Understanding Key Components Of Performance Management

Understanding Key Components Of Performance Management An effective performance management system integrates organisational, business and individual planning and performance. Performance management systems components include: Development of clear job descriptions The selection of right people with an appropriate selection process Provide effective orientation, training and development. Clarify performance objectives and linking these with organisational business plans. Conduct regular performance appraisal of individuals against the achievement of these objectives. On-going coaching and feedback Recognition or compensation that reward people for their performance Provide career development opportunities Actions to deal with poor performing employees. Evaluate the involvement of individual, team and organisational performance. One of the main issues mentioned in the case study was regarding recognition regarding pay and performance. Research on high performing companies has consistently shown that they have at least one common characteristic: their people understand the strategy of the business and believe that if they perform well, they will be recognized and rewarded by the organization. (Wilson Group, 2010) If Colbran Institute is able to develop a appraisal system where recognition is documented and rewards Colbran Institute will be in a better situation when it comes to employee morale and motivation and be able to achieve company goals. Performance Appraisals Performance appraisals are one of the most important components of performance management and are designed to measure and improve employee performance. Edwin B. Flippo wrote in his book titled Personnel Management that performance appraisal is the systematic, periodic and an impartial rating of an employees excellence in the matters pertaining to his present job and his potential for a better job. (Flippo, Edwin B. 1979) The performance appraisal process articulates the standards of work expected of employees and the values and behaviours employees are expected to uphold in meeting their job requirements, communicating and working with others. The information that performance appraisals provide, provides foundations for recruiting and engaging new employees, development and training of existing employees, and maintaining a quality team by adequately and properly rewarding their performance. If a reliable performance appraisal system is not put in place, a human resource management system will fail, resulting in the total waste of the valuable human assets an organisation has. The key objective of appraisal is to provide employees with feedback on their performance provided by the line manager. (Caruth, Donald. 2008). The main objectives of performance appraisals are to: Assess the performance of employees over a period of time Help manage the gap between actual and desired performance Indentify strengths and weaknesses of employees, which in turn will identify training and development needs. Provide feedback on past performance Give clarity of the responsibilities and expectations of the employee in the upcoming appraisal period. Therefore, Performance management leads to higher performance that is more closely directed to the strategic objectives of the organization whereas Performance appraisal and feedback assist employees to understand what work they do well and how they can improve their performance. Issues Identified From reading the case study provided by Colbran Institute there seems to be a number of issues regarding the use of the graphical rating scale performance appraisal system. The graphical rating scale is one of the most popular methods of performance appraisal, it is easy to understand and cost effective to setup and manage. It involves listing subjective traits that the organization considers important for effectiveness on the job for example integrity, reliability, initiative and objective factors such as quality of work. The employee then gets a rating against each trait; these scores are then added up and produce an overall performance score for the employee. As seen with Colbran Institute the graphic rating scale does have a number of disadvantages; issues that have been brought forward include: Rater Errors Generalization of traits No real measurement achieved Issues from pass work history are not reflected. This form of performance appraisal is subject to rating errors mainly due to rater bias which result in incorrect appraisals. Rating errors include central tendency, leniency, severity and the halo effect. In Colbran Institutes situation the rating errors consist of leniency and the halo effect. Leniency is demonstrated when the evaluator rates most employees very highly across performance dimensions rather then spread them throughout the performance scale, in Isabels case she has rated most employees as either good or excellent. Generalisation of traits is another issue that occurs when using the graphical rating system as it might have traits such as creativity which is assessed the same on all employees appraisal. This could become an issue if the employee is working in a position where creativity isnt something that relates to their work. They could be a data entry clerk for example which doesnt involve any creativity; therefore they might get marks down for this because it is unable to be shown; whereas someone that works in marketing would be the completely different. Another issue Colbarn Institute has is the generalities of the documentation produced from the appraisal. Allan suggests to Isabel What is good quality to you might be average to me or someone else and vice versa. This is something that needs to be considered with maybe a review by a second and third level manager. But you will still have the issue so of employees not understanding what is expected from them, for instance an employee is given the rating of 2 on motivation, the question is how is he able to improve this? Another common error in performance appraisal is the halo effect. This occurs when a managers general impression of an employee, after observing one aspect of performance, influences his/her judgment on other aspects of the employees overall performance for the assessment period. This is demonstrated in the case study when Allan asks Isabel about past performance of her employees and she replies with Well in the odd case, a couple of them have let things go a bit. This is not reflected anywhere in the appraisal. Task 2: (500 WORDS) Recommendation An effective performance appraisal system provides guidance so employees understand what is expected of them in their position. It provides flexibility so that employee creativity is encouraged and strengths are utilized. It provides enough control so that employees understand what the organization is trying to achieve. This is why I have put forward Management By Objectives appraisal system as the recommended system that Colbran Institute should take on board. Management by Objectives Management by Objectives was first introduced in 1954 by Peter Drucker in his book The Practice of Management. MBO is an appraisal method where the manager and the subordinate define common objectives and major areas of responsibility, then compare and direct their performance against these objectives. It aims to increase organizational performance by aligning organizational and individual goals throughout the organization. George Odiorne in his thesis describes Management by objectives as a process whereby the superior and subordinate managers of an organization jointly identify its common goals, define each individuals major areas of responsibility in terms of results expected of him and use these measures as guides for operating the unit and assessing the contributions of each of its members.(Odiorne, George S. 1965) In Management by Objectives appraisal system, objectives are written down for each level of the organization, and individuals are given specific aims and targets. The principle behind this is to ensure that people know what the organization is trying to achieve, what their part of the organization must do to meet those aims, and how, as individuals, they are expected to help. This presupposes that organizations programs and methods have been fully considered. If they have not, start by constructing team objectives and ask team members to share in the process. (Heller, Robert 1998) Advantages and Disadvantages MBO overcomes some of the issues that arise from the Graphical Rate Scale as a result of assuming that the employee traits needed for their job success are the same for the whole organization and can be reliably identified and measured. The MBO method concentrates on actual outcomes, instead of assuming traits. An employee has demonstrated an acceptable level of job performance if the employee meets or exceeds the set objectives. Employees are not judged on their potential for success or on their supervisors subjective opinion of their abilities by on real outcomes. The main principle of the MBO appraisal system is that direct results can be observed, where as the traits (which might not even relate to an employees position) and attributes of employees must be guessed. Management by objectives also has its disadvantages like any appraisal method. The main issue with this appraisal technique is the initial development of objectives can be time consuming, which takes employees and managers away from there actual work. When writing objectives for a performance appraisal it must be realize that in this day and age priorities and goals are constantly changing. This is something organizations have to be able to deal with to keep ahead of the game. The Performance Management scheme The new appraisal system will fit into the overall performance management scheme by aiming to increase organizational performance by aligning goals and management objectives throughout the organization. All managers and staff will participate in the strategic planning process, in order to improve the implement ability of the plan and implement a range of performance systems, designed to help the organization stay on track. Colbran Institute employees will get more input into identifying their objectives, milestones and timelines for completion and have a clear understanding of how their roles and responsibilities contribute to the aims of the organization as well as its strategic goals. Management by objectives also includes ongoing tracking and feedback in the process to reach objectives. MBO would be appropriate for Colbran Institute to take on board because it is a knowledge-based organization where the employees are competent in their jobs. It is appropriate in this situation as we wont to build employees management and self-leadership skills and utilize their creativity and knowledge. Conclusion: This report has analyzed the role of performance management at Colbran Institute. It has taken a look at the current performance appraisal method and put forward a new structure which involves Management by objectives. Management of objectives is an efficient and balanced technique that will allow management to receive maximum results form their current employees by focusing on achievable goals.

Celebrity Culture

Another trait which defines America’s culture and identity is the culture of celebrities. With plenty of wealth, fame, and attention, celebrities display to the middle and lower class citizens the ways of life of upper class citizens and nationwide divas. Moreover, they advance these images of themselves by exhibiting their multi-bedroom houses and mansions, multiple vehicles, designer clothing, and their extravagant jewelry. The feeling of being â€Å"on top of the world† only guides celebrities towards a path of demise and wrongdoing. Drugs, sex, and incarcerations have been the result of the celebrity mindset of immortality.Any medium can be viewed as a vehicle for creating a celebrity culture. Celebrity culture, once restricted to royalty and biblical/mythical figures, has pervaded many sectors of society including business, publishing, and even academia. Mass media has increased the exposure and power of celebrity. A trend has developed that celebrity carries with it increasingly more social capital than in earlier times. Celebrity fame was established for an individual or group with recognition of raw talent. Celebrities in the 20th century rightfully deserved every bit of attention received due to their talents that have yet to be seen before.Celebrity figures such as Muhammed Ali and Wilt Chamberlain received celebrity status through athletics, simply due to the fact that they were accomplishing goals in their respected sports that have never been done before. People watched Muhammed Ali fight more swiftly than any fighter before and have a great fighting career. Also, they watched all seven foot one inch, two hundred seventy five pound Wilt Chamberlain being a â€Å"one-man wrecking crew† scoring 100 points in a single basketball game, which still to this day has been accomplished.With technological and medicinal differences in comparison from today and decades past, the actions and luxuries of celebrities were altered. Celebrities in the 20th century were introduced to the widespread of drugs, which led to the downfall of some careers. Most famously, Marilyn Monroe fell prey to the vast influential movement of drugs in America. In the peak of a great career as an actress, model, and playboy centerfold, she'd begun to lose herself to self-doubt, depression, drugs, and alcohol. Marilyn Monroe began taking sleeping pills for her insomnia.She regularly consulted psychiatrists. She drank heavily, and began a habit of arriving late to work, and sometimes not being able to work at all. Celebrities in this era have been noticed publicly wearing expensive jewelry, very appealing makeup, and flashy attire. Among the expensive jewelry were pearl necklaces, diamond rings/ earrings, and top of the line watches. Women displayed sex appeal by wearing bright red lipstick, which Marilyn Monroe most famously wore in the movies she acted in and photo shoots she was in.A trendy attire for celebrities was the fur coats. As outst anding as it appeared, it spoke to the public shouting â€Å"I have a lot of money†. Celebrities wore these outfits to the front row of Boxing matches, sporting events, theater openings, and nightclubs. In today’s world, a celebrity can be introduced through inheritance, skill, a bizarre action, and more. A celebrity today is equivalent to a person with a lot of money or a person who once had a lot of money. The celebrity status of today does not require any skill, talent, or any self-made accomplishments.A child born into a wealthy family is nowadays considered a family once he or she does something to catch the attention of the media. For example, Paris Hilton, great granddaughter of millionaire Conrad Hilton, who established Hilton Hotels, is considered to be a celebrity. Hilton’s fame sprouted from her controversial appearance in a sex tape in 2003. After being noticed in her tape, she received opportunities to be come a American socialite, media personality , model, singer, author, fashion designer and actress. Drug abuse among today’s celebrities is a growing problem.News headlines weekly feature another celebrity incarcerated for possession of drugs or other drug/alcohol related crimes. New generations of teens are deeply affected by this negative media and are taking part in the same actions. Britney Spears and Lindsay Lohan are most notably in headlines about arrests for drug/alcohol related incidents and admission into rehabilitation centers. However it is not all negative news in today’s celebrity culture. There are celebrities in today’s world who use their money and wealth to make a difference in today’s world.Stars such as Brad Pitt and Angelina Jolie use their money to adopt less fortunate kids without families to provide them with a family and better lives. They have several adopted children of different ethnicities to teach their children not to discriminate against people who are different. Anot her star, Wycliffe Jean, a musician, has donated millions of dollars to Haiti after their devastating earthquakes which left about a third of the nation dead or injured. The future for celebrity culture is unpredictable, however based on the increasing reports of drug and alcohol related crimes, the outlook seems negative.Celebrities appear to only be getting more selfish and irresponsible with their wealth and their fame. Also the birth of celebrities is occurring too rapidly and pointlessly. For instance, reality TV is producing celebrities which have no morals for the next generation to look up to. Hopefully, celebrities will start to take notice on how much damage they are abusing on American teens. A decrease in their wrongdoing will positively effect our youth and America’s image as a whole. We will no longer be perceived as the selfish slobs we are portrayed as today, but as a friendly giving country that we strive to be.

Research about plastic recycling Essay

1. Introduction The task for the students was to write about a topic that interested them, and to apply the learned knowledge and skills in connection with the course information literacy. First step was to get an idea of what to write, therefore brainstorming was the adequate method. With the gained information an own mindmap was created. Underneath, we can find both brainstorms, according to those brainstorms the topic has been chosen. Then the research question was formulated: â€Å"What should we do with our plastic rubbish?† Furthemore three subquestions were formulated: â€Å"What is the current situation of plastic pollution?† â€Å"How can we recycle our plastic rubbish?† and â€Å"Which are the best possibilities to recycle plastic?† The purpose of this research is to find out the damage that is caused by plastic rubbish and how to avoid it. Plastic rubbish is a global problem and affects us all. This research will be based on secondary research, so by existing literature. The following chapters describe the findings of this report. Firstly it explains the search plan, made to lead the research. Secondly summaries of two main articles will be given and judged upon their professionalism due to the help of the CARS checklist. A literature review of one of the summarized reports will be given. The report will also contain a chapter about plagiarism and research ethics, which are very important to remember while writing a report. Finally the last chapter â€Å"discussion and conclusion† summarizes the findings of this report. Table 1:Samuel Thà ¶nnes, course Information Literacy. Table 2: Samuel Thà ¶nnes, course Information Literacy. 2. Search plan 1. Search question: What is the current situation in plastic pollution? How can we recycle our plastic rubbish? Which are the best possibilities to recycle plastic? 2. Search terms: plastic rubbish worldwide, problems of plastic rubbish (worldwide), Recycling methods for plastic, most effective recycling methods for plastic, plastic recycling process, innovative plastic recycling methods 3. Information search method: internet search engines (google, bing), internet library HZ 4.Information sources used: scientific articles, reports, websites 3. Summary of the article â€Å"Global declaration on plastic pollution†. Nowadays people are in permanent contact with packages, bottles, toys and a lot more products consisting out of plastic. Most of the products end up as rubbish after the first hour they have been bought. About the question what  is happening to the plastic once it is thrown away, hardly anyone is thinking. The answer is simple, the plastic is coming back to cause even more damage. The way it comes back hardly anyone can imagine. It is coming back through our food chain, to fulfill its task, causing diseases to animals and finally to human kind, which is last in the food chain. For the last 60 years society has been using plastic in a wasteful way, with little concern in which ways this valuable, important and useful product can properly be disposed or recycled. The results are catastrophic, between 60 to 80 % of marine debris are in direct connection with plastic products. In the 5 largest gyres of our oceans enormous quantities of plastic are concentrated, with enormous consequences for the animals that live in the ocean. The consequences are going further to the food chain and human health. (Catto Fellowship Program, 2012, p.2) Plastic is not biodegradable, its decomposing into micro particles. Those tiny pieces are impossible to get out of the water, and the pollution degree is growing on a daily basis. The ocean plastic pollution can be identified as persistent, bioaccumulating and toxic substances. Due to chemical substances, as polychlorinated biphenol, PCBs, the pesticide DDT, several chronic health effects, as endocrine disruption, mutagenicity and carcinogenicity can be observed. (Catto Fellowship Program, 2012, p. 2) After summarizing the main facts of the pollution which can be traced to plastic rubbish, the next step is to find out what possibilities do we have to recycle the plastic. 3.1 CARS checklist on â€Å"Global declaration on plastic pollution†. CREDIBILITY: -Trustworthy source: As the article †Global declaration on plastic pollution† is a submission from the united nations conference on  sustainable development in advance of the Rio earth summit, I would call this source a very reliable one. – Author’s credentials: Detailed information are not given. Only given is that it is the Catto Fellowship Program an initiative from the UN. – Evidence of quality control: This article was published on the online site of the UN, which has to make sure that the quality of the published articles are good. – Known or respected authority/organizational support: The united nations are well known and have respected authority. Organizational support is also given through several experts, which is ubiquitous knowledge, that these kind of organizations have full access to any kind of expertise. Conclusion: The CREDIBILITY of this research is given. ACCURACY: – up-to-date(partially): The research was published in June 2012, nevertheless the used facts have not changed since then. – factual/detailed/exact: This submission contains detailed facts as it was prepared for the â€Å"Rio Earth Summit†. It is worked out in a very detailed way. -comprehensive: As 172 governments participated on the â€Å"Rio Earth Summit†, it was written in a very comprehensive way, which is also accessible to public. -Audience and purpose reflect intentions of completeness and accuracy: This document supports my own research, as it is giving me important facts about the world wide pollution of plastic rubbish. Conclusion: the ACCURACY of this research is given. REASONABLENESS: -Fair/ Balanced/ Objective/Reasoned: This document has been written in a very objective way, reasoned by facts, which have been researched through  experts. Furthermore that makes it fair and balanced. -No conflict of interest: We can find a conflict of interest between the research of the United Nations and large industrial companies, which are depending on the wasteful use of plastic. Despite the fact that this conflict of interest can not be found in the text, but relies on common sense. -Absence of fallacies or slanted tone: Nevertheless no slanted tone against anyone was found in the document, which makes it very objectively. Conclusion: The REASONABLENESS of this research is given. SUPPORT: – Listed sources: At the end we can find several companies which support the ideas of the United Nations. – Contact information: Contact information are provided through the United Nations itself, and can be found on their website. Conclusion: the SUPPORT of this research is given; as we could contact co-workers from the United Nations, to get more information. 3.2 Literature Review on â€Å"Global declaration on plastic pollution†. What is the specific topic of this article? The topic of this article is about the actual situation in plastic pollution world wide. What is the objective of this article? The objective of this article is to provide information about the world wide plastic pollution. In this case it was written for the â€Å"Rio Earth Summit. What are the theoretical assumptions? Assumption 1: Plastic pollution is a global problem. Assumption 2: A huge part of the ocean is affected by plastic pollution. Assumption 3: Plastic pollution is getting worse every day, and has to be stopped. How do the theoretical assumptions fit to your research? The theoretical assumptions do fit my research, because it answers the sub question â€Å"What is the current situation in plastic pollution?† Is there reference to specific concepts of theories/ What are the sources of information the author used? Unfortunately there are no specific information about the author. Only information about the organization, the United Nations, are given. What is the research method? The article has been written through expert opinions, which are working for the United Nations. Which type of material does the article present? As it is written from experts it contains their own field research. How did the author analyze and present the data? The data were presented relying on facts through expertise, so the author based the article on expertise. Does the author describe how the data could be interpreted? A clear description is not contain, the article only gives information about the actual plastic pollution situation and the consequences. What are the main conclusions in the article? As main conclusion it can clearly been identified that the actual situation is catastrophic and is even getting worse. 60 to 80% of marine debris are in direct contact with plastic pollution, the 5 largest gyres of our oceans show an enormous concentration of plastic pollution. This high concentration of plastic pollution results into our food chain being affected and finally being the cause for several diseases for animals and humanity. 4.Summary of the article „5 Stages of the Plastic Recycling Process† Defintion First of all it has to be clarified what plastic recycling means by definition: â€Å"Plastic recycling is the term given to the processing of waste plastic which turns old or scrap plastic in to a useable product which can then re-enter the manufacturing chain. In order for the plastic to be in a suitable format for re use in manufacturing environments such as by injection moulding companies the waste or scrap plastic, needs to go through several recycling processes†. (Daniel Marriott, 5 Stages of Plastic Recycling Process, 2011) Classify Numbers Before explaining the 5 stages of the plastic recycling process, the importance of the 7 numbers given to each plastic product while being produced, has to be explained. -Number 1 is used for â€Å"PETE†, which means Poly(ethylene terephthalate): Soda bottles, water bottles, vinegar bottles, medicine containers, backing for photography film. -Number 2 is used for â€Å"HDPE†, which means high-density Polyethylene: Containers for: laundry/dish detergent, fabric softeners, bleach, milk, shampoo, conditioner, motor oil.  Newer bullet proof vests, various toys. -Number 3 is used for â€Å"V†, which means Poly(vinyl cloride): Pipes, shower curtains, meat wraps, cooking oil bottles, baby bottle nipples, shrink wrap, clear medical tubing, vinyl dashboards and seat covers, coffee containers. -Number 4 is used for â€Å"LDPE†, which means low-density Polyethylene: Wrapping films, grocery bags, sandwich bags. -Number 5 is used for â€Å"PP†, which means Pol ypropylene: Tupperware ®, syrup bottles, yogurt tubs, diapers, outdoor carpet. -Number 6 is used for â€Å"PS†, which means Polystyrene: Coffee cups, disposable cutlery and cups (clear and colored), bakery shells, meat trays, â€Å"cheap† hubcaps, packing peanuts, styrofoam insulation. -Number 7 is used for â€Å"OTHER† Products labeled as â€Å"other† are made of any combination of 1-6 or another, less commonly used plastic and therefor very difficult to recycle. (Eco Reading, 2007) 5 Stages of Plastic recycling Stage one – Sorting the plastic In the first stage the plastic is collected by the recycling company and gets to the recycling plant. At the plant the plastic gets sorted out into specific types of plastic. In total 7 different numbers which are used to specify, which kind of plastic is maintained, can be identified: The problem in plastic recycling is that mixed recycled plastic cannot deliver good quality in manufacturing, therefore it is sometimes difficult or impossible to recycle the plastic to produce new plastic out of it. Recycling companies must therefore pay attention especially to sort out waste plastic. Stage two – Washing Waste Plastic Once the plastic has been sorted out, the washing process begins. Paper labels get removed, as adhesives and other impurities. Any third-party product on the plastic will lower the quality of the recycled plastic. StageThree- Shredding the Plastic In the third step the plastic is getting shredded through huge hoppers that funnel the clean scrap towards rotating metal teeth. The plastic is ripped in to small pellets, which are bagged and tested afterwards. Stage Four – Identify and Classify the Plastic After being bagged the plastic is getting tested chemically and labelled to its exact specification. Either the rGrade plastic can be used for manufacturing by adding a mix of virgin plastic, or it can be further recycled. Stage Five – Extruding In the last step the clean shredded plastic is going to be extruded in to form of pellets, so that it can be either used for manufacturing of for further recycling. (Daniel Marriott, 5 Stages of Plastic Recycling Process 2011) 4.1 CARS checklist on „5 Stages of the Plastic Recycling Process†. CREDIBILITY: -Trustworthy source: PR Log is an online press release distribution and press release submission service. Main objective of this site is to publish news from all over the world in the industry sector. The article â€Å"5 Stages of the Plastic Recycling Process† is supported by the company â€Å"Ck Polymers†, which is a multi-national distributor of rGrade plastic. Therefore we can call this source trustworthy. – Author’s credentials: The author â€Å"Daniel Marriott† is mentioned, it is possible to contact him via email through a hyperlink and via his phone number. 0845 8730037. As a conclusion it can be said, if further questions are necessary, it would be possible to contact the author. – Evidence of quality control: This article was published on the online site  of â€Å"PR Log† and is supported by the company â€Å"Ck Polymers†, which makes sure that the quality of the article is given. – Known or respected authority/organizational support: â€Å"PR Log† is a registered company and all the published content must be controlled. Furthermore it is supported by the company â€Å"Ck Polymers†, which is in the recycling business. Conclusion: The CREDIBILITY of this article is given. ACCURACY: – up-to-date: The article was published in October 2011, we can not call this up-to-date, on the other hand it can not be called old, because the process has probably not changed. – factual/detailed/exact: This article only contains facts , is very detailed and exact about the whole process and the five steps. -comprehensive: The article is very easy to understand and to read , which makes is very comprehensive.the -Audience and purpose reflect intentions of completeness and accuracy: This article supports my own research, as it is giving me important facts about the plastic recycling process. Conclusion: the ACCURACY of this research is given. REASONABLENESS: -Fair/ Balanced/ Objective/Reasoned: This document has been written in a very objective way, reasoned by facts, which have been researched through the company â€Å"Ck Polymers†, which exerts the written process. Furthermore the article is fair and balanced as no one is getting offended. -No conflict of interest: No conflict of interest can be found in the article, as it is only informing about a possible recycling process. No one gets offended. -Absence of fallacies or slanted tone: No slanted tone against anyone was found in the article, which makes it very objectively. Conclusion: The REASONABLENESS of this research is given. SUPPORT: – Listed sources: At the end of the article three hyperlinks can be found, leading to â€Å"Ck Polymers†, where the information is coming from. – Contact information: Either the possibility is given to contact directly the author of the article, or through the hyperlink from the company â€Å"Ck Polymers†. Conclusion: the SUPPORT of this research is given 4.2 Literature Review on „5 Stages of the Plastic Recycling Process†. What is the specific topic of this article? The topic of this article is the five step plastic recycling process. What is the objective of this article? The objective of this article is to provide information about how the five step plastic recycling process works in practice. What are the theoretical assumptions? Assumption 1: Plastic recycling is a great economically opportunity. Assumption 2: The recycling process is simple and effective. How do the theoretical assumptions fit to your research? The theoretical assumptions do fit my research, because it answers the sub question â€Å"How can we recycle plastic?† The article shows me a clear opportunity how to recycle plastic? Is there reference to specific concepts of theories/ What are the sources of information the author used? There is a reference existing, linking to a company using the five step recycling process. The author is basing his information on this source/company. What is the research method? The research method is secondary research, the author made a research by contacting the company to get detailed information. Which type of material does the article present? The article presents detailed knowledge about the recycling process. How did the author analyze and present the data? The data were presented relying on facts through expertise from the company â€Å"Ck Polymers†, so the author based the article on the expertise of the company. Does the author describe how the data could be interpreted? An interpretation is not available, the article only gives information about the five step recycling process. What are the main conclusions in the article? The main conclusion in this article is that we can make the difference between 7 different numbers every plastic material contains for the recycling process. Furthermore we get a detailed explanation about the five  step process, in which the plastic gets sorted, washed, schredded, identified/classified and finally extruded. The end product is called rGrade plastic, which can either be manufactured by adding virgin plastic, or being used for further recycling. 5. Summary of the article â€Å"Startups make plastic rubbish to oil†. This article is about the possibility to transform plastic rubbish into oil. Oil is one of the most used and important products and nowadays called the â€Å"black gold†. Oil relies on 10% of the world wide plastic production, so the main question should be. Why don’t we recycle it back to oil? The possibility for this recycling process is given now. Pioneer companies as â€Å"Agilyx† and â€Å"Vadxx† developed a process, in which plastic can be transformed to oil again. The result is out of 5 kilogram plastic, 3,8 liter oil can be won.. Looking at the yearly production of 265 million tons of plastic, which moves right away to our garbage 1.5 billion barrels of oil, could be recycled. Only in Europe around 70 million tons of plastic rubbish are ending up on landfills. Looking at the actual landfills, which could be seen as giant oil pits. The process is simple. In a first step the plastic gets assorted. In the second step the assorted plastic gets shredded and heated up to 400 degrees. The resulting synthetic gas cools down and is transformed into the end product, oil. According to â€Å"Agilyx† 75% of the oil, which is located in the plastic, can be recycled. Not forgetting the CO2 emission, which is 60 % lower as if we would simply burn the plastic. (Innovation: Startup makes plastic to oil, 2013) Meanwhile this plastic recycling noise is spreading all over the world. In Germany for example the company â€Å"Nill Tech† situated in Mannheim has opened a factory, which is using the same procedure.(Company in Mannheim makes plastic to oil, 2013) 5.1 CARS checklist on â€Å"Startups make plastic rubbish to oil† and â€Å"Company in Mannheim makes plastic to oil†. CREDIBILITY: – Trustworthy source: Both articles are written by the German author â€Å"Benjamin Reuter†, who is working for the magazine â€Å"Wirtschafts Woche Green† , the information are coming from an interview with the named companies, which makes the article trustworthy. – Author’s credentials: Unfortunately, no details about the authors can be found in the report itself, only his name. More information about the author can be found through the Magazine â€Å"Wirtschafts Woche Green†. – Evidence of quality control: This article was published on the online site of the magazine â€Å"Wirtschafts Woche Green†, this magazine is focusing on reporting over innovative technologies and companies. A quality control is guaranteed. – Known or respected authority/organizational support: The magazine â€Å"Wirtschafts Woche Green† is a registered company, which means that the all the online articles are controlled. Conclusion: The CREDIBILITY of these articles are given. ACCURACY: – up-to-date: The articles were posted on January 2013, 11 month ago. – factual/detailed/exact: These articles were made from interviews with the named companies concerning their technology and procedure. -comprehensive: These articles can be called comprehensive as a lot of important information for my report are given. -Audience and purpose reflect intentions of completeness and accuracy: These articles supports my own research, as it gives all detailed information about the possibility , how to recycle plastic. Conclusion: the ACCURACY of this research is good. REASONABLENESS: -Fair/ Balanced/ Objective/Reasoned: These articles are fair, balanced,  objective and reasoned, as direct information from the mentioned companies were given. -No conflict of interest: These articles do not contain any conflict of interest, as it is written to inform public and does not offend anyone. – Absence of fallacies or slanted tone: No slanted tone was found in these articles. Conclusion: The REASONABLENESS of this research is given. SUPPORT: – Listed sources: a list of references is not given. – Contact information: No contact information of the authors, only the magazine can be contacted directly. Conclusion: the SUPPORT of this research is partially given 5.2 Literature Review on â€Å"Startups make plastic rubbish to oil† and â€Å"Company in Mannheim makes plastic to oil†. What is the specific topic of this article? The topic of this article is the process making oil out of recycled plastic. What is the objective of this article? The objective of this article is to provide information about how the process making oil out of recycled plastic works in practice. What are the theoretical assumptions? Assumption 1: Recycling is a great opportunity to gain raw material. Assumption 2: Oil is one of the most important resources nowadays. Assumption 3: The resource oil will even become more important in the future. How do the theoretical assumptions fit to your research? The theoretical assumptions do fit my research, because it answers the sub question â€Å"How can we recycle plastic?† and â€Å"Which are the best possibilities to recycle plastic?† The article shows a clear opportunity how to recycle plastic and make oil out of it again. As Oil is an important resource nowadays it can be seen as the best possibility together with the five step process of recycling plastic. Is there reference to specific concepts of theories/ What are the sources of information the author used? The article contains a link to the companys â€Å"Agylix† and â€Å"Vadxx†, which can be seen as a reference. The recycling process is explained with a video, which can also be seen as a reference. The sources the author used are definitely coming from the above mentioned companies. What is the research method? The research method is secondary research, the author made a research by contacting the company to get detailed information. Which type of material does the article present? The article presents detailed knowledge about the recycling process. How did the author analyze and present the data? The data were presented relying on facts through expertise from the company â€Å"Agylix† and â€Å"Vadxx†, so the author based the article on the expertise of the company. Does the author describe how the data could be interpreted? An interpretation is not available, the article only gives information about the recycling process making oil out of plastic. What are the main conclusions in the article? Main conclusion of the article is that there is possibility to get oil out of recycled plastic. Oil is one of the most wanted resources nowadays. Pioneer companies made it possible to develop a process, where 3,8 liter oil can be produced out of 5 kilogram of plastic. Furthermore the process is being explained, working as follows: The plastic gets assorted and shredded. The shredded plastic is going to be heated up by 400 degrees. Due to this heating up process, results synthetic gas. In a next step the synthetic gas cools down and results into oil, which can be used again. A last point is the CO2 emission, which is 60%, then if the plastic would simply be burned. 6. Plagiarism First of all what is Plagiarism? Definition found on â€Å"Dictionary.com†: Plagiarism is an act or instance of using or closely imitating the language and thoughts of another author without authorization and the representation of that author’s work as one’s own, as by not crediting the original author. In short, plagiarism is all about stealing someone else’s work and lying about it afterwards. During my research on how to recycle plastic rubbish, I tried to prevent plagiarism by summarizing the article into my own words. Furthermore every used source is given in APA style, at the end of the text. In short I used someone else’s knowledge, but summarized it into my own words. 7. Research ethics According to the known information the used sources did not break any common research ethics. The author of this research used information, which were freely obtainable for everyone on the Internet. In order to prevent plagiarism and only use the sources for knowledge and information, no common research ethics was broken. It was not necessary to ask permission to use the mentioned sources. 8. Discussion and Conclusion Then the research question was formulated: â€Å"What should we do with our plastic rubbish?† Furthemore three subquestions were formulated: â€Å"What is the current situation and why is it like that?† â€Å"How can we recycle our plastic rubbish?† and â€Å"Which are the best possibilities to recycle plastic?† The main research question was â€Å"What should we do with our plastic rubbish?† The first sub question â€Å"What is the current situation of plastic pollution?†, was answered as follows: It was found out that the actual situation is catastrophic and is even getting worse. 60 to 80% of marine debris are in direct contact with plastic pollution, the 5 largest gyres of our oceans show an enormous concentration of plastic pollution. This high concentration of plastic pollution results into our food chain being affected and finally being the cause for several diseases for animals and humanity. This fact lead to the next sub question, â€Å"How can we recycle our plastic rubbish?† The answer to this question has been found in the two other summarized articles. It has been found out that there are companies, which are specialized in plastic recycling, following a five step process. In this five step process the plastic gets sorted, washed, schredded, identified/classified and finally extruded. The end product is called rGrade plastic, which can either be manufactured by adding virgin plastic, or used for further recycling. This further recycling leads us to a second effective possibility of plastic recycling. Transforming plastic into oil, which is one of the most wanted resources nowadays. Pioneer companies made it possible to develop a process, where 3,8 liter oil can be produced out of 5 kilogram of plastic. This process works as follows: The plastic gets assorted and shredded. The shredded plastic is going to be heated up by 400 degrees. Due to this heating up process, results synthetic gas. In a next step the synthetic gas cools down and results into oil, which can be used again. An important aspect of this process is also the CO2 emission. It uses 60% less CO2 emission, then if the plastic would simply be burned. The last sub question â€Å"Which are the best possibilities to recycle plastic†, has also been answered. We can say that the â€Å"five step recycling process† is the basic, which should be consequently applied all over the world. The possibility to gain oil out of used plastic again, should be seen as a continuation on the â€Å"five step recycling process†. To answer the main question â€Å"What should we do with our plastic rubbish?† It can be said that the answer is recycling as much as possible. Recycling due to innovative techniques, which can be further developed and ameliorated. The reason humanity has to focus on plastic recycling is not only because of the fact humanity is polluting his earth, which is our source of life. Furthermore the wasteful use of resources will create economical crises, prices of essential products will rise into immeasurable circumstances and make life on earth much harder. All people do need to start thinking long-term and more important in a sustainable way! 9. Reference List 9.1 Summaries, Literature review Catto Fellowship Program (2012). â€Å"Global declaration on plastic pollution† SUBMISSION TO UNITED NATIONS CONFERENCE ON SUSTAINABLE DEVELOPMENT In advance of the rio earth summit. Written on June, 2012, from http://www.uncsd2012.org/content/documents/621Cattos%20Plastic%20Pollution%20 Submission.pdf Benjamin Reuter (2013). Wirtschafts Woche Green, Startup company makes plastic to oil. Written on January, 2013, from http://green.wiwo.de/kreislaufwirtschaft-plastikdeponien-werden-zu-olfeldern/ Benjamin Reuter (2013). WirtschaftsWoche Green, Company in Mannheim makes plastic to oil. Written on January 31, 2013, from http://green.wiwo.de/innovation-fabrik-in-mannheim-macht-plastikmull-zu-ol/ Daniel Marriott (2011). Pr Log, 5 Stages of the Plastic Recycling Process. Written on October 27, 2011, from http://www.prlog.org/11708649-5-stages-of-the-plastic-recycling-process.html 9.2 Other articles Technikatlas.de. Plastic recycling from http://www.technikatlas.de/~tb4/recycling.htm Diana Bocco & Bronwyn Harris (2013). How is plastic recycled? Written on December 20, 2013 from http://www.wisegeek.org/how-is-plastic-recycled.htm Eco Reading (2007). Reading Recycles 1-7 Plastic. Written on June 7, 2007, from http://ecoreading.blogspot.nl/2007/06/reading-recycles-1-7-plastic.html Ck Polymers. Website from recycling company : http://www.ckpolymers.co.uk/ http://www.ckpolymers.co.uk/polymers http://www.ckpolymers.co.uk/polymers/plastic-identification-information 9.3 Pictures Front page picture: https://www.google.nl/search?hl=de&site=imghp&tbm=isch&source=hp&biw=1280&bih= 621&q=Plastikm%C3%BCll&oq=Plastikm%C3%BCll&gs_l=img.3..0l10.2259.6057.0.6372.13.10.1.2.2.0.119.949.7j3.10.0†¦.0†¦1ac.1.27.img..0.13.998.sgL6hhgqFyY#facrc=_&imgdii=_&imgrc=UKWSgudQNm8SGM%3A%3BIHIxbqd3Gq6txM%3Bhttp%253A%252F%252Fwww.wz-newsline.de%252Fpolopoly_fs%252F1.1289863.1365710844!%252FhttpImage%252FonlineImage.jpg_gen%252Fderivatives%252Flandscape_550%252FonlineImage.jpg%3Bhttp%253A%252F%252Fwww.wz-newsline.de%252Fhome%252Fpolitik%252Fvermuellte-meere-kampf-gegen-kostenlose-plastiktueten-1.1289876%3B550%3B328

The internal factors of Islamic banking - Free Essay Example

Sample details Pages: 16 Words: 4829 Downloads: 10 Date added: 2017/06/26 Category Finance Essay Type Analytical essay Did you like this example? Introduction to the Subject Background of the Subject General Objective The purpose of this study is to examine how the internal factors of the Islamic Banking affected their performance before, during and after the financial crisis in the GCC in comparison to the conventional banking in the same area. Research Questions This study aims to answer the following questions: How did the financial crisis affect the profitability of Islamic Banks in comparison to Conventional Banks? What are the internal factors (bank specific characteristics) that influence the profitability of Islamic banking for every year from 2006 à ¢Ã¢â€š ¬Ã¢â‚¬Å" 2009? Did these factors have the same impact on the profitability of Islamic Banking before, during and after the financial crisis? Did these internal factors influence the profitability of Islamic Banking in the same manner as of the Conventional Banking? Don’t waste time! Our writers will create an original "The internal factors of Islamic banking" essay for you Create order Need for the Study Significance of the Study Assumptions of the Study Limitations of the Study Although we cannot neglect the importance of the external factors on the profitability of Islamic Banking, they were not included in this study. To understand the reason behind this decision, we need to go through the different types of external factors and how they are classified: Macroeconomic Factors Country Regulation Rules Bank Regulation Rules These factors were not included for the following reasons: Since we are examining the performance of 92 banks (27 Islamic Banks and 65 Conventional Banks) in 6 countries, the number of countries used in the study is not significant enough to study the impact of GDP and inflation accurately on Bank profitability especially when examining each year separately Country Regulation Rules as per the IMF Database, although it differs slightly for the selected countries, did not change over the period from 2006 to 2009. This means that for each bank, these factors remained constant. Data about Bank Regulation Rules could not be obtained for GCC banks Delimitation of the Study This study was delaminated to the Islamic and Conventional Banks in the GCC whose data could be obtained in the Bankscope database. Chapter 2: Literature Review Overview of Islamic Banking Islamic Baking has established as an alternative to conventional interest-based banking. The first stirring of the Islamic Banking movement began in 1963 by Dr. Ahmed Alnajar in a small town in Egypt, called Mit Ghamar. Dr. Alnajar completed his education in Germany and found that it had many saving banks operating on interest. He took the idea from a savings bank in Germany and created his own small Islamic bank that was interest free. After Dr. Alnajarà ¢Ã¢â€š ¬Ã¢â€ž ¢s small bank proved successful, the establishment of other Islamic banks followed. In 1971, the Nasser Social Bank was founded in Egypt with the objective of lending out money as a charity on the basis of a profit and loss sharing system and helping people in need. And in 1975, the idea of Islamic banking spread to other Islamic regions such Dubai Islamic bank in United Arab Emirates and The Islamic Development (IDB) Bank in Jeddah, Saudi Arabia (Wilson, 1990). Even though Islamic Banking has only been around for thirty years and is still in an evolving stage, Islamic Banking is the fastest growing segment of the credit markets in the Muslim countries. In 2009, Assets held by Islamic Banking banks rose by 28.6 percent to $822bn from $639bn in 2008, according to The Bankerà ¢Ã¢â€š ¬Ã¢â€ž ¢s à ¢Ã¢â€š ¬Ã…“Top 500 Islamic Financial Institutionsà ¢Ã¢â€š ¬? survey while conventional banks posted annual asset growth of just 6.8 percent. Furthermore, GCC states accounted for $353.2bn or 42.9 percent of the global aggregate, while Iran remained the largest single market for Shariah-compliant assets, accounting for 35.6 percent of the total. Source: Asian Banker Research, 2009 Finally, Islamic banking operations are not limited to Islamic countries but are spreading throughout the world. One reason is the growing trend toward transcending national boundaries, and unifying Muslims into a political and economic entity that could have a significant impact on the pattern of world trade (Abdel-Magid, 1981). Islamic Banking Rules and Principles Islamic banking rules are according to the Islamic Shariah derived from the Quran and prophet Mohamedà ¢Ã¢â€š ¬Ã¢â€ž ¢s sayings. The three main practices that are clearly prohibited in the Quran and the prophetà ¢Ã¢â€š ¬Ã¢â€ž ¢s sayings are, Riba (Interest), Gharar (Uncertainty), and Maysir (Betting). Prohibition of Riba or any predetermined or fixed rate in financial institutions is the most important factor in the Islamic principles pertaining to banking. As stated in the Quran à ¢Ã¢â€š ¬Ã…“Allah forbids ribaà ¢Ã¢â€š ¬?. Riba means an increase and under Shariah the term refers to the premium that must be paid by the borrower to the lender along with the principle amount as a condition for the loan (Omar and Abdel, 1996). Gharar occurs when the purchaser does not know what has been bought and the seller does not know what has been sold. In other words, trading should be clear by stating in a contract the existing actual object(s) to be sold, with a price and time to el iminate confusion and uncertainty between the buyers and the sellers. Maisir is considered in Islam as one form of injustice in the appropriation of othersà ¢Ã¢â€š ¬Ã¢â€ž ¢ wealth. The act of gambling, sometimes referred to betting on the occurrence of a future event, is prohibited and no reward accrues for the employment of spending of wealth that an individual may gain through means of gambling. Under this prohibition, any contract entered into, should be free from uncertainty, risk and speculation. Contracting parties should have perfect knowledge of the counter values intended to be exchanged as a result of their transactions. Therefore, and according to Ahmed and Hassan (2007), the principles of Islamic banking and finance enshrined from al-Qurà ¢Ã¢â€š ¬Ã¢â€ž ¢an and Prophet Mohamedà ¢Ã¢â€š ¬Ã‹Å"s Sayings can be summed up as follows: Any predetermined payment over and above the actual amount of principal is prohibited. The lender must share in the profits or loss es arising out of the enterprise for which the money was lent. Making money from money is not acceptable in Islam. Gharar (deception) and Maisir (gambling) are also prohibited. Investments should only support practices or products that are not forbidden or even discouraged by Islam. Islamic Banking Products Islamic Banking products have to be done according to Islamic rules and principles, based on profit and loss sharing as well as avoiding interest. According to BNM statistics 2007, Al Bai Bithaman Ajil financing is the most common in Islamic Banking. There are a lot of Islamic Banking products; however there are some famous Islamic products that will be discussed in this section. Al Bai Bithaman Ajil /BBA This involves the credit sale of goods on a deferred payment basis. In BAA, the Islamic bank will purchase certain assets on a deferred payment basis and then sell the goods back to the customer at an agreed price including some margin or profit. The customer will make payment by installments over an agreed period. A fixed rate BBA is a powerful hedging tool against interest rates (Rosly, 1999). Murabahah Murabahah is a contract of sale. The Islamic Bank acts as a middle man and purchases the goods requested by the customer. The bank will later sell the goods to the cu stomer in a sale and purchase agreement, whereby the lender re-sales to the borrower at a higher price agreed on by both parties. These are more for short term financing Mudharabah According to Kettel (2006), Mudharabah is a basic principle of profit and loss, where instead of lending money at a fixed rate return, the banker forms a partnership with the borrower, thereby sharing in a ventureà ¢Ã¢â€š ¬Ã¢â€ž ¢s profit and loss. Mudharabah is an agreement between the lender and entrepreneur, whereby the lender agrees to finance the project on a profit sharing basis according to a predetermined ratio agreed by both parties concerned. If there are any losses the lender will bear all the losses. Musharakah Musharakah means partnership whereby the Islamic institution provides the capital needed by the customer with the understanding that they both share the profit and loss according to a formula agreed before the business transaction is transacted. In Musharakah all partners a re entitled to participate in the management of the investment but it is not compulsory. Musharakah can help in providing financing for large investments in modern economic activities Al Ijarah Ijarah means meaning to give something on a rental basis. In Ijarah, the bank acquires ownership based on the promise and leases back to the client for a given period. The customer pays the rental but the ownership still remains with the bank or lender. As the ownership remains with the lessor (bank), it continues to give the service for which it was rented. Under this contract, the lessor has the right to re-negotiate the quantum of the lease payment at every agreed interval to ensure rental remains in line with the market rates (Hume, 2004). Wadiah Wadiah is a trust contract and the bank provides gift (hibah) and various types of benefits to the customer. This is exactly like a normal conventional savings account. Istisna Istisna allows one party buys the goods and the oth er party undertakes to manufacture them according to agreed specifications. Normally, Istisna is used to finance construction and manufacturing projects. Salam Salam is defined as the forward purchase of specified goods with full forward payment. This contract is normally used for financing agricultural production. According to Hassan (2004), Salam based future contracts for agricultural commodities, supported by Islamic Banks, can help to overcome the agricultural financial problems Table 2.1 lists the products of conventional banking and their correspondent products in Islamic Banking. Deposit Services Current Deposit Wadiah Wad Dhamana / Qard Hasan Savings Deposit Wadiah Wad Dhamana / Mudaraba General Investment deposit Mudaraba Special Investment deposit Mudaraba Retail / Consumer Banking Housing Property Finance BBA / Ijara wa Iktina /Diminishing Musharaka Hire Purchase Ijara Thumma Al-Bai Share Financing BBA / Mudaraba / Musharaka Working Capital Financing Murabahah/ Bai Al-Einah/ Tawarruq Credit Card Bai Al-Einah/ Tawarruq Charge Card Qard Hasan Corporate Banking/ Trade Finance Project Financing Mudaraba / Musharaka / BBA / Istisna / Ijara Letter of Credit Musharaka/ Wakala/ Murabaha Venture Capital Diminishing Mudaraba/ Musharaka Financing Syndication Musharaka + Murabaha/ Istisna / Ijara Revolving Financing Bai Al-Einah Short-term Cash Advance Bai Al-Einah/ Tawarruq Working Capital Finance Murabaha/ Salam/ Istijrar Letter of Credit Murabaha Letter of Guarantee Kafala + Ujr Leasing Ijara Export/ Import Finance Musharaka/ Salam/ Murabaha Work-in-Progress, Construction Finance Istisna Bill Discounting Bai al-Dayn Underwriting, Advisory Services Ujr Treasury / Money Market Investment Products Sell buy-back agreements Bai al-Einah Islamic Bonds Mudaraba / Mushraka + BBA / Istisna / Ijara Government Investment Issues Qard Hasan/ Salam/ Mudaraba Other Products Services Stock-Broking Services Murabaha/ Wakala/ Joala Funds Transfer (Domestic Foreign) Wakala/ Joala Safe-Keeping Collection (Negotiable Instruments) Wakala/ Joala Factoring Wakala/ Joala/ Bai al-Dayn Administration of Property, Estates and Wills Wakala Hiring of Strong Boxes Amana/ Wakala Demand Draft, Travellerà ¢Ã¢â€š ¬Ã¢â€ž ¢s Cheques Ujr/ Joala ATM Service, Standing Instruction, Telebanking Ujr Source: Obaidullah, 2005 Financial Crisis and the Islamic Banking Previous Literature The study of bank profitability is an important tool to evaluate bank operation by examining the different factors affecting bank profitability and using these factors for management planning and strategic analysis. In the last four decades, many studies have been conducted to study both bank profitability and the determinants of bank profitability either for particular country or for a panel of countries. These studies normally divide these factors into internal factors and external factors. Internal factors represent the bank-specific characteristics such as bank size, liquidity structure; liabilitiesà ¢Ã¢â€š ¬Ã‚ ¦etc while external factors can be macroeconomic factors such as inflation and GDP growth or Country-specific regulations rules and practices. In the area of banking profitability, many studies have been conducted to investigate the profitability of conventional banks while only few were conducted in the field of Islamic banking. In this chapter, we will review these studies for conventional banking first and then will focus on studies in the Islamic banking field. Then we will cover the conceptual framework of this research. Conventional Banking Different studies have been conducted in the field of conventional banking profitability. Short (1979), Bourke (1989), Molyneux and Thornton (1992), Goddard, Molyneux, and Wilson (2004), Peters et al. (2004) are some of the researchers in the field. Short (1979) is one of the early scholars who studied the relationship between banking profit rates and concentration for sixty banks in Canada, Western Europe and Japan during the 1970à ¢Ã¢â€š ¬Ã¢â€ž ¢s and he included independent variables including government ownership and concentration by using H index to quantify concentration. Results showed that the government ownership impact on profitability varied throughout the countries studied but expressed an overall negative relationship. He also found evidence that indicated higher concentration rates lead to higher profit rates (Short, 1979). Bourke (1989) also compared concentration to bank profitability but included other determinants. Bourke (1989) covered ninety banks in Aust ralia, Europe, and North America between 1972 and 198 and examined different internal and external factors: internal factors such as staff expenses, capital ratio, liquidity ratio, and loans to deposit ratio; external factors such as regulation, size of economies of scale, competition, concentration, growth in market, interest rate, government ownership, and market power. His results show that increase in government ownership leads to lower profitability in banking. He also found that concentration, interest rates, and money supply are positively related to profitability along with capital and reserves of total assets as well as cash and bank deposits of total assets. Bourke adds that well capitalized banks enjoy cheaper access to sources of funds as they are less risky than less capitalized banks (Bourke, 1989). Later, Molyneux and Thornton (1992) studied the determinants of European banks profitability. The paper examined eighteen counties in Europe between 1986 and 1989. This paper replicated Bourkeà ¢Ã¢â€š ¬Ã¢â€ž ¢s (1989) work by using internal and external determinants of bank profitability. However, Molyneux and Thornton (1992) results showed that government ownership expresses a positive coefficient with return on capital (profitability) which contradicts with Bourkeà ¢Ã¢â€š ¬Ã¢â€ž ¢s findings. Other results were similar to Bourkeà ¢Ã¢â€š ¬Ã¢â€ž ¢s, showing that concentration, interest rate, and money supply were positively related to bank profitability (Molyneux and Thornton, 1992). In one of the recent papers on bank profitability on European banks, Goddard, Molyneux, and Wilson (2004) shows similar findings to the paper by Molyneux and Thornton (1992). It investigates the determinants of profitability in six European countries and it covered 665 banks between 1992 and 1998. The study used cross-sectional and dynamic panel models. The variables used in the regression analysis were ROE, the logarithmic of total assets, Off Balance Sheet (OBS) dividends, Capital to Asset Ratio (CAR). The results from both models were similar: evidence reveals that there is a positive relationship between size (total assets) and profitability. Meanwhile, OBS appears to have a positive relationship with profitability for UK but neutral or negative for other European countries. Moreover, results also state that CAR has a positive relationship with profitability. Furthermore, the paper touched on ownership type by indicating that there is high competition in banking due to the fact that there is foreign bank involvement in domestic banks, and that profitability is not linked to ownership (Goddard, Molyneux, and Wilson, 2004). Peters et al. (2004) studied the characteristics of banks in post-war Lebanon for the years 1993 to 2000 and compared the results to a group of banks from five other countries in the Middle East including UAE, KSA, Kuwait, Bahrain and Oman for the years 1995 through 1999. They used Return on Equity (ROE) measure prof itability and leverage and they employed regression models that relate bank profitability ratios to various explanatory variables. This study tests the relationships between bank profitability and size, asset portfolio composition, off-balance sheet items, ownership by a foreign bank, and the ratio of employment to assets. The results show a strong association between economic growth and bank profitability, whether measured by ROE or ROA. They found that Lebanese banks are profitable, but not as profitable as a control group of banks from five other countries located in the Middle East. Islamic Banking In the area of Islamic Banking, Bashir (2000) assessed the performance of Islamic banks in eight Middle Eastern countries. He analyzed important bank characteristics that affect the performance of Islamic banks by controlling economic and financial structure measures. The paper studied fourteen Islamic banks from Bahrain, Egypt, Jordan, Kuwait, Qatar, Sudan, Turkey, and United Arab Emirates between 1993 and 1998. To examining profitability, the paper used Non Interest Margin (NIM), Before Tax Profit (BTP), Return on Assets (ROA), and Return on Equity (ROE) as performance indicators. There were also internal and external variables: internal variables were bank size, leverage, loans, short-term funding, overhead, and ownership; external variables included macroeconomic environment, regulation, and financial market. In general, results from the study confirm previous findings and show that Islamic banks profitability is positively related to equity and loans. Consequently, if loans an d equity are high, Islamic banks should be more profitable. If leverage is high and loan to assets is also large, Islamic banks will be more profitable. The results also indicate that favorable macro-economic conditions help profitability (Bashir, 2000). Hassoune (2002) examined Islamic bank profitability in an interest rate cycle. In his paper, compared ROE and ROA Volatility for both Islamic and conventional banks in three GCC region, Kuwait, Saudi Arabia, and Qatar. He states that since Islamic banking is based on profit and loss sharing, managements have to generate sufficient returns for investors given that they are not willing accept no returns (Hassoune, 2002). Bashir and Hassan (2004) studied the determinants of Islamic banking profitability covers 43 Islamic Banks between 1994 and 2001 in 21 countries. Their figures show Islamic banks to have a better capital asset ratio compared to commercial banks which means that Islamic banks are well capitalized. Also, their pap er used internal and external banks characteristics to determine profitability as well as economic measures, financial structure variables, and country variables. They used, Net-non Interest Margin (NIM), which is non interest income to the bank such as, bank fees, service charges and foreign exchange to identify profitability. Other profitability indicators adopted were Before Tax Profit divided by total assets (BTP/TA), Return on Assets (ROA), and Return on Equity (ROE). Results obtained by Bashir and Hassan (2004), were similar to the Bashir (2000) results, which found a positive relationship between capital and profitability but a negative relationship between loans and profitability. Bashir and Hassan also found total assets to have a negative relationship with profitability which amazingly means that smaller banks are more profitable. In addition, during an economic boom, banks profitability seems to improve because there are fewer nonperforming loans. Inflation, on the oth er hand, does not have any effect on Islamic bank profitability. Finally, results also indicate that overhead expenses for Islamic banks have a positive relation with profitability which means if expenses increase, profitability also increases (Bashir and Hassan, 2004). Alkassim (2005) examined the determinants of profitability in the banking sector of the GCC countries and found that asset have a negative impact on profitability of conventional banks but have a positive impact on profitability of Islamic banks. They also observed that positive impact on profitability for conventional but have a negative impact for Islamic banking. Liu and Hung (2006) examined the relationship between service quality and long-term profitability of Taiwanà ¢Ã¢â€š ¬Ã¢â€ž ¢s banks and found a positive link between branch number and long-term profitability and also proved that average salaries are detrimental to banksà ¢Ã¢â€š ¬Ã¢â€ž ¢ profit. Masood, Aktan and Chaudhary (2009) studied the co-int egration and causal relationship between Return on Equity and Return on Assets for 12 banks in KSA for the period between 1999- 2007. For their research, the used time series model of ADF unit-root test, Johansen co-integration test, Granger causality test and graphical comparison model. They found that there are stable long run relationships between the two variables and that it is only a one-direction cause-effect relationship between ROE and ROA. The results show that ROE is a granger cause to ROA but ROA is not a granger cause to ROE that is ROE can affect ROA input but ROA does not affect the ROE in the Saudi Arabian Banking sector. Conceptual Framework Theoretical framework is a basic conceptual structure organized around a theory. It defines the kinds of variables that are going to be used in the analysis. In this research, the theoretical framework consists of seven independent variables that represent four aspects of the Bank Characteristics. Theses aspects are the Bank Size (Total Assets), Capital Structure (Equity and Tangible Equity), Liquidity (Loans and Liquid Assets) and Liabilities (Deposits and Overheads). Bank profitability is the dependent variable and two measures of bank profitability are used in this study, namely return on average equity (ROAE) and return on average assets (ROAA). Financial Crisis Internal Factors (Bank-Specific) Islamic Banking Profitability H1: Bank Size H2, H3: Capital Structure H4, H5: Liquidities H6, H7: Liabilities Return on Average Assets (ROAA) Return on Average Equity (ROAE) In this section we develop the hypothesis to be examined in this research paper. Development of Hypotheses This paper attempts to test seven hypotheses. A hypothesis is a claim or assumption about the value of a population parameter. It consists either of a suggested explanation for a phenomenon or of a reasoned proposal suggesting a possible correlation between multiple phenomena. According to Becker (1995), hypothesis testing is the process of judging which of two contradictory statements is correct. Hypothesis 1: Profitability has a positive and significant relationship with the total assets (ASSETS). Total Assets of a company represents its valuables including both tangible assets such as equipments and properties along with its intangible assets such as goodwill and patent. For banks, total assets include loans which are the basis for bank operations either through interest or interest-free practices. Total assets is used as a tool to measure the bank size; banks with higher total assets indicate bigger banks. Molyneux and el (2004) included total assets in their study and fo und a positive significant relationship between total assets and profitability. Therefore, total assets are expected to have positive relation with profitability which means that bigger banks are expected to be more profitable. Total assets are converted logarithmic to be more consistent with the other ratios Hypothesis 2: Profitability has a positive and significant relationship with equity to asset ratio (EQUITY). Total equity over total assets measures bankà ¢Ã¢â€š ¬Ã¢â€ž ¢s capital structure and adequate. It indicated bank ability to withstand losses and handle risk exposure with shareholders. Hassan and Bashir (2004) examined the relationship between EQUITY and bank profitability and found positive relationship. Therefore, EQUITY is included in this study and it is expected to have a positive relation with performance because well capitalized banks are less risky and more profitable (Bourke, 1989) Hypothesis 3: Profitability has a positive and significant relationship with Tangible Equity to total liabilities ratio (TNGEQTY). Tangible Equity represents the subset of shareholderà ¢Ã¢â€š ¬Ã¢â€ž ¢s equity that is not common shares and not intangible asset. Tangible Equity became very popular after the financial crisis as a measure of bank viability since it indicates of how much ownership equity owners of common stock would receive in the event of a companyà ¢Ã¢â€š ¬Ã¢â€ž ¢s liquidation. Beltratti and Stulz (2009) examined tangible equity to liabilities in their study to examine why some banks perform better during the financial crisis and found positive and insignificant relationship between TNEQTY and bank profitability. Therefore, TNEQTY is included in this study and it is expected to have positive relationship since banks with better capital structure in since of more equity à ¢Ã¢â€š ¬Ã¢â‚¬Å" seems to perform better. Hypothesis 4: Profitability has a positive and significant relationship with the loans to assets ratio (LOANS). Tota l loans over total assets a liquidity ratio used that indicates how much of bank assets are tied to loans. For banks, the higher LOANS ratio means less liquidity. Demirguc-Kunt and Huizinga, (1997) found positive relationship between LOANS and bank profitability. LOANS is included in this study and anticipated to have positive relationship with profitability. Furthermore, conventional banks rely on interest-based loans while Islamic banks rely on profit and loss sharing interest-free lending. Therefore, this ratio is also used to compare the performance of interest-based loans and interest-free lending. Hypothesis 5: Profitability has a positive and significant relationship with the liquid assets to total assets ratio (LIQUID). Liquid assets include currency, deposit accounts, and negotiable instruments that can be converted easily into cash. Liquid assets to total assets ratio is a liquidity ratio that measure how easily the banksà ¢Ã¢â€š ¬Ã¢â€ž ¢ assets can be converted int o cash. Beltratti and Stulz (2009) found that LIQUID has positive and significant relation with profitability as banks with more liquid assets tend to perform better. Therefore, LIQUID is included in this study and expected to have positive relationship with profitability. Hypothesis 6: Profitability has a reverse and significant relationship with the deposits to assets ratio (DEPOSITS). Deposits to total ratio is another liquidity indicator but is considered a liability since they measure the impact of liabilities on profitability. Bashir and Hassan (2004) examined deposits in their study and found a negative relationship with profitability. Therefore, we expect that DEPOSITS to have negative relationship with profitability. Hypothesis 7: Profitability has a positive and significant relationship with the overhead to assets ratio (OVERHEAD). Overhead costs represent all bank expenses excluding interest expenses as they are considered as operations expenses. Overhead over total assets is a liability ratio that measures the operation efficiency of the bank. Alkassim (2005) included OVERHEAD in his research and found positive relationship to profitability. Therefore, OVERHEAD is included in this study and expected to have positive relationship to profitability. Chapter 3: Methods Data Sample From 2006 to 2008 2009 Country Islamic Banks Conventional Banks Islamic Banks Conventional Banks Bahrain 12 14 5 5 Saudi Arabia 2 9 1 7 Qatar 3 5 2 4 Kuwait 4 14 1 3 Oman 0 6 0 3 UAE 6 17 0 7 Total 27 65 9 29 The data used in this analysis were extracted from Bankscope data for all Islamic and Conventional Banks in the GCC for the period from 2006 to 2009. Using Bankscope has many advantages: it has information for over 30,000 banks, plus the accounting information is presented in a standardized format. Therefore, the accounting information of Islamic Banking is adjusted to be comparable with accounting information of conventional banks. The data used for this study are from a pooled time-series cross-sectional data. The data are taken from various countries. Sample period for this study is from 2002 to 2007. Cross-sectional data provide information on variables for a given period of time. While time series data give information about variables over a number of periods of time. The data for internal variables are obtained from BankScope database which is compiled by International Bank Credit Analysis Limited (IBCA). Using BankScope has two advantages. Firstly, it has informatio n for 11,000 banks, accounting for about 90% of total assets in each country. Secondly, the accounting information at the bank level is presented in standardized formats, after adjustments for differences in accounting and reporting standards. The data for external variables are obtained from World Economic Outlook 2008 database, published by International Monetary Fund (IMF). A total of 60 Islamic banks from 18 countries were chosen in this study. The selected banks are those which are classified as Islamic bank in BankScope database. The Islamic banks have available data for at least one year between 2002 and 2007. This yielded an unbalanced panel data consisting of 260 observations. However, after eliminating cases with missing data, only 155 observations of balanced panel data are left. Variable Definition Independent Variable: Profitability Measures There are many ratios that have been used by researchers to measure bank profitability but the two most often used ratios are the return on assets (ROA) and the return on equity (ROE) (Iqbal et al., 2005). Return on Assets (ROA) Return of Assets ROA of a bank is the net after-tax income divided by its total assets (Rose, 2002). The return on assets (ROA) is the most important single ratio in comparing the efficiency and operating performance of banks since it indicates the return generated from the assets financed by the bank. Average assets are being used in this study, in order to capture any differences that occurred in assets during the fiscal year. Return on Equity (ROE) ROE is the ratio of a bankà ¢Ã¢â€š ¬Ã¢â€ž ¢s net after-tax income divided by its total equity capital (Rose, 2002). The return on equity (ROE) indicates how effectively the management of the enterprise (bank) is able to turn shareholdersà ¢Ã¢â€š ¬Ã… ¸ funds (i.e. equity) into net profit. It is the rate of return flowing to the bankà ¢Ã¢â€š ¬Ã… ¸s shareholders (Samad, 1999). The higher ROA and ROE reflect higher managerial efficiency of the bank and vice versa. Independent Variables: Internal Factors The table below summarizes the variables used in this study: Dependent Variables ROA Return on Assets Net Income / Total Assets ROE Return on Equity Net Income / Equity Independent Variables Bank Size ASSETS Total Assets Log (Total Assets) Positive (+) Capital EQUITY Equity Equity / Total Assets Positive (+) TNGEQTY Tangible Equity Tangible Equity / Total Liabilities Positive (+) Liquidity LOANS Loans Loans / Total Assets Positive (+) LIQUID Liquid Assets Liquid Assets / Total Assets Positive (+) Liabilities DEPOSITS Deposits Deposits / Total Assets Negative (-) OVERHEAD Overhead Costs Overhead Costs / Total Assets Positive (+) Methodology In line will the previous literature, Multiple Regression Equation will be used to examine the determinants of profitability in the Islamic Banking and compare the results with those of the conventional banking: Model 1 ROA ROA = ÃŽÂ ±1 + ÃŽÂ ²1 ASSET + ÃŽÂ ²2 EQUITY + ÃŽÂ ²3 TNGEQTY + ÃŽÂ ²4 LOANS + ÃŽÂ ²5 LIQUID +ÃŽÂ ²6 DEPOSITS + ÃŽÂ ²7 OVERHEAD + ÃŽÂ µ Model 2 ROE ROE = ÃŽÂ ±2 + ÃŽÂ ²1 ASSET + ÃŽÂ ²2 EQUITY + ÃŽÂ ²3 TNGEQTY + ÃŽÂ ²4 LOANS + ÃŽÂ ²5 LIQUID +ÃŽÂ ²6 DEPOSITS + ÃŽÂ ²7 OVERHEAD + ÃŽÂ µ Where: Independent Variables: ROA: Return on Assets ROE Return on Equity Dependent Variables: ASSETS: log (Total Assets) EQUITY: Equity / Total Assets TNGEQTY: Tangible Equity / Total Liabilities LOANS: Loans / Total Assets LIQUID: Liquid Assets / Total Assets DEPOSITS: Deposits / Total Assets OVERHEAD: Overhead Costs / Total Assets