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Editorial Board IJCRB is a peer reviewed Journal and IJCRB Editorial Board consists of Phd doctors from all over the world including USA, UK, South Africa, Canada, European and Asian countries. Lord David K Oxford University , St Catherine's College, Oxford, OX1 3UJ ww.stcatz.ox.ac.uk/ , www.ox.ac.uk/ Phone: +44 1865 271700 , Fax: +44 1865 271768 Dr. Kenan Peker Department of Agricultural Economics, University of Selcuk, http://www.selcuk.edu.tr/ University of Selcuk, 42079 Konya, Turkey, Tel: 90-332-231-2877 Dr. A. Sathiyasusuman Senior Lecturer, Dept. of Statistics, University of the Western Cape, South Africa Dr Mahdi Salehi Assistant Professor, Accounting and Management Department, http://www.znu.ac.ir/ Zanjan University , D.N 1 Nagilo Alley, Hidaj City, Zanjan Province, Zanjan, Iran , Tel: 98-9121-425-323 Dr Heryanto Regional Development Bank of West Sumatra Jalan Pemuda No. 21 PO Box 111 Padang 25117 West Sumatra Indonesia Tel: +62-8126771699 Dr. Dave Hinkes Assistant Professor of Managment & Marketing Sam Walton Fellow , Lincoln Memorial University , Harrogate, TN ,UK Tel 423.869.6441 Dr. Francis A. Ikeokwu Sr., Ph.D., MAC, MBA, CFC Adjunct Professor, American Intercontinental University http://www.aiuniv.edu/ Dr Charles C. Dull Sr. MBA, Ph.D. American Intercontinental University http://www.aiuniv.edu/




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Contents Title Page Efficiency Of Community Banks In Nigeria: A Case Study of 8 Community Banks In Ogbomoso Zone of Oyo State, Nigeria. Ajagbe, F.A., Aworemi, J.R. Ajetomobi, J.O Social Security System in Nigeria 15 Muftau Adeniyi Ijaiya A Study of the Effectiveness of IT as a Resource Based Tool 26 Deployed By Nigerian Banks Dr. J. O. Adewoye, Dr. J.R. Aworemi, Oyedokun A. J.

An Empirical Study of SERVQUAL’S Dimensionalityof Credit 35 and Saving Products in Padang, West Sumatra-Indonesia Dr Heryanto Antecedents of Counter Work Behavior in Public Sector 58 Organizations. An Asian Perspective Sajid Bashir Portfolio Diversification and Financial Performance of Mutual 69 Funds in India Nidhi Walia, Dr. (Mrs.) Ravi Kiran Optimization of Design Constraining Factors to Project 87 Management Success of Public and Private Sector Construction in Nigeria (An Analytical Approach) Dr. C.C Nwachukwu ANIVS




HRD roles and competencies: A comparative study of Pakistan 99 and China using ASTD model Hassan Rasool, Fuwad Bashir, Muhammad Ismail Ramay The Effect of Demographic and Academic Backgrounds 112 on Financial Accounting Performance Wan Faizah Wan Abdullah. Siti Salmah Abu Bakar. Marzlin Marzuki. Noraini Abdul Rahim. Kamaruzaman Jusoff Influence of Institutional Pressure and Ownership Structure on 123 Corporate Social Responsibility Disclosure Faizah Darus, Roshayani Arshad, Suaini Othman, Kamaruzaman Jusoff The Effect of Problem-Based Learning on Students’ Teamwork 151 Ability in UiTM Trengganu, Malaysia Noor Liza Adnan , Wan Karomiah Wan Abdullah, Kamaruzaman Jusoff




Efficiency of Community Banks in Nigeria: A Case Study

of Community Banks in Ogbomoso Zone of

Oyo State, Nigeria.

Ajagbe, F.A., Aworemi, J.R. Department of Management Science,

Ladoke Akintola University of Technology, P.M.B. 4000, Ogbomoso, Nigeria.

Ajetomobi, J.O

Department of Agric Economics & Extension, Ladoke Akintola University of Technology,

P.M.B. 4000, Ogbomoso, Nigeria. Abstract

This paper examines the determinants of efficiency of selected Community Banks in Nigeria. All

Community Banks in Ogbomosho zone of Oyo state were included in the study and 200 loan

beneficiaries were selected for interview using stratified sampling method. Two sets structured

questionnaires were used for banks officials and customers respectively. In analyzing the data,

regression analysis was used to investigate the relationship between the following variables:

amount of loan obtain, time lag between loan application and loan disbursement, interest rate,

type of loan and type of account kept. The results show that the banks with high liquid assets will

have high earning capacity and thus, high level of efficiency.

Keywords: Community Bank, Efficiency, Ogbomosho Zone, Nigeria. 1. Introduction

The community banking system was introduced into Nigerian sector early in the 1990s

with the primary objectives of catering for the financial services (savings, mobilization and

micro-credit provision) critically needed for the promotion of the development of rural

agriculture and other small-scale business enterprises in both the rural and urban areas ( Ojo,

2001). In 1991, about 1,458 community banks were licensed by the national board for

Community Banks to operate all over the country (NBCB, 1993). However, at the end of 1997,

282 licenses have been withdrawn. Of course, the withdrawals of these licenses are not entirely

due to the fault of operators of these banks.





Onakoya (1998), quoted by Ayodele(1998), noted that, part of the blames goes to the

federal government and part goes to the National Board of Community Banks (NBCB) which he

describes as “father and mother” oil the community Banks respectively. The NBCB’s failure to

issue share certificates to the shareholders and the activity of the government to recapitalize the

paid up capital of community banks from #250,000 to 3 million caused more disillusion.

Oduwole (1998), quoted by Ayodele(1998), in his view, attributed the decline to the

activities of owners. While some are incompetent, others used it as an avenue to raise capital for

personal projects.

Ogunbiyi (1998), quoted by Ayodele (1998), lays the blame of why some community

banks go under more on the doorstep of the so called “correspondent banks.” This view tallies

with that of Tunde (1998), quoted by Ayodele(1998), that each commercial bank that goes down

pulls some Community Banks along. This is because the government has made it mandatory that

Community Banks should liaise with the Central Bank through the existing Commercial Banks (

who themselves are susceptible to being distress) appointed as correspondent banks.

Layeni(1998), quoted by Ayodele (1998), confirmed that lack of patronage from

government is also one of the reasons why enough confidence wqas not respond community

Banks by the people at the grassroots level. If salaries of government workers at all levels should

be mandated to be paid in community Banks, the banks would be better for it. In order to avert

imminent collapse of community bans in Nigeria there is the need to strengthen the restructuring

and through appropriate policy intervention. This however requires a good understanding of the

efficiency or otherwise of the banks. It is on this background that this paper attempts to examine

the ratio of the output to the input in Community Banks and examine the quality of staff in the

community bank in Ogbomoso Zone of Oyo State, Nigeria

2. Literature Review

The committee on the Nigerian financial system defined the financial sectors as the

congeries of financial institution and arrangements which serve the needs of the economy. The

service is rendered through: the provision of financial recources to meet the borrowing needs

individuals and the households, enterprise, and governments; the provision of facilities to collect

and invest saving fund; and the provision of a sound payments mechanism (CNFS Report, P.6)




Vitta (1981) suggested that, a basic benefit of enhanced efficiency in banks, is a reduction

in the spreads between lending and deposits rates. This would eventually stimulate loan demand

for investment.

Economic theory suggested that, other things being equal, firms having significant

market position in a highly concentrated market will tend to restrict output, change high prices,

earn higher rates of return and uses their entrenched position to retard the competitive efforts of

other firms (Allardice and Edervige, 1981).

Khartchate and Riechel (1980) opined that, economics scale in financial intermediaries

arises from port-folio diversification and management, the minimization of information and

transaction cost. Thus, the authors were thinking of operational efficiency.

Bryan (1972) found that, the most important single factor explaining the operation

efficiency in terms of profitability performance is the ratio of saving and the time deposits to

total deposit to total deposits. The argument is that, the deposit mix, by determining the liquidity

needs of the banking system affect the volume of the earning assets.

Bourne 91986) has suggested the use of sectorial Gross Gomestic Product (GDP). An

increasing trend in the ratio will suggest allocative efficiency. Operation efficiency refers to the

provision of financial resources to meet the borrowing needs of individuals and households,

enterprises, and governments at least cost. It relates to the minimization of operational costs and

hence operational efficiency.

Howard and Haynes (2001) maintain that, operational efficiency is determined by the

market structure and regulatory framework of financial intermediation. Intermediation cost can

therefore, be used as a measure of allocative efficiency can be measured by the ratio of total

operating cost to average total assets. The lower the ratio the smaller the spreads between net

returns to savers and gross cost to leader.

Revel (1981) defines intermediation cost as sum of non-interest operating cost pretax

profits and other costs like provisions for depreciation and loan loses. Intermediation costs are

identically equal to gross profit margins defined as net interest earning plus other incomes. High

income indicates allocative efficiency. This paper, therefore, utilizes the parameters used to

determine the level of efficiency of Community Banks in the study area.




3. Methodology

This study was carried out in Ogbomosho Zone of Oyo State, Nigeria. Both questionnaire and

interviewed techniques were used for data collection. The study considered all registered

Community Banks in Ogbomosho Zone as the sampling frame from which 200 clients were

selected via stratified random sampling technique was used in analyzing the data in addition to

conventional descriptive statistics such as tables, frequency distribution and percentages.

The regression in explicit form is

Y = f(X1, X2, X3, X4, X5)

Y = Income (Naira)

X1 = Interest Rates

X2 = Amount Obtained (Naira)

X3 = Time Lag between Loan Application and Disbursement

X4 = Type of loan (short-term = 1, others = 0)

Three functional forms were fitted namely linear, exponential and log-log. Based on theoretical

expectation from signs and magnitudes of coefficients, statistical and econometric criteria given

by R2, f, t tests and correlation matrix, the log-log function had the best fit and hence the basis

for the foregoing report.

4. Estimation Results

The regression results showing the relationship between level of performance measured

by income in naira and the following explanatory variables amount of loan obtained, time lag

between loan application and disbursement, interest rate, type of loan and type of account kept

with the bank were presented in Tables 1.1, 1.2, and 1.3.

The R2 was 43% meaning that about 43% change in income of the loan recipients were

explained by the explained by the explanatory variables. The f value was 8.964 and statistically

significant at 5% probability level. As expected a priori, the amount of loan obtained had

positive and significant relationship with the income of the respondents. The higher the amount

of loan obtained the higher the income generated. This is a welcome development as it is an

indication that the loans were not diverted to consumption but specifically for production

purpose. The relevance of giving loan type (mainly short-term) was positive and significant.




5. Conclusion

The sampled Community Banks have enough assets to be converted within a short term

into cash to boost their financial capability, and their credit performance were efficient and this

have paved way for high earning capacity.

In order to maintain efficiency level in the community Banks, the directors must adhere strictly

to their resolution and banks policy on credit facility. Besides, the regulatory bodies )NBCB,

NDIC,FGN and CBN) should review their policies on community banks to enhance their

efficiency.




References

Alladice, D.R. and Evdevig, E. (1981), ‘The Significance and measurement of Concentration.’

Business and Financial Review, Economic prospective, Federal Reserve Bank of

Chicago, March/April 1981, pp. 3-5

Ayodele, G. (1998), ‘Community Banks As Silent Achiever killing Owen Baby.’ The

Searchlight, Octomber, pp. 18

Bourne, C. (1986b), `Structure and Performance of Commercial Banking in Trinidad and Tobago

in 1965-1980` in C. Bourne and Ramsawan (eds.) Money and Finance in Trinidad and

Tobago Published by St. Augustine, Trinidad.

Bryan, W.R. (1972), `The Determinants of Bank Portfolio, Research Report,No. 8. ` American

Bankers Association.

CNFS Report (1976), An overview of the Gambian Financial Sector. Gambian: The Concept of

Financial Sector p.6

Howard M. and Haynes, C. (2001), “Commercial Bank Efficiency in Barbados, `` Savings and

Development. No. 3, Vol. 25.

Khatkhate, D.R. and Riechel, (1980). Multipurpose Banking: Its Nature, Scope and Relevance

for Less Developed Country: IMF Staff Pappers. Vol. 22, N0.8.

NBCB, (1993), Annual Reports and Account. Abuja: National Board for Community Banks.

Ojo, A.T. (2001), The Development and Future of Community Banks in Nigeria. Commissioned

Paper for Presentation to the Lagos State Association of Community Banks, Dec. 12,

2001.

Revel, J.R.S. (1981), The British Finance System. London Macmillan.

Vitas , D. (1991), `Measuring Commercial Bank Efficiency,’ Policy Research Working Papers

Series, Country Economic Development, the world Bank, Washington, D.C. November.




Annexure Table 1: The Regression Result (Linear)

Variable Coefficient Std error T T Prob. Constant 741 0.249 2.972 0.003

X1 -0.0072 0.076 0.948 0.344 X2 0.231* 0.074 3.124 0.002 X3 0.118 0.080 1.476 0.142 X4 0.248* 0.074 3.332 0.001 X5 0.0063 0.067 0.942 0.341 R2 0.424

F 8.517

Dependent Variable = Y * Means significant at 5% Level

Source : Data Analysis, 2005.

Table 2: The Regression Result (Exponential) Variable Coefficient Std error T T Prob. Constant -0.0098 0.125 -0.786 0.433

X1 -0.0035 0.038 -0.908 0.365 X2 0.133* 0.037 3.597 0.000 X3 0.0059 0.040 1.469 0.143 X4 0.126* 0.037 3.379 0.001 X5 0.0023 0.034 0.686 0.493 R2 0.45

F 9.75

Dependent Variable = In Y * Indicates significant at 5% Level

Source: Data Analysis, 2005.

Table 3: Regression Result (Log-log) Variable Coefficient Std error T T Prob. Constant 0.200 0.083 2.402 0.017

In X4 0.025* 0.078 3.190 0.002 In X3 0.0088 0.085 -1.060 0.290 In X2 0.283* 0.077 3.681 0.000 In X1 0.0095 0.087 1.091 0.277 In X5 0.0041 0.069 0.593 0.554

R2 0.43

F 8.964*

Dependent Variable = LY * Indicates significant at 5% Level

Source: Data Analysis, 2005.




Social Security System in Nigeria

Muftau Adeniyi Ijaiya Department of Accounting and Finance

University of Ilorin, Ilorin. Nigeria.

Abstract

In Nigeria, family provided assistance had continued to play an important role in taking care of

the old. The introduction of small family units (nuclear) among other factors weakened the

informal and traditional types of social security system and government has moved towards the

formal system through the Pay-as-you-go system which is also faced with a lot of problems. This

made government to abandon this and re-introduced the defined contribution which covers only

the federal civil service. The risk here is borne entirely by the individual, and economic stability,

inflation and devaluation of the nation’s currency can also produce a negative return. It is

recommended that government should integrate both the formal and informal types, makes laws

that would make parents educate their children and such children would be responsible to

support their parents when they become old as well as that the fund should be invested in foreign

stocks to save it from the country’s specific risk.

Keywords: Social Security, Nigeria

1. Introduction

As people grow old, work and produce, they earn less but people need a secured source of

income that will see them through life. These incomes are integral part of social security system.

This social security system differs in different parts of the world. In some countries, the old are

catered for by extended family arrangements, mutual aid societies and other informal

mechanism. The informal arrangements are strained by urbanization, mobility, war and famine,

which weakened the extended family and community ties. This strain is felt mostly where old

age population is growing rapidly as a result of improvement in medical facilities and fertility.

These rapid changes have forced several countries to consider fundamental changes in the way

they provide old age security (World Bank 1994).





In Nigeria, the family-provided assistance had continued to play an important role where

children and extended family members provide income; food, shelter and care for the old people

(see Ekpenyong, Oyeneye and Piel, 1986). As families are becoming smaller and more

dispersed, this informal and traditional arrangements are weakened, and government have moved

towards formal systems of income maintenance without accelerating the decline in informal

system and without shifting more responsibility to government than it can handle. Some of

these formal social security systems are the defined benefits (Pay-as- you-go) and the defined

contribution (Contributory Pension System).

Drawing from the above, this paper therefore examines the Social Security System in Nigeria.

The rest of the paper is organized as follows: Section two discusses the conceptual issues:

Section three examines the Social Security System in Nigeria. The conclusion and

recommendations are contained in the last section.

2. Conceptual Clarification: Social Security Systems

2.1 Definition, Types, Reasons and Significance

Puffer (1988) describes social security systems as publicly administered sets of Programmes

which provide for people in the event of loss of income (due to retirement, disability, death of a

breadwinner, maternity, work-related injury or unemployment) and often in the event of need for

medical care or the expense of raising children. The World Bank (2004) saw social security

system as a developed mechanism to provide income security for older citizens as a part of safety

net.

Schwarz (2002) inferred that social security systems are designed to provide an income to

those individuals who suffer a loss in earnings capacity through advanced age, the experience of

a disability, or the death of a wage earner in the family. While in some cases, the systems are

designed to facilitate direct transfers from the government to these particular target groups, and

the emphasis is on providing a mechanism whereby the individual might insure himself against

the loss of future earnings. The International Labour Organization endorses a minimum standard

of 40 percent of an individual’s wage for 30 years of work (see also Gruber and Wise, 1999).

2.2 Types of Social Security Systems

The World Bank (2004) classification of social security type includes the informal and

traditional arrangement where old people receive food, shelter, and care from their children. As




the productive capacities of the old decline, they are supported by the work of their children, just

as they once supported their children and parents. Other supporting systems under the informal

social security system are local communities, informal clubs, kinship networks, patrons and

religious, and other nongovernmental organizations. However, children support are still the main

source of support for old age and more than half of the world’s old people are estimated to rely

on informal and traditional arrangements system. The World Bank (2004) averted that the

loosening of family, kinship and community ties, and rise of wage labour add new elements to

the age- old problems of providing for those who lack an income or have medicals needs. It was

this problem that made government assumes the responsibility of providing the formal type of

social security system. (See also Pathak, 1978; Martina, 1990; Knodel, et al, 1992; and Schwarz,

2006).

The formal type of the social security system is divided into two. According to Barr (2001),

the first type is where the workers are required to contribute a percentage of their salaries to the

pension plan, with the employer making up the difference, this type is known as the Mandatory

Retirement Saving Scheme, or the defined Contribution System. This social security type

encourages long-term saving and enhances financial backing for long-term investment, and the

risk is borne by the worker. For instance, if people live longer than expected, they may outlive

their retirement saving. The second type is based on the principle of Pay-as-you-go where

payment usually depends on years of service and the workers’ salaries, such Pension plan usually

covers the civil servants and the military, and it is publicly managed. The risks here are broadly

shared with government or employers.

Roots (1994) also said that annuities is another form of social security system type

where regular payments to an Insurance Company is made during the working life of the

purchaser and this provide him with an annuity during retirements. This type of annuity is

usually marketed as a personal social security system scheme.

Discussing the financing mechanism and the benefit structure of the major types of social

security system, Schwarz (2006) said that under the Pay-as-you-go system, current workers make

contributions based on their current earnings and the contribution is used to pay current

recipients. The worker who is making the contribution only receives a promise from the

government that it will pay benefits related to these contributions when the workers become




eligible for a pension. Under the second type, the worker contributions are invested, rather than

spent, and the investment earnings are an integral part of the benefits eventually paid. These

investments can be managed by a monopolistic pubic agency or competitively with participation

by the private sector. The benefit mechanism are also of two types: Under the defined benefit

mechanism, the pension received is usually a function of income expressed as a percentage of

income per year of contribution, the benefit provided is specified in some way and if financing

fall short, someone, typically either the government in a public plan or the employer in an

employer-base plan, have the responsibility to provide the pension. On the other hand, under the

defined contribution mechanism, the contribution is specified as a percentage of salary, and rates

are specified for employees, employers, and, potentially, the government, but the final pension is

determined by the amount in one’s pension account at the time of retirement, which includes

both contributions and the investments earnings in those contributions. Under this system, no

specific benefit is promised, the pension is completely dependent on the money in the account,

and there is no need for a guarantor of last resort. (See also Diamond and Hausman, 1984; and

Schwarz, 2005).

2.3 Reasons for Social Security Systems

Giving reasons for social security system, the World Bank (1994) opined that as people

grow old, they may change their preference and wish that they had saved more but then it is

often too late. Even if people try to save when they are young, they may find few reliable savings

instruments or secure financial markets in developing countries. Savings often take the form of

real estate, livestock, or jewelry, all of which suffer from fluctuations in price and potential

misfortunes due to disease, theft, or war. Besides, the absence of insurance markets is also

another reason, since people are always uncertain about how long they will live they may wish to

purchase insurance that will earn them an income, Pension or annuity over their lifetime. The

insurance companies are also not well developed in many developing countries because of

information deficiencies and weak capital markets. For instance, when people have more

information about their life expectancy than the insurance company does, a problem known as

adverse solution occurs, where good and bad risks are pooled, and premiums are charged

according to the average risk of the group. The good risk (those who expect to die young) find

these terms unacceptable. So the insurance company is left with only the bad risks (those who




expect to live long), the insurance company will raise their premiums leading more good risks to

opt out. For these reasons, the government often takes on the role of regulator or mandator of

social security system (see also Feldstein and Anthony, 1979; Barr, 2001; and Schwarz, 2006).

2.4 Significance of Social Security Systems

Explaining the importance of social security system, the World Bank (1994) opined that social

security system is important to the old and the economy. To the old, it facilitates people’s effort

to shift some of their income from their active working years to old age, by saving or other

means; redistribute additional income to the old who are lifetime poor but avoiding perverse

intergenerational redistributions and unintended intergenerational redistribution, and providing

insurance against the many risks to which the old are especially vulnerable. The importance to

the economy includes minimizing hidden costs that impedes growth such as reduced labour

employment, reduced savings, excessive fiscal burdens, misallocated capital, heavy

administrative expenses and evasion, sustainability based on long-term planning that takes

account of expected changes in economic and demographic conditions. One of which may be

induced by the old age system itself; which enables policy makers to make informed choices,

insulated from political manipulations that may lead to poor economic outcomes. (See also

Munnel and Yoh (1992); , Arrau, (1990); Pesaudo, (1991); Arrau and Klaus, (1993)).

Puffert (1988) also argued that social security systems in most developing countries

have growing reserved funds, which finance much of governments’ deficits, and also,

sometimes, provide a pool of investment capital which furthers economic development. For

instance, the mandatory saving system can be important for increasing long-term saving,

accelerating capital market development, development of modern financial investment and

institutions, boosting investment in productive capital, and monitoring corporate performance.

This advantage is possible because of the way social security funds, most especially defined

contribution are invested particularly the larger ones. The investment consists of three sections,

the first section is a gilt-edged portfolio which provides the basis of the income yield, this is

actively manage by policy switches with the object of maximizing the total return from this

section. The second section is an equity session which is widespread and this includes overseas

stocks, this is done not only to obtain diversification but also to ensure marketability of

individual holdings and the third one is a property folio. The investment policy thus is concerned




with the employment of often quite large sums regularly arising, in addition to the management

of the existing investments (see also Rowlatt, 1979; Roots, 1994 and Barr, 2001).

Schwarz (2006) also noted that social security systems often have substantial impact on

the economy in which it exists because it can affect poverty among the elderly, they can also

affect relationships between younger and elder cohorts, as well as family living arrangements,

they also have a substantial impact on labour markets and employment, particularly if they are

financed through the contributory systems. The social security system can also impact on

national savings and development of financial markets, they can affect the composition of

government spending by squeezing out other types of spending, and they can even affect the

overall level of government spending (see also Diamond and Hausman, (1984); Disney (1996);

Koitz (1998); Gruber and Wise (1999) and Kakwani and Subbarao, (2005) ).

The World Bank (2004) noted that there are strong advantages from international

diversification of social security system most especially the invested Pension funds, particularly

for countries with small or concentrated domestic economies. Lower risk and sometimes higher

returns are possible over the long term through international investment, which reduces the

exposure of investors to country-specific risks such as inflation. This system also gives country

an opportunity to move their capital to countries that offer the highest return, thus opening up the

domestic economy to become part of the global economy (see also Golf, (1971); Koitz, (1988);

Corsetti and Schmidt-Hebbel, (1997); and Barr 2001).

Empirical evidence on formal social security system are well documented. For example,

the defined contribution was reported to have increased savings in some developing countries

like Chile, Malaysia and Singapore and this has imparted positively on their Gross Domestic

Products. Furthermore, studies have also shown the importance of informal social security

system. For instance in Thailand, a large percentage of married people have children because

they need children support when they grow old. Besides, in China the 1954 Constitution asserted

that parents have the duty to support and assist their parents. While in Bombay, more than 80

percent of the old live with their children; and 95 percent in Nepal.(see Pathak,1978; Knodel,et

al, 1984; Knodel, 1987; Martina,1990; Knodel,et al,1992; Davies 1993; World Bank 1994, ).




3. Social Security System in Nigeria

Nigeria like other developing countries also depended largely on the informal social

security system, where people have voluntarily saved and invested in their children and other

extended family members expecting to reap the return later. As the productive capabilities of the

parents decline, the children and their extended family members take up the responsibilities of

feeding, clothing and housing their old parents. In fact old parents are seen living with their adult

children. Ekpenyong, et. al (1986) reported that more than 97 percent of the urban old and 93

percent of rural old are receiving some financial or material support from family or kin in

Nigeria. However, modernization, urbanization, migration, secular education and nuclear

families, and the breakdown of traditional social norms have weakened these ties.

In addition to the informal types, Nigeria also introduced the formal type that was based

on the defined-benefit otherwise known as Pay- as- you- go that is mostly unfunded.

Membership of this social security system is voluntary and it is not transferable. It is usually

managed by the state governments and management of the organizations that adopts the type.

This social security system has a limited coverage and benefits are usually bias, payments

depend on years of service and retirement age is put at either 35 years in service or when one

attains 65 years of age whichever one comes first. This system was faced with some bottlenecks

such as lack of adequate funding, discrimination in coverage, poor record keeping; demographic

shifts and weak administration (see Aminu, 2007). These bottlenecks made the government to

abandon the system, and re-introduce another pension system called defined contribution which

covers only the Federal Civil Service. Under this pension system, benefit is attached to workers

contribution and contribution are invested, rather than spent, the invested contribution would be

used to pay workers benefit. The scheme is still new, deductions have started and it is 15 per cent

of emolument. Employees are expected to contribute 7.5 percent of their emolument charged on

basic salary, housing and transport allowances, while the government contributes the balance of

7.5 per cent for public sector. In case of the military, it is 2.5 per cent and 12.5 per cent for

employees and government respectively. This system is also faced with some risks and it is

borne entirely by the individual worker. For instance, the pension system does not protect

workers with interrupted careers, many of whom are women who spend part of their lives doing

household work; low income workers may never accumulate enough in their pensions accounts




to support themselves in their old age; early generations retirees are not protected because it

takes many years for enough pension capital to build up; economic instability, inflation and

devaluation of the nation’s currency can also produce a large negative rates of return on the

funds which can cause dissatisfaction among the contributors. Besides, some contributors may

outlive their pension contribution, and Government has not also provided a clear cut guideline on

how it would harmonize the Pay –as –you –go with the defined contribution system in the

country.

4. Conclusion and Recommendations

Drawn from the above submission, one can conclude that there are two major types of

social security system in Nigeria namely: informal and formal. The informal type is as old as

mankind and still plays an important role in supporting the old in Nigeria where children,

extended family members, communities’ ties, informal clubs etc play a prominent role. However

because of modernization, urbanization, nuclear families, secular education, etc the

responsibilities of taking care of the old by the system has diminished greatly. The formal system

which includes Pay- as you- go and defined contribution are the major types currently use at

State and Federal level respectively in Nigeria. Both have their limitations as highlighted in the

paper.

Based on the above, it is recommended that government should encourage and integrate

the informal social security system with the formal system. The integration of both forms by the

government should make laws that would make parents educate their children and such children

would be made responsible to support and assist their parents when they become old.

Under the formal system, since Nigeria has adopted pooled fund, government should not

have access to the fund in order not to rub the recipients of the potential benefits; also

government should not force the fund managers to invest in public securities. While prudent

companies and joint ventures companies should be allowed to manage the fund.

Besides, the private institutions vested with power to manage the pension fund should be

advised to diversify their investments, and invest in overseas securities in order to reduce

specific risks associated with such funds in Nigeria.




References

Aminu, F. (2007) ‘’Overview of the New Pension Reforms’’ in Saliu, H.A.et al. (eds.) (2007)

Nigeria’s Reform Programme: Issues and Challenges, Faculty of Business and Social

Sciences, University of Ilorin, Ilorin.

Arrau, P. (1990) ‘’Social Security Reform: The Capital Accumulation and Intergenerational

Distribution Effect’’. Washington, DC: The World Bank.

Arrau, P. and Klaus, S. (1993) ‘’Macroeconomic and Intergenerational Welfare Effects of a

Transition from Pay-as-you-go to fully Funded Pension Systems’’. Policy Research

Department, Macroeconomics and Growth Division, Washington, DC: The World Bank.

Barr, N. (2001) ‘’The Truth about Pension Reform’’. Finance and Development, International

Monetary Fund, Washington, DC: IMF.

Corsetti, G. and Schmidt-Hebbel, K. (1997) “Pension Reform and Growth’’ in the Economics of

Pensions: Principles, Policies and International Experience, S. Valdes-Prieto ( ed)., Cambridge:

Cambridge University Press.

Davies, E.P. (1993) ‘’The Structure, Regulation, and Performance of Pension Funds in Nine

Industrial Countries’’. World Bank Working Paper No 1229 (December),Policy Research

Department, Washington, DC: The World Bank

Diamond, P. and Hausman J. (1984) ‘’Individual Retirement and Savings Behaviour”, Journal of

Public Economics, 23: (.2 ): 81-114.

Disney, R. (1996) ‘’can we afford to Grow older ‘’? Cambridge, MA: MIT Press.

Ekpenyong, S.O., Oyeneye, O.Y. and Piel, M. (1986) Reports on Study of Elderly Nigerians.

Limited Kingdom : University of Birmingham.

Feldestein, M. and Anthony, P. (1979) ‘’Social Security and Household Accumulation: New

Micro Econometric Evidence’’. Review of Economic Statistics 61:361-68.

Goff, T.G. (1971)‘’Theory and Practice of Investment’’.London:Morrison and Gibbs Ltd.

Gruber, J. and Wise, D.A. (eds.) (1999) ‘’Social Security and Retirement around the World’’,

Chicago: University of Chicago Press.

Kakwani, N. and Subbarao, K., (2005) ‘’Ageing and Poverty in Africa and the Role of Social

Pensions’’. Sector Report, Africa Regional Human Development Network, Washington,

DC: World Bank.




Knodel, J; Havanon, N., and Pramualratan, A. (1984) ‘’Family Transition in Thailand’’.

Population Development Review 10:297-328.

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Income Study Working Paper . Luxemburg

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Thailand: View of the Populace’’. Population Studies Centre, Comparative Study of the

Elderly in Asia. Research Report University of Michigan, Ann Arbor.

Koitz, D. (1988) ‘’Social Security: Its Funding Outlook and Significance for Government

Finance’’. Washington DC: Congressional Research Service.

Martina, L. (1990) Changing Intergenerational Family Relations in East Africa, The Annals

510:102-114.

Munnell, A; and Joh, F. (1992) ‘’What is the Impact of Pensions on Savings’’? In Bodie and

Munnell (1992).

Pesaudo, J. (1991) ‘’The Multiple Roles of Private Pensions: Effect on savings, Capital Markets,

and Labour Market Decisions” Presented at the OECD Conference on private Pensions

and Public Policy. Paris.

Pathak, J.D. (1978) ‘’ Our Elderly’’. Bombay : Medical Research Centre.

Puffert, D.J. (1988) ‘’Social Security Finance in Developing Countries’’, World Bank Working

Papers No 36, Washington, DC: The World Bank.

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Press) Ltd.

Schwarz, A.M. (2005) ‘’Old Age Security and Social Pensions’’, Working Paper, Social

Protection Department of the Human Development Network, Washington, DC: The

World Bank.

Schwarz, A.M. (2006) ‘’ Pension System Reforms’’. Social Protection Department of the Human

Development Network, Washington, DC: World Bank.

See The Nigeria Pension Reform Act, 2004.

World Bank (1994) ‘’ Averting the Old Age Crisis ‘’ New York: Oxford University Press.




World Bank (2004) ‘’ Mexico: Public Expenditure Review’’. “Report No. 27894-Mx, Latin

America Economic Policy Sector, Washington, DC: The World Bank.




A Study of the Effectiveness of IT as a Resource Based Tool Deployed By Nigerian Banks

Dr. J. O. Adewoye Dr. J.R. Aworemi Oyedokun A. J.

Department of Management Science,

Ladoke Akintola University of Technology, P.M.B. 4000, OGBOMOSO, NIGERIA.

Abstract

This study examines the effectiveness of IT investment as a resource based tool deployed by

Nigerian banks. The paper presents two propositions about IT investment in Nigerian banks and

tested them with quantitative and qualitative data from five major banks in Nigeria. Using a

sample of 535 respondents, the result provides insights that IT deployed by Nigerian banks do

not differ significantly from one bank to the other. It was concluded that, IT deployed by

Nigerian banks is more of a strategic necessity to be in business rather than a competitive

advantage.

Key words: Information Technology (IT), Resource based tool, Effectiveness, Operational

processes, Strategic resources.

1. Introduction

Information technology has become critical to the operations and competitiveness of

organization around the world. Today more than ever organization must capitalize on changing

technology to increase profitability, expand market opportunity, and improve customer service

and productivity. Evaluating business value from investment in information technology as a

strategic resource weapon in Nigerian banking industry is the main focus of this paper.

Two propositions about information technology as a strategic resource in the Nigerian

banking operation were proposed. The first proposition is that Nigerian banks have used

information technology to drive their processes and deliver superior performance to meet and

surpass customer expectation. The question then is “Does IT usage has significant difference





among the performance of the banks?” However a successful IT investment banking operation is

a key strategy that must continue to further strengthen the banks position.

The second proposition based on the resource based theory of strategy is that Nigerian

banks investment in IT has enable higher volume of transactions processing, low turnaround time

and gradual reduction of cash transactions which informs the need to increase investment in IT.

This paper viewed IT as a resource based view strategy (operational processes) using

both quantitative and qualitative data analysis and series of interviews with senior bank

managers.

2. Literature Review of Past Research

Despite the growing recognition on the fundamental impact of information technology in

determining a firm competitive strength for future business performance, most researchers are

yet to specify the underlying mechanism linking it to firms’ operational processes. Several

studies have been conducted in a variety of manufacturing and service industries. Studies by

strassmann (1990) found no correlation between IT expenditure and return on investment in a

sample of 38 service sector firms. Dos santos et. al (1993) complement Strassmann’s findings on

IT spending and returns on investments. He concluded that investment in IT has no significant

effect on firm returns. Similar research by Crons and sobol (1983) found that IT impact was not

significant on firm performances. This perhaps implies that IT has no impact on firm’s

productivity. Brynjolfsson and Hitt (1996) however caution that the findings do not account for

economic theory of equilibrium. In his own view Alpar and Kim (1990) noted that the

methodology used in assessing IT impact can also significantly affect the result. Corroborating

this view Denison (1989) stressed that the over estimation of IT input for any given amount of

output will lessen the unit productivity. This suggest that researcher must endeavor to pay much

attention to the measurement and methodology used in studies before embarking on a thorough

research work bearing in mind that key ratios can be misleading.

On the other hand Lubbe (2004) studies of IT impact on Small and Medium Enterprises

(SME) found a significant correlation between IT and SME performance.

The findings falls in line with the work of Dykman (2003) where a correlation between firms

output and IT investment was established. More recently, studies by Lucas et al (2002) confirms




that investment in IT create a sustainable competitive advantage. This finding confirms the

argument of Hui and Plant (2001) that the promise of increased advantage in output was the

driving force behind large scale investment in IT since 1970’s.The findings above suggest that

technology and societal changes are moving the global market. Using a different data set, weil

(1990) was able to disaggregate IT by use and found that significant productivity could be

attributed to transactional types IT (Data processing). This support the argument of Santhanam

and Hortono (2003) that resource based view can be used to investigate the impact of IT

investment on organization performance. In this paper attention is restricted to research that has

drawn upon the organization procedure (RBV) of IT investment firms on Nigerian banks

performance.

3. Conceptual Framework

The study is premised on the resource base theory of firms grounded on the perception

that a firm’s internal environment in terms of its resources and capabilities are more critical to

the determination of strategic action than its external environment. Imai (2007) viewed resource

based view as a strategy that emphasizes economic rent creation through distinct capabilities. He

argued that each organization is a collection of unique resources and capabilities that provides

basis for its strategy. This view was supported by barney (1991) that abnormal rent can be earn

from firms resources and sustained competitive advantage that are valuable, rare, imperfectly

imitable and non substitutable.

Ovia (2006) further attest to this in his study on IT deployment on corporate strategy. He

concluded that investment in IT resources boost banks performance. This suggests that the

performance of a firm is shaped by its available resources. The basic logic of resource based

view of a firm starts from the claim that the aim of the firm and the desired outcome of

managerial effort is sustainable competitive advantage as it allows firms to earn economic rent

(kapelko et .al 2005). This theory was supported by Imai (2007), where company’s ability to

assemble and exploit an appropriate combination of resources was identified as a key factor

required to achieving a sustainable competitive advantage. This means that a sustainable

competitive advantage can be obtained if “the firm effectively deploys the resources in his

product market” (Fahy and smithee 1999)




4. Methodology

The first and the most important step in carrying out the assessment of firms efficiency is the

identification of input–output variable (Thanansoulis 2003). Stingler 1976 noted that “measured

inefficiency may be a reflection of a failure to incorporate the right variables and the right

constraint to specify the right economic objective of a production unit. “ Paradi and schaffnit

(2004) however stressed that no consensus exist on the most appropriate variable to apply in

analysis. For the purpose of the study, the approach taken for the measurement of information

technology as a resource input is to produce a given level of operational procedure where

information technology is deployed to aid banking operations via a medium that makes for

speed, utmost flexibility, accuracy and convenience irrespective of place, time and distance. The

deployment of IT to customer service delivery has made Nigeria banks operations synonymous

to E-banking, as such E-product which covers the services rendered by the banks was used as a

proxy for IT input. The products (input) were however classified in to three broad categories –

payment collection, card solution and reporting tools. The approach help capture how the banks

deploy the resources in their product market (Fahy and smithee 1999).The approach is further

consistent with the works of Miller and Rose (2003) where resource utilization revealed by

efficiency was seen as an important RBV thinking because it reflects productive use of

resources. The used of operating revenue, a single output as a proxy for performance is

consistent with the works of Piesse and Thirtle (2000) and Thore et.al (1994) where technology

perspective was judge against operating revenue (turnover).

The study cut across five (Zenith bank, First bank, Union bank, Guaranty Trust bank and United

bank for Africa) banks that are well spread across major Nigerian commercial and political cities

(Ibadan, Lagos, Abuja, Kano, Enugu, Kaduna and Onitsha)where banking operations was

extremely active . The choice of the banks was due to the huge deployment of IT to aid the

operations the banks coupled with the significant presence of the banks in the identified cities. A

total of 700 respondents were randomly selected in this study. 100 questionnaire comprising 20

for each banks in the identified cities was randomly administered. However 535 questionnaires

(76.4%) were retrieved from the respondent. Data for the study were analysed with the use of

statistical tools (ANOVA and Regression Model) to determine, whether there exist any

significant difference in the IT deployed by Nigerian banks to aid their operations while the




regression model estimate the value of IT as a resources deployed to aid Nigerian banks. Various

functional models where examined to identify relationship among the data with a view to

selecting the best fit. The multiple R was use to select the model with the best fit, hence linear

regression model with the highest multiple R and R2 value of (.833, .694 ) was chosen. This

approach was consistent with the works of Aworemi (2006).

Analysis of Variance was adopted to test the null hypothesis that IT deployed by Nigerian

banks to aid their operations do not differ significantly from one bank to the other was stated as:

H0 = µ1=µ2=µ3 ….µn

Linear regression model adopted was mathematically represented as:

Y = f(x1, x2, x3, …. xn)

Y = Operating Revenue

X1 =Payment collection

X2 = Card solution

X3 = Reporting tools.

Thus it is explicitly represented as:

Y= α + β1x1 + β2x2 + β3x3 +…µ

5. Result and Discussion

Table 1 showed an F –VALUE of 2.20 .The ANOVA table tested the hypothesis that IT deployed

by Nigeria banks do not differ from one bank to the other.

Table: 1 Analysis of Variance result of IT deployed by Nigeria banks.

The observed F-value of 2.20 was less than the table F-value of 2.38 which was

significant at 5% level of significance. This informed the decision to uphold the null hypothesis




that IT deployed by Nigerian banks do not differ significantly from one bank to the other. This

outcome implies that information technology deployed by the banks is similar as such it is

viewed more as a strategic necessity rather than a competitive strategy. Each bank should

therefore focus on the developing technology that is flexible and capable of boosting their core

areas of competence relative to the opportunities in the environment they operate.

Table 2 showed the coefficient (β=5.38) of payment collection product.

This means that the operating revenue of the bank will increase by 5.38 for every unit patronage of

payment collection products while holding the effect of other variables constant. This implies that

as the patronage of payment collection product increases the bank operating revenue will increase

by almost triple the rate of increase in the payment collection product and this was significant at

5% level of significance. The suggestion therefore is that payment collection product driven by IT

has gained customers loyalty and acceptance thus signifying the level of confidence the Nigerian

public has on IT deployed by banks to aid their services via payment transaction product marketed

the banks. The coefficient (β= 9458.6) of reporting solutions shows that aggressive unit patronage

of reporting solutions product will increase the operating revenue of banks by 9458units. This is

significant at 5% level of significance thus suggesting that reporting solutions product are of vital

importance to the customers and bank operating revenue. The result further confirmed that every

unit patronage of the product resulted to an operating revenue that double the impact of reporting

solutions product. This evidence further renewed the call for increase investment in IT, especially




those that are customer driven to boost the banks performance. Availability of card solution

product with a coefficient of (β=172.67) was also seen to have improved the operating revenue by

172.67 for every transaction per card solutions recorded. This was however not significant at 5%

and 10% level of significance.

6. Conclusion

The study aimed at evaluating the effectiveness of information technology as a resource tool

deployed by Nigerian banks. The study revealed that information technology deployed by Nigeria

banks do not differ significantly from one bank to the other and this was significant at 5% level of

significance. In addition, it confirmed that payment collection product marketed by Nigerian banks

increases the operating revenue of the banks by almost triple the rate of payment collection product

effect if sustained this was also significant at 5% level of significance. The study further

discovered that reporting tools also contributed to the operational revenue of the banks at a

significant level of 5%, a reflection of the unique convenience offered customers through IT.

Meanwhile, card solutions were also found to have contributed positively to the bank operating

revenue, but this was significant at 5% and 10% level of significance.

In summary, it was discovered that the Nigerian public has a lot of confidence in the level of IT

deployed by the banks to improve the quality of the service rendered as witnessed in level of

patronage experienced by the banks.




References

Alpar, P. and Kim, M. (1990) Comparison of Approaches to the Measurement of IT Value. In

Proceedings of the Twenty-Second Hawaii International Conference on System Science

Honolulu, HI.

Aworemi, J.R. (2006) “Comparative Analysis of the Performance of Public and Private

Transport Companies in Southwestern Nigeria” A Ph.D. thesis submitted to the

Department of Management Science Lautech.

Barney, J. (1991), "Firm Resources and Sustained Competitive Advantage," Journal of

Management, Vol. 17, No.1 pp. 99-120.

Brynjolfsson, E. and Hit, L. (1996) “Paradox Lost? Firm-Level Evidence on the Returns to

Information Systems Spending,” Management Science, 42 (), 541-558

Cron, W.L. and Sobol, M.G. (1983) The Relationship Between Computerization and

Performance: A Strategy for Maximizing the Economic Benefits of Computerization.

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Denison, E.F. (1989). Estimates of Productivity Change by Industry, an Evaluation and an

Alternative. The Brookings Institution, Washington, DC, Economist.

Dos Santos, B., Peffers, K. and Mauer. D.(1993) “The Impact of Information Technology

Investment Announcements on the market Value of the Firm,” Information Systems

Research, 4, 1-23

Dykman C.A. (2003) “Financial Evaluation of Information Systems Investments”¸ Chapter in a

Book “Technologies & Methodologies for Evaluating IT in Business” by Charles K.

Davis, Idea Group

Fahy, J., Smithee, A. (1999), “Strategic Marketing and the Resource Based View of the Firm”,

Academyof Marketing Science Review, 10: 1-20.

Hu Q. and Plant, R. (2001) An empirical study of the Casual Relationship between IT investment

and Firm Performance, Information Resources Management Journal Jul- Sept pp. 15 –

25

Lucas, H. C. (2002) Strategies for Electronic Commerce and the Internet, Cambridge: M.I.T.

Press




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organizational units “Understanding the resource- based view.”, International Journal of

Operations and Productions Management”, 23(9): 1062-1083.

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Paradi, J.and Schaffnit, C. (2004), “Commercial Branch Performance Evaluation and Results

Communication in a Canadian Bank – a DEA Application”, European Journal of

Operational Research, 156: 719-735.

Piesse, J., Thirtle, C. (2000), “A Stochastic Frontier Approach to Firm Level Efficiency,

Technological Change and Productivity during Early Transition in Hungary”, Journal of

Comparative Economics, 28:473 -501

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Firm Performance, MISQ, Vol. 27 No.1, pp. 125-153

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Canaan, CT.

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An Empirical Study of SERVQUAL’S Dimensionality

of Credit and Saving Products in Padang, West Sumatra-Indonesia

Dr Heryanto Regional Development Bank of West Sumatra, Indonesia

Abstract The purpose of the present study are to analyze an SERVQUAL’S dimensionlity between

Minangkabau and Chinese customers. The sample size amount 216 customers consisted of

Minangkabau would amount to 162 persons and Chinese would amount to 54 persons.

Systematic sampling is applied in this study and data analysis technique is use consisted of factor

analysis. The result of factor analysis indicates that there are three dimensions of saving products

and three dimensions of credit products. The dimensions for saving products are labelled

SSERVQUAL-1 (certain time, sympathy and reassurance, dependability, saving service,

accurate records, prompt service, willingness to help consumers, prompt response to consumer

request, trusted employees, and safe feeling), SSERVQUAL-2 (politeness, best interest at heart,

convenient hours, up-to-date equipment and technology, visual appeal, well dressed and neat

appearance and service type), and SSERVQUAL-3 (consumer information, adequate support,

individual attention, personal attention and consumer needs). Whereas, the dimensions of credit

products are labelled CSERVQUAL-1 (certain time, sympathy and reassurance, dependability,

credit service, accurate records, prompt service, willingness to help consumers, prompt response

to consumer request, trusted employees, safe feeling, and politeness), CSERVQUAL-2 (best

interest at heart, convenient hours, up-to-date equipment and technology, visual appeal, well

dressed and neat appearance and service type), and CSERVQUAL-3 (consumer information,

adequate support, individual attention, personal attention and consumer needs).

Keywords: SERVQUAL, Credit and Saving Products, Minangkabau, Chinese

1. Intoduction

The Minangkabau and Chinese form the majority of financial customers, especially as financial

service users at Bank Nagari. The Minangkabau is a faithful community to the kenagarian

(regional) brand. This is proven by the opening of the Jakarta branch office. The bank can attract





bigger savings from this community (“Salah Satu,” 2001). It means Minangkabau customers tend

to be ethnic bonding. Conversely the Chinese tend to be business bonding.

The value orientation makes Minangkabau customers loyal to the bank. The bank has given them

financial services in personal basis and this has increased their feeling of security in using the

Bank Nagari products. The security feeling further encourage them to use the Bank Nagari

products consistently and continually. The product security is part of security feeling. Consumer

will not buy a product if they do not feel secure. The security feeling influences preference to

buy. The security feeling is obtained from close consumer-business location, close to society,

Bank Nagari commitment (to construct image to develop regional), and kenagarian.

In terms of security of the product, Chinese customers like Minangkabau value security of the

bank products. The consumers are more careful and they have a lot of information especially

bank products. Guanxiwang is an information distribution media among Chinese customers. This

makes them differ from Minangkabau customers.

Bank Nagari has different perception on Minangkabau and Chinese customers in providing credit

facilities. Chinese customers have more knowledge and experience in doing business activities

and they have very strong capital. Due to this reason Bank Nagari has minimum risk to distribute

credit facilities to the Chinese customers. Bank Nagari uses lower technology and provides

simple products compared to other banks, it does not seem to be an influencing factor to the

Minangkabau and Chinese in choosing Bank Nagari. It might be other factors of service quality

that influence both ethnic such as prompt service, feel secure, interest rate, accuracy,

dependability, and attribute. The present study analyzes an SERVQUAL’S dimensionlity

between Minangkabau and Chinese customers.


Parasuraman et al. (1988), based on exploratory research to understand the construct of

SERVQUAL and its determinants, defined SERVQUAL as the degree of discrepancy between

customers’ normative expectation for service and their perception of the service performance.

Perceived SERVQUAL is then interpreted from the differences in degree and direction between

perceptions and expectations.




Using the disconfirmation paradigm as a theoretical basis, Parasuraman et al. (1988) devised the

SERVQUAL scale. This instrument employs a pair of 22-item scales, each identical with the

exception that one assesses the perceived performance of a service provider, and the other is the

consumers’ expectation regarding the level of service to be received. Calculating the difference

between the 22 item each of five dimension forms the SERVQUAL measure. Those five

dimensions, that are proposed to be generalizable to virtually any service provider are: (1) the

reliability of the service provider, (2) the responsiveness of the service provider, (3) the tangible

aspects of the service, (4) the assurance provide by the service staff, and (5) the empathy shown

to consumers.

The SERVQUAL instrument has been productively used for measuring service quality in many

proprietary studies. It has also served as the basis for measurement approaches used in published

studies examining service quality in a variety of contexts such as physicians in private practice

(Brown & Swartz 1989); a dental school patient clinic, a business school placement center, and a

tyre store (Carman, 1990); discount and departmental stores (Teas, 1993); a gas and electric

utility company (Babakus & Boller 1992); hospitals (Carman, 1990); banks, pest control

providers, dry cleaners, and fast food chains (Cronin & Taylor, 1992) and institutions of higher

education (Boulding, Kalra, Staelin & Zeithaml, 1993).

While the SERVQUAL instrument has generated considerable interest in service quality

measurement, it has also raised questions about the need to measure expectations (Cronin &

Taylor 1992; 1994), the interpretation and operationalization of expectation (Teas, 1993; 1994),

the reliability and validity of SERVQUAL’s difference-score formulation (Babakus & Boller,

1992; Brown, Churchil, & Peter, 1993), and SERVQUAL’s dimensions (Carman, 1990).

3. Method

Location of the study area is Padang. Padang is the leading port on Sumatra's West coast and is

now the main city of the Minangkabau of West Sumatra. The population comprised of all

Minangkabau and Chinese customers of Bank Nagari in Padang. To select the respondents, a list

of saving-credit customers were obtained from the bank and names were selected randomly. This

technique is called systematic random sampling. Then type of data is quantitative data. This data

is primary and secondary data. SERVQUAL refer to Bank Nagari service gives reliability,




responsiveness, assurance, empathy and tangibles to Minangkabau and Chinese customers (Table

1).

Table 1: Variable, Sub-Variable, Operational Definition, and Indicator

SERVQUAL

Sub-Variable

Operational Definition Indicator

Reliability

1.Certain Time When these institutions promise to do something by a certain time, they should do so

Right transaction

2. Sympathy and reassuring

When consumers have problems, these institutions should be sympathetic and reassuring

Concerning to consumer

3. Dependability These institutions should be dependable

Service guarantee

4. Product services

They should provide their saving/credit services at the time they promise to do so

Credit/Saving transaction

5. Accurate records

They should keep their records accurately

Accurate

6. Keep consumer secret They should not be expected to tell their consumers exactly when saving/credit services will be performed

Secret of the consumers data

7. Prompt service

It is realistic for consumers to expect prompt service from employees of these institutions

Consumer data secret

8.Willingness to help customers

Their employees do always have to be willing to help consumers

Consumer problem decision

9.Prompt response to customer requests

It is okay if they are too busy to respond to consumer requests promptly

Bank sensitive

Assurance

10.Trusted employees Consumer should be able to trust employees of these institutions

Trustee

11.Safe feeling

Consumer should be able to feel safe in their transactions with these institutions’ employees

Secure transaction

12..Politeness Their employees should be polite Employee attitude 13.Adequate support Their employees should get Minimal training




adequate support from these institutions to do their jobs well

Empathy

14.Individual attention These institutions should be expected to give consumers individual attention

Bank intention

15.Personal attention Employees of this institution can be expected to give consumers personal attention

Employee intention

16.Best interest at heart It is realistic to expect these institutions to have their consumers’ best interest at heart

To have desire helping

17.Customer needs

It is realistic to expect employees to know what the needs of their consumers are

Employee sensitive

18.Convenient hours They should be expected to have operating hours convenient to all their consumers

There is no long queue

Tangibles

19.Up-to-date equipment and technology

They should have up-to-date equipment & technology.

Technology sophisticated

20.Appeal visually Their physical facilities should be visually appealing

Attractive

21.Well dressed and neat Appearance

Their employees should be well dressed and appear neat

Bank attribute

22.The physical facilities The appearance of the physical facilities of these institutions should be in keeping with the type of service provided

Layout

The total population of this study was 514 customers, which was divided into two groups

namely Minangkabau and Chinese. In this study, the researcher wanted to estimate the number

of sample size to be taken with assumption marginal of error 10 %, confidence level 95% and

standard deviation arbitrarily 75%. Thus, c = 10%, s = 75% and Zq = 1.96 (corresponding to a

confidence level of 95%) notice that c and s are expressed in the same unit. The value of

sample size (n) is (1.96)2 (0.75)2 / (0.10)2 = 216 customers, approximately. By virtue of the

ethnic composition within the bank’s saving-credit customers list 75% Minangkabau would

amount to162 persons and 25% Chinese would amount to 54 persons.




Moreover factor analysis is used to reduce recommended variable as independent variables.

The KMO test and Bartlett's and correlation anti-image were used to know the feasibility of

these variables. A Variable is feasible if the KMO test and Bartlet's and anti-image correlation

are above 0.50 (Santoso, 2001). If the anti-image correlation from a variable is below 0.50,

hence that variable has to be dismissed, and factor analysis have to be carried out again on the

variable until the KMO and Bartlet's and anti-image correlation are above 0.50. After each

KMO test and Bartlett's and anti-image correlation is feasible, this variable can be accepted in

the form of variable which have been reduced.

4. Saving & Credit SERVQUAL

Research in defining and measuring quality has been mainly developed in manufacturing.

Japan’s philosophy is based on the Zero defects concept, whose definition is ‘doing it right the

first time’. Crosby (1979) defines quality as ‘conformity to needs’. Research on service quality is

however inadequate which has three inherent characteristics: intangibility, heterogeneity, and

inseparability between production and consumption.

Thus, customer intentions to use a service may be limited to the benefits they desire and or

expect from the service. Whether a service or a physical good, customer expectations concerning

a product are beliefs about its performance which act as working hypotheses regarding its nature.

Hence, it is reasonable to use customer expectations as a basis for both formulating purchase

intentions and establishing standards for judging service performance.

The benefits that customers desire (i.e., benefit expectations) are considered to be the

fundamental reasons behind such anticipated buyer behavior and, of course, are the basis for

segmenting the market. Benefit segmentations is perhaps most successful when derived from

measures of what customers believe about product delivery, rather than their emotional

responses toward the offering. Consequently, customer benefit expectation reflect the cognitive

component of attitude and are sometimes labeled cognitive attitude.

Service dimension consist of tangibles, reliability, responsiveness, assurance, and empathy.

Tangibles is looked from physical facility, supply, employees, and communication means used

by a service. Tangible services of banking product are services that have interesting facilities;

presentable appearance of service personnels; the availability of information on credit products

and comprehended easy saving, etc. Reliability is ability to execute and fulfill service, which




have been promised in accurate figure. This is judged from for instance, if bank employee says

that your loan is being processed and will phone you after half hour, and he actually phones you

half an hour later. Responsiveness is willingness and ability to assist customer and give correct

service. It is evaluated from the bank’s swift action when customer face problem on credit or

saving. Assurance is knowledge ability of employees in giving trusts to customers. A good

indicator is if the bank has the reputation as a good bank. The provision of service warranty to its

product, and empathy as well as attention given are other good indicators.

The discussion of this instrument is of value because SERVQUAL instrument is reasonable

illustration of the programmatic development of a universal list of service quality dimensions.

Research was done to two financial ethnic, known as the merchant ethnics in Padang, West

Sumatra. From results of that research present the strong relations among Saving-SERVQUAL

with Credit-SERVQUAL while weak relations between Saving-SERVQUAL with and Credit-

SERVQUAL and Culture. Figure 1 illustrates this:

Figure 1: The Minangkabau-Chinese Inner Factor in Consumption

Based on the inner factor of consumption above and the factor analysis to financial products of

Bank Nagari, three categories of service expectation are identified. They are different from the




previous categories developed by Parasuraman, Zeithaml and Berry. Cultural values is very

much influences one’s expectation of service. This is one of the factor differentiating the service

category developed by Parasuraman et al. (1994) with the one obtained in this research. Below is

the service category which has been changed in the form of a linear equation. As for target of

change of presentation of form categorize SERVQUAL is to facilitate or look for root from

SERVQUAL itself.

This equation is interpreted following rel-n where n=1,2,…5 is reliability coefficient, res-n

where n=6,7...9 is responsiveness coefficient, as-n where n=10,11...13 is assurance coefficient,

em-n where n=14,15...18 is empathy coefficient and ta-n where n=19,20...22 is tangible

coefficient. Getting the root from each SERVQUAL can be done by determinant or Cramer’s

Rule (Budnick, 1993; Dumairy, 1993), while Relia, Respon, Assu, Empa, and Tangi is variable.

Cramer’s Rule is given a system of linear equations of the form AX = B where A is an (n x n)

square matrix of coefficients, Cramer’s rule provides a method of solving the system by using

determinants. To solve the value of the jth variable, form the matrix Aj by replacing the jth

column of A with the column vector B. If it denotes the determinant of Aj by ∆j, the value of the

jth variable is determined as xj = ∆j / ∆. If ∆ ≠ 0, the given system of equations has a unique

solution. If ∆ = 0, the compution of equation is undefined. If ∆ = 0 and ∆1= ∆2 = … = ∆n = 0, the

system has infinitely many solutions. If ∆ = 0 and any ∆j ≠ 0, then the system has no solution.

Service Equation According to Parasuraman, Zeithaml and Berry




The following system of equation can be rewritten in the matrix form AX(Relia,Respon,

Assul,Empa & Tangi) = B as

Whereas root from each Relia, Respon, Assul, Empa & Tangi variables are

Relia = ∆1 / ∆ =




Relia=∆1/∆=(Servqual-1.res-7.as-12.em-17.0)+(res-6.as-11.em-16.ta-22.Servqual-5)+(as-10.em-15.ta-21.0.Servqual-4)+(em-14.ta-20.0.res-9.Servqual-3)+(ta-19.em-18.as-13.res-8.Servqual-2)-(Servqual-5.res-9.as-12.em-15.ta-19)-(Servqual-4.res-8.as-11.em-14.0)-(Servqual-3.res-7.as-10.ta-21.em-18)-(Servqual-2.res-6.ta-20.em-18.0)-(Servqual-1.ta-19.em-16.as-13.0)

(rel-1.res-7.as-12.em-17.0)+(res-6.as-11.em-16.ta-22.rel-5)+(as-10.em-15.ta-21.0.rel-4)+(em-14.ta-20.0.res-9.rel-3)+(ta-19.em-18.as-13.res-8.rel-2)-(rel-5.res-9.as-12.em-15.ta-19)-(rel-4.res-8.as-11.em-14.0)-(rel-3.res-7.as-10.ta-22.em-18)-(rel-2.res-6.ta-21.em-17.0)-(rel-1.ta-20.em-16.as-13.0)

Relia=∆1/∆=(res-6.as-11.em-16.ta-22.Servqual-5)+(ta-19.em-18.as-13.res-8.Servqual-2)-

(Servqual-5.res-9.as-12.em-15.ta-19)-(Servqual-3.res-7.as-10.ta-21.em-18)

(res-6.as-11.em-16.ta-22.rel-5)+(ta-19.em-18.as-13.res-8.rel-2)-(rel-5.res-9.as-12.em-15.ta-19)-(rel-3.res-7.as-10.ta-22.em-18)

Respon = ∆2 / ∆ =

Respon=∆2/∆=(rel-1.Servqual-2.as-12.em-17.0)+(Servqual-1.as-11.em-16.ta-22.rel-5)+(as-10.em-15.ta-21.Servqual-5.rel-4)+(em-14.ta-20.0.Servqual-4.rel-3)+(ta-19.em-18.as-13.Servqual-3.rel-2)-(rel-5.Servqual-4.as-12.em-15.ta-19)-(rel-4.Servqual-3.as-11.em-14.0)-(rel-3.Servqual-2.as-10.ta-21.em-18)-(rel-2.Servqual-1.ta-20.em-18.0)-(rel-1.ta-19.em-16.as-13.0)





Respon=∆2/∆=(Servqual-1.as-11.em-16.ta-22.rel-5)+(as-10.em-15.ta-21.Servqual-5.rel-4)+(ta-19.em-18.as-13.Servqual-3.rel-2)-(rel-5.Servqual-4.as-12.em-15.ta-19)-(rel-3.Servqual-2.as-10.ta-21.em-18)


Assul = ∆3 / ∆ =

Assul=∆3/∆=(rel-1.res-7.Servqual-3.em-17.0)+(res-6.Servqual-2.em-16.ta-22.rel-5)+(Servqual-1.em-15.ta-21.0.rel-4)+(em-14.ta-20.Servqual-5.res-9.rel-3)+(ta-19.em-18.Servqual-4.res-8.rel-2)-(rel-5.res-9.Servqual-3.em-15.ta-19)-(rel-4.res-8.Servqual-2.em-14.0)-(rel-3.res-7.Servqual-1.ta-22.em-18)-(rel-2.res-6.ta-21.em-17.Servqual-5)-(rel-1.ta-20.em-16.Servqual-4.0)


Assul=∆3/∆=(res-6.Servqual-2.em-16.ta-22.rel-5)+(em-14.ta-20.Servqual-5.res-9.rel-3)+(ta-

19.em-18.Servqual-4.res-8.rel-2)-(rel-5.res-9.Servqual-3.em-15.ta-19)-(rel-3.res-7.Servqual-1.ta-22.em-18)-(rel-2.res-6.ta-21.em-17.Servqual-5)





Empa = ∆4 / ∆ =

Empa=∆4/∆=(rel-1.res-7.as-12.Servqual-4.0)+(res-6.as-11.Servqual-3.ta-22.rel-5)+(as-

10.Servqual-2.ta-21.0.rel-4)+(Servqual-1.ta-20.0.res-9.rel-3)+(Servqual-5.as-13.res-8.rel-2)-(rel-5.res-9.as-12.Servqual-2.ta-19)-(rel-4.res-8.as-11.Servqual-1.0)-(rel-3.res-7.as-10.ta-22.Servqual-5)-(rel-2.res-6.ta-21.Servqual-4.0)-(rel-1.ta-20.Servqual-3.as-13.0)


Empa=∆4/∆=(res-6.as-11.Servqual-3.ta-22.rel-5)+(Servqual-5.as-13.res-8.rel-2)-(rel-5.res-9.as-

12.Servqual-2.ta-19)-(rel-3.res-7.as-10.ta-22.Servqual-5)


Tangi = ∆5 / ∆ =




Tangi=∆5/∆=(rel-1.res-7.as-12.em-17.Servqual-5)+(res-6.as-11.em-16.Servqual-4.rel-5)+(as-10.em-15.Servqual-3.0.rel-4)+(em-14.Servqual-2.0.res-9.rel-3)+(Servqual-1.em-18.as-13.res-8.rel-2)-(rel-5.res-9.as-12.em-15.Servqual-1)-(rel-4.res-8.as-11.em-14.Servqual-5)-(rel-3.res-7.as-10.Servqual-4.em-18)-(rel-2.res-6.Servqual-3.em-17.0)-(rel-1.Servqual-2.em-16.as-13.0)


Tangi=∆5/∆=(rel-1.res-7.as-12.em-17.Servqual-5)+(res-6.as-11.em-16.Servqual-4.rel-

5)+(Servqual-1.em-18.as-13.res-8.rel-2)-(rel-5.res-9.as-12.em-15.Servqual-1)-(rel-4.res-8.as-11.em-14.Servqual-5)-(rel-3.res-7.as-10.Servqual-4.em-18)


Factor analysis conducted to financial products especially to credit and saving. This analysis

recommend that SERVQUAL consist of three factors (SERVQUAL-1, SERVQUAL-2, and

SERVQUAL-3).

5. Saving and Credit Products

In the equation rel, res, as, em and ta are coefficients while f is a variable from each coefficient.

This credit and saving equation show changes to the formation of SERVQUAL. SSERVQUAL-1

represents the result of factor 1 which consists of reliability 1, 2, 3, 4, and 5, responsiveness 7, 8

and 9, and assurance 10 and 11. SSERVQUAL-2 represents factor 2 which consists of assurance

12, empathy 16 and 18 and tangibles 19, 20, 21 and 22, and SSERVQUAL-3 represents result of

factor 3 consisting of responsiveness 6, assurance 13, and empathy 14, 15 and 17.

The linear equation showed as follows:




The credit equation ‘CSERVQUAL’ consists of three factor namely CSERVQUAL-1,

CSERVQUAL-2, and CSERVQUAL3. CSERVQUAL-1 consists of reliability 1, 2, 3, 4 and 5,

responsiveness 7, 8, and 9 and assurance 10, 11, and 12. CSERVQUAL-2: empathy 16 and 18

and tangible 19, 20, 21 and 22 while CSERVQUAL-3: responsiveness 6, assurance 13, and

empathy 14, 15, and 17.

The linear equation showed as follows:

Empathy has a big role in forming customer experience. Intangible service result from what is

felt by the customer, and does not seldom awaken the customer’s memorable experience.

Customers nowadays do not again see product which offer is exclusive the than itself product,

exclusively evaluate feature and benefit (F & B), but also from its consumption situation by

holistic. It means people would use a product not only based on the actual product but also the

situation or miscellaneous consorting the product.

6. Saving and Credit Products: The Service Perspective

The saving and credit behavior usually have different patterns. Customer desire to consume the

saving products generally due to the competitive interest rate, group pushing, excellence service,

location and complete facilities. Conversely, customer desire to consume the credit products due

to the competitive interest rate, group pushing, excellence service, and complete facilities. The

location consideration is not dominant in making credit decision. They can look at some

alternative banks to borrow money as it poses no risk to them. Figure 2 below points that

customer perception for credit products indicates subjective satisfaction average 2-9 points and

saving products of 4-9 points between both ethnics. It means that consumption level of saving

products by both ethnic is better than the consumption level of credit products. There is

significant difference between consumption perception towards saving and credit products

among the Chinese ethnic. This is because the Chinese ethnic only use credit products to scale-




up their businesses and put their finances some forms of savings in other banks because this bank

is not completely interesting in terms of its facilities. This condition is depicted in Figure 2 and

will be explained further.

0123456789

10

1 13 25 37 49 61 73 85 97 109 121 133 145 157 169 181 193

Customers

Perc

eptio

n

SavingCredit

Figure 2: The Saving and Credit Average Customer Perception

Figure 3 explains that Minangkabau customers are loyal customers. They have some irrational

considerations e.g., ethnicity, continue customer and insensitive customer. Ethnicity means that

the customers consider using the bank products based on the culture observed in the bank: the

Minangkabau values. Continue customers refer to interactive customers, a son continues from his

father, a father continues from a grandfather and so on. Insensitive customers, refer to customers

who do not know the situation of the banking industry in their region for example matters

regarding interest rate, administration process in using saving and credit products, new banking

products etc in other banks.

A Minangkabau customer is a good customer in using the bank products. From Figure 3, we can

see the customer lines of perception in using the saving and credit products are close. It means

that Minangkabau customers use bank products optimally. They are real customers in using bank

products who demand deposits, saving deposits, time deposits, and all kinds of credits including

working capital credit, investment credit and the combination of both.




0123456789

10

1 10 19 28 37 46 55 64 73 82 91 100 109 118 127 136 145

Customers

Perc

eptio

n

SavingCredit

Figure 3: The Minangkabau Perception of Saving and Credit Average

Figure 4 points that the line of saving product perception is lower from the line of credit

product perception. It means that in this bank the Chinese ethnic only use credit to support their

businesses. They undervalue the saving products. They use the other banks that have given

interesting rate, modern facilities, innovation products, etc.

0123456789

1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49

Customers

Perc

eptio

n

SavingCredit

Figure 4: The Chinese Perception of Saving and Credit Average

6. The Dimensionality of Credit and Saving Scales

This sub-heading will discuss the dimensionality of the scales. Firstly this sub-heading discusses

about banking marketing location. Banking marketing location are consisted Pondok and Pasar




Raya in Padang. Location factor very influencing to customer perception in consuming saving

product and credit, for example a Chinese customer will like to save to bank which close to their

location trade. Secondly this sub-heading discusses dimensionality of the credit and saving scale.

Confirmatory factor analysis will be used as a tool for data reduction.

Both banks are located in business center in Padang. Pasar Raya is central of Minangkabau

traders and Pondok is central of Chinese traders. Both of this ethnic have different idea regarding

place of effort like seen in Chinese picture c-f chosen place of effort, which is direct to be made

by residence at the same time. They think that effort direct become that is residence more

effective and is efficient. Very rare once Chinese chosen place of effort separated from its

residence.

A-B

C-D




E-F

Figure 5: Banking Marketing Location in Pondok and Pasar Raya, Padang

On the contrary Minangkabau chosen place of effort separated from its residence, see Figure b.

This matter is caused by they chosen to be gathered at one place which provided by local

government. Usually in the form of fairish place 'kios-kios' 3 x 3 meter. Therefore such palces

not possible for them to be made as residence at the same time.

Therefore, for Chinese customers apply the adjustment principal and ancestor to modern

condition in Padang. In trading, they still use principles as follow:

1. More and more planning will give the more opportunity to win. Lack of planning will lessen

opportunity to win. What is going on if there no planning is at all. Chinese always think

effectively. They can see to the fore and try to estimate various consequence which possible

happened. They are habit ‘making a map of battlefield’ as does a military general, see map

generally fight and consider various factor. Then, they go forward inch by inch to

‘battlefield’ specific.

2. Recognize your enemy, recognize yourself, your victory even also will not be threatened

(without information, planning become without effect). Recognize its field, recognize its

weather, complete of your victory. Cina information combination people with planning. A

planning can produce fruitful result when having correct information of time, relevant, and

accurate.

3. Speed represent essence a war. Marketing energy of peripatetic Chinese as soon as possible

(time of vital importance). Chinese collect and analyses immeasurablely of information

systematically. They also should be able to project company vision or its production line.

Then, they have to specify marketing strategy and target.




4. First of all, skillful soldier in epoch first will look for position to themselves so that they do

not seen by enemy (thinking is long-range). They will bide time to attack weak point of

enemy. Chinese have idea that marketing do not only destined today or in short-range. They

pattern have to that marketing is an activity yielding advantage on a long term.

5. A team win the day if him relate to faced enemy it ... adjustment with field is best ally to

soldier in encounter (product). Chinese always comprehend all its customer and know what

in fact they require.

6. A team will win if him braid relation with faced enemy it (price). Chinese in meticulous in

pricing product to sell of. Wisdom price very depend on their customer expectancy, ability

and willingness to pay.

Finally, analyses dimension from saving scale and credit relied on factor analysis. Perception

factor both of this ethnic very influencing at forming of SERVQUAL dimension with financial

product consumption. Product saving dimension divided to the three dimension. As seen in

component plot in rotated space below,

Figure 6: Saving Product Dimension Component Plot




SSERVQUAL-1 representing combination of reliability, assurance and responsiveness

components. This represents subjective factor push which both ethnic of Chinese and

Minangkabau to consume saving products. The factors are certain time, sympathy and

reassuring, dependability, saving services, accurate records, prompt service, willingness to help

customers, prompt response to customer requests, trusted employees, safe feeling.

SSERVQUAL-2 representing combination of assurance, empathy and tangibles components.

They are politeness, best interest at heart, convenient hours, up-to-date equipment and

technology, appeal visual, well dressed and neat appearance and the physical facilities in

keeping with the type of service provided. SSERVQUAL-3 representing combination of

empathy, responsibility, and assurance components. They are customer information, adequate

support, individual attention, personal attention and customer needs.

Figure 7: Credit Product Dimension Component Plot

Like SSERVQUAL above, CSERVQUAL-1 representing combination of reliability, assurance

and responsiveness components. This represent subjective pushing factor of Chinese and

Minangkabau to consume credit products. They are certain time, sympathy and reassuring,

dependability, credit services, accurate records, prompt service, willingness to help customers,

prompt response to customer requests, trusted employees, safe feeling, and politeness.




CSERVQUAL-2 representing combination of assurance, empathy and tangibles components.

They are best interest at heart, convenient hours, up-to-date equipment and technology, visual

appeal, well dressed and neat appearance and the physical facilities in keeping with the type of

service provided. CSERVQUAL-3 representing combination of empathy, responsibility, and

assurance components. They are information, adequate support, individual attention, personal

attention and customer needs.

7. Discussion

The dimension SERVQUAL'S was formed by using confirmatory factor analysis. Based on the

analysis, SERVQUAL'S dimension for the product of saving and credit divided to the three.

Dimensions for saving products are SSERVQUAL-1, SSERVQUAL-2 and SSERVQUAL-3 and

for credit products are CSERVQUAL-1, CSERVQUAL-2 and CSERVQUAL-3. The elements

from each dimension are discussed in the sub-heading the dimensionality of credit and saving

scales above.

Thus, from the ethnic graph plot there are differences of the consumption pattern of credit and

saving products. This means that Minangkabau customer have been using bank products

optimally. On the contrary the plot graph of the ethnic Chinese usage of product is very strange.

This means that Chinese customers only use credit products to support business activities. Other

factor which support the difference of dimension is the incorporation of principles like Sun Tzu

principles in the conduct of Chinese customers. Practically this traditional principal is still

apparent in a Chinese customer.

Results obtained from this research with regard to the dimension of ethnic consumption differ

from a former research by Parasuraman, Zeithaml, and Berry. Parasuraman, Zeithaml, and Berry

recommended SERVQUAL'S five dimensions namely reliability, responsiveness, assurance,

empathy, and tangibles. According to this research and by virtue of statistical test, there are three

dimensions to SERVQUAL'S. Such disparity is caused by difference in customer type dealt with

in the former research compared to this present research.




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Antecedents of Counter Work Behavior in Public Sector Organizations. An Asian Perspective

Sajid Bashir

Riphah School of Leadership Riphah International University

Abstract

This study attempts to find out some key factors that determine counter work behavior in public

sector organizations of Pakistan. Data was collected from 427 lower level employees working in

various public sector organizations. Results indicate that insufficient salary, cynical behavior and

work family conflict determine counterwork behavior while supervisor support shows a very

weak negative relationship. Public sector organizations have to seriously address these issues as

they are the root cause of inefficiency in these organizations.

Keywords: Antecedents, Counter Work Behavior, Public Sector Organizations, Asian

Perspective

1. Introduction

For decades organizational researchers are focusing on employee behaviors that affect

organizational prosperity. In this attempt negative behavior are gaining an increased attention. As

Martinko, Gundlach & Douglas(2002) term it as a “proliferation of theoretical explanations for

counterproductive workplace behaviors”. Behaviors like absenteeism, turn over have been

extensively researched while extreme negative behaviors like sabotage, theft, illegitimate politics

have received relatively less attention. These behaviors are intended to hurt organizations or

employees (Miles, Borman, Spector, & Fox, 2002). Apart from explaining the phenomena,

studies also attempted to find out factors which determine counter work behavior like personality

traits (Fox & Spector, 1999; Hepworth & Towler, 2004). Penny (2002) reports a loss of $200

billions in USA alone associated with CWB. Mangers and decision makers are concerned to

reduce frequency and likely hood of these behaviors as it is costly for organizations. While most

of these studies were conducted in developed countries, the developing or underdeveloped

countries received relatively little attention in this regard. The cost of CWB in these countries is

unknown and so are the factors which contribute towards development of such behaviors. The





employees working in the developing or under developed countries are living in much more

miserable conditions than the developed countries. The economic conditions and poor salaries

definitely increases the likely hood of counter work behaviors like theft, sabotage etc. These

facts necessitate a study which can identify factors causing counter work behavior. Thus we have

identified the public sector organizations in Pakistan for analysis regarding counterwork

behavior. The findings will help the decision makers and the researchers to explore ways which

can reduce counter work behavior in these specific organizational settings.

2. Counter work behavior Among the various definitions of counter work behavior, Robinson & Bennet(1995) defined it is

as behavior which violates organizational norms in some harmful manner. This harm can be for

organization in form of any behavior like theft, sabotage, absenteeism etc. and for individual in

form of drugs; alcoholism etc. Organizations are increasingly realizing importance of reducing

counter work behavior as cost . They are more interested in identification of factors which

determine such behaviors. CWB is quite a complex phenomena as Spector & Fox(2002)

points that this behavior is normally hidden. Thus we can argue that i t is more

dangerous for the organizations. “CWB on the other hand is something which can become

a worse nightmare for an organization’s management, as employees demonstrating such behavior

are not non-productive but are counter-productive, because they tend to play a role which

altogether reverses the organization’s progression”(Bukhari & Ali, 2009).

Researchers have attempted to relate these behaviors with various determinants like organizational

justice (Fox, Spector & Miles, 2001) and other factors. Organizations where employees perceive

injustice, they are more likely to engage in counter work behaviors. “Organizational justice is a

mediator of CWB, as it suggests that individuals who perceived their own workgroup to receive

more justice than other units engaged in less counterproductive work behavior” (Flaherty & Moss,

2007). Some researchers have attempted to relate these determinants with types of CWB which are

personal and organizational. Fox, Spector & Miles(2001) consider organizational injustice and

stressors determine organizational CWB while interpersonal conflict determine personal CWB.

Similarly satisfied employees show their commitment towards organization by engaging in




behaviors which are beneficial for the organizations rather than engaging in such behaviors which

result in counter work behavior. Miles, Borman, Spector, & Fox(2002) relate work environment

and emotions with CWB. There are various components of work environment, organizations must

attempt to focus each of these components to reduce incidents of CWB. There has been extensive

research on emotions and different studies have established the importance of emotions and their

subsequent impact on employee and organizational performance. Thus emotions play an important

role in determining CWB in the originations thus Spector and Fox(2002) consider negative

emotions as a potential determinant of CWB. The negative emotions like hopelessness, frustration

and disgust are generally referred to as cynicism (Anderson & Bateman, 1997) which can result in

non productive behaviors(Storm & Spector, 1987). Mount, Ilies & Jhonson (2006) consider

personality as a determinant of CWB. It is important to note that though external factors contribute

towards determining CWB, internal factors do play a role in this regard , thus type of personality

also contribute towards explaining the phenomena of CWB. Type and level of employment also

received attention by researchers some attempted to show which type of employees is more

vulnerable to CWB” Temporary workers had lower job performance and exhibited more counter

productive behaviors”(Posthuma,Campion & Vargas,2005).

While CWB is one extreme of employee behavior, the other dimension to continuum is

Organizational Citizenship behavior (OCB) which is described as “defending organization when

it is criticized” (Turnipseed & Rassuli, 2005). Dalal(2005) suggest that these concepts are

opposite as one (CWB) is harmful while other(OCB) is beneficial for the organization. Similarly

Baker(2005) is of the view that CWB and OCB are negatively correlated. Thus the concept of

CWB is important to understand as if organizations are able to reduce or eliminate CWB it will

result likelihood of OCB in the organization which is a beneficial for the organizations.

These diverse findings indicate that a number of factors need to be considered before analyzing

the phenomena of CWB. The determinants of CWB can not be confined to few determinants

rather there is an exhaustive list of factors which determine CWB. However it seems difficult to

analyze all factors in one study especially in a country like Pakistan where these behaviors

already stand under researched. The factors selected for the present study include compensation,

supervisor support, work life conflict and an interesting variable i.e. organizational cynicism.




These variables have been identified based on findings of different studies relating these

variables with CWB. Based on findings of earlier studies about CWB, the following hypothesis

will be tested in the present study:

H1: Organizational cynicism is positively associated with counter work behavior among civil

servants of Pakistan.

H2: Good compensation practices are negatively associated with counter work behavior

among civil servants of Pakistan.

H3: Supervisor support is negatively associated with counter work behavior among civil


H4: Work life conflict is positively associated with counter work behavior among civil


3. Methodology

3.1 Questionnaire

The CWB questionnaire was adopted from Bennett and Robinson (2000), Organizational

cynicism was measured using a scale developed by Brandes, Dharwadkar& Dean (2000), Pay

satisfaction was measured using Heneman and Schwab (1985) Pay Satisfaction Questionnaire,

Supervisor support was measured using a questionnaire developed by Ramus and Steger (2000)

while work life conflict was measured through an instrument developed by Pare, Tremblay &

Lalonde (2001). The questionnaires were tested for reliability value of each scale showed a

satisfactory value.

The response was required on five point Likert scale. The questionnaire was accompanied by a

short request explaining the importance of the study. It was distributed to HR managers/

administrative officers of different government organizations.

3.2 Population & Sample

The data was collected from employees working in various ministries of the Federal government

of Pakistan. The sample included the lower level employees. A total of 500 questionnaires were

distributed out of which 441 were received back but 427 were valid thus making a response rate

as 85%. Following table describes various character tics of sample:




Table: 1 Sample Characteristics

Description Range Frequency Percentage Gender Male 308 72% Female 119 28% Age(years) 20-29 207 48% 30-39 145 34%

40-49 55 13% 50 and above 20 5% Tenure (years) 1-9 288 68% 10-19 103 24% 20-29 23 5% 30 and above 13 3% Native language Urdu 93 22% Punjabi 225 53% Pushto 63 15% Sindhi 22 5% Balochi 11 2% Others 13 3% The sample composition indicates that majority of respondents were male employees. The

percentage of women working in public sector organizations of Pakistan is quite low. There are

certain reasons for this low percentage like a very low literacy rate in Pakistan especially for

women. As a cultural norm in most rural part of the country women are not allowed to have

education while in urban areas the trend is changing. Still the women who get education are

mostly restricted to join organizations as traditionally they are supposed to look after home

affairs. This makes the percentage of women in the organizations quite low. However women are

striving hard to establish their presence in these organizations and now a days we can find

women working at quite decisive positions in the organizations as well. The other factor

considered for data collection is age of respondents. The data was collected mostly from

employees having age less than 40 years. Since studies suggest possibility of counter work

behavior more in younger employees. Similarly the majority of respondents were having tenure

in organizations less than 15 years. To ensure having opinion of respondents from entire country,

the languages section indicates that respondents belong to different geographical areas of

Pakistan. Thus every possible effort was made to collect data from sample which is

representative of population




4. Results

Table: 2 Correlation Analysis

Variable Mean SD CWB Org Cyn Comp SS WLC CWB 3.14 0.53 1.00 Org Cyn 2.64 0.58 0.55** 1.00 Comp 2.03 0.78 -0.22** -0.20 1.00 SS 2.09 0.66 -0.039 0.01 0.09** 1.00 WLC 2.33 0.68 0.13* 0.10** -0.06 0.42** 1.00 **p≤0.01 , n =427, SD= Standard Deviation, CWB= Counter Work Behavior, Org Cyn = Organizational Cynicism, SS= Supervisor Support, WLC= Work Life Conflict

Correlation coefficient matrix indicates a strong and significant relationship between

organizational cynicism and counter work behavior (0.55**, **p≤.01) while the relation ship

between compensation and counter work behavior is significantly negative (-0.22**,

**p≤.01). Though the relationship between supervisor support and counter work behavior is

negative (-0.039) but it is very weak and insignificant. Work life conflict is positively correlated

with counter work behavior (0.13*,*p≤.05), the possible reasons for which will be explained in

discussion.

Table: 3 Regression Analysis Independent Variable β t-value Sig. Organizational Cynicism 0.52 12.75 .000 Compensation -11.55 -2.82 .005 Supervisor Support -0.78 -1.76 .078 Work Life Conflict 0.11 2.63 0.09

n =427, R Square = 0.334, Adjusted R Square = 0.327, F =52.85, Significance F = .000, Dependent Variable = Counter Work Behavior Regression analysis was used for analyzing various relationships among variables. Value of R

square is 0.33, thus the independent variables explain only 33% variation in the dependent

variable. The value is quite low probably due to the reason that very few determinants of CWB

were selected for the present study. There are number of other factors which affect CWB but the

present study is limited to four factors thus value of R square is relatively low, which can be

improved to a significant level if some other variables are added since 67% variation in the




dependent variable i.e. CWB remains unexplained. In analysis of variance value of F is

significant at 52.85. Regarding individual impact of independent variables on dependent

variables the t value of organizational cynicism is significant at 12.75; the t value of

compensation is significant at -2.82 while value of supervisor support is insignificant at -1.76.

The t value of work life conflict is significant at 2.63.

5. Discussion

The findings indicate some interesting dimensions of CWB in Pakistan. The strong relationship

between organizational cynicism and CWB indicate that cynicism in any form is a threat for the

organizations. The findings are indicative of the fact that employees in public sector are having

high level of cynicism for which a number of factors can be attributed to this hopelessness or

frustration. During our discussions with public sector employees it was observed that they are

highly dissatisfied with their jobs which ultimately resulted cynicism. The lower level employees

face severe discrimination in the organizations. Their opportunities for development are quite

low ; rewards have no relationship with performance while authority and decision making is

totally centralized at top. The working conditions are quite poor. In extreme hot season when

temperature rises up 45 centigrade, there are no proper cooling arrangements, the office layout

and other facilities are quite poor. Employees are forced to sit in very narrow spaces while senior

management in public sector organizations enjoy a luxurious life. Spacious offices with all the

facilities and a contingent of personal staff(who are also supposed to work at their homes), rapid

career growth, foreign trainings etc. are part of their perks. We believe the major cause of

cynicism in public sector employees is this discrimination. Very high rate of absenteeism clearly

indicates that CWB is among the most volatile issues in public sector organizations of Pakistan.

Compensation and supervisor support are negatively correlated with CWB in public sector

organizations. This relationship indicates that incidents of CWB can be reduced to a large extent

if employees are rewarded fairly. On average a lower level employee earns $100-$120 per month

in which he/she supposed to feed the family, pay the rent, school fees and also survive in a

collectivist society where a big chunk of earnings is spent in social events like marriages etc. The

government provides no subsides thus around 60-70% of this meager income is spent in payment




of utilities and transportation. These public servants and their families are living miserable lives.

Obviously in these situations we can only expect CWB as an eminent outcome. Supervisor

support is negatively related with CWB but the strength of relationship is very weak. The

possible reasons for this weak relationship can be attributed to lack of trust in leadership in

public sector organizations. The organizations are following a bureaucratic structure with top

management enjoying all the privilege and the mangers are least concerned about the welfare of

lower level employees. The approach of supervisors at any level in these organizations is more

production oriented rather than employee oriented. Employees are not consulted in any decision

making rather they are supposed to follow the orders. Thus supervisors have no role to play to

reduce counter work behavior in employees.

Work life conflict is positively associated with CWB. The increased pressure for down sizing has

made life of lower level employees more difficult. Massive layoffs have enhanced the workload

on the existing employees. Employees have to do a lot of additional tasks and that too without

any additional benefits. The frequent late sittings in the office have badly affected employees

work life balance and economic conditions. Most of lower level employees make both ends meet

by doing some additional job after office hours but now these late sittings do not allow them to

do any part time job. Another major impact has been on the health of these employees as they

can not afford to buy food if they have to work for late hours or they are forced to buy un

hygienic cheaper food from market. Though no such data was available in these organizations

we found a number of employees being patients of hepatitis and such diseases caused by having

un-hygienic food. The health facilities provided to these employees and their families are very

poor. In case any employee or a family member fell ill they have to wait for days to get an

appointment from a government doctor and to get the medicine and other treatment. All these

factors have made the work life conflict quite severe. As a result the employees are forced to

exhibit CWB. For example as per our observation one of the major cause for absenteeism is due

to the reason that employees spent a significant amount of their time standing in queues for

having a medical check up at hospitals, to deposit utility bills in banks to stand in queues to buy

cheaper food items from government stores. Although no one in these organizations have ever




attempted to calculate cost of this absenteeism, we believe that government is loosing millions of

dollars for this mismanagement by its decision makers in these organizations.

6. Conclusion The world is changing as so are the public sector organizations around the world but the pubic

sector organizations in Pakistan are still operating following obsolete styles of management

having no concern for employees. There is an urgent need on part of decision makers to address

this issue and to focus on reducing counter work behaviors among employees. Traditional

control system can force them to work in offices but it can not restrict them from exhibiting

counter work behaviors. This can only be done if employee behaviors are controlled through

consideration and employee orientation otherwise the CWB will remain an integral part of public

sector organizations of Pakistan.




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Portfolio Diversification and Financial Performance of Mutual funds in India

Nidhi Walia

Faculty – PURCITM Thapar University, Patiala

Dr. (Mrs.) Ravi Kiran, Assosiate Professor,SOMSS, Thapar University

Abstract

Financial innovations have become the central driving force taking any financial system towards

economic efficiency. Indian Capital market has shown a spurt growth with financial innovations

becoming a regular feature leading to change in investor’s preferences for newly fangled

financial innovations. Mutual fund has become an obvious choice for most of the investors

because of its performance in terms of providing higher returns at low risk. Although past

performance of fund is an important parameter in selecting a particular Asset Management

Company (AMC) for investment yet some other parameters that should be considered involves

knowledge and diligence of fund managers in deciding asset mix for funds as it results in

significant difference in financial performance of fund as compared to other funds. This paper

employs Beta (β), Fama, Sharpe (Si), Treynor (Ti) as a risk measure that measures the variability

of fund in terms of return provided and if fund manager was able to provide return over and

above risk free return and expected return. Results of the study show that funds under study vary

to some extent in terms of risk level assumed and returns generated from investment. Difference

in investment style adopted by various funds managers in designing portfolio with updated

market knowledge certainly yields them superior returns in comparison to other funds.

Keywords: Net Asset Value (NAV), Asset Management Companies (AMCs), Asset mix,

Portfolio risk, Financial return, Investment portfolio

1. Introduction

Mutual fund industry in India has already entered in the world of exciting innovations that has

lured investors to invest in Mutual funds as a preferred investment. Intense competition put forth

by private players in this industry has forced fund managers to foster innovations in existing

schemes that can satisfy the investment objectives of investors. Reduced complexities, strong





integrated network and decreasing market imperfections are luring Indian investors to invest

their domestic savings into capital markets but risk averse attitude of Indian investors do not

allow them to directly participate in this race. Thus, investment through mutual fund is most

suitable option that provides them with maximum return at minimum risk. Mutual funds industry

has moved from offering a handful of schemes like equity, debt or balanced funds to liquid,

money market, sector specific funds, index funds and gilt edged funds. Beside this recently

mutual funds have introduced some special specific funds like children plans, education plans,

insurance linked plans, and exchange traded funds. This is the reason that over the time Indian

investors have started shifting towards mutual funds instead of traditional financial avenues.

Automated approaches designed by new technology and data mining is helping Asset

Management Companies (AMCs) of mutual funds in strategic planning and investment decision

making by uncovering the hidden patterns and predict future trends and behavior in financial

markets.

Mutual fund AMCs take care of every specific need of investors especially their risk appetite and

accordingly design well-diversified portfolio that can provide returns to match investor’s

expectations. Thus, complete focus of fund managers is on striving to achieve not less than rate

of return consistent with risk level they assume. On the other side investor’s are generally more

careful while investing and presence of rationality among investors demand more returns at low

risk. Absence of perfect knowledge about financial markets create problem for investors on the

issue of evaluating mutual funds. As a result most investors select AMC on the basis of word of

mouth advertisement and sometimes over tempting returns by a particular fund lure them.

However, fund managers vary in investment styles and knowledge they possess that leads to

different outcomes even for same fund run by different AMCs. This ultimate difference between

investment style opted by fund manager in designing portfolio and investment objective set by

investors poses a serious threat. Thus, it becomes imperative for investors to thoroughly

investigate fund before investing and should not use past returns as only mean in selecting a

particular fund scheme.





Mutual fund industry in India although working at excellent pace is still far behind from the

heights it should have touched as it is still ranked at 19th position among worldwide mutual fund

markets. Despite the reason that Indian Mutual fund industry possesses high potential, very few

researches have been conducted to study the working of mutual funds and which relative

measure should be used to measure their performance. Huge literature available on predicting

stock market returns has proved that generally investors consider stock’s past returns to decide

future returns (De Bondt, 1993) and past returns are positively correlated with investor’s

expectations from future return (Fisher et. al, 2000) but return alone cannot be used as a measure

of evaluating the performance of mutual funds as most commonly some highlighted stocks are

taken into portfolio for cosmetic purposes (Neal, 2001). Return ambiguity and changes in risk

perception of individual investor affect action taken in risky financial market. Computational

complexities are not only the reason why rationality assumption is challenged rather challenges

also come from cognitive reasoning (Anderson 1991) where question is how optima human

beings are. Based on different investment objectives fund managers have to use their specialized

skills and adopt varied investment styles. Gottesman & Morey (2006) conducted research to find

relationship between manager’s education and mutual fund performance and concluded that

certainly managers with higher intelligent level acquire advance knowledge on market

movements and can use these skills to get superior performance.

Analyzing the performance of mutual fund is a critical issue. Different researchers have used

varied parameters to evaluate fund schemes with respect to their ability to generate returns and

skills to reduce risk. Haslem (1988) used fund’s systematic risk, beta coefficient to compare

portfolio risk relative to market risk. Investment in equity funds is the obvious choice of high-

risk profile investors. Treynor (1965) and Sharpe (1966) provided a specialized index to measure

superfluous returns by equity funds. In this regard they differ in their evaluation criteria as

Treynor used only systematic risk to measure portfolio performance but Sharpe used total risk to

evaluate fund Performance. Fama (1972) provided a different approach to measure performance




of mutual funds and accordingly he developed a measure in the form of comparing actual

realized return and expected portfolio return.

Financial innovations have become the central driving force taking any financial system towards

economic efficiency. Similarly innovations in Indian mutual fund industry have completely

given it afresh look. Study by Kane (1978) has described the process of avoiding regulations, as

“loophole mining” which suggests that when regulatory constraints are so burdensome that large

profits can be made by avoiding them, financial innovations is more likely to occur. These

financial innovations may look for searching either entirely new product or making some

structural changes in already built financial products to focus on investor’s requirement. In

Indian context very few studies have been conducted on mutual funds to measure their

performance. Gupta & Sehgal (1997) performed benchmark comparison of 80 mutual fund

schemes during the period from 1992-1996 and concluded that industry performed well during

this period. Bello (2005) matched a sample of socially responsible funds with randomly selected

conventional funds to investigate difference in characteristics of assets held, degree of portfolio

diversification and effect of diversification on fund performance and concluded that socially

responsible mutual funds does not differ significantly from conventional funds in any of these

attributes. Panwar & Madhumati (2006) studied sample of public sector sponsored and private

sector sponsored funds to investigate the differences in characteristic of asset held, portfolio

diversification and variable effect of diversification on fund performance during 2002-2005 and

concluded that private sector funds do not differ significantly in terms of mean return but differ

significantly in terms of average standard deviation and average covariance.

3. Research Objectives

With Mutual fund luring investors with innovative schemes to satisfy investor’s quest, it has

become imperative to study the working of mutual funds in India with reference to strategies

opted by fund managers of different AMCs that result in different return for investors. Moreover

investors are also required to analyze some key parameters of fund they are selecting to invest

besides looking into the historical returns provided by the fund scheme. To address this issue

present study was initiated to analyze various parameters of funds that highlight and disclose the

operational efficiency of funds along with different type of risks associated with the fund. The

study was conducted with following objective:




To study the investment style and distinguished strategies of mutual funds in India those help a

particular AMC to yield superior return than other funds.

To compare the operational performance of selected funds in term of return benefits provided to

the investors.

To analyze the risk level assumed by investors that help fund managers to get return above risk

free return.

To conduct this study only four mutual funds were taken under study that are most commonly

preferred by a common investor either because of their strong fundamentals or because of their

aggressive marketing that include UTI mutual fund, SBI Magnum mutual fund, Reliance mutual

fund and ICICI Prudential mutual fund. Although all these four AMCs have already launched

varied fund schemes to suit individual investors but only equity, income and balanced funds

were taken under broad research purview.

4. Performance evaluation of Mutual funds

A rational investor generally hand over their savings to mutual fund AMCs in the anticipation of

yielding abnormally high return, assuming fund managers possess updated market knowledge

and professional skills. However, despite the fact that fund managers make every possible

attempt to design fund schemes according to investor’s objectives, yet they vary in deciding the

proportion of asset mix and their stock selection abilities. These differences in investment style

and market knowledge of fund manager yield different returns even to the funds categorized

under same umbrella. This study endeavors to identify the hidden practices that fund managers

follow and uses as a key differentiator. The study initially compares the important parameters of

four funds under study for their performance evaluation and simultaneously provides a

comparable choice of fund managers for deciding asset-mix.

4.1 Analysis Of Equity-Growth Funds Table 1 compares the basic parameters of four mutual funds under our study. Expense ratio of all

the four funds when compared shows that SBI Magnum equity fund-Growth has got top position

with Ep=2.50% and UTI Equity fund takes the next lead with Ep=1.94%. With regard to




volatility in NAV UTI seems to be performing well with 52 week highest on 37.88 whereas

Reliance equity fund has a slow move with 13.46. UTI seems to be playing well with healthy

strategies of investment as the 52 week low NAV in this fund was 23.63 in comparison to

Reliance Equity Fund at 8.21. As a general practice a fund with higher portfolio turnover rate is

not accepted to be excellent but in case of Reliance Equity Fund-Growth highest level of

portfolio turnover rate i.e 114% should not be given a negative look as it is providing higher rate

of return than all other funds under our study. The only negative aspect about higher portfolio

turnover rate is that it adds to transaction cost but if this increased return is offsetting the

increased transaction cost it cannot be considered negative. SBI magnum Equity fund has got the

lowest portfolio turnover rate and along with it is also providing the highest rate of return, which

reveals that with minimum shifting of funds SBI Equity plan is performing absolutely excellent.

Table 2 unveils the comparative returns of four Mutual funds that are known for their excellent

performance and most commonly preferred by general investors because of several reasons. SBI

Magnum Equity fund-Growth has been proved to be highly volatile because of higher level of

risk assumed by it, thus, as expected it has been providing high rate of return in comparison to

other three funds under our study. Average results of one-month performance shows that SBI

Magnum equity fund-growth has highest return of 27.31% whereas ICICI Prudential Aggressive

Plan-Growth has lowest return 15.03%. Performance of previous three months average return is

pretty appreciable in case of SBI and UTI Equity fund growth with 77.31% and 50.86%

respectively. Results of return during last one year are negative for all mutual fund plans under

the study and the condition was quite obvious, escapeless and threatening. This particular

negative trend during last one year’s result shows that financial crisis has also put its shadow on

Mutual fund industry in India and as a result all top class mutual funds had to suffer despite the

best strategies adopted by them. Data of last three years performance again declare SBI Magnum

equity fund as a champion among other three funds under the study with highest return of

19.59% followed by Reliance Equity Fund-Growth with 15.06%.

Table 3 highlights the various risk estimations that depict the variability or fluctuations in the

return generated by various funds. Data estimates suggest that among four Mutual funds that

were selected for this study, highest variation is shown by SBI Magnum equity fund-Growth




with σ 5.48 whereas least fluctuations are shown by ICICI Prudential Aggressive plan -Growth.

As standard deviation is a measure of total risk assumed by securities i.e both systematic and

unsystematic risk it means there must be some specific security present in SBI Magnum Equity

fund and Reliance Equity fund that is causing more variability in returns. Beta is used as a

measure of systematic risk only and as shown in table above again SBI magnum equity plan-

Growth is showing higher level of β=0.92 whereas ICICI prudential Aggressive plan has been at

least level with β= 0.59. Data given in above table can not infer that SBI mutual fund are most

risky, however it can be interpreted that this plan is suitable particularly for those investors who

want to avail the superlative advantage of market movements as beta signify fluctuation in NAV

of a fund vis-à-vis market. Higher level of Beta in case of SBI and Reliance equity plan signify

that their NAVs are more responsive to market.

Treynor index of all the four equity fund schemes is showing unfavorable performance as this

particular measure signify the ratio of return generated by fund over and above risk free return.

With regard to this parameter all the four funds are showing negative performance with a

negligible difference. Reliance and ICICI Prudential equity funds are showing their equating

underperformance with negative Ti= –0.69. Similarly Sharpe ratio shown in table 3 is showing

the underperformance of all mutual funds taken under sample. Sharpe ratio depicts reward per

unit of total risk and in our results all the four funds are showing underperformance with a very

thin ignorable difference as Reliance equity fund has an Si=-0.12 and SBI Equity fund has Si=-

0.10. Fama as a quantitative measure of risk is here depicting the compared performance of

return with required return corresponding to total risk associated with it. SBI Magnum equity

fund with highest level of Fama indicates that fund manager has earned returns well above the

return corresponding to level of risk taken by him whereas UTI Equity fund with lowest level of

Fama = 0.02 concludes the poor stock selection skills of fund manager in comparison to other

funds taken under sample. This particular comparison reveals the fact that out of these four

Equity funds taken under sample SBI Magnum Equity fund is performing reasonably well by

providing excess return over and above required rate of return to compensate total risk assumed.

However, Lower level of Fama in case of UTI Equity fund-Growth signify lower level of risk

assumed by fund manager and thus it will be suitable more for risk averse investors.




4.2 Analysis of Income Funds Income funds are especially designed for conservative investors who want to get regular periodic

income from their investment instead of capital appreciation with least risk bearing securities in

their portfolio. Majority of investments that comprise of the portfolio of income fund ranges

from preferred stock, money market instruments, bonds and government securities. Investment

of these funds in low risk bearing securities does not assure average return higher than risk free

return. Analysis of four income funds under our study show that ICICI Prudential income fund-

Growth provides highest variation in NAV during preceding 52 weeks with Range (R) band

6.67. UTI Bond fund-Growth are also showing even higher level of variation R= 4.90 (Table 1).

Comparison of Expense ratio, which highlights the operational efficiency of fund, also shows

that SBI Magnum Income fund-Growth bears highest expense ratio of 1.85% whereas UTI Bond

Fund-growth bears the lowest expense ratio of 1.40% among the four funds under our sample

study. Table 2 provides the detailed comparison of historic as well as current returns provided by

selected sample funds under the study. An analysis of these returns are clearly depicting that

financial crisis putting its impact on all industries has resulted into negative returns for all the

funds during last one year. However in case of income funds private sector funds i.e Reliance

income fund –Growth and ICICI Prudential income fund-Growth are providing pretty good

returns than public sector funds with ICICI providing highest return of 22.68% during last one

year and SBI Magnum income fund growth providing lowest return of 3.64%. Analysis of

average returns during last three years and five years also declare ICICI Prudential and Reliance

income funds providing higher returns than public sector funds. Table 3 highlights the

comparative risks assumed by different fund schemes. Although comparison of standard

deviation of four funds under study does not reveal any significant difference however ICICI

Prudential income fund- growth shows highest fluctuations in returns provided to investors with

σ = 1.47 whereas SBI Magnum Income fund-Growth shows lowest fluctuations with σ = 1.03.

Unlike balanced and equity funds Sharpe ratio in this case does not show negative results.

Highest Si =0.25 as shown by ICICI Prudential income fund- growth highlights the superior

performance of fund in comparison to other four funds whereas SBI Magnum income fund with

Si= 0.02 shows the underperformance of fund. ICICI prudential income fund-growth with β=

11.85 and Reliance income fund-Growth with β= 10.57 explains the intense ability of fund’s




responsiveness to market changes whereas SBI Magnum income fund with β= 6.73 explains

that this fund is least responsive to market fluctuations. Comparative analysis of Treynor (Ti)

shows that any fund is not able to provide extreme superior returns over and above risk free

return and all the funds are ranging in a domain of little significant difference. Risk measure in

terms of Fama provides negative results for all the four funds that explain that any fund is not

able to provide return above the required rate of return.

4.3 Analysis of Balanced Funds

Balanced fund is a perfect choice for the investors who wish to invest in scheme that can provide

them a blend of capital appreciation along with income. Funds collected from unit holders in this

case are invested in stock, money market instruments and bonds. Although balanced funds are

assumed to be less risky than equity funds because of less proportion of funds invested in equity

shares yet they are subject to market fluctuations. Balanced funds select some stocks of well

performing sector and some designated proportion is invested in government securities and

bonds making it a well-diversified portfolio. Data in Table 1 highlight the most important

parameters that are evaluated before selecting a particular fact. Among these four funds under

our study UTI balanced fund is considered to be performing well with highest NAV but it also

show higher volatility with Range= 22.52, whereas Reliance balanced fund seem to move slowly

with highest NAV 16.30 during last 52 weeks whereas it also show less volatility as compared to

other funds with range of variation being 6.99. SBI Magnum Balanced Fund-Growth bears

maximum expense ratio of 2.50% whereas Reliance balanced fund has expense ratio of 2.25%

that makes it clear that all funds do not show any meaningful variation with respect to expense

ratio. Comparison of portfolio turnover ratio of these funds reveal that Reliance Balanced fund

has highest portfolio turnover ratio of 157% which at some time restrict investors willing to

invest in this fund but comparison of returns provided by this fund highlight that this fund is

providing highest returns to investors as compared to other funds under our study that will sub

set the extra cost born by fund. Secondary data compiled in table 2 provides a detailed

comparison of historical and current returns provided by selective funds under our study that

reveals that during past performance SBI Magnum balanced fund outperforms all other funds

with highest return however during last one month Reliance Balanced fund provides highest




return of 22.30%. ICICI Prudential Balanced fund is not showing a positive working style with –

4.51% return during last one year and 15.69% return during last one month, which is

comparatively awfully less than other funds.

Data in table 3 reveals the various risk estimations of four funds under the sample study that

highlights the variation in returns generated by these funds. Most widely accepted measure of

variation in data is σ and a comparative estimations of selected funds show that UTI balanced

fund-growth has least fluctuations in returns provided by them to the investors with σ=3.61.

Reliance Balanced fund-growth shows highest variation in returns with σ = 4.35. Beta (β) as a

risk measure estimates only systematic risk present in securities held by individual fund scheme.

Analysis of (β) of these four funds does not show a significant difference except only Reliance

Balanced Fund-Growth least risky among four funds with β= 1.08. Global crisis putting its

impact on mutual fund industry in India is clearly reflected from negative Treynor (Ti) in all the

four funds. This particular measure signifies the ratio of return generated by fund over and above

risk free return. UTI Balanced fund-Growth and ICICI Prudential fund-Growth are showing

similar Ti =-0.48 whereas Reliance Balanced fund shows Ti =-0.16. Sharpe ratio depicts reward

per unit of total risk and in our results all the four funds are showing underperformance with a

very thin ignorable difference. Fama as a quantitative measure of risk is here depicting the

compared performance of return with required return corresponding to total risk associated with

it. Reliance Balanced fund –Growth with high Fama implies that fund manager is able to prove

his managerial skills in order to tap market returns whereas UTI Balanced fund-Growth with

negative Fama signifies that fund manager did not performed well to avail the recent up trends in

market.

5. Portfolio diversification: Analysis of Asset mix

Different investment styles of fund manager are reflected from the diversified portfolio designed

by them. These sophisticated strategies adopted by fund managers help them in outperforming

their performance in comparison to their competitors. Aggressive style of fund managers force

them to design portfolio with highly risky securities that have tendency to provide high returns

whereas conservative fund managers select securities for their portfolios with minimum expected

risk and expected calculated returns. However fund managers have to match their knowledge and




investment skills in accordance of investment objectives set by investors. A comparative analysis

of portfolio designed by fund managers reveals that among equity-growth fund scheme as per the

investor’s expectations majority proportion is invested in equity stock that may be risky but has

high growth potential in terms of regular return and capital appreciation (Table 4). Among four

funds under study SBI magnum equity fund growth invests majority of funds in equity stock i.e.

88.34% whereas ICICI Prudential equity fund growth seems to be taking calculated risk by

investing only 70.86% funds in equity stock but this high level risk taken by SBI magnum equity

fund seems to be paying it highest return 27.31% during last one month whereas ICICI

Prudential equity fund- growth gets only 15.03% during same period. In addition to this analysis

also provide that additional risk borne by SBI magnum equity fund- growth has resulted in

highest negative returns –1.85% during last one year when bearish trend was following Indian

stock market whereas ICICI Prudential equity fund- growth with its strategy of assuming

calculated risk resulted in –1.03% returns in the same period. Reliance equity fund seems to be

adopting a different investment style by assuming high risk for 76.44% investment whereby

23.56% investment is held completely risk free as liquid current asset. Ability of fund manager

to maintain equilibrium in risk return trade off under this fund resulted in comparatively high

return of 22.54% during last one month and during negative trends following global financial

markets Reliance equity fund proved to be least risky with –0.52% returns. UTI equity fund-

growth also seems to follow a same pattern of SBI magnum equity fund investing more in equity

stock (86.36%) but stock selection abilities of fund manager are doubtful in this case as they

provided 19.04% return during last one month which was comparatively pretty less than 27.31%

provided by SBI magnum-equity fund for same proportion of equity stock held in their portfolio

whereas comparison of returns during last one year also show that fund provided highest

negative return (-4.73%) among four fund funds under study.

Analysis of balanced growth scheme (Table 4) reveals that UTI Balanced fund held maximum

proportion of their stock in equity shares (79.50%) and ICICI Prudential balanced fund held less

proportion in equity stock (57.28%) and a significant gap of returns earned by two funds 20.93%

and 15.69% respectively during last one month can be reasoned out as high risk assumed by UTI

Balanced fund. Reliance balanced fund again adopts a completely different investment style with

67.21% investment in highly risky equity stock and holding remaining funds as a complete risk




free investment. This investment style adopted by Reliance fund manager have resulted them

yielding highest return 19.39% during last one year in comparison to SBI Magnum that invested

71.69% of total portfolio funds in highly risky equity stock but yield only 6.7% return during

same period. These results reveal that stock selection capability of fund manager and his

investment style decides the extent up to which a particular fund can satisfy investor’s

investment objectives. Comparison of SBI magnum balanced fund and UTI balanced fund also

reveal that although both the fund manager believed in putting more proportion of fund in equity

securities yet fund manager of UTI Balanced fund seem to be less sharp and analytic as

compared to SBI Balanced fund as difference in stock selection philosophy of fund managers

result in significant gap between the returns provided by these funds with respective risks

assumed.

Comparison of income funds of these four AMCs reveals that as per the fund scheme these funds

are designed for risk averse investors so no proportion of fund is held in equity stock. Fund

portfolio is invested in either debt or liquid current assets that are known to be completely risk

free. Among these funds under study ICICI Prudential invst huge proportion of funds in debt

securities (97.15%) whereas UTI Bond fund with similar vision invest only 63.18% in debt.

Comparison of return during last one month yield negative returns for all the funds but returns

calculated during last one year reveals that ICICI Prudential income fund was able to gain pretty

well (22.68%) for the level of risk assumed whereas UTI Bond fund yield 8.83% return during

the same period. SBI magnum Income fund has been showing underperformance as compared to

other funds under study with 75.04% investment in debt it yields lowest return 3.64% during last

one year. Again this poor performance of SBI magnum Income fund can be attributed to the in

competencies of fund manager’s stock selection capabilities. Reliance income fund with 72.46%

investment in debt securities performs well with its well - designed strategies and yield 15.38%

return during last year. Thus, overall investment styles of these selected funds reveal that fund

manager’s vision, investment style and stock selection capability make a significant difference in

returns they offer at a calculated risk.




6. Conclusion

Increased risk appetite of investors along with improved regulations of financial market has

attracted the attention of investors towards mutual funds. Comparative analysis of selected funds

operating in India reveals that a fund manager with different investment style of deciding asset

mixes for their portfolio certainly yields higher returns. A general assumption of assuming high

risk by investing in equity stock to yield higher return does not sound valid in absence of

diligence of fund managers’ knowledge. Financial performance of Reliance Mutual funds reveals

that dissimilar style adopted by fund managers have yield higher return with least calculated risk

because of their precision in deciding asset mix for their portfolios. SBI magnum fund seems to

be performing well with highest returns offered by them in case of equity-growth and balanced-

growth funds but analysis of their investment style and asset mix reveals that they assumed

maximum risk by investing maximum funds in equity stock. To conclude investors should not

only consider past performance of funds in order to select AMC for their investment but

portfolio evaluation with regard to fund manager’s thoroughness in deciding asset mix is an

important criteria that will eventually match vision of fund managers with investor’s satisfaction.




References Anderson, J. (1991), Cognitive Architecture in a rational Analysis, Page1-24, Lawrence Erlbaum

Associates, Hillsdale.

Bello, Zakri.Y., (2005) “Socially responsible investing and portfolio diversification”, The

Journal of Financial Research, Vol.XXVIII, No.1, pp. 41-57.

De Bondt, Werner (1993), “Betting on trends: Intuitive forecast of financial risk and return”

International Journal of forecasting, 9(3), Pages 355-371.

Fama, E.F., (1972) “Components of Investments Performance’, Journal of Finance, (June), pp.

551-567

Fisher, Kanneth, and Meier Statman (2000). “Investor sentiments and stock returns” Financial

Analyst Journal, March/April, Pages 16-23.

Gottesman, Aron.A. & Morey, Matthew.R(2006) “ Manager Education & Mutual Fund

Performance”, Journal of Empirical Finance, Vol.13, pp. 145-182.

Haslem, J.A., (1988) “Investor’s Guide to Mutual Funds’, Prentice Hall International, USA. pp.

24-98.

Kane, Edward (1978), “Interaction of financial and regulatory innovation”, American Economic

Review, May issue, No. 2.

Neal,Edward.S.,(2001) “ Window dressing and Equity mutual funds”,(Accessed online)

(www.papers.ssrn.com)

Panwar,Sharad & Madhumati, R.(2006) “ Characteristic and Performance evaluation of selected

mutual funds in India”(Accessed online) (www.papers.ssrn.com)

Sharpe, W.F. (1966) `Mutual Fund Performance’, Journal of Business, XXXIX, Part-2 (January),

pp.119-138

Treynor, J.L., (1965) “How to Rate Management of Investment Funds’, Harward Business

Review, January-February, 1965, pp.63-75.




Annexure

Table 1 Fund Facts

Source: AMFI

Fund NAV 52-week

High NAV 52-week

low Expense Ratio

(Ep) (%) Portfolio Turnover ratio(%)

UTI equity fund 37.88 23.63 1.94 58.65

SBI magnum Equity Fund 32.84 17.51 2.50 48

Reliance equity Fund 13.46 8.21 1.89 114

Equi

ty -

Gro

wth

ICICI Prudential Aggressive plan 23.1 15.72 0.64 NA

UTI Balanced fund 62.8 40.28 2.07 43.14

SBI magnum Balanced Fund 42.05 25.55 2.50 70

Reliance Balanced Fund 16.30 9.31 2.25 157

Bal

ance

d - G

row

th

ICICI Prudential Balanced 36.38 23.17 2.29 1.48

UTI Bond fund 28.12 23.22 1.4 1010.6

SBI magnum Income Fund 22.9 20.35 1.85 NA

Reliance Income Fund 14.65 11.88 1.48 NA

Inco

me

- Gro

wth

ICICI Prudential Income 30.02 23.35 1.7 NA




Table 2 Fund Performance-Return (%)

Fund 1 month 3 Month 6 Month 1 Year 3 year 5Year

UTI equity fund 19.04 50.86 45.03 -4.73 14.23 21.97

SBI magnum Equity Fund 27.31 77.31 62.14 -1.85 19.59 27.47

Reliance equity Fund 22.24 56.36 39.28 -0.52 15.06 NA

Equi

ty -

Gro

wth

ICICI Prudential Aggressive plan 15.03 42.11 37.43 -1.03 12.4 19.56

UTI Balanced fund 20.93 51.34 39.2 6.23 11.18 17.03

SBI magnum Balanced Fund 22.03 60.02 44.69 6.7 15.17 26.48

Reliance Balanced Fund 22.30 70.87 54.47 19.39 14.30 NA

Bal

ance

d - G

row

th

ICICI Prudential Balanced 15.69 40.09 31.39 -4.51 8.25 18.24

UTI Bond fund -0.62 2.93 -2.13 8.83 6.99 6.33

SBI magnum Income Fund -0.73 2.57 -1.03 3.64 4.02 3.16

Reliance Income Fund -0.92 3.07 1 15.38 10.5 7.7

Inco

me

- Gro

wth

ICICI Prudential Income -0.71 6.54 3.49 22.68 12.12 8.14




Table 3 Analysis of Systematic & Unsystematic risk

Fund Mean SD Si β Ti Correlation Fama

UTI equity fund -0.39 4.07 -0.12 0.68 -0.73 0.68 0.02

SBI magnum Equity Fund -0.46 5.48 -0.1 0.92 -0.61 0.92 0.13

Reliance equity Fund -0.4 4.33 -0.12 0.73 -0.69 0.72 0.05

Equ

ity -

Gro

wth

ICICI Prudential Aggressive plan -0.3 3.6 -0.11 0.59 -0.69 0.58 0.04

UTI Balanced fund -0.34 3.61 -0.12 0.91 -0.48 0.93 -0.05

SBI magnum Balanced Fund -0.34 4.08 -0.11 1.05 -0.42 1.06 0.01

Reliance Balanced Fund -0.07 4.35 -0.04 1.08 -0.16 1.10 0.30

Bal

ance

d - G

row

th

ICICI Prudential Balanced -0.35 4.01 -0.11 0.96 -0.48 0.98 0.02

UTI Bond fund 0.23 1.36 0.09 8.48 0.02 8.32 -1.65

SBI magnum Income Fund 0.13 1.03 0.02 6.73 0 6.6 -1.32

Reliance Income Fund -0.36 1.32 0.19 10.57 0.02 10.38 -1.47

Inco

me

- Gro

wth

ICICI Prudential Income 0.48 1.47 0.25 11.85 0.03 11.59 -1.55




Table 4 Portfolio Allocation

Fund Equity(%) Debt(%) Others(%)

UTI equity fund 86.36 3.20 10.44

SBI magnum Equity Fund 88.34 1.49 10.17

Reliance equity Fund 76.44 Nil 23.56

Equ

ity –

G

row

th

ICICI Prudential Aggressive plan 70.86 29.14 Nil

UTI Balanced fund 79.50 17.12 3.38

SBI magnum Balanced Fund 71.69 13.52 14.79

Reliance Balanced Fund 67.21 Nil 32.79

Bal

ance

d –

Gro

wth

ICICI Prudential Balanced 57.28 8.15 34.57

UTI Bond fund Nil 63.18 36.82

SBI magnum Income Fund Nil 75.04 24.96

Reliance Income Fund Nil 72.46 27.54

Inco

me

- G

row

th

ICICI Prudential Income Nil 97.15 2.85




Optimization of Design Constraining Factors to Project Management Success of Public and Private Sector Construction in Nigeria (An Analytical Approach)

Dr. C.C Nwachukwu ANIVS

FCRMI, Lecturer, Project Management Technology Department, Federal University of Technology, Owerri, Imo State, Nigeria, West Africa.

Abstract

The failure of many capital projects in the construction sector in Nigeria seems to have emanated

from poor design. Looking at it as a virus silently eating into the fabrics of the growth of

construction industry in particular and the economy in general called for this analysis. The aim is

to identify these factors, determine their individual effect to construction project management

success in Nigeria. Issues that concerns design in any project cannot be undermined as they

provide perfect guide to the system and the initiators of the project proposals. The study of

design related factors to project success is therefore very relevant as any constrain to the success

in the construction sector has a significant effect on the overall economic growth of the nation.

Data analyses on the subject were computed based on their Relative Relevance Indices of

Attributes. Factor analysis was used to collapse the variables to fewer but interrelated variables.

The major finding is that the design factors exact high level negative influence to success in the

construction project management in Nigeria.

Key Words: Analysis of Design, Relative Relevance, Constraints to Project Success

1. Introduction

Systems design is like a compass that guide developmental process in both the construction and

production sectors of the economy. The role of design in the construction industry cannot be over

emphasized as it gives direction to the implementation process. The conception stage of any

project proposal anchors on the effectiveness of design. A good design is always clear on

material and time specifications which enables the Quantity Surveyor and other project planners

determine realistic time and cost of the project proposal. The client and the financiers rely

heavily on appraisal guide for the initial decision to embark on the project proposal. Therefore,

any ambiguity will send the wrong signal that will result to an eventual failure or abandonment





of the implementation process. The findings will help project planners and implementers to

design and execute successful construction projects thereby reducing the rate at which projects

fail, abandoned and or collapse in Nigeria. However, design related factors on its self can not

assure project management success in the construction industry as an index without a holistic

analysis of other constraining factors from other subsystems.

2. Objective of the Study

The study is aimed at identifying and analyzing design factors constraining project management

success of private and public sector construction in Nigeria. The analysis will reflect the strength

of each factor and the rate at which it influences failure, abandonment and collapse of

construction projects in Nigeria. The result of the findings if implemented is expected to reduce

the rate at which projects fail in Nigeria environment.

3. Methodology

Data for the analysis was through direct and indirect sources. A five point-Likert scale format

was used in the questionnaire design. Factor analysis was used to collapse the variables to fewer

but interrelated variables; the ANOVA was used to confirm the differences in the level of

relevance of these factors constraining project success. The analysis focused on clients related

problems in the construction of Imo State secretariat by ten different construction firms, the

construction of Owerri Onitsha road and the construction of Oceanic bank building along

Douglas road Owerri, all in Eastern Nigeria, West African Sub-Region. The analytical formula is

RRId = ∑di/DI x 100

4. Literature Review/ Historical Background of the Study

Construction industry has been ranked among the top four out of about twenty economic sectors

in terms of inter-sector linkages. The importance of this sector as an agent of development is

enhanced by its ability to provide gainful employment for the teeming population of the nation.

According to Roy (2005) “it is evidenced that noticeable development and the aesthetic

transformation of the environment is bound up with and predicated on the construction industry”.

Construction industry is a major index as a factor in the social and political integration of the

society and ranks as one of the major budgetary areas of developing economies (Nwachukwu,

2008). The construction industry is proven to be the corner stone and bedrock of rapid economic




growth of any nation (Bhavesh, 2006). The products of construction industry are desired not for

their own sake, but for the services, which they help to create as any business; social, religious,

economic, industrial activities etc must have a base in form of structure (Nwachukwu, 2008).

According to Eric, 2003, “the industry is likely to remain a major area of development activity as

the need for the provision and replacement of infrastructure become more important in the years

ahead”. The factors that constrain success in project management implementation process, which

include time, cost, quality and material as direct factors and indirect factors of Environment,

Client, Project management, Design and construction seems not to have been addressed

holistically using systems approach. The end result is huge capital expenditure with few or no

successful projects to show for it. This research is limited to the design factors as part of the

indirect factors constraining project management success of public and private sector

construction in Nigeria. Project success constrains as a system are inter-related and have

significant effect individually and collectively on both public and private sectors of the economy,

therefore, no subsystem should be underrated.

5. Design Subsystem Factors

The system designers could be in-house (from the client’s organizations) or consultants from

outside organizations and these make-up the project team. Variables of the design organization

relevant to success include the following: The inability of choosing the right team of designers,

poor payment strategies in paying designers, Designers are not given adequate authority and

freehand to perform effectively, Some designers do not use modern planning techniques in

designing complex projects, the use of ill-experienced design team in major construction

projects, Some clients inability to be realistic and thorough in the definition of the scope of

project before execution, Lack of commitment to the implementation process by the design team,

Inability of the client to show commitment in motivating the design team, Implementing

ambiguous design which can not help in achieving cost schedule and quality objectives, ease in

approving or giving change orders (variations) without thorough consideration of effects on

project objectives by the design team and the client, design not frozen once there is an agreement

on cost, time and quality control system by the design team, bribery and corruption of the design

team in case of public projects in producing quality and environmental friendly design,

specification of unsuitable and foreign imported materials that may not be environmentally




friendly, recommendation of unsuitable contractors by the design team in relation to some

special works, Lack of effective communication among the design team and other project

stakeholders, managerial competence of the Architect if he leads the design team especially in

handling conflicts within the design team, location problems that prevent designers from

attending to project briefing on site, and design team’s timely response to request for

information and approvals by the project manager.

6. Research Model

The model below was developed as a holistic systems approach to solving the problem of project

failure, abandonment, and frequent collapse of constructed structures in Nigeria. The arrows in

the model show how the variables interrelate and are intra-dependent. However, this study

concentrated on design subsystem factors as an integral part of the whole system constraints to

project success.

Figure 1: The Construction Project Management Success Interactive Model composed by the researcher based on existing literature.

TIME SUBSYSTEM

CLIENT SUBSYSTE

PROJECT MANAGEMENT

ENVIRONMENTAL SUBSYSTEM

CONSTRUCTION SUBSYSTEM

DESIGN SUBSYSTE

QUALITY SUBSYSTEM

CO

ST

SUB

SYST

EM

MA

TER

IALS

SU

BSY

STEM




7. Public Sector Design Principal Factor Analysis Results

Public sector construction principal factor analysis results show that the factors extracted from

the public sector construction accounted for 90% of the total variance. One of the major factors

accounted for 51.0% of the variance and the next factor for only 10% of the total variations, the

third factor accounted for about 11%, while the remaining factor accounted for only 9%. The

strongest factor in the design subsystem variable loadings are communication gap between

project team, availability of designers to attend to the project and designers timely response to

request for information, approvals, etc. most of the variables load highly and these include- time

and quality control system, recommendation of unsuitable contractor, managerial competence of

the architect, and conflict within design team, adequacy of remuneration of designers and their

authority and responsibility, adequate use of modern planning techniques by designers, detailed

and their authority and responsibility, adequate use of modern planning techniques by designers,

detailed scope definition, build-ability of design, attitude towards and adequacy of cost. The third

variable, planning efforts using modern planning techniques loads high. This factor is therefore

identified as the adequacy of authority and remuneration of design team and their use of modern

planning techniques. The last serious factor is the method and adequacy of remuneration of

design team and the adequacy of the authority free hand giving to them.

TABLE 1: DESIGN SUBSYSTEM EIGEN VALUES PERCENTAGE VARIANCE

FACTORS

Source: Derived From Computer Analysis Result

The success of the design subsystem in the public sector construction is determined by the

following factors: - specifying unsuitable and imported materials and ease of giving variations

A – PUBLIC

B – PRIVATE

Factors Eigenvalues Percentage

variance

Cumulative

percentage variance

Eigenvalues Percentage

variance

Cumulative

percentage

variance

1.

2.

3.

4.

1.00280

0.00340

0.00190

0.00630

51.0

10.0

11.0

09.0

51

61

72.0

90.0

1.00590

0.00530

0.00470

55.0

16.0

18.0

55.0

71.0

89.0




and the adequacy of the authority and remuneration design team and their use of modern

planning techniques, competent design teams commitment to detailed scope definition, economic

design and the achievement of cost, schedule and quality objectives, design team’s

recommendation of unsuitable contractors, the efficiency and effectiveness of the design team

and the adequacy of cost, time and quality control system by the design team.

In the design subsystem, the variables that load moderately and were choosing for this subsystem

analysis are; the right team of designers, ease of approving or giving change orders, bribery and

corruption of the design team and the specification of unsuitable and imported materials. This

factor is represented by seventeen variables and was identified as efficient, responsible and

committed design team, detailed scope definition, recommending competent contractors, all

working together with the overall purposes of achieving cost, time, quality and material

specification standards as an integral aspect of the construction project management success

imperatives.

8. Public Sector Design Subsystem Orthogonally Varimax Rotated Factors

The public sector design subsystem orthogonally varimax rotated factors shows that the strongest

factor in this subsystem that exerts great influence on project success is the efficiency and

effectiveness of the design team and the adequacy of cost, time, quality and material

management control systems. The most highly loading variables are conflict within the design

team and the availability of the designers to attend to the project needs. The other highly loading

variables are the communication gap between the project team and the adequacy of cost, time,

quality and material control system by the design team. The moderately loading variable is the

design team’s timely response to request for information, approvals. The last but not the least is

the managerial competence of the design team’s leader. The next factor is the ability to choose

the right team of designers and commitment, attitude, and responsibility of designers in

achieving cost, schedule and quality objectives loading very high. One variable, realistic and

through definition of scope load highly. The last variable is the build ability of design, load

moderately. This factor is regarded as competent design team’s commitment to detailed scope

definition, economic design, quality objective, achievement of cost and schedule initiatives.




TABLE 2: DESIGN SUBSYSTEMS

Source: Computer Analysis Result VARIABLE GROUPING INTO DIMENSIONS USING PRINCIPAL FACTORS; Table 3: Public Sector Construction and B - Private Sector Construction

Factor

Variable grouping into Dimensions No of

variables

loaded per

factor

Factor Name

1.

D1 D4 D5 D6 D7 D8 D9 D10

0.00375 0.00516 0.00995 0.00685 0.00247 0.00805 0.00286 0.00518

D11 D12 D13 D14 D15 D16 D17

0.00595 0.00352 0.00403 0.00801 0.00593 0.00270 0.00143

15

Managerial capability,

technical competence &

commitment towards

achieving cost, schedule

& quality control targets

by the design team

2.

D2 D3

0.00774 0.00289

2

Adequate authority and

remuneration of design

team

3.

NIL NIL NIL

Source: Computer Analysis Result

Factor

Variable grouping into Dimensions No of variables loaded per factor

Factor Name

1. D1 D2 D3 D4 D5 D6 D7 D8

0.00233 0.00022 0.00869 0.00383 0.00975 0.00766 0.00626 0.00212

D9 D10 D11 D12 D13 D14 D15 D16

0.00995 0.00996 0.00500 0.00813 0.00052 0.00918 0.00786 0.00641

14

Efficient, responsible and

committed design team, detail

scope definition,

recommending competent

contractors all working

amicably together with the

overall purpose of achieving

cost, time & quality standard

2.

NIL

NIL

NIL

3. NIL NIL NIL

4. NIL NIL NIL




DESIGN VARIABLE GROUPING INTO DIMENSIONS

Table 4: Public Sector Construction factor

variable grouping into dimensions no of

variables

loaded per

factor

factor name

1. D9 D13 D14 D15 D16 D17

0.00650 0.00617 0.00459 0.00052 0.00279 0.00648

5

The efficiency and effectiveness of the design

team & adequacy of cost, time and quality

control systems by the design team

2.

D1 D5 D6 D7

0.00062 0.00169 0.00572 0.00233

4 Competent designers committed to detailed

scope definition on, economic design &

achieving cost, schedule and quality objectives

3.

D8 D10 D11 D12

0.00816 0.00654 0.00599 0.00123

4 Designers recommendation of unsuitable

contractors, imported materials & the ease of

giving variations

4.

D2 D3 D4

0.00793 0.00052 0.00159

1 The adequacy of the authority & remuneration

of designers & their modern planning

techniques


TABLE 5: PRIVATE SECTOR CONSTRUCTION Fact

or

Variable grouping into Dimensions No of

variables

loaded

per

factor

Factor Name

1.

D4 D5 D6 D7 D9 D12 D13 D14

0.00962 0.005790 0.00586 0.00053 0.00292 0.00040 0.00242 0.00855

5

Detailed scope definition, economic

design & commitment towards

achieving cost, time & quality

targets

2.

D8 D10 D11 D15 D16 D17

0.00107 0.00051 0.00496 0.00774 0.00507 0.004962

5 Bribery and corruption, specifying

unsuitable materials, variation

conflict resolution & the availability

of the designers to attend to the

project

3.

D1 D2 D3

0.00500 0.0015 0.00681

4 Competent designers with adequate

authority and remuneration





9. Private Sector Design Subsystems Factor Analysis Results Using Principal Factors

The private sector design subsystems factor analysis results using principal factors shows that the

factors extracted in construction in design subsystem accounted for about 89.0% of the total

variance. One of the dominant factors accounted for 55.0% of the variance; the second for only

16% of the total variation in data input; the third for 18%. The first and strongest factor describes

almost all the design subsystem variable, except the method and adequacy of remuneration of

design team and the adequacy of authority and free hand giving to them which loaded on the

second factor. Some of the variables load very high, others loads high and moderately

respectively. The variables that load very high include: commitment, attitude and responsibility

of design team in the achievement of cost, schedule and quality objectives, the adequacy of

planning efforts using modern planning techniques, the adequacy of cost, time and quality

control by the deign team, communication gap between the project team and the managerial

competence of the design team leader. The variables that loads high includes; choosing the right

team of designers, build ability of design, specification of unsuitable and foreign imported

material, recommendation of unsuitable contractor, conflict within the design team,

distance/location/availability of the design team and the design team’s timely response to request

for information, approvals etc. the three variables that load moderately include; realistic and

thorough definition of the scope of the project before site work. Ease of approving or giving

change orders and the bribery and corruption of the design team. The next variables that load

moderately are method and adequate remuneration of design team and the adequacy of authority,

and freehand giving to the design team. The last factor is defined by no variable and the loadings

of all these variables are relatively low. In summary, the principal factors that cause design

subsystem failures are directly and indirectly affected by the cost, time, quality and material

management. The target of private sector construction include how to achieve technical

competency, optimal in achieving cost, time, quality and materials specifications by the design

team, enhancing managerial skills, and given adequate authority commensurate with

remuneration.




10. Private Sector Design Subsystem Factor Analysis Using Orthogonally Varimax Rotated

Factors

Private sector design subsystem Factor analysis using orthogonally varimax rotated factors

shows that the three factors having Eigen value greater than 0.01 are extracted from the factor

matrix. The first and dominant factor, is defined by eight out of fifteen variables, the second is

defined by six variables and third factor by one variable only. Some of the variables loaded very

high, others loaded high, moderately and low respectively. The two very high loaded variables

are the build ability of design and commitment, attitude and the responsibility of design tem in

achieving cost, schedule and quality objectives. The two highly variables are the realistic and

thorough definition of scope of project before site works are communication gaps between team.

The three moderately loading variables are the adequacy of planning efforts using modern

planning techniques, adequacy of cost, time and quality control system by the design team. And

the recommendation of unsuitable contractor’s .The last variables, loading low is the managerial

competence of the design team leader. This facto is termed “detailed scope definition, economic

design and commitment towards achieving cost, time and quality targets.

The variables loading highly are bribery and corruption of design team and specification of

unsuitable and foreign imported materials. The next set of variables that load highly are ease of

approving or giving change order, conflict with the design team, distance, location and the

availability of the design team. The only variable that loads moderately is the design team’s

timely response to request for information. This factor is identified as “bribery and corruption,

specifying unsuitable materials, variations, conflict resolution and the availability of the design

team to attend to the project.

The last factor from the design subsystem is the ability to choose the right team, methods,

prompt remuneration of the design team, the adequacy of authority and free hand giving to the

design team. In summary, the success of the private sector construction project management

from the design subsystem, using orthogonally varimax rotated factor are determined by:-

specifying unsuitable materials, giving variations, conflict resolution and the availability of the

design team to attend to the project and competent design team with adequate authority and

remuneration, detailed scope definition, economic design and commitment towards achieving

cost, time, quality and materials management targets and finally bribery and corruption.




11. Conclusion

Construction sector is seen as the pivot on which every other activity in the economy rotates. The

significance of this sector is evidenced in the fact that every business or services must have an

address, a location in the environment which must be constructed. Therefore, any effort towards

reducing or eliminating the noticeable and silent constrains that directly or indirectly affect

project management success in this sector is a right step in the right direction. Most of the

constraining factors from the design in the public sector came as a result of the systems

inefficiency in employing competent personnel, consultants and contractors to handle design as a

major activity. There should be a thorough scope definition of the project with a clear analysis of

real cost, time, quality and material targets at the conception stage.

12. Recommendations

Competent professionals from the design sub-sector should be giving free-hand to perform

especially in the public sector construction. Attempt must be made to divorce political issues

from purely technical and managerial issues involved in construction project management

success. The conception stage which houses the design should handle subsequently any problem

of thorough scope definition of project details before or after the commencement of site works.

The managerial functions of project management should be separate from the technical function

of the design team. A project manager should be appointed early enough in the project life cycle

to handle the management from inception to completion. This project manager, in conjunction

with the design team members should define the scope of the works in detail in terms of what the

construction project will cost.The use of modern project management planning and control

technique methods should be used especially in designing complex projects to achieve the

required quality and environmental targets.




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Management Journal, Vol. XVII No. 2. PP146

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No 8.PP 45.

Bhavesh, .M. P (2006) Project Management Strategy Financial Planning,Evaluation and

Control, New Delhi, PTV Ltd.

Cleland, D.I. and King, W.R. (1988) Project Stakeholders Management, Project

Management Journal, Vol. 17, No.4. PP 36

CLELAND, D.I (1986) Project management Handbook, Second Edition, New York, U.S.A Van

Nostrand Reinhold, PP 964

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Controlling, New Delhi, India. S.K Jain Publishers,pp68

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International Congress, Garmisch Partenkirchen, Federal Republic of Germany.

Macomber, E.A (2008) “Reforming Project Management”

http:///weblog.halmacomber.com// 5/4/2006

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International Journal of Project Management. Vol.7 No.3. PP57

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Public and Private Sector Construction in Nigeria, An unpublished Ph.D Thesis, Federal

University of Technology, Owerri.

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References




HRD roles and competencies: A comparative study of Pakistan and China using ASTD model

Hassan Rasool

University of Agriculture Fuwad Bashir

University of Agriculture Muhammad Ismail Ramay

International Islamic University Abstract

This study provides an in sight to the roles and competencies exhibited by HRD professionals in

Pakistan. Results show that ASTD model is helpful in the development of HRD in Pakistan. There

are similarities between HRD practices of Pakistan and China. For Pakistan, dominant work role

for HRD professionals is of an Administrator and associated competency is relationship building

skill. Organizational change agent, instructor and evaluator roles are perceived important in future.

Keywords: Roles, Competencies, HRD

1. Introduction & Literature Review

In Pakistan, many public and private organizations have started understanding the significance of

human resource development. As Human resource function has started gaining importance,

existing HRD practices are transforming and new roles have been emerging. HRD roles studies

have become critical for the professionalization of HRD practices in Pakistan.

Professionalization and standardization of HRD can be assisted with the examination of HRD

roles. (Xie, 2005). Professionalization of an occupation may come about in four phases. In first

phase, different job tasks are centralized. Then differentiation of jobs occurs and boundaries of

the occupation are established. In third phase occupation is standardized. In fourth phase,

emergence and development of the new occupation goes off. (Odenthal & Nijhof, 1996). In

Pakistan, for professionalization of HRD, it is of great importance to conduct role studies and

identify task boundaries to standardize the profession. Furthermore it is also helpful in

determining training requirements for HRD professionals.





The criteria for defining HRD roles has varied from a focus on activities (what do HRD people

do) to time (where do HRD people spend time) to metaphors (what identity do HRD people

have) to value creation (what value do HRD people create).(Conner et al 1996).

A major study in the area of HRD roles and competencies was conducted by ASTD Mclagan

(1989). In this study, 35 areas of knowledge and skill or competencies were identified. These

competencies were grouped into four categories: technical, business, interpersonal, and

intellectual. Technical competencies include adult-learning understanding, career development

theories and techniques understanding, competency identification skill, computer competence,

electronic-systems skill, evaluation skill, media selection skill, objectives preparation skill,

training and development theories and techniques understanding and research skill. Business

competencies include budget and resource management skill, business understanding,

organization behavior understanding and organization-development theories and techniques.

Interpersonal competencies include coaching skill, feedback skill, group-process skill,

presentation skill, questioning skill, relationship-building skill and writing skill. Intellectual

competencies include Data-reduction skill, information-search skill and visioning skill.

Important HRD roles include administrator, evaluator, HRD manager, HRD materials developer,

career development advisor, instructor/trainer, marketer, need analyst, organization change

agent, program designer and researcher. Many HRD roles and competencies studies have been

conducted in different countries. In America representative works include Mclagan (1983, 1989)

and Rothwell (1996). In Europe among others, HRD role studies have been conducted by Ginkel

et al. (1997), O’Brien, Thompson (1999) and Valkeavaara (1998). In Asia representative work

on HR roles and competencies include Yang (1994) Lee (1994), Xie (2005), Chen et al. (2005)

and Kuo (2002). Using ASTD model, various country level studies are replicated to explore roles

and competencies of HRD professionals.

These studies, over the years, have contributed towards the Professionalization of HRD in

respective countries. There is no such study of Pakistan that may explore the work roles and

associated competencies of HRD professionals. This study would be helpful in understanding

the applicability of ASTD model in Pakistan. Furthermore it may help in the professionalization

and standardization of HRD practices in Pakistan.




Xie (2005) studied HRD roles, required competencies, and outcomes in China. Using ASTD’s

HRD model as a reference, he examined HRD roles in seven provinces of China. The dominant

HRD role identified is of an administrator. The ASTD model is found effective in a Chinese

setting, and its application can help to promote the standardization of HRD work. While

comparing with German studies he found that fewer HRD roles are practiced in Chinese

organizations than in Germany. Our research has used Xie’s study as a reference to find

similarities between Pakistani and Chineese HRD professionals.

2. Research Questions

a. Whether ASTD’s 1989 model fits well in context of Pakistan?

b. What is the profile of HRD professionals in Pakistan?

c. What job tasks or roles HRD professionals perform?

d. What competencies they perceive are important to perform these roles?

e. What future roles HRD professionals expect to be important?

f. What similarities/dissimilarities exist between roles/competencies of HRD professionals

of China and Pakistan?

3. Methodology

Since there is no HRD role study of Pakistan, so there is no benchmark to compare with.

Research carried out by Xie (2005) is used to develop comparison of HRD roles between

Pakistan and China. A questionnaire modeled after ASTD’s McLagan (1989) was pilot tested to

find appropriateness, gap of understanding some terms existed and was eradicated with the use

of description of the terms with the questionnaire. The McLagan model was selected because it is

now mature enough and being tested in many countries. In Pakistan HRD profession is emerging

and it is the right time to test the effectiveness of ASTD model. Furthermore same model is used

in Chinese Study by Xie (2005). So it would be helpful in comparing HRD roles in China and

Pakistan.

The questionnaire was filled from HRD professionals. As there is no nationally recognized

organization of HR professionals, respondents were selected through the following procedure.

Four main sectors of the economy were selected - - financial, communication, textile and public

sector. These sectors were selected because of largest contribution in employment and GDP of




Pakistan. To have a better representation, each sector was further divided into three groups

based on employment size—large companies, medium size companies and small businesses. It is

believed that this selection resulted in better representation of HRD professionals in Pakistan.

From all sectors, a total of 110 representative organizations were selected. These include

organizations with less than 100 employees to more than 10000 employees. With a response rate

of 72.72%, 80 valid questionnaires were short listed for analysis. The study collected information

on profile of HRD professionals, their roles and associated competencies.

4. Research Results

4.1 Personal information of practitioners

4.1.1 Gender

HRD function is dominated by males in Pakistan where 72.5 males perform HRD activities.

Keeping in view the cultural context of Pakistan, female participation of 27.5% is an

encouraging participation rate. HRD jobs are generally back office jobs that are preferred by

females in Pakistan. As compared to Chinese female participation of 46.8%this is a low

percentage.

4.1.2 Age

Age of surveyed HRD professionals mostly range between 25 and 34 as 50% respondents belong

to this category. Individuals in age range 35-44 constitute 32.5 %, while 17.5 % respondents

belong to 45-54 age range. However professionals below the age of 25 and above 54 years are

non-existed in the surveyed sample. This is an indication that HRD work in Pakistan is executed

by young individuals. Like Chinese counterparts, HRD people in Pakistan are moderately

experienced. Furthermore, in Pakistan like China, the profession poses certain entry barriers to

age groups of less than 25 years.

4.1.3 Education level

Pakistani HRD professionals, like Chinese counterparts, are highly qualified as 62.5% of the

surveyed professionals possessed master’s degree and 35% are holding bachelors. This indicates




that HRD profession in Pakistan is ruled by a learned talent pool and future development of HRD

profession is bright in Pakistan

4.1.4 Qualification certificates

Pakistan has not a well established HRD qualification system. However business schools have

started recognizing the need for offering HRD programs. Only 20% of practitioners surveyed had

certificates in HRM.

4.2 Company information

4.2.1 Ownership of enterprises

Out of 80 surveyed professionals, 15% were from state owned enterprises, 15% from foreign

invested companies, 12.5% from joint venture companies and 57.5% from private companies.

4.2.2 Industries

The study covered four sectors of the economy that are largest contributor to employment and

GDP of Pakistan. The public sector accounted for 10.0%, banking and finance for 25.0%, textile

for 50% and communication services for 33.9%.

4.2.3 Size

The number of employees in the organizations surveyed ranged from fewer than 100 to more

than 10,000. Organizations with fewer than 100 employees accounted for 7.5 %, while those

with between 100 and 499 employees accounted for 17.5 %. Organizations with 1000-4999,

5000-9999 and greater than 10000 employees accounted for 35 %, 10% and 20 % respectively.

4.2.4 Department carrying out HRD functions

17.5 % of the surveyed organizations had separate HRD department, while 27.5 % had HRM

department. 27.5 % companies had personal department that take on HRD functions.




4.2.5 Position carrying out HRD tasks

Designation of surveyed professionals that perform HRD tasks vary vastly. 20 % had title of HR

manager, 17.5% hold designation of personnel manager, 27.5% had tag of training managers and

20% had other titles.

4.3 Profile of HRD practice

4.3.1 Number of HRD positions

43.5 % of the surveyed professionals belong to organizations that had 1-5 HRD positions and

31.5 % organizations had 6-10 HRD positions. Numbers of HRD positions generally depend on

the size of the organization. Results infer that every surveyed organization had significant

number of HRD positions. This indicates that HRD function has started gaining importance.

4.3.2 Training time

Time spend on training by surveyed HRD professionals is mostly short as 60 % of the

respondents spend 1 to 4 days training per year and 27.5 HRD practitioners spend 10 to 19 days

training per year. More than 19 days training is non-existent in the surveyed professionals.

Chinese HRD professionals, spend more time in training as most practitioners (53.8%) attend

training for 5 to 19 days per year, 26.3% spend more than 19 days per year on training.

4.3.3 HRD experience of practitioners

The experience level of Pakistani HRD practitioners surveyed is almost confined to less than one

year (31.2%) to a maximum of 9 years (12.5 %). Most participants (52.5%) like Chinese HRD

professionals (48.2%) have one to four years of experience.

4.3.4 Time spent on HRD activities

In Pakistan, most HRD practitioners (80 %) do not spend more than 50% of their work time on

HRD activities. This may be due to inconsistent recognition of HRD importance in

organizations. Another reason for this lack of attention towards HRD activities is due to more

involvement in HRM activities by professionals.




4.3.5 Forms of HRD activities

Table 1 show that most HRD practice in Pakistan takes the form of training (77.5%).

Organizations have a fair understanding of career development. (62.5%). 37.5 % and 35 % of

HRD practice is in the area of organizational development and management development

respectively. This indicates that few Pakistani organizations have established systems for human

resource development. Management development is another area that needs attention by

Pakistani organizations. However HRD activities like organizational development (52.3 %) and

management development (48.9 %) are relatively well practiced in China.

Table 1: Forms of HRD Activities (Pakistani vs. Chinese respondents) Pakistani Respondents Chinese Respondents Freq. % Freq. % Training 62 77.5 163 93.7 Career development 50 62.5 46 26.4 Organizational development 30 37.5 91 52.3 Management development 28 35.0 85 48.9

4.3.6 Roles practiced

A limited number of roles (from Mclagan roles) are practiced in Pakistan. Results show that in

Pakistan, five roles are relatively more in practice. These include administrator (90 %), evaluator

(77.5 %), career development advisor (40%), instructor (52.5%) and organizational change agent

(42.5 %). It means that HRD professionals are involved in communication and support services,

evaluating impact on individual or organizational effectiveness, helping individuals to assess

personal competencies, presenting information and directing structured learning experiences and

influencing and supporting change in organizational behavior. Similarly, in the majority of

Chinese organizations (70.1%), the administrative role plays an important part in leading teams,

coordinating departments and providing support for HRD projects and services. The high ratings

of administrator and evaluator indicate that Pakistani professionals pay great attention to the

delivery of HRD activities and its impact on organizational and individual effectiveness, but lack

of understanding the importance of the role of need analyst (35%) which is crucial to ensuring

the success of HRD activities.

The survey revealed that roles like HRD materials developer (25 %), marketer (15 %), program

designer (25 %), researcher (7.5 %) and HRD manager (27.5 5) do not receive much attention in




Pakistan. It can be inferred that HRD professionals are less involved in supporting and leading

work groups, producing written or electronically mediated instructional materials, marketing and

contracting of HRD view points, preparing objectives, defining contents and identifying,

developing or testing new techniques for human resource development.

4.3.7 Roles thought to be important

Three future roles are considered important by the surveyed respondents. These include

evaluator (75 %), instructor (75 %) and organizational change agent (55 %). A significant change

in the role of instructor (from 52.5% to 75%) indicates that directing structured learning is going

to be the key feature of HRD activities in future. To facilitate this phenomenon HRD

professionals expect to serve as change agents (from 42.5 % to 55%). However diminishing

perceived importance of roles like HRD materials developer, program designer and career

development advisor, indicates that HRD professionals are not clear about the implementation

criteria of the selected future roles. However most of practitioners believe that administrator role

(from 90% to 32%) is less important in future. This indicates a transformation in HRD practices

in Pakistan.

4.4 HRD Competencies

8 competencies are considered significant by HRD practitioners. These include competency

identification skill (62.5%), computer competence (57.5%), evaluation skill (77.5%), training

and development theories and techniques understanding (52.5%), budget and resource

management skill (67.5%), business understanding (67.5%), organization behavior

understanding (67.5%) and relationship building skill (80%).

4.5 Relationship between roles and competencies

Respondents were asked to select the role/roles they practice as a part or whole of their work.

Then role holders were asked to select competencies that are used to perform the role. Hence a

result matrix for roles and competencies was formed. Most practitioners practiced more than one

role. Performing a role may require one or more competencies. The mean value and standard

deviation of all competencies and roles are shown in the Table 2. A comparison of mean values




indicates that Pakistani HRD practitioners use competencies like evaluation skill (mean value

28.9), relationship building skill (mean value 26.3) and business understanding (mean value

26.1) most while performing work at their organizations. Standard deviation for business

understanding is lowest (13.0) as compared to the other two competencies. This shows a

consistent recognition of this competency in the selected sectors of the economy. For China

HRD practitioners, comparison of mean values indicates that Chinese HRD practitioners ranked

four competencies highest: Intellectual versatility (mean value 104.33),

Observing/collecting/processing data and module building skill (100.22), Industrial and

organizational behavior understanding (93.67) and Competency identification skill (91.56).These

rankings highlight the importance of intellectual ability for Chinese HRD practitioners. (Xie,

2005.)

A comparison of mean values of roles performed by Pakistani HRD practitioners indicate that

most practitioners hold work role of administrator (28.6), evaluator (27.7), instructor (21.1),

career development advisor (18.2) and organization change agent (17.6). Standard deviation for

the role of career development advisor is lowest (8.7). While for the role of evaluator it is highest

(15.2).

4.5.1 30% --50% --70% analytic method

In Pakistan HRD is evolving, so a variation to the 50%–70% analytic method was used to

include 30 % values (Table 3). This may ensure better representation of the relationship between

roles and competencies in Pakistan. To analyze the role/competency matrix conveniently,

competencies mentioned more than 32 times and 40 times by respondents (30% & 50% of the 80

qualified questionnaires) were marked , as were competencies mentioned more than 56 times

(70% of the 80 qualified questionnaires).

For the role of Administrator, the most important competencies were found to be relationship

building skill, evaluation skill, competency identification skill and budget and resource

management skill.

More than 30% of the practitioners identified 17 competencies and more than 50% of

participants identified 7 competencies, while only 2 were identified by more than 70% of the

respondents. Competencies mentioned by more than 30% of respondents, were rated important




for seven different roles. These include administrator, evaluator, HR manager, career

development advisor, instructor/trainer, need analyst and organizational change agent.

Competencies mentioned by more than 50%, were rated important for only administrator and

evaluator roles. Competencies (evaluation skill and relationship building skill) mentioned by

more than 70% of respondents, were identified important for the role of administrator and

evaluator.

5. Conclusion

The results show a profile of HRD practitioners as a young male with experience of 1-5 years in

HRD, well educated, dealing mostly with administrative assignments. The practitioner invests

time in training to keep him or her prepared for HRD tasks. Like China, Pakistani HR

professionals have non-HRD responsibilities, and spend even more time on those activities. The

dominant HRD role he or she played is of an administrator. HRD in Pakistan is still in the early

stages of its development. One indication of this is the fact that training is still the dominant form

of HRD in Pakistani organizations. Furthermore, there is an inconsistent recognition of HRD

importance among various sectors of the economy.

The ASTD model is effective in a Pakistani setting, and its application can help to promote the

standardization of HRD work. But there are some differences in Pakistan. There are fewer HRD

roles practiced in Pakistani organizations than in developed countries and even China. The

perceived importance of roles is somewhat similar between Pakistan and China. Administrator,

evaluator, career development advisor and organizational change agent are the main roles

practiced in Pakistani organizations.

Like China, HRD as an independent academic field of learning has not yet gained national

recognition in Pakistan and there are no HRD degree programs offered at Pakistani colleges and

universities.

There are some limitations to this research. First, there is no national association of HRD

practitioners in Pakistan, so probability sampling is not possible; second, not all sectors of the

economy were covered in this research and keeping in view a national study, sample size is

small. Due to the limitations of the research, the results cannot be generalized. However, this

research may provide a base for future research on roles and competencies in Pakistan.




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Table 2: Result matrix of the relationship between roles and competencies ROLES

S.D. Mean Researcher Program Designer

Organization Change Agent

Need Analyst

Marketer Instructor /Trainer

Career Development

Advisor

HRD Materials Developer

HRD Manager

Evaluator Administrator

3.56 5.64 0 4 6 8 0 10 8 4 4 8 10 Adult-Learning Understanding 6.42 17.82 6 12 22 22 10 22 20 14 18 26 24 Career Development theories and

techniques understanding 13.45 23.45 4 14 26 22 8 28 26 18 20 44 48 Competency identification skill 11.15 24.73 6 18 28 26 10 30 30 20 22 42 40 Computer competence 7.76 18.91 6 12 22 22 10 20 24 16 16 30 30 Electronic- system skill

16.81 28.91 6 20 32 24 12 36 30 20 22 62 54 Evaluation skill 4.13 10.73 4 6 12 14 8 12 14 8 8 16 16 Media selection skill 7.09 17.64 6 12 18 22 10 24 20 12 16 28 26 Objectives preparation

10.85 24.55 6 18 30 26 12 42 28 18 20 36 34 T& D theories and techniques understanding

0.93 5.45 6 4 6 6 6 6 6 6 4 6 4 Research 12.61 22.36 6 14 20 22 12 30 24 16 14 40 48 Budget and resource management

skill 13.07 26.18 6 16 30 26 12 36 30 18 22 46 46 Business understanding 12.88 25.27 6 18 28 26 12 34 26 16 20 46 46 Organization behavior

understanding 7.07 19.82 6 16 24 20 10 24 24 18 20 30 26 Organization-development

theories and techniques 7.69 14.00 4 8 12 12 6 22 16 12 10 24 28 Coaching skill 8.59 17.27 4 12 16 18 8 26 20 12 14 30 30 Feedback skill 2.99 6.60 2 6 8 4 8 6 4 6 10 12 Group-process skill 8.19 13.64 2 6 12 12 8 16 16 10 12 28 28 Negotiation skill 8.92 13.09 2 8 12 14 4 18 14 6 10 24 32 Presentation skill 2.59 1.09 0 0 0 0 0 0 0 0 0 4 8 Questioning skill

15.82 26.36 6 14 30 24 12 36 28 16 18 50 56 Relationship-building skill 6.72 10.18 2 8 10 12 4 10 8 6 8 18 26 Writing skill 5.01 13.09 4 10 18 14 6 14 16 12 12 18 20 Data-reduction skill 4.30 12.55 6 8 12 14 10 16 14 10 10 20 18 Information-search skill 1.62 6.73 4 8 8 8 4 8 8 6 6 8 6 Visioning skill

4.40 11.08 17.60 16.88 7.92 21.12 18.24 11.92 13.28 27.76 28.64 Mean 2.00 5.21 9.27 7.42 3.67 11.14 8.78 5.70 6.50 15.26 15.11 S.D.

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Table 3: Result matrix of the relationship between roles and competencies (recognized by more that 30% of respondents) ROLES

HRD Instructor

Administrator Evaluator Manager

Career Development

Advisor /Trainer Need

Analyst

Organization Change Agent

Adult-learning understanding Career development theories and techniques understanding ♦ ♦ Competency identification skill ♦ ♦ ♦ ♦ ♦ Computer competence ♦ ♦ ♦ ♦ ♦ ♦ Electronic-systems skill ♦ ♦ ♦ Evaluation skill ♦ ♦ ♦ ♦ ♦ ♦ Media selection skill Objectives preparation skill ♦ ♦ ♦ T& D theories and techniques understanding ♦ ♦ ♦ ♦ ♦ ♦ Research Budget and resource management skill ♦ ♦ ♦ ♦ ♦ Business understanding ♦ ♦ ♦ ♦ ♦ ♦ Organization behavior understanding ♦ ♦ ♦ ♦ ♦ ♦ Organization-development theories and techniques ♦ ♦ ♦ ♦ ♦ Coaching skill ♦ ♦ Feedback skill ♦ ♦ ♦ Group-process skill Negotiation skill ♦ ♦ Presentation skill ♦ ♦ Questioning skill Relationship-building skill ♦ ♦ ♦ ♦ ♦ ♦ Writing skill ♦ Data-reduction skill Information-search skill

Com

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, Bus

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Inte

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Visioning skill


COPY RIGHT © 2009 Institute of Interdisciplinary Business Research

112


The Effect of Demographic and Academic Backgrounds

on Financial Accounting Performance

Wan Faizah Wan Abdullah. Siti Salmah Abu Bakar.

Marzlin Marzuki. Noraini Abdul Rahim.

Faculty of Accountancy, University Teknologi MARA Kedah, PO box 187, 08400 Merbok, Kedah, Malaysia

Kamaruzaman Jusoff (Corresponding author) TropAIR, Faculty of Forestry, Universiti Putra Malaysia, 43400 Serdang, Selangor.

Malaysia

Abstract The main objective of this study is to compare the Financial Accounting performance

between students with and without Sijil Pelajaran Malaysia grades and their demographic

background. The study was carried out among the Diploma in Accountancy students at

Universiti Teknologi MARA Kedah campus. 190 usable data were obtained from the

Academic Affairs Department at the campus. Independent t-test was used to analyse the

data. The finding shows that the performance of students with SPM Accounting is

significantly higher for FAR 100 and FAR 200. The same result is true for those with

SPM Commerce on FAR 100. On the other hand, there is no significant difference

between those with and without SPM Additional Mathematics and SPM Economics

performances in all Financial Accounting courses. In terms of gender, females performed

significantly better in FAR 200 only. For school location, there is no difference between

students from urban and rural schools on the performance of Financial Accounting.

Key words: Financial Accounting performance, Demographic background, Academic

background

1. Introduction

Diploma in Accountancy (DIA) programme offered by University Teknologi MARA

(UiTM) is a semi professional course. Candidates are required to obtain a credit each in

any five subjects in their Sijil Pelajaran Malaysia (SPM) including English and




113


Mathematics. The current open system implemented by the Malaysian Ministry of

Education on SPM examination allows a student to register and sit for any subjects

offered by the ministry. This leads to a situation where students have to decide on the

subjects that should be taken at SPM level. For those who plan to take DIA programme,

they may need to evaluate the suitability of the subjects taken at SPM level. The results

of this study may benefit those students in making their decisions. This study would also

be of great help to institutions offering accounting programme at diploma level

particularly the Faculty of Accountancy to determine entry requirements. In addition to

that, it may also help lecturers to understand the differential performance among students

and thus are able to evaluate various teaching methods.

Studies have shown that the performance of undergraduate Accounting students was

affected by their academic background. Mitchell (1985) found that there is a positive

relationship between students’ high school grades and performance in the quantitative

aspects of their first year examination. Baldwin and Howe (1982), Bergin (1983), Canlar

(1986), Eskew and Faley (1988), and Bouillon (1990) also found that students who had

studied Accountancy at high school had superior performance initially in university

Accounting courses, but this early superiority diminished overtime and was completely

eroded by the end of the first year. On the other hand, Keef (1988), Keef (1992), Moses

(1987) and Bartlett, Peel and Pendlebury (1993) reported that prior study of Accounting

has no significant advantage for students in the first and third year of the Accounting

degree programme.

Similarly, previous knowledge of Mathematics has positive and significant effects on

student performance in introductory Accounting courses [(Bartlett et al. (1993), Gul and

Fong (1993), Lai Mooi Tho (1994) and Eskew and Faley (1988)]. English and

Economics have also been found to have positive effects on student performance in

introductory Accounting courses. Gul and Fong (1993) found that certificate level

English grade appears to be a significant variable in first year Accounting students’

performance. The study by Bartlett et al. (1993) also showed that the most consistent

explanatory variable of first and third year examination performance is the prior study of

Economics at ‘A’ Level. A Malaysian study by Lai Mooi Tho (1994) found that Sijil



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Tinggi Pelajaran Malaysia (STPM) Economics influences the performance in

introductory Accounting courses.

Besides the academic background, studies on demographic background have also been

carried out particularly on gender and school location. Buckless, Lipe and Ravenscroft

(1991) showed that females are perceived to be better than male students. Mutchler,

Turner and William (1987), Lai Mooi Tho (1994) and Minga Negash (2002) found that

gender has no significant impact on lower Accounting division courses. There is no

difference in performance between rural and urban status as reported by Lai Mooi Tho

(1994).

Unlike previous studies which has been carried out at the undergraduate level, this study

focuses on diploma level. The main objective of the study is to compare the performance

in the Financial Accounting courses between students with and without SPM grades for

Accounting, Additional Mathematics, Economics and Commerce and their demographic

background that is gender and school location.

2. Methodology

The study was carried out at the UiTM Kedah. Data were collected from the students’

record at the campus. A research form was used to gather information related to

demographic information such as gender, previous school; grade history in Accounting,

Additional Mathematics, Economics and Commerce at the SPM level; and students’

grades for Financial Accounting courses at UiTM (FAR100, FAR150, FAR200 and

FAR250). According to the Malaysian Education Department, schools located in

Municipal Councils are considered as urban school whereas schools outside Municipal

Councils are considered as rural. Samples were selected from the DIA population in Part

5, 6, 7 and 8 in the November 2008 - April 2009 semester. Students with incomplete

record in their personal files were excluded from the study.

Data were analyzed using the Statistical Package for Social Sciences (SPSS) version

15.0. Descriptive statistics were used where appropriate and data were summarized as

percentages. The differences in the performance of students who had studied each SPM

subject and the students’ demographic background were tested using independent t-test.

A p value < 0.05 was considered significant.



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3. Result and Discussion

3.1 Demographic

The total number of samples selected for the study was 195 (100% of the total

population) and 5 were excluded due to incomplete data for SPM. The total usable data

were 190. The demographic data of the students are given in Table 1.

3.2 The performance in Financial Accounting courses between students with and without

SPM grades and their demographic background.

The performance in Financial Accounting courses between genders is given in Table 2.

The results showed that female students performed better than the male students.

However, the difference is not significant except for FAR 200. This corresponded to

studies by Mutchler et.al. (1987), and Lai Mooi Tho (1994) where he found that gender

has no impact on lower accounting division courses.

The performance in Financial Accounting courses between students from different school

locations is given in Table 3. There was no significant difference in the performance for

all Financial Accounting courses between students from different school locations where

the students studied for their SPM. The finding corresponded to the study by Lai Mooi

Tho (1994), which found no significant difference in the performance between students

from rural and urban areas. However, Lai Mooi Tho (1994) studied the students’

residence and not the location of their school.

The performance in Financial Accounting courses between students with and without

SPM Accounting is given in Table 4. The performance of students with SPM

Accounting was significantly better than students without SPM Accounting for FAR 100

and FAR 200. The findings on SPM Accounting on the performance of FAR 100

correspond to previous studies by Baldwin and Howe (1982), Bergin (1983), Canlar

(1986), Gul and Fong (1993), Rohde and Kavanagh (1996), and Moy Yin Koh and Hian

Chye Koh (1998) which found that the performance of students with basic Accounting

are better than those without basic Accounting for introductory Accounting.


SPM Additional Mathematics is given in Table 5. There is no significant difference in



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performance between students with SPM Additional Mathematics and students without

SPM Additional Mathematics for all Financial Accounting courses. This finding did not

correspond to the findings of previous studies by Eskew and Faley (1988), Barlett et al.

(1993), Gul and Fong (1993) and Lai Mooi Tho (1994). In Lai Mooi Tho’s study in

Malaysia, she obtained a positive and significant effect of Mathematics on student

performance in introductory accounting courses. The difference in the result could be due

to the streaming system which has been transformed to the open system implemented by

the Malaysian Ministry of Education. In the streaming system, students who performed

better are placed in Science stream and the rest are placed in Arts stream. Additional

Mathematics is a compulsory subject for the science students. Those with Additional

Mathematics (science students) perform better because they have a greater affinity for

quantitative courses. Under the new system, a student is allowed to register and sit for

any subjects offered by the ministry. Therefore, any student may be able to sit for

Additional Mathematics.


SPM Economics is given in Table 6. Students with SPM Economics perform better in

Financial Accounting courses than those with SPM Economics but the results are not

significant. This finding contradicted the study by Lai Mooi Tho (1994) where she found

that Economics in STPM lead to a better performance in introductory accounting at the

undergraduate level. The difference in the finding could be due to the different level of

coverage in SPM Economics and STPM Economics.


SPM Commerce is given in Table 7. The result showed that students with SPM

Commerce performed significantly better than those without SPM Commerce for FAR

100 only. This could be due to the topics covered in Commerce at SPM level are being

included in the syllabus in FAR 100.



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4. Conclusion

The performance of students with SPM Accounting and SPM Commerce in FAR 100

were better than those without the subjects in their SPM. Besides FAR 100, those with

SPM Accounting also performed better in FAR 200 than those without the subject. On

the other hand, there is no significant difference between students with SPM Additional

Mathematics and SPM Economics in the performance of all Financial Accounting

courses. For demographic background, females performed significantly better in FAR

100 only. On the other hand, there is no significant difference in Financial Accounting

performance between students from urban and rural schools.



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References

Baldwin, B.A., and Howe, K.R.. 1982. Secondary-Level Study of Accounting and

Subsequent Performance in the First College Course. Accounting Review. 57 (3):

619 627.

Bartlett, S., Peel,M.J., and Pendlebury, M. 1993. From Fresher to Finalist: A Three

Year Analysis of Student Performance on an Accounting Degree Programme.

Accounting Education 2(2): 111 122.

Bergin, L.J. 1983. The Effect of Previous Accounting Study on Student Performance in

the First College –Level Financial Accounting Course. Issues in Accounting

Education: 19 28.

Bouillon, M.L., Doran, B.M., and Smith, C.G.. 1990. Factors that Predict Success in

Principles of Accounting Classes. Journal of Education for Business 66(1): 22 27.

Buckless, F.A., Lipe M.G. and Ravencooft, C. G., 1991, Factors that Predict Success in

Principles of Accounting Classes, Journal of Education for Business, 6: 248 261.

Canlar,M. 1986. College-Level Exposure to Accounting Study and its effects on Student

Performance in the MBA-Level Financial Accounting Course. Issues in

Accounting Education 1:13 23.

Eskew, R.K., and Faley, R.H.. 1988. Some Determinants of Student Performance in the

First College-Level Financial Accounting Course. The Accounting Review

LXIII(1):137 147.

Gul, F.A., and Fong, S.C.C.. 1993. Predicting Success for Introductory Students: Some

Further Hong Kong Evidence. Accounting Education 2(1): 33 41.

Keef, S.P.. 1988. Preparation for a First Level University Accounting Course: The

Experience in New Zealand. Journal of Accounting Education.6(2), Fall, 293 307.

Keef, S.P. 1992. The Effect of Prior Accounting Education: Some Evidence from New

Zealand. Accounting Education 1(1): 63 68.

Lai Mooi Tho. 1994. Some Evidence on the Determinants of Student Performance in the

University of Malaya Introductory Accounting Course. Accounting Education

3(4): 331 340.



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Minga Hegash. 2002. Demographic Factors, Accounting grades and Maths Skills:

Evidence from a South African University. Paper presented at South African

Accounting Association Regional Conference, Grahamstown.

Mitchell, F., 1985. School Accounting Qualifications and Student Performance in a First

Level University Accounting Examination. Accounting and Business Research

15(58): 81 86.

Moses, O.D. 1987. Factors Explaining Performance in Graduate-Level Accounting.

Issues in Accounting Education 2(2): 281 291.

Moy Yin Koh and Hian Chye Koh. 1998. The Determinants of Performance in an

Accounting Degree Programme. Accounting Education 8(1): 13 29.

Mutchler, J.F., Turner, J.H., and William, D.D. 1987. The Performance of Female versus

Male Accounting Students. Issues in Accounting Education. 2(1):103-111.

Rohde, F.H., and Kavanagh, M. 1996. Student Performance in the First MBA-Level

Financial Accounting Course. Issues in Accounting Education 1(1): 13 23.



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Annexure Table 1: Demographic Data

Parameters Number of students Percentage (%) Gender

Male Female

79

113

41.1 58.9

School location Rural Urban

84

103

43.8 53.6

Table 2: Performance of each Financial Accounting course between genders

Gender N Mean Std. Deviation Significant (2 tailed)

male 79 2.85 0.869 0.221 FAR 100 Female 113 2.99 0.725

male 79 2.23 1.059 0.519 FAR 150 female 113 2.32 0.987

male 76 2.70 0.912 0.021 FAR 200 female 112 3.01 0.875

Male 68 2.04 1.022 0.484 FAR 250 female 106 2.15 1.003

Table 3: Performance of each Financial Accounting courses between students from different school locations

School Location N Mean Std. Deviation Significant

(2 tailed)

Rural 84 2.86 0.683 0.187 FAR 100 urban 103 3.02 0.840

rural 84 2.34 0.975 0.581 FAR 150 urban 103 2.26 1.044

rural 82 2.83 0.924 0.428 FAR 200 urban 101 2.94 0.900

rural 75 2.27 1.016 0.121 FAR 250 urban 94 2.03 0.975



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Table 4: Performance of each Financial Accounting course between students with and without SPM Accounting.

SPM Accounting N Mean Std.

Deviation Significant (2 tailed)

Without 90 2.63 0.805 <0.001 FAR 100 With 102 3.21 0.669

Without 90 2.15 1.055 0.109 FAR 150 With 102 2.40 0.971

Without 87 2.74 0.915 0.035 FAR 200 With 101 3.01 0.872

Without 81 2.03 1.054 0.317 FAR 250

With 93 2.18 0.968

Table 5: Performance of each Financial Accounting course between students with and without SPM Additional Mathematics

SPM Add. Math N Mean Std. Deviation Significant

(2 tailed)

Without 12 3.25 0.669 0.164 FAR 100 With 174 2.92 0.795

Without 12 2.27 0.734 0.931 FAR 150 With 174 2.30 1.020

Without 12 3.20 0.578 0.231 FAR 200 With 170 2.87 0.909

Without 12 2.31 0.644 0.540 FAR 250 With 156 2.12 1.030



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Table 6: Performance of each Financial Accounting course between students with and without SPM Economics.

SPM Economics N Mean Std.


Without 159 2.92 0.787 0.451 FAR 100 With 33 3.03 0.801

Without 159 2.28 1.015 0.861 FAR 150 With 33 2.31 1.033

Without 156 2.88 0.926 0.885 FAR 200 With 32 2.91 0.777

Without 142 2.10 1.019 0.831 FAR 250 With 32 2.15 0.979

Table 7: Performance of each Financial Accounting course between students with and without SPM Commerce

SPM Economics N Mean Std.


Without 166 2.89 0.801 0.049 FAR 100 With 26 3.22 0.646

Without 166 2.26 1.016 0.417 FAR 150 With 26 2.44 1.018

Without 163 2.89 0.888 0.788 FAR 200 With 25 2.84 0.996

Without 151 2.09 1.017 0.403 FAR 250 With 23 2.28 0.962



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Influence of Institutional Pressure and Ownership Structure on Corporate Social Responsibility Disclosure

Faizah Darus

Roshayani Arshad Suaini Othman

Faculty of Accountancy, Universiti Teknologi MARA, Malaysia, 40450, Shah Alam, Selangor, Malaysia

Kamaruzaman Jusoff (Corresponding author)

TropAIR, Faculty of Forestry, Universiti Putra Malaysia, Serdang, 43400 Selangor. Malaysia

Abstract

A clear understanding of the effectiveness of regulation is crucial to regulatory bodies in

their efforts to improve corporate transparency. This study examines the effects of the

introduction of regulatory requirements relating to Corporate Social Responsibility (CSR)

disclosure, and the impact of institutional pressure and ownership structure on

management’s disclosure decisions. Using the annual reports of 144 Malaysian listed

companies, this study investigates the effects of regulatory efforts in promoting CSR

disclosure in periods of uncertainty before (2005 and 2006) and with the introduction of

regulatory requirements (2007), and the association of ownership structure on the extent

of CSR disclosure. The regulatory disclosure environment, managers’ imitation strategy

through board interlock and ownership structure (proxy by family, government and

foreign ownerships) relating to CSR disclosure were investigated. Results of this study

provide evidence that regulatory efforts are important mechanism in promoting greater

corporate transparency in CSR disclosure. This is reflected in the significant association

between government ownership and the extent of such disclosure. However, the findings

demonstrate that such efforts do not appear to promote disclosures of CSR activities in

family owned companies. Nevertheless, the findings indicate strong possibility of raising

investors and other stakeholders’ expectations towards expecting more detailed

disclosure of CSR activities in companies’ annual reports through the influence of

regulatory efforts. An implication of these findings is that regulatory efforts have the




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prospect of becoming a significant force in promoting the extent and quality of CSR

disclosure.

Key words: Mandatory disclosure, institutional theory, ownership structure, corporate

social responsibility, financial reporting regulation.

1. Introduction

There is growing concern world wide regarding corporate social responsibility (CSR)

issues amongst companies. One aspect of CSR that is of concern is the state of CSR

reporting. This is because traditional financial reporting does not adequately capture CSR

activities of companies (Yongvanich & Guthrie, 2006) and currently there are various

frameworks that companies could adopt. Given this setting, CSR activities reported in

companies annual reports may not facilitate investors and other stakeholders in assessing

whether corporate social activities are in line with their interests. More detailed

disclosure of CSR activities will thus provide useful information to a range of

stakeholders. However, according to Gray (2006), recent years have witness a substantial

increase in reporting on corporate social responsibility issues by major corporations in the

world. In East Asian countries, the issue of CSR is particularly important because CSR is

still at an infancy stage and there is a relatively low level of transparency amongst

companies (Thompson & Zakaria, 2004).

In Malaysia, the issues of CSR have attracted increasing attention from the government,

practitioners and academia (Hackston & Milne, 1996, Mustafa et al., 2006). This is

evidenced by the recent government efforts requiring all public listed companies to

disclose CSR activities in their annual reports for financial year ending 31 December

2007. However, management are still given the discretion of deciding on the extent of

disclosures to be made. Prior to this, the government has also launched a guide to

companies with substantial government ownership known as the ‘Silver Book’ in 2006.

The ‘Silver Book’ provides the principles and guidelines on how these companies can

manage their contributions to society in an effective and sustainable manner (The Edge,

September, 2006). The launching of the ‘Silver Book’ is expected to improve their CSR

disclosure and in turn will encourage other companies to follow their lead. In addition,



125


the Federal Government’s 2008 and 2009 budget have also incorporated some incentives

such as tax deductions for companies who provide public facilities and ‘green theme’

(such as biomass energy, biodiesel and biogas plants, sale of certified emission reduction

or carbon credit etc). The overall regulatory efforts are expected to increase managers’

awareness to make detailed disclosure of CSR activities in their companies’ annual

reports and consequently affect investors and other stakeholders’ ability in making

informed judgements regarding such activities. Hence, an improved understanding of

influences on management’s decisions to disclose more or less CSR information would

therefore be sought by outside investors and other stakeholders such as debt holders,

employees and regulators.

Empirical evidence in Cheng and Courtenay (2006) indicates that regulatory efforts are

associated with more detailed corporate disclosure. However, Nazli and Weetman (2006)

found that the culture of secrecy in owner-managed and family-controlled companies of

Malaysian businesses outweighed the reforming efforts of government to establish a

climate of greater accountability and transparency following reforms that emerged from

the Asian economic crisis of 1997 -1998. Their results are consistent with several other

prior empirical evidence that indicate companies in East Asian region have lower

transparencies due to the culture of relative secrecy in owner-managed and family

controlled companies. These studies show that there is an association between ownership

structure and the level of corporate disclosure (e.g. Eng & Mak, 2003; Haniffa & Cooke,

2002; Ho & Wong, 2001). While the presence of substantial family ownership in

companies is associated with lower corporate disclosure, other forms of ownership

structure are associated with more detailed corporate disclosure. Given the varying forms

of corporate ownership structure, it is important to include the influence of ownership

structure on CSR disclosure.

The aim of this study is to examine the effects of external forces as imposed by

regulatory authorities, the effects of social influences in situations of uncertainty

following the introduction of regulatory requirements relating to CSR disclosure and the

impact of ownership structure on managers’ incentives to disclose CSR activities. It is



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based on the expectation that new coercive forces through the regulatory efforts and the

period of uncertainty to have an impact on CSR disclosures by Malaysian companies.

Two theoretical perspectives are used in this study. First, under the institutional theory,

managers have incentives to increase CSR information to comply with regulatory

requirements and social norms in order to justify their actions and to deflect criticisms

regarding their CSR activities and reporting practices. Second, under the agency theory,

managers’ CSR disclosure decisions are influenced by the ownership structure of their

companies as well as their desire to signal that they are acting in the interests of the

shareholders.

2. Motivation for the Study

There is a paucity of empirical evidence on issues related to CSR, in particular regarding

the impacts of institutional forces and ownership structure in relation to CSR disclosures

in the East Asian countries. Therefore, this study aims to provide new evidence on how

external forces, social pressures and the ownership structure of Malaysian companies

influence CSR reporting practices. Such an understanding is useful to regulators, policy

makers, the professional bodies and to other users of financial information.

The context chosen for the study is the CSR disclosure environment in Malaysia during

2005, 2006 and 2007. The setting is conducive to the study of incentives for management

to disclose CSR information as public listed companies in Malaysia are required to

comply with the mandatory requirements of CSR activities in their annual reports for the

financial year ending 31 December, 2007.

3. Literature Review and Hypotheses Generation

3.1 Isomorphic Pressure and CSR Disclosure

Of late, institutional theory has become one of the dominant theoretical perspectives in

organizational theory and increasingly being applied in accounting research to study the

practice of accounting in organizations (Dillard et al, 2004). DiMaggio and Powell (1983)

identify three forms of institutional isomorphism: coercive, normative and mimetic. This

study focuses on the influence of coercive and mimetic isomorphism on CSR disclosure.



127


3.2 Coercive Isomorphism and CSR Disclosure

Coercive isomorphism results when an organization adopts certain practices due to

formal and informal pressures exerted on organizations by other organizations upon

which they depends on externally, such as government’s regulations, resource providers

or head offices control, and by cultural expectations of the society in which the

organizations operate (DiMaggio & Powell, 1983). Coercive isomorphism can influence

management to conform to certain disclosure practices through formal and informal

pressures (Carpenter & Feroz, 2001; Clemens & Douglas, 2006). While empirical

evidence suggest that legislation plays a significant form of formal pressures (Clemens &

Douglas, 2006), a company’s dependence on financial resources from key stakeholders

plays a significant informal pressure on management to conform to certain practices

(Carpenter & Feroz, 2001).

The introduction of mandatory disclosure requirement by the Malaysian Government, the

launching of the Silver Book and the Stock Exchange Guidelines on CSR disclosure are

efforts exerted on companies by the regulatory authorities to improve transparency and

CSR disclosure in Malaysia. It is expected that following the budget announcement in

2006, companies in Malaysia will increase their CSR disclosure in their annual reports.

Chalmers (2001) provides evidence that the quantity of voluntary derivatives disclosure

made by firms progressively increases over the period leading to the introduction of the

mandatory disclosure requirements, and that there is a significant increase in voluntary

disclosure in the year when the mandatory disclosure requirements became effective.

Chalmers and Godfrey (2004) and Taylor and Darus (2006) confirm these findings. Thus,

it is hypothesized that:

H1: The likelihood of a disclosure requirements becoming mandatory is

significantly positively related to the voluntary disclosure on CSR.

As the mandatory disclosure requirements relating to CSR disclosure give management

the discretion of deciding on the extent of disclosures to be made, it is expected that the

extent of CSR disclosure will increase with the introduction of the mandatory disclosure



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requirements. Management are coerced to increase their disclosure relating to CSR with

the regulatory requirements. It is also hypothesized that:

H2: An increase in the regulatory disclosure requirements relating to CSR

is significantly positively related to an increase in the extent of CSR

disclosure.

3.3 Mimetic Isomorphism and CSR Disclosure

Mimetic isomorphism is a response to a situation of uncertainty, whereby social influence

processes lead an organization to imitate or benchmark those firms that are viewed to be

more legitimate and successful than others (Aerts, Cormier, & Magnan, 2006). In

situations of uncertainty, the managers of organizations are more likely to adopt the

benchmark firms, which are either the organizations that exercising the same activity, or

the leaders or the most talented organizations (Touron, 2005).

Prior studies provide evidence that board interlocks allow focal company to imitate

specific and multiple policies of other companies (Brandes et al., 2006; Westphal et al.,

2001). Board interlock refers to appointment of director, either executive or independent

non-executive director, on multiple boards. Imitation is possible through board interlock

since the directors can learn decision-making processes through monitoring management

decisions and also from direct participation in decision making of other boards. Through

direct participation, the directors can rehearse specific behaviors in the decision-making

process in other similar situations and reenact the specific decisions at the focal company

(Westphal et al., 2001). According to Westphal et al. (2001), this imitation strategy is

also known as second-order imitation. Brandes et al. (2005) find strong support for

imitation strategy by managers through board interlocks in relation to imitation of

voluntary recognition of stock option costs within the income statement.

Besides imitation of a specific content of disclosure items, board interlock also has the

prospects of facilitating managers to imitate the mimetic decision process of other

companies. Hence, it is contended in this study that the presence of board interlocks will



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facilitate managers’ imitation strategy of other companies’ CSR disclosure practices.

Manager’s imitation strategy may result in direct imitation of other companies’ CSR

disclosure practices or indirectly through second-order imitation of the CSR disclosure

decision processes of other companies. Irrespective of the imitation strategy, it is

expected that board interlocks will increase managers’ incentives to increase CSR

disclosure in annual reports. Based on this reasoning, the following hypothesis is

formulated:

H3: The percentage of board interlocks is significantly positively related to

the extent of CSR disclosure.

3.4 Ownership Structure and CSR Disclosure

The effect of the agency theory on managers’ decisions to disclose CSR information in

this study is examined by independent variables related to various elements of corporate

ownership structures. Prior studies provide evidence that various elements of corporate

ownership structures influence managers’ disclosure decisions in companies’ annual

reports (e.g. Chau & Gray, 2002; Chen & Jaggi, 2000; Eng & Mak, 2003; Gabrielsen et

al., 2002; Haniffa & Cooke, 2002; Ho & Wong, 2001). This study focuses on the effects

of family ownership, government ownership and foreign ownership on managers’

decisions to disclose CSR information.

3.5 Family Ownership and CSR Disclosure

Several studies focus on family owned companies in examining the impact of controlling

owners on corporate disclosures (Chau & Gray, 2002; C. J. P. Chen & Jaggi, 2000;

Haniffa & Cooke, 2002; Ho & Wong, 2001; Nazli & Weetman, 2006; D. Wang, 2006).

These literatures suggest that gaining control of the company is possible because family

members usually hold important positions on both the management team and the board of

directors. Further, this can also suggests the existence of dominant group of shareholders

or a substantial shareholder with strong influence who can nominate family members

representations on the board. Either argument implies that the company is being managed

by family owners and less diffused in terms of ownership structure. As owner managers



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have greater access to internal information, they have less incentive to disclose detailed

CSR information to outside investors and other stakeholders.

Gaining control of the company also enable the owners to influence the appointments of

independent non-executive directors (C. J. P. Chen & Jaggi, 2000; Ho & Wong, 2001;

Wang, 2006). Such influence could impair the directors’ independence and could lead to

higher risk of collusion between independent non-executive directors and family owners

(Patelli & Prencipe, 2007). In such situation, the family members may limit the

monitoring effectiveness of the board of directors and engage in corporate social

activities that are not in the interests of outside investors and other stakeholders. Prior

empirical evidence suggests that independent non-executive directors appointed through

the influence of family owners support major decisions in favour of family owners rather

than outside investors (C. J. P. Chen & Jaggi, 2000; Leung & Horwitz, 2004).

The potential entrenchment effect of family owners on corporate disclosure can be

mitigated by greater demand for detailed disclosure of CSR information in the annual

reports by contracting parties (Wang, 2006). In Malaysia, this demand can come from the

minority shareholder watchdog group (MSWG), a group that represents outside investors

interests. However, the MSWG role in mitigating this entrenchment effect may be an

ineffective control mechanism as outside investors’ activism is still developing in

Malaysia. Hence, the overall arguments suggest that the existence of higher percentage of

family members on the board is expected to reduce managers’ incentives to disclose CSR

information to outside investors and other stakeholders. Hence, this study formulates the

following hypothesis:

H4: The percentage of family members on the board is significantly

negatively related to the extent of CSR disclosure.

3.6 Government Ownership and CSR Disclosure

In Malaysia, government owned companies are companies owned by government

institutions or government controlled companies. Examples of government institutions

include Employees Provident Fund (EPF, a pension fund), Khazanah Nasional Berhad



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(Khazanah, an investment fund), Permodalan Nasional Berhad (PNB, an investment

fund) and Kumpulan Wang Amanah Pencen (KWAP, an investment fund). Government

controlled companies comprises of companies that are controlled by the respective State

Governments and State-level agencies. The source of finance for these companies is

generally provided through government funding. Given the government’s role in

promoting more detailed disclosure of CSR activities in Malaysia, it is important to

examine the disclosure tendencies of managers in government owned companies.

In line with the government efforts, it is expected that managers in these companies have

higher incentives to disclose CSR information to reduce agency conflicts. Prior literature

on corporate disclosure orientation in government owned companies suggest that agency

conflicts in these companies are relatively higher than private owned companies (Eng &

Mak, 2003; Luo et al., 2006). These studies argue that while government owned

companies are run similar to other private commercial enterprises, their main objectives

differ. The primary objectives of enhancing the national welfare and other non-profit

considerations may not be consistent with value maximization objective of other private

commercial enterprises, thus contributing to the high agency costs. In such situation,

managers in these companies have higher incentives to disclose more detailed

information to signal the state’s commitment in achieving the various objectives to

outside investors and other stakeholders (Eng & Mak, 2003). Following these arguments,

higher disclosure of CSR information is expected among government owned companies.

In contrast, where government ownership is substantial, managers can have lower

incentives to disclose more detailed information to outside investors, and other

stakeholders (Nazli & Weetman, 2006). As substantial state ownership suggests

availability of high government funds and increase monitoring by the government,

managers are required to disclose more detailed disclosures to the government.

Consequently, this can lower managers’ incentives to disclose more detailed information

to outside investors and other stakeholders. However, it is contented in this study that the

state’s commitment to improve transparency in corporate CSR activities will lead to some



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increase in managers’ incentives to disclose CSR information to outside investors and

other stakeholders. Based on this reasoning, the following hypothesis is formulated:

H5: The percentage of government ownership is significantly positively

related to the extent of CSR disclosure.

3.7 Foreign Ownership and CSR Disclosure

Agency theory suggests that ownership by foreign owners increases dispersion of

corporate ownership. In such situation, these owners may demand more detailed

disclosure of CSR in order to aid their decision-making (Haniffa & Cooke, 2002). In

response to this, managers may have higher incentives to disclose more detailed

information to reduce agency conflicts (Barako et al., 2006; D. K. K. Fan, Lui, & So,

2005; Firth, Fung, & Rui, 2007; Haniffa & Cooke, 2002; K. Wang, Sewon, & Claiborne,

2008). In addition, Haniffa and Cooke (2005) argue that managers in Malaysia have

higher incentives to disclose CSR information due to geographical separation between

the managers and owners. Overall, these arguments suggest that managers have

incentives to disclose CSR information that will allow foreign investors to monitor

managers’ disclosure practices and activities are aligned with their interests as owners.

Besides reducing agency conflicts, recent empirical studies suggest that managers in

developing countries have higher incentives to increase CSR disclosure in order to induce

and maintain foreign investments (Firth et al., 2007; Haniffa & Cooke, 2005; K. Wang et

al., 2008). The overall arguments lead to the following hypothesis:

H6: The percentage of foreign ownership is significantly positively related

to the extent of CSR disclosure.



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4. Methodology

4.1 Sample and Data Collection

The sample was drawn from non-financial companies listed on the main Board of Bursa

Malaysia for the year 2005, 2006 and 2007. 144 companies with financial year ending 31

December were randomly selected. This is to eliminate the element of bias in the

selection process. A three-year window period enables an examination of the trends in the

disclosure practices on CSR disclosure of public listed companies in Malaysia from an

unregulated environment (2005 and 2006) to a regulated environment (2007).

The finance companies were excluded due to different regulatory requirements and also

material difference in their types of operations (e.g. Ahmed & Courtis, 1999; Cheng &

Courtenay,2006; Depoers, 2000; Gray et al., 1995; Raffournier, 1995). In addition,

companies were also dropped from the sample due to missing data related to the variables

of interests in this study.

The research approach involves the content analysis of listed companies’ published

annual reports. Content analysis has been widely employed in prior studies to measure

CSR disclosure (Hackston & Milne, 1996; Adams et al., 1998; Tsang, 1998; Imam, 2000;

O’Donovan, 2002; Rahaman et al. 2002; Al-Tuwaijri et al., 2004; Kuasirikun & Sherer,

2004; Hamid, 2004; Smith et al., 2005; Clemens & Douglas et al., 2006).

4.2 Empirical Schema

The relationships developed in the six hypotheses are depicted in an empirical schema as

given in Figure 1. The dependent variable (CSRD) is based on the aggregate number of

words related to CSR disclosure in annual reports. Various recording units have been

used by content analysis researchers to measure the extent of corporate disclosures. For

example Deegan & Rankin (1996) and Wilmshurst & Frost (2000), use word count while

researchers such as Guthrie & Parker (1989) use number of pages. Other researchers such

as Deegan et al. (2000), Deegan et al. (2002), and Tsang (1998), use number of sentences

as the unit of analysis. According to Gray et al. (1995), there is some uncertainty as to the

optimal measure of the extent of disclosure, with words, sentences and pages being the

preferred units of analysis for written communication. Unerman (1999)’s findings

indicate that testing content analysis of using words, sentences and pages has no

significant difference among those methods. Following Haniffa and Cooke (2005),



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graphical presentation of CSR activities were excluded from the word count in this study.

In addition to the identified independent variables, this study also includes two firm

characteristics identified in prior research as determinants of management disclosure

decisions (e.g. Botosan, 1997; Chau & Gray, 2002; Haniffa & Cooke, 2002) as control

variables. These variables are size and profitability.

The relationships developed in the hypotheses can be depicted in an empirical schema as

given in Figure 1. The definition and measurement of variables used in this study are

listed in Table 1.

Figure 1: Empirical Schema of Proxies for the Institutional and Agency Theory on Corporate Social Responsibility Disclosure

Determinants

Extent of Disclosure

Proxies for Institutional Theory: Coercive Isomorphism

Anticipation of Government Regulation – AGREG

Existence of Government

Regulation – EGREG Mimetic Isomorphism

Board Interlock – B LOCK Proxies for Agency Theory: Ownership Structure

Family – FAM

Government – GOV

Foreign – FOR

Control Variables – SIZE, PROFITABILITY

CSR Disclosure (CSRD)

H1 (+ve)

H2 (+ve)

H3 (+ve)

(-ve) H4 (+ve) H5 (+ve) H6



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Table 1: Definition and Measurement of Variables

Variable Acronym

Definition Measurement

CSRD

The extent of CSR disclosure

Number of words counted. (Deegan & Rankin, 1996 and Wilmshurst & Frost, 2000).

AGREG Anticipated Regulation – one year before the existence of mandatory disclosure requirements

Difference in the mean of CSR disclosure (words) in voluntary year (2005) versus the anticipated year (2006)

EGREG Existence of Regulation – the year mandatory regulation on CSR disclosure was introduced

Percentage difference in the number of words of CSR disclosure in anticipated year (2006) versus mandatory year (2007)

B LOCK Board interlocks Percentage of total number of independent non – executive directors with appointments on other boards divided by the number of total board members

GOV Government ownership Percentage of shares owned by government institutions listed in the top thirty shareholdings to total number of shares issued

FAM

Family members as defined by S122A of the Malaysian , CA (1965)

Percentage of family members on board to total number of directors on the board

FOR Foreign ownership Percentage of shares owned by foreign owners listed in the top ten shareholdings to total number of shares issued

SIZE Size of company Total assets

ROA Profitability Proportion of profit after tax over total assets

5. Analysis and Results

5. 1 Descriptive Statistics

Table 2 provides descriptive statistics of the CSR disclosure (CSRD) and the independent

variables. The mean of CSRD measured by number of words in 2005, 2006 and 2007

were 286, 353 and 835 respectively. As expected, the greatest increase in CSRD occurred

in 2007, the year of the mandatory disclosure requirements became effective. These



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values suggest that the mandatory requirements imposed by the regulatory authorities in

2007 have coerced companies to increase the comprehensiveness of CSR disclosure in

their annual reports.

Table 2: Descriptive statistics for the dependent and continuous independent variables

Label Minimum Maximum Mean Std

Deviation CSR Disclosure 2005 CSRD 05 0.00 6,276.00 286.14 778.63

CSR Disclosure 2006 CSRD 06 0.00 4,803.00 353.91 702.18

CSR Disclosure 2007 CSRD 07 10.00 4,410.00 835.09 981.79

Government Regulation

EGREG -95.70 4,313.00 385.41 685.29

Board Interlock B LOCK 0.00 75.00 25.67 15.95

Government Ownership

GOV 0.00 92.38 17.90 24.58

Family Ownership FAM 0.00 100.00 17.66 23.81

Foreign Ownership FOR 0.00 61.14 6.63 11.31

Size SIZE 66.00 67,724.60 3,399.39 9,029.39

Return on Asset ROA 44.00 36.07 6.14 8.47

The extent of CSRD in words ranges from 0 to 6,276 in 2005; 0 to 4,803 in 2006, and 10

to 4,410 words in 2007 respectively. The minimum number of words disclosed improved

from 0 in 2005 to 10 in 2007, indicating that companies abide by the new regulation of

disclosing some information relating to their CSR activities in their annual reports.

Interestingly, the maximum number of words decreased from year to year. This could

possibly be due to the introduction of the CSR Framework by Bursa Malaysia in late

2006, requiring CSR disclosures to be more focused based on certain themes. In

complying with this Framework, companies’ CSR disclosure became more structured.

With regards to board interlock, the percentage of independent non-executive directors

with board membership on other public listed companies ranges from 0% to 75%. Of the



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CSR Disclosures in Year 2005, 2006, and 2007

0

20

40

60

80

100

120

1 100 1000 10000

Number of words

Num

ber o

f com

pani

es

200520062007

ownership variables, the results in Table 2 reveal almost similar values for government

ownership and family ownership. Percentage of government ownership ranges from 0%

to 92.38%, while family ownership ranges from 0% to 100%. The average values of

17.90% for government ownership and 17.66% for family ownership indicate significant

presence of these forms of owners among the sampled companies. Relative to these two

forms of ownership structure, foreign ownership (FOR) has the lowest average value of

6.63%. Finally, the size (SIZE) of the companies in the sample ranges from a minimum

of 66 million to a maximum of 67,724.60 million while profitability (ROA) of the

companies on average is 6.14%.

Figure 2 presents the trend of CSR disclosures from 2005 to 2007. CSR disclosures have

improved from year to year. In 2005 and 2006, out of 144 samples, 104 (72.2%) and 68

(47.2%) companies respectively made zero CSR disclosure. A marked improvement was

shown in 2007 whereby; all companies made CSR disclosures, with 19 (13.2%)

companies disclosed their CSR information in less than 100 words. The number of words

disclosed in companies’ annual reports in 2007 have improved substantially as compared

to those of 2006’s and 2005’s. As in previous literature (Clements & Douglas, 2006; and

M. Tsamenyi et al, 2006), the findings in this study support that argument that coercive

pressures by regulatory authorities encourage companies to embrace new reporting

practices. When coerced by government, companies conscientiously disclose their CSR

activities in the annual reports.

Figure 2: CSR Disclosures Year 2005, 2006 and 2007



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To test the effects of anticipation of and the existence of mandatory disclosure

requirements – tests of H1 and H2 an analysis based on descriptive statistic is undertaken

of the CSRD between the years 2005, 2006 and 2007. The first hypothesis tests the

relationship between voluntary disclosure on CSR (CSRD 05) and the CSR disclosure in

the anticipated year of regulated disclosure environment (CSRD 06).

In testing H1, which predicts that the likelihood of a disclosure requirements becoming

mandatory increases the voluntary disclosure on CSR, a comparison was made between

the means of the CSR disclosure in the unregulated period (CSRD 05 and CSRD 06).

Results from Table 2 shows that the means of CSRD increased from 286.14 (CSRD 05)

to 353.91 (CSRD 06) indicating that the likelihood of a disclosure requirements

becoming mandatory encouraged companies to improve their CSR disclosures in

preparation of the impending introduction of the mandatory disclosure requirements by

the regulatory authorities. A paired sample t-test was then undertaken to compare the

means over the two-year period. Table 3 presents the comparison of means for CSRD

during the pre-regulation years.

Table 3: CSR Disclosures- Comparison of Means for Pre-Regulation Years

Mean number of words of disclosure t-value Sig

Year 2005 Year 2006

CSRD 286.14 353.91 1.125 0.262

Results from Table 3 indicate that during the pre-regulation period, there is an increase in

disclosure even though the increase is not significant. The increase could be related to the

anticipation of legislation, increase awareness through media communication and

introduction of CSR awareness through awards by professional organisations. However,

such factors are insufficient to significantly promote CSR disclosure during this

voluntary period. Hence, H1 is not accepted.

H2 predicts that the introduction of regulatory disclosure requirements in 2007 will result

in an increase in the extent of CSR disclosure. To test H2, a comparison was made



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between the means for the CSRD during the anticipated year (CSRD 06) and the means

of CSRD for the post-regulation year (CSRD 07). Results from Table 2 show that the

means of CSRD increased from 353.91 (CSRD 06) to 835.09 (CSRD 07) indicating a

substantial increase in disclosure between the two years due to the introduction of

regulation. To compare the means, a paired sample t-test is again undertaken to compare

the means over the two-year period. The result of this analysis is shown in Table 4.

Table 4: CSR Disclosures - Comparison of Means between the Pre and Post-Regulation Years

Mean number of words of disclosure t-value Sig

Year 2006 Year 2007

CSRD 353.91 835.09 8.308 0.000** ** Significant at the 0.01 level

Results from Table 4 shows that there is a significant increase in CSR disclosure from the

pre- to the post-regulation year. While such disclosure is mandatory and there is no

specific requirement regarding the content of disclosure, the results indicate significant

differences in the extent of disclosure for the two years. This suggests external regulatory

forces from the government are an important mechanism to promote CSR disclosure. At

the same time this points to the possibility that more detailed and stricter enforcement

regarding CSR disclosure could further enhanced the quality of CSR disclosure. CSR

disclosure quality could also be improved by having auditing and assurance certification

of such disclosure.

5.2 Multivariate Analysis

In this study linear multiple regression is used as the basis of analysis for testing H2 to

H6. The hypothesized relationships are modeled as follows.

CSRD = β0 + β1 EGREG + β2 B LOCK + β3 FAM + β4 GOV + β5 FOR β6

SIZE + β7 ROA + εt

where CSRD represents the extent of CSR disclosure while definitions for

independent variables are given in Table 1.



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In the above regression model, multicollinearity was tested using the variance inflation

factor and tolerance levels, and found to be well within the satisfactory range. The results

of the regression analysis are presented in Table 5 and are now discussed in terms of tests

of each of the hypotheses established in this study.

Table 5: Multiple Regression Results for Factors Affecting the Extent of CSR Disclosure

Dependent Variable: CSRD (Extent of CSR disclosure)

R Square = 0.445, Adjusted R2 = 0.419, F = 16.485, Sig. = 0.000

Variables Beta t Sig.

(Constant) 0.936

EGREG 0.329 4.814 0.000* * *

B LOCK 0.050 0.688 0.493

FAM -0.154 -2.256 0.026* *

GOV 0.125 1.737 0.085*

FOR 0.063 0.947 0.345

SIZE 0.414 5.762 0.000* * *

ROA 0.162 2.483 0.014* *

Coefficient for each variable is shown with t – statistics in parentheses

* Significant at 10% level (1-tailed test); * * Significant at 5% level (1-tailed test);

* * * Significant at 1% level (1-tailed test)

Results of the multiple regression analysis report that the F-statistic is 16.485 and the

adjusted R2 is 0.419 and the p-value is significant. The adjusted R2 value is within the

range as reported (0.389, 1996 disclosure and 0.453, 2002 disclosure) by Haniffa &

Cooke (2005). H2 predicts that the presence of regulatory disclosure requirements

relating to CSR will result in an increase in the extent of CSR disclosure. The results in

Table 5 show that the change in the extent of CSR disclosure from the pre- to the post-

period is significant (EGERG). This result confirms the findings from the paired-sample

t-test as reported in Table 4. Therefore, H2 is accepted.

Table 5 also reveals that of the ownership variables, the family and government

ownership variables (FAM) are significant. However, variables relating to board interlock



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(B LOCK) and foreign ownership (FOR) reveal insignificant results. As such, only H4

and H5 are accepted.

The insignificant relationship of B LOCK indicates that independent non-executive

directors with multiple directorship does not facilitate managers’ disclosure strategies by

imitating other companies practicing detailed CSR disclosure. A possible explanation

could be related to the strong influence of family owners on CSR disclosure. In the

presence of significant family ownership there is a high risk of collusion between the

independent non-executive directors and these owners. In such situation, they are more

likely to support the family owners in disclosing less detailed information on CSR

disclosure rather than facilitating managers by re-enacting the CSR disclosure strategies

of other companies of which they are board members.

The negative effect reported for family ownership on CSR disclosure is consistent with

previous studies, for example, Ahmed and Nichols (1994), Ho and Wong (2001), Haniffa

and Cooke (2002) and Nazli and Weetman (2006). In these companies, the high

proportion of family members on the board indicates the existence of a dominant group

of shareholders or a substantial shareholder that could influence the board’s decision to

nominate family members to the board (Nazli & Weetman, 2006). Accordingly, these

companies are likely to be closely held or owner managed (Claessens, Djankov, and

Lang, 2000). In such situation, the demand for published CSR information by the owners

is less as they have better access to internal information.

The above results also suggest that family owned companies limit CSR information flows

to outside investors and other stakeholders. This indicates potential entrenchment effect

of family owners on CSR disclosure because lower disclosure potentially creates greater

information asymmetry between inside owners and outside owners and other stakeholders

(D. Wang, 2006). The lower extent of CSR disclosure reduces the ability of outside

investors and other stakeholders to monitor corporate social activities of family owned

companies.



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With regards to government ownership (GOV), the results indicate that companies with

higher government ownership disclose more CSR information. The results provide

support to the argument that agency conflicts in these companies are relatively higher

than privately-owned companies and are consistent with the findings by Eng and Mak

(2003). The high agency conflicts are potentially associated with the government’s

commitment to enhance the national welfare and other non-profit considerations. These

considerations may not be directly consistent with value maximization profits of

companies with lower government ownership. Accordingly, managers in these companies

have higher incentives to disclose CSR information to reduce the high agency conflicts.

Finally, the insignificant result reported for foreign ownership variable is inconsistent

with the findings in Haniffa and Cooke (2005). A possible explanation is that because

there is a relatively low percentage of foreign ownership (mean = 6.63%) in the sample

(as reported in descriptive statistics in Table 2). As such, this group of owners would

have low shareholder voting power and would not be able to formally demand greater

public disclosure of CSR from their company. Alternatively, the incentives to attract and

maintain foreign funds can induce close working links between management and foreign

owners. Accordingly, these managers have higher incentives to supply CSR information

through private channels. Where foreign owners can gain informal access to CSR

information from management in order to aid their decision-making, then they would not

need to push for greater public disclosure of CSR.

6. Conclusion and Limitations

This study makes a contribution to the corporate disclosure literature by providing new

evidence that regulatory efforts are important mechanism in promoting greater corporate

transparency in CSR disclosure. The results revealed significant increase in CSR

disclosure in 2007 relative to such disclosure in 2006. This infers that when regulatory

bodies emphasize CSR disclosures, managers align their CSR disclosure strategy with

those of the regulatory bodies. An implication of these findings is that regulatory efforts

have the prospect of becoming a significant force in promoting the extent and quality of

CSR disclosure.



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In line with the regulatory efforts, the regression results show that companies with

significant government ownership are positively associated with the extent of CSR

disclosure. The availability of CSR disclosures of these companies to the public and the

emphasis by regulatory bodies and policy makers are important mechanisms that can shift

investors and other stakeholders’ expectations toward expecting more adequate

disclosure of CSR activities. This is also consistent with the argument that higher

disclosure of CSR activities are important mechanism in reducing agency costs in these

companies. Managers in these companies disclose more detailed CSR information to

signal government’s commitment in enhancing the disclosure of CSR activities to outside

investors and other stakeholders (Eng & Mak, 2003).

In contrast to government ownership, the regression results revealed significant negative

association between family ownership and the extent of CSR disclosure. This result

should be of interests to regulatory bodies as it demonstrates that the regulatory efforts do

not appear to promote disclosures of CSR activities by these companies. In addition, it

indicates potential entrenchment effect of family owners by disclosing less detailed CSR

information to outside investors and other stakeholders. The insignificant results reported

between board interlock and the extent of CSR disclosure further corroborate the

dominant influence of family owners on corporate disclosure. Instead of promoting

higher CSR disclosure through their participation on other boards, the results indicate the

prospect of these directors colluding and supporting the disclosure strategies of family

owners. Hence, these findings provide regulatory bodies with enhanced understanding in

their efforts to improve corporate transparency.

In summary, the findings in this study contribute to a better understanding of the

relationships between various institutional pressures and ownership structure on

management CSR disclosure decisions. The findings also have practical implications to

regulatory bodies in promoting and improving corporate transparency, other policy

makers in strengthening capital market environment, to investment community and other

stakeholders who rely on corporate social disclosures in making their decisions.



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There are some limitations in this study. First, this study focused only on CSR disclosures

in companies’ annual reports. Other forms of communication channels such as the

company’s web site, newspapers and in-house magazines have been used to communicate

corporate social responsibility activities. Hence, future research may consider such

disclosures.

Second, the empirical model adopted in this study may not capture other dimensions that

influence managers’ CSR disclosure decisions. Specifically, data collected to measure the

variables are limited to information disclosed in annual reports. Future research could

include data collection through more extensive interviews with preparers of the annual

reports in order to gain more insights into the determinants of their disclosure decisions.



145


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The Effect of Problem-Based Learning on Students

Teamwork Ability in UiTM Trengganu, Malaysia

Noor Liza Adnan

Faculty of Accountancy, Universiti Teknologi MARA, Terengganu, Dungun Campus, Dungun 23000, Malaysia

Wan Karomiah Wan Abdullah

Faculty of Information Technology and Quantitative Science, Universiti Teknologi MARA, Dungun Campus, Dungun 23000, Terengganu, Malaysia

Kamaruzaman Jusoff (Corresponding author)

TropAIR, Faculty of Forestry, Universiti Putra Malaysia, 43400 Serdang, Selangor. Malaysia

Abstract

One of the criteria looked for by the employers in employing a staff is the ability to work

in a team, especially when employees of an organization could come from diverse

background and culture as a result of globalization. However, many of our graduates do

not possess this ability, which later contributes to poor work performance. Many parties

blame the higher institutions as they fail to expose the students to real working

environment, since the teaching method used is more centered on delivering knowledge

without inviting active participation from the students. Hence, this paper attempts to

examine whether Problem-Based Learning (PBL) would give positive effects to teamwork

ability (TWA) and to determine whether students of different gender and CGPA would evaluate

TWA differently. A preferred learning approach was also sought. The respondents consisted

of 48 graduating accounting students from UiTM Terengganu. It was discovered that

PBL did affect teamwork ability as measured by Paired Samples t-Test before and after

the PBL session. They felt that their teamwork ability had been enhanced after a semester

of PBL. Independent Samples t-Test showed that both genders did not differ

significantly in their views of TWA as a result of PBL. However, students with lower

CGPA of below 3.00 felt that PBL had improved their TWA better than students with

higher CGPA of 3.00 to 3.49. When further probed, many preferred a combination of




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PBL and lecture approach rather than learning solely based on lecture. However, this

study was conducted on a rather small sample size which limits the scope of the study.

Hence, another study which uses bigger sample size, across the whole UiTM campuses

and various faculties would give a better picture on the effect of PBL on TWA.

Comparison with other universities implementing PBL would provide a more holistic

result.

Keywords: Problem-Based Learning, Generic competencies, Teamwork, Student

1. Introduction

Unemployment among graduates in Malaysia has still been discussed heatedly by

many parties. To prove just how serious this phenomena is, Quek (2005) cited the

results of a study conducted by the Higher Education Ministry of Malaysia on this matter,

which revealed that only 57 per cent of graduates were successful in securing jobs, 29 per

cent remained jobless while another 14 per cent went on to further their education.

Previous researches carried out by Asma and Lim (2000); Lee (2000); Quek (2000) and

Kanapathy (2001) attempted to obtain feedback from various employers in Malaysia on

the contributing factors to this issue. They pointed invariably to the deficiencies of

tertiary education in equipping students with generic competencies to meet the needs of

the workplace as the lack of it can add liabilities to the corporations. Repeatedly, Quek

(2005) cited a press release from the Human Resources Ministry of Malaysia which

expressed that many graduates are good only in theory and many are unable to meet the

expectations of the corporate sector. Jacobsen (1993) described generic competencies as

success skills in employees that are needed to transfer learning from the classroom to the

workplace for fulfilling work demands. In other words, Quek (2005) cited from various

researchers that employers prefer workers who have generic competencies like

interpersonal skills, leadership skills, teamwork and oral and written skills for work

performance.

Albrecht and Sack (2000) had strongly urged accounting educators to take greater

effort to devise new pedagogical approaches by stating that, “Students forget what they

memorize. Content knowledge becomes dated and is often not transferable across

different types of jobs. On the other hand, critical skills rarely become obsolete and are



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usually transferable across assignments and careers.” In addition, Duch, et al. (2001)

suggested that accounting educators need to “design educational experiences for students

that require them to be active, independent learners and problem solvers rather than

passive recipients of information.” A few years before, Woods (1997) pointed out that

PBL is the most effective teaching method in the most recent 30 years since the learning

environment in PBL includes every kind of factors currently known to improve the

efficiency of learning, hence equipping students with the generic competencies required.

Moreover, according to Haghparast et al. (2007) PBL challenges students to ‘learn to

learn’ and work cooperatively in groups to seek solutions to foster effective learning,

while Woods (1994) concluded that PBL is more than an extremely effective

environment to learn subject knowledge as it can be used to help students develop skill in

lifetime learning, change management, teamwork, conflict resolution and problem

solving. They learn through experience, through the benefit of working together and they

learn best from teaching each other and in the context of compelling problems (Cross,

1998; Annis, 1983; McKeachie et al. 1986; Cross, 1999).

Similar outcome was revealed by Margetson (1996) who stated that PBL can

change students’ role from being knowledge receivers to knowledge seekers as students

are to develop their own plan of direction. However, she added that it can disturb their

comfort zone that leads to the building of tension among them. A key intention of PBL,

cited by Alessio (2004), is that such tension may lead to learning material in a different

way, creating opportunities for self-directed and deep learning. Dahlgren & Dahlgren

(2002) discovered that deep learning can occur when students work together in small

groups and in self-directed learning, where independent thinking is encouraged.

Apart from that, Prince (2004) stated that in a PBL environment, students

experience working as part of a team which provides a natural environment that promotes

effective team work and interpersonal skills. Dishon & O’Leary (1994) defined a team

as "a group of two to five students who are tied together by a common purpose, to

complete a task and to include every group member." While Moy (1999) defined

interpersonal or team working skills as “the ability to work, adapt and interact with

people of varied background or discipline, within or across organisations.” This will



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obviously form an important experience as part of their preparation for work life in the

modern business world. The same opinion was expressed by Krajcik et al. (1999) who

suggested that in order to succeed in the real world; students need to know how to work

with people from different background. This finding conformed to another research

finding by Cockrell et al. (2000) who discovered that collaborative groups foster students'

sense of ownership of the knowledge that is created over the semester and within the

groups, leadership moves from student to student as situations arise and resolve.

Similarly, Challenger (2008) in his online newsletter asserted that one of the most

important requirements for success in today’s job market is the ability to be a team

player, especially now, when companies are beset on all sides by increasing competition.

A major measure of what kind of an employee the candidate will be is whether the

individual has demonstrated teamwork ability. Of the same opinion is Firth-Cozens

(1998) who stated that major change continues to occur in all successful organizations

and partly as a means of dealing with the changes, there is an increased emphasis on team

working. Team working is seen as a way to tackle the potential fragmentation of services

and improve service quality, to widen skills, and acts as an essential part of the need to

consider the complexity of modern services.

However, as many researches had discovered, despite their potential benefits, it is

clear that not everyone wants to work in team since it can cause some people within them

dissatisfaction and unhappiness. Furthermore, not all team are effective, proving that

teamwork has to be trained and is not a byproduct. In the Malaysian context, tertiary

institutions should consider the implementation of new curriculum pedagogy that can

instill teamwork ability among the students rather than letting the students getting lost in

the process of acquiring it.

The purpose of this study is to urge accounting educators to seriously consider

PBL as a pedagogy that can better prepare accounting professionals effectively for the

challenges of the 21st century, though Hansen (2006) states that PBL is still a relatively

new approach in accounting education. Therefore, this study aims to examine whether

PBL would give a positive effect to teamwork ability of accounting students of UiTM

Terengganu and to determine whether students of different gender and CGPA would



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evaluate TWA differently. A preferred learning approach was also sought. It is hoped

that the positive outcome of PBL will lead to the wide implementation of this approach

by the management. Suggestions on the best way to conduct the PBL approach in

classrooms will also be looked into.

2. Method

Data were collected from all 50 first degree students from the Faculty of Accountancy,

UiTM Terengganu undergoing PBL approach for the subject of Strategic Management

for one semester. The Accounting Faculty was chosen as this was the only faculty that

fully implemented the PBL approach in its teaching of Strategic Management. The PBL

approach was implemented partially in handling other subjects; hence these subjects did

not meet the requirement of the study. After excluding two questionnaires due to missing

information, the final response rate was 96% (48 students).

Only one researcher was directly involved in the data collection. In the first session of

the semester, students were explained about the PBL approach and were briefed on what

were required and expected of them. The students were to form their own groups

consisting of three to five members per group. Work and tasks were also assigned, of

which initially each group was assigned six case studies (known as Do-It-First project,

DIF) that would cover the whole syllabus of Strategic Management. In the second and

third sessions, the researcher gave the enabling lectures that covered the overall syllabus.

The class was conducted twice a week and each session lasted for two hours for a 14-

week semester. In the fourth session, students began to brainstorm in order to solve the

case studies given which marked the beginning of the PBL session. At the beginning of

week six, each group was to submit their written reports of DIF project which would be

followed by group presentations and a quiz. As the semester progressed, more case

studies were assigned and in every session, the groups presented the outcome of their

discussions and the researcher and other students participated in a question and answer

(Q&A) session at the end of each presentation. Each group was allocated 15 minutes for

presentation and 5 – 10 minutes for Q&A session. Hence, students learned to defend

their thoughts and were trained to reach a solution within a short span of time.



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The questionnaire developed was adapted from a few previous researches done

that consisted of two different sections - section A consisted of 6 items on students’

background while section B consisted of 23 items evaluating the effect of PBL on the

students’ teamwork ability. These items were evaluated using Likert Scale from 1, which

represented ‘strongly disagree’ to 7, which represented ‘strongly agree’. There were

several steps that guided items selection. First, all items which were related to the issues

arose in teamwork were pooled from Khoiny (1995), Bauer (2003) and Haslam et al.

(2005). Each item was then scrutinized and only the most appropriate ones were selected

to be included in the questionnaire. However, items which were not that appropriate

were restructured or reworded to suit the course content and the learning experience the

students had gone through. This was important as most of the items referred to were

related to nursing or medical studies. Researchers had to use their own expert judgment,

considering the long years in teaching experience, to ensure the content validity of the

items measured, guided by theory from several literatures. Data entry and analyses were

carried out using SPSS. Paired Samples t-Test and Independent Samples t-Test

were used to meet the objectives.The above researcher also made observation on the

whole process of PBL approach especially during group discussions and presentations

that took place in the classroom, noting down the students’ reactions, opinions and

remarks.

3. Results and Discussions

The findings on the effect of PBL on students’ teamwork ability are discussed

below.

3.1 Does PBL Affect Team Work Ability?

Most researchers like Parker (1990) and Cohen (1994) agreed that teamwork

seems to be a central characteristic of PBL. Therefore, it was hypothesized that

students’ teamwork ability will be enhanced after a PBL session. Before further

analyses were conducted, an internal reliability test was done to determine if the 23 items

evaluated were internally reliable to measure teamwork ability. The outcome with the

high positive value of alpha of 0.925 confirmed that all items did measure the teamwork

ability. Based on Kolmogorov-Smirnov Test, p-values of 0.560 and 0.404 (which were



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greater than 0.05) for before and after the PBL session respectively denoting the

distribution of both teamwork ability before and after the PBL session were normally

distributed. Paired Samples t-Test was then conducted to see how students evaluated

their teamwork ability, before and after the PBL session. The test conducted showed that

the evaluation after the PBL session generated a mean of 5.799 as compared to before the

PBL session with a mean of 5.657. Though it is not significant at a confidence level of

95% (p-value of 0.057), but considering that this was the first time the students were

being exposed to fully PBL approach throughout their learning period, then it would be

fair to reduce the confidence level to 90% which would make it significant, indicating

that there was a slight improvement to their team work ability after the PBL session, as

shown in Table 1.

Upon seeing that PBL did give some positive impacts on students’ teamwork ability,

further detailed investigations were carried out on how students by different genders and

CGPAs perceived teamwork ability as a result of PBL as exhibited in Table 2; and also in

respect of 23 items related to students’ teamwork ability after the PBL session. Table 3

listed the 23 items evaluated with the mean value and standard deviation for each item.

3.2 PBL and Teamwork Ability Perceived by Gender and CGPA

Table 2 shows how students of different genders and CGPAs perceived their

teamwork ability as a result of PBL. Independent Samples t-Test conducted discovered

that both male (mean value of 5.68) and female respondents (mean value of 5.84) gave

almost the same scores, indicating that both genders did not differ significantly in their

view of teamwork ability with a p-value 0.492.

Table 1 : Mean Comparison of TWA Before and After PBL

Team work ability Mean Std. Deviation Before PBL 5.657 0.533 After PBL 5.799 0.604 Significant level (2-tailed) 0.057



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However, when examining their perceptions based on their CGPAs, the result

showed that as a result of PBL approach, teamwork ability was better perceived by

students with CGPA below 3.00 (mean value of 5.96) as compared to students with

higher CGPA of 3.00 to 3.49 (mean value of 5.48). This was significant at 99%

confidence level, with a p-value of 0.008. From the researcher’s observation (who was

directly involved in the data collection), this could be due to the teamwork discussion in

which each team member was expected to contribute ideas equally and this discussion

also ensured that every student in the group would gain the knowledge from the work

done. Therefore, weaker students would feel more at ease learning from their peers for

peer learning tends to eliminate the barrier to ask questions. However, smarter students

might feel that the process would slow them down especially when they felt that they

could not really rely on their weaker counterparts to complete their tasks satisfactorily

and this would require more time and commitment from them.

Table 2: TWA Perceived by Gender and CGPA

Background No. of Students

Mean *Std. Dev

**Std. Error

Male 8 5.68 0.89 0.31 Gender Female 40 5.84 0.54 0.09 Up to 2.99 33 5.96 0.53 0.09 CGPA 3.00 – 3.49 15 5.48 0.62 0.16

*Std. Dev = standard deviation; **Std. Error = standard error mean 3.3 Students Evaluation on Their Team Work Ability as a Result of PBL

Further analysis on 23 items related to students’ teamwork ability as the effect of going

through a semester of PBL pedagogy was carried out and listed in Table 3. Mean values

can be categorized as ‘slightly agree’ when it falls within the scale of 4 to <5,

‘moderately agree’ when it falls within 5 to <6 and ‘strongly agree’ for the scale of 6 to 7

out of possible 7.00. A mean value of 6.13 out of 7.00 for item no. 5 showed that

students strongly preferred to work in groups in solving a problem rather than working

individually for group work would facilitate the completion of a given task as measured

by item no. 4 with a mean value of 6.15. It might be due to the fact that each team

member would try their best to contribute ideas in team discussions (mean of 6.19) which

would result in better alternative solutions. Haghparast, et al,. (2007) discovered that



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students with experience in both PBL and traditional pedagogy preferred the PBL

pedagogy, stating greater independence, more flexibility, self-responsibility, teamwork,

more student involvement, better understanding and integration of subjects and an

enhanced learning environment working in groups. This satisfaction could be due to

several factors, such as a more active role of students in a small group-based PBL

pedagogy which offers a more holistic view. Conforming to this statement, students

moderately agreed that team interactions had certainly enhanced their learning (mean of

5.81).

With a mean value of 5.80, the respondents moderately agreed that they felt at ease

sharing their ideas with the team as each team member would prefer to discuss one's idea

even though it sounds silly rather than totally rejecting it in the first place (mean of 5.96).

They would carefully explore alternatives in order to attain maximum group benefit

(mean of 5.68). This had somehow made them felt that their team members were

supportive to each other (mean value of 5.77) resulted to stronger ties among them (mean

value of 5.77). Seaberry (2002) reported similar teacher observations of face to face

interactions and active discussions among the PBL student groups, during class time.

This was supported by Alessio (2004) who observed students using resources other than

the required text, to search for answers and information designed to fill in gaps and

confirmed statements made by group members making students in the small PBL groups

engaged actively in the learning process and formed a type of learning community, with

each making a meaningful contributions, as they tackled the problems. The second lowest

mean at 5.26 was scored for item no. 23 when students moderately agreed that they could

visualize what was expected of them by their team members, hence enabled them to

complete the task assigned by their team on time (mean of 5.56).

Table 3: Students Evaluation on Their Teamwork Ability as a Result of PBL

No. Items Mean Standard Deviation

1 I always respect my team member's opinions or ideas. 6.30 0.68 2 I would try my best to contribute ideas in team discussions. 6.19 0.73 3 I can respect my team members' strength. 6.17 0.63

I think it's easier to complete the given task in a group rather 4 than working alone. 6.15 0.90



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I would prefer to work together in a group in solving the 5 same problem rather than working individually. 6.13 1.01 6 Through team work, I learn how to be responsible to others. 6.02 0.84

7 I adapt well with any new changes/ideas agreed by the team members. 5.98 0.79

8 When working in a team, I can control my emotion. 5.98 0.81 I would prefer to discuss one's idea even though it sounds

9 silly to me rather than totally rejecting it in the first place. 5.96

0.91 I can take rejections and accept comments from my

10 team members positively. 5.92 0.90 11 My team members respect me well. 5.88 0.89 12 I feel the team interactions enhance my learning. 5.81 0.98 13 I feel at ease sharing my ideas with the team. 5.80 1.20 14 I don't mind working with people with different school of thought. 5.79 1.03 15 I feel strong ties with my group. 5.77 0.86 16 I feel my team members are supportive to each other. 5.77 1.27

I would carefully explore alternatives in order to attain 17 maximum group benefit. 5.68 0.86 18 I can generate positive effect to my group. 5.58 1.03 19 I can always balance my team's interest and my personal interest. 5.57 1.11 20 I can complete the task assigned by my team on time. 5.56 1.15

Should there is a clash in schedule; I normally give 21 priority to my team rather than my own affair. 5.42 1.13

I think I can clearly visualize what is expected of me 22 by my team members. 5.26 0.98

23 I am able to motivate my team members to solve difficult problems. 5.19 1.04

Basically, respondents strongly agreed that through teamwork they learnt how to

be responsible to others (mean value of 6.02). Respondents moderately agreed (mean

value of 5.88) that their team members respect them well. As a result, they admitted that

they could respect their team member's opinions or ideas (mean of 6.30), accepted their

strengths (a mean of 6.17) and took rejections and comments positively (mean of 5.92).

These have somehow trained them to be successful team players as described by

Challenger (2008) who stated that an effective team member could sense what

contributions need to be made, and how he or she can best support the group in achieving

its goals through asking key questions at the appropriate time, or making observations

based on the statements of others, melding differing views into a cohesive whole and



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providing the perspective that is needed to establish a plan of action. In addition, he

added that by respecting others, the team player has sensitivity to the needs of others for

recognition and does not propose any course of action without at first considering the

views of all parties who will be concerned with the decisions.

Due to the ability to tolerate, working with others with different school of thought

should not be a problem to them (mean of 5.79). They also admitted to being able to

adapt to any new changes or ideas agreed by other team members (mean of 5.98) as they

believed that they could control their emotion when working in a team (mean value of

5.98). These traits are highly needed in a successful teamwork as stated by Yalcin et al.

(2006). They reiterated that an effective and democratically structured small PBL group

may benefit from its relation with psychotherapeutic principles (listening and tolerating

hostility) where group members themselves determine the rules resulting to improving

students’ communication skills. As a result, students can acquire abilities to work

together, take initiative, share knowledge, and show mutual respect.

Realizing the benefit and effectiveness of the PBL approach, 20.8% of the students

chose the PBL approach, while another 50% chose a combination of PBL and lecture

when asked of their preferred learning approach. Only 29.2% of them chose lecture

method alone (traditional method). It showed that the majority of the students preferred a

combination method of PBL and lecture, indicating that students did recognize the

effectiveness of PBL, but somehow, a few lecture sessions were required to clear some

ambiguities and put things in the right path, especially when this was their first

experience being exposed to the full PBL approach. PBL was still seen as very essential

to equip them with some soft skills like improving their communication skills, boosting

their confidence level, stimulating their thinking process and others as shown in the

above tables. Therefore, combining both methods was expected to greatly contribute to a

more effective learning.

4. Conclusion

Team work is not a natural process arising from a meeting of a group of people.

Obviously it needs to be trained and developed. One way to instill teamwork ability

among the students is through the implementation of PBL sessions since teamwork seems



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to be a central characteristic of PBL. It trains the students to work in teams, both before

and during the project. Different genders did not evaluate PBL differently, suggesting

that the method is accepted by all. PBL approach is also suitable to help weaker students

who can learn more from their peers as it eliminates the barrier to ask questions and be

asked as compared to traditional approach. A combination of PBL and lecture is most

preferred by students who feel that both methods actually complement each other towards

a more effective learning. Besides encouraging deep-learning and life-long learning,

students also acquired generic skills when working in group, like communication skills,

problem solving, etc which are believed necessary to increase their self confidence and to

win the employers’ attention. This will prepare them to cope with conflicts among team

members, to make group decisions and to accomplish tasks for the necessary

organizational preparations.

This study was conducted on a rather small sample size which limits the scope of the

study. This was also the students’ first experience learning under the PBL approach

which might distort their evaluation. Hence, another study which uses bigger sample size,

if possible across the whole UiTM campuses, and various faculties would give a better

picture on the effect of PBL on TWA. Comparison with other universities implementing

PBL would also provide a more holistic result.



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