IJCBS Vol 2 No 12 December 2011 ISSN 2156-7506

International Journal of Contemporary Business Studies Vol: 2, No: 12. December, 2011 ISSN 2156-7506 Available online at http://www.akpinsight.webs.
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ISSN 2156-7506 VOLUME 2 NUMBER 12 DECEMBER 2011
International Journal of Contemporary Business Studies
IN THIS ISSUE: Determinants of AIS Effectiveness: Assessment thereof in Pakistan

Dr. Rehana Kouser.Gul -e - Rana,Farasat Ali Shahzad
Impact of Firm Size and Capital Structure on Earnings Management: Evidence from Pakistan
Iram Naz,Khurram Bhatti ,Abdul Ghafoor,Habib Hussain Khan
Challenges and Opportunities of Kenyan artisanal Fish Industry

Eddy E. Owaga,Hazel Mumbo,Fredrick Aila,Odhiambo Odera
Modeling Dynamic Financial Market Integration: An Empirical Study on Equity Markets in India and Select South Asian Countries
Dr. Malayendu Saha,Dr. Amalendu Bhunia
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VOLUME 2, NUMBER 12 DECEMBER 2011
Contents:
Determinants of AIS Effectiveness: Assessment thereof in Pakistan..6

Dr. Rehana Kouser.Gul -e - Rana,Farasat Ali Shahzad
Impact of Firm Size and Capital Structure on Earnings Management: Evidence from Pakistan..22
Iram Naz,Khurram Bhatti ,Abdul Ghafoor,Habib Hussain Khan
Challenges and Opportunities of Kenyan artisanal Fish Industry..32

Eddy E. Owaga,Hazel Mumbo,Fredrick Aila,Odhiambo Odera
Modeling Dynamic Financial Market Integration: An Empirical Study on Equity Markets in India and Select South Asian Countries..39
Dr. Malayendu Saha,Dr. Amalendu Bhunia
Determinants of AIS Effectiveness: Assessment thereof in Pakistan

Dr. Rehana Kouser
Lecturer, Department of Commerce Bahauddin Zakariya University, Multan-Pakistan
Gul e Rana
Lecturer, Department of Management Sciences Yanbu University College, Yanbu-Saudi Arabia
Farasat Ali Shahzad

Lecturer, Department of Commerce BahauddinZakariya University, Multan-Pakistan
ABSTRACT
Accounting Information System (AIS) is the application of new and innovative information technology in accounting system of a company. To make this application effective and beneficial certain factors are required to be present. This study reviews these factors (determinants of AIS effectiveness) and then measures them in context of Pakistan. For this purpose a questionnaire as proposed by Ismail (2009) is used to measure these variables in two sectorsTextile and Cement-from Karachi Stock Exchange Pakistan. Survey is based on total nine variables. Eight independent variables are AIS sophistication, managers AIS knowledge, managers participation in AIS implementation, consultant effectiveness, vendor effectiveness, government agencies effectiveness and accounting firm effectiveness. The dependent variable is AIS effectiveness. Data analysis is based on correlation and regression. It is found that two variables, Manager Participation in AIS Implementation and Manager Accounting Knowledge have strong relation to the AIS effectiveness in Pakistan. Keywords: Accounting Information System, AIS, Effectiveness, Pakistan, Assessment, Survey JEL Codes: M19, M41, M43, M49
INTRODUCTION
Business firms must develop new businesses methods and use new technologie. The paramount method which should be chosen in order to enhance competitive advantage and to avoid any decline in value of production is the adoption of new technologies; (Caldeira & Ward, 2003). Development efforts for technical capabilities in Pakistan through larger and more subtle diffusion of communication technologies, is very common nowadays and it is very effective and important strategy to improve productivity and competitiveness. The effectiveness of technology adoption among enterprises and the availability of data play a vital tool for strengthening the company's business.
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Computerized accounting system mainly facilitates small and medium business enterprises, to overcome their weakness and thereby increases the prospects for achievement (DeLone, 1988); the application of technology in corporate data business in Pakistan is also increasing and it became the source of increase in productivity. An information system consist of collecting, entering, processing, storing, managing, controlling, and reporting information so a corporation is able to do its objectives and goals (Romney et al., 1997:18). This explanation of information systems show thats information system has following parts. Every information system is intended to complete one or additional goals or objectives. As an example, an information system is also intended to gather information and methods to assist managers concerning workers prepares payroll reports. In order to determine the effectiveness of specific Accounting Information Systems (AIS), it is important that this term must be clearly defined first. There are various definitions of AIS. Viewed as a subsystem of management information system, it performs the operation method is primarily for monetary, and as non-financial operations that directly have an effect on economic transaction processing (Siegel & Shim 1997). AIS contain four key sub-systems as mentioned in Hall (2006) and that are relevant to this study: Transaction processing systems that support routine business operations with the documents vary from organization Final books / financial reporting systems, which generate reports normal money, such as income statements, balance sheets and cash flow statements, tax returns, and the different reports required by law Fixed asset system, that processes the transaction refers to the acquisition, maintenance, and removal of fixed assets, and Management reporting system, which provides internal management purposes with reports of unusual money and knowledge necessary to create the call, such as budgets, variance reports, and reporting responsibilities. AIS created during a business, is directly related to the level, organizational culture and strategic design of information technology that this specific business have. A number of functions required in the accounting information system that appears in a business are: gather and record information about the activities and transactions; designing, processing and converting data into information that will be used in decision making for planning, application and management activities, and an end to mandatory controls so to keep the business assets. Accounting information plays an important role in the method of managing corporate activities. AIS is said to be valuable when the information provided serves the usual needs of system users. An effective system should systematically provide information that has potential effects on decision-making process. Accounting Information is sometimes divided into two groups: 1) All those information that affects decision-making and is mainly used in order to control the organization and 2) those information which are used by the management within the company decisions.Huber argues that the combination of AISs leads to coordination within the organization which, in turn, will improve the quality of decisions. Several studies in accounting show that the effectiveness of the accounting information system depends on the quality of the output of an information system that will meet the needs of users. AISs helps organizations to increase its performance through better decision making as it provide useful information and reports on a daily and weekly basis. Moreover, company monitors all its activities on the basis of this information. Information technology has led to some changes in the process of reporting information as well. It facilitates the decision-maker by allowing more alternatives to the solution
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of problems in their hands. According to Nicoloau & Sidnei (2001) AIS is computer-based system that will improve and enhance corporate control in the organization. Management is involved with various types of activities that require good quality and reliable information. They also require non-financial information such as production statistics, production quality and so on. However, the quality of information generated by the AIS is very important for management. Narasimhan & Kim (2001) argues that the use of AIS depends on the perceived quality of information by the user. The general rule of the standard depends on the reliability, timeliness of the information, forms and extent and importance of the decision. The effectiveness of the accounting system also depends on the perception of decision makers about the usefulness of the information generated by the system information required for business process management, reporting, budgeting and control, to run the organization. The effectiveness of accounting information systems is analyzed on three bases: 1) the scope of information 2) timeliness 3) aggregation. The amount of information, for example, financial accounts, internal and external information is useful in predicting future events. Timeliness is the quality of the power system of accounting information for a systematic review of the required information on user satisfaction. Aggregation of information taken into account, as has been observed that the collection and synthesis of information within a specified period. Doll and Torkzadeh (1988) used some concept of user satisfaction to measure the effectiveness of accounting information systems. These concepts are information content, accuracy, format, ease of use and timeliness. To our knowledge no research in Pakistan were held on success factors of AIS till now. This research will be very useful for organizations who want to adopt AIS in their organizations and also the interested users of an entity. This research will help to indicate the factors and variables that effect on the success of AIS in different organizations where it is used. It will also help those organizations who want to adopt AIS for the first time in their organization, by considering the influencing factors of AIS identify in this research. The overall objective of this research is the awareness of organizations about the importance of AIS and also to enhance the efficiency of AIS in organizations where it is currently used.
LITERATURE REVIEW
Information systems offer a chance for business to enhance their effectiveness and value and even to get competitive advantage, (Kimberly & Evanisko, 1981, Porter &Millar, 1985). With additional powerful user friendly personal computers and higher software packages, the advantages of Information System events are accessible to smallest business (Thong, 1999). Although massive businesses are using the PC for a few times, small and medium business enterprises are slow in adopting this technology innovation. According to the Attawells theory of technology diffusion, companies tend to delay adoption of technology because of lack of information about how to implement and operate the Accounting Information Systems. Ismail and King (2007) argue a lack of understanding of accounting information managers hinder the company's strategic business of aligning them with the capacity of the AIS requirements. Although business managers can provide expertise in areas of their operations, a mixture of a lot of advice from external consultants may provide relevant information for the effective implementation of the AIS; (De Guinea et al., 2005). In addition to the three top external experts commonly found in the literature AIS, accounting firms can also play an important role in the implementation of the AIS for the company's business (Davis, 1997; Mitchell et al, 2000; Berry et al., 2006) because accounting firms can recommend a company in the field of business costs, expenses, and cash flow to support the monitoring and control.
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Meanwhile, consultants and vendors can facilitate them to choose the right technology fit the needs of business information (de Guinea et al, 2005). Therefore, this support lowers the absence of any external expert informational and technical information relating to the implementation of the AIS that the company's business may face. Subsequently, Wernerfelt (1995)s resource-based theory of firms indicates that firms are collections of resources in which the value of resources is partly dependent on the presence of different resources. Since SMEs typically operate under tight time, finances, and constraints of experience (Cragg& King, 1993; Berry et al, 2006), they have a tendency to regulate their limited funds for the implementation of AIS (Alasadi & Abdelrahim, 2007). However, managers of SMEs have the ability to commit resources towards the implementation of the AIS. Therefore, taking the diffusion of technology and resource-based theory into thinking, conceptual model for the study theorizes that less managerial commitment and external experience, information and poverty faced by SMEs are the obstacles to use and implementation of the AIS. The importance of management commitment to the effectiveness of AIS in SMEs has always been recognized in the literature AIS (Cragg & King, 1993; Igbaria et al, 1997; Thong, 1999; Seyal & Abdul Rahman, 2003; De Guinea et al, 2005; Ismail & King, 2007). In accordance with Yap (1989), there are two reasons why managers support the implementation of the AIS. First, managers in the best position mark the exploitation of business opportunities for AIS. Justification is that managers are those who think their business is simple (Thong et al., 1996). Thus, the manager will bring the AIS into line with company objectives and methods (Jarvenpaa & Ives, 1991). Second, the implementation of the AIS needs extensive investment and has an effect on the organization's all aspects (Yap, 1989). In the case of SMEs, the manager has the authority to confirm the allotment of adequate resources and create a favorable atmosphere in addition to the application of AIS (Lucas, 1981). In addition, managerial commitment in a variety of information and participation in the implementation of AIS encourages users to develop positive attitudes toward the use of AIS (Thong et al, 1996). Furthermore, empirical evidencehas verified that management commitment is strongly associated with the use of simple felt and perceived usefulness of AIS in SMEs. Therefore, management commitment to the AIS will establish the difference between AIS implementation successful and unsuccessful (de Guinea et al., 2005).The effectiveness of AIS is one of the main dependent variables common in AIS literature (DeLone & McLean, 1992; Thong et al, 1996; Seddon, 1997; Foong, 1999). Raymond (1990) describes the effectiveness of the AIS, because it contributes to the achievement of business objectives. But researchers are still struggling to find definitions and concepts for AIS effectiveness, because effectiveness varies significantly between studies (De Guinea et al., 2005). The last important study on which this research is based is Ismail (2009).Author conducted a survey in Malaysia using a sample of 232 registered SMEs. It focuses on the effectiveness of AIS by using the likert scale of five points. It formulated the eight independent variables as the drivers of AIS effectiveness based on literature and then tested their relation to the AIS effectiveness. These variables are AIS sophistication, manager AIS knowledge, manager participation in AIS implementation, consultant effectiveness, vendor effectiveness, government agencies effectiveness and accounting firm effectiveness. Study used the Cronbachs alpha and principles components analysis to check the consistency and validity of its research instrument which yielded positive results. The results show that manager accounting knowledge, and the effectiveness of vendors and accounting firms significantly contributed to AIS effectiveness.
RESEARCH METHODOLOGY
Researchers conducted in the area of information system and information technology are categorized in two types normally. One include those addressing the adoption factors, incentives
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or reasons, second category include the researches those addresses the impacts of adoption. Research studies addressing the adoption process, reasons and factors affecting the decisions during adoption, usually have the survey research design. We study the factors of effectiveness of Accounting Information System. This study as lying in the first category employs the questionnaire to gather the data. This chapter explains the variables of study, sample of study, hypotheses, and statistical methods for analysis. Variables of the Study Research study formulates the nine variables to study; one is dependent variable and remaining eight are independent variables. These are explained below: AIS Sophistication (X1) Manager Participation in AIS Implementation (X2) Manager AIS Knowledge (X3) Manager Accounting Knowledge (X4) Consultants Effectiveness (X5) Vendors Effectiveness (X6) Government Agencies Effectiveness (X7) Accounting Firms Effectiveness (X8) AIS Effectiveness (X9)
Above diagram shows the relationship between the variables and elaborates the research model used in the study.
AIS Sophistication
AIS sophistication refers to the number of AIS applications portfolio adopted by responding firms. The respondents were asked to indicate whether they adopt or not eighteen AIS applications. To measure the level of AIS sophistication, an aggregate measure, termed as application score was created to represent the number of applications adopted by the responding companies. The values of AIS sophistication range from 1 through 18.
Manager Participation in AIS Implementation

In the questionnaire the respondent asked to indicate their level of participation through a five-point scale anchored between no participation and high participation. These areas are: definition of needs (information requirements), selection of hardware and software, implementation of systems, systems maintenance and problem solving, and planning for future AIS deployment.
Manager AIS knowledge

We measured manager AIS knowledge using a list of seven applications commonly found in companies. The respondents were asked to indicate their knowledge level regarding word processing, spreadsheet, database, accounting, e-mail, Internet and computer-assisted production management applications based on bipolar anchors with a five-point scale anchored between no knowledge and extensive knowledge.
Manager Accounting Knowledge

With the help of questionnaire people were asked to mention their knowledge lever relating to different financial and accounting techniques and methods using the same scale as AIS knowledge.
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Sources of Consultancy
The major bases of external expertise explored from the existing literature and these are included in the questionnaire like consultants, vendors, government agencies and accounting firms. The respondents mention the major sources of advice which is used by their firms through questionnaire. And in this way respondents were asked to rate the effectiveness of each external expert based on bipolar anchors with a five-point scale anchored between very ineffective and effective.
AIS Effectiveness
The respondents were asked, based on bipolar anchors with a five-point scale anchored between strongly disagree and strongly agree, to indicate the level of effectiveness of their AIS regarding systems quality, information quality, information use, user satisfaction, individual impact, and organizational impact.
Sampling
Research uses the purposive sampling technique. Companies are selected from two sectors, Textile and Cement, based on the need of research study. Only those companies are selected for studies those have adopted the AIS. List of sample companies is given in appendix.
Hypotheses of Study
It has been argued that investment in sophisticated IT would help firms produce more accurate and timely information for effective decision making (Huber, 1990). An appropriate level of IT and AIS sophistication was found to have a positive and significant impact on the firms ability to align IT strategy and business strategy (Hussin et al., 2002; Ismail & King, 2007). Hence, it is expected that firms with more sophisticated AIS will have a higher degree of AIS effectiveness. Similarly other independent variables are tested against the dependent variable AIS effectiveness on the basis of evidence found in the literature. Following hypotheses are formed on the bases of variables to study and literature reviewed: H1: There is a positive relationship between AIS sophistication (X1) and AIS effectiveness (X9). H2: There is a positive relationship between manager participation (X2) and AIS effectiveness (X9). H3: There is a positive relationship between managers AIS knowledge (X3) and AIS effectiveness (X9). H4: There is a positive relationship between managers accounting knowledge (X4) and AIS effectiveness (X9). H5: There is a positive relationship between consultants effectiveness (X5) and AIS effectiveness (X9). H6: There is a positive relationship between vendors effectiveness (X6) and AIS effectiveness (X9). H7: There is a positive relationship between government agencies effectiveness (X7) and AIS effectiveness (X9). H8: There is a positive relationship between accounting firms effectiveness (X8) and AIS effectiveness (X9).
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Data Collection
All the data is collected through the survey. A questionnaire adopted from Ismail (2009), is used to collect the data from sample companies. It uses six questions having some factors by each based on likert scale of 5 points. Questionnaire is provided in the annexure of thesis report.
Statistical Methods and Analyses

Research used many statistical; techniques to analyze the data collected, and to interpret the results thereof. Research instrument as adopted from Ismail (2009) is tested and have been proved a valid model for measurement, by author. He performed the reliability analysis measured through Cranachs alpha, principle components analysis proved that these factors can be used to measure AIS effectiveness as a single variable. We used the coding in SPSS 16 and calculated the average scores for each variable, and then calculated descriptive statistics measures. Correlation test and multiple regressions is performed using MS Excel 2007, to check the relationship between the independent and dependent variables. Analysis is performed at three levels first for Cement sector second for Textile sector and third for Overall basis.
DATA ANALYSIS
Analysis of collected data is conducted according to the research design, explained in the research design. This chapter expressed the empirical findings and analysis type for hypotheses formulated. Data analysis is done for each hypothesis. All the statistical methods are applied using three levels data, one for cement sector data, second for textile sector and third using whole study period data. The chapter is divided into these sections, Preliminary findings, Approach used for analysis, Descriptive Analysis, Correlation Analysis and Regression Analysis.
Preliminary findings
We will start from the AIS sophistication. Cement sector firms have high AIS sophistication on average. Following table describes the results for the two sample t-test between the AIS applications used by cement sector and textile sector. Below diagram is showing the number of computer applications used by each company of cement and textile sector. The statistics for external export consultancy is also given below using the graph. Consultants Effectiveness (X5), Vendors Effectiveness (X6), Government Agencies Effectiveness (X7) and Accounting Firms Effectiveness (X8), are expressed that how much companies in each sector have external export consultancy in each case. Following diagrams also explain the characteristics of firms for external consultancy by each type. Above shown diagrams elaborate that accounting firms are used as consultants for more firms in both cement sector as well as textile sector. However many textile firms also used the other consultants also.
Descriptive Statistics for the variables

Following is given the descriptive statistics measures for the selected variables for the study. Below tables are elaborating the basic descriptive measures calculated for the scores obtained from cement and textile sector sample companies and on overall basis as well. We summarize the descriptive statistics for the main variables in table 4.6.the results indicate that respondent firms perceived their AIS implementations fairly effective (mean=3.94). Out of eighteen applications the average number of AIS application adopted by respondent firms is 9.50. Most managers of respondent firms participated highly in AIS implementation (mean=4.24). AIS knowledge (mean=4.34) and accounting knowledge (mean=4.70) are good. When we ask about
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the effectiveness of external experts, respondent firms rated accounting firms (mean=4.33) as the most effective followed by the consultant (mean=3.96), vendors (mean=3.42) and government agencies (mean=1.58) in this X7 mean is below the average. The element of trust could explain the findings. For example, Davis (1997) argued that most SMEs treated accounting firm as their most trusted business advisors. Furthermore accounting firms are more knowledgeable about their clients and their clients businesses and thus could help them implement effective AIS that meet their business requirements. In overall sample companies descriptive statistics we find that all the independent and dependent variables are above the average except government agencies. This tables elaborate that the average number of AIS applications used is almost same for both cement and textile sector. However mode differs among the two sectors. In cement sector most firms have 7 AIS applications and in textile sector, most frequent number of applications is 9.
Correlation Analysis
On the second stage research study used the correlation analysis to test the hypothesis. Pearson correlation coefficient indicates the strength of a linear relationship between two variables, but its value generally does not completely characterize their relationship. Correlation analysis just show the numerical relationship and its results may be meaningless. So we cant rely only on correlation to check the relationship between the variables. Following tables include the correlation matrices for the variables of study. However hypotheses cannot be tested merely on the basis of correlation analysis. This table elaborate that there is insignificant relationship between all variable except X7 and X8. There is significant relationship between these variable because the relation value is above 0.8. These tables describe that there is the insignificant relationship between the independent variables and dependent variable. However relation is further expressed through the charts presented below. Correlation analysis remained under the criticism in the literature of statistics. Correlation just expresses the linear relationship and there may be a non-linear relation. In that case result could be misleading. Correlation as measures through the Pearsons coefficient of correlation is a rough measure. To have a clear picture of the results one must have to use the regression analysis. We also used the multiple regression analysis to find the actual relationship between the study variables. Correlation analysis was necessary to conduct to avoid the multi-co linearity between the independent variables. Results show that all the figures are less than .80 for between independent variables correlation. But hypotheses cannot be tested merely on the basis of correlation analysis.
Multiple Linear Regression

At the end regression analysis is used to answer the research question and test the hypothesis formulated. These outputs are produced using the Data Analyses Add-in provided in MS Excel 2007. Regression analysis like other analyses made, is conducted at three levels i.e. for cement sector firms, textile sector firms and overall basis. Below tables are giving the summary of regression results. Regression analysis of Cement sector show that model developed is 23 percent good as denoted by adjusted r square. For cement sector companies scores we can see that the hypotheses made are rejected fully. No variable has p-value less than the level of significance 0.05. Only one variables x3 are near to significance level because there p-value is 0.079.
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Regression analysis shows that model developed is 22 percent good as denoted by the adjusted rsquared for overall sample companies. For cement sector companies scores we can see that the hypotheses made are rejected fully. No variable has p-value less than the level of significance 0.05. But analysis using all sample companies observations produced satisfactory results. Here two variables x3 (Manager AIS Knowledge) and x4 (Manager Accounting Knowledge) are showing significant impact on the dependent variable x9 (AIS effectiveness). However the value of multiple R and R-squared remained good for cement sector and overall basis. The figures are 23% and 22% for R-squared respectively. The values here represent that these independent variables together denote significant variations in the dependent variable. By utilizing whole results of analysis we can reject H1, H2, H5, H6, H7, and H8. The study used for the analysis Ismail (2009), found the X4, X6, and X8 significant factors of AIS effectiveness. However in our case, we find different factors affecting the AIS effectiveness. On the other side goodness of model is 30 percent as stated by Ismail (2009) but we find it 22 percent. Similarly Rsquared is 38 percent against the 31 percent. Overall basis we can say that results are significantly consistent to those found by the Ismail (2009).
CONCLUSIONS
Several implications can be drawn for research and practice based on this study. With respect to research, there are three main implications. First, there is a positive and significant association between Manager AIS Knowledge and manager accounting knowledge and AIS effectiveness.Thus, this study complements previous research by having supported this association within a Pakistani context.Second, there are contradictory findings between this study and previous literature with respect to the relation of manager Participation in AIS Implementation and AIS effectiveness, consultant effectiveness and AIS effectiveness, and government agencies effectiveness and AIS effectiveness.There are a number of potential phenomena, such as the AIS maturity in Cement sector that may affect the results.Finally, it would be interesting to expand the research model by introducing new constructs such as sources of software and time to plan for AIS, using a more sophisticated technique such as structural equation modeling. This study has two implications for practice. First, managers should engage qualified AIS vendors who have experience and understand unique characteristics of cement sector. Qualified AIS vendor can also help cement sector to overcome their lack of AIS knowledge and thus cement companies should take the opportunity to increase AIS knowledge of the business. Merely engaging external expert such as vendors would not guarantee future AIS success without a proper transfer of knowledge to the firms. Second, managers of cement companies need to acquire sufficient accounting knowledge as accounting is the most important component of modern AIS within cement sector. Being the person who best understands a firms business operations, the managers can make use of accounting knowledge to identify business information requirements, and probably with the help of qualified and effective AIS vendors, would be able to choose the right technology to meet those needs. Cement companies should also exploit the good relationship with their accounting firms. Being the most trusted advisors to the cement sector, accounting firms are also the only external party that best understand their clients business, and thus are in a better position to help cement companies identify their business information requirements, and with the help of vendors would contribute to more effective AIS. Manager should get training about information system to implement the effective AIS in the company. It is important for cement companies to learn from their AIS implementation so that opportunities can be recognized and priority can be given to those initiatives that help AIS support their
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information needs. He should asked users about their requirements for System and also consults qualified Consultant for effective and efficient Accounting Information System. This study examined eight hypotheses concerning the effectiveness of AIS implementation in the specific context of cement in Pakistan. All the firms taken as a sample are listed in Karachi Stock Exchange (KSE). The evidence suggests that the major factors that influenced AIS effectiveness among the sample firms were Manager Participation in AIS Implementation (X2) and Manager Accounting Knowledge (X3). Thus, this study has made an important contribution by increasing current understanding of AIS implementation and its influence factors in cement sector as well as in Textile sector. Manager AIS Knowledge, effectiveness of consultants, effectiveness of accounting firms, effectiveness of Government Agencies and Vendors, however, appeared to have insignificant relationship with AIS effectiveness. These unexpected findings indicate the need for further research into the processes associated with the effectiveness of AIS implementation in cement sector of Pakistan.
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Seddon, P.B. (1997). A re-specification and extension of the DeLone and McLean model of IS success. Information Systems Research, 8(3), 240253. Seyal, A. H. and Abdul Rahman, M. N. (2003). A Preliminary Investigation of E-commerce Adoption in Small and Medium Enterprises in Brunei, Journal of Global Information Technology Management, 6(2), 6-26. Shim, J. K. & Siegel, J. G. (1997). Financial management for nonprofits: The complete guide for maximizing resources and managing assets. New York: McGraw-Hill. Thong J. Y. L. (1999). An Integrated Model of information Systems in Small Businesses. Journal of Management Information Systems, 15 (4) 187-214. Thong, J. Y. L., Yap, C. S. & Raman, K.S. (1996). Top Management Support, External Expertise and Information Systems Implementation in Small Businesses. Information Systems Research, 7(2), 248-267. Wernerfelt (1995): The resource-based view of the firm: Ten years after. Strategic Management Journal 16, 171-174. Yap, C.S. (1989). Issues in Managing Information Technology. Journal of the Operational Research Society, 40(7), 649-658.
Appendix-1: List of Sample Companies

Cement Sector Fauji Cement Ltd. Maple Leaf Cement Ltd. Dandot Cement Ltd. KohatCemant Ltd. Lucky Cement Ltd Gharibwal Cement Ltd. D.G. Khan Cemeny Ltd. Bestway Cement Ltd. Flying Cement Ltd. Pakistan Cement Ltd. Fecto Cement Ltd. Cherat Cement Ltd. Al-Abbas Cement Ltd. Attock Cement Ltd. Dewan Cement Ltd. Javedan Cement Ltd. Poineer Cement Ltd. Mustehkam Cement Ltd. Thatta Cement Ltd. Dadabhoy Cement Ltd. Textile Sector Dar-es-Salaam Textile Mills Ltd. Reliance Weaving Mills Ltd. Ellcot Spinning Mills Ltd. Arshad Textile Mills Ltd. Fatima Enterprise Ltd. Allah Wasaya Textile And Finishing Mills Ltd. Ishaq Textile Mills Ltd. Sun Rays Textile Mills Ltd. Chenab Ltd. Masood Textile Ltd. Fazal Cloth Mills Ltd. Ahmad Hassan Textile Mills Ltd. HussainIndustries Ltd. Sargodha Spinning Mills Ltd. Shadab Textile Mills Ltd. Ibrahim Fibres Ltd. Ahmad Fine Textile Mills Ltd. Moderno Fabrics Ltd. Ali Asghar Textile Ltd. Adil Textile Ltd.
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Appendix-2: Notations for Variables X1 X2 X3 X4 X5 X6 X7 X8 X9 AIS Sophistication Manager Participation in AIS Implementation Manager AIS Knowledge Manager Accounting Knowledge Consultant Effectiveness Vendor Effectiveness Government Agencies Effectiveness Accounting Firm Effectiveness AIS Effectiveness
Appendix-3: Use of Consultancy in AIS Implementation Sector/Party X5 Not-Applicable Applicable Total X6 Not-Applicable Applicable Total X7 Not-Applicable Applicable Total X8 Not-Applicable Applicable Total Cement Sector No. of companies 8 12 20 No. of companies 7 13 20 No. of companies 14 6 20 No. of companies 5 15 20 Textile Sector No. of companies 4 16 20 No. of companies 8 12 20 No. of companies 7 13 20 No. of companies 4 16 20 Full Sample No. of companies 12 28 40 No. of companies 15 25 40 No. of companies 21 19 40 No. of companies 9 31 40
Appendix-4: Descriptive Analysis Table-1: Cement Sector Companies Descriptive Measures

Measure Mean Standard Error Median Mode Standard Deviation Kurtosis Skewness Range Minimum Maximum X1 9.50 0.64 8.50 7.00 2.87 0.06 1.00 10.00 6.00 16.00 X2 4.24 0.17 4.40 5.00 0.75 -0.20 -0.89 2.40 2.60 5.00 X3 4.34 0.12 4.43 4.43 0.56 0.81 -1.07 2.00 3.00 5.00 X4 4.70 0.09 5.00 5.00 0.41 2.61 -1.55 1.50 3.50 5.00 X5 3.96 0.25 4.00 5.00 0.86 -1.22 -0.23 2.50 2.50 5.00 X6 3.42 0.38 3.50 5.00 1.37 -1.65 -0.24 3.50 1.50 5.00 X7 1.58 0.15 1.50 1.50 0.38 -0.10 -0.31 1.00 1.00 2.00 X8 4.33 0.14 4.50 4.50 0.52 1.83 -0.94 2.00 3.00 5.00 X9 3.94 0.10 3.83 3.83 0.45 -0.54 -0.02 1.50 3.17 4.67
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Table-2: Textile Sector Companies Descriptive Measures Measure X1 X2 X3 X4 X5 X6 X7 Mean 9.10 4.24 4.49 4.75 3.66 3.75 3.62 Standard Error 0.71 0.17 0.13 0.12 0.30 0.16 0.40 Median 9.00 4.40 4.50 5.00 4.00 3.75 4.00 Mode 9.00 5.00 5.00 5.00 5.00 4.00 5.00 Standard Deviation 3.18 0.75 0.59 0.53 1.21 0.54 1.46 Kurtosis 0.42 -0.20 5.11 6.00 -0.83 1.58 -0.41 Skewness 0.13 -0.89 -1.96 -2.42 -0.55 0.76 -0.91 Range 13.00 2.40 2.43 2.00 3.50 2.00 4.00 Minimum 3.00 2.60 2.57 3.00 1.50 3.00 1.00 Maximum 16.00 5.00 5.00 5.00 5.00 5.00 5.00 Table-3: Overall Sample Companies Descriptive Statistics Measure X1 X2 X3 X4 X5 X6 X7 Mean 9.30 4.24 4.41 4.73 3.79 3.58 2.97 Standard Error 0.47 0.12 0.09 0.07 0.20 0.21 0.36 Median 9.00 4.40 4.43 5.00 4.00 3.50 3.00 Mode 8.00 5.00 4.43 5.00 5.00 4.00 5.00 Standard Deviation 3.00 0.74 0.57 0.47 1.07 1.05 1.55 Kurtosis 0.22 -0.33 2.25 4.42 -0.48 -0.33 -1.71 Skewness 0.46 -0.86 -1.43 -2.05 -0.60 -0.55 0.08 Range 13.00 2.40 2.43 2.00 3.50 3.50 4.00 Minimum 3.00 2.60 2.57 3.00 1.50 1.50 1.00 Maximum 16.00 5.00 5.00 5.00 5.00 5.00 5.00 Appendix-5: Correlation Analysis Table-1: Correlation Matrix for Cement Sector Firms X1 X2 X3 X4 X5 X6 X7 X8 1.00 -0.03 1.00 -0.10 0.20 1.00 0.25 0.08 0.33 1.00 -0.10 0.41 0.40 0.32 1.00 -0.04 0.18 0.60 0.02 0.42 1.00 0.31 -0.56 0.01 0.19 -0.66 0.23 1.00 0.16 0.08 0.30 0.14 0.34 0.20 -0.87 1.00 0.00 0.07 -0.38 -0.36 0.09 -0.13 -0.68 0.44
X8 4.22 0.27 5.00 5.00 1.09 1.09 -1.34 3.50 1.50 5.00
X9 4.29 0.06 4.25 4.00 0.29 -1.01 0.29 1.00 3.83 4.83
X8 4.27 0.15 4.50 5.00 0.85 2.64 -1.54 3.50 1.50 5.00
X9 4.12 0.06 4.17 4.00 0.41 -0.07 -0.43 1.67 3.17 4.83
X9
X1 X2 X3 X4 X5 X6 X7 X8 X9
1.00
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X1 X2 X3 X4 X5 X6 X7 X8 X9
Table-2: Correlation Matrix for Textile Sector Firms X1 X2 X3 X4 X5 X6 X7 X8 1.00 -0.23 1.00 -0.35 0.48 1.00 -0.02 0.08 -0.16 1.00 -0.13 0.19 0.02 -0.42 1.00 0.39 0.33 0.26 0.14 0.53 1.00 0.00 0.11 -0.24 0.54 -0.14 0.11 1.00 -0.27 0.11 0.16 -0.40 0.69 0.12 0.07 1.00 0.15 -0.03 -0.25 -0.10 0.04 0.39 0.20 -0.08
X9
1.00
X1 X2 X3 X4 X5 X6 X7 X8 X9
Table-3: Correlation Matrix for Overall Sample Firms X1 X2 X3 X4 X5 X6 X7 X8 X9 1.00 -0.14 1.00 -0.24 0.34 1.00 0.09 0.08 0.06 1.00 -0.09 0.25 0.12 -0.11 1.00 0.03 0.19 0.54 0.10 0.32 1.00 -0.04 0.15 0.21 0.45 -0.11 0.41 1.00 -0.12 0.09 0.17 -0.24 0.62 0.08 -0.04 1.00 0.03 0.02 -0.23 -0.19 0.01 0.03 0.27 0.07 1.00 Appendix-6: Regression Analysis Panel-1: Cement Sector Regression Results
Regression Statistics Multiple R R Square Adjusted R Square Standard Error Observations 0.74538035 0.555591867 0.232385951 0.391461683 20 Coefficients X1 X2 X3 X4 X5 X6 X7 X8 0.006026678 0.04063259 -0.410399678 -0.2924219 0.011382144 0.081890357 -0.156128188 0.082145604 Standard Error 0.03641646 0.139120928 0.212603607 0.268451364 0.05274794 0.054670402 0.136910637 0.053321892 t Stat 0.165493228 0.292066695 -1.930351436 -1.089291913 0.21578367 1.497891993 -1.140365654 1.540560565 P-value 0.871558106 0.775670448 0.079738852 0.299313679 0.833105466 0.162297078 0.278355057 0.151682479
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Panel-2: Textile Sector Regression Results Regression Statistics Multiple R R Square Adjusted R Square Standard Error Observations 0.615740975 0.379136948 -0.072399817 0.295646506 20 Coefficients X1 X2 X3 X4 X5 X6 X7 X8 -0.011532816 0.061647773 -0.342505054 -0.362340471 0.023844227 0.073954139 0.038379592 -0.003579235 Standard Error 0.027080274 0.122673766 0.175435982 0.184452365 0.057862224 0.065644054 0.051301116 0.048672101 t Stat -0.425875159 0.502534281 -1.952307902 -1.96441217 0.412086258 1.1265931 0.748123923 -0.073537707 P-value 0.678412265 0.625200044 0.076814999 0.075245982 0.688192603 0.28389177 0.47007842 0.942698433
Panel-3: Full Sample Regression Results Regression Statistics Multiple R R Square Adjusted R Square Standard Error Observations 0.616116562 0.379599618 0.219496293 0.362516407 40 Coefficients X1 X2 X3 X4 X5 X6 X7 X8 -0.002657329 0.042426273 -0.255033412 -0.330013512 0.027774188 0.052671182 0.071008192 0.029611447 Standard Error 0.021691813 0.093880448 0.123217664 0.135470543 0.03676507 0.037250985 0.035980063 0.036515895 t Stat -0.122503759 0.451918092 -2.069779641 -2.436053664 0.755450441 1.413954055 1.973542732 0.810919387 P-value 0.903290813 0.654474267 0.046893366 0.020791057 0.455680767 0.16734018 0.057404679 0.423594327
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Impact of Firm Size and Capital Structure on Earnings Management: Evidence from Pakistan
Iram Naz
Ph. D Scholar at Muhammad Ali Jinnah University, Islamabad, Pakistan
Khurram Bhatti
MS Scholar Muhammad Ali Jinnah University, Islamabad Pakistan
Abdul Ghafoor
Habib Hussain Khan

ABSTRACT
This study investigates the impact of firm size and capital structure on earnings management. Annual data for five years (from 2006-2010) for Seventy five companies from Cement, Sugar and Chemical sectors of Pakistan is obtained for the purpose of the study. Total assets were used as proxy for firm size, gearing ratio as measure of capital structure and discretionary accruals for earnings management. Jones Model was used for calculation of discretionary accruals. Data was checked for heteroskedasticity and robust regression was applied controlling the heteroskedasticity, taking discretionary accruals as dependent variable and gearing ratio and total assets as independent variables. The results indicate a significant negative impact of capital structure on earning management. Thus we concluded that firms with debt based capital structure have creditors acting as watchdog on its earning management practices, however results firm size were not significant. Key words: Earnings management, firms size, capital structure, Jones Model, Karachi Stock Exchange (KSE).
INTRODUCTION
It is imperative to have a concrete understanding of earnings before plunging into detailed discussion of earnings management. In simple words, earnings are the income of a company. Share prices are in fact the present value of future cash flows; future cash flows are the dividends which of course are dependent on the earnings of the company. Share prices of the companies with higher projected earnings are higher as compared to the share prices of the companies with lower projected earnings. The concept of earnings management is very important because its plays very vital role in determining the stocks prices. According to Healy and Whalen
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(1999:368), Earnings Management occurs when managers use judgment in financial reporting and in structuring transactions to alter financial reports to either mislead some stakeholders about the underlying economic performance of the company or to influence contractual outcomes that depend on reported accounting numbers. This approach is most commonly used by the management to intentionally modify the earnings so that it can achieve its preset objectives. Debates on the concept of earnings management started in 1980s when it was investigated as a research topic in the studies. The focus of these early studies was to identify the factors that motivate management for this practice. It was found that the motives of earnings management included the management reward contract, management position, meeting market expectations, stabilizing share prices, tax evasion, profit smoothening, meeting certain regulations, meeting contract requirements and avoiding dividend payments, preparing companies for mergers. Healy (1984) conducted a research to investigate the impact of bonus schemes on accounting decisions and found that the administrative personals maneuver the accrued profit to achieve the dividend maximization goal; he also confirmed the accuracy of management reward contracts. For standard setters, in earlier literature, the earnings management provides great deal of insight, while it is complex puzzle to solve. To assess the frequency of earnings management it is very important for standard setters to have complete knowledge about earnings management whether it is ordinary or arise rarely, earnings management focuses on accruals and its effect on decisions of resource allocation. The focal point of earlier research on earnings management was to determine when and how earnings management existed. Many researchers developed the wider measures and models of earnings management from companies where the enthusiasm to administer earnings are projected to be lofty. Researches indicated that earning management does subsist but it happens for the diverse purposes. The main reasons include meeting the expectation of stakeholders, to increase managements compensation. Prevalence of Earnings management in Pakistani listed companies is a question yet to be answered. The companies with the poor economic growth rate of Pakistan are now highlighting the importance of corporate governance practices rather than adopting complex business environment to circumvent the earnings management. By implementation of corporate governance practices, the earnings management practices are supposed to be reduced, but in Pakistan the corporate governance cannot play its role effectively because most of the businesses are family owned thus run by the controlling shareholders. In that case the earning management is significantly high. Dilution of the ownership and induction of debt in capital structure thus can play an important role to prevent management from earnings management practices. Capital Structure can be explained as a companys specific short term debt, long term debt, and preferred equity and last but not the least common equity. Capital structure explains how a company has financed its overall operations and growth by using diverse sources of funds. The management manipulates its capital structure in such a way as to reduce cost of funds and maximize the firms value. This study has important implications for the stakeholders and regulators because the quality accounting information has become very important in current situation, thats why it is very hot issue not only in Pakistan but also in whole the world. In todays business world the size of firms,
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capital structure and earnings management have become important. It is assumed that there is strong and critical relationship between size of firms, capital structure and earnings management. The aim of this research is to quantify the aspects that are used by firms to manipulate their earnings and also the characteristics of such firms in term of their size and capital structure. In emerging economies like that of Pakistan, it is observed that there is deviation in trends of earnings. So to help academicians and investors in predicting earnings management policy, this research elucidates the effect of capital structure on earning management. A comprehensive study of the topic led us to investigate what impact does the size (taken as total assets) of a firm have on earnings management and how the capital structure influence earnings management. Moreover, which of these two factors influences the earnings management most?
LITERATURE REVIEW
Healy and Palepu (1990) examined the effect of accounting-based dividend covenants on earnings management. They documented that companys dividend and accounting restrictions augment the tightness of dividend restrictions. Results showed that reduction in the dividends does have an impact on the companys accounting but to the extent to which decrease in dividend is proportional to the tightness of the dividend restriction. The study concludes that the companys accounting based conventions are effective tools for measuring dividend procedures and to confine the shareholders. Moreover, the results also showed that firms facing possible dividend covenant violations are more likely to reduce dividends than to make accounting changes. DeAngelo et al. (1994) investigated the accounting choice of seventy six firms with consistent losses and dividend diminution listed on New York Stock Exchange (NYSE). The results suggested that managers accounting policies defined the companys financial difficulties instead of having tried to blow up the income and that the firms facing possible dividend covenant violations were more likely to reduce dividends to shareholders than to manipulate accounting earnings.DeFond and Jiambalvo (1994) examined the sample of unusual accruals of 94 firms that accounted debt convention breach in their yearly reports. The methods used to determine the normal accruals were time-series and cross-sectional models. They showed that there had been a proof of abnormal positive working capital accruals after controlling for auditor going concern qualifications and management changes. Moreover it was found out that firms had used excessive discretionary accruals in the year preceding the reported debt convention breaches. Burgstahler and Dichev (1997) took a sample of 300 organizations examine whether the earnings management controlled the losses of the firm. The results indicated that both small and large sized firms manage earnings to circumvent the small negative or small decrease in earnings. Rangan, (1998) found a significant relationship between earnings management and performance of experienced equity offerings. He took a sample of 300 companies and applied cross sectional regression analysis, the results suggested that older and largest firms were maneuvering the current accruals to exaggerate the earnings of the experienced equity offerings .Degeorge, F., J. Patel, and R. Zeckhauser (1999) investigated the impact of behavioral earnings entrances induced on explicit kinds of earnings management considering the company magnitude. He chose a sample of 400 listed firms and used regression analysis to study the impact. The results indicated that large companies manipulated the earnings of the company to avoid the negative earnings.
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Myers and Skinner (2000) examined that managers used the EPS techniques to increase the quarterly long term earning managements, either by flatting the earnings to stabilize the companys earnings or by uplifting the earnings to attain higher earnings. The researchers took the sample of 399 firms with 17 successive increase in quarterly split adjusted EPS and used different characteristics of I/B/E/S analysts earning predications. The results showed that big companies did not account the true picture of their earnings after the review of earning growth. Barton and Simko (2002) studied the balance sheets of 200 firms as an earnings management constraint for managers using statistical tools. Results indicated that big companies faced more influence to get the analysts demands to manage earnings more effectively and efficiently.Nelson et al. (2002) conducted a survey of 253 experienced auditors and asked them to identify how earnings were actually managed from their point of view. The survey showed that sometimes auditors may ignore the earnings management of big clients, in other words by large sized firms.Ching, Firth and Rui (2002) examined that whether unrestricted current accruals forecasted the returns and earnings performance. They took a sample from stock exchange fact book and securities journal from 1993 to 1998 and measured the data by cross-sectional regressions. The results indicated that larger firms were manipulating current accruals to overstate earnings than the small sized firms. Companies do earnings management to attract external financing at lower cost (Richardson, Tuna and Wu 2002). After examining a broad sample taken from (1971-2000) of companies that were enforced to reaffirm earnings, results indicated that the key point of information of accruals are operating and investing accruals that helped to maneuver the earnings to restated. Kim, Liu and Rhee (2003) examined the relationship between corporate earnings management and the firm size. They analyzed the earnings of the small, medium and large companies in relation to their size and the beginning of the market value of each year by taking a sample data of 18 years. They observed that company size had a strong impact on the earning management.Small sized companies were avoiding the addition of earnings management as compared to large companies. On the other hand the medium and large size companies were more involved in earning management as compare to small firms. Bergstresser and Philippon(2006) poved through their study that use of discretionary accruals for the earning management was a distinct tool of the companys CEO because the overall potential compensation was more closely sick to the value of option holdings and stocks. Furthermore, if company had high accruals then CEO exercise abnormal large number of options and some other insider CEOs sold huge quantity of shares. Moreover the research found out that CEO compensation impacted the propensity of firms to manage earnings.Sarker, Sarker and Sen (2006) found correlation between actions of board of directors and earnings management. They concluded that hard working board of directors would be less involved in the earning management while greater number of directors were more indulged in manipulation of earning management activity in India.. Sercu, Bauwhede and Willekens (2006) elucidated the link among capital structure and earnings management by taking a sample of 1302 Belgian non-listed firms and using exploratory models, they found out that earnings management (EM) was positively related to leverage. Moreover main empirical findings by them were that debt was heterogeneous in respect of earnings management i.e. if we were to judge it by the amount of EM it would have triggered, bank debt seemed to be perceived as more alarming than trade credit. Sun and Rath (2009) analyzed the activities of earning management in Australia by taking sample of 4844 firms over period from 2000 to 2006 using Regression model to analyze whether firms were involved in earnings management or not. Results indicated that small companies having lower profits were more indulged in earning management. The study also showed that periphery sector companies
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exhibited a higher tendency for income-increasing earnings management behavior than core sector companies. Zhaoguo and Xiaoxia (2009) examined the relationship between capital structure and earnings management with reference to the Chinese capital market. They measured the impacts of debts, the proportion of controlling shareholders', executives and external large shareholders. Analyzing Chinese companies listed from 2003 to 2007, they established a link between capital structure and earnings management practices by providing evidence that the equity proportion of controlling shareholders had an inverted U shaped relationship with earnings management, and the debt ratio had a strong positive relationship with earnings management.According to Jelinek (2007) there is negative relationship between leverage and opportunistic behavior, when leverage increases opportunistic behavior decreases and earnings management that is related in this function. Primarily it is opportunity behavior that motivates the earnings management. Opportunistic managers involve in manipulation of earnings to cover their opportunistic or non value maximizing behavior (Christie and Zimmerman, 1994: Eastwood, 1997). In setting of take over firms, Christie and Zimmerman (1994) and Eastwood (1997) discovered that managers of take over firms try engage in earnings management to hide their suboptimal behavior. Christie and Zimmerman(1994) found take over firms engaged in increased income accounting method from last 11 years for takeover. The one of the most important challenge faced by researchers as well as academician is that they are unable to fine study the component of earnings management accruals (Beneish, 2001). It can be very difficult to find out and then distinguish between the fraudulent and aggressive but acceptable choice of manipulation exercise that the managers will do in their accounting decisions. (Beneish, 2001) According to Watt and Zimmerman (1986) there are so many factors like constraint of debt covenant, provision compensation plan and political cost that is require to issue equity, insider trading etc that motivate the management involve in earnings management. Most of the studies suggest that management engage in earnings management to setback the onset default (Sweeny, 1994; Defond and Jimbalvo, 1994), but others studies do not find such relationship (Beneish and Press. 1993; DeAngelo, DeAngelo and Skinner, 1994). Some of studies by Healy (1985), Graver et al. (1995) and Holthausen, Laker and Sloan (1995) found evidence that managers engage themselves in earnings management to increase their compensation. Razzaque, Rahman and Salat (2006) investigated earnings management in textile sector of Bangladesh. They found that discretionary accruals are significant in most of the firms. The size of firm has positive relation with earnings management. The first is, size of firm basically relate with internal control system. The larger companies have complex internal control system then smaller one. Efficient internal control system may help the company to disclose inaccurate information to the public. The one of the most important factor that mitigates earnings management and improves the quality of financial report is corporate governance (Warfield, et al., 1995). According to Beasley, et al (2000) most of the deceitful companies in health care, financial service had less internal audit support that were accompanied by weak corporate governance mechanism. The second, the large firms are audited by big 5 Certified Public Accounting firms, these firms have experienced auditor so the chances of earnings management is less. According to Gore, et al. (2001) the non big 5 CPA auditors allow more earnings management then big 5 auditors. In addition, the firms that are audited by big 5 report lower level of discretionary accruals (Becker,
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et al., 1998; Francis, et al., 1999; and Payne and Robb, 2000). Lennox (1999) find that audir reports issued by large auditors are more accurate and informative then the report issue by small auditors. The review of related literature showed some evidence of the causal relationships among firm size, capital structure and earnings management. These relationships led us to hypothesize as firm size (taken as total assets) has an impact on earnings management and the capital structure of the firms has an impact on earnings management.
METHODOLOGY
This study uses the descriptive research methods to identify the impact of size of the firm and the capital structure on earnings management of the companies. The major purpose of the descriptive research is description of the state of affair, as it exists at present. Descriptive research specifies the objective and the techniques for collecting the information from the company and the data collected is processed and analyze using tables and statistical tools. Population and Sample All private firms in Pakistan constitute the population of this study. Convenient sampling technique was used to decide the sample size. Seventy four companies from three sectors namely Sugar, Cement and Chemical Sectors were chosen as sample for analysis. Data collection Data related to our variables is extracted from the State Banks Financial Review report (20062010) of the sampled companies. The dependent variable, (earnings management) was measured by discretionary accruals. Jones Model was used to calculate the discretionary accruals. Jones model based on paper by Jones (1991) is very common model use for measuring earnings management. The model runs multiple regression with total accruals as dependent variable. The model can be implemented on time series as well as on cross section. The residual values from this regression model give the value of discretionary accruals. Total accuralst/ total assetst-1 = 1 (1/total assetst-1) +2 (PPEt/ total assetst-1) + 3 (REVtRECt/ total assetst-1) Value of total assets and gearing ratio were taken for the independent variables, Firm size and capital structure respectively. Gearing ratio = Long Term Debt Shareholders equity
Analysis Tool Data was tested for heteroskedasticity by applying Breusch-Pagan / Cook-Weisberg test for heteroskedasticity in STATA. Null hypothesis under this test was a constant variance. The test results were insignificant with chi square value of 3.40 and Probability of chi2 0.0653, thus presence of heteroskedasticity in the data was supported. A robust regression was run by controlling the heteroskedasticity.
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DATA ANALYSIS
Development of Regression Model Y = + 1X1 + 2X2 + Whereas = Intercept Y = Earnings Management X1 = Capital Structure X2 = Size of Firm = Coefficient of X1 2 = Coefficient of X2 = Error
RESULTS AND DISCUSSION

Table 1 shows the model summary. The F value is 3.85 with probability of 0.0222 this shows the significance of model. R squared value of 0.0134 shows that 13.4% variation in earning management (Dependant Variable) is explained by Firm Size and Capital Structure (Independent Variables). Table 1: Model Summary Linear regression 365 Number of observation 3.85 F( 2, 362) 0.0222 Prob > F 0.0134 R-squared .40995 Root MSE Table 2 shows the results of regression analysis. The estimate of the slope coefficient for capital structure is -0.0026641 with p value less than .05. Hence a significant negative impact of capital structure on earning management. This is consistent with earlier findings. The rationale for negative relation is supported by fact that capital structure is measured through leverage, as leverage increases the creditors interest in companies activities increases, they act as free watchdogs and look after the companies practices related to earning management. Thus our first hypothesis that firms capital structure has an impact on earnings management is supported. However result did not support our second hypothesis that is firm size has an impact on earnings management. The coefficient for firm size is 0.0223748 with p value greater than .05, thus these results are insignificant. Table 2: Coefficient Discretionary Standard Coefficient T p>|t| [95% Conf. Interval] Accrual Error Capital Structure -.0026641 .0010503 -2.54 0.012 -.0047296 -.0005987 ln(T. Assets) Constant .0223748 -.1567622 .0159741 .1221406 1.40 -1.28 0.162 0.200 -.0090389 -.3969565 .0537884 .0834321
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CONCLUSION AND RECOMMENDATIONS

This analysis is only used in Jones model because it is more efficient at modeling the panel data process engendering non discretionary accruals and undergo less from misspecifications caused by gone astray variables of non discretionary accruals (Dechow etal., 1995), Even though other models were used by the different researchers. Our findings suggest the tentative facts of earning management since we have applied the Jones model in measuring the discretionary accruals, gearing ratio to measure the capital structure and to measure the size of firm we take figure of total assets of firms. The negative impact of capital structure on earning management as suggested by our results implicates the use of debt in capital structure as a tool to encounter the problem of earning management. This may also suggest the nomination of a creditors director on the firms board to ensure that practice of earning management is discouraged. Earnings management is term which cover up a large range of valid and illicit actions that affect the earnings of an entity. Here are some recommendations for the firms who do earnings management. Earnings management may involve intentionally recognizing or measuring transactions and other events and circumstances in the wrong accounting period or recording fictitious transactions both of which constitute fraud. Firms should avoid this. There is an opportunity for researcher to conduct the research on this topic in Pakistani environment, furthermore, future researcher can be carried out to examine the relationship among the earning management and various incentives like enhance managerial compensation of increase capital. The results from this study could be worthy of being generalized if a more variables are taken to study this impact because the r squared value suggests the presence of more variables that may have a significant impact on earnings management.
REFERENCE
Barton, J. and Simko. P. 2002. The balance sheet as an earnings management constraint. Accounting Review, 77, pp. 1-27. Beneish, M.D. (2001). Earnings management to avoid earnings decreases and losses. Journal of Accounting and Economics, 17, pp.113-143. Beasley, M.S. et al. (2000). Fraudulent financial reporting: Consideration of industry traits and corporate governance mechanism. Accounting Horizon, 14(4), pp. 441-454. Becker, C.L. et al. (1998). The effect of audit quality on earnings management. Contemporary Accounting Research, 15(spring), pp. 1-24. Burgstahler, D. Dichev, I. (1997). Earnings management to avoid earnings decreases and losses. Journal of Accounting and Economics, 24, pp. 99126. Christie, A.A. and Zimmerman, J.L. (1994). Efficient and opportunistic choices of accounting procedures: Corporate control contents. The Accounting Review, 69(4), pp.539-566. Deangelo, H.E. Linda D. and Douglas, J.S. (1994). Accounting choice in troubled companies. Journal of Accounting and Economic, 17, pp. 113-143.
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Dechow, P.M., Sloan, R.G. and Sweeney, A.P. (1995) Detecting Earnings Management. The Accounting Review, 70(2), pp. 193-225. Defond, M.L. and Jiambalvo, J. (1994) Debt covenant violation and manipulation of accruals. Journal of Accounting and Economics, 17, pp. 145-176. Degeorge, F. Patel, J. and Zeckhauser, R. (1999) Earnings management to exceed thresholds. Journal of Business, 72, pp. 1-33. Eastwood, C. (1997). Takeover and incentive for earings management: An empirical analysis. Journal of Applied Business Research, 14(1), pp. 29-47. Francis, J.R., Maydew, E.L. and Sparks, H.C. (1999). The role of big 6 auditors in the credible reporting of accruals. Journal of Accounting & Economics, 19, pp. 3-28. Graver, J., K. Graver and J. Austin (1995). Additional evidence of bonus plans and income management. Journal of Accounting nad Economics, pp. 3-28. Healy, P.M. (1984) The effect of bonus schemes on accounting decision. Journal of Accounting Research, 7(1-3), pp. 85-107. Healy, P. and Krishna, G.P. (1990) Effectiveness of accounting-based dividends Covenants. Journal of Accounting and Economics, 12, pp. 97-123. Healy, P.M. and Wahlen, J.M. (1999). A review of earnings management literature and its implication for standard setting. Accounting Horizon, December, pp. 365-385. Holthausen, R.W., Larker, D.F. and Sloan, R.G. (1995) Annual bonus scheme and the manipulation of earnings. Journal of Accounting and Economics, 19(1), pp. 29-74. Jelinek, K. (2007) The effect of leverage on earnings management. The journal of Business and Economics Studies, 13(2), pp. 24-108. Ken, M.L. Ching, M.F. and Oliver, M.R. (2002) Earnings Management, Corporate Governance and the Market Performance of Seasoned Equity Offerings. Journal of Contemporary Accounting & Economics, 2(1), pp.73-98. Lennox, C. (1999). Are large auditors more accurate than small auditors? Accounting and Business Research. 29(3), pp.193-228. Nelson, M.W. Elliott, J.A. and Tarpley, R.L. (2002) Evidence from auditors about managers and auditors earnings-management decisions. Accounting Review, 77, pp. 175-202. Payne, J.L. and Robb, S.G. (2000) Ernings earnings management: The effect of Ex Ante expectation. Journal of Accounting, Audit and Finance, 15(Fall), pp. 371-392. Piet, S. et al. (2006) Earnings management and debt. Journal of Accounting and Economics, 16, pp. 3-42. Rangan, S. (1998). Earnings management and the performance of seasoned equity offerings. Journal of Financial Economics, 50, pp. 101-122.
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Razzaque, R.M., RAHMAN, M.Z. and SALAT, A. (2006) Eaarnings management: An analysis on Textile sector of Bangladesh. The Cost and Management, 34(5), pp. 5-13. Richardson, Tuna and Wu (2002), Predicting earnings management: The case of earnings restatements, Journal of Account Research, Vol. 22, PP. 59-82. Sun, L. and Rath, S. (2009) An Empirical Analysis of Earnings Management in Australia. International Journal of Human and Social Sciences, 4(15), pp. 150- 167. Sweeney, A. (1994). Debt covenant violations and managers accounting response. Journal of Accounting and Economics, 17, pp. 281-308. Yangseon, K. Caixing, L. and Ghon, R. (2003) The Relation of Earnings Management to Firm Size, retrieve from http://www2.hawaii.edu/~fima/PDF/Finance_Seminar/EarningsMgmt.pdf Warfield, T.D., Wild, J.J. and Wild, K.L. (1995). Managerial ownership, accounting choices, and informativeness of earnings. Journal of Accounting & Economics, July, pp. 61-92. Zhang Z. and Liu, X. (2009) The Effects of Capital Structure on Earnings Management: Empirical Evidence from China. First International Conference on Information Science and Engineering, pp.4564-4568.
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Challenges and Opportunities of Kenyan artisanal Fish Industry

Eddy E. Owaga Kimathi University College of Technology ,Nyeri, Kenya Hazel Mumbo Great Lakes University of Kisumu , Kisumu, Kenya Fredrick Aila Masinde Muliro University of Science and Technology, Kakamega, Kenya. Odhiambo Odera Corresponding author
ABSTRACT
This paper examines the challenges and opportunities of the artisanal (small scale, non-commercial) fish sector in Kenya which has a potential to significantly contribute to the countrys economy through employment creation, income generation and source of nutrition. However several challenges were identified relating to the artisanal processors including lack of adequate sanitation, chilling, cold storage and distribution facilities hence they opt for traditional fish processing techniques such as sun drying and smoking. However, these challenges often lead to huge economic and quality post harvest losses due to color change, extraneous matter contamination, bacterial breakdown, mould and insect infestation, pilferage by birds and animals. This paper aims at discussing the challenges that the artisanal fish traders encounter and proposes various ways of improving the artisanal fish sector in Kenya. The study adopted exploratory research design to help determine the best research design, data collection method and selection of subjects. The data collected was analysed qualitatively to provide useful information and recommendations for academic purposes. The study recommended improved storage facilities that are able to control and maintain the required environment and at the same time, are technically and economically viable to processors and traders, such as the plastic layered baskets. Keywords: Artisanal fishery, employment, collective efficiency theory, interest group theory
INTRODUCTION
According to Nyeko, (2008) Kenyas fish industry has developed over the years to be a major source of income and an important export commodity which considerably supports the countrys economy with average earnings of Kshs. 4 billion (approximately 0.5% Gross Domestic Product) annually through fish trade. The fisheries sector provides livelihood, income and employment to more than 2 million people and Lake Victoria provides about 95% of the total fish landed in Kenya. The main fish landed in Lake Victoria are Dagaa (Rastrineobola argentea) (62.9 %), Nile
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perch (Lates niloticus L.) (29.9%), Tilapia (Oreochromis niloticus L.) (5.3%), Fulu (Haplochromines) (1%) and others (0.8%) (Odongkara, 2008). The most far-reaching economic change in the Kenyas fish industry has been the commercialization of Nile perch from Lake Victoria (Abila, 1998). However, of urgent public policy concern is the impact of the growing exportation of fish to the international markets on the food security and the local livelihoods of the lake communities. Over the past 20 years, the fisheries sub-sector has gradually evolved from a domestic consumption oriented industry to an export oriented industry with value added processing being applied (EPZ, 2005). Despite food security increasingly becoming an issue of national concern in Kenya, and the fish industry has been identified in the countrys Vision 2030 as one of the sectors that if improved would effectively contribute towards alleviation of food insecurity. However, the local fishing communities are increasingly loosing access to and control of the fishery resources. Production, processing and marketing have become technology dependent leading to marginalization of the artisanal fisherfolk communities (Ogutu, 1996). The export of local fish has also contributed to the reduction in supply of locally available, relatively inexpensive protein source. (Bokea & Ikiara, 2000) established that food security for Kenyans has been increasingly compromised as more fish finds its way to external markets or animal feeds factories. In addition, jobs have been lost as the traditional small-scale processors and marketing agents have been pushed aside to pave the way for national and international capital. The biggest cost, moreover, has been the adverse impact on the ecosystem and threats to the sustainable exploitation of these crucial fisheries.
CONCEPTUAL FRAMEWORK
According to Mitullah (1998), the promotion of individual efforts embedded largely in small scale enterprises have become a key development agenda. The notion of clustering and collective efficiency notions owes its origin to Alfred Marshall's theory of externalities, which was advanced as ways for understanding and fostering efficiency and performance of small scale enterprises through collective action, and focuses not on a firm's internal organisation but on the general development of industry including, the importance of location and the potential for efficiency among small firms. These are reflected in labour pooling, development of specialised local supplies and services, and technology spill overs (Schmitz 1997). Collective efficiency theory states that under certain circumstances, clusters of enterprises give rise to the division of labour and specialization among small producers, the emergence of suppliers, agents, technical and financial service providers, and ultimately a pool of skilled wage workers (Schmitz, 1995). It is further argued that by facilitating the industrialization process, collective efficiency can lead to the creation of jobs and higher incomes for many people in developing countries (McCormick et al 1996). External economies and joint action are the two pieces of the theory of collective efficiency. External economies are important to growth, but are not sufficient to ride out major changes in product or factor market as they require joint action (Schmitz 1995; 1997). What is often not clear, however, is what promotes or prevents joint action. When analysing clusters it is necessary to assess the benefits and costs of joint action. McCormick (1997) hypothesised that the small size of product market, the net effects of disabling external economies, and the high cost of effective joint action have prevented African clusters from developing beyond low level operation.
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Mitullah (1998) concluded that clusters based on petty commodity trade and services except in isolated cases have not exploited the potential of joint action. This can be done by applying interest group theory, derived from pluralist conception of society which is important in processes that involve decisions of who gets what, when, and how. In this process of interest group politics one interest group bears the cost of action and another receives the benefits. There is need to understand what draws individuals and enterprises into cooperating or taking joint action as well as what prevents them from doing so. For one to take joint action there has to be a feeling of inadequacy in one way or the other. To this extent, any entrepreneur who decides to combine forces with other entrepreneurs or firms expects some gain based on shared interest. However, two faces of power characterise politics of interest groups. One is manifested in the decision making process, and the other is evident in the capacity of powerful individuals and groups to prevent issues that threaten their interest from arising (Chilcote, 1981). Mitullah (1998) suggested that most clusters in Africa, either lack relevant institutions and/or have weak ones making it difficult to exploit the benefits of collective efficiency through cooperation. The existing associations are largely informal and address welfare issues. Few of them also engage in advocacy, advice, information and training activities, savings and loans and joint market activities (Haan, 1995). Although these institutions come up 'from within', a distinction can be made between a 'top-down' and "bottom up' approach which is viewed as important for growth since it enables a group of micro and small enterprises to take joint action in facing a particular problem (Haan, 1995). In applying the theory of collective efficiency, the state at local level and sectoral associations can play a pivotal role in fostering and assisting clusters. This is more needed during early stages of industrialisation since most enterprises in Africa are still small, basically for subsistence and revolve around the individual sole proprietors. Therefore the role and vision of the individual entrepreneur may be more important than investing in joint action (Nadvi and Schmitz 1994).
CHALLENGES IN THE ARTISANAL SECTOR

Fishing in Kenya is mostly carried out by artisanal fishermen operating small fishing boats in inland lakes and marine waters. Some fish is sold fresh while a significant proportion is processed for later consumption. The poor infrastructural systems compounded with lack of adequate sanitation, chilling, cold storage and distribution facilities has made it imperative for the subsistence artisanal small holding fishery communities to use indigenous fish preservation methods like smoking, salting and sun-drying as a feasible alternative mainstay for the households . Unfortunately these traditional methods lead to huge economic and quality post harvest losses due to colour change, extraneous matter contamination, bacterial breakdown, mould and insect infestation, pilferage by birds and animals (Mndeme, 1998). For instance, the landings for dagaa in Kenya are high but the value of the catch is very low since the post harvest losses in the dagaa sub-sector are estimated at between 20 - 30% and even up to 50% during the rainy season (Ofulla et al. 2007). Consequently, these small pelagic fisheries have increasingly been underutilized for human consumption but instead they are mostly used for the production of fishmeal in the animal feed industry. In contrast, the industrial fish processors collect the fish from the beaches using refrigerated trucks, buying through intermediary traders and process frozen and chilled products for export. Okedi (1995) suggested that since falling fish supplies has been issue in the Lake Victoria fisheries, this could be addressed by using several methods such as improved technology of catching fish, enforcing regulatory measures such as possibility of complementing existing fish stocks with introduced fish species. Failure to improve fishing methods and enforce regulatory measures will result in overfishing, illegal fishing gears including trawlers gears complemented with trawlers which destroy nursery grounds, the Nile Perch poaching on most small fishes, and water hyacinth weeds spreading and interfering with water
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system, then it will not be possible to isolate the contribution of each of the variables to the diminishing fish catch. (Gheb, 1997). There are concerns that the artisanal fisheries sub-sector operates without an explicit national policy. The government has continued to invest in measures aimed at promoting more exportation of fish and fish products to the international markets as outlined in the revised Fisheries Act. of 1991. Since these efforts are based on the policy of exploitation of resources to maximize foreign exchange earnings, they often favour the large-scale commercial fisheries rather than the artisanal fishermen. The currently launched Economic Stimulus Plan (ESP) is aimed at development of aquaculture mainly focuses on the enhancing fish stocks against the dwindling natural stock but mentions little about post harvest management of the aquaculture fisheries. There is, therefore, a need for a systemic fisheries policy that explicitly addresses the plight of the artisanal fish industry both as a renewable natural resource and source of food. The direction of change towards industrialization in the fisheries sector is an incentive to the need to promote the establishment of cottage industries, which would process fish using improved traditional methods.
MATERIALS AND METHODS

This study was conducted through exploratory research design and this was done by reviewing available literature, interviews and through the use of questionnaires. This design was found appropriate for the study because enabled the researchers to collect data from participants who have had practical experience with the problems being studied. The study relied on self reporting in which quantifiable information was collected from the respondents using questionnaire .The data, after collection, was processed, summarized and verified in accordance with the objectives of the study. Content analysis for qualitative data was the preferred method of analysis on the basis that it subjected the data to summarizing and analysis of messages about underlying perception and opinions.
RESULTS AND DISCUSSION Proposed strategies to improve artisanal fish industry Infrastructure and appropriate fishing gears
Artisanal fish harvesting and handling is often done using traditional or other rudimentary fishing crafts at the prevailing conditions due to limited access to ice cold storage as well as chilling facilities. Furthermore, lack of adequate infrastructure and technical expertise has often translated into significant post harvest losses due to the associated quality defects. Subsequently, the fishermens income has been permanently precarious because of the dependence on middlemen for means of production and marketing. Identification and implementation of sustainable funding mechanisms in terms of savings and credit schemes would be necessary for improving fisheries management during harvesting and handling. It would among other things, facilitate the purchase of appropriate fishing gears such as ice insulated containers, which have the ability to extend the shelf life of the fresh fish(Eyo, 1998).
Public education and community management programs

In recent years, the potential export markets have expressed concerns over the nature of unsatisfactory fish and fish products handling practices in Kenya. This calls for the need to invest in public education and community management programs. The non-governmental and community-based organization represents a unique vehicle for introducing appropriate
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participatory fisheries management practices. Already an attempt has been made towards establishment of Beach Management Units (BMU). On the other hand, fishermen should be encouraged to deliver their fish only at gazetted landing beaches. The stakeholders therefore, need to allocate adequate resources both financial and human towards the improvement of infrastructural facilities such as feeder roads, display shades and cooling facilities to facilitate this.
Improved technologies for handling, processing and storage methods

Following threat of export bans by the European Union markets, urgent attention needs to be given to the establishing of hygienic practices through the supply chain. The other major concern in artisanal fish processing today is on how to extend the shelf life and convert the fish into more marketable form. Longer shelf life allows for market expansion and increases the economic value of the fish as well as nutritional levels in the population. Although, sun-drying is widely used currently, it is greatly hampered by significant post harvest losses (Mndeme, 1998). Therefore, considerable effort should be aimed at assessing the economical and technical feasibility of various improved drying methods such as drying racks and solar dryers through research. Fish smoking is commonly done in pits or raised smoking racks; however, the smoke densities and heating temperature are not easily regulated hence giving rise to substantial nutritional losses and irregular quality of products (Ikeme, 1998). Traditional smoking of fish needs to be improved to reduce the build up of spoilage and pathogenic agents. As such, more emphasis should be put on research and development of appropriate design and modification of the current smoking methods with regard to the fuel consumption, product quality, and reduced processing time. Several channels of distribution characterize the present system of artisanal marketing of fish. However, the packaging relies on perforated woven baskets and sacks, which do not offer appreciable protection against hazardous substances, which may result into shortened shelf life of fish and fish products. Processed fish products are vulnerable to oxidation, insect infestation and bacterial contamination. There is need for improved storage facilities that are able to control and maintain the required environment and at the same time, are technically and economically viable to processors and traders, such as the plastic layered baskets.
CONCLUSION
The domestic market is not well defined or organized and involves buying the fish at the beach by small scale traders and selling to various open-air markets and fish shops. Fish prices have been characterized by numerous upward and downward shifts due to a number of factors. The processing industry has been reported to influence market prices at various landing sites such that fish destined for them attract higher prices than those destined for open markets. The civil society organizations, the government departments concerned and other stakeholders, should organize for seminars, workshops and forums to help create awareness among the fishermen not only on the prices in the market, but also on other pertinent issues affecting the industry such as empowerment of small enterprise groups, progressive environmental practices, capital resources, business skills and knowledge. This would provide useful insight on supply and demand, and other emerging issues affecting the industry hence improve the distribution pattern. The artisanal fisheries communities dominate the fish industry. Therefore, policies and programmes should be developed to restructure and strengthen the traditional fish industry. This would promote a sustainable fisheries management by involving participation of stakeholders including researchers, extension officers, and other relevant officers from government, non-governmental organizations and the community. (Bokea & Ikiara, 2000) proposed that intervention was
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imperative to rectify the increasingly worrisome situation with the Kenyan fisheries of Lake Victoria. Intervention was required at the level of management and management institutions should be transformed to enhance their sensitivity to natural capital which include Lake Ecosystem and physical capital such as fishing vessels and gears (Ikiara, 1999).
REFERENCES
Abila R.O. (1998). Economic analysis of the domestic and export markets of Kenyas Nile perch and its products. In: Proceedings of FAO Expert Consultation on Fish Technology in Africa (Kisumu, Kenya). Report no. 574 FAO (Rome), 1998: 254 - 260. Bokea C. and Ikiara M (2000). The Macroeconomy of the Export Fishing Industry in Lake Victoria (Kenya). http:/ /www. app.iucn.org/dbtw-wpd/edocs/2000. Chilcote, R. (1981). Comparative Politics: The Search for a Paradigm. Westview Press. EPZ (2005). Fishery Industry in Kenya. Export Processing Zones Authority, Nairobi, Kenya. www.epzakenya.com/UserFiles/File/Fishkenya.pdf. Eyo AA (1998) Shelf life of moonfish (Citharinus citharus) and trunkfish (Mormyrus rume) during storage at ambient temperature and on ice: Proceedings of FAO Expert Consultation on Fish technology in Africa (Kisumu, Kenya). Report no. 574 FAO (Rome). Gheb, K. (1997). 'The Regulators and Regulated: Fisheries Management Options and Dynamics in Kenya's Lake Victoria Fishery'. PhD Thesis. University of Sussex, School of African and Asian Studies. Haan, H.C. 1995. 'Informal Sector Associations'. Tool Consult, FIT Working Paper No 1. Amsterdam FIT. Huss H.H. (1988). Fresh fish quality and quality changes. FAO/ DANIDA (Rome).FAO Fisheries Series no. 26. Ikiara. M. (1999) "Sustainability, Livelihoods, Production and Effort Supply in a Declining Fishery: The case of Kenya's Lake Victoria fisheries". Thela Thesis: Amsterdam. Ikeme A.I. (1998). Characterization of traditionally smoke dried fish in Nigeria. In: Proceeding of LVFO. The strategic vision for Lake Victoria fisheries by Lake Victoria Fisheries Organization (1995-2015) http://www.inweh.unu.edu/lvfo/Startegic/20 Vision.htm McCormick, D. Kinyanjui, M. Mitullah, W.V. (1996). 'Small Enterprise Clusters: Fishing and Vehicle Repair in Kenya'. Paper presented at IDS, Sussex, and U.K. McCormick, D. (1997). 'Enterprise Clusters in Africa. Paper prepared for Conference on 'Collective Efficiency'. IDS, Sussex, U.K. Mitullah, W.V. (1998). Lake Victoria's Nile Perch Fish Industry: The Politics of Joint Action Working Paper No. 519 University of Nairobi, Institute for Development Studies.
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Mndeme Y.E.S. (1998). Postharvest fish losses in Tanzania: a case study of Lake Victoria and Mafia Islands fisheries: Proceedings of FAO Expert Consultation on Fish Technology in Africa (Kisumu, Kenya). Report no. 574 FAO (Rome). Nadvi, K. and Schmitz, H. (1994). 'Industrial Clusters in Less Developed Countries: Review of Experiences and Research Agenda'. IDS Sussex, DP 339. Nyeko D. (2008). Challenges in Sharing of Lake Victoria Fisheries Resources: Policies, Institutions and Processes. LVFO Regional Stakeholders Conference. 27th To 29th October 2008, Imperial Royale International Hotel, Kampala. Sponsored by LVFO, European Union and GTZ Odongkara C. (2008). Contribution of Fisheries to National economy. LVFO Regional Stakeholders Conference. 27th To 29th October 2008, Imperial Royale International Hotel, Kampala. Sponsored by LVFO, European Union and GTZ Ofulla A.V.O., Jondiko J.O., Gichuki J., Masai M. D. (2007). Reduction of Post Harvest Losses in Fish for Enhanced Food Security in the Lake Victoria Basin. Baseline Survey Report. Commission for Higher Education (CHE), KMFRI and Maseno University, 68 pages. Ogutu G.E.M. (1996). Rich Fisheries, Poor people: Small Scale fish systems of Lake Victoria, Kenya. Sundowner Press. Schmitz, H. (1995). 'Collective Efficiency: Growth Path for Small-scale Industry', Journal of Development Studies, Vol 23 No 1 April: 529- 566. Schmitz, H. 1(997). 'Collective Efficiency and Increasing Returns'. Working Paper No 50, Brighton:Institute of Development Studies, University of Sussex.
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Modeling Dynamic Financial Market Integration: An Empirical Study on Equity Markets in India and Select South Asian Countries
Dr. Malayendu Saha
Professor, Department of Commerce University of Calcutta 87/1, College Street, Calcutta-700073 West Bengal, India
Dr. Amalendu Bhunia

Reader, Department of Commerce Fakir Chand College, Diamond Harbour South 24-Parganas 743331 West Bengal, India
ABSTRACT
This study examines the relation of the stock markets in India with some leading South Asian countries and also endeavours to impart the impression whether Indian equity market is more proficient than the other south Asian markets as is popularly believed. Globalization, technological advancements and financial market integration have aggravated the challenges to emerging economies to grow at an extraordinary pace for promoting domestic savings, foreign capital inflows and economic growth. To explore these relationships we have used the daily stock indices from August, 2002 to August, 2011 by applying bivariate and multivariate co-integration tests and the Granger causality tests. The result shows both long-run and short-run association among the selected markets. The investors can reap benefit during short-run rather than in the long-run. Keywords: Stock Markets, Stock Prices, South Asian Countries, Multivariate Co-integration, Granger Causality
INTRODUCTION
The developing countries have been transforming themselves into emerging economies by growing at an extraordinary pace while integrating rapidly to their regional and global markets due to globalization, new technological innovation and financial integration (Stiglitz, 2006). The existence of strong economic and trading links, major initiatives in liberalization activities by the governments, advancement in international trade and finance, rapid developments in telecommunication and trading systems and formation of common trading blocs such as NAFTA, European Union and ASEAN have added some more momentum to such integration. Integrated financial market is assumed to be of immense significance as it constitutes an important vehicle for promoting domestic savings, investment and economic growth (Mohan, 2004, 2005) and fostering the necessary condition for a countrys financial sector to emerge as an international
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financial center (Reddy, 2003, 2006). The liberalization of financial markets also resulted in regional economic integration, greater co-movement in the stock prices and foreign investments. The recent global financial crisis has focused more attention on the linkages among the stock markets of Asian countries. India has made tremendous strides in the global economy since opening up of the economy and subsequent economic and political reforms. The outcome being integration of various segments of capital market, strengthening competition, financial deepening with innovative instruments, easing of restrictions of foreign capital flows, lowering transaction costs and enhancing liquidity. This paper aims to examine the relationship of Indian market with the neighboring Asian markets. For this research event study methodology is applied and hence, the daily closing prices of both crude oil and equity indexes of each countrys stock market (which act as a proxy for stock market performance) are considered. Section two briefly glances at the previous studies on stock market integration among the various equity markets in the world, the causes behind increasing stock market integration are discussed in section three. In section four, the data source and the methodology adopted are presented. The empirical results and inferences are discussed in section five and section six concludes the paper.
PREVIOUS STUDIES
Most of the literatures on integration of Asian stock markets have concentrated on the relationships using co-integration and vector regression models (Nath and Verma, 2003; Lamba, 2005; Raj and Dhal, 2008; Auzairy and Ahmed, 2009; Korajazyk, 1995; Chittedi, 2009; Wong, Agarwal and Du, 2005; Abas, 2009; Aktan, Mandaci, Kopurla and Ersener, 2009 and Chattopadhyay and Behera, 2008). Kumar (2002a, 2002b), in his study, confirmed that stock index of Indian stock market was not co-integrated with the developed markets. Mishra (2006) investigated the international integration of Indian stock market and found no long-run relationship between BSE and NASDAQ indices. Kroner and Ng (1998) also found no evidence of relationship among the Asian stock markets. However, correlation analyses signaled integrations among the markets in near future. Nath and Verma (2003) analyzed the level of capital market integration by examining the transmission of market movements among three major stock markets in Asian region, viz., India, Singapore and Taiwan. They suggested that international investors could achieve long term gains by investing in the stock markets because of the independencies of these stock markets. Working in line with above researches, Narayan et al (2004) examined the dynamic linkages between the stock markets of Bangladesh, India, Pakistan and Sri Lanka using Granger causality approach. They observed unidirectional Granger causality running from stock prices in Pakistan to India, Sri Lanka to India and from Pakistan to Sri Lanka in the short run. Bangladesh was the most exogenous of the four markets. Gupta and Agarwal (2011) in their paper observed the correlation of Indian Stock market with five other major Asian economies: Japan, Hong Kong, Indonesia, Malaysia and Korea. A weak correlation concluded that the Indian stock markets had offer diversification benefits to institutional and international investors. According to Raj and Dhal (2003), Indias stock markets were rather scarce despite various stylised facts suggesting, prima facie, the growing linkage of the Indian market with global and major regional markets in Asia during the reform period beginning in the early 1990s. The study applied correlation and the vector error correction and co-integration model (VECM) to gauge such integration of Indias stock market with the United States, the United Kingdom and Japan, and with major regional markets such as Singapore and Hong Kong, the key financial centers in Asia. Ismail and Rahman (2009) investigated the relationship between the US and four Asian emerging stock markets namely Hong Kong, India, South Korea and Malaysia using monthly data between 1996 and 2008. In order to identify the relationships, linear Vector Autoregressive (VAR) model and nonlinear Markov Switching Vector Autoregressive (MS-
40
VAR) model were used. It was found that the two models had managed to explore the possibility of relationship between all the stock markets. Mallick (2006) used the dynamic conditional correlation (DCC) and multivariate GARCH model of Engle (1982) to measure the degree of comovement of BSE and NASDAQ. Empirical findings confirmed that there had been a significant increase in the mean of correlation coefficient between the markets in the crisis periods compared to the pre-crisis period. This proved the existence of contagion between the US and Indian markets and urged to find the channels of the contagion effect. Bose (2005) identified that the Indian stock market did not function in relative isolation from the rest of Asia and the US as stock returns in India were highly correlated with returns in major Asian markets and was led by returns in the US, Japan, as well as other Asian markets during the post-Asian crisis and up to mid-2004. The degree of integration found between the Indian and other markets in the Asian region was, however, not of a very high order, consequently leaving sufficient room for portfolio diversification and not posing any immediate threat for capital outflows in case of regional crisis. The paper by Wong, Agarwal and Du (2005) empirically investigated the long-run equilibrium relationship and short-run dynamic linkage between the Indian stock market and the stock markets in major developed countries (United States, United Kingdom and Japan) after 1990 by examining the Granger causality relationship and the pair-wise, multiple and fractional cointegrations between the Indian stock market and the stock markets from these three developed markets. It was concluded that Indian stock market was integrated with mature markets and was susceptible to the dynamics in these markets in the long run. In a short run, however, both US and Japan, Granger had caused the Indian stock market but not vice versa. In addition, it was also observed that the Indian stock index and the mature stock indices had structured fractionally cointegrated relationship in the long run with a common fractional, non-stationary component and found that the Johansen method was the best to divulge their co-integration relationship. Chen, Lobo and Wong (2006) examined the relation between India-US, US-China and India-China based on Fractionally Integrated VECM to examine co-integration between them. By supplementing the model with a multivariate GARCH model, the study also observed the first and second spillover effects. The result showed that all these pairs are fractionally co-integrated. The US market played a dominant role while there remained an interactive relationship between US and Chinese stock markets. Iqbal, Khalid and Rafiq (2011) attempted to find out dynamic relationship using Johansen (1988) and Juselius and Jones (1990) co-integration procedure for long run relationship and Granger Causality test based on Toda and Yamamoto (1995). No integration was found among US, Pakistan and India. However, the Granger Causality test showed the evidence of unidirectional causality running from NYSE to Bombay and Karachi stock exchange. A significant number of studies on financial market integration related to the developed markets and its spillover effects to the developing economies have been undertaken. Only a few studies have examined the co-movement of Indian stock market with international markets in general and other Asian markets in particular. Based on some studies, it is found that the price behavior of Indian market is statistically indistinguishable from that of the US and UK markets and there is no evidence of systematic cyclical component or periodicity for these markets. Some conclude that the relationship of Indian market with international markets was poor throughout the entire seventies, but turned around significantly since early 1990s with liberalization measures initiated by the government. Given the newfound interest in the Indian stock markets, an intriguing question is how far India has gone down the road towards financial integration with its neighbouring countries. To answer this issue, we would examine the interrelationship between Indian stock markets (both Bombay stock exchange and National stock exchange) and the leading Asian markets. While China, Japan, Hong Kong and Singapore represent well-developed economies, Malaysia and Taiwan stand for developing economies and South Korea and Indonesia belong to less-developed economy.
41
CAUSES BEHIND INCREASING STOCK MARKET INTEGRATION

The theory of portfolio selection developed by Harry Markowitz and James Tobin (1952) states that diversification could eliminate risk if returns are not correlated. According to them, if the correlation between the returns of the equity markets increases, the risk exposure of the portfolio (all else being constant) will start to increase and, at a certain point, international diversification will no longer beneficial. On the basis of portfolio selection theory, the increasing relationship among national stock markets has created more opportunities for global international investment as investors have begun accumulating assets of foreign countries into their portfolio to reduce risk and diversify effectively. Moreover, some of these developing economies have proved themselves in becoming increasingly important players in the global economy, as they have begun to account for a substantial share of world output (Akin and Kose, 2007). While there are divided opinions on the advantages and disadvantages of global financial market integration, most of them, however, have agreed that outcome of globalisation is encouraging, at least to the extent of imposing market discipline on policymakers. In that approach, trade openness and integration of financial markets have showed developed and developing countries the way in becoming more pragmatic in recent years. Integration is assumed to be of imperative significance as it facilitates in (i) serving as an important constituent for promoting domestic savings, investment and economic growth, (ii) enhancing competition and efficiency of intermediaries in their operations (Trichet, 2005) and improving access to modern technology and payment systems to achieve cost effective financial intermediation services for members of the public, institutions and companies alike (Giannetti et al., 2002), (iii) inducing market discipline and nurturing necessary environment to emerge the financial sector of the country as an international or a regional financial centre (Reddy, 2003), and finally, (iv) fostering the composition of countrys financial sector in attracting more foreign capital flows and accumulating international reserves (Kose et al, 2006, 2006a). The scenario of Indian capital market made a paradigm shift since early nineties through opening up of the economy which resulted to increased integration with heightened cross-border flow of capital and helped the country to emerge as one of the most privileged investment destinations to the investors. In line with the global trend, equity markets of Asia, including India, have also been increasingly integrated with the global financial system as a result of calibrated and gradual capital account liberalisation in keeping with the underlying macroeconomic developments, the state of readiness of the domestic financial system and the dynamics of international financial markets. In general, the deregulation and market liberalization measures and the increasing activities of multinational companies have continually accelerated the growth of Indian stock market. The links between Asian stock markets have been of heightened interest in the wake of the October 1987 international market crash and the subsequent sub-prime crisis in US during 2006 which soon after transformed into global financial crisis. The crash has made the global equity market more integrated as the spillover effects were observed in all the markets in the world including Asia.
MATERIALS AND METHODS Data Source

The study is based exclusively on secondary data obtained from various websites of Asian stock markets including yahoo finance and Bloomberg database.
42
Research Design
We have considered daily data (five days in a week) comprising the closing indexes of both SENSEX and NIFTY (India), SSE (China), KOSPI (South Korea), TSEC (Taiwan), HSI (Hong Kong), JSX (Indonesia), NIKKEI (Japan), FTSE (Malaysia) and STI (Singapore). The sample period spans from August 12, 2002 to August 19, 2011. After matching daily closing indexes of all the selected equity exchanges, there are 2252 observations.
Tools Used
To study the long-term relationship among stock indices a common practice in the literature is to employ Johansen's co-integration method and the maximum Eigen value test. We have considered three specifications of the co-integrating equation to observe the long-term relationship. They are (a) the co-integrating equation that assumes no deterministic trend in the data: with intercept only, (b) the co-integrating equation that allows linear deterministic trend in the data: with intercept only and (c) the co-integrating equation that allows linear deterministic trend in the data: with both intercept and trend. The short-term relationship between is explored by using the Granger causality tests or the Error Correction Model (ECM) approach. Furthermore, to observe whether any diversification benefits are offered by the stock markets, the return correlations among the indices are taken into consideration.
Econometric Formula
Assessment of the dynamic relations between Indian stock market indices and the various stock indices of other selected Asian countries may be undertaken through the model suggested either by Engle (1982) or Granger (1986, 1988) or Johansen and Juselius (1990) protocols. While Engle and Grangers (1987) two-step ECM may be used in a multivariate context, the Johansens (1988, 1991) Vector Error Correction Model (VECM) yields more efficient estimators of co-integrating vector as the model is regarded as full information maximum likelihood estimation model, which allows to test co-integration in a whole system of equation in one step without requiring a specific variable to be normalized. This allows researchers to avoid carrying over the errors from the first to the second step, unlike the case of Engle and Granger methodology. It also allows the avoidance of a priori of assumptions of endogenity or exogeniety of variables. Now the VECM is in the form of: zt = 1 zt-1 + ... + k-1 zt-k+1 + zt-k + t (1) Where, denotes first difference, i = - (I-A1--Ai), (I = 1, , k-1), and = - (I-A1- -Ak). The short and long-run adjustments to z is specified by the estimates of i and . = , where is the speed of adjustment to disequilibrium and is the matrix of long-run coefficients that represents up to n-1 co-integration relationship and ensures that zts converge to their long-run steady state. This is to ensure that the variables are stationary and that shocks are only temporary and will dissipate and revert to their long-run mean. The tests for stationarity or unit roots employ the augmented Dickey-Fuller (ADF) and Phillips-Peron (PP) (1988) test performed on the variables in levels and first differences. Co-integration requires to prove that all the variables be integrated of the same order. To test the presence of unit roots, we have used the ADF test which considers the null hypothesis of H0: = 0. This represents, pyt = a0 + yt-1 + i yt-i+1 + t (2) The ADF test assumes the asymptotic normality of the idiosyncratic error term, t, in (2). The choice of lag-lengths may be decided using likelihood ratio test. Determining the appropriate lag length is important as too many lags reduce the power of the test due to estimation of additional parameters and a loss of degrees of freedom. In contrast, too few lags may not capture
43
the dynamics of the actual error correction process, resulting in poor estimate of g and its standard errors. In this paper the multivariate forms of the Akaike information criterion (AIC) and the Schwartz Bayesian criterion (SBC) are employed to determine lag lengths. The model selection criteria are developed considering maximum likelihood estimation techniques, where: AIC = T ln (residual sum of squares) + 2n and SBC = T ln (residual sum of squares) + n ln (T) To minimize the AIC and SBC, we have minimized the natural logarithm of the residual sum of squares adjusted for sample size, n, and the number of parameters included, T. It is observed by testing the null hypothesis that there are at most r co-integration vectors and thus (n-r) unit roots, i.e. H0: i= 0 where i= r+1,.. The test statistics may be represented as, n trace = -T log (1-li ) r=0, 1, 2, , n-2, n-1
(3)
The choice of the number of maximum co-integrating relationships is based on the trace test to examine the specific hypotheses. We have rejected models where has full rank, as in such a situation, zt is stationary and has no unit root and so there is no error correction.
EMPIRICAL RESULTS
To perceive diversification benefits as are offered by the South Asian stock markets including India we have first computed the correlation coefficients of the stock market indices. The following table shows the correlation matrix. Table-1: Correlation Matrix
NIFTY SENSEX SSE KOSPI TSEC HIS JSX NIKKEI FTSE STI NIFTY 1.00 0.78** 0.55** 0.70** 0.54** 0.69** 0.77** -0.13** 0.70** 0.57** SENSEX 1.00 0.97** 0.86** 0.95** 0.95** 0.95** 0.22** 0.95** 0.89** SSE KOSPI TSEC HIS JSX NIKKEI FTSE STI
1.00 0.70** 0.67** 0.82** 0.65** 0.13** 0.71** 0.72**
1.00 0.90** 0.94** 0.94** 0.30** 0.97** 0.91**
1.00 0.90** 0.83** 0.46** 0.91** 0.92**
1.00 0.87** 0.36** 0.93** 0.95**
1.00 0.07** 0.96** 0.81**
1.00 0.22** 0.53**
1.00 0.91**
1.00
** Correlation is significant at 1% level Table 1 identifies that the correlation coefficients between the Indian stock markets and the selected South Asian markets are low and in some cases negative. This means, investment in these selected markets may reap diversification benefits (with low portfolio risks) to the investors. Prior to testing co-integration relationship, unit root tests are performed for each of the selected indices in determining the order of integration among them by applying the Augmented DickeyFuller test (1979,1981) and the Phillips-Perron test, with or without deterministic trend. The DickeyFuller test, fitting the regression model by ordinary least squares (OLS), is represented by:
44
yt = yt1 + (constant, time trend) + ut (4) It is, however, apprehended that serial correlation may lead to some problems. To defend against such, the augmented Dickey-Fuller tests regression includes lags of the first differences of yt. The Phillips-Perron (PP) test, after acknowledging the augmented Dickey-Fuller test, has evolved the following equation: yt = yt1 + (constant, time trend) + ut (5) In (4) ut is I(0) and may be heteroskedastic. The PP tests take into account robust to serial correlation and heteroskedasticity in the errors ut non-parametrically by modifying the DickeyFuller test statistics with Newey-West (1987) heteroskedasticity- and autocorrelation-consistent covariance matrix estimator. Under the null hypothesis that = 0, the PP Zt and Z statistics have the same asymptotic distributions as the ADF t-statistic and normalized bias statistics. One advantage of the PP tests over the ADF tests is that the former consider robust to general forms of heteroskedasticity in the error term ut. The other advantage is that the user does not have to specify a lag length for the test regression. The study has not dealt with it, but the Dickey Fuller test produces two test statistics: a) the normalized bias T ( 1) has a well defined limiting distribution that does not depend on nuisance parameters and b) it can also be used as a test statistic for the null hypothesis H0: = 1. This is the second test from DF and relates to Z in PP test. Both these tests are performed at both the levels and on the first differences of the stock indices. Table 2 shows the results of these tests. The results of the unit root tests indicate that all the series are integrated of order one (i.e., they are I (1). Table-2: Unit Root Test
Series Constant Level Nifty Sensex SSE KOSPI TSEC HIS JSX Nikkei FTSE STI Nifty Sensex SSE KOSPI TSEC HIS JSX Nikkei FTSE STI -1.45 (0) -1.37 (1) -1.09 (0) -0.89 (1) 0.81 (3) -1.62 (2) -1.14 (1) -1.02 (0) -1.61 (0) -1.07 (0) -18.37 (0)* -11.93 (0)* -14.51 (0)* -12.84 (0)* -7.24 (2)* -6.12 (1)* -19.14 (0)* -17.47 (0)* -15.76 (0)* -15.54 (0)* ADF test Constant + Trend -0.97 (0) -1.22 (1) -1.43 (0) -1.73 (1) -1.45 (3) -1.62 (2) -4.03 (0) -3.85 (0) -3.64 (0)** -1.92 (0) Difference -19.04 (0)* -11.29 (1)* -14.53 (0)* -12.86 (0)* -7.45 (3)* -8.62 (0)* -19.83 (0)* -17.85 (0)* -15.64 (0)* -15.29 (0)* Constant -1.51 -1.39 -1.14 -0.94 0.99 -1.84 -1.35 -1.21 -0.83 -2.07 -18.51* -12.39 * -14.52* -13.94* -7.84* -13.47* -18.34* -18.54* -16.14 * -15.34 * P-P test Constant + Trend -1.34 -1.27 -1.88 -1.98 -1.15 -1.47 -3.96 -3.32 -3.72 ** -2.19 -19.34 * -12.27* -15.67 (0)* -13.84 * -8.11 * -13.27 * -17.60 * -18.97 * -17.12 * -15.57 *
Figures in parenthesis are the lag order in the ADF equation that was selected based on the Schwartz Criterion. * Significant at 1% level of significance. **Significant at 1% level of significance.
45
Next we have looked into whether the Indian stock markets are pair-wise co-integrated with each other and also with the South Asian markets. As mentioned earlier, we have exercised Johansen co-integration approach to test the interdependence among these markets. Table 3 identifies the results of the pair-wise co-integration tests and also reveals that both Sensex and Nifty do not have any long-run association with each other and these markets certainly do not share common stochastic trend with the selected Asian markets. For some markets, the long-run relationship is found dubious as the results of the co-integration tests are dependent on the specifications of the co-integrating equation and/or on the method used (trace vs. maximum Eigen value method) and/or on the number of lags included in the co-integration equation. Table-3: Pair-wise Co-integration Test
Nifty Sensex SSE KOSPI TSEC HIS JSX Nikkei FTSE STI Nifty No No No ? No No No No Sensex ? No No ? Yes No ? No No SSE No No No No No No No No No KOSPI No No No No No No No No No TSEC No ? No No No ? ? ? ? HSI ? Yes No No No No No No No JSX No No No No ? No No No No Nikkei No ? No No ? No No ? ? FTSE No No No No ? No No ? ? STI No No No No ? No No ? ? -
* (?) Indicates that the results of the co-integration are not robust. The results depend upon the co-integration equation used and/or on the test method employed and/or on the number of lags included in the co-integration equation The results of the multivariate co-integration tests are found not robust and are also dependent on the choice of the model or on the method employed or on the number of lags included in the cointegrating equation as well as on the sample period considered. Table 4 shows the short-term association among the selected Asian equity markets based on the Granger causality tests. The result reveals presence of short-run associations among them. However, it is observed that none of the South Asian markets has any control over each other, i.e, none of the South Asian markets leads the Indian stock market nor they are being influenced by Indian stock market. Table-4: Short-run association based on Granger causality tests
Nifty Sensex SSE KOSPI TSEC HIS JSX Nikkei FTSE STI Nifty No No No No Yes No No No No Sensex Yes No No No Yes No No No No SSE Yes Yes No No No No No No No KOSPI No Yes No Yes No No No No No TSEC No Yes No No No No No No No HIS Yes No No Yes Yes No No No No JSX No No No No No No No No No Nikkei No No No No No No No No No FTSE No No No No No No No No No STI No No No No No No No No No -
These results are obtained at the 5% level of significance and using 4 lags
46
CONCLUSION The study makes an approach to examine whether there is any inter-linking between the Indian stock markets with the leading stock markets of the South Asian countries. We have employed daily data from 2002 to 2011to explore the long-term association among them. We have applied the Johansen co-integration approach to identify the long-run association and to observe the short-term association the Granger causality tests were taken into consideration. Our findings suggest that: There are ample opportunities for the investors to broaden the horizons of their investments not only in Indian equity markets and also to the selected South Asian markets to reap the benefits of such diversification with risk reduction. Investors can gain from the short-run association that exists among the Asian stock markets. Authorities of South Asian countries may have little worries in respect to the market crash in this region as there remains a modest long-run association among the countries equity markets. International investors can also diversify their portfolio by investing in South Asian countries. In future we will venture to conduct other co-integration tests (other than Johansen tests) to see whether the above results show robustness and employ other approaches, e.g., impulse response, variance decomposition, principal component method etc. to examine both the longterm and short-term associations of the equity markets.
REFERENCES
Abas, M. (2009). Analysis of Stock Market Linkages: Chinese, Indian and Major Markets. Unupublished Dissertation. Akin, C. and Kose, M. A. (2007). Changing Nature of North-South Linkages: Stylised Facts and Explanations. IMF Working Papers. No 07/280. Aktan, B., Mandaci, P. V., Kopurla. B. S. and Ersener. B. (2009). Behaviour of Emerging Stock Markets in the Global Financial Meltdown: Evidence from BRIC-A. African Journal of Business Management. Vol. 3 (9). Auzairy, N. A. and Ahmed. R. (2009). The Impact of Subsequent Stock Market Liberalization on the Integration of Stock Market in ASEAN-4+South Korea, World Academy of Science Engineering and Technology. 58. Bose, S. (2005). Securities Market Regulations: Lessons from US and Indian Experience. The ICRA Bulletin. Money & Finance. Vol. 2. No. 20-21. Chattopadhyay, S. and Behera. S. K. (2008). Financial Integration for Indian Stock Market. Working Paper. 12th Annual Conference on Money and Finance in the Indian Economy. Chen, H., Lobo, J. B. and Wong, W-K. (2006). Links between the Indian, US and Chinese Stock Markets. Working Paper No. 0602. Chittedi, K.R. (2009). Global Stock Markets Development and Integration: with Special Reference to BRIC Countries. Unpublished. Dickey, D. and Fuller, W. (1979). Distribution of the Estimates for Autoregressive Time Series with a Unit Root. Journal of American Statistical Association. 74. Dickey, D. and Fuller, W. (1981). Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root. Econometrica. 49. Engle, R. F. (1982). Autoregressive Conditional Heteroskedasticity with Estimates of the Variance of United Kingdom Inflation. Econometrica. Vol. 50. Engle, R. F. and Granger, C. W. J. (1987). Co-Integration, Error Correction: Representation, Estimation and Testing. Econometrica. Vol. 55(2). Giannetti, M., Guiso, L. J., Padula. T. and Pagano, M. (2002). Financial Market Integration, Corporate Financing and Economic Growth. European Economy. Economic Papers #179.
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Granger, C. W. J. (1986). Developments in the Study of Cointegrated Economic Variables. Oxford Bulletin of Economics and Statistics. Vol 48. Granger, C. W. J. (1988). Some Recent Developments in a Concept of Causality. Journal of Econometrics.Vol 39 (1/2). Gupta, N. and Agarwal,V. (2011). Comparative Study of Distribution of Indian Stock Market with Other Asian Markets. International Journal of Enterprise Computing and Business Systems. Vol. 1 Issue 2. Ismail, M. T. and Rahman, R. A. (2009). Modelling the Relationships between US and Selected Asian Stock Markets, World Applied Sciences Journal. 7 (11). Iqbal, A., Khalid. N. and Rafiq. S. (2011). Dynamic Interrelationship among the Stock Markets of India, Pakistan and United States. International Journal of Human and Social Sciences. 6:1 2011. Johansen, S. (1988). Statistical Analysis of Cointegrating Vectors. Journal of Economic Dynamic and Control. Vol. 12. Johansen, S. (1991). Estimation and Hypothesis Testing of Cointegrating Vectors in Gaussian Vector Autoregressive Models. Econometrica. Vol. 59. Korajczyk, A. R. (1995). Stock Market Integration for Developed and Emerging Markets. The World Bank Policy Research Department. Policy Research World Paper No. 1482 Kose, M. A., Prasad, E., Rogoff, K. and Shang-Jin Wei. (2006). Financial Globalisation: A Reappraisal. IMF Working Papers. No. 06/189. Kose, M. A, Otrok, C. and Prasad, E. S.(2006). Regionalization vs. Globalization: Explaining North-South Business Cycles. IMF Working Paper. Kose, M. A., Otrok, C. and Prasad, E. S. 2006a. How Do Trade and Financial Integration Affect the Relationship Between Growth and Volatility? Journal of International Economics. Vol. 69. Kroner, K. and Ng, V. (1998). Modeling Asymmetric Comovements of Asset Returns. Review of Financial Studies. 11. Kumar, N. (2002a). Towards an Asian Economic Community- Vision of Closer Economic Cooperation in Asia: An Overview. Research and Information System for Non-Aligned and other Developing countries (RIS). Discussion Paper 32. New Delhi. Kumar, N. (2002b). Towards an Asian Economic Community: The Relevance of India. Research and Information System for Non-Aligned and other Developing countries (RIS). Discussion Paper 34. New Delhi. Lamba, A.S. (2005). An Analysis of the Short- and Long-Run Relationships between South Asian and Developed Equity Markets, International Journal of Business, Vol. 10(4). Mallik, G. (2006). Has the Stock Market Integration between the Asian and OECD Countries Improved after the Asian Crisis? Frontiers in Finance and Economics. Vol. 3(2). Markowitz, H. and Tobin, J. (1952) Portfolio Selection. Journal of Finance. 7. Mishra, D. (2006). Financing Indias Rapid Growth and its Implications for the Global Economy. Mimeo, World Bank. Mohan, R. (2004). Financial Sector Reforms in India: Policies and Performance Analysis. RBI Bulletin. October. Mohan, R. (2005). Globalisation, Financial Markets and the Operation of Monetary Policy in India. BIS Papers. No 23. Basel. May. Narayan, P., Smyth, R. and Nandha, M. (2004). Interdependence and Dynamic Linkages between the Emerging Stock Markets of South Asia. Accounting and Finance. Vol. 44(3). Nath, G. C and Verma, S. (2003). Study of Common Stochastic Trend and Co-integration in the Emerging Markets: A Case Study of India, Singapore and Taiwan. Research paper. NSEIndia. Phillips, P. C. B. and Perron, P. (1988). Testing for a Unit Root in Time Series Regression. Biometrika. Vol. 75. No. 2.
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Raj, J. and Dhal, S. (2008). Integration of Indias Stock Market with Global and Major Regional Markets. BIS Papers. No. 42. Reddy, Y. V. (2003). The Global Economy and Financial Markets: Outlook, Risks and Policy Responses. RBI Bulletin. October. Reddy, Y. V. (2006). Reforming Indias Financial Sector: Changing Dimensions and Emerging Issues. RBI Bulletin. June. Stiglitz, J. (2006). Making Globalization Work, W W Norton. Toda, H.Y. and Yamamoto. (1995). Statistical Inference in Vector Autoregressions with Possibly Integrated Processes. Journal of Econometrics, 66. Trichet. J-C. 2005. The Process of European Financial Integration: Where Do We Stand? Speech delivered at WHU Otto Beisheim School of Management. Vallendar. 13 January. Wong, W-K., Agarwal, A. and Du, J. (2005). Financial Integration for Indian Stock Market: A Fractional Cointegration Approach. Working Paper No. 0501. Department of Economics, National University of Singapore.
49
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International Journal of Contemporary Business Studies Vol: 2, No: 12. December, 2011 ISSN 2156-7506 Available online at http://www.akpinsight.webs.

ISSN 2156-7506 VOLUME 2 NUMBER 12 DECEMBER 2011

International Journal of Contemporary Business Studies

IN THIS ISSUE: Determinants of AIS Effectiveness: Assessment thereof in Pakistan

Challenges and Opportunities of Kenyan artisanal Fish Industry

An International Journal Published by

journal of Contemporary Business Studies

One of the largest Research Databases of world

Open Access Policy

International journal of Contemporary Business Studies

Saddal H.A Editor-in-Chief

Enrich Knowledge through Quality Research

Enrich Knowledge through Quality Research

Copyright 2011. Academy of Knowledge Process

VOLUME 2, NUMBER 12 DECEMBER 2011

Determinants of AIS Effectiveness: Assessment thereof in Pakistan..6

Challenges and Opportunities of Kenyan artisanal Fish Industry..32

Enrich Knowledge through Quality Research

Copyright 2011. Academy of Knowledge Process

Determinants of AIS Effectiveness: Assessment thereof in Pakistan

Farasat Ali Shahzad

Manager Participation in AIS Implementation

Manager AIS knowledge

Manager Accounting Knowledge

Statistical Methods and Analyses

Descriptive Statistics for the variables

Multiple Linear Regression

Appendix-1: List of Sample Companies

Appendix-4: Descriptive Analysis Table-1: Cement Sector Companies Descriptive Measures

Habib Hussain Khan

RESULTS AND DISCUSSION

CONCLUSION AND RECOMMENDATIONS

Challenges and Opportunities of Kenyan artisanal Fish Industry

CHALLENGES IN THE ARTISANAL SECTOR

MATERIALS AND METHODS

Public education and community management programs

Improved technologies for handling, processing and storage methods

Dr. Amalendu Bhunia

CAUSES BEHIND INCREASING STOCK MARKET INTEGRATION

MATERIALS AND METHODS Data Source

1.00 0.70** 0.67** 0.82** 0.65** 0.13** 0.71** 0.72**

1.00 0.90** 0.94** 0.94** 0.30** 0.97** 0.91**

1.00 0.90** 0.83** 0.46** 0.91** 0.92**

1.00 0.87** 0.36** 0.93** 0.95**

1.00 0.07** 0.96** 0.81**

1.00 0.22** 0.53**

Enrich the Knowledge through Quality Research

An International Journal Published by

Academy of Knowledge Process

50 Copyright 2011 IJCBS

Copyright 2011. Academy of Knowledge Process

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