Template-Type: ReDIF-Article 1.0 Author-Name: Albert D. Spalding Title: AUDITING DUE DILIGENCE IN LAW AND ETHICS: THE PONZI FEEDER FUND CASES Abstract: Financial accounting is an information conveyance process. When financial auditors issue an opinion in regard to financial statements, the auditors are providing assurance that those financial statements fairly represent the entity, and are prepared in accordance with the relevant standards. If there is a problem with the financial statements for which an unqualified audit opinion has been issued, the auditors may be questioned in regard to their compliance with professional technical and ethical standards that require competency, honesty, and full disclosure. These questions may be asked by the auditors’ professional organizations, such as the American Institute of Certified Public Accountants (AICPA), by government regulators who authorize the performance of auditing services, and by the judges and juries of the judicial system. This paper considers how the judiciary, in particular, takes into account auditors’ technical and ethical standards when auditors are sued for professional negligence and negligent misrepresentation. This investigation is done within the context of the recent lawsuits against auditors of feeder funds that invested with Ponzi scam artists such as Bernard Madoff. This paper concludes that the auditing profession has a teachable moment in the wake of the feeder fund failures, and should not overlook this opportunity to upgrade its ethical standards. Classification-JEL: K23; M42; M48 Keywords: Auditing, financial disclosure, due diligence, negligent misrepresentation, accountants’ liability, professional ethics, Ponzi, feeder funds. Journal: Review of Business and Finance Studies Pages: 1-12 Volume: 3 Issue: 1 Year: 2012 File-URL: http://www.theibfr2.com/RePEc/ibf/rbfstu/rbfs-v3n1-2012/RBFS-V3N1-2012-1.pdf File-Format: Application/pdf Handle: RePEc:ibf:rbfstu:v:3:y:2012:i:1:p:1-12 Template-Type: ReDIF-Article 1.0 Author-Name: Wannapa Wichitchanya Author-Name: Supol Durongwatana Author-Name: Pakpachong Vadhanasindhu Title: THE COMPONENTS OF THE INNOVATIVE ORGANIZATION: EVIDENCE FROM THAILAND Abstract: This paper examines the components of the innovative organization in Thailand. The mixed method was used in gathering the data that can be categorized in two parts. Qualitative collection used focus group discussion in an R&D unit. The findings revealed that employees understood the innovation concept and the importance of innovation. This understanding could enable the company to compete in new business environments. In the quantitative element of the study, data were gathered from 152 employees by questionnaire. The results showed the means of innovative firm factors, company infrastructure, external confidence, clear objectives, team constitution, external influence, freedom, attitude toward risk, internal confidence, department growth and development, were not very different and the work period affected the perception of employees. The employees recommended that firms should create an innovative culture, set innovative behaviors as the work standard, and that communication among individuals, groups, and organizations would help employees create new ideas and implement their ideas. Classification-JEL: M10, M12, M14 Keywords: Innovation, Innovative Organization, Corporate Structure, Biotechnology, Strategy Journal: Review of Business and Finance Studies Pages: 13-21 Volume: 3 Issue: 1 Year: 2012 File-URL: http://www.theibfr2.com/RePEc/ibf/rbfstu/rbfs-v3n1-2012/RBFS-V3N1-2012-2.pdf File-Format: Application/pdf Handle: RePEc:ibf:rbfstu:v:3:y:2012:i:1:p:13-21 Template-Type: ReDIF-Article 1.0 Author-Name: Pina Puntillo Title: CREDIT POLICIES IN SOUTHERN ITALY SOLID WASTE FIRMS Abstract: The aim of the present work is to analyze how relations between financial choices and the capital structure of firms condition the business dynamics of the companies involved. The paper involves an analysis of the balance sheets for the three year period 2005-2007 of firms dealing with urban waste disposal in a region of Southern Italy. The results show how economic dynamics and current tariff policies have resulted in conditions of financial imbalance that, in more than one case, have led to financial bankruptcy. The massive credit given to insolvent public bodies has resulted in excessive risk exposure. The result is levels of debt that it is hard to imagine would be tolerated in companies working under normal market competition. This paper analyzes waste disposal companies dealing in a part of the country that has been defined as underutilized. This sample provides an interesting opportunity to study the policy implications of the crisis and failure of such companies. Classification-JEL: M4 Keywords: Public Utility, Capital Structure Journal: Review of Business and Finance Studies Pages: 23-42 Volume: 3 Issue: 1 Year: 2012 File-URL: http://www.theibfr2.com/RePEc/ibf/rbfstu/rbfs-v3n1-2012/RBFS-V3N1-2012-3.pdf File-Format: Application/pdf Handle: RePEc:ibf:rbfstu:v:3:y:2012:i:1:p:23-42 Template-Type: ReDIF-Article 1.0 Author-Name: Congsheng Wu Title: SHORTCUT TO THE U.S. MARKETS THROUGH REVERSE MERGERS Abstract: A reverse merger takes place when a public company, commonly known as a shell, acquires a private operating company through a share exchange transaction. The public shell typically has no business operations, but is valuable because of its public trading status. Post-merger, the operating company’s owners take control of the newly formed public company. Reverse mergers have long been used in the U.S. as an alternative to achieve public trading status. Conventionally, foreign companies wishing to cross list their shares in the United States have followed the old-fashioned initial public offering (IPO) process. Their shares, typically in the form of American Depositary Receipts (ADRs), are registered with the SEC and are listed on a major stock exchange. In recent years, however, an increasing number of Chinese companies have gained U.S. market listing through reverse mergers. This article provides a detailed case study of an actual reverse merger. The case is appropriate for upper-level undergraduate or graduate finance courses such as corporate finance. Students should have the basic knowledge about the financial markets and corporate finance. Students can work individually or in teams on this project, which requires around 5-8 hours outside of class to complete. Classroom presentations and discussions should be arranged in a regular, 2-hour class. Classification-JEL: G34 Keywords: Reverse Mergers, Chinese Companies, Public Shell; Case Study Journal: Review of Business and Finance Studies Pages: 43-52 Volume: 3 Issue: 1 Year: 2012 File-URL: http://www.theibfr2.com/RePEc/ibf/rbfstu/rbfs-v3n1-2012/RBFS-V3N1-2012-4.pdf File-Format: Application/pdf Handle: RePEc:ibf:rbfstu:v:3:y:2012:i:1:p:43-52 Template-Type: ReDIF-Article 1.0 Author-Name: Ahmet Bayraktar Title: DOES SEXUALITY IN ADS WORK FOR EVERYONE: MUSLIM CONSUMERS’ REACTIONS TO SEXUALITY IN ADS Abstract: This paper explores the reactions and responses of Muslim consumers to advertisements that include sexuality. Specifically, it seeks to answer the following questions: What do Muslim consumers think about the advertisements that include sexuality? How does sexual content of ads influence their behavior? What might be the mechanism that explains the behavioral process? This study utilizes exploratory research methods to answer these questions. It suggests that Muslim consumers tend to develop negative attitude toward the advertisements that include sexuality. They may also develop negative attitude toward the brands in these ads, and toward the firms that own these brands, a process explained by halo effect. Furthermore, they tend to take some measures in order to prevent both themselves and their children from being exposed to these ads. This paper argues that the concept personal modesty explains Muslim consumers’ responses to sexuality in ads. Classification-JEL: M37 Keywords: Advertising, sexuality, Muslim consumers, personal modesty Journal: Review of Business and Finance Studies Pages: 53-60 Volume: 3 Issue: 1 Year: 2012 File-URL: http://www.theibfr2.com/RePEc/ibf/rbfstu/rbfs-v3n1-2012/RBFS-V3N1-2012-5.pdf File-Format: Application/pdf Handle: RePEc:ibf:rbfstu:v:3:y:2012:i:1:p:53-60 Template-Type: ReDIF-Article 1.0 Author-Name: Steven Shapiro Author-Name: Katherine Kinkela Author-Name: Peter Harris Title: CHURNING AND SUITABILITY OF INVESTMENTS: A FINANCIAL INDUSTRY REGULATORY AUTHORITY ARBITRATION CASE STUDY Abstract: The identities of all parties in this matter have been changed to maintain confidentiality. An investor claimed that a broker at a well established securities firm was churning her account and had placed her funds in an account that was not suitable, given her investment objectives. She retained legal counsel. Her attorneys hired a consultant who wrote a report that discussed whether the investments were suitable, as well as whether there was excessive trading. The consultant’s report and ultimately the author’s testimony were expected to be introduced as evidence in Financial Industry Regulatory Authority (FINRA) arbitration. Ms. Laura Smith, a 72 year old retired widow, opened a brokerage account with Establishment Securities in March 1997, in response to a telephone solicitation from George Shady, an Establishment registered representative. Ms. Smith’s primary investment account was with another securities firm. In March 2000, Ms. Smith transferred her primary investment account to Establishment Securities in response to another telephone solicitation from Mr. Shady. Based upon a review of documents that Ms. Smith signed when the Establishment account was created, Ms. Smith had specified that the account was nondiscretionary, meaning that Mr. Shady could not make trades or changes to her portfolio without her permission and that her investment objectives were income and growth. Subsequently by 2003, Ms. Smith noticed that there was unusual activity in her account, which prompted the legal action discussed in this paper. In particular, Ms. Smith’s legal counsel filed claims against Establishment Securities alleging that her account had been churned and that her investments were not suitable, relative to her investment objectives. Pursuant to the agreement originally signed in the brokerage agreement, the parties agreed to settle disputes according to FINRA Code of Arbitration. This case study is appropriate for Senior Level and Graduate students of Accounting and Finance. Classification-JEL: M00, K1 Keywords: Churning, Suitability. Journal: Review of Business and Finance Studies Pages: 61-67 Volume: 3 Issue: 1 Year: 2012 File-URL: http://www.theibfr2.com/RePEc/ibf/rbfstu/rbfs-v3n1-2012/RBFS-V3N1-2012-6.pdf File-Format: Application/pdf Handle: RePEc:ibf:rbfstu:v:3:y:2012:i:1:p:61-67 Template-Type: ReDIF-Article 1.0 Author-Name: Andrews Adugudaa Akolaa Title: CULTURAL DIAGNOSIS AND BYPASSING; THE EFFECT ON SUCCESSFUL INTERNATIONALIZATION Abstract: Globalization and its effect on business continue to propel firms to look beyond local markets for opportunities for market development and as a source of growth. However, Cultural differences in various markets continue to exert enormous pressure on international market operations as a result of cultural bypassing or misdiagnosis and this requires international marketers to undertake robust cultural analysis to ensure successful market servicing strategies. This paper reviews and discusses the crucial role of culture in successful internationalization; key reviews of marketing strategies and failures of some major corporations presented, cultural analytical frameworks have been evaluated and novel theoretical propositions made to segment cultural elements into soft and hard cultures. The paper provides a logical step approach framework to guide the international market practitioners analyzing foreign market cultures. Classification-JEL: F23 Keywords: International marketing, Culture, Diagnosis, Market failures, Soft and hard culture Journal: Review of Business and Finance Studies Pages: 69-84 Volume: 3 Issue: 1 Year: 2012 File-URL: http://www.theibfr2.com/RePEc/ibf/rbfstu/rbfs-v3n1-2012/RBFS-V3N1-2012-7.pdf File-Format: Application/pdf Handle: RePEc:ibf:rbfstu:v:3:y:2012:i:1:p:69-84 Template-Type: ReDIF-Article 1.0 Author-Name: Gulser Meric Author-Name: Chih-Chieh (Jason) Chiu Author-Name: Ilhan Meric Title: FAIR VALUE TELEVISION: SALES VOLATILITY, BUSINESS RISK, AND FINANCIAL LEVERAGE Abstract: Business risk and financial risk are among the most important concepts in corporate finance. The total risk of a corporation is the sum of its business risk and financial risk. Business risk is the risk of the corporation before the financing decision. It is the uncertainty inherent in the corporation’s future operating income. An important cause of business risk is sales volatility. Financial risk is the added risk caused by debt financing. Using financial leverage increases the total risk of the firm by increasing the volatility of a corporation’s net income and return on equity. The case provides an opportunity for students to understand the determinants of business risk, financial risk, and market value in a real-world setting. Fair Value Television (FVT) is a television retailer in California with a high sales volatility and business risk due to competition. The company is considering the effect of increasing financial leverage on its return on equity and common stock value. Classification-JEL: G30; G32 Keywords: Business Risk, Financial Risk, Total Risk, Financial Leverage, Beta, Market Value Journal: Review of Business and Finance Studies Pages: 85-94 Volume: 3 Issue: 1 Year: 2012 File-URL: http://www.theibfr2.com/RePEc/ibf/rbfstu/rbfs-v3n1-2012/RBFS-V3N1-2012-8.pdf File-Format: Application/pdf Handle: RePEc:ibf:rbfstu:v:3:y:2012:i:1:p:85-94 Template-Type: ReDIF-Article 1.0 Author-Name: Koldo Zabalza Author-Name: Jesus Matey Title: CHANGES IN OPERATIONS MANAGEMENT OF PRIVATIZED SPANISH FIRMS Abstract: Firm privatization entails a thorough process of reform that includes the introduction of new management practices. A review of theoretical and empirical studies conducted confirms that a systematic analysis of changes in management arising after a public company’s privatization does not exist. This study explores changes in operations management that take place after a public company’s privatization and proposes relevant factors in four operations performance areas. In order to confirm the theoretical propositions posed, we used contemporary multiple case studies as a research methodology. In particular, changes experienced in the operations management area in four privatized Spanish companies were investigated using a longitudinal analysis. The results of this study confirm most theoretical propositions and identify four areas considered are relevant to the process of change in a privatized firm’s operations management. Classification-JEL: M11 Keywords: Privatization, changes in management, operations management, case study Journal: Review of Business and Finance Studies Pages: 95-108 Volume: 3 Issue: 1 Year: 2012 File-URL: http://www.theibfr2.com/RePEc/ibf/rbfstu/rbfs-v3n1-2012/RBFS-V3N1-2012-9.pdf File-Format: Application/pdf Handle: RePEc:ibf:rbfstu:v:3:y:2012:i:1:p:95-108 Template-Type: ReDIF-Article 1.0 Author-Name: Romilda Mazzotta Author-Name: Giovanni Bronzetti Author-Name: Graziella Sicoli Title: INTELLECTUAL CAPITAL MANAGEMENT IN LOCAL PUBLIC UTILITIES Abstract: The competitive advantage of companies is increasingly focused on Intellectual Capital (IC) and on its management. Factors such as skills, innovation, stakeholders’ relation, development and sharing of knowledge have become key success factors. These aspects are important for Local Public Utilities. These organizations produce goods and services operating in competitive markets in a utility function for the local community using technological and organizational infrastructure resources. In the past, in these organizations, IC was critical to reach objectives such as to satisfy citizen needs. Local Public Utilities focused their assets on the technical components of management including plant equipment, technical expertise, professionalism, and quality control and security systems. The introduction of the economic efficiency logic and competitiveness led to a rethinking of the IC role. The production of public services becomes competitive in the market according to logic of economic efficiency. The relationship with the community begins to be formalized in service contracts; new management structures are introduced and companies need to remunerate the capital invested. Consequently, companies must implement strategic and organizational changes and focus on intangible assets as knowledge, skills and operational mechanisms. In the new scenario IC becomes an important strategic tool both in the company and in the outside environment. Proper IC management can improve company value. Classification-JEL: E24; I23; J24; O15 Keywords: Intellectual capital, Intellectual capital management, Local Public Utilities. Journal: Review of Business and Finance Studies Pages: 109-118 Volume: 3 Issue: 1 Year: 2012 File-URL: http://www.theibfr2.com/RePEc/ibf/rbfstu/rbfs-v3n1-2012/RBFS-V3N1-2012-10.pdf File-Format: Application/pdf Handle: RePEc:ibf:rbfstu:v:3:y:2012:i:1:p:109-118 Template-Type: ReDIF-Article 1.0 Author-Name: Bingqing Yin Author-Name: Susie Pryor Title: BEAUTY IN THE AGE OF MARKETING Abstract: Research has repeatedly demonstrated that beauty is positively related to a number of important outcomes including social and personal power, self-esteem, and preferential treatment from others (Bloch and Richins, 1992; cf. Adams, 1977; Goldman and Lewis, 1977). Moreover, studies consistently suggest that the use of physically attractive models results in positive effects (Berscheid and Walster, 1974; Bower, 2011; Buunk and Dijkstra, 2011; Landy and Sigall, 1974). Accordingly, advertisers utilize attractive models to promote a wide array of products ranging from cosmetics to electronics. Despite the emergence of physical attractiveness as a major component of consumer marketing, there is little cohesive theoretical development in this area. This oversight ignores a marketplace dominated by global marketing initiatives which cross nation-state and cultural boundaries. We have no coherent language system for the study of beauty, nor has there been a systematic attempt to develop a theory of beauty that is robust enough to be useful to marketing and advertising practitioners. The purpose of this paper is to contribute to that theoretical development. First, we refine terminology. Second, we review the marketing literature related to the subject area. Finally, we tentatively suggest how socio-cultural factors may affect consumer perceptions of beauty. Classification-JEL: M31 Keywords: marketing, beauty, consumer behavior, cross-cultural research Journal: Review of Business and Finance Studies Pages: 119-132 Volume: 3 Issue: 1 Year: 2012 File-URL: http://www.theibfr2.com/RePEc/ibf/rbfstu/rbfs-v3n1-2012/RBFS-V3N1-2012-11.pdf File-Format: Application/pdf Handle: RePEc:ibf:rbfstu:v:3:y:2012:i:1:p:119-132