International Journal of Contemporary Business Studies

ISSN 2156-7506VOLUME 3NUMBER 4April, 2012International Journal ofContemporary Business StudiesImpact of Leverage on Stock Returns Empirical Evidence fromKarachi Stock Exchange (KSE)-PakistanSumayya Chughtai,Farah Zamir,Ayesha Riaz,Farah KhanThe Role of Human Resource Practitioners Maintaining SustainabilityIn Organisations: Some Empirical Evidence Of Expectations,Challenges And TrendsDr A J du Plessis, Ms S Paine, Dr C J BothaIn Financial Meltdown Are Country’s Stability Factors of More Interestto Foreign Investors?A Critical ExaminationWajid Shakeel Ahmed, Muhammad Tahir Masood, Ph.D., P.E., Dr.Husnain A. Naqvi, Jibran SheikhIs Outward Bound Training (OBT) An Effective Tool for HumanResource Development (HRD)? A Case Study from Sri LankaDr. Mohamed Esham, Krishanthi Ganga VithanaLiterature Review: Service Quality in Higher Education Institutions inMalaysiaAnantha Raj A. ArokiasamyAdversity Quotient: A new paradigm to exploreEr. Shivinder Phoolka, Dr. Navjot Kaur..A study on the international diversification in the emerging equitymarket and its effect on the Indian capital marketSk Samim Ferdows , Abhijit Roy.An International Journal Published byAcademy of Knowledge Processwww.akpinsight.webs.comCopyright © 2012 IJCBSCopyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comwww.akpinsight.webs.comInternational journal of Contemporary Business StudiesA journal of Academy of Knowledge ProcessSaddal H.AEditor-in-ChiefEditorial BoardEnrich Knowledge through Quality 3 ResearchCopyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comwww.akpinsight.webs.comEnrich Knowledge through Quality 4 ResearchCopyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comwww.akpinsight.webs.comContents:VOLUME 3, NUMBER 4April, 2012 Impact of Leverage on Stock Returns Empirical Evidence from Karachi StockExchange (KSE)-PakistanSumayya Chughtai,Farah Zamir,Ayesha Riaz,Farah Khan………………………………………………….6 The Role of Human Resource Practitioners Maintaining Sustainability InOrganisations: Some Empirical Evidence Of Expectations, Challenges And TrendsDr A J du Plessis, Ms S Paine, Dr C J Botha…………………………………………………………………... 16 In Financial Meltdown Are Country’s Stability Factors of More Interest to ForeignInvestors? A Critical ExaminationWajid Shakeel Ahmed, Muhammad Tahir Masood, Ph.D., P.E., Dr. Husnain A. Naqvi, Jibran Sheikh.35 Is Outward Bound Training (OBT) An Effective Tool for Human ResourceDevelopment (HRD)? A Case Study from Sri LankaDr. Mohamed Esham, Krishanthi Ganga Vithana…………………………………………………………….427 Literature Review: Service Quality in Higher Education Institutions in MalaysiaAnantha Raj A. Arokiasamy……………………………………………………………………………………… 51 Adversity Quotient: A new paradigm to exploreEr. Shivinder Phoolka, Dr. Navjot Kaur……………………………………………………………………………67 A study on the international diversification in the emerging equity market and itseffect on the Indian capital marketSk Samim Ferdows , Abhijit Roy………………………………………………………………………………,,…79Enrich Knowledge through Quality 5 ResearchCopyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comImpact of Leverage on Stock ReturnsEmpirical Evidence from Karachi StockExchange (KSE)-PakistanSumayya ChughtaiPhD scholar, Mohammad Ali Jinnah UniversityLecturer, International Islamic UniversityIslamabad, PakistanFarah ZamirLecturer, International Islamic UniversityIslamabad, PakistanAyesha RiazInternational Islamic UniversityIslamabad, PakistanFarah KhanInternational Islamic University, Islamabad, PakistanABSTRACTThis study is aimed to determine the impact of leverage on stock returns. The basicobjective is to identify whether the capital structure of a firm impacts the returns of itsstock being traded in the stock exchange market.The approach used to conduct the studyis based on Fama and French (1993) three-factor model. We have basically extended theirmodel by including a fourth factor of leverage. The basic methodology used to identifythe impact of leverage on stock returns is same as used in three-factor model to identifythe impact of size premium and value premium on equity market returns. The study isbasically conducted on 36 non-financial leading firms of Pakistan listed on Karachi StockExchange (KSE)-100. Time horizon that this study covers ranges from January 2007 tillDecember 2010. The results indicate that leverage has no significant impact in explainingthe stock returns of a company. Hence, capital structure of firm proves to be of no valuein determining excess stock returns. In addition to that it also reveals that for the saidtime period there is no size effect as well as value effect present in KSE market. Only themarket premium has been given by KSE during 2007-2010 period. This study providesimportant implications for Pakistani investors who are willing to invest in KSE because itprovides an insight to investors regarding capital structure and stock return relation aswell as regarding two important market anomalies (value premium and size premium).The study highlights the impact of firm specific factors like market capitalization, BookValue-to-Market value ratio (BV/MV) and Debt to Equity ratio (D/E) on stock returnsapart from the impact of market specific factors like return of market portfolio.Key Words: KSE, CAMP, Size, Value, leverageCopyright © 2012. Academy of Knowledge Process6

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comINTRODUCTIONMarkowitz (1952) did one of the major advancements in finance; which is the recognition that thecreation of an optimum investment portfolio is not simply a matter of combining numerous securities, butthe investors must consider the relation between the investments to have an optimum portfolio.Heproposed that investors must consider a balance between the risk and return. Markowitz Portfolio theory(1952) tells us that how the investor should minimize the risk and maximize his return. The capital markettheory extended portfolio theory and a model for pricing all risky assets was developed by Lintner (1965),Sharpe (1964), Black (1972)andMossin (1966) independently. The resultant model was the “Capital AssetPricing Model (CAPM)”, which allowed the investors to determine the required rate of return for therisky investments. CAPM linked the excess return with market return.Ri = Rf + β (Rm – Rf )Merton (1973) gave “Intertemporal Capital Asset Pricing Model (ICAPM)” which further linked theexcess return to the market return along with other several variables like wealth as well as state factors;which opened ways to multifactor models.Then Ross (1976) proposed the “Arbitrage Pricing Theory(APT)”, this theory is often considered to be the alternative to CAPM. APT tells us that an asset’s returnscan be predicted using the relationship between that same asset and many common risk factors. APT usesthe risky asset’s expected return and the risk premium of a number of macro-economic factors.Unfortunately, APT failed to tell that what common risk factors must be included to calculate the returnof the security.Then finally Famaand French (1993) gave another multifactor approach in response to serious criticismon CAPM in explaining realized stock returns. They discovered that 2 classes of stocks have tendency todo better than the market as a whole:(1) Stock with small market capitalization (“small capitalization firms outperform high capitalizationfirms” also known as “size premium”)(2) Stocks with high book to market ratio (“value stocks outperform growth stocks” also known as“value premium”).As a result of these two things they added two new factors to the CAPM. The model says that theexpected return on a portfolio in excess of the risk-free rate [E(Ri)- Rf] is explained by the sensitivity ofits return to three factors:(1) Excess returns being given by market (Rm – Rf)(2) Return on portfolio with small capitalization stocks minus return on a portfolio with largecapitalization stocks (SMB; small minus big)(3) Return on portfolio with low B/M stocks minus return on portfolio of high B/M stocks (HML;high minus low).Specifically, the expected excess return on portfolio i is;E(Ri)-Rf= β 1 [(Rm)-Rf] + β 2 (SMB) + β 3 (HML) +alphaWhere [(Rm) – Rf], (SMB) and (HML) are expected premiums (market, size and value premiumsrespectively) and the factor loadings, β 1, β 2 and β 3 are the slopes in the time series regression. The sizepremium is measured by SMB and value premium is measured by HML.α is “effective return”.Fama andFrench (1993) find that the three-factor risk return relation is a good model for measuring the returns ofportfolios formed on size and book-to-market-equity ratio basis.Copyright © 2012. Academy of Knowledge Process7

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comIn this paper we have introduced a 4 th factor in existing Fama and French (1993) three-factor model tomake it a four-factor model. This 4 th factor is leverage or LMU [emphasis added] (LeveragedminusUnleveraged portfolio of stocks). Hence in this four-factor model we assume:(1) “High Cap stocks outperform low Cap stocks”(2) “Value stocks outperform growth stocks”(3) High Leveraged stocks outperform Low leveraged stocks known as Leverage Premium [emphasisadded].This Leverage premium is measured by an additional 4 th factor in three-factor equation called LMU[emphasis added]. This LMU is return on portfolio with leveraged stocks minus return on portfolio withunleveraged stocks (or low leveraged stocks).This factor determines whether the leverage has any impacton stock returns of a company or not. The equation comes out to be in the following form finally.RESEARCH OBJECTIVESE(Ri)-Rf= β 1 [(Rm)-Rf] + β 2 (SMB) + β 3 (HML) +β 4 (LMU) + alphaWe have attempted to study whether the capital structure of a firm has any impact on the risk premiumgiven by its stocks. The objectives of the research can be outlined as follows:• To determine the impact of leverage on stock returns• To identify whether there is any kind of size premium given by KSE• To identify whether there is any kind of value premium given by KSE• To determine that what impact market premium has on stock returns• To determine the validity of Fama and French three factor model in Pakistan’s marketSIGNIFICANCE OF RESEARCHThis study provides important implications for Pakistani investors who are willing to invest in KSEbecause it provides an insight to investors regarding capital structure and stock return relation as well asregarding two important market anomalies (value premium and size premium). The study highlights theimpact of firm specific factors like market capitalization, Book Value-to-Market value ratio (BV/MV) andDebt to Equity ratio (D/E) on stock returns apart from the impact of market specific factors like return ofmarket portfolio. The paper provides evidence against CAPM as well as Fama and French (1993) threefactor model validity in context of Pakistan’s market. It would help investors to identify which factoractuallyexplanatory in determining the returns of stocks held by them.LITERATURE REVIEWWhen there was a lot of empirically supported evidence against the validity of CAPM; Fama and French(1992) examined the combined impact of market beta, size, E/P ratio, B/M ratio and Leverage upon thecross section of avg. stock returns during the time horizon ranging from 1936 to 1990, for three stockmarkets namely NASDAQ, NYSE and Amex. Their study found β insignificant. On the contrary whenthe authors studied individually size, Earning/Price ratio, B/M ratio and leverage were found significantfor average cross-section stock returns. However when tested in combination size and B/M remainedsignificant and nullified the impacts of E/P and Leverage upon average returns.Fama and French (1992)therefore concluded that in a rational market there are multiple factors associated with risk rather a singlefactor like CAPM(Black, 1972; Sharpe 1964; Linter, 1965).Copyright © 2012. Academy of Knowledge Process8

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comFama and French (1993) three-factor-model was basically an extension to Fama and French (1992) studyfor stocks as well as bonds through time-series regression analysis. In total five factors were studied; forstocks 3 factors were found significant 1) Return on market portfolio, 2) firm size and 3) book to marketvalue; however for bonds the two factors 4) term premium and 5) default premium were foundinsignificant. As a consequent of these findings Fama and French (1993) developed an asset pricingmodel known today as “Fama and French Three-Factor Model” which includes one old risk factor calledmarket beta identified by Sharpe (1964) and Linter (1965) in addition to two new factors identified byFama and French (1992) called size and value (so three factor model is an enhancement of CAPM).According to Fama and French (1993) three-factor model; expected return of a portfolio in addition torisk-free-rate is caused by its sensitivity to three factors. (a) Excess return being given by market (Rm –Rf); (b) return on small capitalization minus large capitalization (SMB) (c) High Book-to-market minusLow Book-to-market (HML).Fama and French (1995) study argues that returns for high book to market equity stocks are greater thanstocks with low B/M equity. They explained the reasoning behind it through understanding the propertiesof high and low B/M equity firms. Their study concluded that companies with high book to market equitynormally remain in distress on regular basis and the companies with low book-to-market normally earnprofits on a regular basis. Therefore the high return for high book-to-market stocks is justified as thoseinvestors are compensated for carrying risky and non-profitable securities.Malin and Veeraraghavan (2004) suggest that size premium is found in France and Germany as thesemarkets exhibit the quality of outperforming small stocks by big stocks; however the researcher found anopposite behavior of stocks in UK market because in UK market large stocks produce larger returns ascompared to small stocks. As far as the second factor in three-factor model known as “value premium“ isconsidered their results show that low book to market value firms (growth stocks) guarantee higherreturns as compared to high book to market stocks (value stocks) for France, Germany and UK marketsby rejecting three factor model.Doan,Lin, and Zurbruegg (2010) studied returns of stocks being traded on US and Australian indices.They found that Australian stock returns are sensitive to co-skewnesswhereas US stock returns are moresensitive to co-kurtosis. The reason of this discrepancy in two markets is explained by the size-effectbecause Australian firms are small in size as compared to US firms listed on the indice that is in-line withthree-factor model.Javid and Ahmad (2009) examined the macroeconomic sources of variation in returns of stocksforKarachi Stock Exchange for the period of 1993-2004. They discovered that some factors had significantimpact in determining the returns of stocks like “consumption growth, inflation risk, call money rate andterm structure” whereas “market return, exchange risk and oil prices risk” had minimal role in pricing of astock.Hanif and Bhatti (2010)realized that validity of CAPM needs to be tested in context of Pakistanimarket. Therefore they conducted the study on KSE for the period of 2003-2008 and their results arguethat CAPM measured the returns of securities with accuracy only for a limited number of companies. Formajority of the companies CAPM fails to measure the expected returns; as actual returns deviate frommodel based returns.The basic assumption of CAPM that high risk entails high return fails when it is tested on Greek stockmarket for the period of 1998-2002. The research indicates that securities with high beta does not entail ahigh return as compared to stocks with low beta. (Michailidis, Tsopoglou, Papanastasiou&Mariola, 2006)Copyright © 2012. Academy of Knowledge Process9

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comMETHODOLOGYDataThe sample used in this study consists of 36 non financial-companies, listed on Pakistan’s KSE 100indice. The companies included in this sample cover a variety of industry sectors (like cement, food, oiland gas, tobacco, electricity, textile and automobile) and are Pakistan’s leading firms. Firms belonging tofinancial sector are excluded from the sample to enhance reliability. However as we required marketportfolio returns as well in our study, therefore as proxy for market portfolio of Pakistan we used all 100companies (both from financial and non-financial sectors) listed on KSE 100 indice. The daily returns ofstocks in sample have been obtained from business recorder 1 . The study is conducted on market data ofpast 4 years. The sample period ranges from January-2007 till December-2010. We use 12 monthsTreasury bill rate of Pakistan’s t-bills as proxy for the risk-free rates obtained from Pakistan State Bankwebsite 2 . KSE-100 indice values are used for proxy of market return; that are available at official websiteof KSE 3 .Portfolio formation and formulas for measurementThe methodology of portfolio formation on basis of size (market capitalization) and value (BV/MV) issame as followed by Fama and French (1993). The 36 raw companies were sorted on the basis of Avg.yearly market capitalization initially from smallest to largest (A to Z) or such that firms sort in ascendingorder of size (small size firms on top and big size on bottom). Two portfolios with 18 companies eachwere selected from size based sorting. Then each of these 2 portfolios (containing 18 firms in each) wasfurther sorted on the basis of avg. yearly Book value-to-market value ratio from largest to smallest (Z toA). The firms sort in descending order of their BV/MV ratio (firms with high BV/MV on top and lowBV/MV on bottom). Then each 18 firm’s portfolio was further divided into 3 portfolios of 6 companieseach after sorting BV/MV basis. This resulted in total 6 portfolios of 6 companies each on BV/MV basisfor a single year. Each of these 6 portfolios was then ultimately sorted on the basis of Debt-to-equityratios of each firm from largest to smallest (Z to A). The firms sort in descending order of their D/E ratio(firms with high debt on top and low debt or equity financing on bottom). Then each of six BV/MV basedportfolio is further divided into two portfolios of 3 companies each. This resulted in 12 portfolios of 3companies each on D/E basis for a single year.BV/MV ratio is calculated by using the following formula:Book to market ratio = Book value of share/market Value of ShareD/E ratio is calculated by using the following formula:Debt to equity ratio= total long term debt/total equityFor the firms D/E ratio is given in their annual reports, we used the figures without any furthermodifications.From daily prices the daily returns are calculated by using following formula:Return of stock=Ln (P t / P t-1 )Where,Ln = Natural logP t = Closing price of share on day ‘t’P t-1 = Closing price of share on day ‘t-1’Average monthly returns of stocks are calculated by taking averages of daily returns.1 www.brecorder.com/2 www.sbp.org.pk/3 www.kse.com.pk/10Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comDATA ANALYSISCorrelation analysisAvg. PortfolioReturnsRm-RFR SML HML LMU(Rp-RFR) or Rp1 0.273529 0.087574 0.140171 0.078406(Rp-RFR) or Rp2 0.435032 -0.23971 -0.19262 0.122217Rp-RFR) or Rp3 0.396407 -0.28146 -0.16232 0.109738(Rp-RFR) or Rp4 0.438067 -0.25205 -0.14818 0.087692(Rp-RFR) or Rp5 0.299346 -0.27094 -0.15706 0.117759(Rp-RFR) or Rp6 0.290547 -0.26827 -0.195 0.14102(Rp-RFR) or Rp7 0.566286 -0.13278 -0.11436 0.021451(Rp-RFR) or Rp8 0.531538 -0.13876 -0.11296 0.02585(Rp-RFR) or Rp9 0.459219 -0.23491 -0.17589 0.118758(Rp-RFR) or Rp10 0.532182 -0.22559 -0.17161 0.114838(Rp-RFR) or Rp11 0.398499 -0.24651 -0.18377 0.119466(Rp-RFR) or Rp12 0.402536 -0.20532 -0.20039 0.11849Table 4.1: Correlation of Avg. portfolio returns with market, size, value and leverage premiumfor the period of 2007-2010Table 4.1depicts the correlation between “average portfolio returns in excess of risk free rate (Rp-EFR)”and market premium (Rm-RFR), size premium (SMB), value premium (HML), and finally leveragepremium (LMU) for all twelve portfolios during the period 2007-2010.It can be seen that average portfolio returns are positively correlated with market premium for all twelveportfolios during the time horizon of 2007-2010. However as the correlation values are no where greaterthan 0.5 so we can say that the correlation is positive but not very strong. This is true for all portfoliosexcept Rp7, Rp8 and Rp10 where values are almost 0.5. The highest positive correlation is observed forportfolio Rp7 that comes out to be 32 % i.e. [(0.566286*0.566286)*100]; which means that 32%variability in average portfolio return is caused by market premium.Size premium (SMB) and value premium (HML) have a weak negative correlation with average portfolioreturns except for portfolio return Rp1, whereas leverage premium has a weak positive correlation withaverage portfolio returns for all the twelve portfolios.Regression AnalysisTable 4.2: Regression statistics for portfolio 1 through portfolio 3 during time period 2007-2010Portfolio 1 Portfolio 2 Portfolio 3Coefficients t Stat Coefficients t Stat Coefficients t StatIntercept -0.04338 -2.77784 -0.11403 -48.3951 -0.11389 -45.1786Rm- RFR 0.003006 2.018366 0.000746 3.321757 0.000715 2.975899SML 0.011912 0.840668 -0.00436 -2.03994 -0.00528 -2.30758HML 0.110575 1.236105 -0.02137 -1.58337 -0.02014 -1.3951LMU 0.083665 0.677863 0.017928 0.962779 0.0166 0.83325611Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comTable 4.3: Regression statistics for portfolio 4 through portfolio 6 during time period 2007-2010Portfolio 4 Portfolio 5 Portfolio 6Coefficients t Stat Coefficients t Stat Coefficients t StatIntercept -0.11452 -43.8906 -0.11345 -43.4162 -0.11357 -49.1823Rm- RFR 0.000827 3.322456 0.00053 2.126675 0.000456 2.068966SML -0.0049 -2.07178 -0.00504 -2.12745 -0.00454 -2.16628HML -0.01851 -1.23866 -0.01981 -1.32357 -0.0214 -1.61813LMU 0.01426 0.69153 0.017168 0.831331 0.018288 1.002125Table 4.4: Regression statistics for portfolio 7 through portfolio 9 during time period 2007-2010Portfolio 7 Portfolio 8 Portfolio 9Coefficients t Stat Coefficients t Stat Coefficients t StatIntercept -0.12008 -23.5214 -0.12071 -23.3895 -0.1137 -46.4744Rm- RFR 0.002208 4.53563 0.002038 4.141026 0.000828 3.549436SML -0.00529 -1.14166 -0.00544 -1.1616 -0.00443 -1.99412HML -0.02365 -0.80882 -0.02367 -0.80064 -0.02024 -1.4441LMU 0.011009 0.272861 0.011766 0.288474 0.018485 0.956083Table 4.5: Regression statistics for portfolio 10 through portfolio 12 during time period 2007-2010Portfolio 10 Portfolio 11 Portfolio 12Coefficients t Stat Coefficients t Stat Coefficients t StatIntercept -0.1137 -48.8806 -0.11396 -46.3617 -0.11346 -46.6352Rm- RFR 0.000962 4.337809 0.000697 2.973042 0.000691 2.979673SML -0.00422 -1.99879 -0.00456 -2.04567 -0.00382 -1.73211HML -0.01904 -1.42911 -0.02124 -1.5085 -0.02193 -1.57385LMU 0.018354 0.998465 0.01769 0.910657 0.017443 0.907211Table 4.2, 4.3, 4.4 and 4.5 depict the regression statistics for the twelve portfolios under research. Theresults indicate that only market premium is significant for the study undertaken as only for this variablethe value of t stat is greater than 2 (t stat>2). All other independent variables i.e. SMB, HML and LMUare found to be insignificant for Karachi Stock Exchange for the period of 2007-2010. The results areconsistent for all twelve portfolios under discussion. KSE market is found to be giving only marketpremium and market is not giving any kind of size or value premium. Similarly the capital structure of thefirms is also not very explanatory in determining the returns of stocks. Other than market premium SMB,HML and LMU are not determining the average portfolio returns. Also the confidence interval for allportfolios ranging from Portfolio 1 through Portfolio 12 is found to be 95% that is highly significant forall variables.12Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comDescriptive statisticsTable 4.6:Descriptive statistics for portfolio 1 through portfolio 6 during time period 2007-2010DescriptiveStatsPortfolio 1 Portfolio 2 Portfolio 3 Portfolio 4 Portfolio 5 Portfolio 6Mean -0.05088 -0.1121510 -0.11183 -0.11257 -0.11152 -0.11173StandardError0.014907 0.0025221 0.002656 0.002764 0.002625 0.002341Median -0.09392 -0.11711 -0.11659 -0.11841 -0.11993 -0.11869StandardDeviation0.103278 0.0174734 0.018401 0.019152 0.018188 0.016222SampleVariance0.010666 0.0003053 0.000339 0.000367 0.000331 0.000263Kurtosis -0.66043 -0.654259 -0.86723 -0.53793 -0.64298 -1.13165Skewness 1.109715 0.0100711 0.113714 0.070343 0.14179 0.388219Range 0.289902 0.0719213 0.071459 0.080385 0.075934 0.057285Minimum -0.1526 -0.157416 -0.15358 -0.15727 -0.15674 -0.13935Maximum 0.1373 -0.085495 -0.08212 -0.07688 -0.0808 -0.08207Sum -2.44211 -5.383249 -5.36807 -5.40327 -5.35299 -5.36295Count 48 48 48 48 48 48ConfidenceLevel(95.0%)0.029989 0.0050737 0.005343 0.005561 0.005281 0.00471Table 4.7: Descriptive statistics for portfolio 7 through portfolio 12 during time period 2007-2010DescriptiveStatsPortfolio 7 Portfolio 8 Portfolio 9 Portfolio 10 Portfolio 11 Portfolio 12Mean -0.11743 -0.11808 -0.11183 -0.11189 -0.11205 -0.11169StandardError0.005654 0.005565 0.00264 0.002636 0.002576 0.00253Median -0.1177 -0.11894 -0.1177 -0.11712 -0.11749 -0.11809Standard 0.039175 0.038553 0.01829 0.01826 0.017845 0.017532DeviationSampleVariance0.001535 0.001486 0.000335 0.000333 0.000318 0.000307Kurtosis 13.9224 13.99063 -0.24407 1.058871 -0.63588 -0.7935Skewness -3.44949 -3.46392 -0.05748 -0.39299 0.021972 0.090435Range 0.214954 0.212461 0.081381 0.089578 0.074926 0.068026Minimum -0.29539 -0.2921 -0.16234 -0.17294 -0.15457 -0.15074Maximum -0.08044 -0.07964 -0.08095 -0.08337 -0.07964 -0.08272Sum -5.63687 -5.66776 -5.3679 -5.37091 -5.37831 -5.36096Count 48 48 48 48 48 48Confidence 0.011375 0.011195 0.005311 0.005302 0.005182 0.005091Table 4.6 and 4.7 displays the descriptive statistics for all twelve portfolios. Standard deviation statisticsindicate that variation from mean values of return is high. We can see that except portfolio 1 allportfolios indicate a negative return or loss.Skewness values of returns are also positively skewed except13Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comfor portfolios P7-P10. P7 through P10 are negatively skewed. The value of Kurtosis is less than3(Kurtosis

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comFama, E. F.,&French, K. R. (1992). The cross-section of expected stock returns. Journal of Finance,47(2), 427–465.Hanif, M. &Bhatti, U. (2010). Validity of capital assets pricing model: Evidence from KSE-Pakistan.European Journal of Economics, Finance and Administrative Sciences, 120,140-153.Retrievedfromwww.eurojournals.com/ejefas_20_13.pdfJavid, A. Y. &Ahmad, E. (2009).Testing multifactor capital asset pricing model in case of Pakistanimarket.International Research Journal of Finance and Economics, 25, 114-138. Retrieved fromwww.eurojournals.com/irjfe_25_10.pdfLintner, J. (1965). The valuation of risk assets and the selection of risky investments in stock portfoliosand capital budgets.TheReview of Economics and Statistics, 47(1), 13-37.Malin, M., &Veeraraghavan, M. (2004). On the robustness of the Fama and French multifactor model:Evidence from France, Germany, and the United Kingdom. International Journal of Business andEconomics, 3(2), 155-176.Markowitz, H. (1952). Portfolio selection.Journal of Finance, 7(1), 77-91.Merton, R. C. (1973). An intertemporal capital asset pricing model.Econometrica, 41(5), 867 - 887.Michailidis, G., Tsopoglou, S., Papanastasiou, D., &Mariola, E. (2006).Testing the Capital Asset PricingModel (CAPM): The case of the emerging Greek securities market.International Research Journalof Finance and Economics, 4, 78-91. Retrieved fromMossin, J.(1966). Equilibrium in a capital asset market.Econometrica, 34(4), 768-783.Ross, S. A. (1976). The arbitrage theory of capital asset pricing.Journal of Economic Theory, 13, 341–360.Sharpe, W. F. (1964). Capital asset prices: A theory of market equilibrium under conditions ofrisk.Journal of Finance,19(3), 425-442.15Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comThe Role of Human Resource PractitionersMaintaining Sustainability In Organisations:Some Empirical Evidence Of Expectations,Challenges And TrendsDr A J du PlessisDepartment of Management and Marketing,Unitec New Zealand, New ZealandMs S PaineDepartment of Management and Marketing,Unitec New Zealand, New ZealandDr C J BothaSchool Human Resource Sciences, North-West University,Potchefstroom, South AfricaABSTRACTTo sustain competitive advantage, organisations rely on technology, patents or strategicpositions and on how their workforce is managed. Emphasis on ‘people’ to competeeffectively in global economies requires HR practitioners to live up to the challenges,expectations and trends in HR functions. The aim was to establish if HR practitioners areequipped with the capabilities for the challenges, expectations and trends of HReffectiveness. Data was collected via an e-survey questionnaire, from 364 members of theHuman Resource Institute of New Zealand. The response rate was 41%. Five closelyrelated HR themes were focused on: the first two on the HR practitioner’s role as changeagent and strategic partner. The three remaining themes focused on HR practitioner’sresponsibility of improving relations in the organisation. Findings show high positiveresults in self-identified HR capabilities. This signifies that HR practitioners in NewZealand possess capabilities that can increase HR effectiveness.Key words: Expectations, challenges, trends, themes, value addINTRODUCTIONA company’s workforce is the lifeblood of organisations and they represent one of its most potent andvaluable resources according to Du Plessis (2009). Consequently, the extent to which a workforce ismanaged is a critical element in enhancing internal effectiveness and improving the organisation’scompetitiveness. Human Resource (HR) practitioners play an increasingly vital role in maximising theefficiency of the organisation’s human resources since HR practices support employee behaviour that iscritical for accomplishing key organisational processes, thus advancing organisational success (Nel,Werner, Poisat, Sono, Du Plessis, & Nqalo, 2011; Stone 2008; Rennie 2003; Wright & Boswell, 2002). It16Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.combecomes evident that individuals performing in those HR roles need to be equipped with distinctcapabilities that support the expectations, challenges and requirements of their roles and responsibilities.HR practitioners in New Zealand (NZ) have been exposed to challenges and opportunities initiated by theincreasing change and complexity of the business environment. The emergence of globalisation,development in technology and telecommunications; the shift towards a knowledge-based workforce,labour legislation and intensifying competition for skilled labour create new competitive realities fororganisations. Increasing tightening of competition implies that, regardless of the country in which theyoperate, organisations are all under pressure to react to these changing conditions by cultivating acompetence in human resource management (HRM) (Du Plessis, 2009; Horgan, 2003).Organisations are now looking to the HR function to go beyond the delivery of cost effectiveadministrative services and provide expertise on how to leverage human capital (Jamrog & Overholt,2004). Simultaneously the role of HR practitioners as strategic business partners and leaders of changehas also received considerable attention (Du Plessis, 2009; Rennie, 2003; Walker & Stopper, 2000).Ultimately, the competitive forces that organisations face today create a new mandate for HR and thisnecessitates changes to the structure and role of the HR function.In today’s global economy HR practitioners must be prepared to meet the considerable challenges andexpectations posed by the continuing evolution of their role and show how their function is creating andadding value to the organisation. As recognised by Ulrich and Brockbank (2005, 134) HR should not bedefined by ‘what it does’ but by ‘it’s contribution to achieve organisational excellence’.PROBLEM STATEMENTFrom the research problem, taking into account the broader focus on key HR activities and functions, onerealises that there is a need to consider to what extent HR practitioners in NZ organisations are equippedwith the capabilities that can fulfil the expectations, challenges and trends in HR effectiveness.OBJECTIVES OF THIS STUDYSeveral studies were done over the past years in NZ among HR practitioners’ future, capabilitieschallenges and expectations. The ultimate objective of this study is to determine the extent to which thecurrent levels of capabilities of HR practitioners in New Zealand organisations match the challenges,expectations and trends of their current roles and responsibilities. By comparing this study with NZorganisations from previous studies add more value and it informs the reader of how changes have takenplace over the past ten years in NZ.METHODOLOGYThe quantitative methodology adopted was an e-survey; a questionnaire containing structured closedquestions. This involved the selection of a sample of people from the HR practitioner population in NZ toascertain how factors differ, and to make inferences about the population, or in other words generalisingfrom sample to population. Reliability of this study was seen as high (41% responded) as previous leadingHRM studies conducted in NZ were successful with a response rate of 11% and 34 % respectively.Sample selectionThe study focused on HR practitioners in NZ organisations who are registered as members of the HumanResources Institute of New Zealand (HRINZ). HRINZ have 3600+ individual members who are involvedin the management and development of HR in private and public sector organisations throughout NZ. The17Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comtarget population was limited to HRINZ members that had registered to participate in HR researchrequests that HRINZ provided links to; the total number of HRINZ members in this category was 364.Data collectionThe data was collected via the e-survey, which was specifically designed for this study. The invitation toparticipate in this study went to 364 members of HRINZ. A total of 179 participants responded to thesurvey questionnaire, giving a response rate of 41%.QuestionnaireThe questionnaire consisted of six sections with 40 questions (this number was made up of mainquestions and sub-questions). Several sub-questions were formed to adequately explore each of the fiveHR themes researched in this study. All the questions in the questionnaire were closed questions. All fivethemes are covered in this article but due to the size of the study and length limitation for this article notall the information could be discussed. The Tables reflect the research questions used in this article, andthe rationale for using the five specific themes is discussed later.LITERATURE REVIEWBackgroundFor decades HR practitioners have been tagged as administrators, however organisations are now lookingto the HR function to go beyond the delivery of cost effective administrative services and provideexpertise on how to leverage human capital (Jamrog & Overholt, 2004). Simultaneously the role of HRpractitioners as strategic business partners and leaders of change has also received considerable attention(Rennie, 2003; Walker & Stopper, 2000). Ultimately, the competitive forces that organisations face todaycreate a new mandate for HR and this necessitates changes to the structure and role of the HR function.The HR profession has been continuously evolving and changing over the past hundred years, addingmore and different roles and responsibilities. When one traces the HR profession one finds that out of theIndustrial Revolution, labour unions and the industrial welfare movement arose as well as groundbreakingresearch in scientific management and industrial psychology. In the 1980’s climate of anxiety overprospects for economic growth, it became apparent that there was a need for the HR function to becomemore ‘proactive’ and human resource problems needed to be anticipated and prevented or at leastminimised (Gilbertson, 1984). This decade also saw the HR profession faced with criticism and questionsregarding its validity, which subsequently resulted in a significant body of research that linked HRpractices to organisational performance (Stewart, 1996).From the 1970s to the 1990s NZ experienced major developments in legislation impacting onemployment relations, along with more economic restructuring and radical shifts in the labour demandand supply, enforced a growing awareness of the importance of the ‘human asset’ (Gilbert & Jones,2000). A generally harsher business environment and increasing competitive pressures caused the HRfunction to be increasingly seen as a ‘specialist’ role (Macky, 2008). This made it necessary for HRpractitioners to recognise that they had the potential to play a key part in maximising the efficiency of theorganisation’s human resources. At the same time the role of HR practitioners in NZ organisations wasbecoming more strategic in orientation (Du Plessis, 2010; Du Plessis, 2009; Macky, 2008; Boxall, 1995;Stablein & Geare, 1993). HR practitioners started to depict themselves as ‘strategic’ HR professionalswho divided their roles into operations and strategy.18Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comThe profile of the New Zealand HR practitioner had also changed dramatically. By the late 1990s themajority of HR professionals (60%) were well educated women with a degree or postgraduatequalification and a previous career in HR (Institute of Personnel Management New Zealand, 1997).Authors have taken different stances when referring to HR practices, but there was a consistent focus onthe contribution of HR practices to enhancing human capital. Shared assumptions of a number of authorsresult in the definition that ‘HR practices are a set of activities that actively contribute to achievingorganisational objectives’ (Macky, 2008) and ‘have the ability to gain competitive advantage over otherfirms’ (Barney & Hesterly, 2006). HR practices, i.e. the programmes, processes and techniques thatdirect the management of an organisation’s human resources can complement, substitute for, or evenconflict with other organisational practices and at times arise from reactive and ad hoc choices made byHR practitioners in response to circumstances ( Wright & Boswell, 2002, Macky, 2008).HR practitioners are an active element in the implementation of HR practices because of their commandof professional and business acumen. Their quality, extent of knowledge and experience, level of trainingand education, combined with a belief in their ability to achieve set objectives has a significant impact onthe successful implementation of HR practices (Murphy & Southey, 2003).The five closest related themesfocussed on in this article are: change management, recruitment and retention, work-life balance, diversitymanagement, and HR as a strategic partner. These five themes are closely related and will be comparedwith earlier studies done in NZ on the same topics.Change ManagementOrganisations that effectively manage change by continuously adapting their bureaucracies, strategies,systems, products and cultures in response to the impact of the complex, dynamic, uncertain and turbulentenvironment of the twenty-first century, are identified as masters of renewal according to Nel, Werner,Poisat, Sono, Du Plessis, & Nqalo, (2011). New Zealand businesses are not exempt from this trend andfor the past decade organisations have been facing the need to change in order to remain competitive inthe global market (Du Plessis, 2006). Consequently the HR function has become more multifaceted overthe years as the pace of change quickens, requiring a transition towards more value-added roles, such asthe role of a change agent (Holbeche, 2006).Unquestionably HR practitioners have a critical role to play to ensure that the change process runssmoothly, as change in itself causes a high level of turmoil in organisations (Nel et al., 2011). In the neweconomy HR practitioners, as organisational facilitators to change, have to have the capacity anddiscipline to make change happen and need to be skilled in the management of employee resistance tochange (Macky & Johnson, 2003). The focus on the behaviour of employees is important as change has away of scaring individuals into ‘inaction’, hence change facilitators need to possess the skills and tacticsto modify employees’ perceptions and replace any resistance with motivation and excitement to makechange more appealing and seemingly more likely (Dibella, 2007).Managed change is proactive, intentional and goal-oriented behaviour and in order to reduce thelikelihood of failure, HR practitioners, in change agent roles, need to develop competencies that enablethem to identify and anticipate possible problems that may arise (Cleland, Pajo & Toulson, 2000; Macky& Johnson, 2003; Ulrich & Brockbank, 2005; Ulrich & Smallwood, 2003).Overall, there is clear indication that change happens and the need to ‘change’ is inevitable. Therefore HRpractitioners need to facilitate organisational change and implement the necessary HR practices to ensuresuccess (Joerres, 2006). This requires them to develop change management skills which include thecapability to think strategically, engage employees, facilitate change and exceed expectations (Hayward,2006). The need for change becomes evident when there is a gap between organisation, division, functionor individual performance objectives and actual performance in the organisation.19Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comDu Plessis, Beaver and Nel (2006) refer to the research of Beckhard and Harris, more than two decadesago (1987) that the world in which organisations exist, and will be operating in future, is continuouslychanging. It changes in relationships among nations, institutions, business partners and organisations;changes in the makeup of the ‘haves’ and the ‘have nots;’ changes in dominant values and normsgoverning societies. It also changes in the character and culture of business or wealth-producingorganisations; changes in how work is done and changes in priorities. The core dilemma for leaders andmanagers is to maintain stability and at the same time provide creative adaptation to outside forces,change assumptions, technology, working methods, roles, relationships and the culture of theorganisation.The pressures of change threaten many traditional and long-held ways of managing and working. Dealingwith change is among the greatest challenges facing managers in NZ and other countries, now and in thefuture in modern day business management. Managers as change agents planning to implement changemust predict resistance to these changes as well. Resistance to change is a common human behaviour.Usually they misunderstand the changes and its implications; they do not want to lose something valuableand the fear for the unknown.According to Nel et al (2011) one key to managing resistance is to plan forit and to be ready for it with a variety of strategies to help employees to negotiate the transition. HRmanagers should therefore treat resistance as an opportunity to re-evaluate a proposed change and toidentify and deal with the real barriers to change.Recruitment and RetentionOrganisations promote the idea that employees are their biggest source of competitive advantage. Yet,interestingly enough, too many organisations are unprepared for the challenge of finding, motivating andretaining skilled and talented individuals in today’s labour market (Härtel, & Fujimoto 2010). Attentionhas been drawn to an imminent shortage of capable workers by a number of global studies. According totwo global surveys, conducted by McKinsey Quarterly in 2006 and 2007, finding talented people is thesingle most important challenge for organisations worldwide (Guthridge, Komm, & Lawson, 2008).The 2007 global Web survey, conducted by the Boston Consulting Group (BCG), established that‘managing talent’, which involves attracting, developing and retaining all individuals with high potential,was one of the HR challenges demanding the most immediate action and greatest attention (Strack, Dyer,Caye, Minto, Leicht, Francoeur, 2008). The intensifying competition for talent and the increasingly globalnature of the competition, makes recruitment and retention a strategic priority and it becomes vital for HRpractitioners to rethink the way their organisations plan to attract, motivate and retain employees(Guthridge et al., 2008).HR practitioners have a key role to play in ensuring that organisations have a continuous supply ofsuitably qualified and trained employees. Reaching the best candidates in the market requires an advancedapproach to sourcing talents. There is a need to ‘renovate’ current recruiting and staffing processes andHR practitioners need to work closely with other departments and pay special attention to staffing issues(Strack et al., 2008). Despite the abundance of researchers offering a variety of techniques for therecruitment and selection of employees it is found that HR practitioners are often overwhelmed by theliterature and fail to adopt the most appropriate methods (Heneman, Judge, & Heneman, 2006).Regardless of the fact that New Zealanders pride themselves on being early adopters of technology in thearea of e.g. recruitment, NZ organisations are ‘way behind’ US and UK trends (Kendrick, 2007). If, asalleged by Kendrick (2007,6), “Human capital is a key resource for most companies”, it is vital to recruitand select the ‘right’ people. It also makes business sense to make recruitment an ongoing ‘process’ andnot just an ‘event’ (Banks, 2007). This requires the skill to build a system whereby talent can be tappedinto at any time rather than starting from scratch each time a vacancy arises (Jacobs, 2007).20Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comWhile organisations seek to identify, appoint and select quality people in a labour market where particularskills are sought after and personal commitment to organisational life is decreasing in favour of life-styleneeds, non-standard forms of recruitment (e.g. using recruitment agencies to locate the most appropriateindividual) are on the increase (Fish & Macklin, 2004). This trend, on the one hand, gives HRpractitioners additional time to deal with the variety of other HR activities that are inherent in their role.Nevertheless, it also has the potential to have negative implications such as loss of control of therecruitment process and extra costs associated with recruitment agencies. From a strategic HRMperspective HR practitioners can help to support the sustainability of an organisation throughidentification of capabilities specific to sustainability and by seeking to align recruitment and selectionpractices to these capabilities (Gloet, 2006).An important issue in the new economy is staff retention because without employees who are wellintegrated into the organisation and contributing to their best ability, success is short-term (Losey,Meisinger & Ulrich, 2005; Rennie, 2003). Problems, particularly with employees, have incidental effectscausing further issues with training, planning and strategic decision-making. When set in a global context,this becomes even more complex and the selection and retention of a stable and committed pool of talenttakes careful consideration (Rennie, 2003). As a result this requires more effort in implementing HRpractices that can attract, maintain and motivate these employees (Drucker, 2006).The central conclusion of the Fortune Magazine‘s survey of the ‘world’s most admired companies’summarised the expressed views of the CEO’s stating: “The ability to attract and hold on to talentedemployees is the single most reliable predictor of overall excellence” (Storey, 2007, 9). On the otherhand McKeown (2002, 152) recognises the link between retention and the employee and managerrelationship by saying: “Get it right and acceptable retention is almost assured; get it wrong andeverything else will count for naught”.Work-Life BalanceFinding the ‘balance’ between work and non-work, with neither of them intruding into the other in termsof time, resources and emotional energy (Macky, 2008) could be an elusive goal for more and moreemployees as the twenty-four hour, seven day working week gains ascendancy (Taylor, 2002). From anHR perspective, this issue causes significant concerns for organisations. The difficulty for employees tomaintain a ‘balanced’ life between the paid work they perform and increased responsibilities, such aslooking after the elderly or dealing with financial pressures, can cause stress which can translate intodecreased productivity and retention issues as employees will look for better working conditions (Härtel& Fujimoto 2010). According to Barratt (2007, 5) employers will need to get serious about work-lifebalance and go beyond lip-service because: “While organisations talk the talk of work-life balance, themajority are struggling to make it a reality”.The organisation’s response to employees’ needs may range from family responsive programmes, whichmay include components such as leave programmes, dependent care and health/wellness programmes(Macky, 2008; Stone, 2008). Offering flexible work arrangements, which are the cornerstone of almostall work-life balance initiatives, can have significant beneficial results (Strack et al., 2008). One of thereasons for this may well be the fact that the one factor that helped employees achieve ‘balance’ wassomething in the control of every employer -- that the company was actively helping to achieve a worklifebalance for their employees (Campel, 2002).Many younger employees tend to have new and non-traditional expectations about work. A particulardemographic challenge comes from generation Y (people born after 1980). As observed by Guthridge etal. (2008) these individuals demand, among other things, a better work-life balance. It becomes evidentthat these employees, who operate in positions based on their perception of the organisations commitmentto work-life balance, need to be managed differently. Ultimately employees are interested in having both21Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.coma good job and a life beyond work and there is a need for HR practitioners to implement policies andpractices that will increase employee commitment (Du Plessis, 2006). This is also noted by Johnson(2000), who states that offering employees work-family balance appears to symbolise an employer’sconcern for employees, leading to greater commitment to the organisation.Diversity ManagementManaging people from different cultures and backgrounds has become the norm for HR practitioners inNZ organisations because the face of the country is changing continuously. NZ is becoming anincreasingly multi-cultural society (Du Plessis, 2009; Jones, Pringle, & Shepherd, 2000). According toUlrich and Brockbank (2005) worldwide immigration patterns have sharply internationalised the labourforce and there is a need for organisations to move beyond intellectual diversity and formally ingraindiversity into their culture. HR as a profession therefore has to recognise and espouse the value ofdiversity because diversity management has been identified as an emerging strategic necessity forsurvival in a globally diverse environment (Nel et al., 2011).Härtel et al. (2010) believe it is the responsibility of HR practitioners to manage diversity and to teachother managers and employees what their role in ‘diversity’ is. This is especially important fororganisations in NZ because, like many other developed countries, NZ is experiencing skill shortages; inthis context, valuing diversity management takes on a new urgency. Immigrants want to retain theircultural and linguistic identity even though they live in NZ (Rudman, 2010). This is creating furtherchallenges to the HR practitioner’s ability to manage a diverse workforce. The challenge is to overcomestereotypes and prejudices and to welcome dissimilarities and differences because diversity managementshould view employees as ‘unique individuals’.It also needs to be noted that NZ has the unique existence of biculturalism, which refers to the influencethat both Maori and European culture are meant to have on society and in workplaces (Jones et al 2000).Introducing Maori cultural aspects, such as ‘whanau’ (support) interviews, which is a cultural sensitiveselection and promotion method, enables individuals to stay true to their heritage and culture (Macky,2008). In addition to this biculturalism, there is also a growing number of Pacific Island people, Asians,Indians and many other ethnic groups that can have implications on workplace diversity.Different interests, backgrounds, competencies, skills and talents, if harnessed properly, can be beneficialto productivity and successful teamwork. This is recognised by Ely and Thomas (2001) who say thatdiverse groups and organisations have performance advantages and the recurrent aspect among highperforming groups or teams is the integration of that diversity. Diversity management also involvesconscious efforts to actively recruit members from ethnic minorities (Cleland, Pajo, & Toulson, 2000).Demographic trends in NZ clearly indicate that diversity is here to stay; HR practitioners need torecognise the uniqueness of each individual and the varied perspective and approach to work that theybring to the organisation (Rijamampianina & Carmichael, 2005).Strategic role of HR practitionersThe current normative view of a strategic HR practitioner is depicted as a professional who is able todevelop, plan and implement a wide range of organisational activities which are directly linked toorganisational performance (Murphy & Southey, 2003). HR practices and policies have strategicimplications on organisational performance and in making decisions about any employment relatedstructures HR practitioners must be able to make strategic choices (Boxall & Purcell, 2000). To be seen astruly strategic, important decisions have to be made with a long term perspective (in contrast to day-todayoperational decisions) as changing business conditions, and the organisation’s response to thoseconditions, influence organisational success (Barney & Hesterly, 2006).22Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comThis view fits well with the suggestion by Raich (2002) that there is a clear shift in HRM from a ‘serviceprovider’ to a ‘business partner’. Some companies have even re-titled their HR generalist as ‘BusinessPartner’ (Jamrog & Overholt, 2004). As pointed out by Ulrich and Brockbank (2005) the capability ofproviding direct support and to add value to the organisation through the knowledge of the business, willallow the HR professional to join the management team. This increases expectations, new responsibilities,possibilities and opportunities for the HR function. Consequently if HR practitioners want to become keyplayers in the management team they need to have the relevant capabilities to do so (Raich, 2006).Morley, Gunnigle, O’Sullivan and Collings (2006) refer to the HRM function’s changing characteristicsfrom that of the traditional operational role of personnel specialists, to the strategic role of the HRpractitioner. This new approach to design HR practices which develop the strategic value of theorganisation’s human capital is termed ‘strategic human resource management’ (SHRM) (Stone 2008;Boxall, 1995; Kane, Crawford, & Grant, 1999). In this role HR practitioners must be able to provide theexpertise on how to leverage human capital to create true marketplace differentiation and able todetermine how the company’s current culture, competencies, and structure must change in order tosupport the organisation’s strategy (Cabrera, 2003).ANALYSIS OF THE RESULTSComparison of the profile of the respondents with a previous study (2000) in NZAn HRM questionnaire covering 358 items to identify HRM and management trends was jointlycompiled in New Zealand and Australia in 1994; the same questionnaire was modified and refined andused again in 2000 by Burchell (2001) in association with HRINZ to determine a future perspective onHR in 2010 in NZ. Results were recorded to reflect the percentage of all respondents selecting aparticular alternative for a particular organisation size or occupation. The profile of the respondents isspread over a wide spectrum (refer Table 1 below) and each respondent has some relation to HR.The profile of the respondents is important to add value to their opinions. In the current (being 2008)study in NZ, the most frequent title was HR Manager (37%), and the next most common title was HRAdvisor (27%). Those two titles accounted for 64% of the reported titles. The remaining titles were HRDirector (9%), HR Generalist (6%), HR Consultant (3%), and Employment Relations Manager (3%). Thecategory ‘others’ (15%) included titles such as HR Coordinator, HR Administrator, RecruitmentConsultant, Research Officer, People Development Manager, Chief Human Resources Officer, Sales &Marketing Capability Leader, Talent Management Consultant and Senior Lecturer HRM (Table 1,below).Table 1: Profile of respondents by profession in New Zealand in 2000 and 2008ProfessionNew Zealandprofile 2000New Zealandprofile 2008HR (officer to director) 72,00% 73.00%Business (line managers to CEO) 10,00% 9.00%Consultants 14,00% 3.00%Academic (all tertiary institutions) 4,00% (see other)Other 0% 15.00%TOTAL 100% 100%It is significant that there is not much difference between the respondent’s profile of the 2000 study andthe 2008 in this regard in Table 1 above23Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comTable 2: Profile of respondents by organisation size in New Zealand in 2000 and 2008Number of employees inorganizationNew Zealand profile2000New Zealandprofile 2008Fewer than 10 1,00% _10 – 49 4,00% _50 – 99 9,00% 13.2%100 – 499 40% 34.5%500 or more 46% 52.3%TOTAL 100% 100%In NZ most organisations (83%) have fewer than 10 employees. In this study, the participants are fromdifferent sized organisations (Table 2 above); the following groupings were compiled for analysis:small organisations with fewer than 100 employees (0-99); medium 100 to 499 employees, large is 500or more employees. It should be noted that NZ is predominantly a country of small businesses, with93.3% of enterprises employing 19 or fewer people ("SMEs in New Zealand: Structure and Dynamics,"2006)In Table 2 above, the profile of the respondent’s organisation size for 2008 is very similar to the2000 study.Change managementIn question five of the survey questionnaire, respondents were asked to give an overview of their selfidentifiedcapabilities in the area of change management. A total of 86.1% of respondents are capable ofanticipating the effect of internal/external changes. Only 2.5% disagreed and 11.3% gave a neutralresponse. Similar positive results were received for the other statements for which respondents wereasked to hypothesize whether they are equipped with the capabilities that can improve HR effectivenessin change management. A total of 84.7% have the capability to facilitate support to those affected by thechanges, 87.4% have the ability to have a proactive role in change management initiatives, 80.1% havethe ability to align HR systems with the expected reorganisation and 86.5% have the ability to motivateothers through the application of professional credibility & reciprocal trust respectively.Neutral responses were almost identical in the statements referring to capacity to facilitate support(13.2%), proactive role in change management initiatives (11.2%) and the ability to motivate others(10.6%), thus, 16.5% giving a neutral response for the ability to align HR systems with the expectedreorganisation. Negative responses were very low (1.9%, 1.2%, 3.3%, and 2.6%). It can be deduced thatHR practitioners regard themselves to be able to live up to the expectations and challenges in the changemanagement area.Table 3: Self-identified capabilities in the area of Change ManagementPlease hypothesize on the following statementsindicating the extent to which YOU are currentlyequipped with the capabilities that can imprGEMENTCapable of anticipating the effect of internal/externalchangesCapacity to facilitate support to those affected by thechangesAbility to have a proactive role in change-managementinitiativesAbility to align HR systems with the expectedreorganisationAbility to motivate others through the application ofprofessional credibility & reciprocal trustStronglyagreeAgreeNeitheragree nordisagreeDisagreeStronglydisagree29.1% 57.0% 11.3% 1.9% 0.6%37.0% 47.7% 13.2% 1.9% 0.0%47.0% 40.4% 11.2% 0.6% 0.6%35.7% 44.4% 16.5% 3.3% 0.0%31.9% 54.6% 10.6% 2.6% 0.0%24Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comIn comparison to a similar study in South Africa, executed in 2002, only 12% of the respondents indicatedthat HR is capable of anticipating the effect of internal and external changes on the organisation. Thisfigure grew to 71% who agreed that HR should require this capability for 2010, which is close to thecurrent figure in NZ of 86.1% (Du Plessis, Beaver, Nel, 2006).It is one thing to recognise the need forchange, however it is quite another thing to have the ability and discipline to implement and communicatechanges in the organisation in such a way that they meet the expectations and challenges of theorganisation and support all the employees through the change process. The radical changes in thecontemporary business environment increase the need for HR practitioners to support the change process.Nevertheless, managing organisational and cultural change requires HR practitioners to have distinctcapabilities in order to address expectations and challenges in both operational and organisationalchanges.The focus on the behaviour of employees is vital in the change process as they are predominantly affectedby the changes. HR practitioners may get into difficulties if they try to project their own perceptions ofthe desirability of change to others because a change perceived desirable by some participants or set ofstakeholders is often perceived as undesirable by others. Essentially anyone who views change asundesirable is unlikely to help bring it about, or worse may even sabotage the effort of those trying to doso. HR practitioners therefore should posses the capabilities to manage or shape participant’s perceptionsbecause as established by Dibella (2007) participant’s perceptions of change are more critical tosuccessful change implementation than the nature of the change itself.For the purpose of this study the researchers established that the following capabilities are expected withsuccessful achievement and implementation of change initiatives and for the HR practitioner to be a keydriver for the change:• Capable of anticipating the effect of internal/external changes• Capacity to facilitate support to those affected by change• Ability to have proactive role in change management initiatives• Ability to align HR systems with the expected reorganisation• Ability to motivate others through the application of professional credibility & reciprocal trustThe results of the survey showed that the majority of the respondents reported their level of capabilities inthe area of change management at a positive level. In addition, correlations were done among all of thedemographic data and each of the HR capabilities used as measures to increase HR effectiveness in thearea of change management. Based on these correlations, the ability to manage change had the mostsignificant relationship with the number of years of experience in the profession. This result is notsurprising as experience has long been considered as a possible determinant of the level of technical andprofessional skills an individual holds, the level of understanding of organisational context or industrycharacteristics, as well as the level of business related capabilities (Murphy & Southey, 2003).The level of experience possessed by HR practitioners will also influence their choices on which HRactivities are to be adopted. It can therefore be deduced that the extent and quality of a HR practitioner’sexperience, combined with a belief to have high levels of capabilities to achieve set objectives has asignificant impact on their ability to increase HR effectiveness in the area of change management.Recruitment and RetentionA total of 63.6% of the respondents viewed their ability to align recruitment and retention practices tosupport the sustainability of the organisation as strength/major strength. In contrast 8.6% consideredthemselves as ‘needing improvement’/’significant need of improvement’ in the area of recruitment andretention practices and 23.8% were not sure and gave a neutral response. For 46.9% of the respondents,25Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comidentifying, analysing, forecasting and interpreting trends for organisational HR needs in the recruitmentand retention area were seen as strength/major strength.At the other end of the spectrum, 20.4% viewed this capability in need of improvement. Almost a third(32.4%) of the respondents indicated neither a ‘need for improvement’ nor ‘strength’. The last statementhad almost identical results in the ‘neutral’ answer option (33.1%). Nevertheless a higher percentage ofrespondents (54.9%) identified the ability to ensure that the organisation has the skilled and engagedworkforce it needs as a ‘strength’/’major strength’ and 11.9% indicated a ‘need for improvement’/majorneed for improvement’. It can be deduced that the majority of the respondents (63.6%) regard themselvesas well prepared and capable to retain their skilled employees and to recruit the right people should theyneed to recruit.In comparison, the South African study of 2002, the respondents were asked what are their view onretaining skilled employees and 61.9% regarded it as important and interestingly a downwards trend to2010 was recorded to 53.9%. A similar trend was recorded for attracting skilled people. A total of 55.1%for 2002 and only 44.4% for 2010 were forecasted by the respondents.Table 4: Self-identified capabilities in the area of Recruitment & RetentionRECRUITMENT & RETENTIONAlign recruitment & retention practices to supportsustainability of the organisationIdentify, analyse, forecast & interpret trends inorganisational needs for human resourcesEnsures that the organisation has the skilled, committedand engaged workforce it needs1 2 3 4 53.9% 8.6% 23.8% 52.3% 11.3%5.2% 15.2% 32.4% 39.0% 7.9%2.6% 9.3% 33.1% 45.0% 9.9%The most commonly cited priority in the HR function was to recruit and retain key staff (91.6%). Clearly,HR practitioners in this survey (being 2008) are preoccupied with this activity. The intensifyingcompetition for talent makes recruitment and retention a key priority for organisations and it is imperativefor HR practitioners to rethink their organisation’s plan to attract and retain employees. While it is notclear from this survey whether routine HR activities in the recruitment process are being automated by forexample self-service technology, it can be presumed that HR practitioners are using a range of methods toalign planning needs, to market the employer and to handle hiring and integration processes effectivelyand efficiently to address skill gaps. A precise understanding of recruiting needs and a strong monitoringprogramme also helps HR practitioners to identify areas requiring further improvement.Some of the capabilities were identified as being associated with increasing HR effectiveness in the areaof recruitment and retention and they are challenges for the HR practitioner:• Align recruitment and retention practices to support sustainability of the organisation• Identify, analyse, forecast and interpret trends in organisational needs for HR• Ensures that the organisation has the skilled, committed and engaged workforce it needsThe results of the survey showed that in all of the three areas participants viewed their capabilities toincrease HR effectiveness in the area of recruitment and retention as strength or major strength. Inaddition, correlations were done among all of the demographic data and each of the HR capabilities andthe most significant relationship was identified with the number of years of experience in the profession.26Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comThe above results indicate that HR practitioners have the ability to attract, develop and retain individualswho can drive organisations that are responsive to both, their customers and future opportunities.Nevertheless in order to move forward HR practitioners need to ensure that organisations have fullyautomated and flexible systems in place to improve the efficiency of both, their own function and theentire organisation. This will increase the quality of HR, reduce the cycle time for hiring new candidates,lower costs and generally facilitate them to move closer to becoming the organisation’s administrativeexpert in the area of recruitment and retention.Work-life BalanceThe respondents were asked to state what the developing and implementing policies are in response tochanging demographic trends. A total of 54.9% of the respondents regarded it as a ‘strength’/ majorstrength’. The next question was about the capability to be proactive in the approach to overcomingbarriers to implement work-life initiatives and 53.6% of the respondents regarded it as a ‘strength’/ majorstrength’. An unexpected high percentage (29.1%) gave a ‘neutral’ response in each of the two statementsand negative results were indicated by 15.9%. Statement three i.e. successful in benchmarking andmeasuring the effectiveness of work-life initiatives, was self-perceived as being a ‘strength’/ ‘majorstrength’ by only 23.8% of respondents (see Table 5 below).Employees have changing needs and organisations are required to respond to these flexible work styles.Many employees are now looking for more than just remuneration and organisations need to understandthis quest in order to assist their staff to have a better balance. Organisations’ responses to employees’needs may range from providing flexible work arrangements to addressing employees’ growing desire tohave more family-friendly working environments.Table 5: Self- identified capabilities in the area of Work-Life BalanceWORK/LIFE BALANCE1 for 'significant need for improvement' – 3 neutral- 5 for 'major strength'Develop & implement policies in response tochanging demographic trendsProactive in the approach to overcoming barriers toimplement work-life initiativesSuccessful in benchmarking & measuring theeffectiveness of work-life initiatives1 2 3 4 53.3% 12.6% 29.1% 41.0% 13.9%5.9% 11.2% 29.1% 39.7% 13.9%7.2% 26.4% 42.4% 17.9% 5.9%More flexible time-off arrangements can also encourage more education and training, which ultimatelyaddresses the issue of skill shortages. If organisations accept that HR practices are potentially going toproduce beneficial outcomes for the organisation and the employee, then the areas of practice that aremore likely to contribute positively should be identified. HR practitioners need to be significantly moreproactive in their approach towards improving work-life policies.Diversity ManagementDue to increasing diverse workforces in NZ, the last opinion was related to the area of diversitymanagement. Results are illustrated in Table 6 below. When asked to self-identify the capacity toeffectively implement diversity management programmes 28.4% gave a positive result and 28.5% gave anegative result. Almost half of the respondents (43%) indicated a ‘neutral’ view regarding this capability.Competency in the ability to deal with the application of legislative issues of diversity management andthe ability to effectively use the talents of people from various backgrounds were identified by 54.3% and54.2% of respondents as ‘strength’/’major strength’.27Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comValuing diversity is still not seen as a key priority for the HR function in NZ organisations. Managingdiversity is the practice of understanding and embracing social differences for the mutual benefit of bothemployees and organisations (Wilson, Gahlout, Liu, & Mouly, 2005). Unquestionably, organisations needan action plan for moving diversity initiatives forward. HR practitioners need to be able to have thecapabilities to articulate the changes required, make them explicit and to lead the process (Du Plessis,Beaver & Nel, 2006). It can be deduced that even though HR practitioners in NZ organisations have amoderate level of capabilities in diversity management they must invest time and effort to formallyingrain diversity into the culture if they want to maximise the potential of all available talent.Table 6: Self-identified capabilities in the area of Diversity ManagementDIVERSITY MANAGEMENT1 for 'significant need for improvement' – 3 neutral- 5 for 'major strength'Capacity to effectively implement diversitymanagement programmesCompetent to deal with the application oflegislative issues of diversity managementAbility to effectively use the talents of people fromvarious backgrounds, experiences and cultures1 2 3 4 55.3% 23.2% 43.0% 23.8% 4.6%4.6% 12.6% 28.5% 38.4% 15.9%2.6% 13.9% 29.1% 41.0% 13.2%Strategic role of HR practitionersThis question was designed to establish the extent to which HR practitioners possess capabilities that canimprove effectiveness in the area of strategic HRM. When queried on the ability to take part in framingbusiness strategies and making key decisions, two thirds (66.2%) of respondents agreed, 17.8% showed anegative result. When asked to indicate their ability to implement coherent HR strategies which arealigned to the business strategy, 78.9% agreed. Developing an achievable vision for the future, whilstenvisaging its probable consequences was positively agreed upon by well over half of the respondents(64.2%), and only 10.6% disagreed. The capability of providing direct support to the organisation viastrategic input got the highest percentage of agreed responses, 81.4%. The last statement had 73.5% ofrespondents agreeing. It can be deduced that the respondents do understand the importance of being astrategic partner, to provide support via strategic input (81.4%), and to align HR strategies with theorganisation’s strategies (see Table 7 below).The increasing global nature of competition requires that organisations use all of their available resourcesto survive and to succeed (Sheehan, 2005). The emphasis on the alignment of all functional activities ofan organisation toward the achievement of strategic objectives calls for a strategic role of the HRfunction. Most discussions of a strategic role focus on two major aspects. Firstly, that the HR practitionershould be able to align people with strategies to enable strategy implementation and secondly the HRfunction needs to ensure that the HR activities and practices are in place to effectively implement thestrategy.28Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comTable 7: Self- identified capabilities in the area of Strategic HRMIndicate the extent to which YOU are currentlyequipped with the capabilities that can improveeffectiveness in STRATEGIC HRMAble to successfully take part in framing businessstrategies & making key business decisionsAbility to develop & implement coherent HRstrategies which are aligned to the businessstrategyCapacity to develop an achievable vision for thefuture and envisage its probable consequencesCapable of providing direct support to theorganisation via strategic HRM inputsAbility to develop the relevant portfolio ofcompetencies in order to achieve businessobjectivesStronglyagreeAgreeNeitheragreenordisagreeDisagreeStronglydisagree23.2% 43.0% 15.9% 17.2% 0.6%31.2% 47.7% 14.0% 6.6% 0.6%20.5% 43.7% 25.1% 9.3% 1.3%39.0% 42.4% 12.6% 4.6% 1.3%20.5% 53.0% 19.9% 6.0% 0.7%Given this requirement, it is evident that HR practitioners must have the capabilities to be competent instrategy development, implementation and evaluation. Findings are inconclusive as several factors thatemerged from this survey make the researchers question whether the perceived degree of strategicorientation actually reflects reality; HR practitioners only spent 24.2% of their time on strategic input. Itcan be deduced that HR practitioner’s lack of strategic input is not the result of their incompetence butmore likely the result of having to spend most of their time on transactional activities.Respondent’s level of involvementTo establish the degree of specialisation taking place in HR, question four asked participants to specifytheir level of involvement in a number of HR activities. A 5-point Likert scale was used to determinesurvey participants’ level of involvement. The ratings were converted to numerical values – where oneequals ‘solely responsible’ and five equals ‘no involvement’. The mean scores identified (Table 8, below)ranged between 2.28 and 2.95 (where 2 equals ‘great deal of involvement’, 3 ‘moderate level ofinvolvement, 4 ‘little involvement’).The standard deviation in conjunction with the mean provides a moreaccurate picture of HR practitioner’s level of involvement. As the values in Table 8 reveal, responses infact sit between 1.45 and 4.16, establishing that there was large disparity among responses.Table 8: Level of involvement in HR activitiesRespondents level* of involvement in the following HR activities:Mean StD Value1** Value2***Change management 2.51 1.012 1.50 3.52Strategic planning 2.71 1.087 1.62 3.80Staffing & retention 2.28 0.836 1.45 3.12Managing work-life balance 2.77 1.048 1.72 3.82Managing diversity 2.95 1.202 1.75 4.16* 1 = 'solely responsible', 5 = 'no involvement'Value1**= Mean - Std, Value2***= Mean + StD29Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comCross-tabulation with all of the demographic variables (gender, position classification, occupationalcategory, number of years of experience, highest educational attainment, industry sector and sizeclassification) and chi-square test results found that two of the variables i.e. position classification/job title(Test statistics A) and number of years of experience in profession/occupation (Test statistics B) show asignificance level which is less than 0.05 (Test statistics A and B, Table 8). Findings therefore indicatethat the variables are indeed related. All other test results showed values above the significant level of 5percent (0.05) verifying that the level of involvement in specific HR activities is not associated with anyother demographic variable.Test statistics AParticipants’ level of involvement in HR activities:Pearson Chi-SquareCross-tabulation with position classification/job tileAsymp. Sig. (2-sided)Change management 0.000Strategic planning 0.000Staffing & retention 0.003Managing work-life balance 0.016Managing diversity 0.024Significant level p = < 0.05Test statistics BParticipants’ level of involvement in HR activities:Cross-tabulation with number of years experience inprofession/occupationPearson Chi-SquareAsymp. Sig. (2-sided)Change management 0.000Strategic planning 0.000Staffing & retention 0.191Managing work-life balance 0.059Managing diversity 0.015Significant level p = < 0.05The data associated with the above cross tabulations also enabled the researcher to look at therepresentation of individual job classification in relation to a ‘great deal of involvement’ in the specificHR activities. As established in the findings HR managers consider themselves having a ‘great deal ofinvolvement’ in all of the HR activities equally. This is in contrast to other categories such as HRadministrators, who only have a great deal of involvement in the area of staffing and retention and HRconsultants who indicated a ‘great deal of involvement’ mainly in change management activities.30Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comFigure 1: Areas of great deal of involvement by job classification100.0%90.0%80.0%70.0%60.0%50.0%40.0%30.0%20.0%DiversityWork-life balanceStaffing/RetentionStrategic PlaningChange Management10.0%0.0%HR directorHR generalistHR managerHR advisorHR consultantHR administratorHR co-ordinatorER ManagerOtherThe Cronbach’s Alpha coefficient for the five constructs or HR themes is illustrated in Table 9. The intercorrelationsamong the items were considered good by the researcher.Table 9: Internal reliability testConstruct*Cronbach's AlphaChange Management 0.777Strategic HRM 0.873Recruitment & Retention 0.804Work-Life Balance 0.862Diversity Management 0.827*0-1, with 0 indicating no correlation among items, and 1 indicating very high reliabilityRECOMMENDATIONS FOR HR PRACTITIONERSConcrete recommendations addressing the problems identified are proposed in this section. Even though ahigh level of capabilities is evident in the results in this study (2008), it is recommended for HRpractitioners in NZ organisations to increase their exposure to different practices, methods and systems;this can result in a greater ability to identify potential areas for improvement, as well as the identificationof previously unconsidered solutions. HR practitioners will have to be the change agents and leaders withthe implementation of all the programmes and practices for these changes.NZ businesses employ thousands of foreign citizens and it becomes a very difficult task for any managerto accommodate all cultures. HR managers will have to learn new skills and, amongst others, to become31Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comcompetent leaders who will have the capacity to lead their team to outgrow their rivals domestically,internationally and globally. A major challenge for HR practitioners in the future will be coordinatingwork efforts of diverse organisational members in accomplishing the organisational goals to retain theirworkers.To manage work-life balance:• Develop and implement policies in response to changing demographic trends• Proactive in the approach to overcoming barriers to implement work-life initiativesThe following capabilities are necessary in the area of diversity management:• Effectively implement diversity management programmes• Deal with the application of legislative issues of diversity management• Use the talents of people from various backgrounds, experiences and culturesThe following capabilities are required to provide significant input into the organisation’s strategy:• To successfully take part in framing business strategies and making key business decisions• To develop and implement coherent HR strategies which are aligned to the business strategy• Develop an achievable vision for the future and envisage its probable consequencesCONCLUSIONSFindings indicate that the influx of women into HR has gained great momentum in NZ. In 1978 only 22percent of women represented personnel managers then. Similarly, in 1990, Stablein and Geare (1993)reported that women comprised 31 percent of HR personnel surveyed. However not less than a decadelater, women consisted of 59 percent of HR practitioners (Cleland et al., 2000). Consistent with thisincreasing trend this study established that 76 percent of HR practitioners in NZ organisations in 2008 arefemale. A comparison of the highest rated results reveals significant changes in some areas from the studydone in 2000 and the 2008 study in NZ. The five themes show very similar change management,recruitment and retention, work-life programmes, diversity management philosophies, and strategic rolesfor HR practitioners in NZ. The most significant one is the expectations and challenges for the HRpractitioner in aligning HR strategies with business strategies. Previous studies show an increase in thestrategic role from 2000 and 2002 respectively (25% to 2010) and the current study (2008) reflects 81.4%.The researchers trust that HR practitioners will use the information gained in this study about thecapabilities of HR professionals, and the recommendations to build on this knowledge base to createadditional new knowledge on HR’s current capabilities and the impact on organisational performance. Anew kind of HR practitioner as well as a business manager and employee can be expected in successfulorganisations in the future adding sustainable value.REFERENCESBanks, A. 2007. The talent revolution takes off. Human Resources, 11(5), 2-5.Barratt, J. 2007. Future recruitment trends. Human Resources, 11(5), 4-5.Barney, J. B., & Hesterly, W. S. 2006. Strategic management and competitive advantage: Concepts andcases. New Jersey: Pearson Education.Boxall, P. 1995. The challenge of human resource management: Direction and debates in New Zealand.Auckland: Longman Paul.Boxall, P., & Purcell, J. 2000. Strategic human resource management: where have we come from andwhere should we go? International Journal of Management Reviews, 2(2), 183-203.Burchell, N. 2001. 2000 to 2010: Future directions for HR in New Zealand. Auckland: Unitec Institute ofTechnology.32Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comCabrera, A. 2003. Strategic Human Resource Evaluation. Human Resource Planning, 26(1), 41-50.Campel, A. 2002. Loyalty stems from work, life balance [Electronic Version]. The New Zealand Herald.Retrieved 26 April, 2007 from http://www.nzherald.co.nz/search/story.cfm? storyid=69964B30-39DD-11DA-8E1B-A5B353C55561Cleland, J., Pajo, K., & Toulson, P. 2000. Move it or lose it: an examination of the evolving role of thehuman resource professional in New Zealand. International Journal of Human ResourceManagement, 11(1), 143-160.Collis, J., & Hussey, R. 2003. Business research (2nd ed.). UK: Palgrave.Dibella, A. J. 2007. Critical perceptions of organisational change. Journal of Change Management, 7(3),231-242.Drucker, P. F. 2006. What executives should remember. Harvard Business Review, 84(2), 144-152.Du Plessis, A.J. 2010, International Human Resource Management: an overview of its effect on managersin global organisations. Interdisciplinary Journal of Contemporary Research in Business, August,2 (4): 178-192Du Plessis, A.J. 2009. An overview of the influence of globalisation and internationalisation on domesticHuman Resource Management in New Zealand. International Review of Business ResearchPapers 5(2), March: 1-18.Du Plessis, A. J. 2006. Human resource's role in future priorities and current capabilities in New Zealandorganisations. International Journal of Knowledge, Culture and Change Management, 6(1), 69-78.Du Plessis, A. J., Beaver, B. & Nel, P. S. 2006. Closing the gap between current capabilities and futurerequirements in human resource management in New Zealand: Some empirical evidence. Journalof Global Business and Technology, 2(1), 33-47.Ely, R., & Thomas, D. 2001. Cultural diversity at work: the effects of diversity perspectives on workgroup processes and outcomes. Administrative Science Quarterly, 46(2), 229-272.Fish, A., & Macklin, R. 2004. Perceptions of executive search and advertised recruitment attributes andservice quality. Personnel Review, 3(1), 30-54.Gilbert, J., & Jones, G. 2000. Managing human resources in New Zealand small businesses. Asia PacificJournal of Human Resources, 38(2), 55-68.Gilbertson, D. 1984. Personnel's path to organisational effectiveness. Proceedings of the NationalConference of the New Zealand Institute of Personnel Management, October, 48-51.Gloet, M. 2006. Knowledge management and the links to HRM: Developing leadership and managementcapabilities to support sustainability. Management Research News, 29(7), 402 - 413.Guthridge, M., Komm, A. B., & Lawson, E. 2008. Making talent a strategic priority. The McKinseyQuarterly, 1, 49-59.Härtel, C. E. J., & Fujimoto, Y. 2010. Human resource management: Transforming theory into innovativepractice. Australia: Pearson Education.Hayward, S. 2006. Equipping HR with new tools for success. Strategic HR Review, 5(2).Heneman, H., Judge, T., & Heneman, R. L. 2006. Staffing organisations. Boston: MacGraw-Hill.Holbeche, L. 2006. Understanding change: Theory, implementation and success. Great Britian: MPGBooks Ltd.Horgan, J. M. 2003. High performance human resource management in Ireland and the Netherlands:Adoption and effectiveness. Amsterdam: Rosenberg Publishers.Institute of Personnel Management New Zealand. 1997. Professionalism in personnel: The 1997 survey ofthe HR profession. Human Resources, 2(5).Jacobs, P. 2007. The changing face of recruitment. Human Resources, 12(6), 2-3.Jamrog, J. J., & Overholt, M. H. 2004. Building a strategic HR function: Continuing the evolution.Human Resource Planning, 27(1), 51-62.Joerres, J. A. 2006. Engaging the total workforce. Human Resources, 11(2), 2-7.Johnson, E. K. 2000. The practice of human resource management in New Zealand: Strategic and bestpractice? Asia Pacific Journal of Human Resources, 38(2), 69-83.33Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comJones, D., Pringle, J., & Shepherd, D. 2000. Managing diversity meets Aotearoa/New Zealand. PersonnelReview, 29(3), 364-380.Kane, B., Crawford, J., & Grant, D. 1999. Barriers to effective HRM. International Journal ofManpower, 20(8), 494 - 516.Kendrick, S. 2007. Make today's recruitment tools work for you - not against you. Human Resources,11(5), 6-8.Losey, M. R., Meisinger, S. R., & Ulrich, D. 2005. Future of human resource management: 64 thoughtleaders explore the critical HR issues of today and tomorrow. USA: John Wiley & Sons.Macky, K., & Johnson, G. 2003. Managing human resources in New Zealand (2nd ed.). Australia:McGraw-Hill.Macky, K. 2008. Managing human resources in New Zealand (2nd ed.). Australia: McGraw-Hill.McKeown, L. J. 2002. Retaining top employees. USA: McGraw-Hill.Morley, M., Gunnigle, P., O'Sullivan, M., & Collings, D. G. 2006. New directions in the roles andresponsibilities of the HRM function. Personnel Review, 35(6), 609-617.Murphy, G. D., & Southey, G. 2003. High performance work practices: Perceived determinants ofadoption and the role of the HR practitioner. Personnel Review, 32(1), 73 - 92.Nel, P. S., Werner, A., Poisat, P., Sono, T., Du Plessis, A. J. & Nqalo, O. 2011. Human resourcesmanagement (8th ed.). South Africa: Oxford University Press.Raich, M. 2002. HRM in the knowledge-based economy: Is there an afterlife? Journal of EuropeanIndustrial Training, 26(6), 269-273.Raich, M. 2006. HRM in the knowledge-based economy: is there an afterlife? Journal of EuropeanIndustrial Training, 26(6), 269-273.Rennie, W. H. 2003. The role of human resource management and the human resource professional inthe new economy. University of Pretoria, Pretoria.Rijamampianina, R., & Carmichael, T. 2005. General issues in management: A pragmatic and holisticapproach to managing diversity Problems and Perspectives in Management, 1, 109-117.Rudman, R. 2010. Human resources management in New Zealand (4th ed.). New Zealand: Prentice Hall.Sheehan, C. 2005. A model for HRM strategic integration. Personnel Review, 34(2), 192 - 209.SMEs in New Zealand: Structure and Dynamics. 2006. Retrieved 10 September 2008, fromhttp://www.med.govt.nz/Stablein, R., & Geare, A.(1993. Human resource management in New Zealand: Profession and practice.Asia Pacific Journal of Human Resources, 31, 26-38.Stewart, T. 1996. Taking on the last bureaucracy. Fortune(January 15), 105-108.Stone, R. J. 2008. Human resource management (6th ed.). Australia: John Wiley & Sons.Storey, J. 2007. Human resource management: A critical text (3rd ed.). London: Thomson Learning.Strack, R., Dyer, A., Caye, J., Minto, A., Leicht, M., Francoeur, F., et al. (2008). Creating peopleadvantage: How to address HR challenges worldwide through 2015. USA: World Federation ofPersonnel Management AssociationTaylor, R. 2002. The future of work-life balance [Electronic Version]. An ESRC Future of WorkProgramme Seminar Series. Retrieved 10 April, 2007 fromhttp://www.leeds.ac.uk/esrcfutureofwork/downloads/fow_publication_2.pdf.Ulrich, D., & Brockbank, W. 2005. The HR value proposition. USA: Harvard Business School Press.Ulrich, D. & Smallwood, N. 2003. Why the bottom line isn't! How to build value through people andorganisations. New York: John Wiley & Sons.Walker, J. W., & Stopper, W. G. 2000. Developing human resource leaders. Human Resource Planning,23(1), 38-44.Wilson, M., Gahlout, P., Liu, L., & Mouly, S. 2005. A rose by another name: The effect of ethnicity andname on access to employment. University of Auckland Business Review, 7(2), 65-72.Wright, P. M., & Boswell, W. R. 2002. Desegregating HRM: A review and synthesis of micro and macrohuman resource management research. Journal of Management, 28(3), 247- 277.34Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comIn Financial Meltdown Are Country’sStability Factors of More Interest to ForeignInvestors?A Critical ExaminationWajid Shakeel AhmedDepartment of Management SciencesCOMSATS University of Information TechnologyIslamabad, PakistanMuhammad Tahir Masood, Ph.D., P.E.(Corresponding author)Professor, Department of Management SciencesCOMSATS University of Information TechnologyIslamabad, PakistanDr. Husnain A. NaqviAssistant Professor, Department of Management SciencesCOMSATS University of Information TechnologyIslamabad, PakistanJibran SheikhDepartment of Management SciencesCOMSATS University of Information TechnologyIslamabad, PakistanABSTRACTInvestment business is nothing more than an adult game of capital. This paper criticallyreviews the country’s stability factors, needed to be considered by the foreign investors,to reduce the element of investment risk, in the country that possesses the right aptitude.The research comprises of empirical information in order to confirm the smooth processof prudent investment with only one intension to rescue the minds of the investors fromthe vicious cycle of financial meltdown. There also confirmed a positive correlationbetween the prudent investment and the wealth accretion process, which should be thecore objective of the foreign investors.Key Words: Capital inflow, Investment Risks, Financial Meltdown.35Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comINTRODUCTIONInternational business is a well established term which means to execute the wide range ofoperations in countries which appear to be qualified enough on the standard criteria of Investmentdrawn by that internationally acclaimed establishment. International business is a program initself as this colossal expression seems to submerge the most intense vicinity of wealth creation &accretion. In international business, the operations could either be carried out by privatecorporations or public corporations by trade, venture and logistics or even by haulage or shippingwhich essentially takes place beyond the geographical borders between two nations, states ordifferent localities. One of the chief objectives behind international trade carried by a privateentity is to expand capital and secure expansion whereas, a public or government entity doesinternational trade with the added value phenomenon such as, bilateral pleasant relations. As aresult of healthy trade among two nations will eventually help to boost their Gross domesticproduction level. The highlight feature of international trade is to conveniently exchange servicesand goods in a way that people around the globe not only gain the benefit from it but also,formulate a healthier network with respective nations and regions. The most promising differencebetween international trade and domestic trade is; an increasing risk factor, in terms of losingcapital, which can be witnessed in international trade more often and more costly too. Empiricallyit has been argued the importance of world business cycle and found out that there is said pairwise correlated pattern amoung both the developing & developed industrialized economies forexample see, Backus, D., et al. (1995); Baxter, M., (1995); Mendoza, E. G., (1995); and Kose(2002). One of the most important factors of international business is globalization and the largescale exchange of industry and trade. As we know that without globalization, the world willsuffer great loss of socialization and fusion; similarly the world without international businesswill be nothing more than an isolated entity with no technology, development or expertise. Theacknowledgement of globalization can only be proved by the flow of goods and services, whichare most demanded in all over the globe.As it is a world of competition, so the customer needs and wants are suppose to be the priority ofany foreign or local corporation, as this is the key to success. International trade results inevolution & exploration of industrialization; engineering; increase production; and intensifies inthe field of commerce. International business is one of the most recognized industries in the fieldof commerce and trade. The process of investment isn’t that easy as it sounds, rather there arecrucial dimensions which cannot be neglected, and it is highly needed too to critically judgewhether or not the country under consideration is good enough for their investment or not. It hasbeen evident from the recent past that the capital inflows correlated behavior with the expectedlevel of changes in profitability figures; expected rise in the level of real exchange rates; effectsthe domestic policy making strategies; and entice the world financial investors (Guillermo, et al.,1993). The chief purpose behind any international investment is none other than fulfilling the setpromised goals through increase the annual capital profit, so for that reason, the enterprise willtake into account every tiny detail which might affect their company’s objectives in future. But inorder to understand globalization as well as international businesses, one should consider thecomplex menace of geographical boundaries as well as importance and magnitude of installingindustries and manufacturing in stable countries, states or regions across the border. One shouldget enlighten about the significance of rupturing the stiffness of the border line and challenge theglobalization of business, the technology, growth, development or progression which would be onour door steps after we have a clearer view of these complex terms (Stopford & Turner, 1985).36Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comLITERATURE REVIEWa. Financial meltdownOne cannot overlook the vicious impact of Global crisis in almost every part of the region, andthe present one seemed to be the worst, since 1929 market crash. Empirically it is evident that dueto the rapid declining movement in the financial markets, it has opened debates; on the credibilitylevel of secure investment venues; new window of opportunities for the domestic foreigninvestors and; and bringing boundary politics and resulting disputes into to the lime light, Lamb(1964); Woodman (1969); Razvi (19710; Prescott (1975, 1987); Embree (1979); Graver (1981);and Kreutzmann (1993a). Due to the rising chances of distress economic and financial distress inthe past years, it has taken the world to the “catastrophic” vintage point, where it seems to be apoint of no return. More over, under this, so called never ended global crisis, where the financialmeltdown makes the recession into the state of “depression”, causes non neglectable damage tothe investment world, Roubini, (2008). Since, there found the worst effects of world food anddebt crisis during the recent decade (see, Robertson, 1992), efforts has been made to reduce thegap between the developed and developing countries. This depression has fallen down the grossdomestic product figure up to 70% and disturbed the credit environment of the United States, i.e.,housing pricing eventually falls 20 – 30%. This can also be evident from the sharp drop in theequity markets and arises capital and liquidity problems for the under writers, Roubini, (2008).On the contrary, one can never forego the vicious impact of economic distress which never seemsto be faded out in the coming time and it creates problem for the countries which lacks stability interms of weak legal protections, Johnson et al. (2000). Also, under the distress economicconditions there arises issues in the performance level of the business where there have been seenimbalance of rights shifts more to controlling managers than ownership rights, for example,Mitton (2002); Lemmon & Lins (2002).b. Political & socio-economic conditions under financial meltdownThere are a lot of factors which should be kept in mind before installing a massive foreignoperating machine in any stable country. A stable country - a region, district, area or a state whichis resistant of any change or resistance from deterioration to the condition of its socio economic,political, educational or cultural needs as well as can’t grow weaker, decline or fade away fromits present secure as well as established state. Once business is settled, one thing which should bekept in mind is ‘Protection’ - Protection of the property, either inside the country or even in someother foreign country; protection of goods and services; protection of the name of the company;protection of the rights; and most importantly, protection of human rights - rights of employees,labor, worker etc. Developing, but stable nations, can attract the foreign investors by exhibiting asteady political structure as well as socio economic condition of their state. As we know that thestakes are always high with foreign investors so in order to confirm a position for oneself, thedeveloping but stable countries, according to the global trend, attempt to offer more satisfactoryand suitable atmosphere or environment for the investors as well as demonstrate the relativeeconomic policies as well as investment laws for those corporations in order to attract them sothat they will invest in their nation state.37Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comNow the later discussion leads us to, importance of stability of a country which makes it a goodcandidate for the investments of foreign corporations and the factors which affect stability of thatcorporation. The most common deed which is carried out by the lesser developed as well as stablecountries is that they advertise their worthiness by publicizing attractive as well as appealingeconomic policies for the foreign investors. In the process of choosing a country for theproceeding of international business, the most important factor which should be kept in mind isnone other than, its inside condition/state of competence as well as resources as these two featuresof a company give a detailed view of whether or not the corporation is stable enough in order toestablish business in a foreign country or not. Over the last decades, the foreign tycoon investorshave made lesser developed countries (from now on, LDCs), as place where they can invest intheir businesses. In 1996, net private capital flows to LDCs had full-fledged developed; almost600% since 1990, reaching a total of $240 billion (World Bank, 1997). The significance of thedifference in cultures; difference in economies; difference in currencies exchange rates;difference of political condition, that whether or not the country’s political scenario is stable ornot, all of these must be given balanced weightage to get a good grip over the availableinvestment opportunity. Also, to judge the credibility of the targeted foreign country, one shouldalso appreciate difference between social condition of the country to be invested in andultimately, the difference in the educational condition of that foreign country as it will benefitboth the states to learn something out of ordinary or different from each other.c. Capital Inflow under financial meltdownThe flow of international capital around the world is very important for the confirmation of ahealthy and assured future and it has been arguably said the international capital inflow tend toflow more rapidly into the developing economies due to the sustainable domestic policies, evenunder the crisis Arias (1994). The role of international trade cannot be emphasized enough as wellas international market and its advantages and importance. The significance of internationaltraders and service providers are undeniable as they are the upcoming future go-getters, Drucker(1986). As the cost of labour has declined to high levels of unemployment and relaxationsprovided by governments around the world in order to kick start their economies. So as a result ofit, the multi-national companies are pushed to devote their capital in these states and are left withno other choice but to invest in the most appealing and promising stable country available (Calvo,1993; Fernandez-Arias, 1994; Cheenan, 1993). The best way for international businesses is tothink of themselves as international blood thirsty weapon by getting into this game of cash flowamong different firms regardless of their less privileged, overseas auxiliaries (Stopford, J M andTurner, 1985).d. Portfolio management under financial meltdownThere are a lot of facts and details which should be kept in mind with respect to transportation ortransfer of goods and services, importing or exports of material or absolute product, process oftaking license in respected foreign country, franchising your outlet over there, how muchinvestment is required, either the investment going to be direct or portfolio. Thus the chief reasonof any corporation in conducting a business empire in another state would be none other thanhaving ample profit with very minimum risk threat and with the added significance of portfoliomanagement mechanism; it has become hedging tool for the entities to achieve their set goals.Infact, through the portfolio management mechanism, it has ensured the foreign investors to findthe best possible opportunities, on the easier ground, among the many, thus, helping them furtherto charge to the location on a timely basis.38Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.come. Balance of payment under financial meltdownA lot of scholars have showed the importance of country’s socio economic and political stabilitybut the utmost significant feature of a stable country can be none other than profit tax, the ratio ofinflation as well as exchange rate is indeed by far the most comparative and virtual feature to beput under consideration of the invested country. Eventually this will help the foreign businessinvestor to understate the issues and problems of workers/ employees in the corporation and toeducate how to improve the performance of the conglomerate in international market and produceand manufacture the products, goods and services in the best way possible (Peng, 2001). Theechelon of trade in that country which is, in fact, the most crucial point of investigation in theinternational business as well as market around the world. It’s a well known fact that the stabilityof the country’s currency can only be determined by its exchange rate. As good or elevatedcurrency condition can make a country’s exported manufactured products more costly or priceyand imported products, goods and services in a much cheaper, low priced and economical rate ininternational market place.It is well understood that exchange rate is the most scrutinized and evaluated feature of a countrywhich makes it the most powerful stability factor of a country so something as powerful asexchange rate can be easily maneuver or influence by political authorities or public body officialsin their best interest possible. With huge responsibility, comes the great burden of staying loyaland honest, which lot of investors fail to achieve and get blind folded with greed and personalinterest and it has a massive effect on a over performance and to the targeted country as well.Similarly, if a country’s currency rate is not good then the condition will be reversed as theexported goods and services would be of insanely high cost and imports would be on very lowpriced profits; in short having higher exchange rate in a country is very important in order toattract the internationally stable investors.SummaryThe international businesses and stable countries can be divided into two stages; first stagecomprise of the investors considering the factors of the lesser developed as well as stable state bydeliberately keeping in the factors which suit their requirements and the other stage includes thepolicies as well as the environment provided by the stable country are good enough for thesettlement of the whole operation or not. Studies show the importance of educational as well asstudious value of business in the good judgment of future as well as practical approach in thistricky field of numbers and figures. There is a huge magnitude of international markets and theflow in exchanging of products and goods. The company’s success can only be achieved with aconstant flow of capital; around the globe. Only those companies are truly successful in everysense who perceive and comprehend the world as a global market or in short one market underone roof regardless of the difference of language and cultural values but when it comes to successthen identifying and understanding the world as one is very important (Hout, T., Porter, M.E. andRudden, E, 1982). It’s a wild world out there and in order to make place for you, one has to takecalculated risks with familiarization of the needs and wants of people by bringing renovation toalready existing merchandise.39Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comOne is suppose to study the material which will not only help him/her in the practical world butwill also prepare the newly born babies in this field to stand out as titans and partake in theprocedure as well as progression in best possible way and the most important lesson of all time,when an opportunity come knocks your door step, never let it go instead snatch it with both handsand make the best out of it. With international business, one doesn’t only profit himself but alsofacilitate those consumers/shoppers who are actually deprived of let’s say a particular product ora distinctive feature in a product which no one else is offering him/her. The multi-nationalcorporations have certain strategies through which they categorize, classify, examine and evaluatethe possibility of excessive future profit after their settlement in a particular state. As it takes a lotof man power as well as investment in order to install a business in a state so the experts offoreign investors scrutinize every bit of possibility, policies, stability factors and risks in thelesser developed countries so that there will be no room for liability or imperfection left indecision making. As we know that most stable countries have strict law regarding theenvironment protection and their policies are strictly followed in this matter so, if they will seethe foreign company is going to bring any threat to their already existing policy system, they willrefuse to have any further collaboration with them. According to a famous survey conducted in allover the world by experts in Foreign Affiliates of UNCTAD and the World Association ofInvestment Promotion Agencies (WAIPA), the factors like low income taxes on foreigncorporations; access of skilled and cheap labor; an excellent quality and range of communication;know-how of technology; and positive anticipation, guaranteed secured investment with moreoptimistic approach. So for this reason, the foreign corporations, who are interested in generatingforeign business in any stable country should keep the laws, regulations regarding the foreigninvestors in their mind and should work or perform their functions accordingly for a moresatisfied and peaceful futureCONCLUSION: In conclusion to this paper, it is proved true to say that in order to getenough foreign investments in a nation state to bring bright future, technology and developmentto a country in it a compulsion to change your political as well as economic policies in favor offoreign investors and foreign corporations. The advantages are going to be enjoyed by bothinvestors and the target country and that both the parties seem to take the comfort of each other.The agencies which a nation’s authority as appointed to satisfy the needs of the foreign investorsare chief key to attract the outside investors as they advertise and give best possible environmentto help the foreign investors to settle in their country in a better way. Achieving or over taking thehurdles mentioned above is not as hard as it looks as we know that governments around the worldis now opening up to new investors and looking at concept of international business in a moreoptimistic way then before as it was considered to be intervene in foreign state. The foreigngovernments have developed special establishments and associations which are there to cater andprovide ease to the predicament or hitch which these international companies are facing. It’s notjust the government which is actually indulging in enhancing this international operation but themain reason behind this massive investment is the interest of that foreign market and the demandof that product. There have been a more positive approach towards the international competitionand businessmen are looking at the clash of minds as a path way towards progress and evolution.For the convenience of international businesses, governments around the world have been signingtreaty and settlements for quite some time now. Due to which new ideas and innovations can beseen gushing down and helping to develop more this already modern civilization to become morecontemporary and current through commercial transactions. Due to positive competition ininternational market, people know that there won’t be any deceitful, unjust or unmeritedcompetition around them and there is only one key to success that would be hard work and new,innovative ideas. Hence, the more stability indicators, that has been unearth earlier, the state willlikely to have at his disposal, the more investors would go to bestow, donate and grant theirinvestments in there.40Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comREFRENCESArias, E. F., (1994) “The new wave of private capital inflows: Push or pull?” Journal ofDevelopment Economics. Vol. 48 (1996) 389-418.Backus, D. K., et. al. (1995) "International Business Cycles: The-ory and Evidence," in ThomasF. Cooley, ed., Frontiers of business cycle research. Prince-ton, NJ: Princeton University Press,pp. 331-57.Baxter, & Marianne, (1991) "Business Cycles, Stylized Facts, and the Exchange Rate Regime:Evidence from the United States." Journal of International Money and Finance, 10(1), pp.71-88.Calvo, G., Liederman, L., and Reinhart, C., (1993) "Capital Inflows and Real Exchange RateAppreciation in Latin America: The Role of External Factors." IMF Staff Papers.Drucker, P.F., (1986) "The Changed World Economy", The McKinsey Quarterly, Autumn, pp.2-26.Fernandez-Arias, E., (1994) “The New Wave of Capital Inflows: Push or Pull?" Policy ResearchWorking Paper. Washington D.C.: World Bank.Hout, T, Porter, M.E. and Rudden. E., (1982) "How Global Companies Win Out", HarvardBusiness Review, September-October, pp.98-108.Johnson, S., et. al., (2000) “Corporate governance in the Asian financial crisis.” Journal ofFinancial Economics 58, 141–186.Kose, M. Ayhan (2002). "Explaining Business Cycles in Small Open Economies: How Much DoWorld Prices Matter?" Journal of International Economics, 56(2), pp. 299-327.Lemmon, M., Lins, K., (2002). “Ownership structure, corporate governance, and firmvalue:evidence from the east Asian financial crisis.” Journal of Finance, forthcoming.Mendoza, & Enrique G (1995) "The Terms of Trade, the Real Exchange Rate, and EconomicFluctuations." International Economic Review, 36(1), pp. 101-37.Peng. M.W., (2001) “The resource-based view and international business.” Journal ofManagement 27(6): 803-829.Richard M. Auty., (1994) World Development Volume 22, Issue 1, January, Pages 11-26Roubini, (2008), “The Rising Risk of a Systemic Financial Meltdown: The Twelve Steps toFinancial Disaster”; Global Economic Survey.Robertson, R., (1992) “Globalization.” Social Theory and Global Culture. Newbury Park, NewDelhi.Stopford, J M and Turner, L. (1985), Britain and the Multinationals, John Wiley.World Bank, (1997) Private Capital Flows to Developing Countries. Washington, D.C.: OxfordPress.41Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comIs Outward Bound Training (OBT) AnEffective Tool for Human ResourceDevelopment (HRD)? A Case Study fromSri LankaDr. Mohamed EshamDepartment of Agribusiness ManagementSabaragamuwa University of Sri LankaP. O. Box 02, Belihuloya, Sri LankaKrishanthi Ganga VithanaDurham Business School, United Kingdom andDepartment of Agribusiness ManagementSabaragamuwa University of Sri LankaP. O. Box 02, Belihuloya, Sri LankaABSTRACTThe purpose of this study was to examine the effectiveness of outward training programmes as ahuman resource development tool. For this study 11 organizations practising outward boundtraining were selected and both survey as well as case study approaches was used to collect data.The results revealed that there is clear difference between outward-bound training programmesand the other human resource development programmes in developing expected outcomes ofhuman resource development as these training programmes address different dimensions ofhuman resource development needs. Moreover, the contribution of outward bound trainingprogrammes to develop the expected outcomes considered in the study was much higher than thecontribution of other human resource development programmes. However, the findings suggestthat both outward-bound training and other conventional human resource developmentprogrammes can complement each other to improve the expected outcomes of human resourcedevelopment. Another important finding of this study was that the outcomes of the outwardboundtraining programmes are not influenced either by demographic factors of the participantsor programme related factors. Hence, outward bound training programmes are suitable for a widetarget group within an organization irrespective of their education, gender, age, professionalqualifications or position in the management hierarchy.Key words: Outward Bound Training, Human Resource Development, Training Outcomes, SriLanka."There is more in us than we know. If we can be made to see it, we will be unwilling tosettle for less."—Kurt HahnINTRODUCTIONOutward Bound is an innovative educational approach put forth by Kurt Hahn mainly basedupon his philosophy of providing experiential learning to empower young people to fulfil their42Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.compotentials (Stetson, 1996). In literature, interchangeably a number of terms are used to identifyOBT such as outdoor-based training, adventure based training, adventure based learning,adventure education, adventure counseling, outdoor adventure learning, outdoor experientialeducation, wilderness education and outdoor development are some of the terms used. Priest(1990) defined adventure education as being concerned with two relationships, the interpersonal(relationships with others) and the intrapersonal (self-concept). Bagby and Chavarria (1980)defined OBT as a type of educational and/or therapeutic program in which adventure pursuitsthat are physically and/or psychologically demanding are used within a framework of safety andskills development to promote personal and interpersonal growth. According to Bacon (1983)objectives of OBT are to enhance personal development, interpersonal and environmentalawareness, and refine philosophy and values.Outward bound training programmes have become increasingly a popular human resourcedevelopment tool both in the corporate and public sectors in both developed and developingcountries. In Sri Lanka there are about fifteen organizations offering OBT programme packagesfor organizational clients. The importance placed by local organizations on outward boundtraining as an important human resource development tool is clearly evidenced by the extensiveuse of these programmes by both the corporate and the public sectors in Sri Lanka.Notwithstanding its extensive use in Sri Lanka and other countries there are limited empiricalresearch studies undertaken to evaluate their effectiveness as a human resource development tool.Therefore, in order to bridge this knowledge gap we undertake an empirical study with the aim ofdetermining the effectiveness of outward bound training as a HRD tool. Moreover, case studiesare undertaken to further the understanding of the role of OBT programmes in enhancing HRskills.MATERIALS AND METHODSa. Research SampleThis research focused on the institutions already using OBT programmes. For this study 11organizations practising OBT were selected. These organizations consisting of private and publicsector organizations and a university were selected purposively. From each organization tenparticipants and one top manager from the HR department were selected on simple random basis.b. Data CollectionAs this research was explanatory in nature, survey methods as well as in depth interviews wereused for data collection. Primary data was collected using pre-tested questionnaires distributedamong the sample of 110 participants from the 11 organizations. Of the 110 participants, 60participants returned the questionnaire. However, only 41 questionnaires were considered for theanalysis due to the missing observations and incompleteness of the questionnaires. In addition,ten in-depth interviews were conducted with the HR managers from the selected organizations toget a clear understanding of the overall effectiveness of the training programmes. As secondarydata, documentary information published by selected organizations and training institutions wasused.c. The Research InstrumentThe questionnaire was designed to collect data regarding the characteristics of the participantsand the attributes of the training programmes. Characteristics of the participants includeddemographic variables such as age, gender, educational qualifications, professional qualifications,length of experience and the number of training programmes attended during the career. Theattributes of the programmes covered in the questionnaires included nature of the training,43Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.commanagerial level for which the training was conducted, number of trainees per batch and thenumber of trainees per group in the programme, duration of the training, location of the training,group composition and the number of instructors assigned per group.In order to determine the factors contributing to the success of the programme, the potentialcontributory factors such as course content, training methodology, training environment, toolsand equipments used, knowledge and skills of the instructors, behaviours of the instructors,course combination and group size and composition were measured using a five point numericalscale. Based on literature and participatory observations, 12 potential outcomes of OBT wereidentified. These outcome variables and the descriptions are presented in Table 1. Outcomes weremeasured by using five point numerical scales based on the question: “To what extent OBTprogrammes contribute to improve the following outcomes?” The same numerical scales wereused to measure the extent to which other human resource development programmes contribute toimprove the same set of potential outcomes. Other human resource development programmesconsidered in this study consisted of class room training, on the job training (OJT), apprenticeshiptraining and mentoring.d. Data AnalysisComputer aided data analysis techniques with the use of Minitab and Excel package wereused to analyze the data. Results were generated using statistical analysis as well as thequalitative analysis data obtained from the case studies.Table 1. Outcome variables and their descriptionOutcome variableDescription• Timely completion of tasks the extent to which the individual is able to meet deadlines• Reduce employee dissatisfaction the extent to which the individual is able to maintain cordialrelationships with subordinates• Reduce wastage the extent to which resources are used optimally• Punctuality ability to attend to the assigned task on time• Reduction of disputes and reduction in time wasted because of disputes and conflictsconflicts• Improvement of productivity the extent to which planed outcomes can be achieved• Improvement of quality the extent which a task conforms to established standards ofperformance• Innovations and suggestions contribution of new ideas and solutions• Ability to manage work properly ability to organize work more efficiently• Improvement of communication improvement of relationship with subordinates and superiorsand interpersonal skills• Willingness to undertake change in perception about undertaking challenging taskschallenging assignments• Ability to manage change improvement in perception about changee. Index to Measure Effectiveness of Outward Bound Training ProgrammesA weighted average index to measure the overall effectiveness of the outward bound trainingprogrammes was developed using grand total of the measurement scales under each of thepotential outcomes(timely completion of tasks, reduce employee dissatisfaction, reduce wastage,punctuality, reduction of disputes and conflicts, improvement of productivity, improvement ofquality, number of innovations and suggestions, the ability to manage work properly, improvedcommunication and interpersonal skills, willingness to undertake challenging assignments andability to manage change). The weights were taken as a proportion of the grand total of the44Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comoutcome scores. After determining the weights in order to measure the effectiveness of thetraining programme a composite index was developed using the aggregate of the score multipliedby the weight given to each of the outcome. The composite index value was calculated withrespect to each of the participant using the weighted average of the scale measurement indicatedunder each of the potential outcomes. In order to determine the contribution of the other HRDprogrammes to develop the same set of outcomes were also measured using the same method.RESULTS AND DISCUSSIONa. Results of Empirical Analysisi. Characteristics of the respondentsThe characteristics of the respondents are presented in Table 2. The age of the respondents varyfrom 20 years to 46 years. The majority are either graduates or GCE advanced level qualified. Itwas not possible to maintain a gender balance in the sample as majority of employees who haveundergone OBT were males. The majority of the respondents in the sample had attended only oneOBT programme during their career.Table 2. Characteristics of the respondentsAgeResponses20-29 Years 39%(16)30-39 Years 36.6%(15)>40 years 24.4%(10)Level of EducationMasters degree level 9.8%(4)Bachelors degree level 41.5%(17)GCE (A/L) and bellow 48.8%(20)GenderMale 75.6%(31)Female 24.4%(10)Number of OBT training programs attendedOne 51.2%(21)Two 22%(9)Three 9.8%(4)Four or more 17.1%(7)Note: values in the parenthesis are number of respondentsb. Outcomes of Outward Bound Training ProgrammesThe contribution of OBT programmes to develop each of the identified outcomes was measuredusing a five point numerical scale. The result of the ANOVA is presented in Table 3. Accordingto the results, almost all the mean values are above 3.0 implying that there is a significantcontribution from OBT programme to develop each of the outcomes. According to the confidenceintervals, it is clear that the OBT programmes better addresses outcomes such as willingness toundertake challenging assignments, ability to manage work properly and reduction of disputesand conflicts.45Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comTable 3. ANOVA of OBT programmesIndividual 95% CIs For Mean Based on Pooled StDevLevel Mean StDev -----+---------+---------+---------+----TIME COM 3.6829 1.2736 (----*----)RE EMP DIS 3.4878 1.1208 (----*----)RED WAST 2.9750 0.9470 (----*----)PUNCTU 3.7805 1.1071 (----*----)RE DIS 4.0732 0.7871 (----*----)IMP PROD 3.4878 0.9253 (----*----)IMP QLTY 3.3902 0.8910 (----*---)INN SUG 3.8780 0.8123 (----*----)MG WORK 4.0732 0.9053 (----*----)IM COM 4.0244 1.1065 (----*----)UND CHALL 4.5122 0.5967 (----*----)CHANGE MGT 3.8780 0.9797 (----*----)-----+---------+---------+---------+----3.00 3.60 4.20 4.80Notes: (P < 0.000) with adjusted r2 =0.137, Pooled StDev = 0.970TIME COM -timely completion of task, RE EMP DIS-reduce employee dissatisfaction, RED WASTreducewastage, PUNCTU-punctuality, RE DIS-reduction of disputes and conflicts, IMP PRODimprovementof productivity, IMP QLTY-improvement of quality, INN SUG -number of innovations andsuggestions, MG WORK-the ability to manage work properly, IM COM-improved communication andinterpersonal skills, UND CHALL-willingness to undertake challenging assignments and CHANGE MGTabilityto manage change.The contribution of other HRD programmes to develop the same set of expected outcomes weremeasured using the same numerical scale. The results presented in Table 4 indicates that thedegree of contribution of other HRD programmes were lesser than outward-bound trainingprogrammes. Other HRD programmes contributed largely to develop the outcomes such asimprovement of quality and improvement of productivity. However, even these contributionswere not higher than the contribution from the OBT programmes.Table 4. ANOVA of other HRD programmesIndividual 95% CIs For Mean Based on Pooled StDevLevel Mean StDev -------+---------+---------+---------+--TIME COM 2.4634 0.8092 (------*-------)RE EMP DIS 2.4634 0.8092 (------*-------)RED WAST 2.6341 0.8590 (------*-------)PUNCTU 2.5854 0.9213 (-------*-------)RE DIS &CON 2.5122 0.8100 (-------*------)IMP PROD 3.2683 1.0253 (------*-------)IMP QLTY 3.2927 1.0306 (-------*-------)INN &SUG 2.5366 0.7777 (------*-------)MG WORK 2.6341 0.9422 (------*-------)IM COM&IN C 2.5366 0.8396 (------*-------)UND CHALL 2.5366 0.8092 (------*-------)CHANGE MGT 2.5610 0.8077 (------*-------)-------+---------+---------+---------+--2.45 2.80 3.15 3.50Note: (P < 0.000) with adjusted r2 = 0.142, Pooled StDev = 0.87446Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comc. Overall Effectiveness of Outward Bound Training ProgrammesIn order to measure the overall effectiveness of the OBT programme a composite index wasdeveloped using the weighted average of the scale data. The weight under each of the outcomewas calculated taking the summation of scales under one particular outcome as a proportion ofthe grand total of the scale measures for all twelve outcomes. A similar composite index wasdeveloped to measure the contribution of the other HRD programmes to develop the same set ofoutcomes. The two indices were then compared and the results are shown in Table 5.Table 5. ANOVA of OBT vs. HRDIndividual 95% CIs For Mean Based on Pooled StDevLevel Mean StDev --------+---------+---------+---------+-index of OBT 3.8060 0.5739 (----*----)index of other HRD 2.6573 0.6735 (---*----)--------+---------+---------+---------+-2.80 3.20 3.60 4.00Note: (P < 0.000) with adjusted r2 = 0.364 , Pooled StDev = 0.625The results clearly indicate that there is a significant difference between the two outcome indices.The contribution of the OBT programmes to develop the expected outcomes considered in thestudy is much higher than the contribution from the other HRD programmes.d. Factors Influencing the Success of OBT Programmes.In order to examine the factors influencing the success of OBT programmes, factors such as age,gender, education, professional qualifications, work experience, number of trainings attended,number of trainees per group, number of instructors in a group, group composition and durationof the training were regressed against the composite indices of the individual participants. Theresults of the multiple regression is presented in Table 6.According to the regression results, despite the regression model being significant none of thedemographic variables or variables related to OBT programmes were found to be significant.Implying that the outcomes of the OBT programmes are not significantly influenced byparticipants’ demographics or programme related factors considered in this study.b. Findings from the Case StudiesCase studies were conducted with six organizations representing the banking sector, financialinstitutions, higher educational institutions, manufacturing organizations, hotel sector andnongovernmental organizations. These selected organizations represented large, medium andsmall scale organizations.The case studies were conducted through semi structured interviews with the use of a semistructured interview schedules. In addition to the close ended questions, the questionnairecontained many open ended questions to facilitate in-depth discussions with the respondent HRmanagers from the selected organizations.The number of levels in the organizational hierarchy varied from five to twelve in the selectedorganizations. All the organizations except the university had obtained the services of theOutward Bound Trust of Sri Lanka which is the only accredited institution to offer OBTprogrammes under the guidance of the Outward Bound International despite the availability of47Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.commany other organizations offering OBT programmes to clients. The duration of the OBTprogrammes offered to employees of selected organizations varied from two to five days.i. Why choose OBT programmes?All the respondents in the case study revealed that most of the other HRD programmes to trainstaff are in-house training conducted within a class room environment to which participants areexpected to come formally dressed carrying stationeries such as files, note pads and pens.Therefore, they wanted to change the type of training and allow the participants to be trained in amore relaxed outdoor atmosphere. In addition, they perceived that opportunities to participate inunconventional training programmes will facilitate personal development and job satisfaction ofemployees. The majority of the HR managers stated that OBT programmes were also chosen togive employees a unique long lasting memorable experience.ii. Who participates in OBT programmes?Considering the participant category many organizations have used OBT programmes to trainpeople across the whole organizations representing all the levels of management and occasionallyeven non-managerial employees. For some organizations they had grouped the participantsaccording to the managerial hierarchy. However, the majority suggested that it would have beenmore effective given the nature of the programme if employees had participated on departmentalbasis rather than on the basis of managerial hierarchy. The HR managers of medium and largescale organizations stated that the selection of participants for a programme should be in such away that it consists of employees representing all the managerial levels of a particulardepartment/s rather than a particular managerial hierarchy or a category. They stated such groupcomposition will better enhance the team performances within the organization.iii. What factors are considered in selecting HRD and OBT programmes?Based on the in-depth interviews conducted with the HR managers of the organizations, thefactors they consider in selecting HRD programmes and especially the OBT programmes areillustrated in the Figure 1. Some of the factors are common for all types of HRD programmes.However, some factors are unique for the OBT programmes. Due to the adventures nature and theoutdoor environment in which the OBT programme is conducted, the organizations have givenconsiderable attention to factors such as the number of incidence of accidence, safety, disciplineas well as the behavioural aspects of both participants and instructors.Figure 1. Factors considered in selecting OBT and HRD programmesExclusively HRDPrevious trainingoutcome withtrainerCostTrainingmethodologyCourse contentEffectiveness of theprogrammeDurationCommon for HRDand OBTExpected outcomeTraining locationExperience andqualification oftrainerTrainingmethodologyCourse contentTraining needs ofthe organizationExclusively OBTPrevious experience ofHR staff with OBTGive priority to teamworkNumber of accidenceSafetyDisciplineBehaviour ofinstructorsiv. What are the expected outcomes of the OBT programmes?48Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comGiven the high expectations from OBT programmes, the priority was given to developingoutcomes such as personality, leadership, team building, goal attainment, positive self-conceptand ability to face challenges. In addition, most of the organizations highlighted the expectationsof developing traits such as self confidence, inter personal relationships among employees and theability to confront self imposed barriers of individuals. The outcomes such as improving physicalfitness, time management, innovation and creative thinking received relatively low scores in ourstudy.v. What were the outcomes of the OBT programmes?Responding to the question to what extent some of the outcomes were developed through OBTprogrammes, the outcomes which are people oriented received higher scores than the outcomeswhich are task oriented. The outcomes which received higher scores included team building,cooperativeness, improved individual and group performances, high self confidence, betterinterpersonal relationships, high flexibility, punctuality, low employee disputes and conflicts, andbetter cross functional relationships. The outcomes which received moderate scores consisted oftimely completion of tasks, reduce employee turnover, number of innovations and suggestionsand improvement of productivity, quality and profitability. HR managers also revealed that theOBT programme outcomes are realized at different stages and time periods.Giving special comments on OBT programmes most of the HR managers stated that the OBTprogrammes are capable of breaking the monotony of the routine life of workers. HR managershave also used OBT programmes to identify potential employees for further development and todevelop trust among the employees towards their organization. Further, they tend to considerOBT as a development tool rather than a training tool with direct impacts on the current job.In the in-depth interview conducted with the Dean of a University which has incorporated OBT toits undergraduate curriculum stated that since the employability of the graduate largely dependson the qualities such as leadership, interpersonal skills, communication skills, personalityattributes and the ability to work in a challenging environment, OBT was incorporated to theircurriculum. Members of the alumni of this University emphasised that the OBT helped them to agreater extent to secure employment and perform well in their current jobs.CONCLUSIONThe use of outdoor experience for educational training and development purposes has a rich aswell as a long history since these OBT programmes assist in developing a healthy body as well asa healthy mind within a person. Therefore, this particular training methodology is becoming avery popular among corporate and public sector organizations worldwide and in Sri Lanka.Recognizing the importance of the outcomes addressed through the OBT programmes, even theUniversities in Sri Lanka have incorporated OBT programmes into their undergraduate andpostgraduate curriculums.The research was conducted with the main objective of determining theeffectiveness of OBT programmes as a human resource development tool. The results revealedthat there is a clear difference between OBT programmes and other HRD programmes indeveloping outcomes such as timely completion of tasks, reduce employee dissatisfaction, reducewastage, punctuality, reduction of disputes and conflicts, improvement of productivity,improvement of quality, number of innovations and suggestions, the ability to manage workproperly, improved communication and interpersonal skills, willingness to undertake challengingassignments and ability to manage change. However, it further revealed that the OBTprogrammes particularly addressed the outcomes such as willingness to undertake challengingassignments, reduction of disputes and conflicts, the ability to manage work properly, improved49Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comcommunication and interpersonal skills, number of innovations and suggestions, ability tomanage change and punctuality. Whereas, the other HRD programmes had addressed theoutcomes such as improvement of productivity, improvement of quality, timely completion oftask, reduce employee dissatisfaction and reduce wastage. Moreover, the contribution of the OBTprogrammes to develop the expected outcomes considered in the study was much higher than thecontribution of other HRD programmes. However, these findings suggest that both OBT andother conventional HRD programmes can complement each other to improve expected outcomesof HRD programmes.Another important finding of this study was that the outcomes of the OBTprogrammes were not influenced by demographic factors of participants such as age, gender,educational level, professional qualifications, experience, number of programmes attended andprogramme related factors such as number of trainees in one group, number of instructors pergroup or the composition of the group. Therefore, it can be concluded that the OBT programmesare suitable for a wide target group within an organization irrespective of their education, gender,age, professional qualifications or management hierarchy. Moreover, the training groups could beheterogeneous and drawn out from different levels of the organizational hierarchy without havingnegative implications on the effectiveness of the programme. These findings were furtherconfirmed by the case studies. Nevertheless, the results of this study should be cautiouslyinterpreted, as there were number of limitations in conducting this study such as small samplesize, personal bias of respondents and limited data used in the analysis.REFERENCESBacon, S. (1983). The conscious use of metaphor. Colorado Outward Bound School, Denver,Colorado.Bagby, S. A. and Chavarria, L. S. (1980). Important Issues in Outdoor Adventure, ERIC/CressMini Review, Outdoor Adventure Education and Juvenile Delinquents.Hahn, K., (1957). Outward Bound. World Books, New York.Outward Bound International http://www.outward-bound.org/docs/info/OBSriLanka.htm(Accessed in February 2009).Priest, S. (1990). The Semantic of Adventure Education. In J.C. Miles and S. Priest (Eds.).Adventure Education, State College, PA: Venture Publishing, Inc. pp 113-119.Stetson, C.P. (1996). Journey with Kurt Hahn. Outward Bound International, Victoria, Canada.50Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comLiterature Review: Service Quality inHigher Education Institutions in MalaysiaAnantha Raj A. ArokiasamyQuest International University Perak (QIUP)No. 227, Plaza Teh Teng Seng (Level 2),Jalan Raja Permaisuri Bainun,30250 Ipoh, Perak,Malaysia.ABSTRACTThe main purpose for this review of literature is to configure theimportance of maintaining Service quality in Higher Education industry.The paper would explore the development of the concept of ServiceQuality. It would also explain the development of Service QualityMeasurement Models with respect to the literature as well as theirapplication in various industries and especially the higher educationindustry. Thus the review paper provides a clear insight on thedevelopment of Service Quality Measurement Models. Although a lot ofresearch has been done on the Service Quality; yet the struggle to rightlyunfold the concept is still under progress. From 1988 to 2008, eightService Quality Measurement Models have been developed. In 1988, thefirst service quality measurement model was developed by Parasuraman,et al. It was introduced by the name of Service Quality (SERVQUAL).This model was empirically tested on the validity of Service QualityMeasurement Variable with respect to the multi-industries. EventuallyParasuraman, et al. (1988, p.23) developed five dimensions which wereshowing significance to the measurement of service quality, namely ‘(a)Tangibles (physical facilities and equipment), (b) Reliability (performingthe promised service), (c) Responsiveness (willingness to help customers),(d) Assurance (courtesy of employees to convey trust) and (d) Empathy(individualized attention provided to customers)’.Keywords: Service quality, higher education, development, measurementand customers.1.DEFINITION & DIMENSIONS OF SERVICE QUALITYIn this paper, service quality can be defined as the difference between customers’ expectations forservice performance prior to the service encounter and their perceptions of the service received.Service quality theory (Oliver, 1980) predicts that clients will judge that quality is low ifperformance does not meet their expectations and quality increases as performance exceeds51Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comexpectations. Hence, customers’ expectations serve as the foundation on which service qualitywill be evaluated by customers. In addition, as service quality increases, satisfaction with theservice and intentions to reuse the service increases.Institutions of higher education are increasingly realizing that they are part of the service industryand are putting greater emphasis on student satisfaction as they face many competitive pressures.In today’s competitive environment, the education has not only become a major industry andneed of the day but it is also an investment by the parents for their children. In public as well asprivate sector the quality of education is an important factor that is considered for attracting andretaining the students who wants to get higher education. Currently every university all over theworld tries to become a world class university. In fact quality in higher education is relativeconcept given the number of various stakeholders involved (Tam, 2001) which ranges from thesingle student as a primary customer (Hill, 1995) to the whole of the society (students, parents,staff, employees, business and legislators) (Rowley, 1997).Service industries are playing an increasingly important role in the economy of many nations. Intoday’s world of global competition, rendering quality service is a key for success and manyexperts concur that the most powerful competitive trend currently shaping marketing and businessstrategy is service quality. Service quality has since emerged as a pervasive strategic force and akey strategic issue on management’s agenda. It is no surprise that practitioners and academicsalike are keen on accurately measuring service quality in order to better understand its essentialantecedents and consequences and ultimately establish methods for improving quality to achievecompetitive advantage and build customer loyalty.Parasuraman, Zeithaml and Berry (1985) described service quality as the ability of anorganization to meet or exceed customer expectations. The authors defined service quality as thegap between consumer expectations and perceptions. These original dimensions from theframework are illustrated in Table 1 and served as the initial structure of a service qualitymeasurement instrument (SERVQUAL), which was later created by these academics. They listedten determinants of service quality that can be generalized to any type of service. The tendimensions are as below:Table 1 – Service Quality Dimensions by Parasuraman et. al1. Tangibles Appearance of physical facilities, equipment, personnel andcommunications materials2. Reliability Ability to perform the promised service dependably andaccurately3. Responsiveness Willingness to help customers and provide prompt service4. Competence Possession of the required skills and knowledge to perform theservice5. Courtesy Politeness, respect, consideration and friendliness of contactpersonnel6. Credibility Trustworthiness, believability, honesty of the service provider7. Security Freedom from danger, risk and doubt8. Access Approachability and ease of contact9. Communication Keeping customers informed in language they can understandand listening to them10. Understanding the Making the effort to know customers and their needsCustomer52Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comIn 1988 Parasuraman, Zeithaml, and Berry developed a generic instrument called SERVQUAL tomeasure service quality based on input from focus groups. Although SERVQUAL was developedwithin the marketing sector, it also is used in a variety of organizational settings, includinglibraries and information centers (Kettinger & Lee, 1994; Nitecki, 1996). Since 1988Parasuraman, Zeithaml, and Berry have made numerous changes to SERVQUAL, some inresponse to problems identified by other researchers. These ten dimensions were regrouped in thewell known five dimensions in the SERVQUAL model (Parasuraman, Zeithaml and Berry 1990)which include “tangible”, “reliability”, “responsiveness”, “assurance” and “empathy”.Table 2 – SERQUAL Model by Parasuraman, Zeithaml and Berry (1990)1. Tangibles Appearance of physical facilities, equipment, personnel andcommunications materials2. Reliability Ability to perform the promised service dependably and accurately3. Responsiveness Willingness to help customers and provide prompt service4. Assurance Knowledge and courtesy of staff and their ability to convey trust andconfidence5. Empathy Caring and individualized attention to the customerAccording to Sasser, Olsen and Wyckoff (1978), service quality is a measure of how well theservices (as received) match expectations (as preconceived). The notion of service qualityinvolves more than the outcome quality; the methods and manner by which the service isdelivered are of great importance. The quest for service quality has been an essential strategiccomponent for firms attempting to succeed or survive in today’s competitive environment.Everyone recognizes good service when they see or experience it. What stands out in thecustomer’s mind is excellent service that exceeds their expectations. The real quality revolutionhas come to services. Sasser, Olsen & Wyckoff (1978) listed seven service attributes which theybelieve adequately embrace the concept of service quality. These are listed below in Table 3.Table 3 – Service Quality Dimensions by Sasser et. al1. Security Confidence as well as physical safety2. Consistency Receiving the same treatment for each transaction3. Attitude Politeness4. Completeness The availability of ancillary services5. Condition Of facilities6. Availability Spatial and temporal customer access to services7. Training Of service providersA firm in order to compete successfully must have an understanding of consumer perception ofthe quality and the way service quality is influenced. Managing perceived service quality meansthat the firm has to match the expected service and perceived service to each other so thatconsumer satisfaction is achieved. The author identified three components of service quality,namely: technical quality; functional quality; and image (see Figure 1 below):(1) Technical quality is the quality of what consumer actually receives as a resultof his/her interaction with the service firm and is important to him/her and to his/herevaluation of the quality of service.(2) Functional quality is how he/she gets the technical outcome. This is important to him andto his/her views of service he/she has received.53Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.com(3) Image is very important to service firms and this can be expected to build up mainly bytechnical and functional quality of service including the other factors (tradition, ideology,word of mouth, pricing and public relations).Figure 1 - The Perceived Service Quality ModelAccording to Gronroos (1990), “A service is an activity or series of activities of more or lessintangible nature that normally, but not necessarily, take place in interactions between thecustomer and service employees and/or systems of the service provider, which are provided assolutions to customer problems (p. 27) In other words, service quality is an outgrowth of themarketing concept; focus on the customer. What is important is what is perceived as quality bythe customer and not what designers or operations people feel is good or bad quality. Accordingto the Perceived Service Quality model (see Figure 1), the quality of a service, as perceived bythe customer, is the result of a comparison between the expectations of the customer and his orher real-life experiences. If the “experienced quality” exceeds “expected quality,” the “totalperceived quality” is positive. If expectations are not met by performance or the actualexperience, the perceived quality is low. There are multiple customers in an internship program:students, internship suppliers, and sponsoring entities, for example. Final success is dependent oninitial expectations compared to actual performance.Swartz and Brown (1989) drew some distinctions between different views on service quality,drawing from the work of Grönroos (1983) and Lehtinen and Lehtinen (1982) concerning thedimensions of service quality. “What” the service delivers is evaluated after performance (Swartzand Brown, 1989, p.190). This dimension is called outcome quality by Parasuraman et al. (1985),technical quality by Grönroos (1983), and physical quality by Lehtinen and Lehtinen (1982).“How” the service is delivered is evaluated during delivery (Swartz and Brown, 1989, p. 190).This dimension is called process quality by Parasuraman et al. (1985), functional quality byGrönroos (1983), and interactive quality by Lehtinen and Lehtinen (1982).In 1993, Teas developed two models for measuring service quality. Teas was not convinced withthe entire concept of measuring the customer perceived quality with the gap of perception and54Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comexpectation as in SERVQUAL. The major emphasis of the researcher was on the conceptualunderstanding of Expectation, since the expectation associated to the services could exceed theactual level of performance of the company. Therefore the researcher developed EvaluatedPerformance model (EP) in order to measures the gap between perceived performance and idealamount of a performance to gain consumer satisfaction. Further catering to the expectation, theresearcher concentrated on the prospect created after the experience of the consumer. Teas (1993)perceived Excellence norm as a result of positive experience of the customer, this led to thecreation of Normed Quality model. NQ measures the Quality gap between excellence norm andideal amount of expectations of the consumer. Both the measurement models are applicable tovarious industries. However the EP and NQ measurement model were not applied by otherresearchers in the literature.2. DISCUSSION OF THE SERVQUAL MODELService quality is defined as the result of the comparison that customers make betweenexpectations about a service and perception of the way the service was delivered (Lehtinen andLehtinen, 1982; Gronroos, 1984; Parasuraman, Zeithaml & Berry, 1985). SERVQUAL representsservice quality as the discrepancy between a customer's expectations for a service offering andthe customer's perceptions of the service received, requiring respondents to answer questionsabout both their expectations and their perceptions Parasuraman et al., (1988). The use ofperceived as opposed to actual service received makes the SERVQUAL measure an attitudemeasure that is related to, but not the same as, satisfaction (Parasuraman et. al., 1988). Thedifference between expectations and perceptions is called the gap which is the determinant ofcustomers’ perception of service quality as shown on figure 2 below.Figure 2 – Measuring Service Quality using SERVQUAL Model (Kumar et. al.,2009)55Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comThe expectations of customers are subject to external factors which are under the control of theservice provider as shown on the diagram. The Gap 5 on the diagram represents the differencebetween customers’ expectations and customers’ perceptions which is referred to as the perceivedservice quality (Kumar et al., 2009, p.214). This study focuses on this gap, the difference betweengrocery store customers’ expectations and perceptions of service.Brady and Cronin (2001) identified that the foundation of service quality theory has someconnection with the product quality and customer satisfaction literature based on thedisconfirmation paradigm identified in physical goods literature (Cardozo, 1965, Churchill andSuprenant, 1982; cited by Brady and Cronin, 2001). The discrepancy between customers’expectations or desires and their perceptions of the actual service performance was elaborated inthe Disconfirmation of Expectations Paradigm (Patterson, 1993) which related satisfaction tocustomer’s pre-purchase expectations and perceptions of service performance and identified anydifferences as Disconfirmation. The comparisons which form the basis of the model are asfollows:Comparison ProcessResults1. Perceived Performance > Expectation High Satisfaction (Delight)2. Perceived Performance = Expectation Merely Satisfied3. Perceived Performance < Expectation DissatisfactionThe concept of measuring the difference between expectations and perceptions in the form of theSERVQUAL gap score proved very useful for assessing levels of service quality. Parasuraman etal., argue that, with minor modification, SERVQUAL can be adapted to any service organization.They further argue that information on service quality gaps can help managers diagnose whereperformance improvement can best be targeted. The largest negative gaps, combined withassessment of where expectations are highest, facilitate prioritization of performanceimprovement. Equally, if gap scores in some aspects of service do turn out to be positive,implying expectations are actually not just being met but exceeded, then this allows managers toreview whether they may be "over-supplying" this particular feature of the service and whetherthere is potential for re-deployment of resources into features which are underperforming.According to Gronroos (1984), the service quality experienced by a customer has twodimensions; namely technical quality and functional quality. Functional quality describes how theservice is delivered and technical quality describes what the customers received during a servicedelivery. Gronroos also emphasized the importance of corporate image in the experience ofservice quality, similar to the idea proposed by Lehtinen and Lehtinen (1982). Customers bringtheir earlier experiences and overall perceptions of a service firm to each encounter becausecustomers often have continuous contacts with the same service firm (Gronroos, 2001).Therefore, the image concept was introduced as yet another important component in theperceived service quality model, so that the dynamic aspect of the service perception process wasconsidered as well. A favorable and well-known image is an asset for any firm because image hasan impact on customer perceptions of the communication and operations of the firm in manyrespects. If a service provider has a positive image in the minds of customers, minor mistakes willbe forgiven. If mistakes often occur, however, the image will be damaged. If a provider’s imageis negative, the impact of any mistake will often be magnified in the consumer’s mind. In a word,image can be viewed as a filter in terms of a consumer’s perception of quality.56Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comThe SERVQUAL instrument has been widely used in measuring service quality in many researchstudies (Babakus and Mangold, 1992; Carman, 1990; Cronin and Taylor, 1992; as cited byParasuraman et. al, 1993). According to Brown, Churchill and Peter (1993) the SERVQUAL isthe most popular measure of service quality, which involves the calculation of the differencebetween expectations and perceptions on a number of specified determinants. Parasuraman et. al(1994), acknowledged that the SERVQUAL model has been used productively and widely formeasuring service quality in many published studies examining service quality in a variety ofcontexts, including Banking, Pest Control, Dry Cleaning and Fast Food (Cronin and Taylor,1992).3. CRITICISM OF SERVQUALClearly, the SERVQUAL instrument has been extensively adopted by several academicresearchers and practitioners worldwide to measure service quality. The previously mentionedacademic research studies are examples of this. However, regardless of its extensive use,numerous theoretical, operational, conceptual, and empirical criticisms of the measurementinstrument have been identified and mentioned (Buttle, 1996; Van Dyke et al., 1997, 1999;Ladhari, 2008).Several researchers (Cronin and Taylor, 1992; Brown et. al, 1993) have pinpointed the calculationof difference score (expectation of service quality minus perception of service quality) in theSERVQUAL measure can result in psychometric problems and customers overstating theirexpectations because of prior bad experience with the organizations (Clow and Vorhies, 1993).As a result, a few scholars, (Shewchuck et. al., 1991; Taylor and Cronin, 1994) have suggestedthe use of either the expected or perception scale, but not the difference between them. As withany research tool, there are concerns expressed by other researchers. Lam (1997), Williams(1998) and O’Neil and Palmer have reviewed the criticism of the original instrument. Criticsinclude the failure to draw on various disciplines of psychology social science and economics.Other issues relate to measuring time, stability over time, the measuring scale, the service qualitydimensions and the use of difference scores, that is (Douglas and Connor, 2003);Perception – Expectation = QualityVan Dyke et al. (1997, 1999) recognized a number of conceptual and empirical criticisms ofSERVQUAL. Conceptually, they criticized using two different instruments for measuring twodifferent concepts (perceptions and expectations) to measure a third concept (perceived servicequality). Instead, they argued that direct measurement of perceived service quality is morereliable. Moreover, they argued on the uncertainty of the expectations construct as differentdefinitions and views of the concept resulted from uncertainly defined concept. Empirically, theyargued that SERVQUAL has a number of empirical problems including low reliability andunstable dimensionality.Ladhari (2008) summarized a list of theoretical and empirical criticisms of the model. First, heargued that the use of gap scores is not the right method because of the lack of the support inliterature to consumers evaluating service quality in terms of perception-minus-expectation. Hestated that it has been recommended that service quality is more precisely and correctly evaluatedby measuring only perceptions of quality. On the other hand, he mentioned that the conceptexpectation is not well defined and can be interpreted from different perspectives; as a result, theoperationalization of SERVQUAL may have different interpretations as well. In addition, hepointed out that previous research suggested using perception-only scores rather than gap scores57Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comfor the overall assessment of service quality. Last but not least, he emphasized that previousresearch studies criticize SERVQUAL for its focus on the process of service delivery instead ofthe result and the outcome of service encounters.The original SERVQUAL used an importance score (the customer’s service priorities), anexpectations score (the customer’s expected service level), a perception score (the customer’sagreement that something was provided), and the gap score (the difference between thecustomer’s expectation score for service and the perception score). There were several problemswith this approach (Kaldenberg et. al., 1997). The questionnaire was the excessively lengthy andredundant, the gap scores were unreliable and neither expectation nor importance scorescontributed significantly to explaining variance in service quality (Cronin and Taylor, 1992;1994). In the light of these, Parasuman,Zeithaml, and Berry (1994) proposed several alternativesto the original SERVQUAL design.Smith and Ennew (2001) outlined interesting aspect about Gronroos model. They highlighted thatthere was difficult hidden aspect in the choice of satisfaction perception of customer betweenwhich is more, the affective indignation and the technical functionality. For example, theparticular facility consumed by the students could be judged according to how reliable they are(technical functionality) or according to their ages, appearances, courtesy and empathy(affective). The perfect reliable facility, which is not up to date, but are capable of carrying outthe task, may still be negatively rated if the users expect the university to provide up to datefacility.These inherent choices are difficult and tedious to measure. Smith and Ennew (2001) also showedthat there were specific supportive items known as the peripheral aspect and the universityfacilities (existing packages), which students consume such as canteens and residentialaccommodation that will directly and indirectly have a significant impact on the evaluation of theuniversity. Hence, studies on these related aspects are crucial for the reflection of the university.Furthermore, a study made by Saadiatul, Samsinar and Wong (2000) on satisfaction towardhigher education in Malaysia using the SERVQUAL showed that the perceived five dimensionswas below the expectation. It showed that universities must maintain its service quality in order tomaintain university’s good image towards the future students.4. SERVICE QUALITY IN HIGHER EDUCATION INDUSTRYQuality, as we know so far, was originally developed in the manufacturing industry. In the area ofhigher education, the adoption of quality control has been superficial and diluted by the exerciseof academic freedom (Lagrosen, et. al, 2004). Further, the prevailing culture of universities isoften based on individual autonomy, which is zealously guarded (Colling and Harvey, 1995).Thus, it is usually difficult to apply the features of quality to higher education considering the factthat quality requires teamwork (Boaden and Dale, 1992). However, the quality of highereducation is very important for its stakeholders. Notably, providers (funding bodies and thecommunity at large), students, staff and employers of graduates are important (Srikanthan andDalrymple, 2003). Table 4 summarizes the way product dimensions of quality in higher educationcan be interpreted.58Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comTable 4 – Product Dimensions of Quality in Higher EducationDimensionsDefinition in Higher EducationPerformancePrimary knowledge/ skills required for graduatesFeaturesSecondary/ supplementary knowledge and skillsReliabilityThe extent to which knowledge/ skills learned is correct, accurateand up to dateConformanceThe degree to which an institutional programme/courses meetsestablished standards, plans and promisesDurabilityDepth of learningServiceabilityHow well an institution handles customers’ complaintsSource: Owlia and Aspinwall (1996)Service quality issues, over the years, has become an important consumer trend (Parasuraman etal., 1985) and has gained ground in service marketing literature in general and the extantliterature on Higher education in particular (Tan and Kek, 2004; Telford and Masson, 2005;Smith et al., 2007). The constructs of quality as conceptualized in the extant literature was basedon perceived ‘perceived quality’ (Fitri et al., 2008). According to Zeithaml et al. (1987) andZammuto et al. (1996), perceived quality is defined as the consumer’s judgment about an entity’soverall experience or superiority. Similarly, Parasuraman et al. (1994: 43) also concluded that“consumer perceptions of service quality result from comparing expectations prior to receivingthe service, and their actual experience of the service”. Perceived quality is also seen as a form ofattitude, related to, but not the same as satisfaction, and resulting from a comparison ofexpectations with perceptions of performance (Rowley, 1996). Cronin and Taylor (1992) arguedthat it was unnecessary to evaluate customer expectation in service quality, but measuringperceptions was sufficient.Higher education exhibits all the characteristics of a service provider. It is intangible andheterogeneous, meets the criterion of inseparability by being produced and consumed at the sametime, satisfies the perishability criterion and assumes the students’ participation in the deliveryprocess (Cuthbert, 1996). Seymour (1993) stated that higher education institutions serve studentsand can be considered as service organizations similar in characteristic to other service industries.The concepts of service quality are therefore directly applicable to higher education. As such,higher education institutions are increasingly attracting more attention to service qualityinitiatives mainly due to the social requirement for quality evaluation in education and thecompetitiveness in the higher education market place.The earlier researchers on service quality in higher education emphasized academic more thanadministration, concentrating on effective course delivery mechanisms and the quality of coursesand teaching (Athiyaman, 1997; Bourner, 1998; Cheng and Tam, 1997; McElwee and Redman,1993; Palihawadana, 1996; Soutar and McNeil, 1996; Varey, 1993; Yorke, 1992). Themeasurement of service quality of courses and programmes often rely on research instruments(e.g: student feedback questionnaires) devised by representatives of the higher educationinstitutions. Kamal and Ramzi (2002), however, attempted to measure student perception ofregistration and academic advising across different faculties and other administrative services toassure positive quality service that complements the academic.These days Higher Education Institutions (HEI) are operated on the basis of commercialization.Education is long lasting but the nature is such as it cannot be stored or produced on a large scale,59Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comit is intangible, thus the moment it is delivered, it is consumed, however utilization is up to thecustomer (Hill, 1995; Herstein and Gamliel, 2006; Ruiqi and Adrian, 2009; Houston, 2008). Thisapproach of HEI is due to the lack of available funds as well as economic conditions. Thus HEI’shave to be concerned about the perception of students about their institution as well as the level ofknowledge gained from the amount of income invested by the customers i.e. students (Abdullah,2006b; Russell, 2005; Sakthivel and Raju, 2006). Defining student is more complex in serviceindustry as compared with other industries. Since the customers could be external stakeholder(perspective student) or internal stakeholder (faculty and staff) (Venkatraman, 2007; Eagle andBrennan, 2007; Russell, 2005; Hill, 1995; Sakthivel and Raju, 2006).It is the liability of the HEI to be more translucent to their customers when providing informationregarding their quality measurement methods. The stake holders previously were more concernedabout the nature of programs being offered by the institution and other factors such as fees andlocation (Sakthivel and Raju, 2006; Houston, 2008). Now the level of compromise has decreased.In such condition the institutions will continuously be inspected by the customers until and unlessproper evidence is not provided (Koslowski, 2006; Russell, 2005; Hill, 1995). Maintaining thequality through strategic alliance with recognized institutions worldwide is also the techniquesthese days. Quality management has been a very important factor for the leaders in highereducation. The application of business related quality activities have been a success story formany leading institutions. In this era of extensive competition, quality education is a majorconcern (Koslowski, 2006; Russell, 2005; Sakthivel and Raju, 2006).The management of service quality in higher education institutions (HEI) is becomingchallenging these days, since fulfilling the customer requirement and maintaining a prominentposition in the industry is not easy. Students are becoming aware of the significance of moneyand they want full return with respect to the outcome. Service quality according to the literaturehas been considered to be the ultimate competitive edge, thus the performance of the institutionare attached to the service provided to the students (Smith, et al., 2007; Hill, 1995). Thereforeeffectual systems have been operated in the institution in order to cope with the performancerelated issues of the students (Mizikaci, 2006; Snipes, et al., 2006). That is the reason that qualityservice has connections with the administration as well as teaching and research conducted in theinstitution. Hence defining Quality service in the context of education is all about the institutionsvalues and norms. When evaluating the system in the institution it should be in terms of thevision, adopted strategies and finally the outcome. This approach helps in synchronization amongthe departments, consciousness about the related problems, increasing the expectation relating tothe performance of the institution (Mizikaci, 2006; Hill, 1995; Snipes, et al., 2006). Thus a properquality system is essential for the management of an institution, since other quality evaluationsare not in detail and leave many issues uncovered (Mizikaci, 2006).Owlia and Aspinwall (1996) based on a review of service quality dimensions; present acomprehensive list with their interpretations for higher education in Table 5 below.60Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comTable 5 – Service Quality Dimensions in Higher EducationDimensionsReliabilityResponsivenessUnderstandingcustomersAccessCompetenceCommunicationCredibilitySecurityTangiblePerformanceCompletenessFlexibilityRedressDefinition in Higher EducationThe degree to which education is correct, accurate and up to date.How well an institution keeps its promises? The degree ofconsistency in educational processWillingness and readiness of staff to help studentsUnderstanding students and their needsThe extent to which staff are available for guidance and adviceThe theoretical and practical knowledge of staff as well as otherpresentation skillsHow well lecturers and students communicate in the classroom?The degree of trustworthiness of the institutionConfidentiality of informationState, sufficiency and availability of equipment and facilitiesPrimary knowledge/skills required for studentsSupplementary knowledge/skills learned is applicable to otherfieldsThe degree to which knowledge/skills learned is applicable toother fieldsHow well an institution handles customers’ complaints and solvesproblems?Delivering quality service has become an important goal for most Higher EducationInstitutions (Alves 2006). Universities and faculties strive to provide high quality servicesbecause they need to compete for their students (Faganel and Macur 2005) and havebecome increasingly interested in establishing quality management systems in responseto the demands imposed by a complex, uncertain environment (Athiyaman andO’Donnell 1994; Jenkins 1994; Sallis and Hingley 1991). Sigala and Baum (2003)mentioned that it becomes even more difficult to attract students, since new generationstudents have more influence and greater awareness as consumers, becoming moreinteractive and selective as regards their future and Ford et al. (1999) suggested thatinstitutions need to better understand the nature and quality of the service offered,because of the high competitive intensity surrounding business-related courses. Oldfieldand Baron (2000: 86) claimed that “institutions should address the issue of quality, notonly through the traditional routes of accreditation and course review, students’ feedbackquestionnaires on the quality of course delivery and teaching, but also through evaluatingwhat students themselves consider to be elements in service quality”. Ford et al. (1999)found out the attributes that contribute towards an excellent university. The mostimportant are: reputation, career opportunities, program issues, physical aspects, andlocation and may become the basis where universities have to focus their efforts. Vidal etal. (2003) found out that “guidance services”, in “professional”, “academic” and“personal” matters play an integral part of the education process, while Adee (1997)suggested that several ‘university characteristics’ can help to explain the perceivedquality among students, like competent teaching, the availability of staff for students’61Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comconsultation, library services, computer facilities, recreational activities, class sizes, leveland difficulty of the subject content, and students’ workload.The research on quality in higher education concludes that not a single workabledefinition of quality is possible. Quality is “....a relative concept, meaningful only fromthe perspective of those judging it at the time” (Higher Education Council 1992: 3). Tam(2001) also mentioned that, quality in higher education is a “relative concept”, withrespect to the stakeholders in higher education and the circumstances in which it isinvolved. In other words, quality means different things to different people as well as thesame person may adopt different conceptualizations at different moments (Zafiropouloset al. 2005). However, Sahney et al. (2004) highlighted that definitions of “quality ineducation” follow the general definitions of quality. The term “quality in education” hasbeen defined as “conformance of education output to planned goals, specifications andrequirements” (Crosby 1979); “defect avoidance in the education process” (Crosby 1979)“excellence in education” (Peters and Waterman 1982) and “meeting or exceedingcustomer’s expectations of education” (Parasuraman et al. 1985) and finally “fitness ofeducational outcome and experience for use” (Juran and Gryna 1988).5.CONCLUSIONThe quality of higher education services, especially in developing countries like Malaysiamust be viewed as a strategic issue for social and technological development andeconomic growth. It is clear that service quality has significant positive relationship withstudent satisfaction. Thus, it confirms what other literature try to suggest here, which isby improving service quality, it may potentially improve the students’ satisfaction as welland that is the priority of the higher education institutions. Also, using a literature reviewfrom education and marketing, this study emphasized the role of satisfaction andcustomer orientation as envisioned in these institutions. It is recommended in this studythat the changing nature of the higher education marketplace encourage collegeadministrators to apply the customer-oriented principles that are used in profit makinginstitutions. We also hope that we have raised enough attention to increase the researchefforts in this area. Our overall hypothesis is that satisfied students are necessary toaccomplish the goals of higher education institutions.REFERENCESAdee, A. (1997). Linking student satisfaction and service quality perceptions: the case ofuniversity education, European Journal of Marketing 37(7): 528–535.Alves, A. C. R. R. and Viera, A. (2006). The SERVQUAL as a marketing instrument tomeasure services quality in higher education institutions, in Second InternationalConference: Product management – Challenges of the future, Poznań, Poland,May 18–20.Athiyainan, A. and O’Donnell, B. (1994). Exploring graduates’ perceptions of the qualityof higher education, Journal of Institutional Research in Australasia 3(1): 1–7.Athiyaman, A. (1997) “Linking student satisfaction and service quality perceptions: thecase of university education”, European Journal of Marketing, 31(7), pp. 528-4062Copyright © 2012. Academy of Knowledge Process

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International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comFord, J. B.; Joseph, M. and Joseph, B. (1999). Importance-performance analysis as astrategic tool for service marketers: the case of service quality perceptions ofbusiness students in New Zealand and the USA, The Journal of ServicesMarketing 13(2): 171–182.Gronroos, C. (2000). Service management and marketing, John Wiley & sons Ltd.Hill F.M. (1995) “Managing service quality in higher education: the role of the student asprimary consumer”, Quality assurance in Education, 3(3), pp. 10-21.Hill, F. M. 1995. Managing service quality in higher education: the role of the student asprimary consumer, Quality Assurance in Education 3(3): 10–21.Hill, F.M. (1995). “Managing service quality in higher education: the role of the studentAs primary consumer”, Quality Assurance in Education, Vol. 3 , No. 3.Hill, Y., Lomas, L. and MacGregor, J. (2003). “Students’ perceptions of quality in highereducation”, Quality Assurance in Education, Vol. 11, No. 1. Journal of MarketingResearch, 2(3),244-249.Juran, J. M. and Gryna, F. M. (1988). Juran’s Quality Control Handbook. Jr (Eds.)McGraw-Hill, New York, NY.Kamal Abouchedid and Ramzi Nasser (2002) “Assuring quality service in highereducation: registration and advising attitudes in a private university in Lebanon”,Quality Assurance in Education, 10(4), pp. 198-206.Kettinger W. J., & Lee, C. C. (1994). Perceived service quality and user satisfaction withthe information services function. Decision Sciences, 25(6), 737-766.Ladhari, R. (2008), “Alternative measure of service quality: a review”, Journal ofManaging Service Quality, Volume 18, Number 1, pp. 65-86.Lagrosen, S., R. Seyyed-Hashemi and M. Leitner, (2004). Examination of the dimensionsof quality in higher education. Qual. Assurance Educ., 12: 61-69.Lehtinen, Uolevi and Jarmo R. Lehtinen (1982), "Service Quality: A Study of QualityDimensions," unpublished working paper, Helsinki: Service ManagementInstitute, Finland OY.Liljander, V., & Strandvik, T. (1993). Estimating Zones of Tolerance in PerceivedService Quality and Perceived Service Value, International Journal of ServiceIndustry Management, 4(2), 6-28. Marketing Theory, 6, 1, 2006, pp. 11-39McElwee, G. and Redman, T. (1993) “Upward appraisal in practice: an illustrativeexample using the QUALED scale”, Education and Training, 35(2) December,pp. 27-31. Ministry of University Affairs (MUA) of Thailand Annual report(2002).Mittal, V., & Kamakura, W.A. (2001). Satisfaction, Repurchase Intent, and RepurchaseBehavior: Investigating the Moderating Effect of Customer Characteristics,Journal of Marketing Research, Vol. 38(1), 131-142.Mizikaci, F., (2006). TITLE, Quality Assurance in Education, 14(1), 37-53.Nitecki, D. (1996). Changing the concept and measure of service quality in academiclibraries, Journal of Academic Librarianship, 2(3), 181-190.Nitecki, D. A., & Hernon, P. (2000). Measuring service quality at Yale University’slibraries. Journal of Academic Librarianship, 26(4), 259-273.64Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comOldfield, B.M. and Baron, S., (2000), "Student perceptions of service quality in a UKuniversity business and management faculty", Quality Assurance in Education,Vol 8 No. 2, pp. 85-95.Oliver R. L, (1980). A Cognitive Model of the Antecedents and Consequences ofSatisfactionOwlia, M.S. and Aspinwall E.M., (1996) “ A Framework For The Dimensions ForQuality In Higher Education”, Journal Of Quality Assurance In Education, Vol 4,No 2, pp 12-220.Palihawadana, D. (1996) “Modeling student evaluation in marketing education”,Proceedings of the 1996 Annual Marketing Education Group Conference.Parasuraman, A, Zeithaml, V. A., & Berry, L. L. (1994). Alternative scales for measuringservice quality: A comparative assessment based on psychometric and diagnosticcriteria. Journal of Retailing, 70(3), 201.Parasuraman, A., Zeithaml, V. A., & Berry, L. L. (1988). SERVQUAL: A multiple-itemscale for measuring consumer perceptions. Journal of Retailing, 64(1), 12.Parasuraman, A., Zeithaml, V.A. & Berry, L.L. (1985). A conceptual model of servicequality and its implications for future research. Journal of Marketing, Vol. 49,No. 4 Performance Management 53(2): 143–166.Peters, T. J. and Waterman, R. H. (1982). In Search of Excellence, Harper and Row, NewYork, NY.Rowley, J. (2003). “Retention: rhetoric or realistic agendas for the future of highereducation”, The International Journal of Educational Management, Vol. 17, No.6.Saaditul I, Shamsinar MS, Wong CM (2000). Customer satisfaction towards servicequality of higher education in Malaysia. Seminar FEP 2000 Pulau- Pinang, 20-23October. http://www.econ.upm.edu.my/report/mgm11b.html.Sahney, S.; Banwet, D. K. and Karunes, S. (2004). A SERVQUAL and QFD approach tototal quality education A student perspective, International Journal ofProductivity andPerformance Management 53(2): 143–166.Sakthivel, P. B. and Raju, R. (2006), “An instrument for measuring engineeringeducation quality from students perspective”, The Quality Management Journal,Vol. 13 Nº. 3, pp. 23-34.Sasser, W. Earl, Jr., R. Paul Olsen, and D. Daryl Wyckoff (1978), Management ofService Operations: Text and Cases, Boston: Allyn & Bacon.Soutar, G, McNeil, M. (1996) “Measuring service quality in a tertiary institution”,Journal of Education Administration, 34(1), pp. 72-82.Sigala, M. and Baum, T. (2003). Trends and issues in tourism and hospitality highereducation: visioning the future”, Tourism and Hospitality Research, The SurreyQuarterly Review 4(4): 367–376.Sallis, E. and Hingley, P (1991). College Quality Assurance Systems, Bristol: The StaffCollege.65Copyright © 2012. Academy of Knowledge Process

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International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comAdversity Quotient: A new paradigm toexploreEr. Shivinder Phoolka (Corresponding Author)Assistant Professor, Punjabi University Regional Center for IT and Managemnet, Mohali.Residential Area, Phase-7, Mohali, Punjab, IndiaDr. Navjot KaurAssociate Professor,.School of Management Studies, Punjabi University, Patiala, Punjab, IndiaABSTRACTIt is said that human mind is the most complex machine on earth.Psychologists have always been trying to know why we behave the waywe do or the way our mind functions. It is a complex area of researchwhere explanations have always fallen short. Humans differ in theirmental capabilities. There are various tests available to analyze variousmental abilities of a human mind which have a direct effect on theirbehaviour. Some such measures are IQ test, EQ test, personality tests,achievement test, aptitude test, etc. One such relatively new measure isAQ, which stands for adversity quotient. AQ is the predictor of success ofa person in face of adversity, how he behaves in a tough situation, how hecontrols the situation, is he able to find the correct origin of the problem,whether he takes his due ownership in that situation, does he try to limitthe effects of adversity and how optimistic he is that the adversity willeventually end. The science of AQ was developed by Dr. Paul G. Stoltz in1997. This is a conceptual paper which explains at length what is AQ, howis it different from IQ and EQ, dimensions of AQ, building blocks of AQ,levels of adversity, how is AQ different from resilience and hardiness, AQin organizations, research done on AQ, and how to improve your own andothers AQ.Keywords: Adversity Quotient, Intelligence Quotient, EmotionalQuotient, Cognitive Psychology, Psychoneuroimmunology,Neurophysiology, Resilience, Hardiness.Note: The terms AQ and Adversity Quotient should be read as AQ® and AdversityQuotient® throughout the paper.1. WHAT IS AQ?AQ tells how well a person can withstand adversity and his/her ability to surmount it. Dr.Paul G. Stoltz is the pioneer of the study of AQ which was developed in 1997. AQ tellswhether we can exceed expectations or we will fall short. AQ can predict how we behavein difficult situations. AQ can predict resilience and persistence of a person and can be67Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comused to enhance the effectiveness of teams, relationships, families, communities, cultures,societies and organizations.1.1 AQ versus IQ and EQThe traditional measure of intelligence is always thought to be IQ, i.e., IntelligenceQuotient. It has always been taken for granted to predict the chances of success of aperson. Yet there is large number of people who have high IQs but they haven’t beensuccessful always. It means IQ isn’t enough to succeed. There must be something moreand over and above IQ that is required for consistently successful people. Then came theidea of EQ, i.e. Emotional Quotient or Emotional Intelligence. EQ is the measure ofhow well you control your emotions , how will you empathize with others , your levelof self –awareness, your control on your impulses, your persistence and howeffectively you interact with others. Therefore, possessing high EQ with a high IQ canstrengthen one’s chances of success because to be successful one not only requiresintellectual capabilities but also emotional abilities. AQ is something in addition to thesetwo. It can answer the question, why some people persist and keep on striving hard intough situations while others who are high on IQ and are emotionally well- adjusted stillfail and give up?1.2 What can AQ predict?AQ can be useful to predict performance, motivation, empowerment, creativity,productivity, learning, energy, hope, happiness, vitality, emotional health, physicalhealth, persistence, resilience, attitude, longevity and response to change.2. THREE LEVELS OF ADVERSITYStoltz has given a 3- level model of adversity which is a pyramid in shape and begins attop and works downwards. At the top lies the Societal Adversity. At the middle levelcomes the Workplace Adversity and on the lowest level lies the Individual Adversity asshown in the figure below:Source: Adversity Quotient- Turning Obstacles into Opportunities, pp. 39Societal Adversity: The society is changing at a fast pace. We feel vulnerable residingin the society. Social evils like drug abuse, alcoholism, human trafficking, flesh trade,crime among youth, child abuse, teen pregnancy, teenager suicides, domestic violence,sexual assaults, degradation of morality are the common societal adversities worldwide,68Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comtechnology and information bombardment have added to the woes. Children andteenagers are getting addicted to the television, internet and entertainment gadgets whichin turn are dragging them away from family bonds, relationships, values that they canimbibe from parents and grandparents. Couples are pursuing their individual careerswhich not only eats up the precious time they used to spend with their children but alsodrifts husband and wife away from each other increasing the divorce rate because theyhardly find any quality time to spend with each other. The highly held institutions likelaw, educations etc. are losing their credibility. Environment is becoming more and moreunsafe to live in. Natural resources are being depleted, important species are becomingextinct, air, water, soil and noise pollution are on rise , forests are recklessly cleared,hurricanes and tsunamis are wiping out populations and global warming has become anuncontrollable menace. Hate crime, intolerance towards other religions and minoritiescan be seen worldwide. Economic recession is taking the world into its grip. All these arethe signs of societal adversity.Workplace Adversity: It is said that if anything is constant, it is change. That is whathappening at the workplace of the people worldwide. Employees feel they are always ontheir toes to keep up with the changing environment. The era of lifelong employment,social security, regular salaries and bonus, pension, old age benefits has ended. Today’semployees live in a highly insecure environment of pink slips, salary cuts in the nameof cost cutting, downsizing, restructuring, reengineering, mergers, acquisitions,takeovers, hyper competition etc. They have to cope up with ever changing technology,upgrade their skills and knowledge, need to posses multiple skills and do multitasking tosurvive in the organizations. Then they are even challenged with several ethical dilemmasat work place. Women face biasness, discrimination and sexual harassment at workplace.Individual Adversity: Adversity starts at societal level, seeps into workplace and at lastbecomes the burden for individuals. Any adversity at societal level ultimately reachesindividual level. For example, hate crime which is a societal evil ultimately leads tothrashings or loss of life of individuals and leaves back crying and resentful families.Corruption in the government offices makes a common man fight for his own rights orpush him to the wall so much that he prefers to keep mum and watch quietly whateverwrong is happening in the society. Environmental degradation, entry of pesticides intothe food chain causes diseases like asthma, cancer, skin diseases etc in individuals.Hence, we can say each individual is vulnerable to and at the receiving end of the societaladversity whether he is or not a reason for the existence of that societal adversity.2.1 Categories of AdversityAdversity is personal and relative on one hand and universal on the other hand becausedifferent people face different challenges in life and react differently to them. One’shardship may be too small in comparison to someone other’s. But there is no denial to thefact that ever body faces problems, challenges and adversities in life, big or small.Adversity can be categorized into two areas namely, inner adversity and outer adversity.Examples of inner adversity can be lack of confidence, lethargy, fear , anxiety,uncertainty, depression , self –loathing, physical, pain, loneliness, self-doubt, fatigue,poor health, insomnia, loss of appetite, weight loss etc and examples of outer adversity69Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comare when someone breaches your trust, natural disasters, cancelled flight or reservation,economic downturn, best friend or close relative parts away, theft in the house, yourcomputer crashes, a loved one passes away, your business fails etc. But if we lookminutely we can conclude that most of the times outer adversity leads to inner adversitybecause we humans are not insulated from our environment. What happens at home, inoffice, at a club or a family get together or in our natural environment has a direct effecton us.2.2 Adversity can be advantageousSeery, Holman and Silver(2010) examined the effects of adversity on resilience,concluding that cumulative adversity does seem to make us stronger—within limits.According to their study, the most resilient people are those who have experienced some,but not too many “adverse events.” People who have suffered many traumas are not ahappy bunch, and people who have experienced none have a hard time when hard timesfinally arrive. Furthermore, people with some prior lifetime adversity were the leastaffected by recent adverse events. These results suggest that, in moderation, whateverdoes not kill us may indeed make us stronger. Benoit and Rajshree (2009) found in astudy that manufacturers respond to adversity by introducing new and improvedprocesses in goods production. It was also indicated that threat of bankruptcy spurs firmsto improve efficiency through process innovation. Karolynn Siegel, and Eric W.Schrimshaw (2000) examined perceptions of illness-related positive change or stressrelatedgrowth among a sample of African American, Puerto Rican, and non-HispanicWhite women living with HIV/AIDS in New York City, USA. While these womenacknowledged the negative stresses of living with HIV/AIDS, 83% reported at least onepositive change in their lives that they attributed to their illness experience like healthbehaviours, spirituality, interpersonal relationships, view of the self, value of life, andcareer goals etc.3. THE CO 2 RE DIMENSIONS OF AQAQ consists of four dimensions. CO 2 RE is the acronym for those four dimensions. Thefour dimensions jointly determine the AQ of a person. The overall score of AQ of aperson will not be able to tell what is the weak area of a person’s response to adversity.All the four dimensions need to be studied and understood individually to pin point theweak or strong areas of a person’s personality. These four dimensions are explainedbelow:‘C’ stands for ControlThis dimension tells how much control a person perceives to have over an adversesituation. Stoltz says the word ‘perceive’ is used because it is almost impossible tomeasure the actual control. Perceived control is far more important because that is thesymbol of determination in the mind of the person to control an adverse situation. Life isfull of such situation in which one feels that the situation cannot be controlled. If we talkabout the 9/11 attack on America or 26/11 attack on Mumbai or the latest when tsunamistruck Japan and nuclear leak was the major reason of concern, many felt that thesituations could not be controlled. But there were few whether in the FBI, firedepartment, American hospitals who tried their best to help others or people in Mumbai70Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.compolice force like Hemant Karkare, Vijay Saleskar, Ashok Kamte or the five star hotelTaj employees who dared to bring the terrorist intrusion in Mumbai under control, or theJapanese scientists, emergency workers, who put their lives on stake to control thehavoc caused by tsunami in Japan. All these heroes had or have the power of perceivedcontrol. Control begins with the perception that at least something can be done and cango up to ‘Yes! It will be done.’‘O 2 ’ stands for Origin and Ownership‘Origin’ dimension answers question like where or what was the origin of the problem.‘Ownership’ dimension tells to what degree one owns the outcome of the adversity.Superficially, both look the same but they are actually very different. Origin is related toblame. A fair and accurate degree of self –blame is required to create learning in a personso that he does not repeat the same mistake next time rather improves himself. Thepeople with low origin score tend to take all the blame on themselves even when it is notso. They think they are the reason behind all the bad that happens. On the other handpeople with higher origin score, try to reasonably judge their role in the adverse situation.They also try to consider other, external sources of adversity. ‘Ownership’ dimensiontells how a person takes ownership in an adverse situation irrespective of its cause. Suchaccountability motivates them to take appropriate and corrective actions to reverse theeffects of an adverse situation. A person low on O 2 score tends to over blame himselffor the sticky situation and runs away from taking any ownership , accountability tosolve the situation.‘R’ stands for ReachThis dimension measures how well the person can limit the effect of adversity in hislife, i.e. whether he or she can limit the effects to that particular area where theadversity has cropped or he lets the effects of adversity to creep in other areas of hisor her life. For example, a brawl with the spouse affects the productivity at work; aconflict becomes a career failure, etc. These are the signs of lower ‘R’ score. People withhigh ‘R’ score try to limit the effect of the bad event. A poor performance appraisal willnot lead to fights at home, a misunderstanding with a loved one will not make his/herentire life meaningless. Dr. Stoltz says limiting the reach of the adversity is veryimportant and desirable. To make life easy and simple we must learn to limit ouradversities. If we fail to do so, one adversity in our life can lead to another, then anotherand so on. At that point, one feels helpless, overwhelmed and overshadowed byproblems. For instance, if someone has strained relationships at workplace and he/shediscusses it daily with his/her spouse, remains in a bad mood even at home, shouts athis/her family, can have strained relations at home too, his /her children may avoidhim/her and ultimately children may go stray which can become a bigger and moreserious adversity. Therefore it is both good and healthy to limit the effect our adversities.‘E’ stands for EnduranceThis dimension asks two questions: How long will the adversity last? and How long willthe cause of the adversity last? People with high score on this dimension are generallyoptimistic. They believe that each problem will eventually end. No adversity can have thesame effect forever. There are always chances of improvement. Adversity and its causes71Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comare temporary and can fade with time or even disappear altogether. People who fightdiseases like cancer and AIDS, do not always give up on living. In some cases, wherethere are no chances of full recovery, there are people who at least try to live happilyfor whatever time they are left with. Whereas, people with low ‘E’ score tend to takeadversity and its causes to be permanent. They often speak like this: ‘This situation cannever improve’, ‘I am a loser’, ‘This relation can never work’, ‘I can never getpromoted’ and so on.4. BUILDING BLOCKS OF AQDr. Stoltz with the help of research of many other researchers like Seligman, Hiroto,Ternnan, Eller, Dweck, Oullete , Okun, Werner, Rotter , Barker, Mark, Rene, Locke,Peterson, Vaillant, Nuwer, Squire has been able to establish that there are three buildingblocks of AQ, namely, Cognitive Psychology, Psycho neuroimmunology andNeurophysiology. These are the three sciences that give a stable ground to the study ofAQ as well as the findings of these sciences match with those of AQ studies.Cognitive Psychology: It is that branch of psychology that studies mental processes likehow people think, perceive, remember and learn. It is also related to other disciplines, forexample, neurosciences, philosophy and linguistics. Cognitive psychology forms the firstbuilding block of AQ science because in cognitive psychology is embedded the theory oflearned helplessness. ‘Learned helplessness’ is internalizing the belief that whatever youdo, does not matter, the situation is going to remain the same. It is related to giving up thesense of control completely and control is the first dimension of AQ.Psychoneuroimmunology: It studies the relationship between mind (Psyche), the brain(Neuro) and the immune system. Today an increasing number of physicians arerecognizing that emotional health has a large impact on immune system of the body. Forexample strong feelings of hate, suppressed anger, frustration over an extended periodof time can produce harmful biochemical change within the body where as feelings oflove, laugher, tranquility can lead to healing. That is why we see the growing popularityof yoga, laughter therapy, reiki, art of living courses etc. Similarly, AQ can have directbearing on one’s health because there is a direct link between how you respond toadversity and your mental and physical health.Neurophysiology: It studies the relationship between brain and nervous system. It studieshow the electrical signals from the brain carried by the nerves effect the functioning ofthe body parts. It helps in looking for treatment for diseases like multiple sclerosis,parkinson’s disease, epilepsy etc. Research of leading neurophysiologists shows thatbrain is ideally equipped to form habits which are hardwired in the subconscious regionof the brain. Subconscious habits, such as AQ, can be immediately altered, readilyforming new habits that are strengthened over time.5. HOW IS AQ DIFFERENT FROM RESILIENCE AND HARDINESSHardiness also called as psychological hardiness is a personality style which was firstintroduced by Suzanne C. Cobasa in 1979. It comprises of three dispositions, namely,commitment, control, and challenge. The commitment disposition is defined as a72Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comtendency to involve oneself in the activities in life and having a genuine interest in andcuriosity about the surrounding world. The control disposition is defined as a tendency tobelieve and act as if one can influence the events taking place around oneself throughone’s own effort. And the challenge disposition is defined as the belief that change, ratherthan stability, is the normal mode of life and constitutes motivating opportunities forpersonal growth rather than threats to security. Resilience is a dynamic process wherebyindividuals exhibit positive behavioral adaptation when they encounter significantadversity, trauma, tragedy, threats, or even significant sources of stress. The threedimensions of stress resiliency as described in stress resiliency profile by Kenneth et al.(1992) are deficiency focusing, necessitating and low skill recognition. Deficiencyfocusing is the tendency of focusing upon the negatives at the expense of the positives.Shortcomings and dangers become the centre of attention, at the expense of strengths andopportunities. This bias in perspective creates an unbalanced, exaggerated sense of howmuch is wrong and is likely to go wrong. The result is an unnecessary degree of distressor discouragement. Necessitating occurs when one thinks that it is necessary or veryimportant to do a certain task, believing it is a compulsion that one “has to” do it. Itfocuses upon commitment at the expense of choice. Necessitating predisposes people toplace greater demands on themselves. They believe that the task assigned is an inflexibledemand that must be met. Low skill recognition refers to a tendency not to recognize therole of one’s’ own capabilities in producing successes. Instead attention is focused uponexternal sources, including the help received from others, luck, or the easiness of thetasks - reasons that have little to do with persons’ own proficiency. The result is often anunderestimation of one’s’ competence, and a feeling that successes depend upon thingsoutside the individual. This exaggerated sense of dependence leaves the person feelinghelpless in facing subsequent tasks. Now, if we try to compare the three, i.e, hardiness,resilience and AQ, superficially, they all seem to measure one’s ability to deal with toughsituations. But the way they do it is different. And therefore can measure different aspectsof a person’s ability to face difficult situations. For example, level of one’s commitmentand the ability and willingness to take up challenges can be measured by measuringhardiness and it cannot be done through measuring resilience or adversity quotient.Whereas deficiency focussing and necessitating can be measured through resilience andnot through hardiness or adversity quotient. Similarly, reach of an adverse event and inone’s life and his belief how long it is going to last can be measured through adversityquotient and not through hardiness or resilience. Though ‘Control’ is one dimensionwhich is common in hardiness and AQ and ‘low skill recognition’ which is a dimensionof resilience also measures how a person gives up his sense of control and feels helplessin a difficult situation. Similarly, we can say that deficiency focussing can make a personbelieve that situation is not going to improve, may last forever and may affect all areas ofhis life. Therefore, we can say, hardiness, resilience and AQ, all three constructs havetheir own method and all three highlight different aspects of a person’ behaviour whenfaced with adversity.6. RESEARCH ON AQAQ research has already been done on teachers, students, managers, psychologists,hospital staff, entrepreneurs, insurance agents, IT staff, non- profit organization staff,political leaders, etc. and has proved to improve performance levels, leadership styles and73Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.compractices, resilience, promotions, retention, optimism and commitment to change.Antonette R. Lazarro (2004) studied the adversity quotient and performance level of themiddle managers of the different departments in the city of Manila. He used 360 degreemethod to measure the performance of the managers and established high correlationbetween their AQ levels and their performance levels. He also studied adversity quotientin relation to their demographic profile and found that there was no significant relationbetween their age, gender and the adversity quotient scores. He supported the idea thatpeople with high AQ never allow age, gender, race, physical or mental disability, or anyother obstacle to come in their way. Guy D. Langvardt (2007) examined the relationshipof resilience and commitment to change during a time of organizational transformation.His research is a case study analysis of St. Paul’s First Lutheran Church, which is anonprofit faith-based organization including a church, middle, elementary and preschoolsserving the community of North Hollywood, California and is a congregation ofthe Wisconsin Evangelical Lutheran Church (WELS). All adult employees, members andparents of students had the ability to participate in the research on a voluntary basis. Thestudy used the AQ Profile® to assess participants’ resilience, and the Commitment toChange Survey to determine potential correlation. The study confirmed the significanceof the relationship that exists between resilience and commitment to change duringorganizational transformation. Individuals with higher levels of resilience were morecommitted to change during organizational transformation. Monica Brannon Johnson(2005) studied the relationship between optimism (operationalized by Explanatory Style),response to adversity (operationalized by AQ) and performance of 112 sales employeesof a leading Fortune 500 company in the computer hardware industry. Specifically, thestudy examined whether there is a significant relationship between the two constructs andif there are correlations between each of the constructs and sales performance. Thehypothesis that the overall composite score of each model would be significantlycorrelated was supported. It was also indicated that the higher the salesperson’s AQ, thebetter they performed. More specifically, the more they perceived they had control andthat negative events were limited, the better they did. It appeared that the assumption ofthe Explanatory Style model that the more negative events are internalized, the more onewill feel helpless and lack control, is not correct. By comparing the two models, moreinsight was obtained on the role control plays in empowerment and helplessness – twoessential elements of each model - that can either aid or hinder sales performance. Basedon the results of this study, it appears that the AQ model may provide a more completeand consistent framework for identifying who is empowered and who is helpless. ZhouHuijuan (2009) investigated the adversity quotient and academic performance of theselected students in St. Joseph’s College, Quezon City during the school year 2008-2009.The sample size was 280 male and female college students from the College of Arts andSciences and the Institute of Nursing who were included in the study through randomizedsampling technique. Their GPA(grade point average) during the first semester of thepresent school year was used in order to determine their academic performance. Thelargest percentage of the respondents in this study in terms of GPA was those who hadobtained a satisfactory academic performance. The adversity quotient of the respondentswas not influenced by their sex. However, course and year level were found to besignificantly related to their adversity quotient for the student respondents in this study.The level of adversity quotient and academic performance of the respondents were found74Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comto be significantly related to each other. Bonnie L. Thomas-Sharksnas (2002) studied therelationship between resilience and job satisfaction in mental health care workers. A totalof 94 mental health care workers working at a community mental health center inNortheastern Pennsylvania were included in the survey. The researcher says that mentalhealth care workers face increasingly adverse conditions such as low pay, limited respect,as well as a lack of supervision, peer support, and organizational support and resourceswhich can potentially lead to job dissatisfaction. How they respond to this adversity canimpact patient care, their likelihood of staying in their job, and their mental health. It wasfound out that there was no significant correlation between AQ (Adversity Quotient)scores and Job Satisfaction scores and that resilience is not a significant predictor of jobsatisfaction. No significant correlations between the four dimension scales of the AQ andJIG(Job In General) scores emerged. Pao-Ling Chin and Min-Li Hung (2008) studiedwhy the turnover rate of new insurance agents is high in Taiwan. They tested themoderating effects of Adversity Quotient on the relationship between psychologicalcontract breach and intent to quit of insurance sales agents. A total of 553 insuranceagents from one of leading insurance agent companies participated in this research.Results revealed that Adversity Quotient can influence how an employee feels andresponds to unfulfilled organizational promises in multiple areas of the psychologicalcontracts which are dimensions of relational, transactional and training and developmentcontracts. This finding reinforces the importance of understanding individual differencesas employees may have different belief or take different actions while they feel theirpsychological contracts with the organization are violated.7. AQ IN ORGANIZATIONSStoltz says that the greatest source of adversity for most organizations is the constantavalanche of change. He compares the Normal Change Curve to the High AQ ChangeCurve. The three stages in any Change Process are:Endings: When people have to stop doing old familiar things, the equilibrium isdisturbed. The status quo is disturbed. Old methods, behaviors, procedures, rulesregulations come to an end.Transition: When people have to change. In this phase, many lose hope, get demotivatedand confused and can also get cynical about the reasons and process of change.New Beginnings: This phase witnesses adoption of new methods, strategies, procedures,rules, behaviors, technologies etc.The length and depth of the transition phase, as well as how high the organization comesout on the other side greatly determines people’s enthusiasm for the current as well asnext change. A high AQ organization can greatly reduce the depth and width of thetransition phase. People or employees with high AQ will be less worried, confused andsceptical about the change process. Not only this, they can also encourage others toparticipate in change and expedite change. Synergy and coordination can come from highAQ teams which can result in a leap from Endings to New Beginnings. The AQ of theorganization can also be measured. The AQ of the leaders, AQ of the key teams, thetalk and language employees use when faced with a change, the perseverance of the75Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comchange agents, the behaviour and reaction of employees, the co-ordination betweenmanagement and employees, all this put together and many other things can reflect AQof the organization. Once the AQ of the organization has been gauged, many steps can betaken to improve the AQ of the organization, to make it more robust for future changesand challenges.7.1 Relationship of AQ with Income, Sales, Performance and HiringDr. Gideon Markman, professor of entrepreneurial studies at Rensselaer PolytechnicInstitute, conducted a study which revealed that there is a strong relationship between theAQs and income of entrepreneurial inventors. Studies reveal that higher – AQ peopleappear to earn more. One explanation to this can be the higher AQ entrepreneurs havehigh risk taking ability, they try to have more control over situations, do not give up inlean periods and have the perseverance and conviction to carry on. They look foralternative solutions in sticky situation. They invent new ideas, strategies, products to sayahead of competitors which results in increased profits and higher incomes. Dr. Stoltzteam conducted research with sales employees of SBC Telecommunication and foundthat sales persons with high AQ scores sold more than those with low AQ. In anotherstudy conducted at Deloitte and Touche, the team found that AQ of top performersexceeded the AQ of low performers by 17 points which indicate AQ can be ameasures of employees performance. Also by giving AQ training to the employees, AQof the employees can be improved. Companies like SunTrust measure the AQ of everyapplicant before hiring him/her.7.2 High AQ TeamsThese are the high performance teams. They do not produce good results once in a while,rather they sustain outstanding result. These are the Climbing Teams. They are always ontheir toes for improvement. But such teams are exceptional and rare. Each membercontributes to the final output. They share common goals but well defined roles andresponsibilities. It’s not that members of such teams always think alike. They welcomeopposing opinions and build on each other’s ideas. Team goals are well synchronized andco-ordinated. There is a strong sense of belonging to each team member and the team hasa strong cohesion. One member’s weakness is covered by others strengths. Themembers have an unquenched thirst for improvement and increased outputs.7.3 How to improve your or others’ AQDr. Stoltz has given a sequence of steps called LEAD to improve your own or otherpeople’s AQ. Following are the steps involved:1. Listen to your/others’ Adversity Response: Try to sense the your/others’ adversity or takenote of the tough situation. Then try to see how you/others responded to the adversity.Try to measure whether it was low or high AQ response.2. Explore the Origins and your/others’ ownership of the Outcomes: Try to make out whatwere the origins of the adversity or what was your/others portion of fault. Also decidehow much ownership you/others should genuinely take in the bad event.3. Analyze the evidence: What evidence is there that you/others have no control over theadversity or it is going to last forever for you/others or that it is going to affect all areas ofyour/others lives.76Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.com4. Do something or make others to take the necessary action: See what can you/others do tohave control over the adversity, how you/others should try to limit its effect, how to makesure that it ends as soon as possible.8. CONCLUSIONAQ is a new paradigm which is useful in today’s times where adversity looms in almostevery corner. We can measure our own and others’ AQ with the help of AdversityQuotient profile developed by Dr. Paul G. Stoltz. The AQ of a person can be measuredon five dimensions, namely, control, origin, ownership, reach and endurance. AQ issomething in addition of IQ and EQ and shares some commonalities with hardiness andresilience and is yet very different. The science of AQ has its roots in cognitivepsychology, psychoneuroimmunology and neurophysiology. Adversity is challenging butcan bring out the untapped that exists in every individual. Adversity exists in society, atour workplace and in our individual lives and can be internal or external in nature andhence measuring and then improving our/others AQ can smoothen our daytoday lives.REFERENCESChin, Pao-Ling and Hung, Min-Li. 2008. Consequence of Psychological ContractBreach: The moderating role of adversity quotient, training and tenure, NationalTaipei University, Available at: www.ntpu.edu.twDostie, Benoit and Jayaraman, Rajshree. 2009. The effect of adversity on processinnovation and managerial incentives, Available at: papers.ssrn.comHuijuan, Zhou.2009. The adversity quotient and academic performance among collegestudents at St. Joseph’s College, Quezon City, Ph.D Universiti Kebangsaan,Malaysia, Available at : www.peaklearning.comJohnson, Monica Brannon. 2005. Optimism, adversity and performance: Comparingexplanatory style and AQ, Ph.D. San Jose State University, Available at:www.peaklearning.comLangvardt, Guy D. 2007. Resilience and commitment to change: A case study of a nonprofit organization. Ph. D. Capella University, Available at:www.peaklearning.comLazaro-Capones, Antonette R.2004. Adversity Quotient and performance level of selectedmiddle managers of the different departments of the city of Manila as revealed bythe 360-degree feedback system, IIRA (International Industrial RelationsAssociation).2004, 5 th Asian Regional Congress, Seoul, Republic of Korea, 23-26June 2005. Available at: www.peaklearning.comMarkman, Gideon. (2000). Adversity Quotient: The role of personal bounce-back abilityin new venture formation, Human Resousce Management Review, Vol.13(2),2003, pp. 281-301, Available at: Elsevier.comSeery, Mark D., Holman, E. Alison and Silver, Roxane Cohen. 2010. Whatever does notkill us: cumulative lifetime adversity, vulnerability and resilience, Journal ofPersonality and Social Psychology, Vol 99(6), Dec 2010, pp. 1025-1041Sharksnas, Bonnie L. Thomas. 2002. The Relationship Between Resilience and JobSatisfaction in Mental Health Care Workers, Sripatum University, Thailand,Available at: www.peaklearning.com77Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comSiegel, Karolynn and Schrimshaw, Eric W. 2000. Perceiving benefits in adversity: stressrelatedgrowth in women living with HIV/AIDS, Social Science & Medicine, Vol.51(10),Nov 2000, pp. 1543-1554 Available at: Ideas.repec.orgStoltz, Paul G. (1997). Adversity Quotient- Turning Obstacles into Opportunities, pp-7, 8,9, 11, 12, 38, 39, 42, 43, 55, 83, 84, 106, 154, 235, 236Stoltz, Paul G. (2000). Adversity Quotient @ Work- Make Everyday Challenges the Keyto Your Success, pp-24, 221Stoltz, Paul G. and Weihenmayer, Eric. (2006). The Adversity Advantage- Turningeveryday struggles into everyday greatness, pp-1778Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comA study on the internationaldiversification in the emerging equitymarket and its effect on the Indiancapital marketSk Samim FerdowsAssistant Professor of Management Institute of Durgapur, West BengalAbhijit RoyLecturer of Dr. B.C.Roy Engg. College, West BengalABSTRACTWith the easy transfer of money and information in cross-country marketshas opened the floodgate to the international portfolio managers for theeffective utilization of fund. As the return in the emerging markets aremore with a given level of risk than that of developed markets so thetendency of flow of funds from the developed economy towards theemerging one is very natural and justified. This trend has made the studyabout the impact of international diversification in emerging markets as aninteresting one. Further it is very much relevant to know the impact of thisinternational diversification on Indian capital market. In this paper anattempt has been made to examine the impact of internationaldiversification and its effect on Indian capital market taking BSE and threeexchanges from ASIA (Philippines, Malaysia, and Singapore) and onefrom America (Mexico). The study reveals that there is a lasting impact ofinternational diversification on India Capital Market affected by the otheremerging markets and the flow of FIIs.Key words: BSE , FII, International diversification, Indian capital market.1. INTRODUCTIONEmerging markets exhibited higher intra-day volatility compared to developed markets. Itis a sign of an emerging market owing to economic and socio-political variations; thevolatility in the emerging markets is generally on the high side. Countries like Indonesia,Brazil and South Korea, did show higher intra-day volatility. Among all the emergingcountries studied, Brazil experienced very high intra-day volatility and also extremevalue volatility followed by Indonesia, South Korea and Mexico. Intra-day volatility for79Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comIndia has been computed for 13 years. Compared to most of the emerging marketssampled here, intra-day volatility in India is low. Extreme value volatility touched itspeak in 2000 at 3.17 percent and it continuously slide in the following years andmarginally increased to 1.69 percent in 2003. Between BSE SENSEX and S&P, CNX,Nifty, Nifty appears to be more volatile both in terms of open to close and high lowdispersions. In India open to open, volatility is always higher than close-to-closevolatility and many a times higher than open to close. This observation holds true to boththe major exchanges. Intra-day volatility in 2003 has been very slightly higher than theimmediate preceding years though nothing disturbing is evidenced. Only Nifty showed alittle more intra-day volatility compared to the previous year and to the SENSEX.The international diversification in equity market is effected Indian capital marketbecause FII (Foreign Institutional Investment) and FDI (Foreign Direct Investment) aredirectly invested in Indian companies with their high volume capital that directly affectedIndian Stock Market- BSE & NSE. The impact of it the SENSEX is going to be touched17000.The performances of the emerging equity markets are matured counterparts in thedeveloped world have shown repeated reversals in recent times; in the pre-Mexican crisisperiod (1990-1994), most of the emerging markets performed much better compared tothe matured markets in terms of both return and associated risk, while the patternreversed during 1995-2001 (a period affected by the Asian crisis). In the recent pastemerging markets (those of Asia and Latin America, in particular) have shown aremarkable recovery, in terms of both the level of return and risk, while the maturedmarkets have experienced drop in return and rise in risk. Such reversals of marketperformances make foreign equity investment extremely volatile and may have adestabilizing effect on the domestic economy of the recipient country. It is thereforeprudent to evolve appropriate built-in mechanisms in these economies such thatdestabilization and damages can be minimized in case foreign investors suddenlywithdraw from the equity market. It is in this context that a careful examination of thenature of foreign institutional investment (FII) flow into an economy may help identify,the strength of various factors likely to affect such flows, and also, the possible impact ofsuch flows on the performance of the equity market concerned.Globalization has meant increased cross-border capital flows, tighter links amongfinancial markets, and greater commercial presence of foreign financial firms around theworld. An element of the globalization trend has been the migration of securities marketactivities abroad, particularly in the case of emerging markets. Many firms now cross-listin global markets, including using Depositary receipts. Many stock exchanges, especiallyin emerging markets, have seen trading migrate abroad. With foreign listing,firms canobtain access to more liquid markets, attract more easily funds at lower costs and betterterms, and tap into wider investor bases. In addition, firms that operate under weakminority shareholder protection frameworks might use the foreign listing as a signal totheir shareholders that they are willing to protect minority shareholder rights. The shareof trading abroad also seems to be on an increasing trend and advances in technologyfurther accelerate these trends, as remote access to foreign markets has become80Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comincreasingly easy. High liquidity increases the value of additional transactions, leading tomore concentration of order flow and even greater liquidity at global exchanges. Thesedevelopments may make it even more attractive for firms to list abroad.In the following study an attempt has been made to identify the trend of internationaldiversification in emerging markets and the impact of other emerging markets on Indiancapital market.The rest of the paper is presented as follows:In first section the objective of the study is shown followed by the limitation of the studyin next section. In section three the details of the research methodology is explainedalong with the sources of data. Section four illustrates the previous related works underthe heading review of literature. As the study is done with reference to ICICI Direct .comso a brief the profile is depicted in fifth section. The core part of the study that is theempirical analysis is carried on in section six. Followed by the findings and suggestionand conclusion in section seven and eight respectively.2. REVIEW OF THE LITERATUREGeert Bekaert & Campbell R. Harvey (Jun 1997) defined that Returns in emergingcapital markets are very different from returns in developed markets. From averagereturns, they analyze the volatility of the returns in emerging equity markets andcharacterize the time-series of volatility in emerging markets & explore the distributionalfoundations of the variance process. They investigate the cross-section of volatility anduse measures such as asset concentration, market capitalization to GDP, size of the tradesector, cross-sectional volatility of individual securities within each country, turnover,foreign exchange variability and national credit ratings to characterize why volatility isdifferent across emerging markets.Geert Bekaert (1995) develops a return-based measure of market integration for nineteenemerging equity markets. From his conclusions emerge, first, global factors account for asmall fraction of the time variation in expected returns in most markets, and globalpredictability has declined over time. Second, the emerging markets exhibit differingdegrees of market integration with the U.S. market, and the differences are not necessarilyassociated with direct barriers to investment. Third, the most important de facto barriersto global equity-market integration are poor credit ratings, high and variable inflation,exchange rate controls, the lack of a high-quality regulatory and accounting framework,the lack of sufficient country funds or cross-listed securities, and the limited size of somestock markets.Geert Bekaert & Campbell R. Harvey (April 2000) proposes a cross-sectional timeseriesmodel to assess the impact of market liberalizations in emerging equity markets onthe cost of capital, volatility, beta, and correlation with world market returns.Liberalizations are defined by regulatory changes, the introduction of depositary receiptsand country funds, and structural breaks in equity capital flows to the emerging markets.81Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comMichael J. Brennan and H. Henry CAO (1997) in their article developed a model ofinternational equity portfolio investment flows based on differences in informationalendowments between foreign and domestic investors. When domestic investors possess acumulative information advantage over foreign investors about their domestic market,investors tend to purchase foreign assets in periods when the return on foreign assets ishigh and to sell when the return is low.Pavlos Petroulas (May 24, 2004) state that a lot of attention has been directed towardsrecent financial crises around the world. Empirical studies have found that short-termflows increase financial fragility and also increase the probability of financial crises. Thisis not the case though for rich countries, where short-term capital flows have no effect ongrowth. The results in this study indicate that opening up emerging markets capitalaccounts, which imply increased short-term capital flows, is not a clear-cut way toprosperity.Fernando A. Broner (CREI, Universitat Pompeu Fabra) and Roberto Rigobon(MIT and NBER and University of Maryland) (October 2004) defined that thestandard deviations of capital flows to emerging countries are 80 percent higher thanthose to developed countries. First, they show that very little of this difference can beexplained by more volatile fundamentals or by higher sensitivity to fundamentals.Second, they show that most of the difference in volatility can be accounted for by threecharacteristics of capital flows: (i) capital flows to emerging countries are more subject tooccasional large negative shocks (“crises”) than those to developed countries, (ii) shocksare subject to contagion, and (iii) shocks to capital flows to emerging countries are morepersistent than those to developed countries. Finally, they study a number of countrycharacteristics to determine which are most associated with capital flow volatility.In the literature, the relationship between financial liberalisation and economic growthhas been extensively studied and so there is no shortage of empirical studies supportingthat the former positively impacts the latter. However, the evidence is less apparent as tohow a more liberalised financial system delivers growth. In theory, more liquid stockmarkets can induce more researches on firms, given the incentives to profit from newinformation (Boot and Thakor, 1997); more liquid stock markets can stimulate greatercorporate control, leading to more efficient resource management of firms (Stein, 1988);and more liquid markets can better facilitate the channeling of savings into long-terminvestment, increasing capital allocation efficiency (Levine, 1991). Hence, a possiblechannel that financial liberalization can contribute to growth is that it helps develop moreliquid financial markets.In Europe, research has found that the creation of the pan-European exchange, Euronext,for instance, has been followed by significant improvements in the market liquidity andefficiency. Using bid-ask spread, trading volume and volatilities as liquiditymeasurements, Pagano and Padilla (2005) show that the resulting integration of cashtrading and clearing platform has contributed to an improvement in liquidity.82Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comNielsson (2008) also finds that the integration had significant and positive effects on (i)the liquidity of big firms and firms with foreign sales and (ii) the market share ofEuronext.Jess Lee and Alfred Wong (2009) assess the impact of the recent financial reforms inChina. Measures introduced encompass deregulation in the banking sector andrefinements in various financial markets, as well as allowing more freedom for Chineseand foreign investors to participate and interact domestically and overseas. Compared toother studies on financial liberalisation, this study focuses on a relatively narrower aspectof financial reforms namely, the impact on stock market liquidity. Using a panel data setdrawn from the Shanghai stock market, he found a positive and significant liquidityimpact associated with the recent round of measures, which reflects not only animprovement in capital allocation efficiency in China’s equity market but, from afinancial stability point of view, also a reduction in its vulnerability. The finding alsoprovides evidence on one of the important channels in which financial liberalization canbe transformed into economic growth over time.3. OBJECTIVES:The main objectives of this study are:• To know about the evolution of financial markets.• To understand the changes that have recently encroached financial markets• To know about the impact of FDI (Foreign Direct Investment) and FII (ForeignInstitutional Investment) in Indian Capital Market.• To know the impact of other emerging equity market on Indian stock market• To inspect the changes density brought about by the study of different factors ofchanges emergence of private players.• To critically analyze my company stands to gain from the changes to make acomparative• To know the future trend.• To know about international stock market.4. METHODOLOGYTo achieve the above objectives, I planned to adopt the following methodology to collectthe necessary data for project For the purpose of this thesis the average return of the stockexchange of Singapore Stock Exchange (SYMAX), Mexico Stock Exchange(MEXBOL), Philippines Stock Exchange (FTSE), Bursa Malaysia Stock Exchange(FBM30) and India Stock Exchange (SENSEX) has been chosen. Here Singapore,Mexico, Philippine and Bursa Malaysia exchange has been chosen on the independentvariable and SENSEX has been chosen on the dependent variable. Taking these fivevariables, MULTIPLE REGRESSION EQUATION is fitted to see the influence of thesefour exchanges of emerging equity market (Singapore, Mexico, Philippine, BursaMalaysia) on the Indian Equity Market (SENSEX). Further a Bivariate correlation istested and shown in the matrix.83Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.com4.1 Source Of DataSecondary dataThe secondary data were collected from the books, magazines and website.The index data are collected from the website of the World federation of Exchanges.Other relevant data are collected from the respective web sites of exchanges such as BSE,Philippines Stock Exchange, Bursa Malaysia Stock Exchange, Mexico Stock Exchange andSingapore Stock Exchange.5. EMPIRICAL ANALYSISIn the era of globalization the world is becoming a global village. All most all developingcountries are going for liberalization and open market economy. Developing countrieslike India, Mexico, Philippines, China, Singapore, Malaysia, and Brazil are lifting theirtrade barriers to enable the foreign investors to participate in their economy. As a resultof that foreign funds in the form of Foreign Direct Investment (FDI) and ForeignInstitutional Investment (FII) are flowing in the market. As the returns of the emergingmarkets is much more higher than the returns in developed market so a large pool ofinvestment is flowing form the developed economy towards the emerging market. So inthis days the portfolio of investors are no more bounded in the national territory rather itis the funds are invested in the international market to make the portfolio an internationalportfolio. That means for the purpose of the diversification the funds are invested in themarkets spread all over the world. Emerging markets are the first choice of theInternational portfolio managers because of its above normal returns.India is one of the fastest growing emerging markets in the world. So the flow of FII inIndian market is obvious as a result of international diversification. These FIIs in Indianmarket have a clear effect, which depicts the impact of international diversification on anemerging market like India.In the following literature the trend of the FII investment of India and its impact onIndian capital market is shown. Further, as Indian capital market is proved to be anefficient market in its semi strong form going towards the near strong from, the impact ofthe other emerging markets on Indian Capital market is also analyzed, because theseothers emerging markets are not out of the purview of international portfolio managers.5.1 Foreign Institutional Investors- an Indian perspectiveThe capital market of India is one of the fastest growing markets in the world. It allstarted with the liberalization of Indian economy, which was initiated with the view tointegrate it with the global economy. The process began in the year 1992 as per therecommendations of the Narasimham Committee report on the Financial System, to openup the countries stock markets for the direct participation of Foreign InstitutionalInvestors (FII). In simple terms, FII is an entity established or incorporated outside Indiawhich proposes to make investment in India. These institutional investors include hedgefunds, insurance companies, investment trustees, pension funds, mutual funds etc.84Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.com5.2 Trend in FIIs investments in India:With the opening up of the borders for capital movement, the foreign investments inIndia have grown enormously. Starting from the liberalization period, the intervention ofFIIs in terms of their participation (refer Table-1) and quantum of investment (referTable-2) is gradually growing.Table-1: Distribution of FIIs indifferent yearsYear Number of FIIs1993 11994 01995 501996 1001997 291998 451999 332000 622001 502002 472003 682004 143Source: www.sebi.gov.inTable -2: Trends in FII Investment (in US $ mn) in different yearsYear Gross Purchases Gross Sales Net Investment1992-931993-941994-951995-961996-971997-981998-991999-002000-012001-022002-032003-042004-0517.405592.507631.009693.5015553.9018694.7016115.1031407.6074050.7049920.1045031.50128729.80203532.804466.32834.802751.606989.4012737.2017699.4025619.6064116.304116543232.7090568.40156354.1013.405126.204796.306942.008574.505957.50-1584.5057889934.308755.201798.7038161.5047178.50Source : www.sebi.gov.inFrom the table above it is evident that in each year, except 1998-99, the net investment ofFIIs is positive. This implies the growing amount of foreign exchange reserve of ourcountry. The matching of the gross purchase and gross sale of FIIs is shown in thefollowing chart.85Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comChart -1 : Trend in FII InvestmentTrend in FII investment2500002000001500001000005000001992-931994-951996-971998-992000-012002-032004-05GrossPurchasesGross Sales5.3 Why India? :One of the basic reasons why FIIs getting attracted towards Indian market is the inherentstrength of Indian economy. SEBI’s initiatives towards the development of Indian stockmarket, like transparency, implementation of screen based trading, efficient settlementmechanism etc, have created havoc in attracting FIIs. For the last few years Indian stockmarket is giving double digit returns and is one of the best investing destinations for FIIs.The P/E ratio of the market is on the higher side in comparison to BRIC nations and otherAsian markets.5.4 Impact of the FIIs inflow on the stock market:FIIs investments are very volatile in nature. Further the quantum of investment in FIIs isso large that they can put a considerable impact on the movement of various indices. Thefollowing table (Table-3) depicts the comparative amount of foreign portfolio investmentin relation to average Sensex points.Table-3 Distribution of average sensex and Foreign Portfolio Inv. in different years.Year AverageForeign Portfolio1992-931993-941994-951995-961996-971997-981998-991999-002000-012001-022002-032003-042004-052005-06Sensex(points)28562899397532593459381332954568427033323206449257418260Inv.( $mn)24435873524274833121826.513026276020219791137785091249286Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comThe following chart shows the movement of Sensex with the inflow of foreign portfolioinvestments.Chart-2 : Movement of Sensex with FPI140001200010000800060004000200001992-931994-951996-971998-992000-012002-032004-05AverageSensex(points)ForeignPortfolio Inv.($mn)5.5 Future of FIIs :Participatory notes(PN) offer the advantage of preserving the anonymity of the overseasinvestor. As of now SEBI has not banned the issuance of PN, but it has banned FIIs fromissuing PNs to unregulated entities. At the same time SEBI has amended its definition ofthe regulated entities, thus making it less strict. In this way SEBI is balancing the wholematter to create a conducive environment for the FIIs.5.6. Impact of other emerging markets on Indian capital markets:As Indian capital market is proved to be an efficient market in its semi strong form goingtowards the near strong from, the impact of the other emerging markets on Indian Capitalmarket is also analyzed, because these others emerging markets are not out of thepurview of international portfolio managers. Here the impact of other emerging marketsnamely Singapore, Malaysia, Filipinos, and Mexico is taken to find out their impact onIndian capital market.The multiple regression equation is form taken Indian stock market as dependent variableand other emerging markets are taken as independent or explanatory variables. BSEsensex is used as a proxy of the Indian capital market. The regression equation is fitted asfollows.Bse = α + β 1 . phill+ β 2 .malys+ β 3 .mex+ β 4 .sing+e iBse = SensexPhill = Philippines Stock ExchangeMalys = Malaysia Stock ExchangeMex = Mexico Stock ExchangeSing= Singapore Stock Exchange87Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comα = positive vertical intercept ande i = error termAs E (e i ) = 0 so we are ignoring the error termBased on the model above the data of the five exchanges under sample are analyze takingBSE as the impendent variable and other four exchanges such as Philippines StockExchange, Malaysia Stock Exchange, Mexico Stock Exchange, Singapore StockExchange as independent variables. Using the multiple regression analysis the impact ofother four exchanges on BSE is obtain. Further, correlation using Bivariate data betweenall exchanges is calculated and a correlation matrix is prepared. For the purpose ofAnalysis of Variance (ANOVA) the hypothesis is tasted to judge the significance of thevalue of F ratio whereNull Hypothesis:H 0 : the difference in sample means is due to matter ofchanceAlternative Hypothesis: H 1 : the difference in sample means is due to theimpact of international diversificationApart form this individual impact of each independent variable on the dependent variableis also soon drawing the exponential curve. The finding of the study is shown isfollowing section.6. FINDINGS AND SUGGESTIONSThe analysis using the data of five stock exchanges taken under sample is showingdifferent relations between the dependent and independent variables. In the followingtable (Table 1) the output of multiple regression analysis is shown under the headingmodel summary. The analysis, giving the result of R square as 0.728 is highly significantfor the purpose of this study. This high value of R square (0.728) confirms a high degreeof impact of other stock exchanges of emerging economics on BSE SENSEX. Thatmeans other emerging market reflecting the impact of international diversification affectsIndian capital market.Table 4- Output summery showing R Square coefficientsModel SummaryModel R R Square Adjusted R Std. Error of theSquare Estimate1 .853 .728 .629 15931.2017Predictors: (Constant), SING, MEX, PHILL, MALYSThe details about the dependent and independent variables are given in the followingtable 2. After minute analysis of table it is clear that Beta coefficient of Philippines andMalaysia stock exchanges are negative which means these two exchanges have negative88Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comor inverse impact on BSE. Other two exchanges are showing a positive Beta coefficientout of which Singapore exchange is showing a very high value of Beta (0.810). Theoverall “t” value of the study is 2.723 that are significant.CoefficientsTable 5- Output summery showing Beta coefficientsUnstandardizedCoefficientsStandardizedCoefficientsModel B Std. Error Beta1 (Constant) 40561.281 14896.307 2.723 .020PHILL -.978 .814 -.285 -1.201 .255MALYS -.157 .136 -.320 -1.158 .271MEX .494 .305 .322 1.620 .133SING .615 .122 .810 5.021 .000a Dependent Variable: BSEThe analysis regarding ANOVA is given in the following table (Table 3). The essence ofANOVA is that in this analysis the total amount of variation in set of data is broken downinto two types, that amount which can be attribute to the chance factor and that amountwhich can be attributed to specified causes. So we set out Null and AlternativeHypothesis (as stated in the previous section) as follows:H 0 = the difference in sample means is a matter of chanceH 1 = the difference in sample means is due to the impact of internationaldiversificationThe ANOVA is showing an F ratio, which is calculated as means square between thesamples divided by the means square within sample. The calculated F ratio here is 7.367,which are much, more than the table value (3.36) at 95% confidence level. This analysisreject the Null Hypothesis that difference in sample means is a matter of chance. Theacceptance of Alternative hypothesis proves that the difference the sample means is dueto the impact of international diversification.Table 6 ANOVA tabletSig.ModelSum ofSquares1 Regression 7478742130.358Residual 2791835080.257Total 10270577210.614df MeanSquare4 1869685532.58911 253803189.11415FSig.7.367 .00489Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comPredictors: (Constant), SING, MEX, PHILL, MALYSDependent Variable: BSEThe impact of independent variables individually is shown using the followingexponential growth curve. In the following figure (Figure 1) the relationship betweenobserve and growth curve between BSE and Philippines exchange is clarified. Theimpact of negative Beta between BSE and Philippines is clear in the growth curve. Infigure 2 and 3 also the impact of negative Beta and very low value of positive Beta onBSE due to Malaysia and Mexico Stock Exchange respectively is clearly shown. Theimpact of a very high degree of positive Beta (0.810) of Singapore exchange with BSE isexpressed in Figure 4 with an upward rising growth curve.Figure 1 Exponential growth chart between BSE and Philippines160000BSE1400001200001000008000060000Observed400000100002000030000Grow thPHILLFigure 2 Exponential growth chart between BSE and Mexico160000BSE1400001200001000008000060000Observed40000020000400006000080000Grow th100000MEX90Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comFigure 3 Exponential growth chart between BSE and Singapore160000BSE1400001200001000008000060000Observed40000020000400006000080000100000120000Grow thSINGThe correlation matrix between BSE and other four exchanges under sample is showinglow degree of negative correlation except Singapore, which is showing a high degree ofpositive correlations (0.702). Other exchanges also showing positive relationship betweenthem except Singapore exchange having low or moderate correlations between them. Theresult of the correlations would have been much more dependable if more number ofobservations can be collected.Table 7 Distribution of Correlations MatrixBSE PHILL MALYS MEX SINGBSE Pearson Correlation 1.000 -.291 -.252 -.012 .702Sig. (2-tailed) . .274 .347 .964 .002N 16 16 16 16 16PHILL Pearson Correlation -.291 1.000 .735 .309 .161Sig. (2-tailed) .274 . .001 .244 .552N 16 16 16 16 16MALYS Pearson Correlation -.252 .735 1.000 .574 .115Sig. (2-tailed) .347 .001 . .020 .671N 16 16 16 16 16MEX Pearson Correlation -.012 .309 .574 1.000 -.077Sig. (2-tailed) .964 .244 .020 . .777N 16 16 16 16 16SING Pearson Correlation .702 .161 .115 -.077 1.000Sig. (2-tailed) .002 .552 .671 .777 .N 16 16 16 16 16Correlation is significant at the 0.01 level (2-tailed).Correlation is significant at the 0.05 level (2-tailed).91Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.com7. LIMITATIONSThe time sires data taken for the purpose of analysis is less in number. Only sixteenobservation of each variable are abatable for the purpose of the study. Some moreobservation would have made the multiple regression analysis trust worthier.Pearson’s correlations using the Bivariate data world have been more reliable with morenumber of observations.FDI data of India an other emerging market required more insights.As FIIs are directly related to the stock exchange, so, an index study of otheremerging market is due, as it is done in case of Indian market.Relevant data have been collected form website without checking for its authenticity.8. CONCLUSIONS AND RECOMMENDATIONSOver the past decade India has gradually emerged as an important destination of globalinvestors' investment in emerging equity markets. In this paper we explore therelationship of foreign institutional investment (FII) flows to the Indian equity marketwith its possible impact based on a time series of yearly data for the period 1992-03 to2005-06. Here we try to identify the relevant covariates of FII flows into and out of theIndian equity market and also to determine the nature of causality between the relevantvariables. We incorporate into the analysis variables that appear, a priori, to be theprimary determinants of global investors' demand/supply for/of stocks in the Indianmarket. The variables taken are reflecting yearly volatility (representing risk) indomestic and international equity markets, based on the BSE SENSEX, Philippines StockExchanges, Malaysia Stock Exchange, Mexico Stock Exchange and Singapore StockExchange as well as measures of co-movement of impact in these markets (with therelevant betas). In this study several macroeconomic variables like daily returns on theRupee-Dollar exchange rate, short run interest rate and index of industrial production(IIP); that are likely to affect foreign investors' expectation about returns in the equitymarket is not considered, which needed special attention. The data set embodies year-toyearvariations and hence, is better suited for examination of various interrelationships ofequity. Also, we relate yearly FII flows to the exchange index values mentioned abovecombining three kinds of flows, namely, FII flows into the country or FII purchases, FIIflows out of the country or FII sales and the net FII inflows intothe country or FII net.Our results show that, though there is a general perception that FII activities exert astrong demonstration effect and thus drive the domestic stock market in India, evidencesuggests that FII flows to and from the Indian market tend to be caused by return in thedomestic equity market and not the other way round. The regression analysis, in variousstages, reveals that returns in the Indian equity market are indeed an important (andperhaps the single most important) factor that influences FII flows into the country.While, the dependence of net FII flows on daily return in the domestic equity market (at alag, to be more specific) is suggestive of foreign investors' return-chasing behavior, therecent history of market return and its volatility in emerging and domestic stock marketshave some significant effect as well. However, while FII sale (and FII net inflow) is92Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comsignificantly affected by the performance of the Indian equity market, FII purchase is notresponsive to this market performance. Looking at the role of the betas of the Indianmarket with respect to the Philippines Stock Exchanges, Malaysia Stock Exchange,Mexico Stock Exchange and Singapore Stock Exchange indices it is concluded thatforeign institutional investors do not seem to use the Indian equity market for the purposeof diversification of their investments. It is also seen that return from exchange ratevariation and fundamentals of the emerging economies may have strong influence oninternational diversification decisions. Policy implications that emerge are that a movetowards a moreLiberalized regime, in the emerging market economies like India, should be accompaniedby further improvements in the regulatory system of the financial sector. To fully reap thebenefits of capital market integration, in India (and other countries having thin andshallow equity markets) the prime focus should be on regaining investors' confidence inthe equity market so as to strengthen the domestic investor base of the market, which inturn could act as a built-in cushion against possible destabilizing effects of suddenreversal of foreign inflows.REFERENCESAmihud, Y., 2002, Illiquidity and Stock Returns: Cross-section and Time Series Effects,Journal of Financial Markets 5, 31-56.Bekaert G and R H Campbell (1995)- ‘ Time Varying World Market Integration’,Journal of Finance, Volume 50, pp. 403-444.Chee-Keong Choong and Kian-Ping Lim (2007)- ‘Foreign Direct Investment inMalaysia: An Economic Analysis’, The ICFAI Journal of Applied Economics,Volume 6 No. 1, pp. 75.Endo, Tadashi. 1998. The Indian Securities Market—A Guide for Foreign and DomesticInvestors. Vision Books. India.Gupta, L.C. 1998. ‘What Ails the Indian Capital Market?’ Economic and PoliticalWeekly, 23 , pp. 29-30.Gupta, R (2005)- ‘Economic Development of West Bengal’, Vol. I, Icfai UniversityPress, Hyderabad.Hermes, N. and Lensink, R., 2005, Does Financial Liberalization Influence Saving,Investment and Economic Growth? Evidence from 25 Emerging MarketEconomies, 1973-96, United Nations University, World Institute for DevelopmentEconomics Research, Research Paper No. 2005/69.Jess Lee and Alfred Wong (2009)- Impact Of Financial Liberalisation On Stock MarketLiquidity: Experience Of China Working Paper 03/2009, Honkong.Joydeep Biswas (2007)- ‘Emerging Equity Market: A Cross-country Time SeriesAnalysis’, The ICFAI Journal Of Applied Finance, Volume 13 No. 7, pp. 55.Kothari C. R. (2004)– Research Methodology Methods and Techniques, New AgeInternational Publishers, pp. 256-264.Misra, B. M. (1997)- ‘Fifty Years of the Indian Capital Market: 1947-1997.’ In Bankingand Financial Sector Reforms in India, Vol. 6, edited by Kapila, Raj and UmaKapila.93Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comNielsson, U., 2008- ‘Stock Exchange Merger and Liquidity: The case of Euronext’,Journal of Financial Markets, Article in press.O'Neill, J. (1993) – Ecology, Policy and Politics. Human Well-Being and the NaturalWorld Routledge Press , London.Pagano, M. and Padilla, A., 2005, Efficiency Gains from the Integration of Exchanges:Lessons from the Euronext “Natural Experiment”, A report for Euronext.People’s Bank of China, 2006, A Year of Smooth Implementation of the Reform of theRMB Exchange Rate Regime, Appendix of Monetary Policy Report, Quarter Two,2006.Prasad, E., Rogoff, K., Wei, S. and Kose, M., 2003, Effects of Financial Globalization onDeveloping Countries: Some Empirical Evidence, IMF Occasional paper No.220.Raju M. T. and Anirban Ghosh (2004)- ‘Stock Market Volatility an InternationalComparison’, SEBI Working Paper Series No. 8.Ranciere, R., Tornell, A. andWestermann, F., 2006, Decomposing the Effects of FinancialLiberalization: Crises vs. Growth, Journal of Banking & Finance, Volume 30, Issue 12,3331-3348.Rangarajan, C. 1997- ‘Activating Debt Markets in India.’ Reserve Bank of India Bulletin.Reddy, Y. V. 1997- ‘The Future of India’s Debt Market.’ Reserve Bank of India Bulletin.Securities and Exchange Board of India. 1995/96 and 1996/97. Annual Report. India:SEBI .Shah, Ajay, and Susan Thomas. 1997. ‘Securities Markets—Towards GreaterEfficiency.’ In India Development Report, edited by K. Parikh. UK: OxfordUniversity.Tarapore, S. S. ‘The Government Securities Market: The Next Stage of Reform.’ Bankingand Financial Sector Reforms in India, Vol. 4.Websites of BSE, Philippines Stock Exchange, Malaysia Stock Exchange, Mexico StockExchange, Singapore Stock Exchange.Williamson, Oliver E. (1999)- ‘Public and Private Bureaucracies: A Transaction CostsEconomics Perspective’, Journal of Law, Economics and Organization, Vol 15,pp. 306-342.94Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comAPPENDIX ISummary StatisticsMarketCapitalization RatioTurnoverRatioValuetradedRatioMean SD Mean SD MeanIndonesia 0.227 0.1 0.522 0.342 0.11331Thailand 0.319 0.2 0.792 0.237 0.32396India 0.312 0.1 0.829 0.753 0.34436Malaysia 1.458 0.6 0.384 0.184 0.65858Philippines 0.464 0.2 0.261 0.193 0.12653Korea 0.416 0.2 2.210 0.939 1.04709Pakistan 0.185 0.0 1.687 1.698 0.17921Bangladesh 0.028 0.0 0.451 0.260 0.01341Sri Lanka 0.110 0.0 0.158 0.059 0.01517SD0.0580.2300.3290.5390.1110.8050.1480.0080.012Growth of RiskListedCompaniesMea SD Meann0.03 0.044 0.16650.02 0.134 0.19710.11 0.066 0.22020.06 0.050 0.08900.01 0.016 0.10530.13 0.435 0.09280.00 0.023 0.17310.03 0.020 0.13430.00 0.020 0.1669MarketIntegrationSD Mean SD4.546 0.649 0.2136.368 0.405 0.2464.050 0.121 0.1935.478 0.189 0.1164.347 0.271 0.0986.587 0.502 0.2146.240 0.124 0.3205.560 0.282 0.2744.554 0.018 0.15095Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comAPPENDIX IIFDI Inflows in the East Asian Developing CountriesCountry/Group FDI Inflows (Million of Dollars)1970 1980 1985 1990 1995 1997 1998 1999 2000 2001Developing 788 395 5191 24230 75293 107205 95599 99728 143479 102066Countries: AsiaChina - 57 1659 3487 25849 44237 43751 40319 40772 46846China, Hong 50 710 -267 3275 6213 11368 14776 24591 64448 22834Kong SARIndonesia 83 180 310 1092 4346 4677 -356 -2745 -4550 -3277Korea 66 6 234 789 1776 2844 5412 10598 10186 3198Malaysia 94 934 695 2611 5816 6513 2700 3532 5542 554Philippines -25 -106 12 550 1459 1249 1752 737 1489 1792Singapore 93 1236 1047 5575 8788 12967 6316 7197 6390 8609Thailand 43 189 160 2542 2004 3627 5143 3562 2448 3759Source: UNCTAD (2002), Division on Investment, Technology and Enterprise Development.The source also can be obtained at:www.UNCTAD.org./en/subsite/dite/fdistats_files/fdistats.htm96Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 4. May, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comServing People Interestin Research, Teachingand PracticeAn International Journal Published byAcademy of Knowledge Processwww.akpinsight.webs.comCopyright © 2012 IJCBS97Copyright © 2012. Academy of Knowledge Process