Schizas & jarvis icsb presentation 18 jun stockholm

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  • 1. Trust and confidence inSMEs’ use of advisers. Prof. Robin Jarvis (Brunel University; ACCA) Emmanouil Schizas (ACCA) The global body for professional accountants
  • 2. THE AGENDA IN BRIEF• Accountants are the most likely advisers of SMEs in many countries• Traditional compliance work reduced• The future: business advisers (cross) selling value-added services The global body for professional accountants
  • 3. Blackburn, Carey & Tanewski (2010) Adviser provides minimal advice Adviser Client acts as requests broker to ad-hoc Adviser expert services Adviser wins trust partners builds new and service privileged Adviser Social line access buys or rapport develops establishe in house d Adviser expertise displays technical Advice skill sought for Jarvis & Rigby (2011) growth threat or regulation The global body for professional accountants
  • 4. BUT WE ALSO KNOW THAT...• Few practitioners can market advice• Accountants and clients disagree re: importance of rapport v. competence• Many SMEs don’t take advice at all• Few SMEs are willing to pay for advice• Studies are mostly qualitative, small n The global body for professional accountants
  • 5. QUANTITATIVE VALIDATION IS HARD• The subject is the client only• Easiest to measure use, not trust etc• How would we know if we’re measuring trust?• Previous studies were qualitative for a reason! The global body for professional accountants
  • 6. OTHER REQUIREMENTS• Trust and competence must be separate• Variations in perceived expertise of adviser types by subject• Compartmentalised trust• Trust and competence must interact The global body for professional accountants
  • 7. Distinguishing between Trust, Confidence and Familiarity (Luhmann 2000)Dimension Trust Confidence FamiliarityFocus of disappointment Fiduciary duty Effectiveness Natural / moral(Barber 1983) orderDimension of trust (1) Individual trust Business trust N/A(Mouzas et al, 2007)Dimension of trust (2) Affective trust Calculative trust N/A(Tyler & Stanley, 2007)Nature of contingency Risk Danger DangerAssumed characteristic Benevolence / affinity Competence ContinuityAttribution of outcomes Internal External NonpersonalPerception of alternatives High Low None The global body for professional accountants
  • 8. THE FORBES INSIGHTS DATASET• 1,777 businesses with • Commissioned by < 250 employees ACCA, CGA-Canada• 6 countries: Canada, and CNDCEC (Italy) China, Italy, • Collected Nov 2010 Singapore, S. Africa, • Sourced from the UK Forbes readership• 28% micros, 41% • VC bias, esp. in non- small, 31% medium English-speaking countries The global body for professional accountants
  • 9. • Friends and family• Trade & Prof. Assoc• Local bus. Assoc, • Taxation Chambers of • Financing Commerce • Financial• Professional Management colleagues and • Legal and network regulatory• Accountants • Marketing• Attorneys • Operations• Banks etc • Technology• Online resources• Others The global body for professional accountants
  • 10. Proxies for the need for confidence and trust • Factor Analysis • Promax rotation (oblique) • Input: all 7x11 adviser use dummies • Output: 6 factors explaining much of KMO and Bartletts Test Kaiser-Meyer-Olkin Measure of Sampling Adequacy. .664 the variation in use Bartletts Test of Approx. Chi-Square 17324.081 of advice by SMEs Sphericity Df 2926 Sig. .000 The global body for professional accountants
  • 11. Table 7: A summary of factor loadings (see Table A.1 for details) Component 1 2 3 4 5 6 Community Family and BusinessInterpretation crossover Use of Experts Internet Use friends ‘Reading up’ associationsVariables with Friends and Accountants - Internet - tax Friends and Government - Businesshigh loadings family - Tax Tax family - Tax association - Tax Marketing Trade, prof assoc - Bank - Financing Internet - Friends and Government - Business Financing financing family - Regulatory association - Operations Financing Business assoc. - Accountants - Internet - Friends and Internet - Business Financial Financial Financial family - Marketing association - Management management management Technology Marketing Prof. Network - Attorney - Legal Internet - Books and Business Regulatory and Regulatory Regulatory magazines - association - Marketing Operations Accountant - Internet - Internet - Books and Business Marketing Technology Marketing magazines - assocation - Operations Technology Attorney - Operations Bank - Technology The global body for professional accountants
  • 12. TESTING THE ‘TRUST’ FACTOR• Two tests against Luhmann (2000)• Greater ‘need for trust’ should create more internal attributions for failure• Greater ‘need for trust’ should lead to a wider use of ‘alternative’ advisers The global body for professional accountants
  • 13. Distinguishing between Trust, Confidence and FamiliarityDimension Trust Confidence FamiliarityFocus of disappointment Fiduciary duty Effectiveness Natural / moral(Barber 1983) orderDimension of trust (1) Individual trust Business trust N/A(Mouzas et al, 2007)Dimension of trust (2) Affective trust Calculative trust N/A(Tyler & Stanley, 2007)Nature of contingency Risk Danger DangerAssumed characteristic Benevolence / affinity Competence ContinuityAttribution of outcomes Internal External NonpersonalPerception of alternatives High Low None The global body for professional accountants
  • 14. RESULTS• ‘Community crossover’ behaves like ‘trust seeking’ in determining attributions for failure to receive funding• ‘Community crossover’ behaves like ‘trust-seeking’ in determining alternatives to expert advice The global body for professional accountants
  • 15. 95% Confidence Interval Std. Lower Estimate Error Wald df Sig. Bound Upper BoundGot all of the finance applied for 1.232 .299 16.990 1 .000 .646 1.819Got most of the finance applied for .849 .275 9.551 1 .002 .311 1.388Got some of the finance applied for .514 .274 3.518 1 .061 -.023 1.052Got none of the finance applied for 0a . . 0 . . .Community cross-over .233 .241 .935 1 .334 -.239 .705Expert -.011 .279 .002 1 .968 -.557 .535Internet -.066 .071 .846 1 .358 -.206 .074Friends and Family .018 .082 .051 1 .822 -.142 .179Reading up -.058 .075 .590 1 .442 -.206 .090Business Association -.196 .073 7.243 1 .007 -.339 -.053Got all finance * Community -.896 .302 8.816 1 .003 -1.488 -.305Got most finance * Community -.597 .273 4.793 1 .029 -1.132 -.063Got some finance * Community -.596 .280 4.520 1 .033 -1.146 -.047Got no finance * Community 0a . . 0 . . .Got all finance * Expert .153 .316 .233 1 .630 -.467 .773Got most finance * Expert .146 .303 .232 1 .630 -.447 .739Got some finance * Expert .150 .303 .246 1 .620 -.443 .743Got no finance * Expert 0a . . 0 . . .Note: The regression analysis also controlled for employment, turnover, legal status, type of customer (B2B v. B2C),Turnover growth (past and expected) and country. Note also that the dependent variable was coded as (1 = totalagreement … 5 = total disagreement). The global body for professional accountants
  • 16. 95% Confidence Interval Std. Lower Upper Est. Error Wald df Sig. Bound Bound Community cross-over 1.097 .080 190.002 1 .000 .941 1.252 Expert .047 .064 .546 1 .460 -.078 .173 Internet .752 .061 153.554 1 .000 .633 .871 Friends and Family .546 .068 64.034 1 .000 .412 .679 Reading up .455 .063 52.023 1 .000 .331 .578 Business Association .736 .063 135.503 1 .000 .612 .860 Less than $2m turnover -.518 .325 2.536 1 .111 -1.156 .120 $2m to $4.9m turnover -.266 .326 .667 1 .414 -.905 .373 $5m to $9.9m turnover -.573 .334 2.946 1 .086 -1.227 .081 $10m to $24.9m turnover -.380 .348 1.189 1 .276 -1.063 .303 Over $25m turnover 0a . . 0 . . . No employees -.683 .375 3.317 1 .069 -1.418 .052 1 to 9 employees -.662 .221 8.989 1 .003 -1.094 -.229 10 to 49 employees -.323 .179 3.241 1 .072 -.674 .029 50 to 99 employees .041 .206 .040 1 .841 -.362 .444 100 to 249 employees 0 a . . 0 . . .Note: The regression analysis also controlled for employment, legal status, type of customer (B2B v. B2C), Turnovergrowth (past and expected) and country; only significant effects are highlighted on this table. The global body for professional accountants
  • 17. -5 -4 -3 -2 -1 0 1 2 3 4 55 Need for trust Canada4 Transaction China3 Italy Partnership Singapore2 South Africa1 UK0-1-2 Casual/no-3 relationship Conversation-4 Need for confidence The global body for professional accountants-5
  • 18. What accountants are good at v. what they aretrusted with Tax 2.5 Technology 1.5 Financing 0.5 -0.5 Operations Fin. Managment Marketing Regulation Confidence Trust The global body for professional accountants
  • 19. Trust and confidence in advice on regulation Government Books and magazines Internet resources Finance providers Attorney AccountantsProf. colleagues or network Local business association Trade or prof. Body Confidence Friends & family Trust -2.5 -1.5 -0.5 0.5 1.5 2.5 The global body for professional accountants
  • 20. What about that interaction? The global body for professional accountants
  • 21. CONTACTManos Schizasemmanouil.schizas@accaglobal.comwww.accaglobal.com The global body for professional accountants