morgan-Thomas, 2009). However above and
beyond its support or deviation from the positions of extant literature, it further extends the conceptual
model with the new examination of the effect of two key moderating variables (economic and spending
growth rate) related to target foreign markets and found that they both strengthened the relationship
between the mediators in the original model (availability of export information and business network
relationships) and export market growth.
From a managerial and practical perspective, the findings of this study support the need for
Jordanian export managers to both deploy Internet technologies and develop Internet marketing
capabilities directed towards the generation of a wealth of export information and business network
relationships in a bid to increasing export market growth. This is supported by findings from the Chilean
context (Bianchi & Mathews, 2015). However, a novel contribution to the implications for management is
the fact that carefully targeting export markets based on economic and consumer spending growth both
enhances export market growth potentials and thus, export managers will do well to incorporate these
findings into the development of their international marketing strategies.
In particular findings show that in the development of international marketing strategies,
Jordanian export companies should understand that the development of Internet marketing capabilities
alone do not directly improve international market growth, instead managers should focus on directing
Internet based technologies to particular marketing functions which are proven to facilitate the generation
of a rich amount of export information and proven to facilitate the development of business network
relationships, since our findings show that these two mediate the relationship between Internet marketing
capabilities and export market growth. More importantly though is the fact that the mediating effect of
these two variables has been shown in this study to improve and strengthen export market growth.
Limitations and Recommendations for Future Research
Two key limitations of this study point to generalizability related issues and includes the fact that
the conceptual framework was tested within only one context (the Jordanian context), and the fact that
data was not collected in a longitudinal manner. Also, in line with a common limitation of studies which
depend on email surveys (Bianchi & Mathews, 2015), a low response rate (22%) was obtained. Thus,
future research could use other survey distribution techniques to obtain higher response rates.
To further extend the findings, a replication of the study should be carried out in the Middle East
and North Africa (MENA) region to examine support or lack thereof of the findings of the study. Also, an
attempt should be made at establishing relationship either using an experimental approach of the
collection of longitudinal data.
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Influence of leadership style, training, role of ambiguity on employee

performance of higher education of Saudi Arabia (KSA)
Abdullahi Hassan Gorondutse
Shahmir Sivaraj Abdullah
Fais Bin Ahmad
School of Business Management
College of Business Universiti Utara Malaysia
Waleed bin Rashed al sherry
Directorate of Protocols, King of Saudi Arabia
Halilu Bello Rogo
Department of Economics and Management Sciences
Police Academy Wudil, Kano, Nigeria
Keywords
Leadership Styles, Training, Employee Performance, Higher Education and Kingdom of Saudi
Arabia (KSA)
Abstract
Employee performance is always considered as one of the important factors of employee management
that determines the success of an organization. The higher education sector of any country is considered as an
important sector which needs to concentrate on achieving its goals successfully. Thus, this research aimed to
investigate effect of leadership and training on employees’ performance by taking role ambiguity as a
moderating variable in the higher education sector of the Kingdom of Saudi Arabia (KSA). The population of
this study consisting of 39154 employees was divided into five groups based on the geographic regions (East,
West, Middle, North, and South). This study used the systematic sampling. 600 questionnaires were
distributed among the employees working in the higher education system of KSA. 366 questionnaires were
returned and were usable for analysis. To test the proposed hypotheses, the Partial Least Squares Structural
Equation Modeling (PLS-SEM) was employed. The results found leadership and training have significant
positive impacts on employee performance. The study also showed that role ambiguity significantly moderates
the relationship between leadership styles with employees’ performance in the higher education sector of KSA.
Unpredictably, this study found that role ambiguity does not significantly moderate the relationship between
training and employees’ performance. Role ambiguity negatively influences the relationship of leadership with
employees’ performance. Therefore, policy-makers and leaders of higher education institutions of KSA should
focus on reducing role ambiguity.
Corresponding author: Shahmir Sivaraj Abdullah

Email address for corresponding author: shahmir@uum.edu.my
Introduction
Over the past few decades, higher education all over the world has developed momentous
changes concerning its role and formation (Alshery & Ahmad, 2016; Teichler, 1988; Kelo, Teichler, &
Wächter, 2006). In the early twentieth century, higher education was inadequate to a little university
outside Europe, North America, and the colonies of Great Britain (Alshery & Ahmad, 2016; Rohstock &
Lenz, 2011). Therefore, higher education is measured a space for free examination and the developments
of the minds and a very good locus for thought, communication, dealings, and thorough for truth or
exchanging idea into concensus (Alshery & Ahmad, 2016; Bagga, Erbe, Murphy, Freid, & Pomrink, 2007).
Including aforementioned important functions of higher education, economic and social demands also
became important focuses for it. Thus, higher education is no longer limited to the purpose of training for
the elite (Alshery & Ahmad, 2016).
In the context of KSA Management of Saudi higher e education, all the organization and
institutional levels, was a main concern; particularly academic leadership in the institutions that create
difficulties (Alshery & Ahmad, 2016); Altrasi, 2014). For instance, academics leader s in KSA institutions
interest for advancement in research and teaching may face with difficulties in order to actively play
significant role in their institutions
Excellent job performance has to be maintained and employees should be well enriched with the
needed skills to guarantee that the business was not in misfortunes because of the absence of obliged
attitudes at both levels, broadly and globally (Tomaka, 2001) and higher education sector is not an
exemption in this context. According to Smith and Abouammoh (2013), academic staff performance and
other related issues such as a student’s ability to acquire learning skills, efficient interactive delivery of
knowledge, contemporary developed curriculum and overall employee performance standards is one of
the major challenges being confronted by Saudi universities. In sum, the Saudi universities have not
achieved the required status among international universities due to failing in achieving high-quality
teaching and performance standards.
Saudi higher education institutions are facing various problems and challenges to meet global
education benchmarks including a partnership among departments, institutions and leadership
development to bridge the gaps of quality of the employees’ outcomes (Alnassar & Dow, 2013). The
experience of academic leadership development in Saudi Arabia stemmed from a strategic perspective
(Smith & Abouammoh, 2013). Staff training is also regarded as on the challenges that face Saudi
universities (Alshery & Ahmad, 2016; Alnassar & Dow, 2013; Ratyan & Mohammad, 2016). In addition,
Kattuah (2013) states that there is a lack of skills among academic staff in Saudi universities which involve
providing training programs in order to bring them to international standards. It is also argued that lack
of the lecturers’ awareness level about their roles is not so clear such as research publication and
community service in Saudi universities (Jdaitawi, Ishak, & Foua'd Musallam, 2013). The consequences of
the role ambiguity are lower job satisfaction, less productivity, absenteeism and low commitment
(Alshery & Ahmad, 2016; Al-Kahtani & Allam, 2015). Based on the previous discussion, it is clear that
higher education sector in KSA has faced many issues such lower ranking of Saudi universities compared
to international universities and underperformed performance of the academic staff due to their
leadership issues, lack of training and their role ambiguity.
Likewise, the link between training and employee performance is conflicting as many studies
such as Farooq and Khan (2011), Naqvi and Khan (2013), Diab and Ajlouni (2015), Asfaw, Argaw and
Bayissa (2015) and Alshery and Ahmad (2016) have proved the significant relationship between the two
constructs; whereas other scholars Jones, Jones, Latreille and Sloane (2009) argued that the link between
training and employee performance is complex due to the variety of their measurements. Many
researchers also argue that training is not the only source to improve the job performance of employees
(Murrell, 1984). Al-Gahtani (2002) states that many researchers showing various results regarding the
training and job satisfaction to improve the job performance of the employee. Thus, the inconsistent
findings regarding the relationship between these variables, namely, leadership and training and
employee performance shows that there is an urgent need to examine these relationships in the context of
higher education sector in KSA to take a broad view the previous results.
2. Literature review and hypothesis development
2.1 Leadership and employee performance
There are numerous approaches to characterize leadership. In view of 54 specialists from 38
nations, the leadership management is about affecting, propelling, and empowering others to contribute
to the viability and the accomplishment of an organization (Alshery & Ahmad, 2016, McShane & Glinow,
2010). “The leadership is additionally characterized by Robbins and Judge (2007) as the capacity to impact
a gathering toward the accomplishment of a vision or set of objectives”. “A less complex definition was
given by Kassim and Sulaiman (2011) where they define leadership as to be a piece of administration that
includes the supervision of others”. Pater (2001) as cited in Lu & Yang’s (2010) study, state that safety
leadership was highlighted as a sub-system of hierarchical administration ((Alshery & Ahmad, 2016;
Semedo et al., (2017).
Referring to literature review, the link between job satisfaction and leadership is confirmed. For
example, Lee and Wilber (1985) reported a positive relationship between job satisfaction and leadership in
their investigation of cops in Malaysia separately. Holdnak, Harsh, and Bushard, (1993) discovered a
positive relationship between consideration leadership behaviour and job satisfaction, and negative
relationship between initiating structure leadership behaviour and job satisfaction.
Leadership and job performance qualities are the most effective factors that help organisations to
achieve their objectives. Leaders can impose decisions on the strength of achievable performance. The goal
of all the managers is to increase the production level and to enhance the efficiency to achieve the set
targets of the organisation. The positive relationship between job performance and leadership styles
influence the improvement and help organisations to achieve the vision and mission with great success
(Ullah & Batool, 2013). Furthermore, more recent studies confirmed that leadership styles have a
significantly effect on employees’ performance (Wambugu, 2014; Rasool et al., 2015; Girei, 2015; Desderio
et al., 2016). Thus, the first hypothesis is specified as follows;
Hypothesis 1: There is a significant effect of the leadership style on performance of employees working in the public
universities of KSA.
2.2 Training and employee performance
Training can be referring to filling the paucity between the present performance and the usual
desired performance (Alshery & Ahmad, 2016). Training could be given through different methods such
as on the coaching and mentoring, peers’ cooperation and participation by the subordinates. The past
researchers confirmed a positive connection between training and employee performance, as training
brings favourable circumstances for the individual adjacent for the firm by completely influencing
employee performance through the change of employee's performance and behaviour. The development
of employess’ capabilities and skills should be given much attention by the firms for the benefits of the on
shareholders and customers alike (Alshery & Ahmad, 2016; Elnaga, & Imran 2013).
Effective training is useful to the firm in an assortment of routes, for example, it assumes an
indispensable part in building and look after capacities, both for the individual and authoritative level,
and in this way take an interest during the time spent on hierarchical change (Hamosh et al., 2000). Other
research argued that to raise the employee performance organisations should specifically focus on to DK
and PKS by shaping personalities, improving training, fulfilling interests, and enhancing the experience
(Campbell et al. 1993; Kinicki & Kreitner; 2007). Thus, the second hypothesis is defined as follows;
Hypothesis 3: There is a significant effect of training on performance of employees working in the public
universities of KSA.
2.3 Role ambiguity as a moderator
Rizzo, House and Lirtzman (1970) described role ambiguity as the inharmoniousness of the
organisational demands from an employee in the reference to his role. Based on the theoretical model
developed by Rizzo et al. (1970), there are three dimensions of role ambiguity, namely: 1) organisational
factors, 2) personality factors, and 3) interpersonal factors. For organisational factors, role requirements
were measured in three areas. First, the role was measured in terms of the extent to which the position
crossed outside of the organisation's boundaries or interacted with individuals outside of the
organisation. The researchers hypothesised that employees who work close to a boundary - both of the
organisation or of a department or work area - experience increased conflict about their role and increased
tension. Second, the extent to which an employee's role requires innovative problem-solving for non-
routine problems were measured.
The relationship between ambiguities with employee performance had been widely studied in
past researches. Nevertheless, there were often found to have mixed empirical evidence between role
ambiguity and performance (Singh, 1993). A meta-analysis based on the work of Jackson and Schuler
(1985) by Tubre and Collins (2000) found that in order for an individual to carry out a task effectively,
sufficient information is imperative. Alshery and Ahmad (2016) point out that when the employees do not
understand their job duties well, they may become dissatisfied with their job and the probability to leave
the job is higher. It is also stated that the role ambiguity likely affects the relationship between job
satisfaction and employee performance (Sum, Mclaughlin, Khatiwada, & Palma, 2008). Leadership then
comes forward and rules out the ambiguities in the head of an employee and let them perform well”
(Othman, Daud, & Kassim, 2011). And An employee with a lower job-based maturity will not perform
well at their job tasks without the injection of some training sessions (Bougie et al., 2009). Thus, it is
needed to examine the moderating effect of the role ambiguity on the relationship between job satisfaction
and academic staff performance in the higher education sector in KSA as examining this relationship has
been ignored in the literature. Therefore, this study makes an endeavor to study role of ambiguity as a
moderator on the relationship between the independent variables namely, training and leadership
behaviors and employee performance in the Saudi universities.
Hypothesis 3: Does role ambiguity moderates the relationship between leadership style and the performance of
employees working in the public universities of KSA.
Hypothesis 4: Does role ambiguity moderates the relationship between training and the performance of employees
working in the public universities of KSA.
3.4 Underpinning theory
The model by Campbell is considered as the most important model of job performance in the
literature which is compared with a few other related theories of performance theories (Hunter, 1983;
Pritchard, & Costa 1991) and have been adopted by researchers on individual job performance studies
(Alshery & Ahmad, 2016; Law, Wong, Huang & Li, 2008).
Campbell’s (1990) model makes clear distinctions between three components, which comprised of
performance components, performance determinants, and the antecedents of performance determinants.
Since in this study, the purpose is to look at the determinants of performance components, the antecedents
of the determinants are not discussed. However, in general, the antecedents are made up of those
variables such as person’s abilities, personality, interests, education, experience that was lead to
individual differences in performance determinants. Cambell’s job performance model sufficiently
explains variables of current study’s framework like employee job performance (dependent variable),
leadership style (independent variable), training (independent variable) and role ambiguity (moderating
variable). Thereby, it is adopted as an underpinning theory.
Leadership Style
Employee
Performance
Training
Role of Ambiguity
Based on the above framework Cambell’s job performance model sufficiently explains variables of
current study’s framework like job performance (dependent variable), leadership (independent variable),
training (independent variable) and role ambiguity (moderating variable).
3. Methodology
3.1 Sample and Data Collection
Probability simple random sampling was used for this study. Probability sampling was selected
because according to Sekaran and Bougie (2013). Another reason for this technique, according to Salkind
(2003) it has the ability to reduce the biasness of selecting sample object by the researcher while Cavana,
Dalahaye, and Sekaran, (2001), acknowledged as the high generalizability technique. The population of
the study is the academic staffs who have an administrative position and non-academician staffs of public
sector universities in KSA as both are considered as university employees who have lack of a clear set of
instructions for guiding one's actions in a particular setting. In order to determine the population of this
study, reference was made to a sampling frame that was obtained from the ministry of higher education
in Saudi Arabia, which indicated that there are 71976 employees in 26 public universities of KSA. The
number of public universities (population of the sample) was divided into five groups based on the
geographic regions (East, West, Middle, North, and South), which these universities considered as the
largest in each region in KSA.
The paper used proportionate stratified sampling, 384 samples are targeted to be technically
acceptable, completed, and returned. However, the recorded response rate for the universities' employees
in past studies is between 40-60% (Sneed, 2007). Thus, this research fulfils the rule of thumb as proposed
by Roscoe (1975); therefore, this study increase the number of distributed questionnaires by 56%
(384*1.56=600), so 600 questionnaires were distributed to five public university employees in five regions
in KSA. The usable rate of response for this paper is 61% and all constructs achieved the highest reliability
above 0.70.
3.2 Measurement
3.2.1 Employee job performance
Job performance represents behaviours that are formally evaluated by the organisation as part of
the employees’ responsibilities and duties” (Jex & Britt, 2008). The researchers also described the
employees’ performance as an individual level variable; the performance was something that an
individual did. The measurement of employees’ performance is adapted from the previous research by
Williams and Anderson (1991) using a five-point Likert scale ranging from strongly agrees to strongly
disagree for job performance scales. Reported reliability by William and Anderson (1991) on the
measurement was about 0.91. The employees were asked to rate their job performance on the selected
items.
3.2.2 Role of ambiguity
The measurement of role ambiguity was adapted from Rizzo et al. (1970). It consists of seven-
point Likert scales, ranging from strongly agree to strongly disagree for role ambiguity scales. The
reliability of this instrument was reported 0.81 as recorded by Rizzo et al. (1970). Since the nature of role
ambiguity is negative, all of the items were reversed scored in which high scores indicated higher role
ambiguity.
3.2.3 Leadership
Leaders, as defined by Robbins and Judge (2007) “as the ability to determine a group toward the
accomplishment of a vision or set of destinations”. Therefore, a simpler definition was made by (Kassim &
Sulaiman, 2011) as “to be part of management that involves the oversight of others”. The measurement of
leadership is adapted from Yang (2010), which had been applied successfully.
3.2.4 Training
Hansson (2007) utilised a universal data set incorporated from 26 nations to analyse the degree of
training, which improves performance and resources for training where the essential variable ultimately
enhances the performance. The measurement of training is adapted from Hansson (2007). The
measurement of training is adapted from Hansson (2007). The researcher was using a five-pointed Likert
scale, such as 1- strongly agrees, 2 - Agreed, 3 - Neutral, 4 - Disagreed and 5 - strongly agreed.
3.3 Analysis Method
Partial Least Sequential, structural equation modelling (PLS SEM) approach was used as a main
analysis technique for the data analysis. Smart PLS 3.0 software application (Ringle et al., 2015) was
employed in the analysis and reporting the results.
Descriptive analysis was conducted since Sekaran and Bougie (2013) stated that, it is used to
describe the phenomena of interest. Therefore, for the analysis of descriptive information on frequency,
mean and standard deviation were analyzed. Frequency determine the frequency of the phenomena
occur, mean for the average score and standard deviation for the extent of variability. Overall, descriptive
analysis was employed for the respondents’ characteristics and for the construct.
As stated earlier, this study employed PLS SEM techniques employing PLS path modelling (Wold
1974) using SmartPLS 3.0 (Ringle et al., 2015) to test the theoretical model. PLS path modelling was
considered because this technique can examine the relationship between constructs and between latent
constructs and indicators simultaneously (Chin, Marcolin, &Newated, 2003).
4. Results
4.1 Testing of measurement model
Since all the items are adapted, there is no need to do exploratory factor analysis (EFA) but there
is a need to do confirmatory factor analysis (CFA). Items were appropriately allotted to their respective
constructs on the basis of confirmatory factor analysis; all items were correctly assigned to their
constructs. Construct’s validity was determined by two ways. First, the items indicated high loadings on
their constructs while they were juxtaposed with the other constructs. Second, the item loadings loaded
very significantly upon their respective constructs as per the opinion of Chow & Chan (2008).
Convergent Validity related to the Measurements
The Table 1 indicated the values concerning the composite reliability varied from 0.759 to 0.901.
And thus, the values surpassed the endorsed value, i.e. 0.6 (Hair, 2010; Fornell & Larcker, 1981). But the
AVE (average variances extracted value) fluctuated between 0.508 and 0.681 that is greater than the
recommended value (0.5) of AVE by Hair, Hult, Ringle and Sarstedt (2016). This indicates a good level
concerning the validity of the concert related to the employed measures (Barclay, Higgins, & Thompson,
1995). Hence results authenticate the very convergent validity, which is related to the outer model.
Table 1
Convergent Validity Concerning the Measurements
Construct Items Loading Cronbach Alpha CRa AVEb
JP1 0.634
JP2 0.839
JP3 0.835
Employees’ performance JP4 0.776 0.853 0.889 0.536
JP5 0.733
JP7 0.608
JP8 0.664
LE1 0.778
LE2 0.786
LE3 0.797
Leadership LE4 0.851 0.874 0.901 0.568
LE6 0.634
LE7 0.634
LE8 0.769
RA3 0.723
RA4 0.734
RA5 0.782
Role Ambiguity RA6 0.759 0.845 0.875 0.541
RA7 0.764
RA8 0.641
TR3 0.669
TR6 0.842
Training TR7 0.9 0.841 0.894 0.681
TR8 0.872
*a CR = (Σ factor loading) 2 / {(Σ factor loading) 2) + Σ (variance of error)}
*b AVE = Σ (factor loading) 2 / {Σ (factor loading) 2 + Σ (variance of error)}
Discriminant Validity related to the Measures

The differentiated validity concerning the quantifications was authenticated through using the
method of Fornell and Larcker (1981). As it has been explained in Table 2 the square root of the average
variance extracted (AVE) for all the constructs was put at the diagonal elements related to the correlation
matrix. Since the diagonal elements were greater as compared to the elements concerning the row and
column where they were placed. This authenticates the differentiated validity of the said outer model. In
conclusion, it may be said that after having determined the validity of the construct which is related to the
outer model, it is, therefore, presumed that the procured findings concerning the hypothesis testing have
to be reliable as well as valid.
Table 2: The Discriminant Validity Matrix
Employees’ Leadership Role
Construct Training
performance style Ambiguity
Employees’
performance 0.732
Leadership 0.083 0.633
Role Ambiguity -0.231 -0.138 0.735
Training 0.513 0.329 -0.023 0.825
4. 2 Predictive Relevance and the Quality of the Model

Result regarding the quality of the prediction related to the said model is shown in Table 3, that
clarified the cross-validated redundancy concerning Employees’ performance was 0.219189. So, this value
was greater than zero, which indicated an adequate predictive validity related to the model which relies
upon the criteria proposed by Fornell and Cha (1994).
Table 3: The Model’s Predictive Quality Indicators
Variable Cross-validated Cross-validated
Variable R square
Type Communality Redundancy
Employees’
Endogenous 0.426 0.386831 0.219189
performance
4.3 Structural Model Assessment

Hair et al. (2011) viewed structural model as a model that test the hypothesized direct relationship
between endogenous and exogenous variables. Whereby, in partial least squares, structural model
explains on the directional association between the constructs and their t-values as well as the path
coefficient. Referring to the path coefficient, partial least squares are considered by Argawal and
Karahanna (2000), are the same as the standardized beta coefficient in regression analysis.
4.3.1 Examining the Direct Relationships
The previous studies associated the results which were found out of the analysis that was carried
out for the development of the hypothesis, the direct effect of role ambiguity among employees’
performance and an explanatory variable, namely, training and leadership as shown above in Table 4
Table 4: The Results concerning the inner structural model (Direct Hypothesis Testing)
path standard P-
Hypothesis T-value Decision
Coefficient Error value
Leadership > Employees’
0.035** 0.105 1.733 0.042 Supported
performance (H1)
Training > Employees’ performance
0.397** 0.079 5.005 0.000 Supported
(H2)
*:p<0.1; **:p<0.05; ***:p<0.01
Discussion
Hypothesis 1: There is a significant effect of leadership style on the employee’s performance who
is working in the public sector universities in Saudi Arabia.
The bootstrapping technique was employed to test the hypothesis. The results show that
leadership has a significant and positive effect on employees’ performance (β= 0.035, t=1. 733, p<0.05). In
this study, the model proved significant and positive results. Thus, this supports the second hypothesis of
this research. The results of the current study pertinent to the relationship of leadership and employee
performance are contrary to the past studies. Several past studies have found a significant and positive
relationship between the leadership and the employee’s performance. For instance, motivation and
leadership always bring and develops motivation among employees that ultimately affects employee
work standards positively. This result is in line with previous studies including Rasool, Arfeen, Mothi and
Aslam (2015), Girei (2015); Semedo et al., (2017); Desderio, Piason & Bhebhe (2016). From the above result,
it is evident that there exists a positive relationship between leadership as well as the performance of
employees. Results of current research are in line with the previous research as showing the significant
and positive relationship that exists between leadership and performance of the employee. The current
research also reveals if public sector universities of KSA want to enhance employee performance, they
should focus on leadership aspect among academic who has an administrative position and non-academic
employees.
Hypothesis 2: There is a significant effect of training upon employees’ performance who is working in the
public sector universities in Saudi Arabia.
Training has a significant as well as the positive impact upon employee’s performance, which is
the third independent factor that influences the employees’ performance in this research (β= 0.397, t=5.
005, p<0.01). In this study, the model reaches statistically significantly. Hence, the third hypothesis test of
the current research is underpinned. The result of the current study is line with various previous studies
that also showed the same result such as Farooq and Khan (2011), Naqvi and Khan (2013), Diab and
Ajlouni (2015), Asfaw et al. (2015) and Alshery and Ahmad (2016). However, Jones et al. (2009) argued that
the link between training and employee performance is complex due to the variety of their measurements.
Current studies unfolds the relationship existing between training and performance of the employee in
public sector universities in KSA. The current study shows the significant and positive relationship
existing between training and performance of the employee. So, this study implicates that in order to
uplift the employee performance, training is a significant factor among academic who has an
administrative position and non-academic employees of public universities of KSA.
4.4 Testing the Moderation Effect of Role Ambiguity
In this section, Figure 2 represent the moderating effect of role ambiguity between employees’
performance and independent variable (training, and leadership) as shown above in Table 5.
Table 5: The Results of the Inner Structural Model for Moderating Role Ambiguity
Path Standard P-
Hypothesis T-Value Decision
coefficient error Value
Role Ambiguity * Leadership >
-0.259** 0.148 1.746 0.041 Supported
Employees’ performance (H3)
Role Ambiguity * Training > Not

0.023 0.079 0.113 0.455
Employees’ performance (H4) Supported
*: p<0.1; **: p<0.05; ***: p<0.01

Hypothesis 3: Role ambiguity moderates the relationship existing between leadership style as well
as the employees’ performance who are working in the public sector universities in Saudi Arabia.
Role ambiguity has significant and negatively influence the relation of leadership and
performance on the job (β= -0.259, t=1. 746, p<0.05). In this study, the model reaches statistics significant
values which mean that role ambiguity significantly and negatively moderates the relationship existing
between the leadership and the employees’ performance. Resultantly, the hypothesis (H5) of this research
is supported. Above result of hypothesis shows that in order to enhance the performance of the
employees through leadership style in higher education institutions of KSA should clarify shows the role
of each employee in reducing role ambiguity. It is a core responsibility of the leader to enlighten his
follower by clarifying and educating that what he/she ought to do for the attainment of organisational
objectives.
It is in line with the findings of Kassim et al. (2011) who asserted that role ambiguity is one of the
most crucial impediments that hinder the employees to achieve their optimum level of performance. He
further stated that in the case of role ambiguity leader should come in the front and clear the ambiguities
so that employees may feel satisfied and attain organisational objectives. Judge et al. (2007) also asserted
the similar findings that it is the leader who eradicates the role ambiguities from the minds of the
employees to transform them to be more comfortable as well as loyal to their respective organisation so
that they may perform higher.
Hypothesis 4: Role ambiguity moderates the training relationship as well as the employees’ performance
who are working in the public sector universities in Saudi Arabia.
Role ambiguity has no significant effect on the relationship between training and employees’
performance (β= 0.023, t=0. 113, p>0.1). In this study, the model reaches statistically significant which
means that role ambiguity, not significantly moderate the relationship that exists between training and
employees’ performance. Resultantly, the hypothesis (H6) of the research is not supported.
Sekaran and Bougie (2013) explained that organisations provide adequate training to its employees to
enhance their skills and abilities to perform their task effectively and efficiently. Role ambiguity confuses
the employees and any kind of training would be futile activity as long as employees are not aware of
their role and responsibility through proper training mechanism (Bougie et al., 2009). Role ambiguity has
constantly been the focus of studies in the field of human performance.
A logical employee can only experience one or the other end of the continuum as when work is
performed from the opposite end of the ambiguity of the role is unclear. Jackson and Schuler (1985)
emphasised the importance of understanding their role, from an individual perspective, it is believed to
influence your own motivation, satisfaction, and performance.
Figure 2 provides plot of the interaction between leadership and role ambiguity on employees’
performance at high and low leadership based on the recommendation of Madera, Dawson and Neal
(2013). As shown in Figure 2, the relationship between leadership and employees’ performance was
strongest among employees in public universities in the case of low role ambiguity and weak in the case
of high role ambiguity. Individuals of different level of role ambiguity did not differ much in performance
under conditions of high leadership, but large differences were noted under conditions of low leadership.
In other words, under conditions of low leadership, individuals reporting higher levels of role ambiguity
than under conditions of high leadership which individuals reporting lower levels of role ambiguity.
Figure-2
Plot of Interaction between Leadership and Role Ambiguity on Employees’ Performance
5. Conclusion
This study explores the effect of the main variables, including leadership, and training on
employees’ job performance via examining the role ambiguity as moderator in the KSA’s higher education
sector. The main motivation of this study is to improve the employees’ performance concerning the higher
education sector of the kingdom of KSA while identifying the vital role of various variables including job
satisfaction, leadership, and training while highlighting the importance of role ambiguity as being a
moderating variable.
5.1 Implications, Limitations, and Suggestion for Future Research
This study contributes to the existing body of knowledge in understanding the employees’
performance as this is the first study with the set of such variables. In other words, this study attempts to
increase the understanding of the relationship which is between job satisfaction, leadership, training as
well as the performance of employees with the moderating role of role ambiguity in higher education
institutions of KSA.
The present study’s results have implications for higher authorities, decision makers, and policy
planners. This study raises the importance of employee performance in the higher education institutions
of KSA. In addition, impacts of various other variables have also been examined, including leadership,
job satisfaction and training as predictors and the role ambiguity as being the moderator.
Secondly, this study demonstrated the importance of job satisfaction, leadership, and training in
improving the employees’ performance. And the results indicate that training was the most important
variable which significant predictor of the employees’ performance. There are clear, practical implications
of these findings. Employee performance has been a matter of quest and research in almost all industries
due its importance and higher education institutions are not different in this regard. Job satisfaction urges
the employee to put their optimum effort to attain their objectives aligned with the objectives of the
organisation.
Despite the insight offered, this study has several limitations that should be considered by future
studies. Firstly, this study incorporates only public sector universities that affect the employee
performance in the higher education institutions of KSA. To address the limitation, it is strongly
recommended that longitudinal studies should be conducted to examine the impact of job satisfaction,
leadership style and training on employee performance with the same or different moderator. Further
study can be extended by doing multi-sector analysis as well as a comparison of various industries. It was
fruitful to have a better insight of employee performance by analysing more variables that are not
considered in the current study.
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Performance model development for assessing maintenance service

providers using the Kano model
Moses Laksono Singgih
Putu Dana Karningsih
Mokh Suef
Department Industrial Engineering
Sepuluh Nopember Institute of Technology, Surabaya, Indonesia
Primahasmi Dalulia
Department Industrial Engineering
University of Merdeka Malang, Malang, Indonesia
Keywords
ICU, Medical equipment, Outsourcing, maintenance service provider, performance model
Abstract
Outsourcing is delegating partial or total business functions to other companies in conjunction with
administrative and operational activities. One of the industries that implements outsourcing in its
maintenance activity is the healthcare industry. An Intensive Care Unit (ICU) is part of a hospital which is
very vital, so that it requires medical equipment with high availability and reliability. The aim of this research
is to develop a performance model to use to assess the performance of medical equipment or the used
maintenance outsourcing service providers. Developing the performance model involves 14 criteria. The 14
criteria were clustered by the Kano Model to obtain the importance of each criteria. . Kano was used to
identify the criteria within the dimension of basic requirements and special requirements. DEMATEL was
employed to identify the connection between criteria and ANP in order to provide the integrity of the criteria.
The three criteria with the highest integrity rating were the technicians’ capability by the rate of integrity that
reached 0.256881, the aptitude of providing diagnosis by the rate of integrity that reached 0.222181, and the
flexibility by the rate of integrity that reached 0.175684. Two criteria which had a rate of integrity of 0 and
were considered as therefore having the lowest integrity rate were the criteria of charges and dependability
respectively.
Corresponding author: Moses Laksono Singgih

Email address for corresponding author: moseslsinggih@ie.its.ac.id
1. Introduction
There are two types of maintenances, i.e., preventive maintenance and corrective maintenance.
Preventive maintenance includes maintenance activities that are performed before the system experiences
a breakdown, which includes inspections and spare part replacement. The intent of preventive
maintenance is to improve on one or more criteria, such as the maintenance cost, reliability, and
availability. On the other hand, corrective maintenance refers to maintenance activities that are performed
after the system has experienced a breakdown (Nosoohi & Hejazi, 2011). Usually, all maintenance
activities, both corrective and preventive, are performed internally by an internal maintenance
department. However, it is now common to outsource the performance of these activities.
Outsourcing is the delegation of a business function to one or more companies, along with the
associated administrative and operational activities (Gomez et al., 2009). There are many reasons why
companies implement outsourcing, including when the maintenance department is not able to operate
economically, or when the company needs flexibility in order to respond to changes in the market that
they serve. Hospitals now outsource their maintenance activities in order to focus on health services. On
the other hand, medical equipment requires high availability and reliability because it is used to ensure
patient safety. The Intensive Care Unit (ICU) is a very important hospital area for treating critical patients,
therefore, the availability and reliability of ICU medical devices should be given high priority. It is crucial
that the maintenance service provider has a high enough performance to achieve that goal. The aim of this
study is to develop a performance measurement model that can be used to assess maintenance service
providers.
This study proposes a model that is used to measure the performance of the maintenance service
provider for ICU equipment. This research is restricted only for maintenance service provider for ICU
equipment. The criteria were developed in the previous research study conducted by Singgih & Dalulia
(2016). From the set of criteria has been established, these criteria were classified according to the level of
importance using the Kano method. The provider expects to know which criteria are expected by the
maintenance service provider users. This is so then the providers can improve the appropriate services.
Previous papers have focused on the relationship between each criterion and the associated level of
performance, whereas the current research has focused instead on the relationship links between the
criteria and the weighting of each criterion. The importance of describing the relationship between the
criterions is to emphasise that each criterion has been affected by the other criterion. Defining the
importance classification of each criteria also involves the participation of the users of the maintenance
service provider by using the principle of Multi-Criteria Decision-Making. The aim of this study is to
develop a performance measurement model that can represent the real conditions between the user’s
aspirations, the maintenance service provider and the medical device’s condition. This is so then the
model produced can be used by the user as decision-maker within the maintenance department to
evaluate the maintenance service provider periodically.
2 Literature Review
Cruz & Rincon (2012) mentioned that there have been a few research studies focused on
outsourcing maintenance including provider selection, evaluation and performance appraisal. This paper
aims to map the previous studies on outsourcing maintenance. The overall objective of this study is to
identify the measurement of the maintenance performance of outsourcing in relation to medical devices in
hospital, using a qualitative or quantitative approach. The mapping process in this research was used to
define the strategies of the previous research, to find the previous research literature, to conduct the
selection of the relevant research studies, and data analysis. The disadvantages of the previous studies
include the absence of the mention of management theory used to reinforce the findings of the research,
which makes it difficult to apply the results appropriately. In addition, the proposed mathematical model
uses assumptions that cannot be applied to real conditions in the field. Some mathematical models can
only be applied to a particular industry type, which is not applicable to other industries.
This research only describes the condition of the previous studies in the field of outsourced
maintenance, but has not specified what can be examined in the field of outsourcing maintenance. The
results gained from this research are that the mapping review produced is been specific, so then it can be
determined which area has already been discussed in upcoming research. Almeida (2005) stated that
every alternative to contract repair or maintenance activities is determined by several characteristics, such
as response time, quality service, dependability and related costs. This study focused on a quantitative
approach involving the decision-maker’s judgment using multi-criteria decision-making approach. The
purpose of this study was to find the best alternative criteria to determine the performance of the
maintenance service provider. The multi-criteria method used was the utility theory, in order to evaluate
each criterion based on its utility function. The second method was ELECTRE, which was used to evaluate
the alternative combinations of all criteria. The criteria developed in this study do not describe how
involved the decision-maker is in determining the criteria preference. The number of criteria was too
small, so there may be more alternatives that have the same preference results from the decision-maker.
The same research conducted by Almeida (2007) was about modelling contract selection for outsourcing.
This study is more general than that conducted by Almeida (2005). This study focused on the selection of
outsourcing, without any limitations on outsourcing in certain areas. The criteria developed were also
general; dependability, cost, and time. The advantage of this research is its general nature, so then it can
be applied to any type of industry. However, the criteria developed in this study still does not clearly
describe how the decision maker is involved in determining the preferences.
The purpose of Cruz et al’s study (2013) was to identify the characteristics of the service
provider’s maintenance that directly affected the service quality, measuring the co-variable risk changes to
the service quality in terms of turnaround time (TAT) equipment time. For medical equipment, the
maintenance activities being performed by a third party is already a common thing. The method used in
this study involved statistical tools, which determined the relationship between the criteria and the
influence of each criterion on the performance maintenance service provider. However, this study did not
involve a decision-maker to determine how much the criteria contributed to the performance
measurement of the service provider’s maintenance and the combination of the criteria used.
This research used the concept of outsourcing maintenance performance measurements using
criteria, which was used in each phase of the outsourcing maintenance problem. The resulting model is
used by health industry players to consider the performance measurement of their outsourced
maintenance. The research idea was obtained from Cruz & Rincon’s (2012) study on a mapping review of
outsourced maintenance for medical equipment. The healthcare industry is a service industry that is
closely related to human life and safety. The characteristics of the healthcare industry are unique when
compared to the manufacturing industry. In Indonesia, the performance measurement of outsourced
maintenance generally has not been conducted by the service user, that is, a hospital. The performance
criteria were obtained from Cruz et al. (2013), Almeida (2005), Almeida (2007), Liou & Chuang (2010) and
Singgih & Dalulia (2016). However, Cruz et al’s (2013) research focused on the correlation of each criterion
to delivery service, where there is no interest level preference in relation to the weighting form of the
criteria. In addition, there was no continuous use in the study.
Almeida (2005) and Almeida (2007) developed selection criteria for outsourcing maintenance,
weighted the criteria with utility theory, and elected to use ELECTRE, one of the MCDM methods. This
research did not provide the steps in relation to developing the criteria. Criteria development can be
conducted by case study analysis, including collecting, comparing and confirming the criteria used and
discovering what is considered to be important by the user of the outsourcing maintenance service. A case
study analysis was conducted on five Class B Hospitals in East Java. This study required the participation
of the decision-makers in the field of maintenance in each hospital. The experts provided an assessment
for as long as the research took place. The criteria obtained from the literature study were confirmed for
each user. After obtaining the criteria considered important by the user, they were compared and selected
using Kano principles. After obtaining the criteria, namely the basic and additional attributes, they were
then weighted against each of the criteria. Several weighting methods have been proposed by previous
research, including the Multi Attribute Utility Theory (MAUT) proposed by Almeida (2005) and Almeida
(2007). Another weighting method is the integration of DEMATEL and ANP, proposed by Lee et al. (2011)
and Liou & Chuang (2010), where the method considers the interrelation between the criteria. The MAUT
method does not consider the interconnection between the criteria, so in this study, we used the
integration between DEMATEL and ANP. After the criteria were obtained, a measuring instrument for
outsourcing the maintenance performance was performed on the list of criteria and their weight.
3 Research Method
3.1 Performance Criteria
Performance measurement is a quantitative indicator that can be used to measure the
achievement of a particular goal, to detect changes over time, and to identify differences within the
changes in a given program. Dewangan & Godse (2014) stated that the absence of a performance
measurement method will make it difficult to measure the achievement of a particular goal. In Yildiz &
Demirel (2014), it was stated that the performance of outsourcing will affect the performance of the
company. In hospitals, the performance of the maintenance service providers is directly related to patient
safety, as medical equipment with low availability has the potential to be the greatest risk to the patient.
Therefore, this study has fulfilled the necessity of creating a performance measurement model to assess
maintenance service providers in hospitals. Singgih & Dalulia (2016) developed 14 criteria to assess
maintenance service provider performance. The 14 criteria have been stated in Table 1 below.
Table 1. Criteria for Maintenance Service Provider

Criteria Definition
Dependability Response time achievement that has been stated in the contract document.
Flexibility Flexibility in handling abnormal conditions.
Service Quality Customer satisfaction level due to the provider services
Cost Total cost that occurs from outsourcing activities in a certain period.
Total time required by the maintenance service provider, from the request call
Turn Around Time
until the equipment performs normally.
Contractual Relationship Contract types offered by the provider.
Flexibility in billing Flexibility in payment condition.
Knowledge sharing Provider and customer relationship related to information and knowledge.
Equipment Types Equipment types that the provider is capable of handling.
Firm Capacity & Human Resource Provider capability of fulfil maintenance contract agreement.
Technician Skill Technician’s ability to solve medical equipment problems.
Quality and accuracy of the administration performed by the maintenance
Administration service provider.
Provider ability to diagnose damage, as well as to provide diagnosis-related
Diagnosis Accuracy information to the users of the service maintenance service provider.
Part availability Availability of the replacement part.
Clarity of standard operating procedures when performing maintenance
SOP Clarity activities or improvements; transparency to users.
Preparation of reports on maintenance activities or improvements that have
Routine Reporting been made.
Attitude Attitude of the maintenance service provider
Source: Singgih & Dalulia (2016)
3.2 Kano Model
The Kano model classifies the products’ features into five categories, namely ‘must be’, which is a
basic attribute, ‘one-dimensional’, which is a performance-related attribute, ‘reverse’, which is a
performance conversely-related attribute, ‘indifferent’, which is a performance do not change related
attribute and ‘attractive’, which is an excitement related attribute (Basfirinci & Mitra, 2015; Suef, Suparno
& Singgih, 2017). Attributes that are classified as ‘must be’ are defined as the basic features which are
essential for every consumer related to customer satisfaction. If this basic feature cannot be fulfilled, then
it will lead to consumer dissatisfaction. For example, the repair of equipment must continue until the
equipment functions normally. In addition to the categories listed, there are two additional classifications
used within the Kano model, namely ‘indifference’ and ‘reverse’. Indifference attributes are attributes that
do not affect the level of satisfaction of the consumer, whereas a reverse classification is applied to
attributes that lead to consumer dissatisfaction. The Kano model was used because the principles of the
basic and special requirements are identified in detail. In addition to the criteria defined as the basic and
special requirements, the principles of Kano can also identify any non-essential criteria that can be
removed without affecting the consumer perception of the product or service.
In this study, the desired outcome of the case study analysis was to determine what basic and
additional criteria are needed. Kano principles were used to select the attributes or criteria that constitute
the basic and additional features of the maintenance service provider. Criteria that do not affect the
outcome will be eliminated from the list of criteria that influence the performance of the maintenance
service provider. The following steps were performed when implementing the Kano model: 1. identify the
product or services requirement, 2. develop the Kano questionnaire, and 3. plot the Kano matrix by
calculating the extent of satisfaction and dissatisfaction using (1) and (2).
Extent of satisfaction = (1)
Extent of dissatisfaction = (2)
Using the Kano Model approach, the criteria will be classified into groups based on the level of
importance of the user. By recognising the importance of each criteria, the maintenance service provider
can focus more on the development of services that are important and expected by the users of the
maintenance service provider.
3.3 DEMATEL-ANP Integration

DEMATEL is a method that can be used to determine the links between various criteria. In
addition to being able to capture the pattern of links between the criteria, the DEMATEL method is also
able to capture and analyse the dominant criteria within a particular system. Lee et al., (2011) integrated
the DEMATEL and ANP methods to analyse the corresponding relationships between the factors in their
study. If the relationships between the factors affecting an investment are known, then the decision-
making process is expected to be more effective and efficient. The DEMATEL method can be used to
investigate the relationship between the factors of a stock investment, followed by the use of ANP to
evaluate the magnitude and links between the factors. The DEMATEL method is often applied to
effectively arrange problems that have links between the factors. The steps for implementing DEMATEL
are as follows: 1. construct an evaluation scale, 2. develop the direct relationship matrix, 3. develop the
normalisation matrix, 4. construct the total relationship matrix, 5. calculate the importance and
relationship values and 6. develop the network relationship matrix (NRM). ANP is designed to
accommodate the relationship and interdependence criteria and can complement weaknesses in the
Analytical Hierarchy Process (AHP). ANP can be seen of as a generalisation of AHP. The fundamental
difference between AHP and ANP is that ANP is used in multi-criteria decision-making and focuses on
the corresponding relationships between the criteria, while AHP assumes that there is no link between the
criteria and only explores the hierarchical relationships. ANP is able to represent the level of interest of
various parties while taking into account the interdependence of any existing criteria and sub-criteria. A
weighting calculation using ANP can be performed using the Super Decision software package.
4 Results and Discussion
4.1 Results
The criteria which were collected were used to construct the performance model. Before assigning
suitable weights, the criteria were evaluated using the Kano Model and separated into the five dimensions
mentioned previously. The criteria developed from the Kano model have been illustrated below.
Table 2 - Kano Dimension
Criteria Dimension
Dependability one dimensional
Flexibility must be
Service Quality one dimensional
Cost attractive
Turn Around Time indifferent
Contractual Relationship indifferent
Flexibility in billing indifferent
Knowledge sharing one dimensional
Equipment Types must be
Finn Capacity one dimensional
Technician Skill one dimensional
Administration one dimensional
Diagnosis Accuracy one dimensional
Part Availability attractive
SOP Clarity one dimensional
Routine Reporting attractive
Attitude one dimensional
Source: calculation
The indifference criteria, such as the turn-around time, flexibility in billing, and contractual
relationship, should be eliminated because they have no impact on the performance. The gathered criteria
should be weighted based on the importance definition by integrating the results from DEMATEL and
ANP. As the significance matrix has been defined, the ANP operation can be performed using the Super
Decision software. The significance matrix was used in the development of the criteria relationship model,
and the output of the ANP operation was the weight of each criterion. The criteria weights have been
illustrated in Table 3 below.
Table 3 - Criteria Weighting

Notation Criteria Weight
C1 Dependability 0.0
C2 Flexibility 0.175684
C3 Service Quality 0.053293
C4 Cost 0.0
C5 Knowledge sharing 0.005496
C6 Equipment Types 0.018238
C7 Firm Capacity 0.132503
C8 Technician Skill 0.256881
C9 Administration 0.041585
C10 Diagnosis Accuracy 0.222181
C11 Part Availability 0.01998
C12 SOP Clarity 0.00914
C13 Routine Reporting 0.045708
C14 Attitude 0.019312
Source: calculation
Total Score = 0.175684 C2 + 0.053293 C3 + 0.005496 C5 + 0.018238 C6 + 0.132503 C7 + 0.256881 C8 +
0.041585 C9 + 0.222181 C10 + 0.01998 C11 + 0.00914 C12 + 0.045708 C13 0.019312 C14.
4.2 Discussion
The flexibility criterion in the must-be category had the third highest weighting out of the 14
proposed criteria. The first and second ranked criteria, namely technician skill and diagnostic accuracy,
were the criteria proposed by Expert 1 according to the assigned weighting. The criterion for technician
skill, which was proposed by some experts as a new criterion, was considered to be a uniform criterion,
the highest weight of which was considered to be a representation of the real conditions in the field. The
criteria of cost and dependability did not contribute to the performance assessment. In addition, the cost
criterion was not preferred because it was not a major consideration. This is as it is unlikely to change due
to the fact that it is a quantity that has precise numbers involved. Frequently, cost is correlated with the
quality of the available facilities. In medical equipment, quality is important because it is related to the
safety of the patient, but cost is not the emphasis. The criterion of dependability was not considered to be
an important criterion when compared to flexibility. Therefore, in the pair-wise comparison of ANP, the
rate of the criterion of flexibility was 9, which means that it was more important than the criterion of
dependability.
5 Conclusion and Further Research
By integrating several methods, namely case study analysis, Delphi, Kano, DEMATEL, and ANP,
a performance model was developed which can be used by the healthcare industry to assess the
performance of the used maintenance service providers. The resulting performance criteria can be used as
a reference when assessing the performance of general outsourcing. Case study analysis and Delphi were
used to determine the new criteria based on the needs of the user. Kano was used to identify the criteria
for the basic and special dimension requirements. DEMATEL was used to determine any linkages
between the criteria, and ANP was used to weight the criteria. The results obtained from the Kano method
indicated that the criteria that must be fulfilled (basic requirements) also provide flexibility in terms of
abnormal situations and the type of equipment that can be handled by the provider (equipment types).
The three criteria that had the highest weighting were the criterion of technician skill at 0.256881,
diagnostic accuracy at 0.222181 and flexibility at 0.175684. The two criteria that were assigned a weight of
0 (meaning that they did not contribute to the performance) were the criteria of cost and dependability.
The model can be enlarged for equipment in another area in the hospital or other types of
hospitals. It is suggested that the Ministry of Health creates a special license for maintenance service
providers for ICU equipment to control their performance.
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521.
Optimal board size in the Jordanian banks: Empirical evidence based on

accounting performance
Mohammad Ahid Ghabayen
Faculty of Economics and Administrative Sciences
Zarqa University, Zarqa, Jordan
Zaid Jaradat
Ahmad Hardan
Mohannad Obeid Al-Shbail
University Malaysia Terengganu, Kuala Terengganu, Malaysia
Keywords
Optimal Board Size - Accounting Performance – Jordan - Banks.
Abstract
The aim of this paper is to examine the optimal board size in the Jordanian banking sector with a focus
on the accounting performance using a panel data from 2004 to 2013. In general, we find that the board size
and bank performance are related but not at a significant level. Interestingly, we find that neither too small
boards nor too large boards are effectively enhancing the bank accounting performance. The study concludes
that the optimal board size is between 9 to 12 directors. Boards with less than nine directors are found to be
insignificantly related to the bank performance while boards with more than 12 members are significantly and
negatively related to the performance. Currently, the corporate governance codes suggest the board to be at
least five directors and not more than 13 directors. Thus, this study suggests the policy makers to limit the
size of the board to 9-12 directors only.
Corresponding author: Mohammad Ahid Ghabayen

Email address for corresponding author: Mohammadahed83@yahoo.com
Introduction
Board size is an issue of the board characteristics that has been often discussed in the corporate
governance studies. Raheja (2005) pointed out that advising and monitoring are the two main functions of
the board of directors. The size of the board has significant impacts on the level of controlling, monitoring
and information disclosure. Prior studies have searched the determinants of board size (Chaganti,
Mahajan & Sharma, 1985; Akhtaruddin, Hossain & Hossain, 2009). Yermack (1996) concluded that the
firm size determines the board size. In addition to the firm size, Boone et al. (2007) stated that the size of
the board grows with the growing and diversifying of the firms. They concluded that firm tradeoff
between the advantages and the costs of monitoring to determine the size of the board.
Board size has been examined extensively and the issue of the optimal board size is still
researchable due to the inconsistent perspective either theoretically or empirically. From agency theory
perspective, it is argued that small board size is expected to be better because fewer members in the board
are likely to be more dynamic and active, as well as, it is easier in the small board to reach consensus
(Jensen, 1993). Furthermore, boards with fewer members monitor the firms and control the managements
more effectively while large board face coordination problems and director free-riding (Lipton & Lorsch;
1992; Jensen, 1993). Kim, Nofsinger and Mohr (2009) argued that members in small boards exert more
effort because they all realize their monitoring function in the firm. In addition, boards with larger
directors may negatively impact the process of decision making (Jensen, 1993) and mitigates their
effectiveness in monitoring top managers (Yermack, 1996).
On the other hand, resource dependency theory argues that larger boards are more likely to
consist of experts and specialists, which may result in increasing the company value and enhancing the
decision-making procedures (Chaganti et al., 1985; Dalton et al., 1998; Dalton et al., 1999; Dallas, 2001;
Abeysekera, 2010). In addition, greater number of directors in the board might be a better monitoring tool
because they will have the ability to perform their function more effectively (Zahra & Pearce, 1989;
Hillman & Dalziel, 2003). Furthermore, more directors in the board may have better ability to solve the
problem facing the company due to the varied directors’ viewpoints.
The main role of the board of directors is to monitor the top managements. This role has been
examined extensively and the findings are inconsistent, but the consensus indicated the small boards are
monitoring more effectively (Jizi et al., 2013). Boards with fewer directors are more productive and more
cohesive and active while the large board size is seen as over-sized boards (Lipton & Lorsch, 1992; Jensen,
1993). On the other side, resource dependency theory views the board of directors as resources providers.
Thus, more directors in the board may provide the firm with more resources.
Thus, both theoretical views can be critical when it comes to the accounting performance. That is,
the monitoring and controlling functions are assumed to enhance the firm performance. In the same line,
providing the firms with the important resources may lead to better performance. Empirically, board size
is found to be associated with firm performance (Yermack, 1996; Eisenberg et al., 1998; Kiel & Nicholson,
2003). The association between board size and firm performance has been extensively examined and they
have showed mixed results. Notwithstanding the majority of the previous studies found that board size
has a negative impact on the firm performance (e.g., Jensen, 1993; Barnhart & Roseinstein, 1998; Mak & Li,
2001; Van Ees et al., 2003; Adams & Mehran, 2005; Cheng et al., 2008; Shakir, 2008; Guest, 2009), some
other studies found a positive relationship (e.g., Hermalin & Weisbach, 2003; Bonn, Yoshikawa & Phan,
2004; Haniffa & Hudaib, 2006). Furthermore, some empirical studies do not find any association between
board size and firm performance (Chaghadari, 2011; Topak, 2011; Ghabayen, 2012).
The focus of this study is to examine the applicability of agency theory and resource dependency
theory on the Jordanian banking industry. More precisely, this study examines the relationship between
board size and bank performance. The results of this study significantly contribute to the body of
knowledge. We find that neither too small boards nor too large boards are effectively enhancing the bank
accounting performance. The study concludes that the optimal board size is between 9 to 12 directors.
Boards with less than nine directors are found to be insignificantly related to the bank performance while
boards with more than 12 members are significantly and negatively related to the performance. Currently,
the corporate governance codes suggest the board to be at least five directors and not more than 13
directors. Thus, this study suggests the policy makers to limit the size of the board to 9-12 directors only.
The subsequent sections are organized as follows: the second section reviews the board
size/performance relationship following with the research methodology in the third section. Section four
presents the procedure of the data analysis. Results and discussion are discussed in section five while the
conclusion and future works are presented in the final section.
Board size and performance
A firm’s board size refers to the number of firm’s directors serving in the board of directors
(Jensen & Meckling, 1976). Roles of board size have been a controversial issue from different theoretical
views. Lipton and Lorsch (1992) and Jensen (1993) suggested that the board size should be limited to
seven or eight members only. In the developed countries, Lipton and Lorsch (1992) examined the US
board size and their study indicated that the US firms have crowded boards which might result in
increasing the cost to the shareholders, reducing the competitive opportunities in the market and causing
the employees to lose their jobs. They concluded that the board size should consist of a maximum eight
directors and if the board has more than 10 members they will not perform effectively because they will
face a communication problem during the meetings such as the difficulty in expressing their ideas and
opinions.
Besides, Jensen (1993) argued that the functions of the board will be reduced in a large board size,
more than eight directors, because it is difficult for the board to manage the meetings or to reach to a
consensus. Furthermore, he argued that the large board size is easier to be controlled by the CEO. In the
same vein, Topak (2011) concluded that board with more directors is costlier and it affects the decision-
making procedures, communication and coordination between directors in the board. Furthermore, in
comparison with large board size, boards with few directors have superior performance (Barnhart &
Rosenstein, 1998). Based on the agency theory, larger companies need larger boards to control and to
monitor the management actions. This means that the size of the firm is an influential factor that
determines the board of directors’ size. This viewpoint has been empirically supported by many authors.
Coles et al. (2008) pointed out that large and complex firms, which have diversified businesses, need more
members in their board because they need more advising requirements. Dalton et al. (1999) pointed out
that larger boards are likely to consist of more experts and knowledgeable directors and offer better
advice to the CEO. This indicated that complex firms need larger boards. Many members in the boards
may enhance director’s board to perform their roles more effectively.
Focusing in the board size/bank performance relationship, different studies have been conducted
in this area with mixed results. Grove et al. (2011) found that banks with smaller boards outperform their
counterparts during the global financial crisis in a sample of 236 US public commercial banks from 2005–
2008. Moreover, using a sample of 74 listed banks of Gulf Council Countries (GCC) except Kuwaiti listed
banks during the period 2008–2010, Al-Musalli and Ismail (2012) reported that board size and intellectual
capital performance are negatively associated. More recently, Naushad & Abdul Malik (2015) found that
smaller boards are more effective in monitoring the management in GCC. Some other studies found that
the board size is not significantly related to the firm performance in the GCC region such as in UEA
(ALJifri & Moustafa, 2007), Saudi Arabia (Al-Matari et al., 2012; Ghabayen 2012) and Kuwait (Al-Matari et
al., 2013).
In conclusion, the issue of the board size has been extensively investigated and the optimal board
size is not yet under the focus of the majority of the previous studies. In the context of the firm
performance, the focus of the previous studies was to examine the board size-firm performance
relationship. Thus, this study is an attempt to test one-sit-fits-all concept. First of all, it examines the board
size-performance relationship in the Jordanian banking industry. Secondly, it attempts to examine the
optimal board size. If small (large) board size is better, to which extent small (large) board size can be
effective? Thus, the following hypotheses are developed:
H1: there is a positive relationship between board size and bank performance.
H2: very small (large) boards are ineffective in improving the bank performance.
Research methodology
Sample and data collection
The banking industry in Jordan is well-organized and it follows the roles of different acts such as
Banking Acts (2006) companies Law (1997, 2006) and corporate governance regulations (2007). The
banking sector in Jordan has its own characteristics. That is, the banks are either to be publicly listed or
affiliated bank or offshore company (Jordanian Bank Act, 2006, Article, 6). In addition, in terms of
activities, the banks in Jordan may operate their businesses either based on the Islamic rules (Islamic
banks) or conventional rules (conventional banks) but not a mixture. In Jordan, there are 16 local banks
operating in the country. Some of them have branches in the Arabic region (regional banks) and some
other banks have international orientation. From the 16 Jordanian banks, 15 banks are traded in the
Amman Stock Exchange (ASE). In other words, one of the banks is totally owned by another bank
(affiliated bank). In addition, out of the 16 banks, there are three Islamic banks. The focus of this study is
the conventional banks. Islamic banks are excluded in this study. As their activities are different, their
characteristics and institutional structure are also believed to be different.
The data of this study includes the 13 local conventional banks. In collecting the data, this study
uses secondary sources. Secondary data includes both qualitative and quantitative and can be used for
both descriptive and explanatory studies (Kervin, 1999). It is also considered as an interpretation of
primary data (Cooper & Schindler, 2003). Secondary data is referred to the data that already exists such as
annual reports, published statistics, books and internal reports kept by the firms (Veal, 2005). Recently,
firms issue other reports in a frequently basis such as corporate governance reports. In this study, the
banks’ annual reports, banks’ corporate governance are the main source to gather the data. The annual
reports are downloaded from either the banks’ websites or from ASE (http://www.ase.com.jo/). In the case of
unpublished annual reports, they are collected manually from the banks. In general, out of 130 annual
reports, the study could collect 123 annual reports; 115 annual reports were downloaded online while
eight annual reports were collected manually from the banks. However, seven annual reports were
missing. The procedures of data collections are summarized in Table 3.1. Furthermore, the data of this
study is collected from the Jordanian conventional banks in a period of 10 years (2004-2013).
Table 3.1 Summary of the sample
Expected Sample 160 (16 banks*10 years)
Islamic Banks (30) (3 banks*10 years)
Possible sample size 130 banks
Missing data (7)
Final sample size 123 banks/year
Online-downloaded annual reports 115 annual reports
Hand-collected annual reports 8 annual reports
Total collected annual reports 123 annual reports
Research model and measurement of the variables

In order to examine board size/performance relationship, the following regression model is utilized:
PROFTit = α0+β1BSIZit+β2LOGSIZit+β3LEVit+ εit
Where;
PROFT: is the bank profitability, which is the bank financial performance, measured by the return on
assets (ROA) which is earnings before tax divided by total assets. Similar measurement was used in the
previous studies (e.g. Ghabayen, 2012; Al-Matari et al., 2012; Saibaba & Ansari, 2013).
BSIZ: is the size of the board of director measured by the number of directors serving in the board. This
measurement is widely used in the previous studies (e.g. Yermach, 1996; Kiel & Nicholson, 2003; Al-
Matari et al., 2012; Ghabayen, 2012).
LEV: is leverage and it is the ratio of the book value of long-term debt divided by total assets (Anderson &
Reeb, 2003; Alsaeed, 2006; Al Matari et al., 2013; Amran & Che-Ahmad, 2013).
LOGSIZ: is the natural log of the total assets. This measurement is widely used in the previous studies
(e.g. Liu, Ahlstrom & Yeh, 2006; Amran & Che-Ahmad, 2013; Ibrahim & Samad, 2013; Jizi et al., 2013; El-
Chaarani, 2013).
it: period indicator
ε: Error Term.
Data analysis
Descriptive analysis
Table 4.1 presents the descriptive analysis of the model. Relatively, low level of ROA is found in
the Jordanian conventional banks with a mean of two per cent. In addition, some banks have recorded
losses in their activities. In respect to board size, the Jordanian banks have relatively large boards with a
mean of almost 11 directors. The largest boards have a maximum of 13 directors while the smallest ones
have seven directors. In other words, all the banks have complied with the Jordanian corporate
governance guidelines which recommend 13 directors as a maximum of the board size and five directors
in minimum.
Table.4.1 Descriptive Analysis
ROA BSIZ LOGSIZ LEV
Mean 0.02 10.7 21.1 0.86
Median 0.02 11 20.9 0.86
SD 0.01 1.64 1.1 0.33
Max .06 13 24.3 0.96
Min -.01 7 19 0.78
Skewness 0.8 -0.78 1.258 0.87
Kurtosis 5.0 3.15 4.84 2.91
Observations 123 123 123 123
Panel data
Prior to run the data, we employ different diagnostics tests such as normality, heteroscedasticity,
autocorrelation and multicollinearity tests to ensure unbiased results. Normality is “degree to which the
distribution of the sample data corresponds to a normal distribution” (Hair et al., 2010). The most common
normality tests are skewness and kurtosis. Kline (1998) recommended the data to be normally distributed
if the skewness and kurtosis are between ±3 and ±10 respectively. All the variables of this study fill in the
range of Kline as shown in Table 4.1.
To test the heteroscedasticity, Modified Wald test is employed as suggested by Greene (2000).
STATA 10 provides a written command (xttest3) to check for heteroscedasticity. The result of the statistical
test is distributed Chi-squared (N-g) under the null hypothesis of homoscedasticity. Thus, the null
hypothesis is rejected if the p value is lower than 0.05. Failure of rejecting the null hypothesis ensures the
violations of the homoscedasticity and presence of the heteroscedasticity problems. The result of the
Modified Wald test in this study accepts the hypothesis. Thus, it indicates that the data of this study is
heteroscedastic.
In addition, we test for autocorrelation using Wooldridge test. The autocorrelation test (known also
as serial correlation or first order correlation) is considered as one of the important assumptions in
multivariate analysis because it leads to a biased data and misleading results. Autocorrelation leads to a
higher R-squared and smaller standard errors of the coefficients. The autocorrelation test is conducted
with the help of xtserial in STATA 10. It employs a test of serial correlation of a linear panel-data model's
specification errors (Wooldridge, 2002). The result of the Wooldridge test shows a presence of
autocorrelation. Thus, we use Drisc/Kraay standard errors (xtscc) to solve the both problems as suggested
by (Driscoll & Kraay, 1998). The xtscc command is suitable for both balanced and unbalanced panel data.
In addition, it handles missing values.
In panel data, Hausman test is employed to decide either fixed effect model or random effect
model is more appropriate to be used in the study (Greene, 2011). The null hypothesis postulates that the
unique errors are not correlated with the regressors. Thus, if the P-value is not significant (Prob>Chi2 is
more than 0.05), the null hypothesis will be accepted, and the random effect is more appropriate to be
used in the study. However, if the P-value is significant (Prob>Chi2 is less than 0.05), the null hypothesis
will be rejected, and the hypothesis will be accepted. This means that the unique errors are correlated with
the regressors. Thus, this indicates the appropriation of the fixed effect. Interestingly, if the hausman
specification test is significant (specified the use of fixed effect), Torres-Reyna, (2007) suggests testing the
model to be checked for the effects of the year. STATA 10 provide a written command (testparm i. year*) to
check the effect of the time period. In all our models, the time period has significant effects on explaining
the models. In the main model (model 1) the R2 was 15.33% and became 48.22%. Means, the time period
explains almost 33% of the relationship. Also, almost the same effects are in the other three models.
Results and discussion
The results of the multivariate analysis are presented in the Table 5.1. In the main model (model
1), the board size has insignificant effects of the performance measured by ROA. Thus, increasing
(decreasing) the number of director dose not enhance (destroy) the bank performance. This leads to a
general conclusion of the ineffectiveness of the board of directors in the Jordanian banking sector. Similar
results were found in the Arabic region such as in UEA (ALJifri & Moustafa, 2007), Saudi Arabia (Al-
Matari et al., 2012; Ghabayen, 2012) and Kuwait (Al-Matari et al., 2013). Alternatively, we rerun different
models to examine the optimal board size in the Jordanian banks.
Table 5.1 Multivariate Analysis
Model (1) Model (2) Model (3) Model (4)
Variables
Coef t Coef t Coef t Coef t
Constant 0.067 0.90 0 .068 1.01 0.066 1.01 0 .072 1.14
Board Size 0.0002 0.21 -.0017 -1.00 0.003 2.48* -0.003 -2.85*
Leverage -0.071 -3.54** -0.072 -3.61** -0.071 -3.55** -0.070 -3.50**
Bank Size (log) .0006 0.19 .0006 0.22 .0006 0.21 0.0004 0.15
Years Included Included Included Included
Observations 123 123 123 123
Modified Wald test 0.000 0.0000 0.0000 0.0000
Wooldridge test 0.0377 0.0366 0.0136 0.0360
Prob > F 0.0000 0.0000 0.0000 0.0000
Hausman Test 0.0000 0.0000 0.0000 0.0000
R2 (within) 48.22 48.29 48.62 48.57
Notes: ** and * is the significance level at 1% and 5% respectively.
Board size is measured as number of director serving in the board in model (1), dummy variable equal to 1 if the board is small (7 or 8 directors) and zero otherwise
in model (2), dummy variable equal to 1 if the board size is moderated (9-12 directors) and zero otherwise in model (3), and dummy variable equal to 1 if the board
is crowded (13 directors) and zero otherwise in model (4).
As discussed in the descriptive analysis, the size of the Jordanian conventional banks is varied
from seven to 13 directors. Hence, we measure the board size as dummies. We categorize the boards
based on their sizes. The first category contains the smallest boards of the sample; seven and eight
directors, the results indicate negative and insignificant effects (model 2). The second category (model 3)
contains the moderated sizes; 9, 10, 11 and 12 directors. The banks with moderated board size are found to
outperform other banks. The results of the third model show a significant positive relationship between
board size and bank performance. The third category presents the crowded boards; boards with 13
directors (model 4). The results of the fourth model show significant negative effects of the crowded
boards on the bank performance. This indicates that the crowded boards may suffer from communication
and cooperation issues as discussed previously by Lipton and Lorsch (1992).
In general, the size of the Jordanian boards is relatively large. It is believed that large boards are
more effective in monitoring the management, but too large boards may lose their effectiveness (Siregar &
Bachtiar, 2010). One of the main reasons that could be behind the ineffectiveness of the board in Jordan is
the ownership structure. The ownership in Jordan is concentrated in few hands of owners and normally
institutional investors. Thus, many directors will represent the institutional investors in the boards
(Ghabayen, Mohamad & Ahmad, 2015). As a result, it can be argued that the Jordanian banks are well-
managed and supervised. In addition, the function of the boards might be focused on the advising and
provide resources rather than monitoring the top managements. Therefore, it can be said that the conflicts
between managers and owners are well-aligned. But, however, it might be shifted to the majority-
minority conflicts. Notwithstanding the insignificant impact of the board size on the bank performance,
the positive direction of the relationship (even it is not significant) may indicate a positive role of the
board size on the bank performance and this impact is reversed when reaching a certain size (13
directors). The empirical results indicate that the boards lose their effectiveness when it is very large.
Furthermore, small boards (7 or 8 directors) are found to be ineffective in enhancing the bank
performance. This might be due to the high workload of the directors which may lead to ineffective
monitoring function (John & Senbet 1998). In addition, smaller boards might have small pools of expertise
resulting in ineffective advising and monitoring (Guest, 2009). Another reason that could be behind the
ineffective of small boards is the complexity of the banks’ activities. Previous studies suggested that the
firm size, industry type and businesses’ complexity are the main determinants of the board size (Krishnan
&Visvanathan, 2009; Pathan, 2009). Banks are considered as complex organizations because they are
subject to various regulations (Grove et al. 2011). Furthermore, banks are considered as a link between the
financial resources and the other economic sectors. Thus, financing other sectors may require the banks to
have larger boards to acquire good pools of expertise. Therefore, larger boards are found to function more
effectively in advising the top management and, therefore, the board of directors will be designed in the
purpose of providing the banks with different resources such as accesses to financial and information
resources.
Effective boards focus on both monitoring and advising functions. Thus, effective boards are
therefore supposed to enhance the banks performance. In a business environment with a concentrated
ownership such as in Jordan and other developing countries, the ownership might be a good tool to align
the interest between managers and owners as suggested by Barako et al. (2006). In other words, the
ownership structure may align the managers/owner’s conflicts. But, however, the conflicts might be
shifted from managers-owners to majority-minority. Therefore, the board of directors can be proposed as
a good tool to align the interests between majority-minority. The boards are assumed to be designed and
structured to protect the interests of the shareholders (Fama, 1980; Hermalin & Weisbach, 1998, 2003).
Thus, effective boards might set the banks’ agendas and strategies in the best interests of the banks. In the
case of the Jordanian banking sector, the board with moderated size is found to be more effective in
enhancing the bank performance. The communications and discussions can be more fruitful when the
board is not crowded. Furthermore, the monitoring function can be efficient if the board is not small due
to the complexity of the banking operations.
Conclusion and Future Studies

This study is conducted in Jordan with a focus on the banking industry. The main aims of this
paper are to examine the relationship between board size and bank performance in addition to attempt to
find the optimal board size for the Jordanian conventional banks. The results of the panel data indicated
insignificant relationship between board size and bank performance which is similar to the majority of the
previous studies in the Arabic region. Thus, we categorize the board size into three categories; small
boards (7 and 8 directors), moderated boards (9-12 director) and crowded board (13 directors). Neither
small boards nor crowded board are effective in enhancing the bank performance. Larger boards are
found effective in enhancing the bank performance, but this positive impact is reversed when reaching a
certain size (13 directors). Too large boards may have more conflicts resulting in focusing on self-
interested objectives. Due to the bank size and the complexity of their operations, the banks need
relatively larges boards and small boards are found to be ineffective in improving the performance.
This study has different theoretical and practical implementations. Theoretically, adopting the
agency theory in the banking sector might be critical due to the complexity of the banks’ operations. Thus,
larger boards might be more effective in monitoring (agency theory) and providing resources to the banks
(resource dependency theory). Practically, the code of corporate governance in the Jordanian banks
suggests the banks to have boards with 5-13 directors. However, the empirical results of this study find
that boards with less than 9 directors are ineffective related to the bank performance. In addition, too large
boards (13 boards) are negatively related to performance. Thus, policy makers and the conventional banks
in Jordan may consider a moderated board size when designing their boards. Further studies may
consider the experience of the director as one of the possible tools for the effectiveness of the bank
performance. In addition, other studies may focus on the board diversity such as the independence level,
female directors and nationality. Further, the ownership structure may moderate the relationship between
firm performance and the board characteristics.
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The roles of internal audit quality on the relationship between

narcissistic CEOs and real earnings management
Jasman Jasman
IKPIA Perbanas, Jakarta, Indonesia
Etty Murwaningsari
Universitas Trisakti, Jakarta, Indonesia
Keywords
Narcissistic CEOs, quality of internal audit function, real earnings management, cash flow from
operation (CFO), production costs, discretionary expenses
Abstract
This study aims to investigate the roles of internal audit quality on the effects of narcissistic Chief
Executive Officers (CEOs) to earnings management through real activities manipulation. The research
design is quantitative method using secondary data. The sample used in this study consisted of 116
manufacturing Companies which are listed on Indonesia Stock Exchanges for the period of 2013 to 2015.
Earnings management through real activities manipulation which is also called real earnings management is
proxied with three patterns: cash flow from operation (CFO), production costs, and discretionary expenses as
developed by Roychowdhury (2006). The results show that narcissistic CEOs has a positive and significant
effect toward real earnings management in the pattern of cash flow from operation and in the pattern of
discretionary expenses. Narcissistic CEOs has no effect toward real earnings management in production costs
pattern. The results of this study also provide empirical evidence that quality of internal audit can alleviate
the influence of narcissistic CEOs toward real earnings management in the pattern of cash flow from
operation. Meanwhile, internal audit quality can not mitigate the effects of narcissistic CEOs toward real
earnings management in the patterns of production costs and discretionary expenses.
Corresponding author: Jasman Jasman

Email address for corresponding author: jasman@perbanas.id
First submission received: 4th September 2017
Background
Many researches conducted a decade ago were related to accruals earnings management (Im,
2015; Jafarpour et al, 2013; Kalgo et al, 2015; Zang, 2012; Qi, 2014). The researches have examined whether
exposure media and corporate actions such as dividen policy, IPO affect accruals earnings management.
Meanwhile, there is a limited research regarding earnings management through real activities
manipulation which is also called real earnings management (Edinburgh, 2011; Jeong, 2014; Alarlooq,
2014; Malik, 2011).
In addition, research related to incentives to involve in earnings management is not complete if
only conducted on aspects of corporate governance and positive accounting theory such as financial
performance or corporate action like dividend policy, IPO, and takeover protection, accounting expenses
lik e cash flow operation, production cost, and discretionary expenses and R &D expenditures) and
accounting conservatism, and ownership structures. Study relating to the characteristic of the person
responsible for financial reporting such as the CEO is important to examine. It is because each CEO is a
person who has different styles and characteristics.
Research on the effect of CEO characteristics such as CEOs narcissism to earnings management is
very limited. Narcissistic CEOs is triggered ideosyncratic, cultural, environmentlal, and structural factors
(Ouimet, 2010). CEO narcissim is proven to limit the influence of other directors on the corporate strategy
and affect the information process in strategic decision making (Zhu & Chen, 2015).
Fraudulent financial statements will be deterred when internal control function is implemented
effectively; therefore, quality of internal control should be increased through the quality of internal
auditor (Ege, 2015). Internal audit play an important role in mitigating agressive accounting behaviour of
management; hence, reliable internal auditor is expected to take action on anticipating every fraudulent
action which could occur in the future (Prawitt & Wood, 2009). Ege (2015) argues that high quality of
internal auditor is more likely mitigate management misconduct as compared to low quality of internal
auditor. Moreover, high-quality of internal auditor would be as an effective tool to prevent earnings
management. Gramling & Hermanson (2009) says that the quality of internal audit is based on what
inputs and processes are used to produce quality performance products; in other worlds, using the
average experience of audit professionals, certification owned by professional auditors, and training
provided to the internal auditors.
The purpose of this study is to examine the influence of Narcissistic CEOs on real earnings
management as well as the role of internal audit in moderating it. The significance of this research is to
contribute to stakeholders regarding the influence of psychological aspects such as CEOs narcissism on
real earnings management. This research raises variables of narcissistic CEOs who are associated with
earnings management activities which have been very limited examined in Indonesia. Next section of this
paper discusses literature review and hypothesis development, research method, result and discusstion,
and conclusion.
Literature Review and Hypothesis Development
The effects of Narcissistic CEOs on Earnings Management
Literatures have evolved in generating models to identify factors which motivate management to
commit in earnings management practices. In addition, one of the factors which is indicated to contribute
to earnings management is believed to be from a psychological aspect: narcissim. Narcissism is
characterized by traits such as dominance, self-confidence, sense of entitlement, grandiosity, and low
empathy that have developed evidence that such individuals often appear as Leadership (O'Reilly III et al,
2013). Narcissism has become a popular topic because it has two strong organizational relationships:
counterproductive and leadership behaviors (Grijalva, 2014). Another view about the negative nature of
narcissistic CEOs are sensitive to criticism, poor listener, lack of empathy, dislike mentoring, intense
desire to compete; despite, there is a productive narcissistic such as self-reflection, strong point of view,
and a high sense of humor (McMahon, 2009).
Narcissism is a characteristic that is thought to negatively affect the company's financial results
and reputation (Duchon & Drake, 2009). Theoretically, extreme narcissistic CEOs point out themselves as
the companies they lead and use accounting figures to gain awe from Stakeholders and for example can
also result in unfavorable behavior including accounting fraud and stock manipulation (Amernic & Crag,
2010). Chatterjee and Hambrick (2007) discuss that narcissistic CEOs often want a large aide, developing
the right-fisted strategy that is related to the fluctuating performance of the company. Furthermore,
Chatterjee and Hambrick (2011) add that in comparisons with CEOs who are not narciss, narcissistic CEOs
are less responsive to current performance goals. Narcissistic CEOs are preferred by praise and therefore
require admiration and social recognition (Judge et al, 2009). In relation to the company's financial
performance, Olsen et al (2014) argues that there is a positive relationship between the narcissistic CEO
and the earnings per share in the company's financial statements. His research also proved the narcissism
CEO crave praise and adulation of the accounting information presented to public. Narcissistic CEOs are
not only surviving the influence of other directors' experience but also strengthened by their corporate
strategic strategy as opposed to what has been replaced by the experience of other directors (Zhu & Chen,
2015).
Jiang et al (2010) examines the influence between CEOs and CFOs in adopting earnings
management. His research finds a strong relationship between CFOs' desires for earnings management
action. In contrast, the results of this study differ from the findings of Feng et al (2011) on companies in
the US, which found no evidence that CFOs manipulate the company's financial statements; meanwhile,
CEOs have a stronger influence within the organization (proxies with CEO position holder as Chairman
of Board and often has a compensation share of top five executives) and CFOs often leave the company
before the period of accounting manipulation. This study concludes that CEOs who manipulate corporate
financial information have substantial authority over CFOs insofar as the threat of job loss is not involved
in accounting manipulation. The results of Feng et al (2011) study are supported by Rijsenbilt and
Commandeur (2013) who find that Narcissistic CEOs limit the directors' influence on corporate strategy.
Also, the study prove that there is a positive relationship between the psychological point of view of the
CEOs who is narcissistic about the potential causes of Fraud. Based on the discussion, the hypothesis of
this research is stated as follows:
Hypothesis 1 (H1): Narcissistic CEOs have a positive effects on real earnings management
Internal Audit Quality Roles in Moderating the Effects of Narcissistic CEOs on Real Earnings Management
In the decision of Indonesia Securities Exchange Commission (called Bapepam & LK) decree
number: KEP-496/BL/2008 concerning the establishment and guidance of the preparation of the charter
for the internal audit unit provides a requirement for auditors of internal audit department that internal
auditors should have knowledge and experience on audit technical and other relevant disciplines.
Previous studies have found that narcissistic CEOs are preferred by praise and therefore require
admiration and social recognition (Judge et al, 2009). In relation to the company's financial performance,
Olsen et al (2014) argues that there is a positive relationship between the narcissistic CEO and the earnings
per share in the company's financial statements. His research also proved the narcissism CEO crave praise
and adulation of the accounting information presented to public. Also, Narcissistic CEOs limit the
directors' influence on corporate strategy and there is a positive relationship between the psychological
point of view of the CEOs who is narcissistic about the potential causes of Fraud (Feng et al, 2011;
Rijsenbilt and Commandeur, 2013). As narcissism is a characteristic that is thought to negatively affect the
company's financial results and reputation (Duchon & Drake, 2009), the quality of internal audit through
its function in the organization are expected to mitigate the negative characteristic.
Prawitt and Wood (2009) provides empirical evidence that the quality of the internal audit
function is negatively related to earnings management. Companies with high internal audit quality are
negatively related to abnormal accruals. Internal audits can play an important role in reducing the
aggressive management behaviour such as narcissistic CEOs. Thus, reliable internal auditors are expected
to take steps to anticipate any possible deviation in the future (Ege, 2010). He also asserts that as
compared to low quality auditors, high quality auditors are more likely to reduce management
misconduct. Thus, high-quality audits would act as an effective prevention for earnings management
practices. Gramling & Hermanson (2009) argue that the quality of internal audit is based on what inputs
are used and what processes are implemented to produce quality performance products, using the
average audit experience of audit professionals, professional level audit certificates, and training for
Professional audit. Based on that discussion, the following hypothesis is established.
Hypothesis 2 (H2): Internal audit quality mitigates the influence of narcissistic CEOs on real earnings management
Firm Size, Leverage, Market to Book, CEO’s Tenure, CEO’s Age, and CEO’s Gender
Dang et al (2017) argue that the most popular proxiest of firm size are based on natural logarithm
forms of three firm size measures: total assets, total sales, and market value of equity. Dechow and Dichev
(2002) explain that the smaller the firm, the lower accrual quality. Olsen and Stekelberg (2016) document
that firm size has a negative sign on management misconduct. In addition, large firms will be more stable
and predictable in operation rather than small firms. Thus, firm size has a negative effect on earnings
management.
Horne and Wachowicz (2012) confirm that financial leverage or debt to equity ratio is to assess the
extent to which the firm using borrowed money; the lower the ratio, the higher the level of the firm’s
financing that is being provided by shareholders. According to positive accounting theory, firms which
have high debt-to-equity ratios tend to use accounting methods to increase corporate earnings to fulfill
debt covenants (Scott, 2015). Ege (2015) demonstrates that leverage has a positive relation with
management misconduct. Therefore, leverage ratio has a positive effect on real earnings management.
Gitman and Zutter (2015) explain that market to book value ratio provides an assessment of how
investors view the firm’s performance and it relates the market value of the firm’s shares to their book
value. Roychowdhury (2006) who determined suspect firms-year with zero-earnings threshold (firms
which have net income scaled by total assets that is greater than or equal to zero but less than 0.005) found
that suspect firm-years with high market-to-book ratio exhibit higher abnormal production costs than
other suspect firm-years. Suspect firm years with high market-to-book ratio exhibit lower abnormal
discretionary expenses than other suspect firm-years. Skinner and Sloan (2002) demonstrated that firms
which have growth opportunies are penalized more by capital market as compare to other firms when
they do not fulfill certain earnings thresholds. As a result, market to book value has a positif effect toward
real earnings management.
In addition to these firm-level variables, at the CEO-level, we control for the CEO’s Tenure, CEO’s
Age, and CEO’s Gender. CEO’s Tenure is defined as CEO’s time in office (Lubojacky, 2017). Olsen et al
(2014) found a positive relationship between CEO tenure toward Earnings Per Share. In addition, Olsen
and Stekelberg (2016) demonstrates that CEO’s tenure has a positive influence toward corporate tax
shelters. Thus, CEOs’ tenure has a positive effect toward real earnings management.
Serfling (2013) denotes that CEO’s Age is the age of CEO at the time served as CEO in the
company. Olsen et al (2014) documents that CEO’s Age has a positive effect toward Earnings per Share.
The findings support the importance of considering how CEO’s tenure may impact accounting related
policies and decisions. Nevertheless, Olsen and Stekelberg (2016) shows that CEO’s Age negatively affect
corporate tax shelter. In addition, Chatterjee and Hambrick (2007) found a negative effect of CEO’s Age
toward ROA extremeness. Therefore, CEO’s Age has a negative effect toward earnings management.
Powell and Butterfield (2003) describe that individuals gender identity is defined as their self-
concept of possessing masculine or feminine characteristics. In addition, gender refers to the biological
and physiological characteristics that define as male or female (Littrell & Nikomo, 2005). According to
Olsen et al (2014) CEO’s Gender has no effect on Earnings per Share. Nonetheless, Olsen and Stekelberg
(2016) provide empirical evidence that the CEO's gender negatively impacted on corporate tax shelter.
This indicates CEO’s Gender plays a role in determining firm tax policies. Firm tax policies and decisions
are related to financial reporting (Dyreng et al, 2010). Therefore, CEO’s Gender has a negative effect
toward earnings management.
Research Method
Sample Selection
Population of this study is all manufacturing companies listed on the Indonesia Stock Exchange
(IDX). The manufacturing sector is chosen because it is the dominant industry with many companies’
listings in IDX and manufacturing industry has played an important role in contributing Indonesia’s
economic growth towards employement, exports, and National Gross Domestic which was 20,8% in 2013
(Nurcahyo & Wibowo, 2015). The technique of determining the sample is purposive sampling with
criteria: (1) Manufacturing companies listed in IDX during 2013-2015, (2) The Company issued financial
statements and other management reports for the period ended December 31, (3) the company published
a complete data in the form of financial reports and other management reports during 2013-2015. Based
on the selected criteria, there are 116 manufacturing companies (348 firm-years of observation) can be
analyzed.
Variables and Measurement
Real earnings managements were measured by using three models developed by
Roychowdhury (2006).
1. Cash flow from operation (CFO) as a linear function of sales and sales changes in one period:
2. Normal production costs is Prodt = COGSt + ΔINVt +, using the following regression equation:
3. Normal discretionary expenses by using the following regression equation
where CFOt = Operating cash flow of company i in year t; Prodt = Production costs of company i in year t;
Disexpt = Corporate discretionary expenses i in year t; At-1 = Total assets of the company at the end of
year t-1; St = Sales of the company at the end of the year.
Research on narcissistic CEOs was using secondary data obtained from financial statements and
other official information published by the company was first developed by Rijsenbilt (2011) which
consists of 5 determinants and 15 variables that are as follows. The first determinant is Media Exposure:
consists of number of publications in newspapers & business magazines; Number of awards; Number of
lines in the Marquis who’s who entry (masuk dalam pemberitaan media Forum eksekutif); Presence and
size of the Photo in Annual Report. The second determinant is Compensation: Cash Compensation (Salary
& Bonus); Total Compensation (TDC1; Ratio Cash Compensation CEO/Second Best Paid Executive; Ratio
Total Compensation; CEO/Second Best Paid Executiv; Executive Rank by Salary and Bonus. The third
determinant is Power: consists of CEO Duality; Governance Index of Gompers; Number of official formal
titles of the CEO. The fourth determinant is Growth: Number of acquisition, Size Acquisitions. The fifth
determinant is Perquisites: Private use of the corporate jet or Membership in Golf Club.
The measure of the narcissistic CEOs has been modified by Olsen and Stekelberg (2016). They
score photograph on a scale from 1 to 5 as follows:
Score 1: Annual report contains no photograph of CEO
Score 2: The CEO is photographed with other executives
Score 3: The CEO photographed himself and occupied less than half a page
Score 4: The CEO is photographed alone and occupies at least half a page and is followed by text
Score 5: The CEO is photographed alone and occupies a full page.
Some of these measurements still use 5 determinants with 7 variables that are as the following.
The first determinant is Media Exposure which consists of Publication in Print Media; Awards / Awards
obtained, the size of photos in the annual report (scale 1 to 5). The second determinant is Compensation
indicated with Cash Compensation (Salaries and Bonuses) and Total Compensation. The third
determinant is Power determined by CEO Duolity (Multiple Positions). The fourth determinant is
Growth indicated with Acquisition Transaction. Last determinant is Perquisites chategorized with Golf
Club Membership.
The calculation formula of Narcissistic CEOs’s score is stated below:
NARCISSCEOit = Xij/nij
where NARCISCEOj = NARCISCEO Score of company i in year t; Xij = determinant as indicated in
financial statements of company i in year t; nj = Total 5 determinants (12 indicators).
The quality of Internal Audit function uses measurement developed by Prawitt and Wood (2009)
by using scores on three indicators: auditor certification, auditor training, and audit experience. The
auditor certification indicator is given a score of 1 if any of the auditors hold CIA, CFE or QIA (Qualified
Internal Auditor) certification and is given 0 otherwise; auditor training is also given a score of 1 if the
Internal Auditor is given audit training at least twice in one year and score 0 otherwise; and audit
experience is given score 1 if there is a provision that to become an internal auditor must have work
experience in the accounting or finance company at least 3 years and 0 otherwise. Data is collocted and
obtained from information disclosed in the financial statements and other information published by the
Company. The calculation formula score quality internal audit function based on the proxy is given
below:
IAQit = Xit / n
where IAQ = Internal Audit Quality of company i in year t; Xit = total scores as indicated in financial
statements for company i in year t; N = Total scores: 3.indicators
Control variables consist of (1) leverage is measured by total debt/total asset (Ege, 2015); (2)
market to book value is measured with closing price/book value of shareholders equity (Roychowdhury,
2006); (3) firm size is measured with natural log of total assets (Dyreng et al, 2010); (4) Gender is the
indicator variable that is set 1 if the CEO is male and equal to zero if the CEO is a female (Olsen &
Stekelberg, 2016); (5) Age is the age of the CEO and (6) Tenure is the number of years of CEO’s tenure
(Olsen & Stekelberg, 2016).
Research Models
The research model is expressed in the following regression equation:
Regression model to test hypotheses 1:

REM(CFO)it = β0 + β1NARCSit + β2LEVit + β3SIZEit + β 4MTBit + β5TENUREit + β6AGEit +
β 7GENDERit + ɛ
REM(Prod. Costs)it = β0 + β1NARCSit + β2LEVit + β3SIZEit + β4MTBit + β5TENUREit + β6AGEit +
β 7GENDERit + ɛ
REM(Disc. Exp)it = β0 + β1NARCSit + β2LEVit + β3SIZEit + β4MTBit + β5TENUREit + β6AGEit +
β 7GENDERit + ɛ
Regression model to test hypotheses 2:
REM(CFO)it = γ0 + γ1NARCSit + γ2IAQit + γ 3NARCS*IAQit + γ 4LEVit + γ5SIZEit + γ 6MTBit +
γ 7TENUREit + γ 8AGEit + γ9GENDERit + ɛ
REM(Prod. Costs)it = γ0 + γ1NARCSit + γ2IAQit + γ 3NARCS*IAQit + γ4LEVit + γ5SIZEit + γ 6MTBit +
γ 7TENUREit + γ 8AGEit + γ 9GENDERit + ɛ
REM(Disc. Exp)it = γ0 + γ1NARCSit + γ2IAQit + γ 3NARCS*IAQit + γ 4LEVit + γ5SIZEit + γ 6MTBit +
γ 7TENUREit + γ 8AGEit + γ9GENDERit + ɛ
where, REM(CFO)it is real earnings management for CFO pattern; REM(Prod. Costs)it is real
earnings management for production costs pattern; REM(Disc. Exp)it is real earnings management for
discretionary expenses pattern; NARCSit is Narcissistic CEOs of company; IAQit is Internal Audit Quality
of firm; LEVit is leverage; SIZEit is log natural of total assets; MTBit is market to book value; TENUREit is
CEO Tenure; AGEit is the age of the CEO; and GENDERit is the gender of the CEO.
Data Analysis
This study uses panel data analysis because the data containing time series observations of
variables of a number of firms. Heidi et al (2004) suggest that observations in panel or pooled data
involve at least two dimensions: cross sectional dimension, indicated by subscript i, and a time series
dimension, indicated by subscript t. Gujarati and Porter (2012) explain that in pooled estimators, the error
terms are likely to be correlated over time for a given subject. Thus, if the fixed effect model is
approaproate but we use the pooled estimator then the estimated coefficients will be inconsistent.
According to Greene (2003) as cited by Murwaningsari et al (2015) the steps to determine the
suitable model were as follows: (1) to test betweeen pooled OLS and a fixed effect model, one should test
the correlation between the cross-section specific effect and the dependent variable using the F-test and
the Chi-Square test. If a correlation existed, the pooled OLS was inconsistent; (2) to test between the fixed
effect and random effect models, one could use the Hausman specification test, which tests the correlation
between unobserved individual random effects and a dependent variable. If the null hypothesis was
rejected, then the random effect model was inconsistent, hence use the fixed effect model.
The panel data are analyzed using EViews 8. To test which model is better, Widarjono (2013)
explains the following steps, namely: Chow test, Hausman test, and Langrange Multiplier (LM) test.
Chow test is to determine which model of common effect or fixed effect is used. If the Prob. cross-section F
was smaller than α value (=0.05) then Fixed Effect model was consistent; if it was not then common effect
model is selected. Hausman test is to determine between Fixed Effect or random effect model that is
suitable for regression model estimator. If the Prob. cross-section F was smaller than α value (=0.05) then
Fixed Effect model was consistent; if it was not then Random Effect model was used. LM test is required
if there were different test results between Chow test and Hausman test. For example if chow test
recommended to use common effect model while Hausman test recommendeded random effect model.
Then, LM test is needed to determine which model between common effect and random effect is better.
LM test model is developed by Bruesch-Pagan (1980). The test is based on chi-square distribusion with the
degree of freedom equivalent to the amount independent variable. If LM statistic was above the critical
value of chi-square then random effect is consistent; if it was not, mean otherwise.
Result & Discussion

Descriptive Statistics.
Table 1 Descriptive Statistics
Mean Min Max Mode Std. Deviation
Internal Audit Quality (IAQ) 0.28 0 1.00 0.33 0.29
Narcissistic CEOs (NARCS) 0.54 0.23 1.00 0.54 0.17
Leverage (LEV) 2.70 0.04 354.99 0.62 20.11
Size (SIZE) 28.37 25.30 33.13 26.48 1.56
Market to Book Value (MBV) 84.84 0.05 7330.57 5.90 595.90
CEOs Age (AGE) 54.74 34.00 77.00 51.00 8.98
CEOs Tenure (TENURE) 4.49 3.00 5.00 5.00 0.83
CEOs Gender (GENDER) 0.93 0 1 1.00 0.24
Table 1 shows that market to book value ratios and leverage have a relatively high standard
deviation as compared to the mean. This indicates that sample variability for market to book value and
leverage is quite high. Each variable of internal audit quality and narcissistic CEOs has quite the same
value both in average and modes; this means that each firm in the sample are homogeneous and low
variability. Other control variables such as Size, CEO’s Age, CEO’s Tenure and CEO’s Gender have lower
standard deviation than the mean. This shows that firm size, CEO’s Age, CEO’s Tenure and CEO’s
Gender are also homogeneous and low variability. Descriptive statistics also reveal the average age of
CEO is 55 years with a maximum age of 77 years and the youngest is a minimum of 34 years. The CEO’s
tenure is 5 years in average and the gender is generally male.
Before hypothesis test, classical asumption test was undertaken. The test includes (1) data
normality test; (2) heteroscedasticity test using the Glejser; (3) multicolinearity test using VIF test; and (4)
autocorrelation test using Durbin-Watson Test. Data normality was tested using Eviews 8 through
residual diagnostic of histogram – normalitity test. The results show Skewness is in the range of 0 and
Kurtosis is in the range below of 3; which mean the regression of residual is normally distributed. Other
test results indicate that the data is free from autocorrelation, heteroscedasticity, and multicollinearity.
Then, model selection test is conducted to decide which model is suitable for regression model
estimator. Chow test and Hausman test were undertaken. Results of the test indicate for CFO and
production costs regression model in table 2 below are better to use fixed effect model, and for
discretionary expenses regression is recommended to use random effect model.
The Results of Hypothesis 1
REMit = β0 + β1NARCSit + β2LEVit + β3SIZEit + β 4MTBit + β5TENUREit + β6AGEit + β 7 GENDERit + ɛ
REM (CFO) = 2.2011 + 0.0345 NARCS – 0.0002 LEV - 0.0628 SIZE + 0.7350 MTB – 0.0112 TENURE +
0.0046 AGE - 0.1051 GENDER + ɛ
REM (Prod. Costs) = 3.8500 – 0.1298 NARCS + 0.0012 LEV - 0.1170 SIZE - 0.5350 MTB + 0.0011 TENURE -
0.0065 AGE - 0.0986 GENDER + ɛ
REM (Disc. Exp) = 0.0213 + 0.0158 NARCS – 0.5450 LEV - 0.0003 SIZE - 0.1550 MTB – 0.0042 TENURE -
0.0001 AGE - 0.0181 GENDER + ɛ
Table 2. Empirical Results
Variables Pred. Sign CFO Production Costs Discretionary Expenses
Coeff (B) p-value Coeff (B) p-value Coeff (B) p-value
C 2.2022 0.0000*** 3.8500 0.0000*** 0.0213 0.0714*.
NARCS + 0.0345 0.0336** -0.1298 0.0000*** 0.0158 0.0004***
SIZE - -0.0628 0.0000*** -0.1170 0.0000*** -0.0003 0.03672
LEV + -0.0002 0.0560 0.0012 0.1671 -0.5450 0.5378
MTBV + 0.7350 0.6528 -0.5350 0.0002*** -0,1550 0.6554
TENURE + -0.0112 0.4517 0.0011 0.9455 -0.0042 0.0000***
AGE - 0.0046 0.0000*** -0.0065 0.0000*** -0.0001 0.0526**
GENDER - -0.1051 0.0004*** -0.0986 0.0020*** -0.0181 0.0002***
Adj R2 0.46 0.89 0.23
Prob(F-
statistic) 0.0000 *** 0.0000 *** 0.0000 ***
N 348 348 348
***Significat at 1 percent; **Significant at 5 percent; *Significant at 10%
Note : NARCS: narcissistic CEOs; Size: natural log of total assets; LEV: Leverage; MTBV: market to book
value; TENURE: Tenure of CEOs; AGE: Age of CEOs; GENDER: Gender of CEOs.
Table 2 shows that narcissistic CEOs have positive and significant effect toward real earnings
management for the pattern of cash flow from operation (CFO). Its p-value is 0.0336 (below 0.05). This
means that Narcissistic CEOs have the discretion to manage cash flow from operstion to manage the
desired earnings. This findings support Roychowdhury (2006) who explains that CFO pattern is one of
the real earnings management activities which are related to or conducted through sales manipulation.
However, Narcissistic CEOs has no effect toward real earnings management for production costs
pattern. Although, p-value is below 0,05 (0,0000) but its coefficient has a negative direction which is not in
accordance with hypothesis . This result supports Feng et al (2011)
The effect of narcissistic CEOs toward real earnings management for the pattern of discretionary expenses
shows positive and significant results. Its p-value is 0, 0004 (below 0.05). This means that Narcissistic
CEOs have the discretion to manage administrative expenses to maintain the desired earnings. CEO
preferred to involve in discretionary expenses manipulation in conducting real earnings management
activities. This result is consistent with Jiang et al (2010) and Judge et al (2009).
The test on control variables shows that Size has a negative and significant association toward
each pattern of real earnings management: Cash Flow from Operation (CFO), production costs and
discretionary expenses. This suggests that a higher level of Size lead to lower real earnings management
of cash flow from operation, production costs, and discretionary expense. This result support Dechow &
Dichev (2002).
Leverage consistently shows no effect toward each of the two patterns of real earnings
management: production costs, and discretionary expenses. Although leverage has a significant effect
toward real earnings management in CFO patterns, but its direction is negative; thus, it can be concluded
no assocation. In contrast, previous study related to accrual earnings management demonstrated positive
association (Scott, 2015; Ege, 2015).
Market to book value does not affect real earnings management of CFO, production costs, and
discretionary expenses. These results are not consistent with study conducted by Roychowdhury (2006)
who found firms with have growth opportunies tent to undertake earnings management to fulfill certain
earnings thresholds. Altough CEO’s Tenure generates significant p-value of 0, 0000 for CFO and
discretionary expenses, but they have negative directions. However, this result support Olsen et al (2014)
who argued the importance to consider CEO’s Tenure on accounting related policies and decisions.
Empirical evidence on CEO’s Age shows negative and significant influence toward each of the
three patterns of real earnings managements: CFO, production cost, and discretionary expenses. This
suggests that the older an individual at the top leaders of companies such as CEOs, the more conservative
in making decisions with the purpose of safety factors for himself after retirement, and in order to be free
from corporate problems caused by the decision they made before retirement. This result support
Chatterjee and Hambrick (2007) and Olsen & Stekelberg (2016). Table 2 shows CEO’s Gender has a
negative influence on real earnings management. This result support Olsen & Stekelberg (2016) and
Dyreng et al (2010) who argues that CEO’s Gender determine firm tax policies which are related to
financial reporting.
Simultaneously, with alpha 5%, model of the effect of narcissistic CEOs, size, leverage, market to
book value, tenure, age and gender toward real earnings management indicate a good model. This is
indicated by F value of 0.000 and adjusted R square valued of 0.92 for CFO pattern of real earnings
management; 0.99 for production costs pattern of real earnings management; and 0.23 for discretionary
expenses patten of real earnings management.
The Result of Hypothesis 2
REMit = γ0 + γ1NARCSit + γ2IAQit + γ 3NARCS*IAQit + γ 4LEVit + γ 5SIZEit + γ 6MTBit + γ 7TENUREit +
γ 8AGEit + γ 9GENDERit + ɛ
REM (CFO) = 1.4941 + 0.1309 NARCS + 0.2619 IAQ – 0.5044 NARCS*IAQ – 0.0003 LEV – 0.0478 SIZE +
0.3913 MTB + 0.0082 TENURE – 0.0044 AGE – 0.0021 GENDER - ɛ
REM (Prod. Costs) = 3.0224 -0.1028 NARCS – 0.0670 IAQ + 0.0051 NARCS*IAQ + 0.0010 LEV – 0.0871
SIZE – 0.4505 MTB – 0.0061 TENURE – 0.0065 AGE – 0.1053 GENDER + ɛ
REM (Disc. Exp) = -0.0642 – 0.0027 NARCS – 0.0239 IAQ + 0.0615 NARCS*IAQ – 0.4221 LEV – 0.0006
SIZE – 0.6381 MTB – 0.0046 TENURE + 0.0002 AGE – 0.0152 GENDER + ɛ
Table 3. Empirical Results
Variables Pred. CFO Production Discretionary Expenses
Sign Costs
Coeff (B) p-value Coeff (B) p-value Coeff (B) p-value
C 1.4941 0.0000*** 3.0224 0.0000*** 0.0597 0.0000***
NARCS + 0.1309 0.0034*** -0.1028 0.0365** -0.0027 0.5506
IAQ - 0.2619 0.0018*** -0.0670 0.2962 -0.0239 0.0044***
NARCS*IAQ - -0.5044 0.0002*** 0.0051 0.9688 0.0615 0.0000***
SIZE - -0.0478 0.0000*** -0.0871 0.0000*** -0.0006 0.0560*
LEV + -0.0003 0.0902* 0.0010 0.0981* -0.4221 0.5632
MTBV + 0.3913 0.4766 -0.4505 0.0006*** -0.6381 0.8324
TENURE + 0.0082 0.6502 -0.0061 0.7722 -0.0046 0.0000***
AGE - -0.0044 0.0000*** -0.0065 0.0000*** 0.0002 0.0047***
GENDER - -0.0021 0.9531 -0.1053 0.0253** -0.0152 0.0005***
Adj R2 0.94 0.98 0.39
Prob(F-
statistic) 0.0000 *** 0.0000 *** 0.0000 ***
N 348 348 348
***Significat at 1 percent; **Significant at 5 percent; *Significant at 10%
Note : Narcceo: narcissistic CEOs; Audint: Internal Audit Quality; Size: natural log of total assets; Lev:
Leverage; MTBV: market to book value; Tenure: Tenure of CEOs; Age: Age of CEOs; Gender: Gender of
CEOs.
Model selection test is conducted to decide which model is suitable for regression model
estimator. Chow test and Hausman test were undertaken. Results of the test indicate that for CFO and
production costs regression model in table 3 are better to use fixed effect model, and for discretionary
expenses regression is recommended to use random effect model
Table 3 presents the results of internal audit quality as moderating variable for the effect of
narcissistic CEOs toward real earnings management for the patterns of CFO (Cash Flow from Operation),
Production Costs and Discretionary Expenses. Table 3 shows that the interaction between narcissistic
CEOs and internal audit quality has a negative and significant interaction toward real earnings
management for the pattern of Cash Flow from Operation. The coefficient is -0.5044 (p-value 0.0002 below
0.05). This means that internal audit has significant effects in mitigating the influence of narcissitic CEO
toward Cash Flow from Operation in conducting real earnings management activities. Cash flow from
operation (CFO) is a model to show and measure whether real earnings management exists in sales
activities (Roychowdhury, 2006). Also, internal auditors are involved in conducting operational audit to
marketing division which the sales activities and transactions as an audit object. As a consequence, quality
of internal audit has been empirically proven to have important role in reducing the impact of narcissistic
CEOs to real earnings management practice in manipulation of cash flow from operation. This results
support Prawitt and Wood (2009), Ege (2010), and Gramling & Hermanson (2009).
Table 3 also demonstrates the interaction between narcissistic CEOs and internal audit quality
was not proven to be the moderating variable for the influence of narcissistic CEOs toward real earnings
management for production costs pattern. Its p-value was 0.9688 above 0, 05. This result consistent with
the interaction between narcissistic CEOs and, internal audit quality which does not moderate for the
impact of narcissistic CEO toward real earnings management of discretionary expenses. P-value is below
0.05 (0.0000); however, the coefficient was positive which had opposite direction with predicted negative
sign in the hypothesis. This findings indicate that internal audit quality do not play an important role in
mitigating real earnings management of production costs and discretionary expenses which are related to
financial statements. This result due to the role of internal audit division which are generally focused
more on operational audits rather than as financial statements auditors. Internal auditors do not engage in
financial statements audits since the task are already conducted by public accounting firms as financial
statements auditors (Sawyer et al, 2003).
Simultaneously, with alpha 5%, model of the effect of narcissistic CEOs, Internal Audit Quality,
interaction of narcissistic CEO and Internal Audit Quality, size, leverage, market to book value, tenure,
age and gender toward real earnings management indicate a good model. This is indicated by F value of
0.000 and adjusted R square valued of 0.94 for CFO pattern of real earnings management; 0.98 for
production costs pattern of real earnings management; and 0.39 for discretionary expenses pattern of real
earnings management.
Conclusions, Limitations, and Future Research
It is concluded that narcissistic CEOs has a positive and significant effect toward real earnings
management activities for the pattern of cash flow from operation and for the pattern of discretionary
expenses. This indicates that Narcissistic CEOs have the discretion to manage cash flow from operation
and administrative expenses to maintain the required earnings. CEO preferred to involve in cash flow
from operation and discretionary expenses manipulation in conducting real earnings management
activities. This result support Jiang et al (2010) and Judge et al (2009). However, Narcissistic CEOs has no
effect toward real earnings management for the pattern of production costs. This result supports Feng et
al (2011).
The findings that are related to the roles of internal audit quality has been empirically proven in
mitigating the influence of narcissitic CEO toward Cash Flow from Operation (CFO) in conducting real
earnings management activities. Cash flow from operation (CFO) is a model to show and measure
whether real earnings management exists in sales activities (Roychowdhury, 2006). Also, internal
auditors are involved in conducting operational audit to marketing division which the sales transaction as
an audit object. As a consequence, quality of internal audit has been empirically proven to have important
role in reducing the impact of narcissistic CEOs to real earnings management practice in manipulation of
cash flow from operation. This results support Prawit et al (2009), Ege et al (2010), and Gramling &
Hermanson (2009).
The interaction between narcissistic CEOs and internal audit quality was not proven to be the
moderating variable for the influence of narcissistic CEOs toward real earnings management of prduction
costs pattern and discretionary expenses patterns. Internal audit quality do not play an important role in
mitigating real earnings management of production costs and discretionary expenses. This result due to
the role of internal audit division which are generally focused more on operational audits and not as
financial statements auditors. Internal auditors do not engage in financial statements audits since the task
are already conducted by public accounting firms as financial statements auditors (Sawyer et al, 2003).
The results of this study contribute to the theoretical implications related to agency theory
(Jensen & Meckling, 1976). The results of narcissistic CEOs that has a positive and significant effect
toward real earnings management activities for the pattern of cash flow from operation and discretionary
expenses support the assumption of agency theory which CEO’s characteristics such as narcissism is one
the factors that motivate management to commit in real earnings management practices. This study also
contributes to the literature related to the internal audit quality which has an important role in mitigating
the effect of narcissistic CEOs toward real earnings management for cashflow from operation pattern. The
research has implications for shareholders which provide input that the function of internal audit quality
can alleviate earnings management.
The limitations of this study are on the availability of secondary data financial reports that publish
narcissistic indicators of CEOs provided in the Rijsenbilt model (2011). Therefore, this study uses
modification of indicators performed by Olsen and Stekelberg (2016) as indicators available in the
financial statements of firms in Indonesia. Further research is recommended to develop narcissistic CEOs
indicators for research purposes of corporate cases in Indonesia.
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The impact of corporate social responsibility on customer loyalty in the

Qatari telecommunication sector
Ghaith M. Al-Abdallah
Faculty of Business
Applied Science Private University, Jordan
Ragy S. Ahmed
University of Liverpool, UK
Key words
Corporate Social Responsibility (CSR), Customer Loyalty (CL), Telecommunication Industry, Qatar.
Abstract
This study aims at examining the impact of Corporate Social Responsibility (CSR) on Customer
Loyalty (CL) within the Telecommunication sector in the State of Qatar, the market in Qatar consists of two
telecommunication providers; Ooredoo Qatar and Vodafone Qatar. Moreover, the study examines whether
selected demographics (gender, age, income level and educational level) play any role in moderating the
potential relation between CSR and CL. In order to accomplish this, the study utilized a descriptive analytical
methodology and a quantitative research approach utilizing survey strategy. Using personally submitted
questionnaires, 476 filtered and screened questionnaires were analyzed using SPSS software. The study
revealed that customers perceived CSR activities as an essential element for them and for the operating
organizations as well, moreover their awareness of such activities was salient through their responses to the
questionnaire in place, and as a result, CSR activities were found to have a positive direct significant impact
on CL. As for the suggested demographics, gender, age, and educational level didn’t play any significant
effective role in moderating the impact of CSR on CL. On the other hand, the Income Level slightly enhanced
the original relationship between CSR and CL, as the higher the income level, the more CSR activities impact
CL. Based on the results of the study, the researchers recommend that telecommunication providers should
continue conducting CSR activities and focus more on ethical, economic, and environmental dimensions of
CSR. Providers should also work on communicating their CSR activities to the public and customers to
increase customer loyalty and maintain their market share. Recommendations for future research based on the
results are also provided.
Corresponding author: Ghaith M. Al Abdallah

Email address for corresponding author: ghaith.abdallah@yahoo.com
Accepted: 16th April 2018 DOI: https://doi.org/10.24052/JBRMR/V13IS01/ART-25
1.0 Introduction
In a world where customers are becoming the core of attention for all organizations, their
demands and wants are unavoidable for various reasons, and from an organizational point of view, the
long-term strategic success lies down in listening and appealing to such desires, needs and wants. One of
the major customers’ concerns today is the social responsibility, or in other words, how organizations can
be a positive member of the society, giving back to it, and operate according to the expectations set by
individuals within that society. While it has been argued that an organizational response to such demands
can grant great benefits and most importantly the loyalty of those customers (Martínez & Del Bosque,
2013; Chomvilailuk & Butcher, 2014) other opinions claim that such result is not really guaranteed (Afifah
& Asnan, 2015).
In one of the most dynamic sectors of the state of Qatar, both providers; Ooredoo and Vodafone
are directing some considerable efforts and attention towards various types of Corporate Social
Responsibility (CSR) activities, for instance; youth empowerment, education, philanthropic donations,
reach out to un-deserved communities, health, women’s empowerment, and infrastructure and
innovation (Ooredoo, 2016; Vodafone, 2016). On the other hand, Customer Loyalty (CL) is perceived as an
essential element and pillar for any business to survive and acquire long-term sustainability (Kotler &
Armstrong, 2008; Lewis & Soureli, 2006; Lii et al., 2013, Cited in Shin & Thai, 2015). Considering the wide
diversity within the population of Qatar, with nationalities from all around the world (BQ-Magazine,
2014), this study intends to examine the relationship between CSR and CL within the Telecommunication
sector in the state of Qatar, and to reveal whether CSR efforts are yielding the required impact on the
consumers’ behavior, represented in this study with CL.
2.0 Research Background
2.1 Corporate Social Responsibility (CSR)
Although CSR can be seen as an attribute of the modern era, in fact this concept is definitely not
recent (Isaksson, Kiessling & Harvey, 2014). Actually, the term Social Responsibility can be traced back to
the 50’s where Carroll (1999) argued that companies should give back to society, laying down the
foundations of modern CSR concept. Even prior to the 50’s there were certain publications that alluded
CSR, for instance; Chester Barnard’s (1938) The Functions of the Executive, J. M. Clark’s (1939) Social
Control of Business, and Theodore Kreps’ (1940) Measurement of the Social Performance of Business.
According to IPSOS (2013), most surveyed consumers (77% of them) consider it an obligation for
organizations to operate in a manner that enhances the society’s well-being. Not to mention the internal
pressure presented by the employees themselves, as 60% demanded the same as well (Franklin, 2008). The
aforementioned has significantly drawn more attention to CSR and dragged such concept into the
spotlight.
CSR definition has been through different stages and names, for instance; corporate responsibility,
corporate citizenship, and corporate social responsiveness (Wartick & Cochran 1985, Carroll, 1999, Matten
& Crane, 2005). Carroll (1979) defined CSR (or what he called Corporate Social Performance) as the
concept that covers the business obligations towards society which incorporates four elements; economic,
legal, ethical and discretionary categories of business performance, prior to that, Davis (1960)
conceptualized CSR as the organizational non-profit activities. More recent definition of CSR provided by
Mohr, Webb & Harris (2001) as “the company’s commitment to minimizing or eliminating any harmful
effects and maximizing its long-run beneficial impact on society”. Stanisavljević (2017) considered CSR as
the commitment to improve well-being through discretionary business practices and contributions of
corporate resources. That being said, CSR can be defined in various ways depending on the perspective
from which CSR is observed or examined, for instance, marketers highlight CSR in the shade of; cause-
related marketing (Barone, Miyazaki, & Taylor, 2000) social sponsorship (Simmons & Becker-Olsen, 2006)
environmental marketing (Crouch, 2006) communication with customers and their response to CSR
(Caruana & Crane, 2008) brand image and reputation (Berens, Riel, & Bruggen, 2005).
CSR has been recognized as: a powerful tool that can distinguish organizations (Astaryan &
Asamoah, 2014), a tool that targets achieving economic, societal and environmental balance (Ali et al.,
2010), a criterion for ranking and evaluating companies (Porter & Kramer, 2006), and a line of defense for
organizations against the different attacks and criticisms it may face. Along with the previous
functionalities, CSR can be used as a marketing tool to compete and gain unique market position
(Gallardo-Vázquez & Sanchez-Hernandez, 2014). CSR can yield more investments (Smith, 2005, cited in
Carroll & Shabana, 2010), enhance corporate sales (Barone, Miyazaki, & Taylor, 2000), improve
corporate/brand image and reputation (Singh, Sanchez &Del Bosque, 2008; Marin, Ruiz, & Rubio, 2009)
and attract more customers through influencing the way they perceive the company (Berens, Riel, &
Bruggen, 2005).
2.2 Customer Loyalty (CL)
It is prominent how different markets and industries are dynamically changing from focusing on
products (Product-oriented) into focusing on consumers and creating long-term relationships with them
(Customer-oriented). Nowadays, organizations are trying to achieve high level of customer satisfaction
which is an essential prerequisite of CL (Kaur & Soch, 2012; Pérez & Del Bosque, 2015; Shafei & Tabaa,
2016). CL can be achieved by knowing and meeting customers’ needs and wants (Talpau & Boscor, 2011;
Lemon & Verhoef, 2016). It is critical for organizations not only to attract more customers, but to maintain
and keep the existing ones, commonly referred to as CL. Accordingly, CL has been highlighted as a
crucial organizational target (Ganiyu, Uche & Elizabeth, 2012), and an important area for continuous
improvement (Aydin, Özer & Arasil, 2005; Homburg, Jozi & Kuehnl, 2015, cited in Lemon & Verhoef,
2016; Shafei & Tabaa, 2016) through which organizations can succeed in establishing profitable and long-
term relations with their customers (Kim & Kim, 2016).
CL is a polemic concept, looking at such concept from a holistic point of view, CL can be regarded
as a consequence of all the experiences that a customer has with a product provider (Mascarenhas,
Kesavan, & Bernacchi, 2006). Maheshwari, Lodorfos, and Jacobsen (2014) defined CL as a customer’s
unconditional commitment to the company and his or her strong relationship with the brand, which is not
likely to be affected under normal circumstances. Uncles, Dowling, and Hammond (2003) defined CL as a
feature of people rather than something inherent in brands. Moreover, they have recognized CL to be one
of the three common concepts of attitudes and behaviors, circumstances and purchase situations. The
behavioral loyalty focuses on the customers’ tendency of repeatedly conducting a purchase for a
particular brand, while the attitudinal loyalty indicates that on top of committing to buy the same brand,
customers have to positively perceive the brand which can be reflected by the customers’
recommendations to others which are known as the word of mouth (Kaur & Soch, 2012). Word of mouth
has been identified as an important antecedent of CL, as according to Pizzutti and Fernandes (2010), there
are two leading indicators that can interpret and clarify the level of CL to a certain organization, those are;
consumers’ intentions to repeatedly conduct a purchase of the same product, and the recommendation of
the goods and services to others (aka word of mouth).
It is worth mentioning that within the academic literature authors and researchers heavily
support the behavioral conceptualization of CL over other concepts, and they actually refer to it as the
most realistic indicator and measurement of CL (Uncles, Dowling, & Hammond, 2003). Researchers
actually consider the behavioral loyalty to be a spurious or false loyalty, as the true loyalty shouldn’t be
entirely dependent on the purchasing behavior, instead along with this behavior; researchers argue that
there should be a commitment towards the brand itself (Caceres & Paparoidamis, 2014).
CL is indeed a critical component and salient indicator for any business persistent success (Aksoy,
2013), CL has various benefits to organizations, for instance, lower marketing costs, as loyal base of
customers require less marketing campaigns, and hence higher revenues and profit (Mulki & Jaramillo,
2011; Rafiq, Fulford & Lu, 2013). In addition, acquiring new customers is not an easy task and may require
what is known as offensive marketing which normally antagonizes the competitors and escalates
commercial war. It is true that CL can help gaining new customers through word of mouth (as discussed
above) but CL by definition means maintaining relationships with the existing customers, which is seen to
be five times easier than putting the effort and cost of acquiring new customers (Gee, Coates, & Nicholson,
2008), not mentioning the significant increment in the organization’s market share with customer’s
willingness to remain with the brand even if the prices are higher than the competitors’ (Aaker, 1996; Dick
& Basu, 1994; Nyadzayo & Khajehzadeh, 2016).
2.3 CSR and CL
Many authors tried to explore the relationship between CSR practices and customer loyalty
within different industries, however as the telecommunication sector is part of the service industry, below
are some of the previous studies illustrating the attempts to study the relationship between CSR and CL
through different types of services.
Rashid, Khalid, and Rahman (2015) examined whether CL is affected by three elements of
environmental CSR, those are; philanthropy, community services, and society well-being. The study
findings showed a positive relationship between each of community services, customer well-being and
CL. The study also revealed that e-CSR philanthropy didn’t show much influence on CL. Shin and Thai
(2015) tested how the way customers perceived the CSR exercises (as a marketing tool), precisely the
ethical and environmental ones impacted different elements including CL in the shipping industry in
South Korea. The findings indicated that the higher the positive impact on customer satisfaction, the
higher the relationship maintenance and customer’s loyalty in order.
Moisescu (2015b) analyzed the CSR and CL relation based on the socio-cultural and economic
dimensions of the Romanian telecommunication market, and it was found that CSR didn’t play a
significant role in impacting customer loyalty. Nevertheless, the study revealed that there is a need for full
and transparent disclosure of CSR policies and activities, adopting more customer-centric approach,
where customers are the center of attention, ensuring the fairness and adequacy of prices, and improving
quality. Xu (2014) examined the relationship between CSR and CL in the fast food industry in China,
precisely within the customers of McDonald’s, by measuring five important aspects; consumer’s dine-out
behavior, expectations of CSR, perception of CSR, loyalty to and satisfaction of McDonald’s customers
and the demographics of the respondents. Xu found that the fast food diners in China emphasized on two
particular activities of CSR, which are the human well-being and providing safe healthy/safe food, while
other CSR activities were less important to customers.
Chomvilailuk and Butcher (2014) carried out an insightful study in the banking industry, to
measure to which extent do both; service quality and CSR impact CL. The study treated and addressed
customer’s loyalty from a wider perspective, they referred to it as the loyalty outcomes that included;
purchase intentions, affective commitment, and word of mouth. CSR was found to have a significant
impact on both; word of mouth and purchasing intentions, while the influence on the affective
commitment was relatively small compared to the service quality.
Martínez, and Del Bosque (2013) tested whether CL of hotels clients are impacted by CSR activities of
hotels in Spain and within the hospitality sector, the study highlighted customer trust, customer
satisfaction, and identification as mediating variables, and the results signified that CSR does strongly
relate to each of the mediating variables mentioned previously, which in return enhances and improves
CL.
Chen, Chang, and Lin (2012), investigated customers’ loyalty in relation to how they observed
CSR in Taiwan’s airlines market, the study found that CSR can firmly enhance CL upon the control of
relationship quality and that CSR within the airline industry, known as Airline Social Responsibility
(ASR) influences both behavioral and attitudinal loyalty. Salmones, Perez and Del Bosque (2009)
examined the Spanish financial sector by shedding the light on ethical and philanthropic practices of CSR,
numerous dimensions were tested such as; relationship satisfaction, trust, identification with the firm,
business performance, relational outcomes and loyalty, the results showed positive indirect relationship
between CSR and CL through three critical dimensions; satisfaction, trust, and identification with the
organization.
Salmones, Crespo, and Del Bosque (2005) focused on the mobile phones in Spain, where CSR was
divided into three main categories; economic, ethical and philanthropic. Impact on customer loyalty was
measured through each of the previous elements, and it has been noticed that each of them, except the
economic dimension, positively influences the overall evaluation of the service and accordingly CL. CSR
has different impact on CL ranging from very strong effect to no effect at all based on the dimensions
tested and the market itself. Accordingly, it is hard to determine how CSR would impact CL in the
telecommunication sector in Qatar.
2.4 Role of Demographics
Different demographics play an essential role in shaping consumers behavior and attitude.
Having the customer loyalty as an aspect of such behavior, different researchers have tested such
demographics influence. The majority examined demographics like; age, income, education and gender,
to understand the impact of those variables on the original relationship between independents and
dependents variables (Thomaidou & Bellou, 2012; Astaryan & Asamoah, 2014; Moisescu, 2015a; Kim &
Kim, 2016). Hence, this study considered the same demographics, namely; gender, age, income level and
education level.
2.5 Research Questions and Hypotheses
The problem of this research can be formulated through the following questions:
Q.1 What is the effect of Corporate Social Responsibility (CSR) on Customer Loyalty (CL) in the
Telecommunication sector of Qatar?
Q.2 If any, what is the moderating effect of selected demographics (age, income, education, and gender)
on the relationship between Corporate Social Responsibility (CSR) and Customer Loyalty (CL)?
In order to examine the above questions in quantitative approach, the following hypotheses were drafted
Ha1: There is a significant positive direct impact of Corporate Social Responsibility (CSR) on Customer
Loyalty (CL) in the Qatari Telecommunication sector at α≤ 0.05.
Ha2: Selected demographics (gender, age, income, and educational level) have a significant moderation
effect on the original relationship between Corporate Social Responsibility (CSR) and Customer Loyalty
(CL) in the Qatari Telecommunication sector at α≤0.05.
Ha2.1: Gender has a significant moderation effect on the original relationship between Corporate Social
Responsibility (CSR) and Customer Loyalty (CL) in the Qatari Telecommunication sector at α≤0.05.
Ha2.2: Age has a significant moderation effect on the original relationship between Corporate Social
Responsibility (CSR) and Customer Loyalty (CL) in the Qatari Telecommunication sector at α≤0.05.
Ha2.3: Income has a significant moderation effect on the original relationship between Corporate Social
Responsibility (CSR) and Customer Loyalty (CL) in the Qatari Telecommunication Sector at α≤0.05.
Ha2.4 Educational level has a significant moderation effect on the original relationship between Corporate
Social Responsibility (CSR) and Customer Loyalty (CL) in the Qatari Telecommunication sector at α≤0.05.
3.0 Research Methodology
Considering the nature of this study and the questions being addressed, this study has utilized a
quantitative methodology, furthermore the research is following a descriptive methodology that is
respectively following an analytical approach. In order to describe “What is” the nature of the relation
between the variables (CSR & CL) within the conditions of the Qatari market, and what are the customers’
perception/response and attitude towards CSR practices of the telecommunication providers. The study
utilized survey strategy; a questionnaire is used to collect the primary data as discussed below.
3.1 Research Instrument
The instrument used to collect the primary data of this study was the questionnaire. Five-points
Likert scale ranging from “Strongly Disagree” to “Strongly Agree” with “I don’t know” as a sixth option
to minimize random and blank answers was developed based on the previous similar studies in order to
measure certain aspects that were found to be critical for revealing the nature of the relationship between
CSR and CL. The questionnaire was divided into three main parts, the first part is the cover letter as an
introduction and an invitation for participants to undertake it, ethical aspects were covered to inform the
participants about the student’s identity, nature of the research and its goal, the full privacy and
confidentiality of participants’, The second part collected data on the research variables and consisted of
33 statements distributed between five directions as follow: importance of CSR (CSRIMP; 4 statements),
awareness of CSR activities (CSR; 19 statements), customers’ loyalty and attitudes towards their
telecommunication provider (CL; 10 statements). Finally, the third part collected the demographics;
characteristics of the respondents (4 statements), indicated the telecommunication provider that the
respondent uses (1 statement) and the best communication channel through which participants recognize
CSR activities (1 statement).
The research instrument was assessed through a pilot study in which copies of the questionnaires
were send to a panel of expertise for final evaluation and upon their notes the final questionnaire was
distributed to few random customers and friends. 43 copies were collected and tested for validity and
reliability.
3.1.1 Validity
According to Heale and Twycross (2015) ensuring the research validity incorporates insuring
validity on various levels, primarily, content validity, construct validity and face validity. The content
validity mainly concerns with the ability of the measurement tool to rightly measure the targeted variable.
While construct validity is the extent to which a test measures the concept or construct that it is intended
to measure. Face validity is an estimate of whether a test appears to measure what it supposed to be
measuring. All three validity testes were established as follow.
Both content validity and face validity were established based on the fact that the questionnaire
was formed based on previous similar studies that measured the same variables, the feedback received
from the panel of experts, and the 43 pilot study respondents. The language, clarity of statements and time
needed to fill the questionnaire were also assessed during the pilot study.
Construct validity was established using Person Correlation Coefficients; the results are presented in table
1 below.
CSR CL
Item No. R Item No. R Item No. R
1 0.526 11 0.750 1 0.738
2 0.639 12 0.729 2 0.728
3 0.650 13 0.689 3 0.79
4 0.664 14 0.675 4 0.741
5 0.733 15 0.722 5 0.796
6 0.698 16 0.631 6 0.787
7 0.652 17 0.730 7 0.715
8 0.687 18 0.611 8 0.717
9 0.629 19 0.524 9 0.670
10 0.686 10 0.736
Table (1) Construct Validity of Research Instrument
Table (1) provide the construct validity for the items of CSR and the items of CL, it indicates the
Person correlation values calculated between each item and the total of the CSR, and the correlation
values calculated between each item of CL and the total of CL. This kind of correlation expresses the
construct validity. The maximum value of correlation is known to be (1), accordingly at least 50 % of this
value will be considered as a good correlation value to express the relation between each item and the
total domain it belongs to (i.e. 0.50 or higher). Inspecting the provided values in the above table, it is clear
that all values are > 0.50 suggesting good and acceptable construct validity.
3.1.2 Reliability
The Cronbach alpha test was implemented to establish the reliability of the research instrument;
the results are presented in table 2 below.
Variable No. of Items Reliability
- Importance of the CSR 4 0.798

IV CSR 19 0.929
DV CL 10 0.903
Questionnaire (IV and DV) 29 0.944
Table (2) Reliability Analysis
Table (2) indicates the results of Cronbach alpha analysis to measure reliability for the Items of:
Importance of the CSR, CSR and the Items of CL. The values obtained were (0.798) for the Importance of
the CSR, (0.929) for the items of CSR and (0.903) for CL. The value for the whole questionnaire is (0.944).
The reliability values reflect a satisfactory reliability level (knowing that the maximum value that could be
reached is 1.00) any value above 0.7 is considered a good value (Heale & Twycross, 2015). Accordingly, a
conclusion that the research instrument is reliable can be concluded.
3.2 Research Population and Sample
The research’s population is basically all the mobile phone users in Qatar. Based on the annual
reports of both Ooredoo and Vodafone; customers who are actually utilizing the mobile services of both
providers are ranging between 1.548 million (Vodafone, 2016), to 1.76 million (Ooredoo, 2016), the total
number of mobile phone users in Qatar is approximately 2.4 million which represent the research
population that shall be examined. As discussed before, those 2.4 million are very diverse and from over
50 different nationalities and backgrounds, around 50% of them are Asians (BQ-Magazine, 2014) and they
all represent different income levels, educational levels, age and gender.
The study used probability sampling technique to come up with a representative sample,
precisely, a stratified random sample was utilized to address the variation in the market share between
both telecommunication providers in Qatar. Ooredoo Qatar acquires almost 68% of the market share,
while Vodafone Qatar acquires the remaining; 32%, hence the sample was constructed taking into
consideration these percentages.
According to Singh and Musuku (2014), the sample size for any given population that exceeds
100,000 members for a precision level of 5% and a confidence level of 95% should be above 400. Therefore,
the researchers distributed and send out 500 questionnaires proportionally. The distribution followed two
methods; personally, submitted questionnaires. 480 questionnaires were retrieved with a response rate of
96%. After the initial screening process, 4 incomplete questionnaires were eliminated, leaving 476 filtered
and screened questioners for the statistical amylases, out of which, 322 were customers of Ooredoo
(approximately 68%), and 154 were customers of Vodafone (approximately 32%) reflecting the market
share of each telecommunication provider in Qatar.
4.0 Data Analysis
4.1 Demographics Description
The study consisted of six demographics items (Telecommunication Provider, Gender, Age,
Educational level, Income, and Communication Channel of CSR). Table (3) represents the demographic
characteristics of the study sample.
Variable Category Counts %
Ooredoo Qatar 322 67.6

Main Telecom
Vodafone Qatar 154 32.4
Provider
Total 476 100.0
Male 250 52.5
Gender Female 226 47.5
Total 476 100.0
Less than 20 11 2.3
20- less than 28 118 24.8
28- less than 35 200 42.0
Age 35- less than 45 105 22.1
45 –Less than 60 35 7.4
60 and more 7 1.5
Total 476 100.0
Less than 1,200 44 9.2
1,201- Less than 14,000 305 64.1
14,001- Less than 17,144 63 13.2
Income
17,145- Less than 87,000 61 12.8
87,000 and above 3 .6
Total 476 100.0
High school level or less 29 6.1
2 years Diploma 42 8.8
Bachelor Degree 318 66.8
Educational Level
Master Degree 80 16.8
PHD Degree 7 1.5
Total 476 100.0
Social Media (Facebook, Instagram, Twitter, You Tube, others) 306 64.3
News Paper 44 9.2
Radio 10 2.1
Communication
Channel Website 34 7.1
TV 15 3.2
Others 67 14.1
Total 476 100.0
Table (3) Describing the Sample's Personal and Demographic Characteristics
4.2 Hypotheses Testing

4.2.1 Testing the First Main Hypothesis
Simple linear regression using SPSS were utilized to test the first main hypothesis and analyze the
impact of Corporate Social Responsibility (CSR) on Customer Loyalty (CL). The results are shown in table
(4)
Ha1: There is a significant positive direct impact of Corporate Social Responsibility (CSR) on Customer
Loyalty (CL) in the Qatari Telecommunication sector at α≤ 0.05.
Independent variable r r2 f Sig(f) β t Sig(t)
Corporate Social Responsibility (CSR) 0.628 0.394 308.43 0.000 0.681 17.56 0.000
Table (4) Simple Linear Regression of CSR on CL in the Qatari Telecommunication sector
As presented in table (4), there is a statistically significant relationship between the variables with
a value of (0.926) for the relationship. The f value (308.43) is significant because the related Sig value (also
known as p value) is (0.000), which is statistically significant (< 0.05). The beta coefficient reflects the
impact value of the independent variable on the dependent variable. The value is (0.681) and significantly
contributes to the dependent variable as the probability of t statistics is (0.000) < 0.05. The t statistics tests
the linearity importance of the beta coefficient obtained for the independent variable. The value of R2
expresses the variation percentage in the dependent variable that can be accounted for (i.e. explained by)
the independent variable, it is found to be (39.4) which indicate that 39.4% of the variance in the
dependent variable is predictable by the independent variable. Moreover, r value indicates a moderately
strong impact of CSR on CL since the value is above 0.6 (Washington, 2017). As a result, the first main
hypothesis is accepted.
4.2.2 Testing the Second Main Hypothesis
The second main hypothesis is divided into four sub-hypotheses and was tested through these sub-
hypotheses. Multiple linear regressions were performed, and the results are presented next.
4.2.2.1 Testing the First Sub Hypothesis
Ha2.1: Gender has a significant moderation effect on the original relationship between Corporate Social
Responsibility (CSR) on Customer Loyalty (CL) in the Qatari Telecommunication Sector at α≤0.05.
To test this hypothesis multiple linear regressions was performed. The results are included in table (5)
below.
Independent variables R R2 F Sig(f) β t Sig(t)
CSR 0.520 17.46 0.000
Gender 0.629 0.395 102.77 0.000 - 0.025 - 0.84 0.399
Moderation effect - 0.003 - 0.11 0.910
Table (5) Multiple Linear Regression for Testing the Moderation Effect of Gender on the Original
Relationship between CSR and CL
The results provided show that the model consisting of CSR and gender is statistically significant
as the probability of f test (0.000) is less than 0.05. The impact value for CSR on CL is (0.520) this value is
statistically significant because the probability value (0.000) related to t test is < 0.05. The effect of gender
on CL is (- 0.025). The value of effect is not statistically significant as the probability of t test (0.399) is >
0.05. Comparing the value of R2 for the current model (moderation model) which is (0.395) with the value
of R2 for the basic model that tests the effect of CSR on CL (in the first main hypothesis) which was
(0.394), It is obvious that the two values are approximately the same and that only a negligible increase of
(0.001) can be noticed. Accordingly, gender did not enhance the power of the model by increasing the
value of R2 to explain more variance in the CL. Moreover, the Moderation effect in the model is not
statistically significant as the probability value (0.910) is > 0.05 and the impact value is very small (- 0.003).
Accordingly, a conclusion that gender did not moderate the original relationship between CSR and CL
can be drawn and as a result, the hypothesis is rejected.
4.2.2.2 Testing the Second Sub Hypothesis
Ha2.2 Age has a significant moderation effect on the original relationship between Corporate Social

CSR 0.520 17.46 0.000
Age 0.630 0.397 103.71 0.000 - 0.045 - 1.53 0.125
Moderation effect 0.009 0.31 0.757
Table (6) Multiple Linear Regression for Testing the Moderation Effect of Age on the Original Relationship
between CSR and CL
The results provided show that the model consisting of the CSR and age is statistically significant
as the probability of f test (0.000) is less than 0.05. The impact value for CSR on CL is (0.520), this value is
statistically significant because the probability value (0.000) related to t test is < 0.05. The effect of age on
CL is (- 0.045). The value of effect is not statistically significant as the probability of t test (0.125) is > 0.05.
Comparing the value of R2 for the current model (moderation model) which is (0.397) with the value of R2
for the basic model that tests the effect of CSR on CL (which was 0.394), It is obvious that the R2 values are
approximately the same and that only a negligible increase of (0.003) can be noticed. Therefore, age did
not enhance the power of the model by increasing the value of R2 to explain more variance in the CL. The
Moderation effect in the model is not statistically significant as the probability value (0.757) is > 0.05,
moreover the impact value is very small (0.009). Accordingly, a conclusion that age did not moderate the
original relationship between CSR and CL can be drawn and as a result, the alternative hypothesis is
rejected.
4.2.2.3 Testing the Third Sub Hypothesis
Ha2.3 Income has a significant moderation effect on the original relationship between Corporate Social
CSR 0.520 17.46 0.000
Income 0.644 0.415 111.60 0.000 - 0.099 - 3.35 0.001
Table (7) Multiple Linear Regression for Testing the Moderation Effect of Income on the Original
Relationship between CSR and CL
The results provided show that the model consisting of the CSR and income is statistically
significant as the probability of f test (0.000) is less than 0.05. The impact value for CSR on CL is (0.520),
this value is statistically significant because the probability value (0.000) related to t test is < 0.05. The
effect of income on CL is (- 0.099). The value of effect is statistically significant as the probability of t test
(0.001) is < 0.05. Comparing the value of R2 for the current model (moderation model) which is (0.415)
with value of R2 for the basic model that tests the effect of CSR on CL which was (0.394), an increase of
(0.021) equivalent to 5.3% of the original value can be noticed. Accordingly, income enhances the power of
the model by slightly increasing the value of R2 to explain more variance in the CL.
The Moderation of effect in the model is statistically significant as the probability value (0.029) is < 0.05,
however, the impact value is small (- 0.065). Accordingly, a conclusion that income moderates the original
relationship between CSR and CL can be drawn and as a result, the alternative hypothesis is accepted.
4.2.2.4 Testing the Fourth Sub Hypothesis
Ha2.4 Educational level has a significant moderation effect on the original relationship between CSR and
CL at α≤0.05.
CSR 0.520 17.46 0.000
Education 0.643 0.414 111.13 0.000 - 0.111 - 3.79 0.000
Table (8) Multiple Linear Regression for Testing the Moderation Effect of Educational Level on the
Original Relationship between CSR and CL
The results provided that the model consisting of the CSR and educational level is statistically
significant as the probability of f test (0.000) is less than 0.05. The impact value for CSR on CL is (0.520),
this value is statistically significant because the probability value (0.000) related to t test is < 0.05. The
effect of educational level on CL is (- 0.111). The value of effect is statistically significant as the probability
of t test (0.000) is < 0.05. Comparing the value of R2 for the current model (moderation model) which is
(0.414) with the value of R2 for the basic model that tests the effect of CSR on CL which was (0.394) an
increase of (0.020) which is equivalent to 5% can be noticed. Apparently, educational level enhances the
power of the model to explain more variance in the CL by slightly increasing the value of R2. However,
the Moderation of effect in the model at large is not statistically significant as the probability value (0.221)
is > 0.05, and the impact value is small (- 0.032). Accordingly, a conclusion that educational level did not
moderate the original relationship between CSR and CL can be drawn and as a result, the alternative
hypothesis is rejected.
5.0 Results and Discussion
Both elements of Corporate Social Responsibility and Customer Loyalty have attracted the
attention of different researchers, hence various studies have been conducted to examine the nature of
relationship these two elements may have in common, as explained earlier. The results of these previous
studies varied between concluding a positive correlation or a negative one, thus it was critical to
understanding the nature of this relationship in the Qatari Telecommunication sector, which is considered
one of the fastest growing telecommunication markets in the region with a highly fast rate of growth
(Oxford Business Group, 2017), which hasn’t been explored before to the best of the researchers’
knowledge.
The results showed that customers in the Qatari Telecommunication sector do pay attention and
are aware of the CSR-related activities, more importantly they do believe that the existence of such
activities and the organizations involvement in it is significantly important. Such results are good
indicators of a progress in the customers’ mentality and awareness in developing countries that is going
through a relatively fast development and rapid growth on various levels.
The study found out that almost all different types of CSR activities conducted by the telecom
providers are being noted and acknowledged by their customers, however the CSR activities that seemed
to gain more interest and higher attention are those activities falling under the philanthropic, legal, and
social umbrella/dimensions, other activities are related to the ethical, economic, and environmental
dimensions are being noticed as well but not on the same level as the previously mentioned dimensions.
Having the first three CSR dimensions being the most seen by customers can in fact indicate that a higher
value is placed on these dimensions; the remaining CSR categories that acquire less attention need more
efforts from both providers.
The study reported that customers of the Qatari Telecommunication sector tend to have high level
of loyalty to their providers. Moreover, it has been acknowledged that customers have high tendency to
recommend their telecommunication provider to others and positively talk about them, which is by
definition a positive WOM. Also, the tendency of conducting a repurchase was relatively high and is
considered as a sort of behavioral loyalty (Kaur & Soch, 2012), Nevertheless, it is essential to highlight that
price tolerance tendency is not as high as the rest of loyalty aspects, such results express that customers’
loyalty might actually be negatively impacted in case the telecommunication providers raise the prices of
their services.
The study pointed out that the way customers perceive CSR activities of their telecommunication
providers have an impact on their loyalty, which aligns with previous studies that aimed at exploring the
same (Chen, Chang, & Lin, 2012; Martínez & Del Bosque, 2013; Rashid, Khalid, & Rahman, 2015). Other
studies showed that the correlation is indirectly positive, through other mediating variables such as the
whole evaluation of service, the word of mouth, the purchase intentions and the satisfaction level
(Salmones, Perez, & Del Bosque, 2009; Mandhachitara and Poolthong, 2011; Choi and La, 2013;
Chomvilailuk & Butcher, 2014; Shin & Thai, 2015). The results of this study indeed contradict with other
studies that found insignificant correlation between CSR and CL (Xu, 2014; Moisescu, 2015b). This might
be due to cultural differences and lack of general awareness of CSR importance to society.
This study focused on exploring the role of certain demographics such as; Gender, Age, Level of
Income, and Level of education in moderating the original relationship between CSR and CL. Although
the study sample had very close male to female ratio (52.5% males to 47.5% females) it was found that the
gender element doesn’t contribute or moderate the impact of CSR on CL. In addition, assessing the
collected data about the age, it was found that the highest age category was customers who aged between
28 to less than 35 years old, forming around 42% of the total respondent. Nevertheless, all age categories
were insignificant in terms of moderating the original impact of CSR on CL. In the income level aspect, it
was found that respondents with median income (1,201- Less than 14,000) constructed 64.1% of the
study’s sample. Unlike previous demographics, customers with higher levels of income were found to be
more sensitive to CSR activities in terms of their loyalty, in other words the higher the income is, the
higher the loyalty to telecom providers involved in CSR is. This could be contributed to the fact that
higher income is in a way associated with better quality of education, more exposure to developed
cultures and sustainable lifestyle. Next and lastly, the study addressed the level of education; most of the
respondents were bachelor’s degree holders (66.8% of the sample). By analyzing possible moderating
effect of the educational level, it was revealed that even though the educational level is a critical
demographic aspect, it didn’t really moderate the relationship between CSR and CL indicating that the
level of awareness is almost the same across the different educational level categories.
6.0 Conclusions & Recommendations
By accomplishing this study goals and generating the statistical results; the study has in fact made
contributions on two different levels. Firstly, the academic dimension, where concluding the positive
impact of CSR on CL highlights the important role CSR represents in directing consumers’ behavior,
specifically the element of customer loyalty, which is an addition to all the previous literature examining
CSR. Secondly, the study is an index to whether the companies’ efforts in communicating their activities
to the public are effective or not, which is a contribution on the professional level as it turns out that CSR
activities impact consumers in the Telecommunication sector in Qatar. The results revealed that customers
in the Qatari Telecommunication sector pay attention to and aware of the CSR-related activities, and they
do believe that the existence of, and the organizations’ involvement in such activities is significantly
important for them and should be as well for organizations. Such result actually is an indicator of a
progress in the customers’ mentality and awareness in a developing country that is going through a
relatively fast development/progress as well as a rapid growth on various levels.
Looking at the role of demographics, it was found that the gender element doesn’t actually
contribute or moderate the impact of CSR on CL, similarly age was found to be irrelevant in terms of
influencing the impact of CSR on CL, however customers with higher levels of income were found to be
more sensitive to CSR activities in terms of their loyalty, lastly it was revealed that even though the
educational level is a critical demographic aspect, it didn’t really moderate the relationship between CSR
and CL. The CSR activities that seemed to gain more interest and higher attention are those activities
falling under the philanthropic, legal, and social umbrella, other events related to the ethical, economic,
and environmental aspects are being noticed as well but not on the same level as the previously
mentioned categories. Accordingly, CSR categories that acquired less attention shall need more efforts
from both providers in terms of educating customers and increasing their awareness.
In terms of loyalty, customers tend to have high level of loyalty to their providers, with high
tendency to recommend their Telecommunication providers to others and positively talk about them,
which is considered a positive WOM. In addition, the tendency of conducting a repurchase was relatively
high and which is sort of behavioral loyalty that organizations normally seek (Kaur & Soch, 2012) and an
index to strong loyalty that organizations normally aspire (Oliver, 1997, Cited in Uncles, Dowling, &
Hammond, 2003).
In conclusion, the study has shown that CSR does impact CL, therefore both providers shall pay
attention on continuing and improving their CSR practices, furthermore out of all the CSR statements that
indicate the organizations’ activities, the consumer related activities, products and services prices, and
environmental activities are the ones gaining the least awareness and attention, this might require both
telecommunication providers to do more effort in educating and increasing the customers’ awareness
about the importance of environmental causes and subsequently their activities in supporting, advocating
and protecting such causes.
6.1 Recommendations for Future Studies
A critical aspect that future studies can incorporate within their research is the demographic
element of ethnicity, this is due to the massive diversity of nationalities and ethnicities of Qatar that might
actually give more insightful information about such role in moderating the relationship between CSR
and CL, taking into consideration that different cultures do construct and contribute to individuals’
behaviors, perceptions and attitudes (Muwazir & Abdul Hadi, 2013).
It would be recommended for future research to inspect and explore the same variables within
different areas, sectors and industries, this can provide a holistic view of the perception and attitudes
toward CSR in Qatar and can be utilized for cross-sectional comparisons and development purposes.
Also, future research may expand on a geographical basis to examine the same variables but within
different markets in other countries of the Gulf region to compare the results.
7.0 Limitations
Financial and time limitations prevented the researchers from expanding the horizon of the study
to include other intervening variables and larger cluster sample instead of stratified one. CSR and CL
dimensions could be viewed from different aspects and perspectives, other than the one used in this
study.
Acknowledgements
The first author is grateful to the Applied Science Private University, Amman, Jordan, for the financial
support granted to this research project (DRGS-2017-20148-60).
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Corporate Governance Practices in the Banking and Finance Sector:

Perspectives from Bangladesh
Md. Nazmul Hossain
Raju Mohammad Kamrul Alam
RUDN University, Moscow, Russia
Palto Datta
Mark T. Jones
Centre for Innovative Leadership Navigation, UK
Keywords
Corporate Governance, Bangladesh, accountability, agency theory, shareholders, whistleblowing
Abstract
Corporate Governance has become one of the most important strategic tools for enterprises and
organizations to increase both stakeholders’ value and a firm’s performance. It ensures the accountability and
responsibility of the directors, managers and others who hold key positions of responsibility. It is based on a
set of rules and principles, processes and mechanisms by which the affairs of the corporations and firms are
directed, managed and controlled. Over the past thirty years the concept of corporate governance has received
substantial attention from regulatory bodies, scholars and practitioners worldwide as it has been viewed as
one of the most important tools for the progress and prosperity of corporations. However, the concept is still in
its infancy in Bangladesh and thus is not as well established and commonplace as it might be elsewhere.
The main purpose of this study is to understand the nature of corporate governance, its importance,
need and its practices in Bangladesh within the Banking and Finance sector. The study is mainly based on
secondary sources of data and information that includes scholarly journal articles, books, the Corporate
Governance Act of Bangladesh 2004, and other relevant sources pertaining to the subject.
A wide range of factors, including codes of corporate governance, legal and regulatory frameworks,
development of the capacity of boards of directors, introduction of good governance and institutional capacity
building have been recommended to institutionalize and improve corporate governance in Bangladesh. Issues
such as whistleblowing and the efficacy of Bangladesh’s Legal system are germane to discussions within the
ambit of this research.
Corresponding author: Raju Mohammad Kamrul Alam

Email address for corresponding author: rajukamrul@gmail.com
Revised submission received: 6th August 2018
Accepted: 17th September 2018 DOI: https://doi.org/10.24052/JBRMR/V13IS01/ART-26
Introduction
Corporate Governance can be understood as a set of processes, rules and regulations, principles
and guidelines by which all activities of a corporation or a firm are governed, directed, managed, and
controlled. An effective corporate governance structure can enhance organizational performance by
increasing stakeholders’ value as it can increase the responsibility, accountability and transparency
throughout the organization. It is not only increasingly becoming the required condition for corporations
for their sustainable growth and prosperity, but also the most valuable strategic concept for the
shareholders and other stakeholders to maintain organizational impartiality, fairness, accountability and
transparency. For the past three decades we have witnessed different types of uncertainty, volatility in the
global business environment. Since 1990 there have been several high-profile corporate scandals and
collapses in North America, Europe and some Asian countries. The ramifications of scandals and
mismanagement in entities such as Enron, Lehmann Brothers and WorldCom in the USA, Glitnir,
Kaupthing and Landsbanki banks in Iceland, Royal Ahold (Koninklijke Ahold NV) in the Netherlands,
Barings Bank in the UK and the Satyam scandal and Ketan Parekh scam in India has been considerable.
Inadequate corporate structures and governing policies were the main causes of these corporate failures
(Mallin, 2003). Since then, the concept of corporate governance has received considerable attention from
scholars, policy makers, government and regulatory bodies (Khan, 2011; Sarker 2014).
The need for this transparent corporate structure in Bangladesh has become a necessity,
particularly following a series of high-profile corporate scams within the banking and finance sector.
Scams and corporate governance failures such as that of the Hallmark-Sonali Bank Loan Scam involving
Sonali Bank, the largest State-Owned Commercial Bank in Bangladesh, scandals concerning Oriental Bank
and Farmers Bank and issues over corporate impropriety involving the Stock Market and Foreign
Exchange Reserve have generated trenchant criticism both inside Bangladesh and further afield.
Therefore, corporate governance is not only about the ways in which a corporation is managed and
administered but also the ways it monitors the policies and practices, decisions and actions of the
corporation, their agents and stakeholders. Such an approach can lead to greater transparency, efficiency
and effecting the functioning of a corporation. The core objective of the corporate governance is to
increase long-term shareholders value and at the same time protecting the other stakeholder’s interest
(Malling, 2003) whilst ensuring corporate probity. Despite its value to organizations and the nation too,
the concept and its practices are not well developed in Bangladesh, essentially it remains in its infancy.
However, since the introduction of the Corporate Governance Act 2004, it has been gradually introduced
in many large organisations (Haque and Arun 2016) and furthermore organizations have started to see the
positive impact of corporate governance on the performance and optimization of organizational values
(Shobod, Saiful, and Anup 2015); Rouf (2012); Rashid., Zoysa., Lodhh and Rudkin (2010).
The main purpose of this study is to understand the nature of corporate governance and its
practices in Bangladesh, with reference to financial institutions. Also, the study highlights the need for,
and importance of corporate governance in Bangladesh.
Literature Review
Corporate governance is a multi-faceted subject and is a strategic concept for enhancing
organizational value and performance. There is no single and universal definition of corporate
governance (Khan, 2011; Thapar and Sharma, 2017), rather it is viewed from different perspectives.
According to Garvey and Swan (1994) corporate governance determines the ways management direct,
manage, administer and control the activities of an organization. Shleifer and Vishny (1997) asserted that
the concept should be understood by the ways in which suppliers of finance to organizations assure
themselves of an increased probability of a return on their investment. The Organization for Economic
Cooperation and Development defines Corporate Governance as a “system by which organisations are
managed, governed and controlled (OECD, 1999). However, the OECD definition is narrow in scope as it
does not consider the societal elements such as stakeholders’ interest. Shliefer and Wolfenzon (2002)
observed that a good corporate governance structure protects outside investors (shareholders) from inside
investors (managers). According to Cadbury (2000), corporate governance is the mechanism used to
discipline organizations. In 2000, Cadbury stated at the “Global Corporate Governance Forum” that
corporate governance is primarily about maintaining the balance between economic and social goals. The
purpose is to align the interests of individuals, organisations and society at large as much as possible.
Likewise, Morin and Jarrell (2001), argued that corporate governance is a framework that controls
and safeguards the interest of the relevant actors in the markets. The best corporate governance practices
improve overall accountability and performance throughout organizations. According to Beiner, S.,
Drobetz, W., Schmid, M., and Zimmermann, H (2004) a good corporate governance mechanism has a
positive impact on the performance of the listed companies and increases the value of firms. The
distribution of managerial rights and responsibilities among different actors in the organization such as
boards of directors, managers at different levels, shareholders, auditors and other stakeholders are
defined by the corporate governance structure. However, one of the most important definitions of
Corporate Governance is given by the Ministry of Finance, Singapore which helps define the true notion
of the concept as follows: “a set of processes and structure by which all affairs of an organization are
managed, directed and controlled for enhancing long-term shareholders value and stakeholders’ interests
through enhancing corporate accountability and performance”. The corporate governance principles
should be based on four important and interrelated elements: Accountability, responsibility, transparency
and fairness (Moudud-ul-Huq, 2014). The OECD (1999) identified the following key principles: (a) It
should protect the shareholders’ rights, (b) All shareholders should be treated equally (equitable
treatment), (c) Recognition of the rights of stakeholders and that should be protected by law, (d)
Disclosure and transparency, (e) The responsibility of the board.
Corporate governance & Agency Theory
Jensen and Meckling (1976) defined the agency relationships as “a type of contact in which the
main actor (principal) allows the agent to perform the organizational services on behalf of the principal”.
As there is a concept of delegation by principal to the agent, problems arise due to the differing interests
and the conflict between these parties (principal and agent). However, these problems are not the same
across the firms and sectors or industries (Himmelberg, C.P., R.G. Hubbard and D. Palia, 1999). Jensen
and Meckling (1976) asserted that the value maximizing decisions are reduced by this type of delegation
of authority by managers in an organization. By extending the original theory of Jensen and Meckling
(1976), McColgan (2001) asserted that an effective corporate governance structure can help to reduce such
agency problems.
Agency Theory recommends the involvement of independent non-executive directors to monitor
any self-interested actions by managers and as a means to minimize agency costs (Walters and Kroll 2006;
Williams. D., Duncan, W., Ginter, and Shewchuk R., 2006). Although the executive directors have
specialized skills, expertise and valuable knowledge of a firm’s activities, there is a demand for the
independent directors to contribute in the field of idea generation, independence, objectivity and expertise
knowledge (Weir 1997). By reviewing the various challenges and issues of corporate governance in an
African context, Okeanhalam and Akinbode (2003) pointed out that many organizations in past have
manifested failing or collapsed in Asia and USA due to inadequate corporate governance structures. They
suggested that African organisations can learn from the past failures that have happened elsewhere. Their
findings suggest that only the implementation of adequeate and appropriate corporate governance
structures in an organization can help to reduce the problems between principal agents and shareholders’
interests. A study conducted by Farinha (2003) to understand the consequences and nature of corporate
governance with reference to the ownership problems between principal agents (managers/directors) and
shareholders provides food for thought. This study identified risk preferences as one of the most
important sources of conflict between these parties. While managers are concerned with the company
risks as their survival depends on this risk, the shareholders are mainly concerned with the risk of stock
and market risk. They suggested that an external disciplining device can reduce such problems in the
organization. This is possible through the implementation of a corporate governance structure that should
include the composition of board of directors, inside ownership maximization, increase the number of
shareholders and appointment of independent auditors among others.
Within the context of Bangladesh, a study conducted by Moudud-Ul-Hoq (2014) on the state of
corporate governance in the banking sector elucidates some key indicators. To measure the corporate
governance status, they have used five specific indicators such as nature of compliance, Independent
Directors (ID), Board of Directors (BOD) and its functionalities, Audit Committee (AC) and Transparency
and disclosure. Their findings indicate that most of the banks are reluctant to appoint independent
directors and unwilling to include independent directors on the audit committee. The nature of
compliance has now improved in the banking sector and one of the possible reasons for this has been the
introduction of revised guidelines by Securities Exchange Commissions in 2006. All banks are required to
adopt these guidelines as a benchmark to measure the status of corporate governance. The same
improvements have also been identified in the domain of transparency and disclosure. Their findings
indicate that although there are some areas of improvements, Bangladesh is still lagging behind other
regional states and economies of a comparable size. La Porta, R., F. Lopez-de-Silanes, A. Shleifer, and R.
Vishny, (2002) conducted a study based on the sample of 539 organisations from 27 countries.
Significantly, their study found that the better protection there is of minority shareholders the greater the
positive impact on a company’s valuation.
A board of directors is a key mechanism for the appropriate functioning of an organization. The
board of directors is not only responsible for monitoring the behavior of the management but is also
accountable to an organization’s stakeholders. The size of board is also significant for effective
performance of an organization. Beiner, S., Drobetz, W., Schmid, F., and Zimmermann, H., (2004),
Dehaene, De Vuyst and Ooghe (2001), found a positive relationship between the size of board and the
performance of a company. According to Goodstein, J., K. and Boeker, W., (1994), Uadiale (2010), a large
board size is believed to be beneficial for organizations as it saves valuable resources and can help reduce
uncertainty. On the other hand, a small size of board is believed to improve the performance of the firm
(Yoshikawa and Phan, 2003) as they highlighted that larger boards tend to be less cohesive and more
difficult to coordinate because there might be diverging views and factionalism and conflict among group
members. This view is reinforced by the opinions of Mark and Kusnadi (2005), who argue that small
boards are more positively associated with high performance. Lipton and Loarch (1992), suggest an
optimal board size between 7 to 9 directors. Having an odd number is significant as it ensures that when
votes take place that ties are less likely.
Another important aspect of the corporate governance principle is the Audit Committee (AC).
The role of an audit committee is important in improving the performance of a company or organization.
According to the Securities and Exchange Commission (SEC) Rule (2012), an audit committee should
work independently and perform their duties with professional care. An Audit Committee is a monitoring
mechanism that in theory should help increase the quality of information. Mansi, S.A. and Reeb, D. M.,
(2004), reported a positive relationship between an audit committee and an organization’s performance.
On the other hand, Kajola (2008), shows there are no significant relation between audit committee and a
company’s performance.
The practices of corporate governance are essential for effective, competitive, safe and sound
financial and banking institutions and to stimulate and support the economic growth through the efficient
allocation of resources.
Corporate Governance in Bangladesh: Banking and Finance sector
Most companies depend on banks as their chief source of finance. In Bangladesh, the capital market is
still in an emerging state with market capitalization amounting to a mere 6.5% of GDP with low investor
confidence in corporate governance and financial disclosure practices in many companies listed on the
Stock Exchange (Hua. 2006). Bangladesh, like many other developing countries, has been experiencing
broad-based corporate governance reform initiatives since 2001 under the guidance and sponsorships of
international financial institutions such as the World Bank (WB), the International Monitory Fund (IMF),
and the Asian Development Bank (ADB) (Haque and Arun 2016). Following this, the regulatory authority
of Bangladesh introduced a code of corporate governance that sets out the principles, procedures and
processes of corporate governance practice in 2004. Subsequently, it has been a requirement for the
financial institutions and banks to adopt the corporate governance practices and procedures as a measure
of benchmarking. Corporate governance in Bangladesh is shaped by several guidelines: (a) Company law,
(b) Bangladesh Bank guidelines, (c) Securities and Exchange Commission (SEC) guidelines, and finally (d)
peer pressure (Moudud-Ul-Huq, 2015). Whilst these four dimensions have resulted in change there is a
general consensus that they are still not enough, and that Bangladesh lags behind its Asian and
international competitors. Ahmed and Yusuf (2005), argue that there has been failure in most of the
elements of corporate governance. According to them one of the main reasons for such poor corporate
governance practices in Bangladesh is due to the dominance of family-oriented businesses, weak
regulatory system, inadequate bankruptcy laws, the influence of top management, fraud and corruption,
lack of initiatives to drive corporate governance from international investors community, and political
pressure. Some other factors are:
1. Inconsistency between the Companies Act, Bangladesh Accounting Standards (BAS) and SEC
requirements: (Ahmed & Yusuf 2005). The Company Act, 1994 provides among other things for
provision regarding preparation and publication of financial systems, disclosures and auditing.
However, in many cases, the Act lacks clarity with regards to statutory requirements on
disclosures in the financial statements of listed companies (Moudud-Ul-Huq, 2015; Sarkar, 2014)
2. Limited or no disclosure regarding related party transactions: Related party transaction is not
disclosed properly in the financial statements. This is a serious barrier when it comes to achieving
corporate governance in Bangladesh (Sarkar, 2014).
3. Capital market role: Tadesse (2004) asserts that adequate production of information and
monitoring systems can help facilitate good governance. However, the capital market in
Bangladesh is still a weak link that requires attention to strengthen corporate governance. The
overall performance measures of its stock market show low trade volumes and intermittent
turbulence.
4. Board committees: In corporate governance, board committees (audit, remuneration and
nomination) are very important. An audit committee is treated as a principal player in ensuring
effective corporate governance and can play a key role in helping to rebuild public confidence in
financial reporting. However, most of the listed organisations do not have any monitoring and
remuneration committees, only a few boards have an audit committee and some of these are
decidedly supine in nature.
5. Lack of Shareholder Activism: Shareholder rights are recognized across the globe as pertinent to
efforts for enhancing and strengthening corporate governance. This is clearly indicated in the
OECD Principles (1999) and these have been adopted in organizations throughout developed
countries. However, in Bangladesh, the average non-controlling or minority shareholders do not
possess significant levels of education, understanding and sophistication required to exert
pressure on a company to change behavior. The number of shareholders with adequate
knowledge and skills to understand company operations and to hold management and the board
of directors accountable is very low. Furthermore, general shareholders do not pay sufficient
attention to issues of performance, business strategy, future business plans, disclosures and
processes that could give them a greater voice in the policy decisions of a company. In fact, in
Bangladesh there is very little awareness of shareholders’ rights and responsibilities.
Shareholders’ activism is still an illusion (Hossain 2015).
6. Lack of Auditor Independence: Auditors in Bangladesh are not considered independent or
sufficiently qualified to attest to the validity of the financial statements of corporate entities
(Bangladesh Enterprise Institute 2003). A study conducted by Raihan in 2003 showed that 64.4%
of the companies conduct regular audit for effective implementation of the core labour policies. Of
the companies which audit the implementation of core labour policies, 91.1% met their labour
policy objectives. Only 2.2%of the companies admitted that they carry out unfair dismissals and
4.4% of the companies admitted that they had violated labour laws over the previous five years.
Around 67% of companies have a formal Health & Safety policy to ensure clean, healthy and safe
working conditions. Procedures to implement policy and specific assignment to senior
management for implementation were found in only 26.7% of companies.
7. Poor Audit Reporting: Audited financial reports are rarely reliable and free from the malign
influence or control of the owners of the company’s being audited. Despite irregularities in the
audit report, the auditors issued unqualified audit report on the financial statements. Matters are
not helped by the fact that in Bangladesh there is a shortage of accountants with specialist
knowledge of forensic accounting.
8. Weakness in the Judicial System: The wheels of justice turn notoriously slowly, and this has a
direct bearing on cases concerning corruption and suspected financial impropriety. Concerns
have been raised in certain quarters that laws have failed to keep pace with the increasingly
complex nature of serious fraud in a globalized economy. Furthermore, rates of successful
prosecution in respect of fraud and corruption cases remain low, with the added complication
that the Bangladesh Judicial System is periodically tainted by the politicization of the judiciary
and attempts by successive executive branches of government trying to manipulate it or bring
pressure to bear (Panday & Mollah, 2011).
Nevertheless, the past few years have witnesses a greater inclination towards corporate governance
due to a variety of forces such as deregulation in the financial sector and economic liberalization,
institutionalization of capital markets, globalization, market competitiveness, standards of disclosure and
media and social media scrutiny.
According to the Securities and Exchange Commission Rules (2012), at least one fifth of the total
number of directors in a company’s board should be independent directors. The main role of an
independent director is to monitor and control a company’s activities effectively, thus potentially helping
to provide a safeguard against internal managerial fraudulent activities. The proportion of independent
directors is positively correlated to the performance of the firm. Rashid, A., Zoya, A. D., and Rudkin, K.,
(2010), Kajola (2008), and Moscu (2013) have concluded that the independent directors cannot add
potential value to the economic performance of organizations. Some researchers found that although the
proportion of independent directors on the board is high, the level of board independent and
professionalism is not necessarily good (Chen, K.y., Elder, R. and Hseh, M., 2007). Thus, the message in
this respect is decidedly mixed.
The rules further explain that the positions on the Board and CEO should be filled by different
individuals as their function is not necessarily separate. Duality occurs when one individual holds the two
most powerful post of CEO and Board chairman (Weir and Laing, 2001). The separation of the two
positions creates necessary checks and balances over their performance. The results of the study of Klein
(2002), suggest that boards that are separated from the CEO are more effective in monitoring the corporate
financial accounting process. Separation of board chair from CEO basically reduces agency costs for a firm
(Coleman and Osei 2007). Kajola (2008), found a positive and statistically significant relationship between
performance and separation of board chair and CEO.
Despite various regulations for the financial institutions to implement corporate governance
codes in Bangladesh, progress and success remains decidedly patchy. There are many forces of resistance
within the sector. According to Mueen (2007) resistance comes mainly from vested interests who want to
maintain the status quo. There is a tendency in Bangladesh to make large investments in highly capital-
intensive enterprises with an eye to price incentives through relationships, this leads to wastage of scarce
capital resources. To finance expenses, many firms now need foreign capital which can lead to demand for
greater transparency and better corporate governance. In Bangladesh vested interests and a highly
charged political dynamic are the key factors that hinder the process of any good governance framework.
Thus, policy makers need to focus on both regular financial accounting and transparency, whilst also
addressing thorny issues such as whether a large business group should also be allowed to have their own
bank. Currently, there are many issues that impede the enforcement of corporate governance in
Bangladesh. Some of these are: (a) The board of directors: Lack of power by the head of the
Institution/CEO and unwillingness to appoint independent directors, an absence of accountability
mechanisms within the organization; (b) Accountability and Monitoring: Difficulty in accessing the actual
information, management collusions with trade unions, commercial audits are doubtful in many cases; (c)
Commercial focus: Non market driven price mechanisms, unfair competition from the private sector; (d)
Poor employee incentives: No genuine incentives for the employees for better performance, poorly
designed remuneration package, pressure from trade unions, and malfeasance by those persons who have
a duty to ensure that the law is upheld and that codes are enforced. e) Nepotism and appointments,
promotion and preferment that is not based on merit: Across all sectors there are legitimate concerns
about the fact that individuals occupy roles not on their qualifications, experience or what they know and
can contribute, but on who they know, have bribed or who they happen to be related to.
Methodology
The study is purely based on secondary sources of data that include scholarly journal articles,
conference proceedings, relevant books, corporate governance guidelines and code of practice produced
by concerned bodies such as Bangladesh Bank (BB), Securities and Exchange Commission (SEC), the Code
of Corporate Governance for Bangladesh, Bangladesh Enterprise Institutes (BEI) guidelines and OECD
principles of corporate governance.
Findings and discussions

Based on the current and relevant literature of corporate governance and various corporate
governance guidelines and codes of practice introduced by regulatory bodies in Bangladesh and
elsewhere, the study found that the concept has received substantial attention worldwide over the last
thirty years and increasing attention in Bangladesh over recent years. This interest has become more
pronounced following a series of high-profile corporate scandals and failures worldwide that includes
scandals in financial institutions in Bangladesh. There are a range of corporate governance guidelines and
codes of practice introduced by regulatory bodies in Bangladesh such as Bangladesh Enterprise Institute
(BEI) which introduced the Corporate Governance Codes in 2004. The Securities and Exchange
Commissions (SEC) introduced Corporate Governance Guidelines in 2006 and asked financial institutions
and all listed companies to adopt these guidelines mandatorily as a benchmark for measuring corporate
governance status within the organization. The issue of corporate governance and its practices came to
public prominence when the Bangladesh Central Bank had to take over the Oriental Bank in 2006 due to a
serious liquidity crisis.
It is evident that since the introduction of corporate governance guidelines by the SEC, various listed
organizations have started, albeit sometimes rather reluctantly, to adopt various corporate governance
principles within their organizations. However, the practices are often far from comprehensive and
satisfactory. The study identified the following areas that require attention in order to expedite the
implementation of corporate governance practices in Bangladesh within the banking and finance sector:
1. Appointment of independent directors: SEC guidelines indicate that at least one tenth of the
company`s directors should be independent and independent director should be appointed by the
elected directors and this should be approved by the shareholders at the annual general meeting
(Zaman and Quazi, 2015). However, most of the banks do not follow this guideline. Although
some banks appoint an independent director, but the appointment process is not included in the
company`s annual financial report (Sarkar, 2014).
2. The role of Audit Committees: Although, many banks are not willing to include an independent
director in the audit committee, after the introduction of revised guidelines by SEC in 2012, many
listed organizations have been complying with these guidelines.
3. Board composition and size: According to SEC guidelines, 5-20 should be the ideal size of the
board of directors of a corporation. Study conducted by Sarkar (2014) found that DBBL (Ductch
Bangla Bank Limited) comply the SEC guidelines. DBBL had 9 directors in 2009 including 4 non-
executive directors. In relation to the audit committee, board size and voluntary disclosure, study
conducted by Rouf (2010) observed that a positive association between board size, audit
committee and voluntary disclosure.
4. Appointment of CEO and Chairman/Chairwoman; According to the revised SEC guidelines 2012,
the separation between the roles of CEO and Chairman of the company is vital and required. The
study observed that a number of banks currently are complying with this guideline, such as DBBL
(Butch Bangla Bank Ltd) and this support the findings of Rouf (2010), Sarkar (2014)
5. Lack of transparency towards shareholders: Findings suggest that as the concept is in infancy in
the context of Bangladesh, despite various guidelines introduced by regulatory bodies, the
applications of corporate governance principles are still unsatisfactory and there remains a degree
of reluctance on the part of companies. Many financial institutions and banks are still not
clarifying the roles and responsibilities of the board. Management consistently fail to provide
transparent information with accountability to the stakeholders. Some companies’ financial
integrity is questionable. On occasions shareholders do not have clear and clear information on a
whole range of activities of the organization. Previous studies support the findings (Shobha and
Kalaivani, 2014; Sarkar, 2014).
6. Lack of enforcement and monitoring systems: Weak regulatory system have been found to be a
barrier for achieving sound corporate governance. Laws are flouted and not enforced effectively.
7. Poor financial reporting system: The financial reporting system in Bangladesh is still not fully
standardized. A robust regulatory regime and enforcement mechanism are both lacking and not
effectively applied. Disturbingly in many cases auditors are not independent. The findings are in
the line with the research of Mahmud and Ara (2015)
Recommendations
The following recommendations can be put forward to implement reforms in corporate governance with a
view to ensuring robust corporate governance in Bangladesh:
1. Code of Corporate Governance: Bangladesh needs to have a “Code of Corporate Governance and
Best Practice Recommendations” which can be either rule based, or principles based. For
Corporate Governance, Bangladesh Enterprise Institute (BEI), Bangladesh Bank (BB), and SEC
have developed separate Codes of Corporate governance practice. By making necessary changes
in the Companies Act the Government must take initiatives to make sure that these are both
widely known and properly implemented.
2. Implementing Competition Policy: An effective competition policy invariably yields a more
flexible, dynamic, and competitive private sector that in turn leads to sustained and widely
shared economic development. Bangladesh needs to formulate a Competition Policy that assures
a culture of strong corporate governance that becomes embedded and reflective. Competition
policy helps bring about greater efficiency, promotes greater accountability, helps to reduce price
distortions, lowers the risk of poor investment decisions, and increases transparency in business
decisions, and lead to better corporate governance (BEI 2004).
3. Robust legal and regulatory framework: The legal and regulatory framework should ensure that
non-controlled or minority shareholders are protected from exploitation by insiders and
controlling or sponsor shareholders. The Government should introduce measure or enhance
existing measures to strengthen disclosure mechanisms, compliance systems throughout the
organizations, establishing shareholders rights and director’s accountability and responsibilities.
4. Improve the Capacity of Board of Directors: From the outset it is vitally important that goals are
aligned and that there is an appreciation of the fact that invariably on any Board of Directors there
are different aversion levels to risk, hence the relevance of Agency Theory. The directors should
commit to promoting participation in strategic planning, monitoring of internal control systems as
well as the independent review of transactions involving managers, controlling shareholders and
other insiders. It is imperative that there is director training, expectations for professional
conduct, voluntary codes of conduct and authority vis-à-vis management. Clear parameters need
to be set with an emphasis on addressing matters that might appear ambiguous. It is also required
to minimize or eliminate loopholes by tightening standards for director ‘independence’ by
making ‘shadow’ directors liable for their actions, by increasing sanctions for violations of duties
of care as well as by advocating delineation of a core set of related-party transactions that should
be outright prohibited. It is significant to facilitate mechanisms to adequately empower the
shareholders to seek redress for the violation of their rights and to ensure accountability of
director. The two most important things that can ensure good corporate governance are high
standards of ethical and personal conduct. High standards can only be ensured if the value
system of society instils these in citizens as the norm in every aspect of life. Good corporate
governance must become an unshakable social and moral imperative (Hossain 2015).
5. Monitor and Enforce the Implementation of Corporate Governance: The Securities and
Exchange Commission of Bangladesh needs to be strengthened so that it can devise and enforce a
code for good corporate governance. The Companies Act requires updating to be consistent with
the Bangladesh Accounting Standards (BAS), SEC requirements and the Bank Companies Act. For
all listed companies, independent Audit Committees should be made compulsory. A healthy
corporate governance environment will prevail in Bangladesh through the policymakers
implementing the recommendations suggested above (Ahmed & Yusuf 2005). Ensuring that there
are an adequate number of personnel with suitable training and resources is integral to success.
6. Public-Private Partnership (PPP): Both Public and Private institutions should continue to raise
awareness among companies, directors, shareholders and other interested parties of the value of
good corporate governance. It requires not only a strong national commitment, but also a
committed board to achieve the desired corporate governance framework in Bangladesh.
Knowledge sharing is vital, and the public and private sector would do well to forge meaningful
links as well as engineering opportunities to learn from one another.
7. Commence good governance practice in state owned enterprises: With a view to providing a
strong demonstration effect, corporate governance reforms in strategic state-own enterprises
(SOEs) that handle energy supply, telecommunication as well as air transportation can be
undertaken. There is considerable potential to help state-owned enterprises to become beacons of
exemplary practice.
8. Institutional Capacity Building: The enabling of a sound framework for corporate governance
requires the dissemination of corporate governance and enterprise restructuring principles. Public
awareness and development of governance structures for example, enforceable regulations,
ensuring financial transparency, combatting financial malpractice and any form of market
manipulation are essential for that. Thus, it is important to educate the public about their rights as
shareholders and about the work of modern corporations through the specialized publications as
well as national and regional media. Social media is a powerful means for engagement and
articulation.
9. Quality improvement of financial reporting: The quality of financial reporting needs to be
improved in Bangladesh. A robust regulatory regime and effective enforcement of the accounting
and auditing standards are required for that to take place. The genuine independence of the
auditor is at the crux of effective corporate governance. Auditors need to be able to carry out their
work without fear or favour. Auditors require monitoring through strict enforcement of the
professional code of ethics of auditors, with safeguards for whistleblowers and a clear disciplinary
process that involves the threat of legal action for those engaged in serious and sustained breaches
of professional standards and or the law. If auditors fail to act independently, overtime trust will
be eroded, and they will cease to be relevant as a bulwark against corporate/financial
impropriety.
10. Whistle Blower Protection: A powerful signal of the national commitment to addressing fraud,
corruption or mismanagement would be the formulation and passage into law of a Whistle
Blowers Protection Act. This should cover both the public and private sector and include suitable
safeguards and punishments for those who might engage in vexatious or frivolous complaints.
Bangladesh might wish to emulate or seek inspiration from the Whistle Blowers Protection Act, 2011
that is an Act in the Parliament of India. Whistleblowers have a constructive role to play in
Corporate Governance and developing clear procedures about such activity helps connote a
commitment to transparency and bolsters trust (Callahan et al, 2002).
Limitations of this study and scope for future research
A purely theoretical paper of this nature has value for practitioners, and yet such is the dynamic
nature of Corporate Governance that there is much to be gained from undertaking an empirical study that
is anchored in findings collected via the use of a survey. The lion’s share of research that focuses on
Bangladesh tends to be Dhaka-centric, and thus it is important to ensure that businesses outside of the
Bangladeshi capital are not overlooked or forgotten. Attitudes and approaches to Corporate Governance
are not the same across the globe, hence there is merit in taking greater cognizance of cultural factors, and
in this regard, there is potentially some value to be gained by examining Geert Hofstede’s 6 dimensions
model of national culture in respect of Bangladesh. Additional research could be undertaken to examine
the local composition of Boards of Directors and the degree to which those who sit on them are prepared
for the task and given appropriate guidance and ongoing training. A perennial concern is the degree to
which boards are often perceived as being reactive rather than proactive, hence the desirability of further
research that examines the factors that help create an environment where Corporate Governance thrives.
The role of business and leadership education in enhancing the understanding of business ethics and the
pivotal role that Corporate Governance can play in Bangladesh is worthy of consideration. Another
possible future avenue of research could be an exploration of the part played by local higher education
providers, both public and private, in helping spread and embed a wider appreciation of Corporate
Governance as a central mechanism for effectiveness and greater transparency both in banking and
finance and other fields of human endeavor.
Conclusion
This research confirms the growing appreciation of Corporate Governance, whilst acknowledging
that in a Bangladeshi context there are limitations in coverage and application. The degree to which
Corporate Governance in Bangladesh remains in its infancy is open to debate, sectors vary considerably
and yet there are signs that the subject itself is receiving greater attention. In identifying some of the most
common weakness and areas of concern this paper has endeavoured to elucidate what requires attention,
along with elements that might enable positive and purposeful development. As a country Bangladesh
can benefit tremendously from benchmarking against what is helping elsewhere. Corporate scandals
serve as an important reminder that there is no room for complacency and that it is better to be proactive
rather than merely reactive. Additional research would improve general understanding of Corporate
Governance and help shed light on the way in which enterprises in Bangladesh are receptive to best
practice. Finally, it is important to acknowledge that whilst effective Corporate Governance is not a
panacea for all corporate ills, it has a key role to play and as such warrant’s greater attention and action.
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The
The Journal
Journal
The of
ofof
Journal Business
Business
Business
&&&
Retail
RetailManagement
Management
Retail Management Research
Research
Research
Volume
Volume
1313
Volume 13Issue
Issue
1Issue
1 1 October
October2018
2018
October 2018
Articles
Articles
Articles
TheThe
effect
effect
of talent
of talent
The management
effect management andand
emotional
emotional
of talent management intelligence
intelligence
and emotional ononorganizational
organizational
intelligence performance:
performance:
on organizational Applied
Applied
performance: study
study
Applied on
onpharmaceutical
study pharmaceutical
on pharmaceutical
industry
industry
in Jordan
inindustry
Jordan in Jordan 111
Factors
Factors
thatthat
influence
influence
Factors Malay
that Malay
students
students
influence instudents
Malay purchasing
in purchasingskincare
skincare
in purchasing products
products
skincare in in
Malaysia
productsMalaysia
in Malaysia 15
15
15
Antecedents
Antecedentstowards
towardsemployees’
Antecedents employees’harmonious
harmonious
towards employees’ habitation
habitation
harmonious of of
thethe
environment
habitation environment
of and
and
the environment workplace
workplace
and environment-friendly
environment-friendly
workplace behaviour:
behaviour:
environment-friendly behaviour:
a case
a case
of Johannesburg
of Johannesburg employees
employees
a case of Johannesburg within
within
small
employees small
and
withinand
medium
medium
small enterprises
enterprises
and medium (SMES)
(SMES)
enterprises (SMES) 22
22
22
Is service
Is service
fairness
fairness
influencing
influencing
Is service fairnesscustomers’
customers’
influencing satisfaction
satisfaction
customers’ andand
intention
intention
satisfaction to to
paypay
and intention insurance
toinsurance
premium?
premium?
pay insurance AAcase
premium?case
A inin
BPJS
case BPJSKesehatan
Kesehatan
in BPJS Indonesia
Indonesia
Kesehatan Indonesia 38
38
38
Integrated
Integrated
marketing
marketing
communication
Integrated communication
marketing model
modelforfor
communication creating
creating
model for brand
brandloyalty
creating loyalty
brand to to
Japanese
Japanese
loyalty cars
cars
to Japaneseincars
in
Thailand
Thailand
in Thailand 49
49
49
Burnout,
Burnout,
Organizational
Organizational
Commitment
Commitment
Burnout, Organizational and
and
Turnover
Turnover
Commitment Intention
Intention
and Turnover Intention 62
62
62
TheThe
effect
effect
of good
of good
The corporate
corporate
effect of goodgovernance
governance
corporate on on
financial
financial
governance on performance
performance
financial and
and
netnet
performance working
andworkingcapital
capital
net working turnover
turnover
capital asasa as
turnover amediation
mediation variable:
variable:
a mediation variable:
evi evi
evidence
evidence
fromfrom
Indonesia
evi Indonesia
evidence fromStock
Stock
Exchange
Exchange
Indonesia Stock (IDX)
(IDX) (IDX)
Exchange 70
70
70
TheThe
effects
effects
of The
an
of IT-related
an IT-related
effects of ancurriculum
curriculum
IT-related based
based
on on
curriculum hybrid-style
hybrid-style
based problem-based
problem-based
on hybrid-style learning
learning
problem-based onon
career
learningcareerdecision-making
decision-making
on career self-efficacy
self-efficacy
decision-making self-efficacy
of women’s
of women’sUniversity
of University
women’sstudents
students
in students
University Korea
in Koreain Korea 81
81
81
AreAre
cooperative
cooperative
Arerelationships
relationships
cooperative a viable
a viable
option
relationships aoption
forfor
viable accessing
accessing
option resources
resources
for accessing forfor
female
resourcesfemale informal
informal
for female traders
traders
informal ininSouth
traders South Africa?
Africa?
in South Africa? 89
89
89
Co Co
Consumer
Consumer
purchase
purchase
Co regret:
Consumer regret:
how
purchasehow
personality
personality
regret: influences
influences
how personality outcome
outcome
influences regret
regret
outcome and
andprocess
regret process
regret
regret
and process regret 100
100
100
TheThe
impact
impact
ofThe
financial
of impact
financial
accessibility
accessibility
of financial constraints
constraints
accessibility andand
government
government
constraints regulations
regulations
and government onon
the
the
regulations organisational
on organisationalperformance
performance
the organisational ofofsmall-and-
performance ofsmall-and-
small-and-
medium-sized
medium-sizedenterprises
enterprises
medium-sized enterprises 108
108
108
Determining
Determining
shopping
shopping
malls
Determining malls
customers’
customers’
shopping satisfaction
satisfaction
malls customers’ and and
loyalty
loyalty
satisfaction and loyalty 121
121
121
CusCus
Customers’
Customers’
repurchase
repurchase
Cus
Customers’decision
decision
in decision
repurchase the
in the
culinary
culinary
in theindustry:
industry:
culinary DoDo
thethe
industry:Big-Five
Big-Five
Do personality
personality
the Big-Five types
types
personality matter?
matter?
types matter? 131
131
131
TheThe
relationships
relationships
among
amongleadership
The relationships leadership
styles,
styles,
communication
among leadership communication skills,
skills,
styles, communicationandand
employee
skills,employeesatisfaction:
satisfaction:
and employee AA study
satisfaction:studyon
onequal
A study equal
on employment
employment
equal employment
opportunity
opportunityin leadership
in leadership
opportunity in leadership 138
138
138
Forecasting
Forecasting
the the
tendencies
tendencies
Forecasting theof the
of the
Russian
tendenciesRussian
vegetables
of the vegetables
Russian market
market
vegetablesdevelopment
development
market development 148
148
148
Internal
Internal
audit
audit
quality
quality
Internal dimensions
dimensions
audit andand
organizational
organizational
quality dimensions performance
performance
and organizational in in
Nigerian
performanceNigerian
federal
federal
in Nigerian universities:
universities:
federal the
therole
universities: role
the ofoftop
role top
of management
management
top management
support
support support 156
156
156
Does
Does
the the
spin-off
spin-off
Doespolicy
thepolicy
cancan
accelerate
spin-off accelerate
policy can thethe
deposit
deposit
accelerate thefunds
funds
in funds
deposit in
thethe
Indonesian
Indonesian
in Islamic
Islamic
the Indonesian banking
banking
Islamic industry?
industry?
banking industry? 171
171
171
Impact
Impact
of motivational
of motivational
factors
factors
on knowledge
Impact of motivationalonfactors
knowledge sharing
sharing
on knowledgebehaviour
behaviour
sharing of of
managers
managers
behaviour in in
Ready
of managersReadyMade
Made
in Ready Garments
Garments
Made (RMG)
(RMG)
Garments Industry
Industry
(RMG) Bangladesh179
ofofBangladesh
Industry ofBangladesh 179
179
TheToptimum
he optimum
Trefurbishment
refurbishment
he optimum time
time
of shopping
of shopping
refurbishment centres
centrescentres
time of shopping 190
190
190
Moderated-mediation
Moderated-mediation
investigation
investigation
Moderated-mediation on on
internet
internet
investigation onmarketing
marketing
internet andand
export
export
marketing andmarket
market
export growth
growth
market inin
the
growth the
inJordanian
Jordanian
the export
export
Jordanian sector
sector
export sector 200
200
200
Influence
Influence
of leadership
of leadership
Influence ofstyle,
style,
training,
training,
leadership role
style, role
of ambiguity
of ambiguity
training, onon
employee
employee
role of ambiguity performance
performance
on employee ofof
higher
performancehighereducation
education
of higher ofofSaudi
education Saudi
of Arabia
Arabia
Saudi (KSA)
(KSA)
Arabia (KSA) 213
213
213
Performance
Performance
model
model
development
development
Performance forfor
assessing
assessing
model development for maintenance
maintenance
assessing service
service
maintenance providers
providers
service using
using
providers the
the
Kano
using Kanomodel
model
the Kano model 225
225
225
Optimal
Op Optimal
Op board
board
sizesize
Optimal
Op inboard
the
in the
Jordanian
Jordanian
size in thebanks:
banks:
Empirical
Jordanian Empirical
evidence
evidence
banks: Empirical based
based
on
evidence on
accounting
accounting
based performance
performance
on accounting performance 232
232
232
TheThe
roles
roles
of internal
of
Theinternal
audit
roles ofaudit
quality
quality
internal on on
audit thethe
relationship
qualityrelationshipbetween
between
on the relationship narcissistic
narcissistic
between CEOs
CEOs
narcissistic and
and
CEOsreal
real
andearnings
earnings
real management
management
earnings management 241
241
241
TheThe
impact
impact
ofThe
corporate
of impact
corporate
social
of social
responsibility
responsibility
corporate on on
customer
customer
social responsibility loyalty
loyalty
on customer in in
thethe
loyaltyQatari
inQatari
telecommunication
telecommunication
the Qatari sector
sector
telecommunication sector 253
253
253
Corporate
Corporate
Governance
Governance
Corporate Practices
Practices
GovernanceinPractices
the
in the
Banking
Banking
in theand
and
Finance
Finance
Banking and Sector:
Sector:
Finance Perspectives
Perspectives
Sector: from
from
Perspectives Bangladesh
Bangladesh
from Bangladesh 269
269
269
Available
Availableonline
online
Available atat
www.jbrmr.com
onlinewww.jbrmr.com
at www.jbrmr.com
Copyright
Copyright
Academy
Academy
Copyrightof Business
of Business
Academy & Retail
& Retail
of Business Management
& Management
Retail (ABRM)
(ABRM)
Management 2010-18,
2010-18,
(ABRM) All
AllRights
2010-18, Rights
All Reserved
Reserved
Rights Reserved

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Journal of Business & Retail Management Research (JBRMR)

Dr. Justin Henley Beneke Professor Evelyn Germinah Chilone-Tsoka

Dr. Sudaporn Sawmong Prof. Małgorzata Magdalena Hybka

Volume 13 Issue 1 October 2018

ISSN 1751-8202 (Print) ISSN 2056-6271 (Online)

Statement of Editorial Policy

Aims & Objectives

A statement about open access

Journal of Business and Retail Management Research (JBRMR)

The effect of talent management and emotional intelligence on organizational performance: 1

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Forecasting the tendencies of the Russian vegetables market development 148

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The effect of talent management and emotional intelligence on

Corresponding author: Marzouq Ayed Al-Qeed

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Figure 1: Research model: TM – EI – OP relationship (developed by authors)

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Table 3. Unstandardized coefficients and standard errors of the 4 models implemented

Figure 3. Direct effect of Talent Management on Organizational Performance

Figure 4. Effect of Talent Management on Organizational Performance through Emotional Intelligence

Table 4. Epitomizing results

6. Discussion and conclusion

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Factors that influence Malay students

Corresponding author: Nazatul Shima Abdul Rani

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they market Halal skincare products in Malaysia.

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4.2 Reliability Analysis

4.4 Findings and Hypothesis Test

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Table 3: Hypothesis Test – One-Sample T-test

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Antecedents towards employees’ harmonious habitation of the

Corresponding author: Eugine Tafadzwa Maziriri

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Figure 1: Conceptual Model

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6.2 Questionnaire design

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Table 2: Accuracy analysis statistics

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11. Inter-construct correlation matrix

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