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CHIEF PATRONSh. K. C. GargChairman, RDIASFounder President, SPMES

PATRONProf. (Dr.) Raman Garg Director, RDIAS

EDITORIAL TEAM

Editor-in-Chief Prof. Anil Kumar Goyal

Associate EditorProf. Manoj Kumar GuptaDr. Anshu LochabDr. Madhu AroraMr. Miklesh Yadav

Editorial Advisory Board

Prof. R. K. MittalVice - Chancellor, Ch. Bansi Lal University, Bhiwani

Prof. Debi S. Saini Emeritus Professor of Human Resource ManagementIndian Institute of Management, Ranchi

Prof. A. T. K. RamanNew Delhi Institute of Management, New Delhi

Prof. Satinder BhatiaIndian Institute of Foreign Trade, New Delhi

Prof. Manipadma DattaTeri University, New Delhi

Prof. Sudhir K. JainIndian Institute of Technology, Delhi

Dr. Ravi GuptaSriram College of Commerce University of Delhi, Delhi

Prof. C. P. GuptaDepartment of Financial Studies, University of Delhi

Prof. A. K. SinghFORE School of Management, Delhi

Dr. D. K. SharmaGautam Buddha University, Greater Noida

Prof. Vishal Gupta University of Alabama, USA

Prof. Florent DeistingProfessor of Economics, Research Dean, Enseignant Chercheur Chez Group ESE PAu, France

Prof. Boaz (Buzz) Barak, Ph. D.Professor of Economics, School of Business, Keiser University Flagship Campus, Florida, USA

Prof. Navin MathurUniversity of Rajasthan, Jaipur, India

Prof. Saurabh AgarwalDean, Indian Institute of Finance, Greater Noida

Dr. Anjala KalsieFaculty of Management Studies, University of Delhi

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J-Gate

Vol. 16, No.-2, July - December, 2018

ISSN (O) : 2456-6675, ISSN (P) : 0972-8058

ContentsRESEARCH PAPERS Page No.Financial Liberalization and the Banking Crisis: A Study of ASEAN Nations 01

Dr. Anjala Kalsie

Jappanjyot Kaur Kalra

Stockbrokers' Services Availed by Equity Investors': A Study of Punjab, India 14

Dr. Jaspreet Kaur

Fama French Three-factor Model: A Comparative Study 32

Smita Datta

Anindita Chakraborty

The Nature of Organizational Culture in Indian Knowledge Organizations 42

Dr. Mohnish Kumar

Corporate Web Reporting: An Empirical Investigation of Indian Companies Websites Content & 57

Design Features

Harmandeep Singh

Dr. Arwinder Singh

Advocates/ Legal Experts' Perspective on Effectiveness, Opportunities and Threats of 78

Consumer Grievances Redressal Agencies

Dr. Ishwar Mittal

Dr. Ravi Kumar Gupta

Editorial

Dear Readers,

Innovation can make a substantial difference in addressing sudden developmental challenges. The transfer and, when necessary, adaptation of technologies in both developed and developing countries can often contribute significantly towards the attainment of goals. Therefore, extensive research efforts are needed to find solutions that further address other global challenges.

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The journal will serve as a valuable addition to the management literature and will also prove to be a valuable reference material for the practitioners. This issue of the journal carries research papers, on topics like Stockbrokers' services availed by equity investors', Advocates/ Legal Experts' Perspective on Effectiveness, Opportunities and Threats of Consumer Grievances Redressal Agencies, Nature of Organizational Culture in Indian Knowledge Organizations, Fama French Three-Factor Model, Financial Liberalization and the Banking Crisis, Corporate Web Reporting. Total six papers have been included in this issue together offer the theoretical and practical insight that hold immense value to the practice and research in a multi disciplinary zone.

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Happy Reading!

With best wishes

Prof. Anil Kumar GoyalEditor-in-Chief

Effulgence

Vol. 16 No. 2

July - December, 2018

Rukmini Devi Institute of Advanced Studies

E-mail : [email protected], Website : www.rdias.ac.in

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J-Gate

Financial Liberalization and the Banking Crisis: A Study of ASEAN Nations

1Dr. Anjala Kalsie

2Jappanjyot Kaur Kalra

1. Faculty-Finance, Faculty of Management Studies, University of Delhi, [email protected]. Research Scholar, Faculty of Management Studies, University of Delhi, [email protected]

Abstract

Capital Account Liberalization has always been a major policy concern among the economist and researchers in India since the

occurrence of 1991 Balance of Payment Crises. In the last four decades a lot of policy discussion has been done over the issues by

the policy makers and the scholars, but no common consensus has been formed, also lately IMF has changed its views on the

openness of the economy in its report by . Therefore, in this paper we make an attempt to analyse the empirical relationship

between the Financial Liberalization, Economic Freedom and the Banking Crises. The data set adopted for the purpose of study

is for the years 1980-2005 and covers Emerging Asian Markets: ASEAN 5 [Indonesia, Korea, Malaysia, Philippines and

Thailand (those impacted by 1997-98 crises)]. The impact over the various dimensions of the financial reforms has been tested

using the Panel Logit model. The results of the paper support the cautious approach towards the liberalization of the capital

account if the nation is having weak institutional environment.

Keywords: Financial Liberalization, Banking Crises, Economic Freedom, Institutional Environment, Logit Model.

expectations in the short run only. The liberalization INTRODUCTIONleads to surge of capital into the markets, which are

speculative in nature and these flows are invested ince past four decades the researchers and the

into the high risk projects to earn higher returns. Spolicy makers are discussing and probing the These flows only show positive and greater impact

relationship between the financial liberalization and on the economic growth in the initial years of capital

financial crisis, but have not derived a definite account openness and in the later years the risk and

conclusion. “Minsky” who gave the financial the defaults increases, reversing the situation. This

instability hypothesis, states that: if the financial leads to instability and crisis in various sectors of the

institutions and the financial markets are not stable, economy, primarily affecting the banking sector. The

the financial liberalization shows positive experiences of the various Latin American nations

Effulgence

Vol. 16 No. 2





ISSN (O) : 2456-6675, ISSN (P) : 0972-8058

and the South East Asian nations supports the fact Reinhart, 1999) states that the foreign currency risk is

that the liberalization policies till date are not transformed to the credit risk (the financial

efficient and the researchers have no common views intermediaries raise funds in foreign currency

on the issue.(Eichengreen, 2001; Eichengreen & abroad and lend it to domestic borrowers) causing

Arteta, 2000) in their paper mentioned that the twin crises (both currency and banking crisis).

“removing controls on the capital account may not

be beneficial in the presence of the other distortions The primary function of the banking system is to

which are plausibly the case in the developing channelize the short-term deposits into the long term

economies”. funds (loans), matching the maturities. The theory

states that in the more closed economies the bank

Various studies (Beck, Demirgüç-Kunt, & Levine, lending interest rates are subject to ceilings, due to

2006; Asli Demirguc-Kunt & Detragiache, 1998; which they can’t invest or lend loans in the high risk

Shehzad & Haan, 2009) focuses on the issue that projects and makes it impossible for these banks to

more open economies are prone to crisis in particular charge the high risk premium and earn higher 3the banking sector as it becomes more fragile due to returns. In an open economy the interest rates

the frequent inflows and outflows of the funds. The (nominal) are market determined and are more 4capital account convertibility (CAC) induces the volatile . Once the financial system is deregulated i.e.

behaviour of higher risk taking among the investors the ceilings are lifted, more investing participants

by investing into riskier projects in expectation of enter into the competition, therefore it becomes

better returns from the emerging markets. But these easier for the banks to lend and disburse the funds to

studies basically used very objective data for the more risky projects, charging high risk premia

liberalization i.e. just focusing on the deregulation of and earning higher returns. These investment

the banking interest rates. It is a cycle where bankers hedge the credit risk by holding well-

investors invest in the fast growing economies i.e. diversified portfolios, but these portfolios are

where the opportunity cost is higher, (the herd exposed to the various risk and economy wide

behaviour of the investor follows), thus reducing the shocks. In a less developed banking system the

cost of capital (“pooling liquidity risk”(Diamond & maturity mismatch can occur leading to fund

Dybvig, 1983)) and the returns on investment. Given shortages in the system, leading to liquidity problem

the situation, the investors start moving out the and contagion due to market imperfections and

money from these projects in emerging markets panic among the public. The evaluation and the

again the herd behaviour of investors follow, the monitoring of these loans and the collateral is a

sudden inflows and outflows in the economy primary activity and requires lot of skills, which may

traumatize the banking sector. The openness and the not be the case with all of these banks. Thus the

removal of the controls on the international capital failure to evaluate the loan during the term (along

flows render the financial intermediaries to jeopardy with other factors like economic slowdown,

of foreign exchange risk. (Graciela L. Kaminsky & reduction in demand etc) leads to the non-payment

ISSN (O) : 2456-6675, ISSN (P) : 0972-8058Effulgence, Vol. 16, No. 2, July - December, 2018

02

3. “Chilean experiences, and those of other Latin American countries, also show that fiscal extravagance is a sure way to bring about not only economic dislocation, but also the weakening and even collapse of fragile democratic institutions” (Diaz-Alejandro, 1985). The same situation was faced by the Asian tigers or the fast growing Asian economies which suffered with crisis in 1997-98 after the fall of Thai Bhatt.

4. “Bank insolvency often occurs when macroeconomic volatility is on the rise and when incentives appear to have weakened— not a good time to try to determine causality. When financial deregulation occurs at the same time it becomes a convenient target, though in many countries deregulation proceeded faster than improvements in financial infrastructure and incentives, suggesting that weak financial infrastructure and poor incentives led to the crises”.(Caprio and Klingebiel, 1997)

of the instalments, increasing the Non-Performing sector leads to a shock to all the financial institutions

Loans (NPLs) of the banks. as the capital flow increases, also the access in capital

markets abroad fuels the system during the boom

The paper is an attempt to analyse empirically the period of the economy, providing excessive

theoretical reasons why the capital account open financing options.(Graciela L Kaminsky &

economies, in particular the liberalized banking Schmukler, 2003; Graciela Laura Kaminsky &

system, makes economy more vulnerable to the Schmukler, 2008; Ranciere, Tornell, & Westermann,

crisis. With the insights from the research of 2006) supports the same school of thought with little

(Minsky, 1993), we try to argue that the financial difference in the findings. They show that financial

liberalization makes the economy more inclined to openness in the short run causes larger investment

BC (Banking Crisis). cycles witnessing the development of lending boom

which ends up in financial distress.

REVIEW OF LITERATURE

(Blackburn & Forgues-puccio, 2008) summarized

As per (Caprio & Klingebiel, 1997) the bank their study stating that the effect of corruption is

insolvencies are increasing due to systemic failure, more adverse in an open economy that the closed

weak institutional policies which drain the country’s one and in a weak bureaucratic system. The growth

finances. (Demirgüç Kunt & Detragiache, 1998), of an economy is far less in presence of corruption

analyse the empirical relationship between financial even if the capital account is made open and foreign

liberalization and banking crises using the data from flows are invited for the investment. If the

1980-1995 for 53 nations. Their findings suggest that governance is weak the investors will lose the

in a liberalized financial system the probability of the confidence in the long run finding it riskier and less

banking crises is more likely. But in a stable and a profitable to invest in the nations with weak rule of

strong institutional environment the impact of law, (Elbir & Goaied, 2012) in their paper suggest

liberalization on the vulnerability of banks is lesser. that the lower corruption and financial liberalization

(Graciela Laura Kaminsky, 1999)analysed the link are substitutes in promoting growth. There is clear

between the 76 currency crisis and 26 banking crisis evidence from literature that in the developing

for the period 1970 to 1995, taking into account 20 nations, if the institutional environment is weak, the

countries and focusing on the fragility of economy as financial liberalization has costs in terms of increased

an indicator for future crisis. But (A. Demirguc-Kunt fragility in the economy and the financial markets.

& Detragiache, 2000) uses a multivariate Logit This may even spread from one nations to many

technique to develop the model for banking crisis, other in the integrated and liberalized markets. It is

that can be used for monitoring the vulnerabilities in really very important to develop the strong

the banking sector. The results are lower in type I institutional environment before taking up full

and type II error than the previous approaches used capital account liberalization.(Beck, 2008; Hellmann,

for determining the banking crisis. After Murdock, & Stiglitz, 2000) suggest that due to the

investigating almost 90 banking crises, 202 currency regulatory and supervision failures, the financial

crisis and 37 twin crisis (Glick & Hutchinson, 2005), liberalization and unfettered competition globally,

finds the more liberalized emerging economies are has resulted in the systemic failures and undermine

prone to twin crises and mainly concentrated on, prudential bank behaviour. Similarly (Giannetti,

openness triggers excessive booms and busts cycles 2007; Noy, 2004)in their research writes that one of

in financial markets leading to crisis. (Graciela L. the main culprits of volatility in the banking sector is

Kaminsky & Reinhart, 1999) focuses on the issue of financial liberalization due to the sudden loss of

both banking and balance of payment crises, and monopoly power of the domestic regulated bank, as

states that the sudden liberalization in the financial the uninformed international lenders invest the large


03

amount funds at a lower cost. Thus, from the of the banks can be too late after the actual

literature it’s clear that financial openness makes the problem with the bank. On the similar pattern

system fragile and contagious, therefore signalling (Laeven & Valencia, 2013) defined the banking

the developing nations a cautious approach towards crises dating process, the second criterion

the fuller capital account convertibility. mentioned above is adopted is the first one is not

met. One of the reasons for adopting the data

DATA AND METHODOLOGY base is the wide coverage of the time period

which begins from 1800 and is dated till the year,

The data set adopted for the purpose of study is for which helps to capture different period of

the years 1980-2005 and covers ASEAN 5 [Indonesia, financial turmoil.

Korea, Malaysia, Philippines and Thailand (those

impacted by 1997-98 crisis)] nations. These nations The index of the banking crises is a binary

are gauged in the paper as stated in (Stiglitz, 2003) variable where 1 represents the year of banking

“when the THAI baht collapsed... the currency crises (onset of the banking crises) and 0

speculation spread and hit Malaysia, Korea, the otherwise. A total of 54 episodes were identified

Philippines and Indonesia and by the end of the year for all the nations included in the sample during

what had started as an exchange rate disaster the defined period (See the appendix I). Out of

threatened to take down many of the region’s banks, the 54 crises episodes 13 were recorded as the

stock markets and even entire economies”. Also twin crises. The twin crises are the situation

these Emerging Asian nations had recently opened when the nations bear both the banking and the

there capital accounts and had adopted policies for currency crises. The currency crisis is defined as

the integrated trade and financial markets. “a nominal depreciation of 25% or greater in the

value of the currency, which is at least 10% 1 Banking Crises greater than the depreciation in the previous

The dataset for the banking crises has been year”(Frankel & Rose, 1996). But for the current adopted from the(Reinhart & Rogoff, 2008b), study we only focus on the 54 banking crises which is based upon detailed country to country episodes.analysis of various forms of economic and

financial crises. The definition of the banking 2 Financial Liberalizationcrises as given in the(Reinhart & Rogoff, 2008a) Financial Liberalization means the deregulation

basically analyse the stresses events in the of the domestic markets and the free currency

banking sector. There are two situations which convertibility with the motive of long-run

define the banking crises in the nation; first economic growth. There are different categories

when the “bank runs that lead to the closure, of measurement of financial liberalization or 5merging, or takeover by the public sector of one upliftment of controls from the Capital account :

or more financial institutions and second • De Jure: De Jure measures are the binary situation is when; there are no runs, the closure, indicators developed for evaluating the level of merging, takeover, the large-scale government controls implemented on the capital account i.e. assistance has been provide to an important the controls instigated upon the cross border financial institution (or group of institutions), capital flows. It is the accounts which maintains that marks the start of a string of similar the record of- the presence and the absence of outcomes for other financial institutions”. But the control measure over the different categories researchers criticised this method as the closure of flows and is coded in 0 and 1 form. The zero

5. Study considered the financial liberalization as openness of the capital account.


04

here represents the presence of the control and from 3(fully liberalized) to 0 (not liberalized at

the 1 represents free mobility of the capital. But all). It also take into account the policy reversals

this construct does not record the actual amount (but not measured in the paper). The first

of flows, nor the magnitude and the direction of dimension is the credit controls and reserves

the flows. requirement focusing on the credit ceilings, the

• De Facto: De Facto measures captures the real next dimension is interest rate controls than is

market situation taking into the account the entry barriers followed by the state ownership.

integration of a nation into the international The next important dimensions are the

capital and money markets (Lane & Milesi- restriction on the international capital flows,

Ferretti, 2001). It is an alternative approach to the security market restrictions and the last is the

DeJure index or the regulatory index as it prudential banking regulations (a greater score

accounts the actual flows in and out of the in the prudential regulation dimension would

economy. It includes both the price and the mean better regulation). A raw scale was

quantity based measures for recording the actual assigned to each dimension and there after it

flows of the economy. was normalized to the 0-3 scale so that the score

• Hybrid Measures: It’s the blend of both De Jure is comparable among the dimensions and the

and De facto measures of capital controls. cross sections. Each dimension individually was

scored on the 0-4 or 0-2 scale depending upon

For the purpose of this paper we take into the categorization, where 0 being fully repressed

account only De Jure measures as they are and 2or 4 means fully liberalized transactions,

directly related to the policies and regulatory before the normalization process. The finre form

aspect of the nation. Any change in this is relates index is the total of all seven categories of

to the change in the policies of a nation in Financial Account and the score lies on the scale

relation to financial liberalization. The de jure of 0-21 (3 being the maximum score and total

measure takes into account the scale based on number of categories are 7), therefore the

the rigorousness and the degree of capital financial reform index was normalized to 0-1

controls or in particular the binary variables scale, i.e. the score of the country for each year

from the AREAER recorded by the IMF. These lies between minimum 0 to maximum 1.

binary variables include the restrictive and non-

3 Economic Freedom of the World Indexrestrictive regulations in relation to capital

In the previous studies the researchers had controls further diversifying in according to the

evaluated the impact of financial liberalization resident and the non-resident categories. In these

over the increase of the growth of the economy. studies the 1 indicates the liberalization or

Authors like (Stiglitz, 2003; Vasudevan, 2006) deregulation of control and 0 represents any

and others concluded that there are pre kind of restriction imposed. The Annual report

requisites to the liberalization of the financial on Exchange Arrangements and Exchange

account, that needed to be met before the Restrictions was a binary Measure until 1996 and

integration of the nation with the rest of the then recorded with the sub Categories

world. These include strong domestic financial subsequently. For the liberalization (the

system, corruption free environment, strong openness of the Capital account) of the economy,

regulatory system and free movement of labour we adopted the data set named FINREFORM

and trade & capital. The Regulatory Efficiency from (Abiad, Detragiache, & Tressel, 2008),they

takes into account the amount of government measured the intensity of the openness of the

intervention into the Legal, Economic and financial sector by taking into account the

Monetary aspects of a country. The freedom is different dimensions and scoring on the scale


05

based on three fundamental principles: the list mentioned in the Demirguc-Kunt and

“empowerment of the individual, non- Detragiache (2000); Eichengreen and Arteta (2000);

discrimination and open competition leading to Mehrez and Kaufmann (2000); Glick and Hutchinson

the creation and maintenance of mutual sense of (2005). The various variables used in the regression

liberty for all. The Economic freedom should were: GDP growth, Terms of Trade adjustment, Real

provide an absolute right of property ownership, Interest Rate, Real effective Exchange Rate, Inflation

free movement of labour and capital, (Consumer price Index), Money and Quasi Money to

consumption of goods and services, economic Total Reserve Ratio, Bank Non-Performing Loans to

decisions at the decentralized form”. Various Total Gross Loans, Domestic Credit to Private Sector

previous researches have reported in their Loans and Inflation GDP deflator (See appendix II

studies the relationship between the ‘lax for the definition of Variables and Sources for the

supervision’ and the failure of the financial data).

liberalization. Therefore it becomes important to

5. Panel Data Logit Model Specificationstudy the bureaucratic environment of the

nation before commenting of the volatility in the

As the dependent variable in the study i.e. the banking and the financial sector and economic

banking crises is binary in nature (representing 1 for freedom as a whole.So, we used the Economic 6 the crises period and 0 otherwise) and to normalize Freedom of the World Index (Gwartney,

the analysis we use Logistic distribution function Lawson, & Hall, 2017) developed by the FRASER

and employ panel data Logit model as given in Institute, is based on 42 quantitative and

equation (1). In the Logit model the estimated qualitative data points recorded separately

coefficients capture the effect of change in an under 5 different categories:

explanatory variable, where the sign of the

coefficient implies the direction of the change, i. Size of government: expenditures, taxes, and

whereas the slope of the cumulative distribution enterprises;

function defines the magnitude of change. So the ii. Legal structure and security of property rights;

Logit model is appropriate for the purpose of study, iii. Access to sound money;

as we want to analyse the effects of financial iv. Freedom to trade internationally;

liberalization reforms over the occurrence or the v. Regulation of credit, labour, and business.

non-occurrence of banking crises (Asli Demirguc-

Kunt & Detragiache, 1998) as given in equation 2. So, 4. Macroeconomic Variables

we use panel containing yearly observations the

defined set of indicators for the A5 nations.To avoid the spurious regression problem we added

various macroeconomic and financial variables that

have been mentioned in the earlier studies to be used

Thus in this paper the Logit Function is:as control variables. Control variables are those

which are not of primary concern in the regression

outcome, but any change in these variables would

skew the relation between the dependent variable

• BNK : is a binary variable for the onset of the and independent variable. These are used as the i,t

control variables as they have a significant impact on banking crises in i country and t year

the banking crises. We selected these variables from

6. For the detail methodologies review the study: (Hall & Lawson, 2014). Economic Freedom of the World: An Accounting of the Literature. Contemporary Economic Policy. http://onlinelibrary.wiley.com/doi/10.1111/coep.12010.


06

EMPIRICAL RESULTS • LIB : is the financial reform (liberalization) i,t

variable in i country and t year

The results are shown using the panel Logit model • LIBC : is the decomposed financial reform i,t

and analyse the relationship between the banking (liberalization) variable into 7 Components in i

crisis and financial liberalization with the regulatory country and t year

and macroeconomic control variables. We run the • ECFR : is the economic freedom index variable i,t

different regressions for being more liberalized and in i country and t yearbetter ranking according to Economic freedom • ECFRC : is the decomposed economic freedom i,t

index:variable into 5 Areas in i country and t year

• LIB : * ECFR : is the integrated variable to i,t i,t

I. Effect of financial reforms on banking crises study the financial integration in presence of (Table 1)economic freedom

ii. Effect of economic freedom on banking crises • LIBC : * ECFRC : is the integrated variable to i,t i,t

(Table 2)study the different type of flows in the financial iii. Effect of financial reform and economic freedom reform index and evaluating the bureaucracy

on banking crises (Table 3)environment, economic environment and the

enforcement of prudential regulationFor all the three objectives we have divided the • i subset : represents countries from 1 to 5 analyses in two panel Logit regressions separately as (Indonesia, Korea, Malaysia, Philippines and following:Thailand )• Regression 1: is the equation where we measure • t subset : represents the time in terms of a year (

the composite index and25 years from 1980-2005)• Regression 2: is the equation where we measure

the components of the index in details.

i Financial Liberalization and the Banking

Crises

We estimate the equation using the Panel Logit

model with the Random effects and report the

results in table I. We regress banking crises only on Thus, the Key Objectives of the Study are:

the financial reform variables and control variables.

We report the regression with average marginal • To test the effect of financial reform

effects on means because they are more meaningful (Liberalization) and its various categories of

and accurate measures, as suggested in literature flows on the probability of banking crises and

(Drukker, 2010). The Coefficient value tells the macroeconomic variables.

direction and the magnitude of the variable in the • To test the effect of Economic Freedom variables

Logit models. Our findings are in line with those of on the probability of banking crises and

the previous studies.macroeconomic variables.

• To test the effect of financial reform Hypothesis: Ho: There is no impact of financial

(Liberalization) and it’s various categories of reforms over the occurrence of the banking crises.

flows, conditional on economic freedom on the

probability of banking crises and In Regression 1 study analyse the relationship

macroeconomic variables.between the total score of financial reform variable

We have reported the marginal effects alongside the

coefficient values as the literature suggest reporting

of the marginal effects is more apt as it explains the

change in outcome as a function of the change in the

independent variable holding all other variables in

the regression constant.


07

and found that it is not significant, but when we positive and significant showing the increases in the

segregate the Financial reform variables into occurrence of the crises. In case of A5 international

different categories as mentioned in (Abiad et al., capital flows are significant in increasing the

2008), we found the results significant in few cases. probability of crises. In case of control variables the

In Regression 2, the interest rate controls, real GDP growth, Broad Money to reserves and

privatization and capital controls are negative and terms of trade also predict the chances of crises. The

significant in the occurrence of the banking crises, significance of the dummies for Indonesia, Korea

whereas the banking entry barriers come out to be and Malaysia are negatively significant.

ii Economic Freedom and the Banking Crises Economic freedom (listed above) in Regression 2.

In table 2 we regress the dependent variable banking Hypothesis: Ho: There is no impact of economic

crises on the economic freedom index. In the first freedom over the occurrence of the banking crises.

regression (Regression 1) and the Components of

Independent Variables

Regression 1

Regression 2

Coefficient Standard Error Marginal Effect


Financial Liberalization: CRT CO -0.5451676 (0.5306086) -0.18525005 INT CO -0.7067674 (0.4344894)* -0.24016227

BAN EN

2.322484 (0.8912714)***

0.7891889

PVT

-2.172099 (0.5577231)***

-0.73815546

SUP CO 0.3458771 (0.9382983) 0.11753038

CAC CO -0.7969142 (0.5936918)* -0.27079453

SCR MA -0.1074989 (0.9668383) -0.03652856

LIB (Financial Reform)

-1.50508

(2.326691)

-0.32473832

Independent Control Variables

GDP GROW

-0.2729851

(0.083021)***

-0.6259947

-0.2063608

(0.1043508)**

-0.07012219

TOT

2.04e-14

(1.05e-14)**

4.708e-15

2.39e-14

(1.17e-14)**

8.108e-15

RE INT

0.0046713

(0.0570223)

0.00253734

0.1096183

(0.761263)

0.03724873

REER

-0.0029423

(0.008547)

-0.00060297

0.0057636

(0.011608)

0.00195849

INF CP

-0.0945496

(0.052986)*

-0.02066407

-0.0380163

(0.0661288

-0.01291808

M2/TR

0.4830128 (0.1440825)***

0.10866487

0.9153535

(0.2333569)***

0.31104066

CRD PVT/GDP

0.0210603

(0.0127301)*

0.00458958

-0.0102278

(0.0185888)

-0.00347546

D1

-0.9997108

(1.411226)

-0.2630243

-7.340934

(2.442753)***

-2.4944775

D2

-1.369177

(0.9191256)

-0.29320014

-5.597816

(1.664951)***

-1.9021593

D3

-0.8486101

(0.788677)

-0.19945199

1.961069

(1.372955)*

0.66637886

D4

0.917987

(1.08702)

0.17846298

-0.9754114

(1.655878)

-0.33144855

***, **,* indicates rejection of null

(coefficient=0) at 1%, 5%, 10% significance levels, respectively.

The values in the parentheses

are the standard errors

Table 1 : Effect of Financial Reforms on the Banking Crises


08

***, **,* indicates rejection of null (coefficient=0) at 1%, 5%, 10% significance levels, respectively.

The values in the parentheses are the standard errors

The results of the Panel Logit in table 2 shows that crises. In regression 1 the total of the financial reform

the economic freedom in total does not impact the and the economic freedom index is examined and in

occurrence of the crises in Regression 1. But when regression 2 we regress the banking crises on all the

the individual components of the economic freedom components of financial reform variable and the

index were evaluated in regression 2, the legal economic freedom variable along with the control

structure and the security of property rights and the variables.

regulation of credit & business shows a negative and

a significant impact over the occurrence of the Hypothesis: Ho: There is no impact of financial

banking crises. In regression 2 among the control reforms and economic freedom over the occurrence

variables GDP growth has a negative effect and of the banking crises.

broad money and credit to the private sector has a

positive and significant influence over the These significant variables show the occurrence of

happening of the crises in the banking sector. the crises in different situations. More liberalized

and less developed nations increases the chances of

iii Financial Liberalization, Economic Freedom occurrence of the crises. Among the Components of

and the Banking Crises the Economic freedom index the LSPR and the

Regulation of the credit & business has a highly

In table III the third set of regression we tried to negative significance over the chances of the banking

analyse the total financial liberalization and crises.

economic freedom variable as the predictors of

Independent Variables Regression 1 Regression 2



Economic Freedom of the World:

SOG 0.424255 (0.3614469) 0.28778948 LSPR -0.4127375 (0.2428195)* -0.23471626 SM 0.0377333 (0.1472014) 0.00708855 FTI 0.2429699 (0.2836905) 0.15717806 REG -1.158626 (0.3805981)** -0.72926666 Economic Freedom Index Value

-0.4327184 (0.5314052) -0.16116057


GDP GROW -0.2776158 (0.083594)*** -0.10339455 -0.172255 (0.0543723)*** -0.108312 TOT 2.01e-14 (1.05e-14)** 7.500e-15 8.63e-15 (6.31e-15) 5.476e-15 RE INT 0.0093297 (0.0540239) 0.00347472 0.0091372 (0.0345184) 0.00479312 REER -0.0042224 (0.0071886) -0.0015726 0.0007644 (0.0052654) -0.000032449 INF CP -0.090468 (0.0509865)* -0.0336937 -0.0447489 (0.0345732) -0.02844347 M2/TR 0.4796449 (0.1451649)*** 0.1786378 0.2924145 (0.0920503)*** 0.18678612 CRD PVT/GDP 0.0238782 (0.0134141)* 0.00889314 0.014012 (0.0089861)* 0.00950823 D1 -1.047587 (1.40507) -0.3901607 -2.691039 (1.107864)* -1.5888034 D2 -1.478351 (0.8731415)* -0.5505934 -1.300999 (0.5670014)* -0.83699914 D3 -0.8844742 (0.773382) -0.3294114 0.3463828 (0.8118555) 0.23683065 D4

0.8102689

(1.062674)

0.30177455

-0.5684351

(0.9870494)

-0.27520703

Table 2 : Effect of Economic Freedom on the Banking Crises


09

Independent Variables Regression 1 Regression 2

Coefficient Standard Error Marginal Effects

Coefficient Standard Error Marginal Effects

Economic Freedom of the World:

SOG 0.1537002 (0.5769529) 0.10699077 LSPR -1.231176 (0.3749826)*** -0.59847339 SM 0.2802465 (0.2421652) 0.13229075 FTI -0.0198573 (0.4571778) -0.03071669 REG -1.979877 (0.7037866)*** -1.0470095 Economic Freedom Index Value -0.3490052 (0.6080638) -0.1299504 Financial Liberalization: CRT CO -0.2253744 (0.4527011) -0.13859395 INT CO -0.8495667 (0.3415671)*** -0.42385076 BAN EN 1.802497 (0.691127)*** 0.86860251 PVT -1.325962 (0.3694263)*** -0.7093827 SUP CO -0.4969663 (0.7417986) -0.19461276 CAC CO -0.6212506 (0.4490439)* -0.28341155

SCR MA 1.166949 (0.7635296)* 0.61626519

LIB (Financial Reform) -0.757842 (2.666554) -0.28217881


GDP GROW -0.2758259 (0.0835319)*** -0.10270245 -0.1652213 (0.0752561)** -0.08886389 TOT 2.02e-14 (1.05e-14)** 7.507e-15 1.39e-14 (8.69e-15)* 7.261e-15 RE INT 0.0040196 (0.0570047) 0.02776873 0.0597085 (0.0500092) 0.02776873 REER -0.0029083 (0.008575) 0.01056627 0.019252 (0.0102202)* 0.01056627 INF CP -0.0948567 (0.0531067)* -0.01609958 -0.0255129 (0.0484115) -0.01609958 M2/TR 0.4762616 (0.1449541)*** 0.3003924 0.5586986 (0.1535446)*** 0.3003924 CRD PVT/GDP 0.023469 (0.0134722)* -0.00942263 -0.0166639 (0.0166531) -0.00942263 D1 -1.883017 (1.336684) -5.2223469 -10.1582 (2.494574)*** -5.2223469 D2 -2.281454 (1.173319)** -2.5877932 -5.033878 (1.315798)*** -2.5877932 D3 -1.717302 (1.292713) 1.9365201 3.741489 (1.384953)*** 1.9365201 D4 -0.8855463 (1.092582) -1.8394026 -3.731314 (1.686516)** -1.8394026

***, **,* indicates rejection of null (coefficient=0) at 1%, 5%, 10% significance levels, respectively. The values in the parentheses are the standard errors.

Table 3 : Effect of Financial Reforms and Economic Freedom on the Banking Crises.

CONCLUSIONSAmong the Variables of the financial reform index

the interest rate controls, privatization and capital

In this paper, we examine the effect financial controls have a negative significance of the chances

liberalization on the likelihood of banking crises. For of happening of the banking crises and the

the purpose we had regressed the different restrictions over the banking entry and the security

dimensions of financial reforms and the economic market controls have a significant positive influence

freedom on the odds of banking crises. We find that over the probability of banking crises. In this

if financial liberalization is undertaken in the weak regression all the nation dummies are significant, but

institutional environment and lack of economic for Indonesia, Korea and Philippines shows a

freedom, the likelihood of banking crises augment. negative sign whereas for Malaysia shows a positive

We also found that stronger GDP Growth rate sign with the manifestation of crises. Among the

reduces the probability of banking crises whereas the control variables the GDP growth has a negative

credit to private sector increases the same. The paper influence and REER and the broad money has a

supports for the gradual approach towards the positive influence on the happening of the crises. But

liberalization, as various previous studies also found the results doesn’t support the hypothesis, the signs

that more liberalized and repressed financial system of the variables are as per the previous studies that if

has a greater chances of occurrence of the banking the liberalization is more and the economic freedom

crises. The results in the paper shows that in case of is less the chances of crises increases.


10

financial reforms the privatization and the openness Monitoring banking sector fragility: A

of the banking sector i.e. lack of entry barriers are multivariate logit approach. The World Bank

highly significant variables along with the freedom Economic Review, 14(2), 287–307.

to international capital flows. The Economic freedom https://doi.org/10.1093/wber/14.2.287

variables shows the negative sign and a significant 8) Demirgüç Kunt, A., & Detragiache, E. (1998).

impact on the nations. The direction of the all above Financial Liberalization and Financial Fragility.

mentioned variables are in line with the previous IMF Working Paper.

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are the open economies who ultimately reversed the Runs, Deposit Insurance, and Liquidity. Journal

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10) Diaz-Alejandro, C. (1985). Good-Bye Financial

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25) Kaminsky, G. L., & Schmukler, S. L. (2003). Different- A Panoramic View of Eight Centuries

Short-run pain, Long-run gain: The effects of of Financial Crises. Working Paper, 1–123.

financial liberalization. National Bureau of https://doi.org/10.1017/CBO9781107415324.004

Economic Research. 35) Reinhart, C. M., & Rogoff, K. S. (2009). This Time

https://doi.org/10.3386/w9787 Is Different: A Panaromic View of Eight

26) Kaminsky, G. L., & Schmukler, S. L. (2008). Centuries of Finacial Crises, 1–123.

Short-run pain, long-run gain: Financial https://doi.org/10.1017/CBO9781107415324.004

liberalization and stock market cycles. Review of 36) Shehzad, C. T., & Haan, J. (2009). Financial

Finance, 12(2), 253–292. Reform and Banking Crises. CESifo Working

https://doi.org/10.1093/rof/rfn002 Paper Series, (2870). Retrieved from

27) Laeven, L., & Valencia, F. (2013). Systemic http://ideas.repec.org/p/ces/ceswps/_2870.ht

Banking Crises Database. IMF Economic Review, ml


12

*IFS: International Financial Statistics, **IMF: International Monetary Fund, **BIS: Bank for

International Settlements

Variable Name DescriptionExpected Sign

Source

Dependent Variable

BANK CR

Banking Crisis

(Reinhart & Rogoff, 2008b)

Independent Variables

LIB

Liberalization(Financial Reform)

+/-

(Abiad et al., 2008)

CRT CO

Credit Controls

+/-


INT CO

Interest Rate Controls

+/-


BAN EN Banking Entry +/- (Abiad et al., 2008)

PVT Privatization +/- (Abiad et al., 2008)

SUP CO Supervisory Control +/- (Abiad et al., 2008)

CAC CO

Capital Controls

+/-


SCR MA

Securities Market

+/-


SOG

Size of Government

+/-

(James et al., 2014)

LSPR

Legal Structure and security of

property Rights

+/- (Gwartney, Lawson, &

Hall, 2015)

SM

Access to Sound Money

+/-

(Gwartney et al., 2015)

FTI

Freedom to trade internationally

+/-


REG

Regulation of Credit and Business

+/-


INDEPENDENT CONTROL VARIABLES (Asli Demirguc-Kunt & Detragiache, 1998)

GDP GROW

Rate of Growth of Real GDP

- World economic

outlook, IFS*, IMF**

TOT

Change in Terms of Trade

+/- World economic

outlook, IFS, IMF

RE INT

Nominal Interest rate Adjusted for Inflation

+ World economic outlook, IFS, IMF

REER

Inflation Adjusted Exchange Rate

+ World economic

outlook, IFS, IMF

INF CP

Inflation, GDP deflator (annual

%)/NY.GDP.DEFL.KD.ZG

+ World economic

outlook, IFS, IMF

M2/TRMoney and quasi money (M2) to total reserves ratio

+/- World economic outlook, IFS, IMF

NPA/GLBank nonperforming loans to total gross loans (%)/FB.AST.NPER.ZS

+ World Bank, BIS***

CRD PVT/GDPDomestic credit to private sector (% of

GDP)/FS.AST.PRVT.GD.ZS+/- World Bank, BIS

Appendix II Data Sources for Variables Included in the Logit Regression

Indonesia 1992,1994, 1997-2002

Korea 1983, 1985-1988, 1997-2002

Malaysia 1985-1988, 1997-2001

Philippines 1981-1987, 1997-2001

Thailand 1980-1987, 1996-2001

Source: (Reinhart & Rogoff, 2009)

37) Stiglitz, J. E. (2003). Globalization and Its 38) Vasudevan, A. (2006). Great Indian Story of

Discontents (2012th ed.). Gurgaon: Penguin Convertibility. Economic & Politcal Weekly,

Books India. 41(19), 1881–1884.

Appendix I Banking Crises Episodes


13

Stockbrokers' Services Availed by Equity Investors : A Study of Punjab, India

1Dr. Jaspreet Kaur

1. Assistant Professor, Khalsa College for Women, Amritsar, [email protected]

Abstract

Retail equity investors seek guidance from stockbrokers to manage their investment and to meet their own and their families'

goals. These investors rely on stockbrokers for investment advice and expect that advice to be given in their best interest.. The

study has been to analyse the various services availed by retail equity investors from the stockbrokers while dealing in securities

market and to check whether there is any significant difference in the opinion equity investors across their demographics

regarding the stockbrokers' services availed by them. Three hundred and seventy three (373) questionnaires have been filled up

by the respondents. Forty five (45) questionnaires have been found to be incomplete and have been excluded from the analysis.

Remaining three hundred and twenty eight questionnaires have been used for the analysis. In order to achieve the objective of the

study descriptives, T-test and ANOVA have been used.

Keywords: Stockbrokers, investors, stockbrokers’ services, securities market.

customers have been empowered by the regulators INTRODUCTIONand stock exchanges through numerous initiatives

like the introduction to new investment avenues, etail equity investors seek guidance from

educating and making the investor aware, increasing Rstockbrokers to manage their investment and to his reach, advancement of technology and higher

meet their own and their families’ goals. These accountability of various market participants. These

investors rely on stockbrokers for investment advice steps will encourage the retail investors to invest in

and expect that advice to be given in their best stock market. (Srinivasan and Mohan, 1995 and

interest. The regulatory regime that governs the Chakravarty, 2010).

provision of investment advice to retail investors is

essential to assuring the integrity of that advice and The Indian stock brokerage industry has grown

to matching legal obligations with the expectations significantly over the last decade in terms of both

and needs of investors (Study of the staff of the U.S. size and scope. The relationship between the

Securities and Exchange Commission, 2011). The

Effulgence

Vol. 16 No. 2





ISSN (O) : 2456-6675, ISSN (P) : 0972-8058

14

stockbroker and the investor has always been very unfavourable report of IB analysts rather than on

rocky and also very beneficial to both of them. The their favourable reports because their favourable

broker has an inside knowledge about the companies reports were biased being based on incentives given

and also the share market. So, he can always help the to them by the companies, rather than on the basis of

investor to make the right investment decision and facts. The researchers opined that the situation must

thereby charge a fee for the services offered. The really be bad if IB analysts were willing to admit it.

investor may be new to the market; therefore the Chakrabarti (2004) highlighted that stock brokers

knowledge accumulated by the stockbroker as per recommendations were significantly helpful to

his experience can be greatly beneficial to the small investors especially the strong buy recommendations

investor who may be a first timer or a new entrant to and these recommendations also had an impact on

the stock market. If the advice given to the first timer the prices of the relevant stocks. Chi (2006)

is beneficial to him, then there may be many more highlighted that in the absence of brokers

first timers who will be introduced to the recommendations, investors were willing to sell the

stockbroker by the benefitted one (Rajkumar, stock in both circumstances i.e. in case of loss as well

K.Prabhakar and Kavitha, N. Lakshmi, 2015). as profit. When the impact of brokers

recommendations were analysed, it was found that

With gold prices fluctuating and the real estate not investors were following their recommendations.

being up to the mark, the individuals have found a Hung, Clancy and Dominitz (2009) the study

good and lucrative investment option which can be revealed that 1. investors were not able to

done with as low as Rs 1000/- per month, which is a understand the key distinctions between investment

very negligible amount in today’s world (Volpe, advisors and brokers with regard to their duties, the

Kotel, and Chen, 2002 and Vosra, and Younes, 2013). titles used by them and the fees charged by them, 2.

The stock market has seen a steady growth and most investors were satisfied with their financial service

of the share prices have been constant with an providers. Verma and Tiwari (2010) suggested that

increase in the same. Many small time investors are the stock brokers should satisfy their existing

waiting to enter the stock market and test the waters. customers in order to avoid revenue loss and to

Since most of them will be first time investors, they acquire new customers through the existing

will require knowledge about the market and also customers. Shukla and Upadhyaya (2013) revealed

details of the companies which can be provided by that customer satisfaction in broking agencies was

the brokers, for a fee and if the small investor is highly influenced by attributes of services and the

given good advice then he/she may introduce many way in which these services had been delivered to

more clients to the broker who in turn may earn the customers. The study recommended that the

more, thereby making the situation a win- win one broking agencies need to invest more money and

for the investor and also the broker. gain more expertise in their in house research

activities. Jeelan (2014) found that1. number of

REVIEW OF LITERATURE registered stockbrokers increased gradually, 2. the

number of registered stockbrokers of proprietorship

McAlexander and Scammon (1988) concluded that was declining at snail pace from fifty percent to forty

high knowledgeable investors required problem four percent, 3. the registered brokers of

specific advice and they used professional persons’ corporatorship were increasing gradually from forty

recommendations and company report as a source of six point four percent (46.4%) to fifty three percent

information. Moreover, they considered advisors’ (53%), 4. major share in premier stock exchanges like

knowledge as the most important attribute while BSE, NSE, OTCEI, Delhi, Ahmadabad were of

selecting the financial advisor. Hirst, Koonce and corporatorship stock broking firms, 5. number of

Simko (1995) stated that investors relied upon registered stockbroker in equity derivative segment


15

were more than those of cash segment, 6. about This analysis has been done to check whether there

twenty five percent (25%) of the total turnover of is any significant difference in the opinion equity

cash segment was captured by top ten share brokers, investors across their demographics regarding the

7. brokerage paid on trade had been steadily stockbrokers’ services availed by them.

declining with CAGR of -12.19% and 8. brokerage

paid on delivery had also been steadily declining H01: There is no difference in the opinion of the

with CAGR of -5.9%. Imthiyas, Shyamasundar and equity investors as per their gender regarding

Ramar (2015) recommended to include the the stockbrokers services availed by them.

introductory sessions related to investment H02: There is no significant difference in the

awareness in the academic curriculum so that root opinion of the equity investors regarding the

was soiled with proper fertilizers and investment various stockbroker services availed by them

professionals should be instrumental in spreading while making equity investment decision

awareness among investors apart from profit across their age.

booking. Rajkumar and Kavitha (2015) concluded H03: There is no significant difference in the

that middle class people should be encouraged to opinion of the equity investors regarding the

invest in the stock market and stock brokers should various stockbroker services availed by them

also be encouraged to give the correct advice to the while making equity investment decision

investors so that they could get many more people to across their educational qualification.

the stock market. H04: There is no significant difference in the

opinion of the equity investors regarding the

HYPOTHESIS DEVELOPMENT AND DATA various stockbroker services availed by them

COLLECTION while making equity investment decision

across their occupation.

By personally visiting the offices of the stockbrokers, H05: There is no significant difference in the

one thousand questionnaires have been distributed opinion of the equity investors regarding the

among retail equity investors of Punjab i.e. Amritsar, various stockbroker services availed by them

Jalandhar, Ludhiana and Mohali. Stockbrokers have while making equity investment decision

been selected by using simple random sampling across their income.

technique due to their large number. Questionnaires H06: There is no significant difference in the

have been got filled by 1. personally visiting the opinion of the equity investors regarding the

stock brokers’ offices and handing over the various stockbroker services availed by them

questionnaires to the stock brokers and asking them while making equity investment decision

to get these filled from their clients, 2. sitting in the across their location background.

offices of the stock brokers and personally asking

their clients to fill the questionnaires. Three hundred DATA ANALYSIS

and seventy three (373) questionnaires have been

filled up by the respondents. Forty five (45) The demographic profile of the equity investors has

questionnaires have been found to be incomplete been presented in Table 1. The purpose of this profile

and have been excluded from the analysis. is to obtain a visualization of the equity investors

Remaining three hundred and twenty eight responding to the profile. The gender wise analysis

questionnaires have been used for the analysis. The shows that the percentage of males has been found

objective of this study has been to analyse the to be 57.9% and the percentage of females has been

various services availed by retail equity investors 42.1%. The table 1 shows that the age group of up to

from the stockbrokers while dealing in securities 35 years represents 46.6% of the respondents. The

market. age group of 35-50 years represents 24.4% of the


16

respondents; while above 50 years of age category largest group at 31.7% while remaining 18.3% of the

represents 29.0% of the respondents. respondents have professional qualification such as

doctors, engineers, lawyers etc. The smallest group

As set out in table 1 the largest segment of comprises of those who have qualification up to

respondents i.e. 46.0% has been holding master’s under graduation i.e. 4.0%. Therefore, it has been

degree followed by respondents with bachelor’s found that 96.0% of the total respondents are

degree from college who have made up the second graduates and above.

Table 1 : Demographic Profile of Respondents

Demographic Variable Category Frequency Percentage

Gender Male 190 57.9

Female 138 42.1

Total

328

100

Age in years

Up to 35

153

46.6

35-50

80

24.4

Above 50

95

29.0

Total

328

100

Educational Background

Professional

60

18.3

Post Graduate

151

46.0

Graduate

104

31.7

Under Graduate

13

4.0

Total

328

100

Occupation

Academician

63

19.2

Banker and Insurer

70

21.3

CA, CS, CWA and financial consultant

34

10.4

Businessman

90

27.4

Others

71

21.6

Total

328

100

Income in Rupees

Less than 2,00,000

18

5.5

2,00,001-5,00,000

89

27.1

5,00,001-10,00,000

157

47.9

More Than 10,00,000

64

19.5

Total

328

100

City

Amritsar

82

25

Jalandhar

82

25

Ludhiana

82

25

Mohali 82 25

Total 328 100


17

Particulars Frequency

Less than one year 19 (5.8%)

1-3 years 24 (7.3%)

3-5 years 66 (20.1%)

More than 5 years 219 (66.8%)

Total 328 (100%)

Note: Figures in parentheses indicate percentages

The occupation wise analysis shows that majority of 5,00,000 represent the second largest group at 27.1%.

the respondents are from business class (27.4%) The third largest group is of the respondents having

followed by others (21.6% comprising of doctors, income more than Rs.10,00,000 at 19.5% and the

engineers, lawyers, inspectors and persons working smallest number of respondents are in the income

at clerical posts in various offices etc.) followed by group of less than Rs.2,00,000 at 5.5%. The table

bankers and insurers (21.3%) and academicians reveals that equal number of respondents i.e. 82 have

(19.2%). The smallest group of respondents on the been taken from each district i.e. Amritsar,

basis of occupation is formed by chartered Jalandhar, Ludhiana and Mohali.

accountants, company secretaries, cost and work

accountants and financial consultants i.e. 10.4%. Retail equity investors avail the services of

Therefore, by selecting this sample, an attempt has stockbrokers while investing in primary market and

been made to represent the population of the study. secondary market. The table 2 highlights that one

hundred and eighty nine i.e. 57.6% of the investors

Income wise analysis reveals that the respondents in take help of stockbrokers while investing in primary

the Rs.5,00,001-10,00,000 category of income market and three hundred and twenty one (97.9%)

represent the largest group of respondents at 47.9%. i.e. almost all of the respondents take the help of the

Those respondents earning between Rs.2,00,001- stockbrokers while investing in secondary market.

Table 2 : Stockbrokers Services availed by Retail Equity Investors while Investing

Particulars Yes No Total

Primary Market 189 (57.6%) 139 (42.4%) 328

Secondary Market 321 (97.9%) 7 (2.1%) 328


Retail equity investors have been availing the have been availing the services of stockbrokers for

services of stockbrokers for long time. The table 3 three to five years and twenty four (7.3%) have been

highlights that most of the retail equity investors i.e. availing the services of stockbrokers for one to three

two hundred and nineteen (66.8%) have been years while nineteen (5.8%) retail equity investors

availing the services of stockbrokers for more than have been availing the services of stockbrokers for

five years. Sixty six (20.1%) retail equity investors less than one year.

Table 3 : For How Long Retail Equity Investors have been availing the Services of Stockbrokers


18

Registration of the stockbrokers and sub-brokers has guidelines laid down by SEBI for regulation of

been made compulsory as per the Securities and stockbrokers while eight (2.4%) retail equity

Exchange Board of India (Stockbrokers and Sub- investors are not aware of these guidelines.

brokers) Regulations, 1992. The table 4 reveals that

almost all the equity investors i.e. three hundred and The table 7 reveals that out of three hundred and

twenty four (98.8%) have been aware of the fact that twenty retail equity investors who are known to the

registration of the stockbrokers has been made fact that guidelines for the regulation of stockbroker

compulsory. Only four (1.2%) retail equity investors have been issued by SEBI, eleven respondents say

are not aware of the fact that registration of that their stockbrokers always follow the guidelines.

stockbrokers has been made compulsory. Three hundred (93.75%) respondents state that their

stockbrokers often follow the guidelines laid down

Table 4 : Awareness of Retail Equity Investors by SEBI and nine (2.8%) respondents have

regarding the fact that Registration of Stockbrokers highlighted that their stockbrokers rarely follow the

has been made Compulsory guidelines.

Table 6 : Awareness amongst Retail Equity

Investors regarding the Guidelines laid down by

SEBI for the Regulation of Stockbrokers


The table 5 reveals that out of three hundred and

twenty four equity investors are aware of the fact

that registration of the stockbrokers has been made Note: Figures in parentheses indicate percentages

compulsory. Three hundred and twenty three equity

Table 7 : Retail Equity Investors’ View regarding investors are aware of the fact that they are dealing

whether Stockbrokers follow the Norms Lay down with registered stockbrokers while one (0.31) retail

by SEBIequity investor does not know whether the

stockbroker with whom he is dealing is registered or

not.

Table 5 : Awareness amongst Retail Equity

Investors whether the Stockbroker with whom

They are Trading is Registered or Not


Note: Figures in parentheses indicate percentages Respondents have also been asked whether the

failure of the stockbrokers to follow norms affect

The table 6 reveals that three hundred and twenty their investment decision. The table 8 reveals that

(97.6%) retail equity investors are aware of the most of the respondents i.e. three hundred and five


Yes 324 (98.8%)

No 4 (1.2%)

Total 328 (100%)


Yes 323 (99.69%)

Do not know 1 (0.31%)

Total 324 (100%)


Yes 320 (97.6%)

No 8 (2.4%)

Total 328 (100%)


Always 11 (3.44%)

Often 300 (93.75%)

Rarely 9 (2.81%)

Never 0 (0.0%)

Total 320 (100%)


19


Changed my stockbroker 15 (65.21%)

Changed my stockbroker and report to SEBI 6 (26.09%)

Getting wrong information leads to wrong investment decision 1 (4.35%)

Money get blocked 1 (4.35%)

Total 23 (100%)


Table 8 : Failure of the Stockbrokers to follow (93%) have replied that it will not affect their

Norms affects Retail Equity Investor Investment investment decision. Only twenty three (7.0%)

Decisionrespondents have replied that it will affect their

investment decision. It means that respondents are

only bothered about their concerns like safety,

marketability, regular return and growth. They are

least bothered about regulatory measures taken by

the government and SEBI for their benefit.

Note: Figures in parentheses indicate percentagesRespondents will take legal action only when

The table 9 is revealing how the retail equity something wrong happen to them. Respondents do

investors’ investment decision gets influenced by the not take precautionary measures.

failure of the stockbroker to follow norms lay down


Yes 23 (7.0%)

No 305 (93.0%)

Total 328 (100%)

by SEBI. Out of these twenty three respondents, fifteen (65.21%) respondents say that they will change their

stockbrokers and six (26.09%) respondents say that they will change their stockbrokers and report to SEBI. One

respondent says that getting wrong information leads to wrong investment decision and one says that money

get blocked.

Table 9 : Retail Equity Investors’ Investment Decisions get Influenced

Stockbrokers provide various valuable services to analysed in terms of numbers and percentages of

the investors like provide advice about the securities retail equity investors and mean scores, the results of

as part of their regular business, execute shares and which are presented in table 10.

mutual fund transactions on the client’s behalf,

recommend specific investments, provide retirement The table 10 highlights the frequency of services

and general financial planning etc. By taking this availed by the retail equity investors while dealing in

into consideration, this study has been carried out to equity shares in terms of numbers and percentages

analyse the various services availed by retail equity of equity investors and mean scores of services. It

investors from the stockbrokers while dealing in has been found from the table 10 that a major chunk

securities market. The respondents have been given of respondents have rated all the services as often,

a list of nine services and have been asked to rate occasionally and always availed by them. The

these on five point Likert scale ranging from five to highest mean scores has been found for the variable

one, where five stands for ‘Always’ four stands for provide advice about the securities as a part of their

‘Often’ three stands for ‘Occasionally’ two stands for regular business (4.02) followed by execute shares

‘Rarely’ and one stands for ‘Never’ on the basis of and mutual fund transactions on the client’s behalf

their usage. The ratings have been given by the retail (3.97), recommend specific investments (3.97),

equity investors on all nine services and have been typically charge commission on purchases or trades


20

that the client makes (3.81), required by law to act in on the amount of assets that the client holds (3.24).

the client’s best interest (3.65), required by law to Therefore, it can be analysed from the table 10 that

disclose any conflict of interest (3.55), provide most of the respondents deal in the share market

retirement planning (3.54), provide general financial with the help of stockbrokers.

planning (3.51) and typically paid commission based

S. No. Services Always Often Occasionally Rarely Never N Mean

1 Provide advice about the securities as a part of their regular business

19 (5.8%) 297 (90.5%) 10 (3.0%) 2 (0.6%) - 328 4.02

2 Execute shares and mutual fund transactions on the client’s behalf

12 (3.7%) 296 (90.2%) 19 (5.8%) 1 (0.3%) - 328 3.97

3 Recommend specific investments 16 (4.9%) 289 (88.1%) 19 (5.8%) 4 (1.2%) - 328 3.97

4 Provide retirement planning 5 (1.5%) 180 (54.9%) 132 (40.2%) 9 (2.7%) 2 (0.6%) 328 3.54

5 Provide general financial planning 8 (2.4%) 168 (51.2%) 137 (41.8%) 12 (3.7%) 3 (0.9%) 328 3.51

6 Typically charge commission on purchases or trade that the client makes

10 (3.0%) 250 (76.2%) 63 (19.2%) 5 (1.5%) - 328 3.81

7 Typically paid commission based on the amount of assets that the client holds

12 (3.7%) 159 (48.5%) 54 (16.5%) 101 (30.8%) 2 (0.6%) 328 3.24

8 Required by law to act in the client’s best interest 82 (25.0%) 81 (24.7%) 136 (41.5%) 27 (8.2%) 2 (0.6%) 328 3.65

9 Required by law to disclose any conflict of interests 82 (25.0%) 76 (23.2%) 113 (34.5%) 54 (16.5%) 3 (0.9%) 328 3.55


Table 10 : Investors’ Ratings on the Stockbroker Services availed by Them on Five Point Likert Scale

Ninety males and one hundred and thirty eight regarding the stockbrokers services availed by them.

females) on the services availed by them has been

comparatively analysed using independent sample To test this hypothesis, independent sample T-test

T-test. The respondents have been asked to rate the has been performed, the results of which are shown

services on a five point Likert scale ranging from five in the table 11. The table presents the comparative

to one where five stands for ‘Always’ four stands for picture of the equity investors as regards their

‘Often’ three stands for ‘Occasionally’ two stands for gender with respect to the stockbrokers services

‘Rarely’ and one stands for ‘Never’. Hence, it has availed by them. The table 11 depicts the

been decided to study such relationships in this descriptives (mean and standard deviation) and t-

section. This analysis has been done to check statistic of the differences together with the level of

whether there is any significant difference in the significance.

opinion of male and female equity investors

Table 11 : Difference amongst Retail Equity Investors with regard to the Services availed by them in

Relation to the Stockbrokers across their Gender


21

S. No. Services Levene’s Test for Equality

of Variance F (Significance)

Groups Mean (Standard Deviation

T- statistic

(p-value)

Remarks

1 Provide advice about the securities as a

part of their regular business

.013 (0.909) Male 4.00 (0.37)

-0.964 (0.336)

No significant difference

exists

Female 4.04 (0.28)

It is found that female equity investors have given charge commission on purchases or trades that the

four point zero one (4.01) average rating to client makes etc. the differences are found to be

recommend specific investments. A significant insignificant.

difference is found in the opinion of female and male

equity investors as far as the service of recommend An attempt has been made in this section to

specific investment is concerned. Male equity investigate the differences, if any amongst equity

investors rate this service at three point nine three investors regarding various services availed by them

(3.93). Whereas in case of the rest of the services like in relation to stockbrokers while making investment

provide advice about the securities as part of their decision across their demographics variables. This

regular business, execute shares and mutual fund analysis has been done by using one way ANOVA,

transactions on the client’s behalf, provide for which stockbroker services availed by equity

retirement and general financial planning, typically investors are measured on five point Likert scale


22

2 Execute shares and mutual fund transactions

on the client’s behalf

1.48 (0.225) Male 3.96 (0.34)

-0.956 (0.340)


exists

Female 3.99 (0.31)

3 Recommend specific investments

5.73 (0.017) Male 3.93 (0.42)-1.957

(0.051)*

Significant difference

exists Female 4.01 (0.34)

4 Provide retirement planning

4.15 (0.04) Male 3.51 (0.65)-1.231 (0.219)


exists

Female 3.59 (0.55)

5 Provide general financial planning

5.75 (0.017) Male 3.47 (0.71)-1.091 (0.276)


exists

Female 3.55 (0.57)

6 1.583 (0.209) Male 3.79 (0.52)

Typically charge commission on purchases or trade that the client makes

Female 3.83 (0.47)

-0.563 (0.574)


exists

7 Typically paid commission based on the amount of assets

that the client holds

0.010 (0.921) Male 3.25 (0.96)

0.213 (0.832)


exists

Female 3.22 (0.95)

8 Required by law to act in the client’s best interest

4.208 (0.041) Male 3.62 (0.93)-0.797 (0.426)


exists

Female 3.70 (1.01)

9 Required by law to disclose any conflict of interests

3.151 (0.077) Male 3.52 (1.04)-0.552 (0.581)


exists

Female 3.59 (1.11)

*10% level of significance

S. No. Services Groups Mean (Standard Deviation)

F- statistic

(p value)

Remarks


Less than 35 4.02 (0.42)

0.47 (0.63)


exists 35-50 4.04 (0.25)

More than 50 3.99 (0.23)


Less than 35 3.97 (0.41)

0.01 (0.99)


exists 35-50 3.97 (0.22)

More than 50 3.97 (0.23)


Less than 35 3.95 (0.48)

0.19 (0.83)


exists 35-50 3.99 (0.29)

More than 50 3.97 (0.31)


Less than 35 3.49 (0.69)

0.71 (0.49)


exists 35-50 3.57 (0.52)

More than 50 3.58 (0.52)


Less than 35 3.48 (0.73)

0.40 (0.67)


exists 35-50 3.56 (0.57)

More than 50 3.49 (0.58)


Less than 35 3.76 (0.59)

1.10 (0.33)


exists 35-50 3.84 (0.40)

More than 50 3.85 (0.38)


Less than 35 3.27 (0.97)

0.59 (0.56)


exists 35-50 3.14 (0.95)

More than 50 3.26 (0.92)


Less than 35 3.65 (0.94)

2.07 (0.13)


exists 35-50 3.81 (0.94)

More than 50 3.51 (1.01)


Less than 35 3.57 (0.99)

1.64 (0.19)


exists 35-50 3.68 (1.11)

More than 50 3.40 (1.12)

ranging from five to one (where five stands for dependent variable and demographics of the retail

‘Always’ four stands for ‘Often’ three stands for equity investors such as age, education qualification,

‘Occasionally’ two stands for ‘Rarely’ and one stands occupation, income and location background have

for ‘Never’). These services have been taken as been taken as independent variable.


Relation to the Stockbrokers across their Age

The results of one way ANOVA are presented in behalf, recommend specific investments, provide

table 12 which demonstrate the probable impact of retirement and general financial planning, typically

the equity investors’ age on the level of stockbroker charge commission on purchases or trades that client

services availed by them while making financial makes, typically paid commission based on the

transactions. The services under review are amount of assets that client holds, required by law to

mentioned in table 12 like provide advice about the act in the client’s best interest and required by law to

securities as a part of their regular business, execute disclose any conflicts of interest exhibit no significant

shares and mutual fund transactions on the client’s difference with reference to various age groups. So,


23

S. No. Services Groups Mean (Standard Deviation)

F statistic (p value)

Remarks


Professional 4.07 (0.31)

0.79 (0.50)


exists Post Graduate 4.00 (0.35)

Graduate 4.00 (0.34)

Under Graduate

4.08 (0.28)



2.76 (0.04)**




Under Graduate

4.08 (0.28)



0.49 (0.68)




Under Graduate

4.00 (0.41)



0.32 (0.81)




Under Graduate

3.38 (0.51)



0.60 (0.61)




Under Graduate

3.31 (0.75)

the null hypothesis is accepted. financial planning, typically paid commission based

on the amount of assets that the client holds,

The table 13 presents the results of one way ANOVA required by law to act in the client’s best interest etc.

which demonstrates the impact of retail equity So, the null hypothesis is accepted except in case of

investors’ education on the level of stockbroker execute shares and mutual fund transactions on the

services availed by them. The table 13 has revealed client’s behalf (0.04) and typically charge

no significant impact of education on the level of commission on purchases or trades that the client

stockbroker services availed by retail equity makes (0.012). In the case of these services the null

investors such as provide advice about the securities hypothesis is rejected at five percent level of

as a part of their regular business, recommend significance.

specific investment, provide retirement and general


Relation to the Stockbrokers across their Education


24

*10 % level of significance **5% level of significance ***1% level of significance


Relation to the Stockbrokers across their Occupation


25

6 Typically charge commission on purchases or trade


3.69 (0.012)**



that the client makes Graduate 3.71 (0.51)

Under Graduate

3.69 (0.48)



1.09 (0.35)




Under Graduate

3.00 (1.08)



0.94 (0.42)




Under Graduate

4.08 (0.64)



0.41 (0.74)




Under Graduate

3.85 (0.80)

S. No. Services Group Mean (Standard Deviation)

F statistic

(p value)

Remarks


Academician 4.01 (0.38)

0.56 (0.69)


exists

Banker and Insurer 4.04 (0.39)

CA/CS/CWA/FC 3.94 (0.24)

Businessman 4.01 (0.24)

Others 4.03 (0.38)



0.83 (0.51)


exists


CA/CS/CWA/FC 3.88 (0.33)


Others 3.98 (0.39)



1.51 (0.19)


exists


CA/CS/CWA/FC 3.85 (0.43)


Others 3.98 (0.36)

4 Provide retirement Academician 3.62 (0.61) 1.43 No planning (0.22) significant Banker and Insurer 3.54 (0.61)

CA/CS/CWA/FC 3.59 (0.49) difference exists Businessman 3.58 (0.56)

Others 3.39 (0.71)



2.99 (0.019)**


exists Banker and Insurer 3.51 (0.63)

CA/CS/CWA/FC 3.50 (0.61)


Others 3.29 (0.72)



0.17 (0.95)


exists


CA/CS/CWA/FC 3.76 (0.43)


Others 3.79 (0.53)



1.82 (0.12)


exists


CA/CS/CWA/FC 3.26 (0.89)


Others 3.03 (1.03)



1.09 (0.36)


exists


CA/CS/CWA/FC 3.44 (0.93)


Others 3.80 (0.96)



1.94 (0.10)


exists


CA/CS/CWA/FC 3.29 (1.06)


Others 3.79 (1.04)


The table 14 reveals the impact of equity investors stockbroker services availed by retail equity

occupation on the level of stockbroker services investors except in case of general financial planning

availed by them. The table highlights that there is no (0.019). The null hypothesis is rejected in this case at

significant impact of occupation on the level of five percent level of significance.


Relation to the Stockbrokers across their Income


26

S. No. Services Group Mean F-statistic Remarks (Standard (p value) Deviation)

1 Provide advice about Less than 2,00,000 4.22 (0.55) Significant the securities as a difference

2.62 (0.051)* 2,00,000 – 5,00,000 4.02 (0.48)

part of their regular exists 5,00,000 – 10,00,000 4.00 (0.25) business More than 10,00,000 3.98 (0.12)

2 Execute shares and Less than 2,00,000 4.11 (0.47) No mutual fund 1.18 (0.32) significant 2,00,000 – 5,00,000 3.95 (0.42)

5,00,000 – 10,00,000 3.97 (0.28)

transactions on the client’s behalf

More than 10,00,000 3.97 (0.17) difference exists


Less than 2,00,000 4.05 (0.64)

0.84 (0.47)


exists

2,00,000 – 5,00,000 4.00 (0.43)

5,00,000 – 10,00,000 3.95 (0.38)

More than 10,00,000 3.92 (0.27)


Less than 2,00,000 3.28 (0.89)

4.53 (0.004)***


exists 2,00,000 – 5,00,000 3.50 (0.66)

5,00,000 – 10,00,000 3.49 (0.58)

More than 10,00,000 3.76 (0.43)


Less than 2,00,000 3.22 (1.11)

4.63 (0.003)***


exists 2,00,000 – 5,00,000 3.48 (0.71)

5,00,000 – 10,00,000 3.45 (0.60)

More than 10,00,000 3.75 (0.44)


Less than 2,00,000 3.72 (0.83)

1.49 (0.22)


exists

2,00,000 – 5,00,000 3.79 (0.57)

5,00,000 – 10,00,000 3.78 (0.47)

More than 10,00,000 3.92 (0.27)


Less than 2,00,000 2.94 (1.11)

4.45 (0.004)***


exists 2,00,000 – 5,00,000 3.16 (1.01)

5,00,000 – 10,00,000 3.16 (0.93)

More than 10,00,000 3.61 (0.79)


Less than 2,00,000 3.83 (0.78)

3.14 (0.025)**


exists 2,00,000 – 5,00,000 3.74 (1.04)

5,00,000 – 10,00,000 3.71 (0.96)

More than 10,00,000 3.33 (0.85)


Less than 2,00,000 3.72 (0.89)

4.77 (0.003)***


exists 2,00,000 – 5,00,000 3.61 (1.12)

5,00,000 – 10,00,000 3.67 (1.02)

More than 10,00,000 3.11 (1.04)


The results of one way ANOVA are presented in been found to be 2.62, 4.53, 4.63, 4.45, 3.14 and 4.77

table 15 which demonstrate the impact of income of respectively. The null hypothesis is accepted in the

equity investors on the level of stockbroker services rest of the cases like execute share and mutual fund

availed by them. The table 8.10.5 highlights that transaction on the client’s behalf, recommend

there is significant impact of income on the level of specific investment and typically charge commission

stockbroker services availed by them such as on purchases or trades that client makes.

provide advice about the securities as a part of their

regular business (0.051), provide retirement planning The differences in the level of services like provide

(0.004), provide general financial planning (0.003), retirement planning (0.004), general financial

typically paid based on the amount of assets that the planning (0.003), typically paid based on the amount

client holds (0.004), required by law to act in the of assets that client holds (0.004) and required by law

client’s best interest (0.025) and required by law to to disclose any conflict of interest (0.003) on account

disclose any conflict of interest (0.003). The F-values of income are found to be statistically significant at

of the services availed by retail equity investors have one percent level of significance. The difference is


27

Services Group Mean (Standard Deviation)

F-statistic (p value)

Remarks S. No.


Amritsar 4.01 (0.46)

0.31 (0.82)


exists Jalandhar 4.04 (0.33)

Ludhiana 4.02 (0.22)

Mohali 3.99 (0.29)



1.49 (0.22)




Mohali 4.00 (0.22)



0.59 (0.62)




Mohali 3.99 (0.25)



6.42 (0.00)*




Mohali 3.36 (0.58)

found to be statistically significant at five percent location background.

level of significance in case of the service required by

law to act in the client’s best interest (0.025) and the The F-values of these stockbroker services availed by

difference is found to be statistically significant at ten retail equity investors are 6.42, 8.32, 9.12, 11.98, 18.69

percent level of significance for the service provide and 17.07 respectively. The differences in the level of

advice about the securities as a part of their regular stockbroker services of retail equity investors like

business. provide retirement planning (0.000), provide general

financial planning (0.000), typically charge

The table 16 highlights the impact of location commission on purchases or trades that the client

background of retail equity investors on the level of makes (0.000), typically paid commission based on

stockbroker services availed by them. The table the amount of assets that the client holds (0.000) and

reveals that statistically significant differences have required by law to act in the client’s best interest

been found in the level of services availed by retail (0.000) and required by law to disclose any conflict

equity investors such as provide retirement of interest (0.00) are found to be statistically

planning, provide general financial planning, significant at one percent level of significance. The

typically charge commission on purchases or trades null hypothesis is accepted in the rest of the cases

that the client makes, typically paid based on the like provide advice about the securities as a part of

amount of assets that the client holds, required by their regular business, execute share and mutual

law to act in the client’s best interest and required by fund transactions on the client’s behalf and

law to disclose any conflict of interest on account of recommend specific investment.


Relation to the Stockbrokers across their Location Background


28



8.32 (0.00)*




Mohali 3.35 (0.53)



9.12 (0.00)*




Mohali 3.89 (0.35)



11.98 (0.00)*




Mohali 2.76 (0.96)



18.69 (0.00)*




Mohali 4.26 (1.00)



17.07 (0.00)*




Mohali 4.21 (1.09)


RESEARCH FINDINGS their stockbrokers often follow the guidelines laid

down by SEBI.

It has been found that 57.6% of the retail equity

investors have taken help of stockbrokers while It has been found from the study that 93% of the

investing in primary market and 97.9% of the respondents have said that the failure of the

respondents have taken the help of the stockbrokers stockbrokers to follow norms have not affected their

while investing in secondary market. Moreover, it investment decision and only 7% of the respondents

has also been found that 66.8% of the retail equity have replied that it has affected their investment

investors have been availing the services of decision and they have changed their stockbroker.

stockbrokers for more than five years, 20.1% retail

equity investors have been availing the services of It has been identified that a major chunk of

stockbrokers for three to five years, 7.3% have been respondents have rated all the stockbrokers services

availing the services of stockbrokers for one to three as always, often and occasionally availed by them.

years while 5.8% of retail equity investors have been

availing the services of stockbrokers for less than one Implications of the Study

year and almost all the investors (98.8%) have been

This study would be of great use for investors and aware of the fact that registration of the stockbrokers

financial intermediaries who make decisions has been made compulsory.

regarding investment. This study will help the

investors and investment consultants in identifying It has been found that 97.6% of the retail equity

profitable investment avenues. Investor’s preference investors have been aware of the guidelines laid

for equity will help the policymakers in formulating down by SEBI for regulation of stockbrokers and

strategies and will also help the credit rating 93.75% of the retail equity investors have stated that


29

agencies in rating the investment instruments. witness a surge of investment and may not require

the investments made by the FDIs and the FIIs in the

Limitations and Future Research Directions years to come (Hu & Bentler, 1999). In order to make

this a possibility, wherein the middle class people

Based on the study done by the researcher, the are encouraged to invest in the stock market, the

following suggestions are identified for further stock broker and the small investor has to work hand

research. in hand and the stock broker needs to give the

1. Since the present study is at a state level, it could correct advice to the investor so that he can get many

be extended to national level. more people to the stock market (Rajkumar,

2. The impact of retail investment in capital market K.Prabhakar and Kavitha, N. Lakshmi, 2015).

may be studied in view of rural investors. Moreover, it is explicit that the enactments like

3. The study may further be carried out to analyse Companies Act 1956, Securities Contracts

the impact of reforms on the functioning of stock (Regulation) Act 1956 & SEBI Act 1992 contain

exchanges. provisions to protect the interest of investors

4. A study on the awareness of women investors (Srinivasan, 2010).

about retail investment pattern could be

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31

Fama French Three-factor Model: A Comparative Study

1Smita Datta

2Anindita Chakraborty

1. Research scholar, Institute of Management Studies, Banaras Hindu University, Varanasi, [email protected]. Assistant professor, Institute of Management Studies, Banaras Hindu University, Varanasi,

[email protected]

Abstract

The sector which has the highest weight (31.58%) in S&P CNX Nifty (the benchmark index of the Indian equity market) is the

financial services sector. Therefore, it is very crucial to understand the risk-return trade-off of the stocks belonging to this sector

for the purpose of making better investment decision. Hence, this study aims to examine whether the current standard model for

asset pricing, the Fama-French three factor model, succeeds in capturing the excess returns of the size and value sorted

portfolios of Indian financial services sector stocks. This study aims to fulfil this objective by implementing the Fama-French

three factor model to stocks constituting the CNX-finance index and firms comprising the CNX-auto index and comparing the

goodness of fit and the pricing error of the model for the financial services sector to those obtained for the auto sector which acts as

the benchmark. The empirical findings obtained provide evidence that the Fama-French three factor model can be applied to the

Indian financial services sector.

Keywords: Fama-French three factor model, risk and return, performance, auto sector, financial services sector.

(1965). However, various empirical studies on INTRODUCTIONportfolio returns (Basu, 1977; Bhandari, 1988; Banz,

1981; Stattman, 1980; and Chan et al., 1991) have ricing stocks have always been an area of

documented several anomalies. According to one Pimmense interest for analysts and researchers school of thought such anomalies are caused due to

because equity pricing has varied applications the fact that the single factor asset pricing model is

ranging from estimating the cost of capital for firm, mis-specified and the expected return is related to

judging the performance of portfolios managers and multiple dimensions of risk.

cost-benefit analysis. The most widely used model

for this purpose is the Capital Asset Pricing Model The most popular multifactor asset pricing model is

(CAPM) put forward by Sharpe (1964) and Lintner

Effulgence

Vol. 16 No. 2





ISSN (O) : 2456-6675, ISSN (P) : 0972-8058

32

the Fama- French three factor model. Fama and three factor model has been developed on the basis

French developed this model through empirical of an empirical study of a sample of manufacturing

testing of a sample of US non financial firms. firms and the auto sector belongs to this category.

However, a serious limitation with empirical models

such as this one, which use proxies for non-market The rest of the paper is organised as follows: the

sources of risk, is that none of these factors can be second section has been devoted to literature review

clearly identified as hedging a significant source of where prior research in this area have been analysed.

uncertainty. Black (1993) has cautioned that when In the third section the research methodology that

the database is scanned repeatedly in search of has been employed for carrying out this study has

explanatory factors (which is often referred to as been discussed. The fourth section contains the

data-snooping) some past “patterns” may be empirical findings and statistical analysis. Section 5

identified that are purely due to chance. But, Fama incorporates the concluding remarks.

and French (1995) have succeeded in gathering

LITERATURE REVIEWpartial evidence in favour of rational pricing theory

behind size and value premium. In order to examine

Fama and French (1992) examined the simultaneous the validity of these two contradicting claims,

effects of firm specific characteristics such as size, researchers are focusing extensively on carrying out

past returns, leverage, dividend yields, E/P ratio, empirical testing of the three factor model in

BE/ME ratio on the cross section of average stock different countries and in different time periods (out

returns of all non-financial firms either in NYSE, of sample tests).

AMEX or NASDAQ for the period 1963-1990. The

study revealed that market beta fails to explain the Several out of sample tests of the Fama-French three

mean return on the sample stocks, while size and factor model have been carried out with Indian

BE/ME ratio capture the cross-sectional variation of equity as sample. Empirical studies (Connor and

stock returns which is associated with all the Sehgal, 2001; Taneja, 2010; Sehgal & Balakrishnan,

variables under study. Based on their empirical (2013) mostly supports the validity of Fama-French

study of non-financial US firms for the 1963-1990 three factor model in Indian equity market and

period Fama-French (1993) argued that the single indicates that this model does a better job than

factor CAPM is inadequate for explaining the cross CAPM in predicting stock returns in the Indian stock

section of expected returns across stocks and market. Following the original study of Fama and

proposed a three factor model that takes into French (1993) these Indian studies had also excluded

consideration two additional risk factors, namely, financial stocks from the sample.

size and book to market equity along with market

beta.However, it is observed that the weight of the

financial services sector is highest (31.58%) in S & P

The empirical evidence of the test of the Fama CNX Nifty. Hence, this study is aimed at examining

French three factor model on 364 Indian companies whether the Fama-French three factor model can

that constitute CRISIL 500 list conducted by Connor predict the stock returns for Indian financial services

and Sehgal (2001), generally support the Fama sector. To attain this objective the performance of the

French model. However, they acknowledged that three factor model for the financial sector stocks is

their study does not provide answer for several compared to its performance for automobile firms.

pressing questions – whether the Fama-French The performance of the three factor model for the

factors can absorb the excess returns of wider range automobile sector has been used as a benchmark for

of portfolios, whether there are evidence of any other judging the performance of the model for the

pervasive factors affecting returns, whether the financial services sector because the Fama-French


33

findings are valid when alternative samples or French three factor model with respect to alternative

estimation method are employed, what are the versions of the model using other measures of value

underlying economic theory that can account for the (P/E and past sales growth) and size ( enterprise

size and value premium. value and total assets) by applying the alternative

models on 465 companies that form part of BSE

Bahl (2006) carried out a study on a sample of 79 index. They inferred that all the alternative versions

stocks comprising the BSE-100 index to compare the of the Fama-French model are identical in terms of

performance of the CAPM and Fama-French three performance and are able to provide better

factor model and to investigate whether any description of portfolio returns than the CAPM. But

particular month had any specific effect on portfolio the three factor model failed to fully capture the

returns. The conclusion of the study was that the abnormal returns that remain unexplained by the

three factor model does a better job of capturing the CAPM.

cross-sectional variation of portfolio returns

compared to the CAPM and seasonal effects on Jain (2013) made an effort to analyse the

portfolio returns do not exist. performance of Indian stocks that constitute the BSE

SENSEX as well as study the sector wise

Tripathi (2008) aimed to examine the relationship performance using the Fama-French three factor

between four firm characteristics (size, P/E ratio, model. The analysis strongly indicated that besides

leverage and book to market equity) and stock the Fama-French factors some additional factor is

returns in India and to test whether alternative asset required to explain the variation in performance

pricing models formed by incorporating one or more across industrial sectors.

of these four company fundamentals can give an

improved explanation of cross-sectional variation in Recently, Singh and Yadav (2015) have undertaken a

mean returns on India equity using monthly returns study using the stocks constituting the CNX 500

of a sample of 455 firms forming part of S & P CNX index as sample for a period spanning October 1999

500 index for the period between June 1997 and June to September 2014. This study confirms the findings

2007. The findings revealed that out of all the of the previous studies that the Fama and French

possible alternative asset pricing models which can three factor model exhibits superior performance

be formulated using different combinations of the than the CAPM in India.

four firm specific characteristics the Fama-French

model performs best in Indian context. It is evident from the review of literature that the

applicability of the Fama-French three factor model

Taneja (2010) also examined the comparative in the Indian stock market has been tested

performance of the CAPM and the Fama-French repeatedly with different sample stocks in different

three factor model by taking a sample of I87 time periods and with different proxies for size and

companies belonging to S & P 500 index for a study value factors and all these studies have confirmed

period of five years (June 2004- June 2009). On the the superiority of this model over the traditional

basis of the study it was concluded that Fama-French CAPM. Thus, the Fama and French three factor

model is a better predictor of Indian equity returns model has emerged as the new standard model for

than CAPM but the improved explanatory power of pricing the stocks in the Indian market like in other

the three factor model can be credited to either of the countries around the world. It is also obvious that

two added factors (size and value). there is a lack of literature that establishes the

validity of the Fama-French three factor model, the

Sehgal & Balakrishnan (2013) evaluated the current worldwide standard model in asset pricing

robustness of the standard version of the Fama- in the Indian financial sector. Most of the previous


34

studies examining the validity of the Fama-French The book value of equity and number of shares

three factor model in the Indian context have outstanding at March-end of each year from 2009 to

excluded financial firms from the sample following 2013 for the sample firms have been taken from the

the original study of Fama and French (1993) and website: www.moneycontrol.com.

only two out of these studies cover financial firms.

Out of these two the one undertaken by Jain (2013) The S&P Nifty, also called Nifty 50 or simply Nifty

uses only three financial firms which is too small a has been used as a proxy for market portfolio. It is a

sample size to reach any reliable conclusion. The free float market capitalisation weighted index of 50

other one by Singh and Yadav (2015) uses as test financially sound and most actively traded firms on

assets four sets of five portfolios formed on the basis the National Stock Exchange of India Ltd. The stocks

of univariate sorting on size, book-to-market equity comprising Nifty covers 23 sectors of the Indian

ratio, profitability and investment. Hence, the economy and represents about 66.85% of the free

findings of this study is also questionable because it float market capitalisation of the stocks listed on

does not follow the standard practice of using test NSE as of June 30, 2014. The base value of Nifty has

portfolios that are formed from independent double been set as 1000 and its base period is November 3,

sorts on size and an anomaly variable. This study 1995. The risk free rate has been specified by the

attempts to bridge this gap by comparing the implicit yield on 91 days Treasury bill obtained from

performance of the Fama-French three factor model RBI website.

with respect to Indian financial services sector stocks

2. Constructing the size and value sorted to that of the model with respect to a sector of the

portfolios:Indian stock market (auto sector) for which the

applicability of the Fama-French three factor model

For each sector we rank the firms according to their has already been established.

market capitalisation in June of year (t). If the market

capitalisation of a firm is less than the median value RESEARCH METHODOLOGY

it is classified as Small (S) otherwise it is placed the

1. Sample: category Big (B). Similarly the constituent stocks of

each sector are ranked according to BE/ME ratio

The sample data for this study pertains to firms that measured in March of year (t) and then divided into

constitute the CNX-finance index and the CNX auto three categories: Low (L) bottom 30%, Medium (M)

index as of March 2015. However, four stocks- 30% to 70% and High (H) above 70%. The monthly

Amtek Auto Ltd., Bosch Ltd., Eicher Motors Ltd. and returns on each stock are computed from July of year

MRF Ltd., comprising the CNX auto index have been (t) to June of year (t+1). The ranking is revised in the

excluded from the sample because they have non- month of June of each subsequent year and the

March financial year-ending. The month end stock procedure for sorting stocks into various portfolios is

prices of the sample firms have been sourced from repeated. Since for some companies there may be

the website: www.finance.yahoo.com for the period delayed release of financial statements, there may be

spanning June 2009 to June 2014. The time series of a lag between the end of the fiscal year and the time

monthly share prices have been converted into time when the information is available to the investors for

series of monthly returns using the formula: decision making purpose. Therefore, the study form

R = (P – P )/P portfolios with three months gap from financial it it it-1 it-1

Since the dividend yield in India is very small, only closing. These six portfolios (HB, HS, MB, MS, LB

the capital gain component has been utilised to and LS) formed from independent double 2 x 3 sorts

compute stock returns. on size and BE/ME ratio have been employed as test

portfolios.


35

Portfolio Mean Standard Deviation Skewness Kurtosis

HB -.062574 .1116633 .299 .797

HS -.043453 .1189922 .749 2.081

MB -.057165 .0976842 .208 .094

MS -.057743 .0985017 -.005 .068

LB -.068785 .0970040 -1.974 7.254

LS -.061560 .0773551 -.139 2.125

Market_factor -.06 .058 .173 -.421

SMB .008589 .0500586 .198 .712

HML .012159 .0880202 .821 1.261

3. Constructing the Factor Portfolios: Where,

R = Rate of return on i-th asset in time‘t’it

The Fama French three factor model comprises of R = Rate of return on market portfolio in time‘t’mt

three explanatory factors: the market factor (MKT), R = Rate of return on risk free assets in time‘t’ft

the size factor (SMB) and the value factor (HML). SMB = Small minus Big i.e. returns of a portfolio of t

The monthly return on Nifty fifty minus the risk-free small stocks in excess of the returns of a portfolio of rate is the value of the variable MKT for that month. large stocks in time‘t’The difference between mean monthly returns of HML = High minus Low ie. returns of a portfolio of t

three small stock portfolios (SL, SM and SH) and that stocks with high book to market ratio in excess of the of the three big stock portfolios (BL, BM and BH) of a return on a portfolio of stocks with low book to sector is the value of the variable SMB for that sector market ratio in time ‘t’for that given month. The monthly value of the a = unconditional mean return of i-th asseti

variable HML for a sector is computed as the b = the coefficient loading of the i-th asset for excess i

difference between mean monthly returns of the two return of the market portfolio over the risk free rate

high value portfolios (SH and BH) and the arithmetic s = the coefficient loading of the i-th asset for the i

mean of the monthly returns of two low BE/ME excess average return of portfolios with small equity

portfolios (SL and BL) for that sector.class over portfolios of big equity class

h = the coefficient loading of the i-th asset for the i4. Model Specification and Regression:

excess average return of portfolios with high book-to

market equity class over those with low book-to-Time series multiple regression technique is applied

market equity classto regress the excess returns on the size-value sorted

e = error term for asset i at time titportfolios on returns on market, SMB and HML

The Ordinary Least Square method is used for using the Fama-French three factor model which is

regression analysis.expressed in the form of:

R – R = a +b (R – R ) + (SMB) + h (HML) + eit ft i i mt ft st t t t it

EMPIRICAL RESULTS

1. Descriptive Statistics

Table 1 : Summary Statistics on the Portfolio Returns for the financial services sector


36

Portfolio Mean Standard Deviation Skewness Kurtosis

HB -.032943 .1320272 .794 1.066

HS -.039158 .1203490 .570 .976

MB -.060132 .1095115 -1.291 6.761

MS -.056829 .1040207 .133 3.058

LB -.051426 .0734992 .177 .434

LS -.031019 .0909458 -.221 -.612

Market_factor -.062420 .0583090 .173 -.421

SMB .005832 .0603172 .050 -.144

HML .005172 .0813273 .681 1.075

Table 2 : Summary Statistics on the Portfolio Returns for the auto sector

Table 1 and Table 2 summarize the descriptive agreement with the evidence obtained by Fama and

statistics for response variable (six portfolios) and French (1992) for US stocks as well those obtained by

the explanatory variables (factor portfolios) used in Connor and Sehgal (2001) for Indian stocks who

the multiple time series regressions for the financial found that a strong positive relationship exists

services sector and auto sector respectively. In case between book-to-market equity ratio and stock

of the financial services sector, for the three small returns. But for the auto sector this relationship was

sized portfolios the average return ranged between - not validated because mean return of the medium

4.35% to -6.16 % while for the three big portfolios the BE/ME ratio portfolios were lower than those of the

same ranged between -5.72% to -6.88%. For the auto high BE/ME portfolios, but the returns of portfolios

sector stocks, while the mean returns earned by the containing low BE/ME stocks were higher than the

portfolios of small firms varied between -3.1% to - ones containing the stocks with medium BE/ME

5.68% the same ranged between -3.29% to -6.01% for ratio.

the portfolios of big firms. Hence, for both the

2. Correlation between the Factor Portfoliossectors the inverse relationship between size and

average monthly return of portfolios as claimed by

Fama-French model is free from the From Table 3 Banz (1981) and Fama-French (1992) has been

and Table 4 it was observed that for none of the two validated. With respect to the value premium, it was

sectors there is any strong significant correlation found that for financial services sector, the average

between any pair of factor portfolios. This implied portfolio return declined from high to medium

that with respect to both the sectors the problem of BE/ME ratio and further declined from medium to

multi-collinearity.low book to market ratio. This finding is in


37

Table 3 : Correlation between the Factor Portfolios of Financial Services Sector

*Correlation is significant at the 0.05 level (2-tailed).

**Correlation is significant at the 0.01 level (2-tailed).

Market_factor

SMB

HML

Market_factorPearson Correlation Sig. (2-tailed)

N

1

60

-.314*

.015 60

.381**

.003

60

SMBPearson Correlation

Sig. (2-tailed)N

-.314* .015

60

1

60

.063

.633

60

HMLPearson Correlation

Sig. (2-tailed)N

.381**

.00360

063

.633

60

1

60

Table 4 : Correlation between the Factor Portfolios of Auto Sector

3. Time-series regression

Table 5 : Results of Time-series regression for the financial services sector

Table 6 : Results of Time-series regression for the auto sector

Market_factor

Market_factor Pearson Correlation Sig. (2-tailed)

N

SMB Pearson Correlation

Sig. (2-tailed) N

HML Pearson Correlation

Sig. (2-tailed) N

**Correlation is significant at the 0.01 level (2

SMB HML

1

60

-.049

.708

60

.392**

.002

60

-.049 .708

60

1

60

.187

.153

60

.392**

.002 60

187

.153 60

1

60

-tailed)

S. No.

1

2

3

4

Portfolio

HB

HS

MB

MS

Intercept

.051

(.000)

.010

(.363)

.003

(.843)

.010(.473)

Independent variable

Adjusted R2

F-statistic

Market factor (9.453, .000)

SMB (-3.375, .001)

HML (7.020, .000)

.799

79.309

(.000)


SMB (5.941,

.000)

HML (7.052, .000)

.779

70.450

(.000)


SMB (-3.558, .001)

HML (.891, .377)

.421

15.297

(.000)


SMB (2.954, .005)

HML (1.868, .067)

.569

26.918(.000)

5 LB .014(.159)

Market factor (8.596, .000)SMB (-1.913, .061)

HML (-2.818, .007)

.577 27.859(.000)

6 LS .048

(.000)

Market factor (9.253, .000 )

SMB (4.007, .000)

HML (-3.019, .004)

.610 31.748

(.000)

S. No. Portfolio Intercept Independent variable Adjusted R2

F-statistic

1 HB -.002(.871)

Market factor (8.600, .000)SMB (-2.406, .019)

HML (8.233, .000)

.820 90.679 (.000)

2 HS .009

(.490)


SMB (3.377, .001)HML (6.673, .000)

.717 50.753

(.000)

3 MB

.017

(.107)


SMB (-.424, .673)

HML (3.043, .004)

.726

53.236

(.000)

4 MS

.015

(.288)


SMB (1.942, .057)

HML (.872, .387)

.521

22.394

(.000)

5 LB

.008

(.517)


SMB (-4.111, .000)

HML (-3.979, .000)

.623

33.559(.000)

6 LS

.000

(.960)


SMB (6.813, .000)

HML (-3.433, .001)

.572

27.317(.000)


38

The results of the time series regressions for financial Similarly, for the auto sector, from multiple

services sector, (Table 5) revealed that for each of the regression analysis it was seen (Table 6) that for each

six test portfolios the Fama-French model fitted well of the six test assets the F-statistic was significant

because each of the six F-statistics were significant. indicating goodness of model fit. The signs of the‘s’

The existence of size effect was confirmed in the coefficients and ‘h’ coefficients were in conformity

financial services sector because the ‘s ‘ coefficient with size and value effect respectively. On the basis

were positive for portfolios consisting of small stocks of average adjusted R2 it was established that the

and became negative for portfolios of large stocks. three Fama-Frech risk factors (market factor, SMB

The ‘h’ coefficient was negative for portfolios and HML) can explain 62.6% of the variability of

containing stocks with low book to market ratio and portfolio returns for auto stocks. Also, it was found

became positive for portfolios containing stocks with that the market factor has all significant exposures

high BE/ME ratio which confirmed the existence of while the coefficients of HML and SMB were

value premium for financial services sector stocks. significant for four and five portfolios respectively.

Further, the model succeeded in explaining a This finding signified that like in case of financial

considerable portion (66.3%) of the variability in service sector stocks, the market factor has the

portfolio returns. Moreover, all the factor loadings highest explanatory power for auto stocks as well,

were significant except for the coefficient for the but the ranking of the explanatory power of the

SMB factor for both the medium BE/ME portfolios other two factors was ambiguous.

and the HML factor for the MS portfolio. On the

4. Measure of Goodness of Fit and Measure of basis of this finding it was evident that market factor

Abnormal Returnhas the highest explanatory power but the other two

factors could not be conclusively ranked in terms of

On the basis of adjusted R2 criterion (measure of their ability to explain the cross-section of returns

goodness of fit), it can be stated that the Fama-within Indian financial services sector.

French three factor model holds for Indian financial

Table 7 : Comparative performance of the Fama-french three factor model for financial services sector and

auto sector

Sector Mean Absolute Alpha Mean R2

Financial services 0.0085 0.663

Auto 0.0227 0.626

service sector stocks because the average adjusted R2 services sector has been compared to that of the auto

for this sector was found to be in the same range as sector and it was found that the model appears to

that of the benchmark auto sector. perform better for the financial service sector stocks

than the benchmark auto sector because the latter

If an asset pricing model is accurate, then the has substantially high mean absolute alpha (.0227) in

intercept terms of the time series regression should comparison to the former (.0085).

be equal to or close to zero, which implies that the

risk factors constituting the pricing model are able to To summarize, the results obtained clearly indicate

completely account for the cross-sectional variation that the Fama-French three factor model can be

of stock returns. Hence, to complete analysis, study applied to the Indian financial services sector.

had also examined the zero intercepts hypothesis.

The method of using mean absolute alpha has been

employed to test this hypothesis. The mean absolute

alpha (measure of abnormal return) of the financial


39

CONCLUSION 3) Basu, S. (1977), “Investment Performance of

Common Stocks in relation to their

This study evaluates the efficacy of the Fama- French Price‐earnings Ratios: A Test of the Efficient

three factor model in explaining the returns on size Market Hypothesis”, The Journal of Finance,

and value sorted portfolios of financial service sector 32(3): 663-682.

firms. The efficacy has been measured by comparing 4) Bhandari, L. C. (1988), “Debt/equity Ratio and

the goodness of fit and absolute pricing error of the Expected Common Stock Returns: Empirical

model for the financial services sector to those of the Evidence”, The Journal of Finance, 43(2): 507-528.

model for auto stocks.5) Black, F. (1993), “Beta and Return”, The Journal

of Portfolio Management, 20(1): 8-18.The findings have established the applicability of

6) Carhart, M. M. (1997), “On Persistence in Mutual Fama and French three factor model on the Indian

Fund Performance”, The Journal of Finance, financial service sector firms. Furthermore,

52(1): 57-82.comparison with the benchmark sector (i.e. the auto

7) Chan, L. K., Hamao, Y. and Lakonishok, J. sector) shows that this model can better explain the

(1991), “Fundamentals and Stock Returns in cross-section of average stock returns for this sector

Japan”, The Journal of Finance, 46(5): 1739-1764. than the auto stocks as indicated by the value of

8) Connor, G. and Sehgal, S. (2001), “Tests of the mean absolute alpha for the respective sectors. Of

Fama and French Model in India”, Discussion the three explanatory variables market factor plays a

Paper, [379], Financial Markets Group, ANESRC more vital role than the other two as indicated by the

Research Centre, London School of Economics, number of significant exposures of each of the three

London, May.risk factors.

9) Fama, E. F. and French, K. R. (1992), “The Cross-

section of Expected Stock Returns”, The Journal The value of R2 for both the sectors and significant

of Finance, 47(2): 427-465.intercept terms for two portfolios out of the six auto

10) Fama, E. F. and French, K. R. (1993), “Common stock portfolios indicate that there has to be some

Risk Factors in the Returns on Stocks and other risk factor besides these three that affect stock

Bonds”, Journal of Financial Economics, 33(1): 3-returns for these sectors. These additional factors

56.may be momentum (Carhart, 1997) and/or industry

11) Fama, E. F., and French, K. R. (1995), “Size and concentration (Hou and Robinson, 2006). Future

Book‐to‐market Factors in Earnings and Returns. research should aim at examining whether asset

The Journal of Finance, 50(1): 131-155. pricing models incorporating these factors can better 12) Hou, K. and Robinson, D. T. (2006), “Industry explain the cross-sectional variation of average stock

Concentration and Average Stock Returns”, The returns for these sectors and for the Indian equity Journal of Finance, 61(4): 1927-1956.market as a whole.

13) Jain, S. (2013), “Fama-French Three Factor Model

in Indian Stock Market”, The Current Global REFERENCESTrends, 2(1): 7-13.

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21st Australasian Finance and Banking

Conference, Sydney, Australia.


41

The Nature of Organizational Culture in Indian Knowledge Organizations

1Dr. Mohnish Kumar

1. Assistant Professor, Dr. Bhim Rao Ambedkar College, University of Delhi, [email protected]

Abstract

The main purpose of this paper is to figure out the nature of the Organizational Culture in the six selected Knowledge

Organizations and how they vary across the public and private sector organizations as well as on the sectoral lines viz., Power

Sector Vs. IT sector Vs. other infrastructure sector organizations and in the perception of different genders from a random

sample of 204 Knowledge Workers. The data about the Organizational Culture and background variables including

demographic variables have been collected using a questionnaire-survey technique through the questionnaire given by Pareek

(1997). The Principal Component Analysis was used to figure out the nature of organizational culture and the multiple

regression analysis with dummy variable was used to differentiate among sectors and genders. The Principal Component

Analysis throws up only one Principal Component out of eight variables, which suggests the unitary nature of the

Organizational Culture. The unitary nature of Organizational Culture prevalent in the selected Knowledge Organization

supports the Integration Perspective of the Organizational culture. The integration perspective helps in the Knowledge

Management and can safely argued that it is nothing but “Knowledge-Centered Culture” in the selected Knowledge

Organizations. There is no significant difference in the positive ethos or Organizational culture of the Public Sector and Private

Sector Knowledge Organizations, and of the IT Sector and Infrastructure Sector Knowledge Organizations including Power

Sector Organizations. However, the female Knowledge Workers perceive more Positive ethos than the male Knowledge Workers

in their respective organizations.

Keywords: Organizational Culture, OCTAPACE, Positive Ethos, Knowledge-Centered Culture, Knowledge Organization.

the organization (Kumar, 2012). The word ‘culture’ INTRODUCTIONhas different meaning in different context and used

differently by different people. For a lay person, it very organization has unique organizational

indicates sophistication, e.g., someone is very Eculture that not only provides special identity to “cultured”. The anthropologists use it to refer to the

an organization like personality of an Individual but customs and rituals that societies develop over the

also influences the behavior of employees by course of their history. In modern times in the

directing them to think, feel, and act as expected in

Effulgence

Vol. 16 No. 2





ISSN (O) : 2456-6675, ISSN (P) : 0972-8058

42

REVIEW OF LITERATUREorganizational context, it is used to indicate the

climate and practices or espoused values and credo

A large body of literature has been produced by of the organization (Schein, 1992, p-3).

researchers and academicians of anthropology and Organizational culture suggests the collective

sociology and others relating to the area of culture in perceptions, beliefs, and values of employees in the

the 1940s and 1950s. However, Organizational workplace and Individuals come to know about it on

culture studies started around early 1970s (Clark, the very first day in the office (Debowski, 2006, p-

1972), which was later incorporated into 83). Culture can also be defined as the accumulated

management literature during 1980s (Deal and shared learning of a given group and these shared

Kennedy, 1982). Schein’s (1981, 1983, 1984, 1985) learning as values get ingrained into pattern called

work has revolutionized it further. However, culture (Schein, 1992, p-10).

Schein’s approach based on the unitary perspective

of the organizational culture was critiqued and Schein (1992) pointed out that the Cultural analysis

challenged (Barley, 1983). illuminates subcultural dynamics within

organizations, e.g., communication failures or lack of

PERSPECTIVES ON ORGANIZATIONAL teamwork, or integration of several organizational

CULTUREsub-groups; Cultural analysis is necessary if we are

to understand how new technologies influence and

There are mainly three perspectives on are influenced by organizations, e.g., use of IT and

organizational culture developed by Martin and its impact on transforming work or misadventure of

Meyerson (1988) as follows and their differences are implementing IT unless cultural perspective are

explained in Table 1 in the appendix:taken into consideration. The management tries to

do Cultural analysis, as this paper propose to do, for 1. Integration perspective on culture:several issues at hand e.g., cultural problems in

several mergers and acquisitions; cultural resistance According to Martin and Meyerson (1988), the in the Organizational learning, development, and Integration Perspective of culture represents culture planned change (pp. xii-xiv). in terms of organization-wide consistency,

consensus, and clarity. From an integration Schein (1983, 1992) specified that the primary task of perspective, there is no room for ambiguity (Frost et leaders of organization to develop and actively al., 1991). The integration perspective on culture reinforce strong organizational cultures. assumes that certain structural preconditions such as Organizational culture positively impacts retention a well-defined hierarchy and highly centralized of employees (Sheridan, 2002), Knowledge Creation decision making and this is an overriding (Kumar, 2013, 2014), Knowledge Capture (Kumar, assumption in Schein’s work and all of the business 2016) and productivity (Kopelman et al., 1990). excellence literature that it is in fact feasible for Newell et al., (2002) argued that the strong leaders of firms to actively create and shape an organizational cultures are those values and ethos organizational culture which promotes integration which are widely shared across the organization (p-and consensus around dominant organizational 33). values (Newell et al., 2002).

Schein (1992) argued for better study and proper 2. Differentiation perspective on culture:understanding of the dynamics of culture in an

organization to take into account the resistance to Several studies with the differential perspective change and irrational behavior of the employees.represent predominantly inconsistent cultural


43

manifestations. According to these studies, the time, very little difference or no difference was

extent to which the consensus and clarity emerge, it found among the words values, ethics, beliefs, ethos,

does so only within the boundaries of a subculture. climate and culture and these words are used

At the organizational level, different subcultures interchangeably. Pareek (1997) proposed the idea of

may co-exist and ambiguity is channeled outside the Ethos as the underlying spirit or character of an

sub-cultural boundaries (Frost et al., 1991). entity or group and is made up of its beliefs,

customs, or practices and core values at the base of

3. Fragmentation perspective on culture: it. The eight important values relevant to institution

building are as follows, whose acronym came out to

The fragmentation perspective views ambiguity as be OCTAPACE (Pareek, 1997).

most prevalent aspect of Organizational Culture.

These studies focus predominantly on the experience Openness: Pareek (1997) defined openness as, one of

and expression of ambiguity within organizational the ethos, a spontaneous expression of feelings and

cultures. Clear consistencies, like clear thought, and sharing of these without defensiveness,

inconsistencies, are rare. According to this that too in both directions such as orders and

viewpoint, consensus and dissensus co-exist in a suggestions as well as feedback and criticism.

constantly fluctuating pattern influenced by changes, Openness means receiving without reservation and

e.g., in events, attention, salience, and cognitive giving without hesitation. Openness allows open

overload. Any cultural manifestation can be, and is, environment where an employee can submit without

interpreted in a myriad of ways. No clear retribution as well as free and frequent interactions

organization-wide or sub-cultural consensus with other colleagues in the organization. Greater

stabilizes when a culture is viewed from a openness in the organizations is reflected in

fragmentation point of view (Frost et al., 1991). productive meetings and effective implementation of

plans (Pareek, 1997).

The fragmentation perspective suggests that culture

is better viewed as a metaphor rather than a Confrontation: As defined by Pareek (1997),

variable- something an organization is rather than confrontation ethos is more prevalent when most of

something an organization has. From this the employees try to approach a problem with the

perspective, culture is only loosely structured and intension to solve it rather than leave the problem or

partially shared, emerging dynamically as pass the buck in the organization. Pareek (1997)

organizational members experience each other, argued that this ethos is better represented by the

events and the organizational context over time term ‘confrontation and exploration’ (CE). It results

(Martin, 1992). The fragmentation perspective in more clarity regarding roles, more conversation

importantly legitimates differentiation- that is, and discussion and resolving conflicts and solving a

competing and contradictory value systems held by problem

individuals across the firm. This perspective

acknowledges ambiguity, recognizing that within Trust: Trust refers to sense of assurance that

organizations individuals might experience a lack of commitments and obligations will be honored as

clarity or simultaneously hold multiple meanings well as others will help when needed and will not

and beliefs. Lack of clarity can result from unclear misuse the information already shared (Pareek,

structures, organizational boundaries or precise 1997). Kumar (2017a) highlighted the role of trust in

goals (Newell et al., 2002, p-35). the institution building and other aspects of

organizational life. Higher trust ethos helps in

The term “Organizational Culture” connotes institution building, timely support, stress reduction,

different things to different scholars. Most of the reduction in procedures and paperwork, and greater


44

production (Pareek, 1997). experimenting ethos as new and unique ways of

handling things in the organization to solve a

Authenticity: Authenticity is defined by Pareek problem and taking-risk. This results in adopting

(1997) in terms of absence of difference in what new approaches and more creativity and innovation

someone in the organization feels, says, and does. It in the organization.

is the correspondence between reality and

Perspective of organizational culture relevant for perception in the organization. The presence of

knowledge Organizations:authenticity ethos in an organization leads to less

distortion and confusion in the communication

Even though the structural conditions of an (Pareek, 1997).

organization is helpful in the Knowledge work, it is

not difficult to get creativity and innovation subdued Proaction: Pareek (1997) defined Proaction as taking

(Starbuck, 1992). Newell et al., (2002) argued that the initiative, preplanning, and taking preventive

even particular norms and informal routines might action, and calculating the payoffs before taking

hamper in the Knowledge and creative work because action. In opposite to reaction, proaction relates to

it might quickly become standardized ways of things preplanning and starting a new process or new

in the organizations and embedded in the best procedures or new behavioral patterns. Proaction is

practices as well as organizational culture. The not just new but also unique behavior. This operates

knowledge organizations need to focus not only on at the following three levels:

the structural conditions such as flexible and

autonomous team-working as a precondition but Proaction at the feeling level results in greater

also on the cultural conditions to improve and empathy, proaction, at the thinking level, leads to

promote knowledge work (Newell et al., 2002). preplanning and taking care of more contingencies,

Several empirical research papers proved that the and at the action level, proaction leads new set of

organizational culture collectively influences the actions that alters the regular course of events. The

Knowledge Creation (Kumar, 2013), Knowledge outcome of higher proactivity will be less

Capture (Kumar, 2016) and Knowledge Management “emergency” meetings in organizations and with

per se (Kumar, 2012).customers, willingness to enter new areas of work,

timely curtailing of unprofitable business. All these

There are mainly two schools of organizational can also be used as indicators of proaction, including

culture which are relevant to knowledge better capital management (Pareek, 1997).

organizations viz., the integration perspective and

differentiation perspective. The integration Autonomy: Autonomy has been defined by Pareek

perspective of organizational culture argues that (1997) in terms of independence and freedom in the

there should be strong organizational culture in the individual’s sphere of influence. The higher

organization as to integrate the whole organization prevalence of autonomy ethos in the organization

as one unit. Newell et al., (2002) summarized this leads to effective delegation and decentralization.

perspective by suggesting organizations needs to

have strong organizational culture which is widely Collaboration: Pareek (1997) defined collaboration

shared across the organization for better as ethos as helpful ethos prevalent in the

productivity in Knowledge work. The integration organization and it leads to better coordination,

perspective on organizational culture (Martin, 1992) effective team-work and efficient sharing of

proposes that the culture is an organizational resources.

variable that can be directly shaped by the leaders of

the organization. Newell et al., (2002) argued that the Experimenting: Pareek (1997) defined


45

core values and beliefs of a leader spread throughout Knowledge Organizations belonging to different

the organization and impact the values, ethos and sectors.

norms of behavior of other Knowledge workers HA5-Different genders of Knowledge Workers

which consequently influence knowledge work. perceive Organizational Culture differently.

RESEARCH METHODHowever, asking educated and skilled knowledge

workers with broader latitude of acceptance and

This empirical research paper is based on the non-diverse values, beliefs, and norms to forgo and

experimental research design having diagnostic forget their uniqueness, identity, values, beliefs,

aspect behind the study of Organizational culture of interests and attitudes and to assume shared values

six Knowledge Organizations belonging to both and belief of the organization would be too much for

Public sector and Private sector. any knowledge worker (Newell et al., 2002).

Objective:From the differentiation perspective, culture is only

1. To figure out the nature of the Organizational loosely structured and partially shared, emerging

Culture in the Indian Knowledge Organizations.dynamically as organizational members experience

2. To study the Public Vs. Private sector differences each other, events and the organizational context

in the Organizational Culture prevalent in those over time (Martin, 1992). Newell et al., (2002)

Knowledge Organizations.suggested that the leaders of such organizations

3. To study the Sectoral differences in the need to accept that leaders are only in a position to

Organizational Culture prevalent in the Indian loosely manage organizational culture. Instead of

Knowledge Organizations belonging to Power transforming every knowledge workers’ values and

Sector, IT Sector and other infrastructure sectors.beliefs and instilling dominant core values of the

4. To study the gender differences in the organization, the leader can promote a diverse and

organizational Culture in the selected Indian loosely structured as well as loosely managed

Knowledge Organizationsculture in the organization. This will not only allow

knowledge workers to identify with the organization

Research questions: The most basic question that but also make them believe it as a great place to

this paper tries to answer is: work.

1. Whether Organizational Culture in the Indian HYPOTHESES

Knowledge Organization is a unitary variable

HA1-The Organizational Culture in the selected and form part of Integration Perspective of the

Indian Knowledge Organization follow the Organizational Culture or follows any other

Integration perspective of the Organizational perspective?

Culture. 2. What is the nature of Organizational Culture

HA2-The Organizational Culture in the selected and its gender and sectoral distribution (both

Indian Knowledge Organization follow the public sector Vs. Private Sector as well as Power

Differentiation perspective of the Organizational sector Vs. IT Sector Vs. Other Infrastructure

Culture. Sector) among six Indian Knowledge

HA3-The Organizational Culture in the selected Organizations?

Indian Knowledge Organization follow the

SAMPLING DESIGN:Fragmentation perspective of the Organizational

Culture.

From the universe of Knowledge Management HA4-The Organizational Culture is different in the


46

practicing companies, a random sample of 204 the above selected six Knowledge Enterprises. The

Knowledge Workers were selected. These questionnaire consists of the items relating to

Knowledge workers belong to six Knowledge personal details and demographic variables

Creating Companies of India, as follows: regarding the Knowledge Workers along with 40

Organization A: It operates in the power sector as items of OCTAPACE variables. The Knowledge

one of the largest power companies in India. It Workers were asked to assess the presence of such

considers and proclaims that Knowledge practices in the daily Knowledge work.

Management form part of the core of the

DATA COLLECTIONorganization. Organization B: It belongs to the top

100 Knowledge Creating company. It operates as

The primary data from a sample of 204 Knowledge technology and manufacturing leader, serves

workers belonging to 6 Knowledge Creating customers worldwide with aerospace products and

Companies from three different sectors, viz. Power, services; controls technologies for buildings, homes

IT and Infrastructure sectors (excluding power and industry; automotive products; turbochargers;

sector), belonging to both public and private and specialty materials. Organization C: It is a

enterprises, have been collected using survey-global consulting, technology, training, and

questionnaire technique. For further analysis and outsourcing company. It focuses exclusively in

calculation of sectoral differences, two dummy providing IT Services and Products. It works

variables named “dum var sec 1” and “dum var sec extensively with Clients in many major industries

2” were created. The variable named “dum var sec and services. It emphasizes on acquiring an in-depth

1” stands for the IT sector organizations and the knowledge of the customer's context and needs, and

variable “dum var sec 2” stands for infrastructure designs solutions fine-tuned to these needs.

sector organizations except power as shown in the Organization D: It is one of the top global steel

Table 2 in the appendix. The base organization producing multinational organization. It is a winner

operates in the power sector.of Indian Most Admired Knowledge Enterprise

(MAKE) award at multiple times. It has several key

For calculation of public sector and private sector Knowledge Strategies like Customer Value

differences, a new dummy variable by the name of Management (CVM), Supplier Value Management

“Sector” has been created, which has two values of (SVM), and Knowledge Manthan. Organization E: It

“0” and “1”. “0” stands for public sector is India's flagship government owned, public sector,

organizations and “1” stands for private sector Knowledge Creating Oil Company which covers

organizations. Out of 204 Knowledge organizations entire hydrocarbon value chain – from refining,

responses, 108 (52.9%) are from public sector and 96 pipeline transportation, and marketing of petroleum

(47.1%) from private sector organizations.products to exploration & production of crude oil &

gas, marketing of natural gas and petrochemicals.

For calculation of gender differences, a dummy Organization F: It is one of the top 10 Knowledge

variable named “dum var gender” was created Creating, technological multinational company

which has two values of “0” and “1”. “0” stands for operating in 170 countries around the world and

male and “1” stands for female. Out of 204 providing solutions for a smarter planet.

Knowledge Workers, 83.8 % of them are male and

MEASURES the rest 16.2 % are female.

DATA ANALYSIS, RESULTS AND DISCUSSIONThe primary data for this empirical research paper

has been randomly collected using a self-

Under this overwhelming literature support, the administered questionnaire by Pareek (1997) from


47

collected data about OCTAPACE has been analyzed Bartlett’s test is highly significant (p<0.001), and,

using Principal Component Analysis to figure out its therefore, principal component analysis is

nature and perspective it follows. The Principal appropriate.

Component Analysis not only helps in figuring out 1the nature of the items forming part of a variable The inverse of the correlation matrix (R- ) (shown in

(Singh & Kumar, 2013; Kumar, 2017b); but also Table 7 - Inverse of Correlation Matrix) is used in

whether a variable has unitary nature or not (Kumar, various calculations including factor scores.

2018). Later, the Multiple Regression Equation with

dummy variables was used to find the sectoral and The Anti-image correlation and covariance matrices

gender differences out of the Principal Component (as shown in Table 8) provide similar information as

thus derived. there is a relationship between covariance and

correlation. The KMO values can be calculated for

Principal Component Analysis: multiple and individual variables. The KMO values

for individual variables are produced on the

There are eight variables in the OCTAPACE. To diagonal of the anti-image correlation matrix. These

figure out the nature of all the eight ethos of the are above 0.5 so none of the variables need to be

organization, Principal Component Analysis was removed. Almost all the off-diagonal elements are

applied and which has resulted in only one Principal small suggesting that the analysis is moving in the

Component as shown in Table 3 in the appendix. right direction.

The written warning, in Table 3, suggests that there The Table 9 - Communalities shows before and after

is only one component could be extracted. Since extraction. Communality is the proportion of

there is only one component, it cannot be plotted on common variance within a variable. The amount of

the graph. The Table 4 shows the descriptive variance in each variable that can be explained by

statistics of all the eight variables. the retained factors is represented by the

communalities after extraction.

If we scan the correlation or R-matrix (as shown in

Table 5 - OCTAPACE Correlation Matrix), almost all The SPSS uses Kaiser’s criterion of retaining factors

the variables correlate fairly well with every other. with eigen-values greater than 1. In the output Table

However, none of them correlate perfectly or 10 - Total Variance Explained, the eigen-values

particularly large, therefore, there is no need to associated with each linear Principal Component

consider eliminating any item or question at this before extraction and after extraction. Since there is

stage. To check singularity in the data, the only one component that could be extracted as per

determinant of the R-matrix should be greater than Kaiser’s criteria, there is no rotation value of

the necessary value of 0.00001. For this data the component. SPSS then extracts all factors with eigen-

value of the determinant is equal to 0.010, which is values greater than 1, which leaves us with only one

greater than the requisite value. Therefore, we can be Principal Component.

confident that multi-collinearity is not a problem for

these data. The eigen-values associated with this factor are

displayed (and the percentage of variance explained)

The Kaiser-Meyer-Olkin (KMO) Measure of in the columns labeled Extraction Sums of Squared

Sampling Adequacy is 0.887 shown in Table 6, which Loadings. The values in this part for the table are

suggests that the data adequacy is great and there is same as the values before extraction, except that the

no need to collect more data or inclusion or values for the discarded factors are ignored.

exclusion of any more variables. For these data, Principal component -1 which could be labeled as


48

Power Sector Vs. IT Sector Vs. Other Infrastructure “Over-all-Culture” for later analysis has the eigen-

Sector Differentiation:values of 4.722. The output Table 11 shows the

component matrix.

The t value of “dum var sec 1” and “dum var sec 2”

(in the Table 15) is not at all significant even at 10% The matrix which is given in Table 12 - Reproduced

level of significance with the probability of 0%. The Correlations, contains the correlation coefficients

Beta, both standardized and unstandardized, as well between all of the questions or items based on factor

as t value of the IT sector organizations represented model. For the good model these values will all be

by “dum var sec 1” and ‘Other infrastructure Sector small. Statistically, if more than 50% of residuals are

Knowledge Organizations’ represented by “dum var greater than 0.05, there is a ground for concern. In

sec 2” is positive but their magnitude is quite low. our case, it satisfies our statistical condition for good

This suggests that IT sector and ‘Other infrastructure model.

sector’ Knowledge Organizations are little better but

not significantly different or better than Power The first and only Principal Component has been

Sector Knowledge Organization in the area of recorded and fed as score into the original dataset.

positive ethos. So, essentially, all the selected This variable has been named and labeled as “Over-

Knowledge Organizations exhibit almost similar all-Culture” which has all OCTAPACE ethos and

level of positive ethos.their respective component score as shown in Table

13, that has been incorporated into and termed as

Gender Differentiation“Over-all-Culture” to be part of further modeling.

These items have the common theme of

The t value of “dum var gender” (in Table 16), which “OCTAPACE ETHOS” or positive ethos.

stands for gender, is significant at 10% level of

significance. The positive beta, both standardized The principal component analysis produced only

and unstandardized, and t value of the female one principal component which has been labeled as

Knowledge Workers represented by the dummy “Over-all-Culture”. This variable includes all the

variable “dum var gender” suggest that the female eight paces or limbs of OCTAPACE for better

Knowledge Workers are significantly better than the understanding and further analysis.

male Knowledge Workers in the positive ethos in

their respective Organizations.Public Sector Vs. Private Sector Differentiation

Discussion and ConclusionsThe t value of “Sector” (in the Table 14) is not

The findings generated from this empirical study not significant even at 10% level of significance. The

only influence academia and research but also the positive beta, both standardized and

industry and its managers who are interested in the unstandardized, and t value of the Private Sector

Organizational Culture. Since, only one Principal Knowledge Organizations represented by the

Component has come out after the Principal dummy variable “Sector” suggests that the Private

Component Analysis of eight OCTAPACE variables, Sector Knowledge Organizations are little better but

thus, we accept the first alternate hypothesis that the not statistically significant than the Public Sector

Organizational Culture in the selected Indian Knowledge Organizations in the area of positive

Knowledge Organizations follows the integration ethos in their respective Organizations.

perspective of the Organizational Culture and reject

the other two alternate hypotheses about the

differentiation and fragmentation perspectives about

the Organizational Culture.


49

There is no sectoral difference (even public-private Administrative Science Quarterly, 393-413.

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difference) in the Organizational Culture in the six higher education”, Administrative science

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null hypothesis that all the selected Knowledge cultures: The rites and rituals of organizational

Organizations exhibit almost similar Organizational life”, Reading–Mass: Addison-Wesley, 2, 98-103.

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characteristics as National Culture. Management”,Milton: John Wiley & Sons,

Australia.

However, we accept the fifth alternate hypothesis 5) Frost, P. J., Moore, L. F., Louis, M. R., Lundberg,

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51

dum var sec

1- IT Sector

dum var sec 2-

Infra. Sector

except power

No. of

responses

Sectors

Organization- A 0 0 100 Base- Power / Public Sector

Organization- B 1 0 38 IT Sector / Private Sector

Organization- C 1 0 30 IT Sector / Private Sector

Organization- D 0 1 25 Infrastructure Sector/ Private

Organization- E 0 1 8 Infrastructure Sector/ Public

Organization- F 1 0 3 IT Sector / Private Sector

TOTAL 71 33 204

Perspectives

Features Integration Differentiation Fragmentation

Orientation to consensus

Organization-wide consensus

Subcultural consensus Lack of consensus

Relation among

Manifestations

Consistency Inconsistency Not clearly consistent

or inconsistent

Orientation to

Ambiguity

Exclude it Channel it outside

subcultures

Acknowledge it

Source: adapted from Table 1 in Martin and Meyerson (1988) and Figure 3 in Meyerson and

martin (1987) cited in Frost et al., ed. 1991, p-8.

APPENDIX

Table 1 : Perspectives of Organizational Culture

Table 2 : Dummy variables for Sector-wise distribution of organizations

Table 3 : Warnings about single principal components

Only one component was extracted. Component plots cannot be produced.


52

Table 4 : Descriptive Statistics of OCTAPACE Variables

aTable 5 : OCTAPACE Correlation Matrix

Table 6 : KMO and Bartlett's Test

Kaiser-Meyer-Olkin Measure of Sampling

Adequacy. .887

Bartlett's Test of

Sphericity

Approx. Chi-Square 913.462

Df 28.000

Sig. .000


53

Mean Std. Deviation Analysis N Missing N

Openness 13.87 2.370 204 0

Confrontation 14.01 2.502 204 0

Trust 13.78 2.218 204 0

Authenticity 12.19 2.057 204 0

Proaction 14.43 2.529 204 0

Autonomy 12.36 1.941 204 0

Collaboration 13.72 2.189 204 0

Experimentation 13.14 2.376 204 0

Openness Confrontation Trust Authenticity Proaction Autonomy Collaboration Experimentation

Correlation Openness 1.000 .731 .540 .435 .665 .383 .643 .607

Confrontation .731 1.000 .656 .505 .741 .421 .556 .712

Trust

.540

.656

1.000

.472

.636

.311

.552

.479

Authenticity

.435

.505

.472

1.000

.381

.385

.539

.406

Proaction

.665

.741

.636

.381

1.000

.308

.507

.635

Autonomy

.383

.421

.311

.385

.308 1.000

.491

.458

Collaboration .643 .556 .552 .539 .507 .491 1.000 .512

Experimentation .607 .712 .479 .406 .635 .458 .512 1.000

Sig. (1-tailed) Openness .000 .000 .000 .000 .000 .000 .000

Confrontation

.000

.000

.000

.000 .000

.000

.000

Trust

.000

.000

.000

.000

.000

.000

.000

Authenticity

.000

.000

.000

.000

.000

.000

.000

Proaction

.000

.000

.000

.000

.000

.000

.000

Autonomy

.000

.000

.000

.000

.000

.000

.000

Collaboration

.000

.000

.000

.000

.000

.000

.000

Experimentation .000 .000 .000 .000 .000 .000 .000

a. Determinant = .010

Table 7 : Inverse of Correlation Matrix

Table 8 : Anti-image Matrices

Openness Confrontation Trust Authenticity Proaction Autonomy Collaboration Experimentation

Openness 2.764 -1.115 .150 .049 -.571 .047 -.918 -.163

Confrontation -1.115 3.828 -.764 -.425 -.906 -.196 .313 -1.007

Trust .150 -.764 2.144 -.267 -.689 .064 -.495 .197

Authenticity .049 -.425 -.267 1.600 .157 -.170 -.498 -.015

Proaction -.571 -.906 -.689 .157 2.738 .175 -.028 -.548

Autonomy .047 -.196 .064 -.170 .175 1.468 -.474 -.392

Collaboration -.918 .313 -.495 -.498 -.028 -.474 2.289 -.164

Experimentation -.163 -1.007 .197 -.015 -.548 -.392 -.164 2.339

Openness

Confrontation

Trust

Authenticity

Proaction

Autonomy

Collaboration

Experimentation

Anti-image Covariance

Openness

.362

-.105

.025

.011

-.075

.012

-.145

-.025

Confrontation

-.105

.261

-.093

-.069

-.086

-.035

.036

-.112

Trust

.025

-.093

.467

-.078

-.117

.020

-.101

.039

Authenticity

.011

-.069

-.078

.625

.036

-.072

-.136

-.004

Proaction

-.075

-.086

-.117

.036

.365

.044

-.005

-.086

Autonomy .012 -.035 .020 -.072 .044 .681 -.141 -.114

Collaboration -.145 .036 -.101 -.136 -.005 -.141 .437 -.031

Experimentation -.025 -.112 .039 -.004 -.086 -.114 -.031 .427

Anti-image Correlation

Openness .887a -.343 .062 .024 -.208 .023 -.365 -.064

Confrontation -.343 .866a -.267 -.172 -.280 -.083 .106 -.336 Trust .062 -.267 .894a

-.144 -.284 .036 -.223 .088 Authenticity

.024

-.172

-.144

.912a

.075

-.111

-.260

-.008

Proaction

-.208

-.280

-.284

.075

.897a

.088

-.011

-.217

Autonomy

.023

-.083

.036

-.111

.088

.888a

-.259

-.212

Collaboration

-.365

.106

-.223

-.260

-.011

-.259

.862a

-.071

Experimentation

-.064

-.336

.088

-.008

-.217

-.212

-.071

.906a

a. Measures of Sampling adequacy

Initial Extraction

Openness 1.000 .689

Confrontation 1.000 .779

Trust 1.000 .585

Authenticity 1.000 .432

Proaction 1.000 .659

Autonomy 1.000 .342

Collaboration 1.000 .609

Experimentation 1.000 .627

Extraction Method: Principal Component Analysis.

Table 9 : Communalities


54

Table 10 : Total Variance Explained

aTable 11 : Component Matrix

Component

Initial Eigenvalues Extraction Sums of Squared Loadings

Total % of Variance Cumulative % Total % of Variance Cumulative %

1 4.722 59.030 59.030 4.722 59.030 59.030

2 .869 10.857 69.886

3 .682 8.519 78.405

4 .483 6.036 84.442

5 .464 5.796 90.238

6 .324 4.045 94.283

7 .269 3.359 97.642

8 .189 2.358 100.000


Component

1

Confrontation .883

Openness .830

Proaction .812

Experimentation .792

Collaboration .780

Trust .765

Authenticity .657

Autonomy .585


a. 1 components extracted.

Openness

Confrontation

Trust

Authenticity

Proaction

Autonomy

Collaboration

Experimentation

Reproduced Correlation

Openness

.689a

.733

.635

.545

.674

.485

.648

.658

Confrontation

.733

.779a

.675

.580

.717

.516

.689

.699

Trust

.635

.675

.585a

.502

.621

.447

.597

.606

Authenticity

.545

.580

.502

.432a

.533

.384

.513

.520

Proaction

.674

.717

.621

.533

.659a

.475

.634

.643

Autonomy

.485

.516

.447

.384

.475

.342a

.456

.463

Collaboration

.648

.689

.597

.513

.634

.456

.609a

.618

Experimentation

.658

.699

.606

.520

.643

.463

.618 .627a

Residualb Openness -.002 -.095 -.110 -.009 -.103 -.005 -.051

Confrontation -.002 -.019 -.075 .024 -.095 -.133 .013 Trust -.095 -.019 -.030 .015 -.136 -.045 -.127 Authenticity

-.110

-.075

-.030

-.152

.001

.026 -.114

Proaction

-.009

.024

.015

-.152

-.167

-.126

-.008

Autonomy

-.103

-.095

-.136

.001

-.167

.034

-.005

Collaboration

-.005

-.133

-.045

.026

-.126

.034

-.106

Experimentation

-.051

.013

-.127

-.114

-.008

-.005

-.106


a. Reproduced communalities

b. Residuals are computed between observed and reproduced correlations. There are 14 (50.0%) nonredundant residuals with absolute values greater than 0.05.

Table 12 : Reproduced Correlations


55

Table 13 : Component Score Coefficient Matrix

Component

1

Openness .176

Confrontation .187

Trust .162

Authenticity .139

Proaction .172

Autonomy .124

Collaboration .165

Experimentation .168


Rotation Method: Varimax with Kaiser Normalization.

Component Scores.

aTable 14 : Coefficients of Public Vs. Private Sector Differentiation in Organizational Culture

a. Dependent Variable: OverallCulture

Model

Unstandardized Coefficients Standardized Coefficients

T Sig. B Std. Error Beta

1 (Constant) -.091 .096 -.948 .344

Sector .193 .140 .097 1.381 .169

aTable 15 : Coefficients of Power Vs. IT Vs. Other Infrastructure Sector Knowledge Organizations in

Organizational Culture

Model

Unstandardized Coefficients

Standardized

Coefficients


1 (Constant) -.091 .100 -.910 .364

dum var sec 1 .196 .155 .094 1.263 .208

dum var sec 2 .141 .201 .052 .700 .485


aTable 16 : Coefficients of Gender Differences

Model

Unstandardized Coefficients Standardized Coefficients


1 (Constant) -.056 .076 -.737 .462

dum var gender .347 .189 .128 1.833 .068



56

Corporate Web Reporting: An Empirical Investigation of Indian Companies Websites Content & Design Features

1Dr. Arwinder Singh

2Harmandeep Singh

1. Assistant Professor, Department of Commerce, GNDURC, Gurdaspur E-mail: [email protected]. Senior Research Fellow, Department of Commerce, GNDURC, Gurdaspur, E-mail: [email protected]

Abstract

Business firms use internet to satisfy the growing needs of their stakeholders. They are disseminating various companies’

information on the internet. Therefore, Internet reporting has various benefits to the source company such as wider reach, mass

communication, speed, and low cost. The focus of the present study is to examine the extent of corporate web reporting practices

across various industries in India. The study is based on 183 BSE listed companies from the database of BT-1000 for the year

2015-16, and these companies are broadly categorized into sixteen sectors. The results reveal that various content and

presentation features, such as online chat facility, E-commerce facility, webcasting, animation, hyperlink to the annual report

from the homepage and many more are not fully disclosed across industries. It also found that Indian companies have

uniformity in the disclosure of companies' mandatory information across the various industry groups. The results of ANOVA

indicate that there is the significant difference in the corporate web reporting practices among the Indian companies across

different industries groups.

Keywords: Web Reporting, Website Content, Website Presentation.

benefits to source company. Firstly, it helps in INTRODUCTIONreducing costs associated with communication of

company information such as printing, postage, he rapid growth of internet technology, have

delivery, etc. (Lymer, 1999). Secondly, it reaches Tsignificantly impacted on the accounting widely, limitless to content, and cross the territorial

practices. Many of the companies worldwide utilize boundaries. Thirdly, through web reporting,

the internet to disseminate their financial as well as companies improved their presentation of

non-financial information on the web (Debreceny et information by using graphics, animation,

al. 2002). The reporting through the internet is highly navigation, hyperlink, etc. (Garg and Verma, 2010).

accepted by companies all over the world since 1996 Lastly, the internet reporting allows the company to

(Louwers et al. 1996) because it provides various get integrated reporting by giving all dimension of

Effulgence

Vol. 16 No. 2





ISSN (O) : 2456-6675, ISSN (P) : 0972-8058

57

corporate reporting such as financial, social, and disclosure on the internet by UK companies.

marketing on one platform, i.e., corporate web Debreceny and Gray (1999) studied financial

pages. reporting on the internet and found companies using

internet technologies such as PDF, HTML for

Most of the studies on web reporting have been presenting the information. Ettredge et al. (2000)

conducted in developed economies such as USA, analyzed the accounting content of 100 companies

UK, and Australia during the last decades (see and found that it was mostly providing accounting

Louwers et al. 1996; Lymer, 1997; Ettredge et al., information such as balance sheet, cash flow, and

2000; Debreceny et al. 2002; Larran and Ginner, 2002) income statement. Larran and Ginner (2002) studied

and only a few studies have been conducted in India the use of the internet for corporate reporting by 144

(see Raman et al., 2003; Singh, 2009; Garg and Spanish companies and found that 107(74%)

Verma, 2010). The present study focuses on the companies had websites and of the sample

extent of internet reporting of different industry companies 67% IBEX and 50% IGBM included

groups of listed Indian companies. The recent annual accounts on their web pages. This study

growth of web-based corporate reporting have reveals a statistically significant association between

shown that that specific industry groups for example the size of the company and extent of corporate

industry related to technology, finance may have disclosure on the internet. Raman et al. (2003) survey

more incentives to adopt this practice in a broader 32 leading Indian corporate sector reporting

way than other industries (Bonson and Escobar, practices through the web. The analysis of result

2002). Wallace et al., (1994) justified the idea that reveals that 87.5% (28) companies had a website and

organizations corporate disclosure practices are 46.43% (13) companies of them presented some

probably going to shift over various industry groups financial information on their web pages. Garg and

and proposed that the nature or significance of an Verma (2010) studied the 200 BSE listed Indian

industry sort to the stakeholders may clarify companies and found all the companies had the

expected differences in corporate disclosure level website with more than 60% of the companies had

across different industries. Hence, the present study the higher level of disclosure. Singh (2009) studied

examines the extent of corporate web reporting 200 Indian companies and found 90% of the

practices of content and presentation attributes companies had websites with 100% of them

across the various industry groups and to test reporting any one of financial/investor

significance of differences in web reporting practices relation/corporate information on their websites.

across the various industry groups. Despina and Demetrios (2009) analyzed the internet

reporting criteria followed by the 302 listed

LITERATURE REVIEW AND HYPOTHESIS companies in Athens stock exchange and found all

DEVELOPMENT the companies had websites and reported some

dimensions of financial information on their web

An extensive literature have assessed the extent of pages. Further, result depicts that on average

internet reporting, Lymer, 1997 investigated 50 UK financial information (78.6%) was highly

companies and found 68% use internet for disseminated on the web pages, followed by

disseminating financial information. Xiao et al. corporate governance information (53.3%) and

(1997) analyzed the four dimension of internet investor relation information (49.7%). Pertiwi and

reporting, i.e., content and form of financial Hermana (2013) compared the financial reporting on

reporting, the role of the internet (problem solver or the internet between 25 Indonesian banks and nine

creator), the determinant of technology & non- non-banks and found the statistically significant

technology and pace of change. Carven and Marston difference in the internet financial reporting practices

(1999) examined the extent of financial information between the banks and non-banks in Indonesia. Alali


58

and Romero (2012) investigated the use of corporate Further, regression results indicate that company

internet reporting by 84 publicly traded Argentina size, board size, and liquidity were significant

companies and reported 85.7% companies had explanatory factors of internet financial reporting.

websites and disseminating financial as well as Based on the literature review it becomes evident

nonfinancial information on their websites. that content and presentations are the two

fundamental dimensions of internet reporting.

Thus, most of the studies were conducted by taking However, these two decisive factors are missing in

one dimension, i.e., content which included financial Indian context see Garg and Verma (2010) and Singh

and non-financial information. Advance technology (2009). Hence, the present study attempt to measure

leads internet reporting to the utilization of two the extent of content and presentation features across

dimensions of disclosure, which are content and the different sector of Indian companies.

presentation (Khan and Ismail, 2012). Debreceny et

al. (2002) studied the perceptions of the user Signaling theory also clarifies that organizations

regarding form and content, and it reveals that inside a similar industry tend to embrace a similar

respondent ranked traditional financial highlights level of disclosure. If a company within industry

higher than dynamic attributes such as forward- neglects to take the same disclosure level, including

looking statement. Further, they found respondent web-based disclosure, like others in the similar

preferred the new multimedia formats and industry at that point, it might be translated as a

navigation facilities such as audio/video, and signal that the organization is concealing terrible

hyperlink. Robbins and Stylianou (2003) investigated news (Carven and Marston, 1999). There are

the content and design of global corporate websites. numerous numbers of studies that analyze the

They found that content and presentation categories relationship between the industry classification and

are significantly standardized among global the web-based reporting. The results for industry

corporations. classification and internet reporting reported the

mixed results likewise, Oyelere et al. (2003), Marston

Kahn and Omar (2013) studied essential items of (2003), Xiao et al. (2004), Aly et al. (2010), Uyar

Internet financial reporting and they found financial (2011), Kamel and Awadallah (2017), found a

items were necessary attributes of the content significant association between industry

dimension. Multimedia and navigation were classification and web-based corporate reporting. On

indispensable presentation attributes. Ilias et al., the contrary, Ginner (1997), Carven and Marston

(2015) discovered an important presentation and (1999), Prabowo and Angkoso (2007), Abdelsalam

content aspects of Internet business reporting among and Street (2007), found no relationship between

212 Malaysia public listed companies. He added industrial classification and internet reporting.

usability, accessibility, navigation, and timeliness are Hence the disclosure literature shows the mixed

essential attributes of presentation features. results between the corporate web disclosure and the

Furthermore, financial statement, quarterly report, industry classification. Thus the following

financial highlights, stock information, corporate hypothesis is purposed for the study:

governance, management team, auditor information,

corporate social responsibility, online trading, and H0: There is no significant difference in the industry

marketing are essential content attributes of type and the corporate web reporting.

websites. Omran & Ramdhony (2016) analyzed 34 The alternate hypothesis for the purposed

listed Mauritius companies' websites regarding hypothesis is:

content and presentation factors. There results depict H1: There is a significant difference in the industry

82% of content attributes, and 53% of presentation type and the corporate web reporting.

attributes were disclosed by Mauritius companies.


59

RESEARCH METHODOLOGY Where, IDIS is Internet Disclosure Index Score

ri is 1 if attribute found otherwise 0

The section describes the methodology used in the i is 1,2,3,4……..122.

study including sample size, design and data The IDI consist 122 attributes and these attributes

collection. have been broadly categorized into two groups,

namely content (6 attributes) and presentation (4

Sample attributes). Content dimension have been further

sub-categorized into six groups, namely financial

183 companies based on market capitalization listed information (31 attributes), company information (15

on the BSE are selected from the BT-1000 database attributes), stakeholder support (8 attributes),

for the year 2015-16 for this study. The selected Human resources and employment opportunity (9

companies are categorized broadly into sixteen attributes), social responsibility (8 attributes), and

sectors to measure the extent of internet reporting marketing information (9 attributes). The

across different sectors. The sampled companies are presentation dimension has been subcategorized into

given in Appendix. four groups, namely, multimedia (5 attributes),

navigation (13 attributes), security (6 attributes), and

Data Collection user support (18 attributes).

The study is based on secondary data and the first FINDINGS AND DISCUSSION

step in the data collection is to identify the websites

of the respective company. Thus, to locate the The section represents the results and analysis

website of the company leading search engines such relating to corporate web reporting across the

as Google (www.google.com) has been used. different industry groups. Of the 183 companies, 99

Thereafter, information on the web was measured percent companies have active websites and

with the help of internet disclosure index (IDI). The disseminating financial and non-financial

data was collected from the websites of sample information on their web pages. Analysis Of

companies during October-November, 2016. Variance (ANOVA) was conducted to examine the

significant variations of the each of the content and

Scoring Scheme presentation attributes between the classified

industries groups (see Robbins and Stylianou, 2003).

The internet disclosure index (IDI) is prepared to Industry categories were used as dependent

identify whether companies are utilizing the internet variables, and the content and design attributes were

technology for reporting or not. The IDI is prepared used as independent variables. The next paragraph

from previous research (Robbins and Stylianou, presents the analysis on two broad categories and

2003; Debreceny et al. 2002, Khan and Omar, 2013) their subcategories.

and is modified as per the requirement of study and

also satisfy the Indian context. The score of 1 is Extent of Content Features across Different

awarded if the attribute from the IDI is presented on Industry Groups

the webpage, otherwise 0 is assigned (Lymer, 2000;

Debreceny et al., 2002; Garg and Verma, 2010; Singh, As indicated in Table 1, most of the financial

2009). The formula for calculating total score is as attributes has been disclosed by the majority of

follow: companies across the different sectors. The ANOVA

value for historical share prices, share performances

IDIS = Sri share day high/low and monthly high/low

i=1 significantly different across sectors. The significant


60

difference is observed in the disclosure of analyst opportunities, the result indicates that the attributes

report, the number of analyst following the firm, and feature stories & interviews of the employee,

analyst contact details. Disclosure of press releases employee welfare & perquisites, employee health &

and information on subsidiaries has the significant safety, and employment results are significantly

difference at 5 percent level of significance. All other different across the different industry groups.

financial attributes are not significantly different

across the industry groups. The result further shows that all the marketing

information related attributes significantly different

Most of the companies complied with the required at 5 percent level of significance expect the

disclosure of corporate governance information The disclosure of product and services attribute. Lastly,

ANOVA value for corporate governance category in the stakeholder support attributes disclosure of

indicate that governance attributes does not postal address of the company, company email-id,

significantly different at 5 percent level of and frequently asked questions are significant at 5

significance except the attribute business risk percent level of significance.

analysis.

Extent of Presentation Features across Different

Industry GroupsThe higher variation is observed in the disclosure of

corporate social responsibility across the different

The Table 2 depicts that there is standardization in industry groups. Six out of nine attributes of the

the utilization of multimedia attributes across the corporate social responsibility section have

different industry groups as attributes frames, significant differences at one percent level of

flashes, graphics and interactive chart groups are not significance. The attributes which are significantly

significantly different. However, the webcasting different are environmental spending & activities,

attribute is significantly different at 10 percent level corporate social responsibility policy, social

of significance. Furthermore, the majority of community engagement, sustainability report, and

navigation attributes are also standardized across the innovation and expansion.

different industry groups, as the ANOVA values are

less significant. In the human resources and employment


61

Att

rib

ute

s

Oil and Gas

Metal

Banking

Utilities

Commercial Services

Automobiles

Chemicals

Telecom

Consumer Products

Information Technology

Pharmaceutics

Capita; Goods

Other Financial

Construction

Transport Services

Food & Beverages

AN

OV

AR

esu

lts

f

p

Fin

an

cial

Att

rib

ute

s

An

nu

al R

epo

rt1

00

91

10

0

10

0

80

10

0

10

0

10

0

94

10

0

10

0

92

95

10

0

10

0

10

0

.84

0

.63

2

Bal

ance

Sh

eet

10

0

91

10

0

10

0

80

10

0

10

0

10

0

94

10

0

10

0

10

0

10

0

10

0

10

0

10

0

1.2

80

.22

0

Inco

me

Sta

tem

ent

10

0

91

10

0

10

0

80

10

0

10

0

10

0

94

10

0

10

0

10

0

10

0

10

0

10

0

10

0

1.2

80

.22

0

Ca

sh F

low

10

0

91

10

0

10

0

80

10

0

10

0

10

0

94

10

0

10

0

92

10

0

10

0

10

0

10

0

1.0

69

.38

8

Dir

ecto

r R

epo

rt1

00

10

0

10

0

10

0

80

10

0

10

0

10

0

88

10

0

10

0

92

95

10

0

10

0

10

0

1.1

02

.35

8

Au

dit

or

Rep

ort

10

0

10

0

10

0

92

80

10

0

10

0

10

0

94

10

0

10

0

10

0

95

10

0

10

0

10

0

.92

3

.54

0

Ch

air

ma

n M

essa

ge

73

82

74

77

60

78

56

83

81

50

85

85

71

80

80

40

.63

9

.83

9

No

tes

to A

cco

un

ts1

00

9

1

9

7

1

00

8

0

1

00

1

00

1

00

9

4

1

00

1

00

1

00

9

5

1

00

1

00

1

00

.7

23

.

An

nu

al R

epo

rt (

Arc

hiv

e)

10

0

10

0

10

0

92

8

0

10

0

10

0

10

0

94

1

00

1

00

1

00

9

0

10

0

10

0

10

0

.98

0

.47

9

Cu

rren

t S

har

e P

rice

s4

0

36

1

6

31

2

0

22

1

1

33

5

6

83

3

1

46

1

9

40

2

0

60

1

.62

2

.07

3

His

tori

cal

Sh

are

pri

ces

2

0

27

2

9

15

0

3

3

11

3

3

38

8

3

31

5

4

24

8

0

0

40

1

.86

9

.03

0*

Mo

nth

lyS

har

e P

rice

s

93

8

2

10

0

85

8

0

10

0

10

0

10

0

94

8

3

10

0

92

9

5

10

0

10

0

80

.9

72

.4

86

Lin

k t

o N

SE

/B

SE

53

3

6

55

4

6

20

3

3

56

1

7

38

6

7

46

6

9

38

1

00

6

0

40

1

.12

.3

34

Sh

are

Per

form

ance

73

8

2

61

7

7

40

1

00

6

7

33

8

1

33

8

5

85

8

1

10

0

10

0

80

1

.84

7

.03

2*

To

day

's c

ha

ng

e in

pri

ce

33

4

5

10

2

3

40

2

2

11

5

0

38

8

3

31

4

6

19

2

0

20

4

0

1.6

29

.0

71

75

9

Tab

le 1

: C

on

ten

t F

eatu

res

of

Co

rpo

rate

Web

Rep

ort

ing

acr

oss

dif

fere

nt

Ind

ust

ry G

rou

ps


62

Da

y H

igh

/L

ow

20

45

6

0

40

11

11

50

44

67

23

38

19

40

20

60

2.2

87

.00

6*

Mo

nth

ly H

igh

/L

ow

7

27

6

0

20

22

11

33

44

67

15

38

19

40

20

40

1.9

86

.01

9*

An

aly

st R

epo

rt

0

9

10

8

0

44

0

0

13

0

23

8

0

0

0

40

2.1

29

.01

1*

Lis

t o

f A

nal

yst

fo

llo

win

g

the

firm

0 0

6 1

5

0 0

11

17

6 6

7

23

0

5

0

0

0

3.0

41

.00

0*

An

aly

st C

on

tact

Det

ails

0

0

6

0

0

0

0

17

6

50

15

8

5

0

0

0

2.0

83

.01

3*

An

aly

st P

rese

nta

tio

n

13

18

39

38

40

22

0

17

38

50

46

46

14

20

0

20

1.3

22

.19

4

Co

nso

lid

ate

d F

ina

nci

al

Res

ult

80

55

65

85

80

78

56

83

69

10

0

92

69

81

80

60

10

0

.96

3

.49

6

Qu

art

erly

Res

ult

10

0

91

90

10

0

10

0

78

10

0

83

88

10

0

92

85

95

10

0

10

0

80

.73

8

.74

4

Key

Fin

an

cia

l R

atio

47

45

52

23

0

67

56

67

50

10

0

62

38

38

60

60

0

1.7

07

.05

4*

Su

mm

ary

Of

An

nu

al

Rep

ort

0

0 1

3

0 0

0 0

33

0 0

8 8

0

0

0

0

1.6

49

.06

6

Div

iden

d I

nfo

rmat

ion

(Cu

rren

t Y

ear)

8

7

82

90

10

0

80

89

78

10

0

88

83

92

85

90

80

60

10

0

.62

1

.85

5

Div

iden

d I

nfo

rma

tio

n

(Pre

vio

us

Yea

r)

3

3

27

19

46

20

11

33

0 3

8

0 2

3

46

33

60

0

40

1.1

90

.28

4

New

s/P

ress

Rel

ease

s

87

82

90

85

20

78

67

10

0

94

10

0

10

0

77

86

10

0

10

0

10

0

2.2

59

.00

6*

Seg

men

ted

Rep

ort

ing

8

0

7

3

8

1

4

6

6

0

5

6

6

7

6

7

4

4

5

0

7

7

8

5

5

2

8

0

6

0

4

0

1

.20

3

.2

74

Fin

an

cia

l H

igh

lig

hts

6

7

10

0

61

7

7

60

1

00

7

8

67

5

6

67

8

5

10

0

76

1

00

1

00

6

0

1.6

72

.0

61

Su

bsi

dia

ries

Fin

In

fo

20

2

7

13

4

6

80

6

7

22

5

0

44

1

7

62

2

3

57

8

0

20

4

0

2.4

42

.0

03

*

Co

rpo

rate

Go

ve

rna

nce

Sep

ara

te C

G S

ecti

on

0

2

7

13

1

5

40

0

0

0

6

0

8

1

5

0

0

0

0

1.5

26

0

.10

1

Co

mp

an

y's

' Ba

ckg

rou

nd

1

00

1

00

9

4

92

1

00

1

00

8

9

83

1

00

8

3

92

1

00

9

0

10

0

80

1

00

.7

16

.7

66

Bri

ef c

ho

rolo

gic

al

dis

cuss

ion

of

Ma

jor

Ev

ents

4

0

45

4

5

62

4

0

10

0

22

5

0

50

5

0

54

5

4

33

6

0

20

8

0

1.3

52

.1

77


63

Mis

sio

n/

Vis

ion

60

73

90

77

10

0

56

44

83

56

83

69

77

57

60

10

0

40

1.5

30

.10

0

Org

an

iza

tio

na

l C

ha

rt

20

36

16

31

40

22

11

67

13

0

0

23

19

0

40

0

1.5

51

.09

3

Bo

ard

Of

Dir

ecto

r

10

0

10

0

10

0

10

0

10

0

10

0

10

0

10

0

94

10

0

10

0

10

0

10

0

10

0

10

0

10

0

.67

7

.80

4

Info

rma

tio

n o

n B

OD

73

73

84

85

40

56

67

83

81

10

0

85

54

81

80

10

0

80

1.0

98

.36

2

Bo

ard

of

Dir

ecto

r W

ith

Ima

ges

87

91

90

85

60

78

78

67

69

10

0

85

69

76

80

80

80

.62

7

.85

0

Lis

t o

f B

oar

d C

om

mit

tee

10

0

10

0

10

0

10

0

10

0

89

10

0

10

0

88

10

0

10

0

92

90

10

0

80

10

0

1.0

12

.44

6

Ma

in B

usi

nes

s R

isk

An

aly

sis

33

27

71

38

0 3

3

22

33

25

17

38

15

38

80

0

20

2.3

67

.00

4*

Qu

arte

rly

Go

ver

na

nce

rep

ort

40

27

23

46

40

44

56

33

63

67

54

31

24

20

40

40

1.0

49

.40

8

CE

O/

CF

O C

erti

fica

te

40

36

45

62

60

44

22

67

56

50

31

46

57

80

80

40

.81

7

.65

8

Co

de

of

Eth

ica

l C

on

du

ct

10

0

10

0

87

77

10

0

10

0

78

10

0

94

67

10

0

92

86

10

0

10

0

60

1.4

91

.11

3

Ma

na

gem

ent

Dis

cuss

ion

an

d A

na

lysi

s

1

00

73

81

10

0

80

89

89

83

81

83

92

92

86

80

10

0

10

0

.70

0

.78

2

Co

rpo

rate

An

no

un

cem

ents

/N

oti

ces

5

3

64

68

77

60

67

22

33

63

17

69

46

62

80

0

60

1.6

47

.06

6

Co

rpo

rate

So

cial

R

esp

on

sib

ilit

y

Sep

ara

te C

SR

Sec

tio

n

73

5

5

23

46

40

11

67

0 4

4

50

6

2

62

1

9

80

2

0

60

2.6

49

.00

1*

Bu

sin

ess

Res

po

nsi

bil

ity

Rep

ort

5

3

64

3

2 4

6 4

0 4

4 0

67

50

5

0

31

4

6

38

1

00

4

0

40

1.3

97

.15

4

En

vir

on

men

tal

Sp

end

ing

a

nd

Act

ivit

ies

9

3

10

0

23

77

60

67

67

33

63

1

00

8

5

77

2

9

10

0

40

10

0 5.7

00

.00

0*

Co

rpo

rate

So

cia

l

Res

po

nsi

bil

ity

Po

licy

9

3

82

2

9 9

2 8

0 6

7 8

9 6

7

81

8

3

85

6

9

86

6

0

80

10

0 3.5

50

.00

0*

So

cia

l C

om

mu

nit

y

En

gag

emen

t

10

0

10

0

65

10

0 6

0 8

9 1

00

67

94

1

00

1

00

8

5

90

1

00

10

0 8

0 2

.54

1 .0

02

*


64

Su

sta

inab

ilit

y R

epo

rt

60

55

10

62

20

22

11

17

31

10

0

15

46

14

80

0

0

4.5

14

.00

0*

Aw

ard

s A

nd

Rec

og

nit

ion

93

91

74

77

60

89

89

50

81

83

92

69

62

80

60

80

.96

4

.49

5

Inn

ov

atio

n a

nd

E

xp

an

sio

n

13

9 3

15

0 2

2

33

17

44

67

23

38

0

0

0

0

2.9

56

.00

0*

Hu

man

Res

ou

rces

&

Em

plo

ym

en

t D

etai

ls

Sep

ara

te H

R S

ecti

on

93

91

81

77

60

89

78

10

0

88

10

0

92

85

71

10

0

10

0

10

0

.90

6

.55

9

Key

Em

plo

yee

D

escr

ipti

on

67

73

87

54

60

44

44

33

50

67

38

62

71

60

60

80

1.3

27

.19

1

Em

plo

yee

Tra

inin

g &

Dev

elo

pm

ent

5

3

45

48

54

20

22

44

33

38

50

31

62

14

20

40

0

1.2

68

.22

8

Fea

ture

sto

ries

an

d

inte

rvie

ws

1

3

27

6 8

20

44

22

50

38

67

15

31

19

60

40

40

1.8

18

.03

6*

Em

plo

yee

wel

fare

&

per

qu

isit

es

4

7

55

29

38

40

0 3

3

50

25

33

0 3

8

5

40

20

0

1.9

23

.02

4*

Em

plo

yee

Hea

lth

an

d

Saf

ety

7

3

1

8

1

0

3

8

4

0

2

2

5

6

1

7

3

1

3

3

4

6

3

8

5

40

4

0

0

2.7

17

.0

01

*

Cu

rren

t Jo

b O

pen

ing

s 87

7

3

84

6

2

60

3

3

56

6

7

50

1

00

6

2

77

5

7

40

6

0

40

1

.52

0

.10

3

Res

ult

s E

nro

llm

ents

etc

4

7

45

6

1

31

4

0

0

11

0

0

0

0

3

1

19

0

6

0

0

4.3

01

.0

00

*

Co

mp

any

Val

ues

4

0

36

1

3

46

4

0

44

3

3

33

5

0

33

6

2

38

3

8

20

6

0

80

1

.25

2

.23

8

Mar

ket

ing

In

form

atio

n

Des

crip

tio

n A

bo

ut

Pro

du

cts

an

d S

erv

ices

100

1

00

1

00

1

00

1

00

1

00

1

00

1

00

9

4

10

0

10

0

10

0

10

0

10

0

10

0

10

0

.67

7

.80

4

Res

earc

h a

nd

Dev

elo

pm

ents

6

0

36

0

38

0

44

6

7

17

3

8

17

8

5

77

1

0

20

2

0

0

6.1

01

.0

00

*

Pro

du

cts

Qu

ali

ty P

oli

cy

33

2

7

10

8

2

0

33

4

4

17

3

1

0

46

6

9

10

4

0

20

0

2

.43

8

.00

3*

Eco

mm

erce

fa

cili

ty

2

7

27

1

00

3

8

20

0

2

2

50

2

5

0

8

8

33

0

8

0

40

9

.06

0

.00

0*


65

*Sig

nif

ican

t a

t P

< 0

.05

lev

el.

Sto

re/

Bra

nch

lo

cato

r

60

73

97

15

60

78

56

50

69

33

54

38

52

60

20

40

3.1

17

.00

0*

Ad

ver

tise

men

t

40

36

87

31

40

78

44

67

69

17

46

46

67

20

40

40

2.3

72

.00

4*

Key

Sa

le

20

27

3

15

0

44

44

0

6

0

0

8

0

0

0

0

2.8

60

.00

1*

Pro

du

ct D

escr

ipti

on

Wit

h

Ima

ges

/P

ictu

res

40

45

94

54

80

89

33

67

88

10

0

46

69

62

60

60

80

2.6

24

.00

1*

Su

rvey

of

key

pro

du

cts

13

0

13

8

0

11

0

0

6

0

0

0

0

0

0

40

3.0

75

.00

0*

Sta

keh

old

er

Su

pp

ort

In

form

ati

on

Co

nta

ct H

um

an

Rel

ati

on

7

36

16

15

60

22

33

0

19

33

23

54

14

0

20

20

1.4

75

.12

0

Co

nta

ct I

nv

esto

r R

ela

tio

n

73

82

55

69

40

67

78

83

81

10

0

92

85

62

10

0

10

0

80

1.4

18

.14

4

Co

nta

ct M

ark

etin

g

Rel

ati

on

4

0

36

19

15

60

33

33

17

25

0 3

8

46

5

40

40

40

1.2

88

.21

4

Po

stal

Ad

dre

ss o

f

Co

mp

any

73

1

00

7

1

9

2

6

0

7

8

8

9

6

7

1

00

8

3

1

00

8

5

9

5

1

00

4

0

8

0

1.9

93

.0

18

*

Co

mp

any

Ph

on

e N

um

ber

6

7

10

0

61

9

2

60

7

8

89

6

7

10

0

67

9

2

10

0

95

1

00

6

0

80

2

.35

3

.00

4*

Co

mp

any

E-m

ail

ID

4

7

45

2

3

38

4

0

56

4

4

17

3

8

50

3

8

77

5

2

60

6

0

60

1

.12

1

.34

1

Lin

k t

o S

oci

al

Sit

e-F

aceb

oo

k, T

wit

ter,

etc

.

80

8

2

65

8

5

60

7

8

33

8

3

88

1

00

6

9

69

6

2

80

8

0

80

1.1

06

.3

55

Fre

qu

entl

y a

sked

qu

esti

on

s

40

2

7

68

5

4

60

2

2

44

6

7

75

8

3

31

3

1

62

2

0

40

2

0

1.8

53

.0

31

*


66

Tab

le 2

: P

rese

nta

tio

n F

eatu

res

of

Co

rpo

rate

Web

Rep

ort

ing

acr

oss

dif

fere

nt

Ind

ust

ry G

rou

ps

Att

rib

ute

s

Oil and Gas

Metal

Banking

Utilities

Commercial Services

Automobiles

Chemicals

Telecom

Consumer Products

Information Technology

Pharmaceutics

Capita; Goods

Other Financial

Construction

Transport Services

Food & Beverages

AN

OV

A

Resu

lts

f

p

Mu

ltim

ed

ia

Web

cast

ing

67

55

29

38

40

78

22

33

69

10

0

54

46

52

60

40

40

1.6

30

.07

1*

F

ram

es9

3

82

90

85

60

67

56

67

75

83

62

62

81

60

60

60

.92

7

.53

6

F

lash

es1

00

82

10

0

92

60

89

89

83

88

10

0

69

85

90

20

80

60

2.5

42

.00

2

G

rap

hic

s1

00

10

0

10

0

85

80

10

0

89

83

10

0

10

0

85

85

95

10

0

10

0

10

0

.95

8

.50

1

In

tera

ctiv

e C

har

t g

rap

hs

7

9

6

8

20

22

0

17

38

33

23

31

19

20

40

20

1.1

03

.35

7

N

av

iga

tio

n

Inte

rna

l S

earc

h E

ng

ine

80

55

77

77

10

0

56

33

50

88

10

0

77

69

52

60

60

80

1.4

60

.12

6

H

om

epa

ge

Bu

tto

n8

7

91

10

0

92

80

89

89

83

94

83

10

0

10

0

10

0

10

0

10

0

10

0

.71

5

.76

7

H

yp

erli

nk

to

An

nu

al

Rep

ort

67

64

29

38

20

22

56

0 5

0

17

77

46

29

20

20

80

2.2

46

.00

7*

H

yp

erli

nk

to

In

ves

tor

Rel

ati

on

10

0

10

0

87

10

0

10

0

89

10

0

83

88

10

0

10

0

92

10

0

10

0

80

10

0

.99

3

.46

4

H

yp

erli

nk

to

new

s/m

edia

80

82

65

10

0

40

10

0

67

83

81

83

10

0

92

76

10

0

60

10

0

1.7

98

.03

8*

H

yp

erli

nk

to

car

eer

10

0

10

0

87

92

10

0

89

10

0

10

0

75

10

0

10

0

10

0

76

10

0

10

0

10

0

1.5

52

.09

3

H

yp

erli

nk

to

Co

nta

ct U

s8

71

00

97

10

08

01

00

10

08

38

81

00

10

01

00

86

10

01

00

80

.91

8.5

46


67

Hy

per

lin

k i

nsi

de

the

an

nu

al r

epo

rt

13

9

3 1

5

0 0

0 1

7

13

5

0

0 8

10

0

0

0

1.5

18

.1

04

On

lin

e A

nn

ual

Rep

ort

7

9

3

0

0

0

1

1

0

13

0

1

5

0

0

0

0

0

.79

3

.68

4

Sit

e M

ap

7

3

55

9

0

85

1

00

6

7

67

8

3

88

1

00

8

5

62

8

6

10

0

10

0

80

1

.30

1

.20

6

Men

u C

lick

Ov

er

27

4

5

35

3

1

40

2

2

33

6

7

38

1

7

54

2

3

48

2

0

20

6

0

.75

4

.72

6

Men

u P

ull

Do

wn

0

9

3

0

0

2

2

0

0

6

0

15

0

0

0

0

0

1

.23

1

.25

3

Ba

ck a

nd

Nex

t B

utt

on

7

1

8

0

0

20

1

1

0

17

1

3

0

8

0

10

0

0

0

.8

89

.5

78

L

ega

l D

iscl

aim

er

6

7

7

3

8

1

6

9

8

0

5

6

4

4

6

7

5

6

8

3

6

9

4

6

6

2

8

0

1

00

2

0

1

.19

4

.2

81

S

ecu

rity

C

op

yri

gh

t o

f S

ite

93

10

0

87

92

10

0

78

78

83

75

83

10

0

85

90

80

80

60

.82

1

.65

3

P

riv

acy

Po

licy

60

55

35

54

80

78

11

83

81

10

0

31

46

81

20

40

20

3.2

09

.00

0*

T

erm

Of

Use

33

0

23

15

60

22

22

0

25

50

8

46

48

40

40

0

1.7

33

.04

9*

D

evel

op

er I

nfo

rmat

ion

20

55

39

38

20

11

44

17

13

17

15

23

29

60

20

20

1.0

15

.44

3

W

arn

ing

bef

ore

lea

vin

g

Web

site

7 0

0 8

0 2

2

11

0 6

17

0 0

10

0

0

0

.95

6

.50

4

U

ser

Su

pp

ort

D

ate

Web

site

La

st U

pd

ate

47

9

13

38

40

11

11

17

0

0

8

31

19

0

20

20

1.6

57

.06

4

M

ult

iple

La

ng

ua

ge

60

45

74

46

80

11

33

33

13

50

8

54

29

0

60

20

3.0

86

.00

0*

N

um

ber

of

vis

ito

r in

form

ati

on

27

27

39

31

40

0 1

1

17

0 0

0 2

3

19

0

20

0

1.7

26

.05

0*

F

ile

Fo

rma

t2:

HT

ML

27

27

19

46

20

33

0

17

31

67

31

46

38

20

40

40

2.8

71

.00

1*

P

DF

10

0

10

0

10

0

10

0

10

0

89

10

0

10

0

94

10

0

10

0

10

0

10

0

10

0

10

0

10

0

4.6

53

.74

5

H

TM

L/

PD

F

27

27

19

46

20

22

0

17

31

67

31

46

33

20

40

40

13

.04

.00

0*

E

xce

l

7

9

0

0

20

0

11

33

6

17

15

15

10

0

20

0

1.3

13

.19

9


68

*S

ign

ific

ant

at

P <

0.0

5 le

vel

.

N

ote.

1H

yp

erli

nk

ob

serv

ed f

rom

th

e H

om

e p

age

In N

avig

atio

n A

ttri

bu

te.

2 F

ile

Fo

rmat

to

pre

sen

t fi

na

nci

al i

nfo

rma

tio

n o

n w

eb p

ag

es

Wo

rd F

orm

at

0

0

0

0

0

11

0 0

0 0

0

0

0

20

0

0

1

.43

4 .1

37

X

BR

L F

orm

0

0

0

0

0

0 0

0 0

0 0

0

0

0

0

0

1

.32

3 .1

93

O

nli

ne

Req

ues

t F

orm

4

0

64

4

8

31

4

0 5

6 8

9 5

0 5

6 6

7 5

4

69

5

7

60

2

0

40

8.5

96

.00

0

On

lin

e F

eed

bac

k

40

0

2

9

31

0

11

0 1

7 6

17

0

38

1

4

40

2

0

20

1.2

67

.22

8

Reg

istr

ati

on

fa

cili

ty t

o

Sta

keh

old

ers

60

5

5

94

6

2

40

22

56

67

44

50

38

3

8

62

2

0

60

4

0 2

.13

9 .0

10

*

Su

bsc

rip

tio

n F

aci

lity

2

0

45

1

6

23

2

0 1

1 1

1 3

3 3

1 6

7 0

3

1

14

4

0

0

40

2.7

31

.00

1*

O

nli

ne

Ch

at

Fa

cili

ty

0

0

13

0

0

11

0

17

13

0

8

0

5

0

0

0

2.2

69

.00

6*

G

loss

ary

20

36

6

38

0

0

11

33

6

50

8

0

0

0

40

0

1.0

27

.43

0

D

ow

nlo

ad

of

Rep

ort

s

10

0

10

0

97

85

10

0

89

89

10

0

94

10

0

10

0

10

0

10

0

10

0

10

0

10

0

20

.38

.00

0*

B

row

ser

Co

mp

ati

bil

ity

27

27

68

31

0

0

44

33

13

17

8

8

19

40

0

0

9.3

70

.00

0*

W

eb S

ite

Su

rvey

7

0

10

0

20

0

0

17

6

17

0

0

5

0

0

20

4.5

63

.00

0*


69

The analysis of security attributes depicts that there variation in disclosure practices of different industry

are not such higher variations between the industry groups, analysis of variation test has been applied

groups, only privacy policy and terms of use of and the result of ANOVA is presented in Table 3.

website attribute significantly different across the The results of ANOVA test reveals that there is a

industry groups. significant difference among the sixteen industries

classification and corporate internet reporting at 5

In the vital attribute of presentations, user support percent of significance level (F=2.427, p=0.03).

(Table 2), we found that overall there is Therefore, the null hypothesis has been rejected and

standardization in providing the user interface the alternate hypothesis H1, which states that there

attributes. However, the significant difference is seen are significant differences in the mean score of

in the attributes multiple languages, the number of corporate web reporting and industry type, has been

visitor information, financial information in HTML accepted. These results are consistent with previous

format, registration facility to stakeholders, email research in different countries, which found an

subscription facility of information, online chat association between industry type and internet

facility, browser compatibility and website survey reporting. For example, Oyeler et al. (2003) reported

facility. an association between industry type and online

reporting of New Zealand companies. Marston

Hypothesis Testing (2003) indicates that industry sector influences the

disclosure practice of Japanese companies. Xiao et al.

The analysis of extent of content and presentation (2004) proved that corporate internet disclosure was

features of website from Table 1 and 2 indicate that greater among Chinese company in information

there are comparatively variations among the technology sector.

different industry groups. In order to confirm the

Table 3 : ANOVA test for differences in Corporate Internet Reporting and Industry Groups

Table 4 : ANOVA test Multiple Comparison - Scheffe

Sum of Squares Df Mean Square F p-value

Between Groups 4184.926 15 278.995 2.427 .003*

Within Groups 19081.409 166 114.948

23266.335 181

*Note: The mean difference is significant at 0.05 levels.

Dependent Industry (I) Industry (J) Mean SE Sig. 95% Confidence Level

Variable Diff(I-J)

Lower bound

Upper bound

Total Oil and Gas Metals and

Mining

0.188 4.256 1.000 -21.47 21.85

Score

Banking

4.572

3.372

1.000

-12.59

21.74

Utilities

1.503

4.063

1.000

-19.18

22.18

Commercial Services

10.533

5.537

.999

-17.65

38.71

Automobiles

2.733

4.521

1.000

-20.27

25.74


70

Capital Goods -1.608 4.392 1.000 -23.96 20.75

Other Fin. Services

6.784 3.990 1.000 -13.53 27.09

Construction -2.455 5.783 1.000 -31.89 26.98

Transport Services

6.945

5.783

1.000

-22.49

36.38

Food

and

Beverages

4.545

5.783

1.000

-24.89

33.98

Banking

Utilities

-3.069

3.543

1.000

-21.10

14.96

Commercial

Services

5.961

5.167

1.000

-20.34

32.26

Automobiles

-1.839

4.060

1.000

-22.50

18.82

Chemicals

6.939

4.060

1.000

-13.72

27.60

Telecom

-0.005

4.782

1.000

-24.34

24.33

Consumer Products

-9.239

3.372

.938

-26.40

7.92

IT

-16.005

4.782

.734

-40.34

8.33

Pharmaceutics

-2.916

3.543

1.000

-20.95

15.12

Capital Goods

-5.993

3.543

1.000

-24.02

12.04

Other Fin.

Services

2.399

3.030

1.000

-13.02

17.82

Construction

-6.839

5.167

1.000

-33.14

19.46

Transport

Services

2.561

5.167

1.000

-23.74

28.86

Food and

Beverages

0.161

5.167

1.000

-26.14

26.46

Chemicals 11.511 4.521 .968 -11.50 34.52

Telecom 4.567 5.179 1.000 21.79 30.93-

Consumer -4.667 3.915 1.000 -24.59 15.26

Products

IT 11.433 5.179 .992 37.79 14.93

- -

Pharmaceutics 1.656 4.063 1.000 19.02 22.33-

Capital Goods -1.421 4.063 1.000 -22.10 19.26

Other Fin. 6.971 3.624 .998 11.48 25.42

Services-

Construction 2.267 5.537 1.000 30.45 25.91- - Transport Services

7.133 5.537 1.000 -21.05 35.31

Food and

4.733 5.537 1.000 23.45 32.91

Beverages-

Metals and Banking 4.384 3.763 1.000 -14.77 23.54

Mining Utilities 1.315 4.392 1.000 21.04 23.67

-

Commercial

10.345 5.783 .999 19.09 39.78Services

-

Automobiles 2.545 4.819 1.000 -21.98 27.07

Chemicals 11.323 4.819 .985 13.20 35.85

-

Telecom 4.379 5.441 1.000 23.32 32.07

-

Consumer

Products-4.855 4.256 1.000 -26.52 16.81

IT 11.621 5.441 .995 39.32 16.07- -

Pharmaceutics 1.469 4.392 1.000 20.89 23.82-


71

Capital Goods -11.954 5.642 .995 -40.67 16.76

Other Fin. Services

-3.562 5.335 1.000 -30.72 23.59

Construction

-12.800

6.781

.999

-47.31

21.71

Transport Services

-3.400

6.781

1.000

-37.91

31.11

Food and

Beverages

-5.800

6.781

1.000

-40.31

28.71

Automobiles

Chemicals

8.778

5.054

1.000

-16.95

34.50

Telecom

1.833

5.651

1.000

-26.93

30.59

Consumer Products

-7.400

4.521

1.000

-30.41

15.61

IT

-14.167

5.651

.972

-42.93

14.59

Pharmaceutics

-1.077

4.649

1.000

-24.74

22.59

Capital Goods

-4.154

4.649

1.000

-27.82

19.51

Other Fin.

Services

4.238

4.272

1.000

-17.50

25.98

Construction

-5.000

5.980

1.000

-35.44

25.44

Transport

Services

4.400

5.980

1.000

-26.04

34.84

Food and Beverages

2.000

5.980

1.000

-28.44

32.44

Chemicals

Telecom

-6.944

5.651

1.000

-35.70

21.82

Consumer Products

-16.178

4.521

.617

-39.19

6.83

IT

-22.944

5.651

.361

-51.70

5.82

Pharmaceutics

-9.855

4.649

.995

-33.52

13.81

Capital Goods

-12.932

4.649

.929

-36.59

10.73

Utilities Commercial Services

9.031 5.642 1.000 -19.69 37.75

Automobiles 1.231 4.649 1.000 -22.43 24.89

Chemicals 10.009 4.649 .994 -13.65 33.67

Telecom

3.064

5.292

1.000

-23.87

30.00

Consumer

Products

-6.169

4.063

1.000

-26.85

14.51

IT

-12.936

5.292

.978

-39.87

14.00

Pharmaceutics

0.154

4.205

1.000

-21.25

21.56

Capital Goods

-2.923

4.205

1.000

-24.33

18.48

Other Fin. Services

5.469

3.784

1.000

-13.79

24.73

Construction

-3.769

5.642

1.000

-32.49

24.95

Transport Services

5.631

5.642

1.000

-23.09

34.35

Food and Beverages

3.231

5.642

1.000

-25.49

31.95

Commercial

Automobiles

-7.800

5.980

1.000

-38.24

22.64

Services

Chemicals

0.978

5.980

1.000

-29.46

31.41

Telecom

-5.967

6.492

1.000

-39.01

27.08

Consumer

Products

-15.200

5.537

.937

-43.38

12.98

IT

-21.967

6.492

.717

-55.01

11.08

Pharmaceutics

-8.877

5.642

1.000

-37.59

19.84


72

Other Fin.

Services-4.540 4.272 1.000 -26.28 17.20

Construction

-13.778

5.980

.988

-44.21

16.66

Transport

Services

-4.378

5.980

1.000

-34.81

26.06

Food and

Beverages

-6.778

5.980

1.000

-37.21

23.66

Telecom

Consumer Products

-9.233

5.179

.999

-35.59

17.13

IT

-16.000

6.190

.963

-47.51

15.51

Pharmaceutics

-2.910

5.292

1.000

-29.84

24.02

Capital Goods

-5.987

5.292

1.000

-32.92

20.95

Other Fin.

Services

2.405

4.963

1.000

-22.86

27.67

Construction

-6.833

6.492

1.000

-39.88

26.21

Transport

Services

2.567

6.492

1.000

-30.48

35.61

Food and

Beverages

0.167

6.492

1.000

-32.88

33.21

Consumer

IT

-6.767

5.179

1.000

-33.13

19.59

Products

Pharmaceutics

6.323

4.063

1.000

-14.35

27.00

Capital Goods

3.246

4.063

1.000

-17.43

23.92

Other Fin.

Services

11.638

3.624

.795

-6.81

30.09

Construction

2.400

5.537

1.000

-25.78

30.58

Transport

Services

11.800

5.537

.995

-16.38

39.98

Food and

Beverages

9.400

5.537

1.000

-18.78

37.58

IT

Pharmaceutics

13.090

5.292

.975

-13.84

40.02

Capital Goods

10.013

5.292

.999

-16.92

36.95

Other Fin.

Services

18.405

4.963

.547

-6.86

43.67

Construction

9.167

6.492

1.000

-23.88

42.21

Transport

Services 18.567

6.492

.912

-14.48

51.61

Food and

Beverages 16.167

6.492

.974

-16.88

49.21

Pharmaceutics

Capital Goods

-3.077

4.205

1.000

-24.48

18.33

Other Fin.

Services 5.315

3.784

1.000

-13.94

24.57

Construction

-3.923

5.642

1.000

-32.64

24.79

Transport

Services 5.477

5.642

1.000

-23.24

34.19

Food and Beverages

3.077

5.642

1.000

-25.64

31.79

Capital Goods

Other Fin.

Services 8.392

3.784

.992

-10.87

27.65

Construction

-0.846

5.642

1.000

-29.56

27.87

Transport

Services 8.554

5.642

1.000

-20.16

37.27

Food and

Beverages 6.154 5.642 1.000 -22.56 34.87


73

Other Fin. Construction -9.238 5.335 1.000 -36.39 17.92

Services Transport

Services 0.162 5.335 1.000 -26.99 27.32

Food and Beverages -2.238 5.335 1.000 -29.39 24.92

Construction Transport Services 9.400 6.781 1.000 -25.11 43.91

Food and

Beverages 7.000 6.781 1.000 -27.51 41.51

Transport

Services Food and

Beverages -2.400 6.781 1.000 -36.91 32.11

Note: * The mean difference is significant at 0.05 levels.

Furthermore, Aly et al. (2010), found that formatting and presentation features. There is extensive

(presentation) of websites were superior in financial variation among the sub-dimensions of content and

and communication industry of Egyptian presentation features such as banking and financial

companies. Turmin et al. (2016) reported a positive industry leading to the disclosure of financial

association between industry classification and information. Telecom industry has better customer

corporate internet reporting. The results also support than other industry groups. The automobile

consistent with studies conducted in India which industry is more concerned about the disclosure of

found an association between industry type and corporate social responsibility because these units

internet reporting (Garg and Verma, 2010; Malhotra directly affect the environment. Only finance and

and Singh, 2005). The rejection of null hypothesis H0 telecom sectors are utilizing the E-commerce facility.

allows the further analysis of pair wise comparison These findings have supported the result of Aly et al.

between the industries. Post hoc Scheffe’s test (as (2010) that communication and financial services

samples are unequal) has conducted to examine how industry are the determinants of voluntary

significant the corporate internet disclosure disclosure. Of presentation dimension, Information

difference between each pair of industry type. The technology industry is leading in the utilizing of

test result from Table 4 shows no significant multimedia and navigation for internet disclosure.

difference between each pair of industry for the total All the sectors utilizing the presentation attribute

score of corporate internet reporting. These findings such as file formats (PDF), link to social sites,

suggest that companies in different industries in downloading and printing of reports. Whereas, the

India have standardized web based corporate result of a language translator, website update,

disclosure browser compatibility is very disappointing with

regards to all sectors. The results of ANOVA indicate

CONCLUSION that website content and presentation were

significantly different across the industry groups.

The present paper is attempted to study the extent of However, the multiple comparison test show no

internet reporting across different industry groups of significant difference between each pair of industry

listed Indian companies. The study reveals that for the total score of corporate web reporting.

among the 183 companies only one company does

not have the website in this digital era. The internet The findings show that Indian companies are

reporting disclosure is not consistent among the utilizing the internet technology for disseminating

different sectors. Companies in information company’s information. However, we observed

technology industry are leading comparatively than numbers of significant content and presentation

other industries in the overall disclosure of content attributes being ignored by Indian companies. There


74

is much scope for improvement in the disclosure Audit”, European Accounting Review, 8(2), 335-

regime. The policy makers of reporting companies 350.

identify the essential factors of internet disclosure, 7) Debreceny, R., Gray, G. L. And Rahman, A.,

the establishment of separate information technology (2002), "The determinants of Internet financial

department wholly accountable for internet reporting", Journal of Accounting and Public

disclosure and training their employees ‘how to Policy, 21(4-5), 371-394.

compete with other sectors, locally and globally’. 8) Despina, A. C., & Demetrios, P. L. (2009). The

Moreover, regulatory bodies such as RBI, SEBI, IAS, web-based financial reporting adopted by the

etc. also take the initiative to assure the listed companies in the Athens Stock Exchange.

standardization, reliability, and completeness of the Journal of Modern Accounting and Auditing,

content & presentation attributes of the website. 5(7), 7.

9) Ettredge, M., Richardson, U.J. and Scholz, S.,

We acknowledge one of the most significant (2000), “Timely Financial Reporting at Corporate

limitations of our study is the problem of Websites,” Communications of the ACM, 45(6),

generalization. Our result may not be representative 67-71.

of the companies in the other parts of the world due 10) Garg, M.C. and Verma, D. V., (2010), “Web-

to different socio-economic culture, industrial Based Corporate Reporting Practices in India”,

structure and behavior. IUP Journal of Accounting Research and Audit

Practices, 9(3), 7-19.

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(2015). The quality of non-Financial information

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Internet for corporate reporting in the Mercosur Stock Exchange: Its determinants and

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3) Aly, D., Simon, J. And Hussainey, K., 13) Khan, M.N.A.A. and Ismail, N.A., (2012), “ An

(2010),“Determinants of Corporate Internet Empirical Study on Indexes of Internet Financial

Reporting: Evidence from Egypt”, Managerial Reporting: The case of Malaysia”, African

Auditing Journal. 25(2), 182-202. Journal of Business Management, 6(5), 2086-

4) Bonsón, E. and Escobar, T., (2002), "A Survey on 2100.

Voluntary Disclosure on the Internet. Empirica 14) Khan, M.N.A.A. and Omar, N.A.B., (2013), “ A

Evidence from 300 European Union Companies", Study of Importance Items of Internet Financial

The International Journal of Digital Accounting Reporting: A Case of Malaysian Auditors”,

Research, 2(1), 27-51. Middle-East Journal of Scientific Research, 18(3),

5) Craven, B. M. and Marston, C. L., (1999), 340-351.

"Financial reporting on the Internet by leading 15) Larrán, M. and Giner, B., (2002), "The Use of the

UK companies", The European Accounting Internet for Corporate Reporting by Spanish

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6) Debreceny, R. and Gray, G.L., (1999), “Financial Accounting Research, 2(1), 53-82.

Reporting on the Internet and the External 16) Louwers, T.J., Pasewark, W.R. and Typpo, E.W.,


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(1996), “The Internet: Changing the Way companies listed on the Istanbul Stock Exchange

Corporations Tell Their Story”, CPA Journal, (ISE).Managerial Auditing Journal, 27(1), 87-104.

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of Corporate Reporting in Europe”, European corporate annual reports and firm characteristics

Accounting Review, 8(2). in Spain. Accounting and business research,

18) Marston, C., (2003), "Financial reporting on the 25(97), 41-53.

Internet by leading Japanese companies", 28) Xiao, J. Z., Yang, H. and Chow, C. W. (2004),

Corporate Communications: An International "The Determinants and Characteristics of

Journal, 8(1), 23-34. Voluntary Internet-based Disclosures by Listed

19) Omran, M. A., & Ramdhony, D. (2016). Chinese Companies", Journal of Accounting and

Determinants of internet financial reporting in Public Policy, 23(3), 191-225.

African markets: the case of Mauritius. The 29) Xiao, Z., Sangster, A. and Dodgson, J.H., (1997),

Journal of Developing Areas, 50(4), 1-18. “The Relationship between Information

20) Oyelere, P., Laswad, F. and Fisher, R., Technology and Corporate Financial Reporting”,

(2003),"Determinants of Internet Financial Information Technology and People, 10(1), 11-30.

Reporting by New Zealand Companies", Journal

of International Financial Management and

ProceedingsAccounting, 14(1), 26-63.

1) Khan, M.N.A.A. and Ismail, N.A., (2012), 21) Pertiwi, A.D. and Hermana, B., (2013),

“Users’s Opinions about the Importance of “Comparing Internet Financial Reporting Index

Internet Financial Reporting: Evidence From between Bank and Non Bank in Indonesia”,

Malaysian Academics”, Paper provided by Journal of Internet Banking and Commerce,

Conference Master Resources in its series 18(2), 1-14.

Annual Summit on Business and 22) Prabowo, R. and Angkoso, K.S., (2006), “Factors

Entrepreneurial Studies (ASBES 2011) Influencing the Extent of Web-based Disclosure.

Proceeding with number 2012-023-162.An Empirical Analysis of Indonesian

2) Lymer, A., (1997), “The Use of the Internet for Manufacturing Firms”, Journal Akuntansi Dan

Corporate Reporting. A discussion of the Issues Keuangan, 8 (2), 92-98.

and Survey of Current Usage in the UK”, Paper 23) Raman, R., Gurdip, S., & Mahesh, J. (2003).

presented at the 21st Annual Congress of the Reporting Financial Performance Through

European Accounting Association, Antwerp, Internet: (A Case Study of Indian Corporate

Belgium.Sector). Management and Labour Studies, 28(4),

335-348.

Further reading24) Robbins, S.S. and Stylianou, A.C., (2003), “Global

1) Singh, M., (2009), “Corporate Disclosure Corporate Web Sites : An Empirical

Through Web: A Study of Selected Indian Investigation of Content and Design.

Companies”, Ph.D Dissertation, Guru Nanak Information & Management, 40(3), 205-212.

Dev University, Amritsar, Punjab, India.25) Turmin, S. Z., Hamid, F. A., & Ghazali, N. A. M.

(2016). Corporate Internet Reporting Within

Malaysian Economic Sectors. International

Journal of Economics & Management, 10(2).

26) Uyar, A. (2011). Determinants of corporate

reporting on the internet: An analysis of


76

Appendix

Distribution of Indian Companies across different Industry Groups

Sector No. of Companies

Oil and Gas 15

Metals and Mining 11

Chemicals 9

Construction Materials 5

Commercial Services 5

Capital Goods 13

Utilities 13

Automobiles 9

Pharmaceuticals 13

Telecom Services 6

Transport Services 5

Banking 31

Other Financial Services 21

Consumer Products 16

Food and Beverages 5

Information Technology 6

Total 183


77

Advocates/ Legal Experts' Perspective on Effectiveness, Opportunities and Threats of Consumer Grievances Redressal Agencies

1Dr. Ishwar Mittal

2Dr. Ravi Kumar Gupta

1. Assistant Professor, Institute of Management Studies and Research, Maharshi Dayanand University, Rohtak, [email protected]

2. Professor, Department of Management Studies, Maharaja Agrasen Institute of Technology, Delhi, [email protected]

Abstract

This paper looks into the perception of advocates/ legal experts towards consumer dispute redressal procedure effectiveness

under Consumer Protection Act. It also examines the underlying opportuinities and threats affecting the functioning of

Consumer forum. Consumer Protection Act has not made the compulsion of engaging advocates in consumer forum. Yet, they

are the important functionaries in consumer grievances redressal mechanism. Descriptive research design was adopted for the

study. The sampling unit was advocates/ legal experts who plead at Consumer Disputes Redressal Agencies. Convenience cum

purposive sampling was adopted for selecting respondents. The sample size was 50 respondents. A questionnaire was prepared

for primary data collection. Various statistical tools and techniques viz. average, ratio, standard deviation, percentage, one

sample t-test, Chi Square Goodness of Fit Test, Multi Dimensional Scaling (MDS) and Factor analysis using Principal

Component Analysis used to analyze the data. Consumer cases were randomly dealt by the existing advocates. It was concluded

by advocates' opinion that consumer forums were sufficiently effective in providing justice to consumers. Advocates viewed

that consumer forums are easily accessible, provides hassle- free disputes redressal. It was explored that effectiveness of dispute

redressal procedure at consumer forums was largely influenced by five factors viz. 'Fair Judgments', 'Consumer Friendliness',

'Ease of Disputes Redressal', 'Relevancy' and 'Forum Reliability'. Traditional & innovative opportunities and dissonance &

system insufficiency threats to consumer forums were worked out. Advocates stressed upon online registration of complaints

and strong consumer movement as highly ranked innovative opportunity and traditional opportunity respectively. They

described inactive consumer organizations and lack of awareness among consumers as highly ranked dissonance and system

insufficiency threats respectively.

Keywords: Consumer Disputes Redressal Agencies, Advocates/ Legal Experts, Effectiveness of Consumer Forum,

Opportunities, Threats.

Effulgence

Vol. 16 No. 2





ISSN (O) : 2456-6675, ISSN (P) : 0972-8058

78

suggestion about consumer grievances redressal INTRODUCTIONprocedure can be better explained by the legal

experts who are active in the area of consumer onsumer Protection Act, 1986 (CPA) was meant

protection.Cto ensure that the consumers themselves argue

their cases in a friendly atmosphere but the REVIEW OF RELATED LITERATURE

experience was different. With the opposite parties,

manufacturers and service providers, hiring The study needs to understand the gap in research

advocates, consumers are forced to follow suit. hence the following significant work done on the

Frequent adjournments and long arguments in various aspects of consumer protection concering

consumer cases are there with the presence of advocates has been reviewed here.

advocates. Advocacy is done to bring the social

issues of marginalized, disadvantaged or Jain (1999) studied the appraisal of district consumer

unorganized sections of society to the person in disputes redressal forums in Haryana. He carried

authority to address issues. Advocates being the out a survey on functioning of 5 district forums of

important participants of the Consumer Grievances Haryana taking the data of 1993-1997. He suggested

Redressal Mechanism help in ensuring justice to the that frequent adjournment must be discouraged to

innocent. Consumer forums are not that effective as achieve the purpose of justice. On adjournment

they ought to be. It may be due to several reasons. issue, the policy should be not to grant adjournment

Effectiveness of consumer forums is very important for more than one time unless justified. He further

to safeguard the interests of consumers. Consumer suggested establishing consumer forums at sub

forums are meant to provide simple, speedy and division level by amending CPA for speedy disposal

inexpensive redressal. CPA provides the facility of of cases & justice at the doorstep. For de-

defending the complaint directly by self or through politicization of consumer forums, he advocated to

advocates. The mechanism under CPA is free from include one member from registered consumer

procedural bindings of the court. Under Sec 13 (3A) organizations in operation for more than 10 years.

of the CPA and the Consumer Protection Besides above, many suggestions regarding staffing,

(Amendment) Act, 2002, the authorities need to infrastructure, library, consumer awareness

decide the complaint of consumers within 3 months campaign, research etc. are also included in his

or within 5 months (in case of analysis of study.

sample).The Forums are not supposed to grant

adjournment unless sufficient cause is shown and Ali (2010) dealt with the functioning of Consumer

the reasons for grant of adjournment have to be Dispute Redressal Agencies in the two districts of

recorded in writing by the forum. There are several Goa namely North Goa and South Goa. He found

opportunities and threats exist before the consumer that redressal agencies take approximately more

forums in today’s scenario. Opportunities and than one year in disposing the complaints.

Threats analysis is a conduct to analyze external Sometimes the complaint is pending for five to six

environment of any business and non- business years before these redressal agencies. The study

organization. Computerization with CONFONET, cleared that there are three reasons for delay i.e.

availability of funds, strong consumer movement, frequent adjournment, non appearance of opposite

consumers’ non-awareness, community radio party and workload. Consumers and VCOs

stations, online registration of complaints, inactive expressed that the procedure followed by the

consumer organizations, fake complaints, consumer forums is simple as compared to that of

disobedience with the final orders of consumer the ordinary courts. VCOs in Goa was satisfied with

forum etc are some of the opportunities and threats the procedure at forums but reported that justice is

before the forums. The basic problems and


79

always delayed. Adjournments were primarily aggrieved consumers with the factors of

responsible for delay in justice. effectiveness of consumer forums was calculated and

falls in the range of moderate agreement. It was

Krishna and Suganya (2011) compared the observed that there was a huge difference in the

performance of consumer courts (State Commission views of different categories of respondents

and 30 District Forums) in Tamilnadu with the regarding the effectiveness of consumer forums. It

consumer courts (State Commission and 14 District was been inferred that difference between actual and

Forums) in Kerala from November 2009 to expected effectiveness was insignificant. At the end,

September 2010. The study revealed that consumer it was concluded that efficiency of the consumer

courts in Kerala were functioning more effectively forums was moderate, that is why these forums were

than in Tamil Nadu. Apart from statistics, there were not as effective as they supposed to be and needed to

other factors, which influenced the effectiveness of be improved for providing speedy and less

consumer courts such as consumers’ awareness expensive justice.

level, their attitude and behavior, funds availability,

support of state government concerned etc. Misra, Chadah and Pathania (2013) sought to assess

Consumer courts termed like double edged swords the impact and effectiveness of CPA. The study

with government and consumers on either side. covered 5 states, 10 districts, and 50 villages. For 41.9

Neither the government, nor the consumers can be percent respondents, the source of information about

individually blamed for any cause and benefit. the CPA was family and friends. Media as a source

was indicated by 71.5 percent, lawyers by 13.2

Kumar (2011) carried an empirical study on percent. For 29 percent respondents, VCOs were the

complainants to consumer forum in the Haryana. source of information about the CP Act. There was a

The study concluded that the 75% complainants broad consensus among the various stakeholders

lodged their complaints by engaging advocates. that the delay in disposal of cases was largely due to

Complainants considered the complex and technical the involvement and appearance of lawyers in all

procedure as the most important factor for the slow cases. Because of this the proceedings have become

disposal of cases in district forums and a very high too technical, cumbersome, and expensive as slowly

percentage of respondents were in the grips of the procedures of the civil court have crept in the

advocates regarding lodging of complaint in district proceedings of the district forums. It also revealed

forum. It was clear from the analysis that in the that 61.4 percent of the respondents would again file

opinion of complainants that the accommodation of a complaint if the need be. Majority of the

the district forum was sufficient for their efficient respondents believed that the Forums/

working. It was found that one third of the Commissions decide the cases only on merit.

complainants would not like to file their complaints

in the district forums, in case they are exploited in Siddamma (2013) focused on the redressal

future. It was exhibited from the research that the mechanism established under CPA and problems

procedure of filing the complaints in the forums was faced by the governments in establishing this

too technical, expensive and complex. mechanism in the Bellary district of Karnataka. The

research concluded that majority of the complainants

Singh (2012) studied the effectiveness of consumer and advocates were satisfied with the functioning of

forum and its Impact on corporate and consumers in the forums and the forums were working efficiently

U.P. region. He found that a huge backlog of in protecting the interests of the consumers. These

pending cases was great cause of concern for both forums were suitable and relevant in today’s

the Forums and pending cases seemed to have economic environment. These forums provided

increasing every year. Collective agreement of hassle free redressal of consumers’ grievances. The


80

justice was reported to be always delayed at these to deal with of unfair trade practices, the author

forums. presented the challenges being faced in India in

relation to such practices. The author emphasized on

Sinha, Gupta & Mittal (2015a) analyzed the attitude the need for amendment in the current institutional

and perception of opposite parties towards set-up of the country. Consumer Protection Act, 1986

consumer grievances redressal under Consumer can be successful if lacunae in the act are removed. It

Protection Act in Haryana. It was found that services needs effective implementation by the central and

of advocates were availed by most of the defendants. state government.

Defendants favoured the appointment of advocates

at consumer forums. They justified it as advocates It is evident from above literature that no

can represent the cases in more efficient and effective comprehensive study was undertaken in recent past

manner. Further the procedure complexities and on the opinion of advocates/ legal experts with

technicalities at consumer forums can be better respect to consumer grievances redressal mechanism

handled by advocates. Defendants were found in Haryana.

satisfied with the procedure adopted for settling

OBJECTIVES complaints at consumer forums.

• To assess the perception of advocates/ legal Sinha, Gupta & Mittal (2015b) revealed that even

experts towards consumer dispute redressal consumers hired the advocates to file cases at

procedure effectiveness under Consumer consumer forums but they did not desire to engage

Protection Act in Haryana.advocates. It was observed that consumers opposed

• To analyze the underlying opportuinities and the engagement of advocates because they demand

threats affecting the functioning of Consumer heavy fees and unnecessarily delay the proceedings

Disputes Redressal Agencies.of consumer forums by taking adjournments. Some

consumers defended the appointment of advocates

RESEARCH METHODOLOGYbecause they felt that advocates can defend the case

effectively more importantly, because the opposite

Considering to above objectives, descriptive research party always engages the advocates. The logic

design was adopted for the study. The unit of seemed to be justified as a normal consumer is not

sample for these objectives was advocates/ legal that capable to argue against the seasoned lawyers.

experts who plead at Consumer Disputes Redressal

Agencies. Consumer Protection Act has not made Datt, Bhisham (2017) made a study on the base of

the compulsion of engaging advocates in consumer secondary data to review the effectiveness of

forum. Yet, they are the important functionaries in Consumer Protection Act, 1986. The author insisted

consumer grievances redressal mechanism. A on to make some new provisions to improve the

questionnaire was prepared on the basis of study of effectiveness of Act. The number of dispute

Singh (2012). The modifications were made in settlement bodies also should be increased. There

questionnaire form the study of Jain (1999). Ten should be more transparent method to file complaint

advocates each from the ten randomly selected and proceeding of judgment. The most important

districts of Haryana were taken and total 100 conclusion is lack of timely justice. Timely relief is

questionnaires were mailed. The districts chosen the key of justice.

were Bhiwani, Gurgaon, Hissar, Jhajjar, Karnal,

Mahendergarh, Panipat, Rewari, Rohtak and Sandhu, Amandeep Kaur (2017) studied the cases of

Sonipat. Only 8 responses were received through unfair trade practices. After analyzing the Indian

mailed questionnaires. Then, 42 advocates of and global the social, economic and legal framework


81

S. No. Statement 1 2 3 4 5 Total WMS %WMS Agree-

ableness

1

Consumer Forum provides

time bound & speedy

redressal.

1

(2)

2

(4)

2

(4)

12

(24)

33

(66)

50

(100) 1.52 13 S.D.

2


inexpensive redressal. (Only

Nominal Fees)

17

(34)

31

(62)

2

(4) --- ---

50

(100) 4.3 83 S.A.

Bhiwani (18), Panipat (14) and Rohtak (10) were than ten years of experience and 52 percent

personally contacted. Considering the opinion of the advocates were having more than ten years of

experts in related field and reference of pevious experience. The basic reason for choosing these

studies, a sample size of 50 advocates/ legal experts categories was to randomize the findings with

was decided to be optimum for this study. experienced advocates and young advocates. Most

Convenience cum purposive sampling was adopted of the male advocates were found to be active in

for selecting respondents. Ten advocates each from taking up the cases of consumer forums. 88 percent

the ten randomly selected districts of Haryana were of the current sample was found to be male

taken and total 100 questionnaires were mailed. The advocates while only 12 percent female advocates

districts chosen were Bhiwani, Gurgaon, Hissar, recorded their opinion.

Jhajjar, Karnal, Mahendergarh, Panipat, Rewari,

Rohtak and Sonipat. Only 8 responses were received Data collection was targeted for the advocates who

through mailed questionnaires. Then, 42 advocates have taken up the cases of consumer exploitation

of Bhiwani (18), Panipat (14) and Rohtak (10) were and pleaded at consumer forums. Few advocates/

personally contacted. The data were coded, legal experts who were having expertise in consumer

tabulated and analyzed by using various statistical matters have also been consulted to get better

tools and techniques viz. average, ratio, standard responses. 94 percent respondents were found to be

deviation, percentage, one sample t-test, Chi Square taking up the cases of consumer exploitation. On the

Goodness of Fit Test, Multi Dimensional Scaling basis of purposive sampling, 6 percent respondents

(MDS) and Factor analysis using Principal were also the experts of consumer related matters

Component Analysis. but did not directly deals with the consumer

exploitation cases at consumer forums.

DATA ANALYSIS AND INTERPRETATION

Agreeableness with Dispute Redressal Procedure

Profile of the Respondents Effectiveness Related Factors of Consumer Forums

The profile of the total sample of 50 respondents was Fourteen factors were selected for analyzing the

analyzed in terms of work experience and gender. underlying dimensions of dispute redressal

Advocates were categorised on the basis of their procedure given under section 12 and 13 of CPA.

experiences in their profession. One category was of The responses were recorded on the Likert’s five

advocates who were having less than ten years of point scale running from ‘Strongly Agree’ to ‘Agree’,

experience and another having more than ten years ‘Neither Agree nor Disagree’, ‘Disagree’ and

experience. 48 percent advocates were having less ‘Strongly Disagree’ and presented in the Table 1.


82

Table 1 : Agreeableness of Advocates with dispute redressal procedure effectiveness related factors of

Consumer Forum

(1- Strongly Agree) (2- Agree) (3- Neither Agree nor Disagree) (4. Disagree) (5- Strongly Disagree)


83

Source: Primary Data; Figures in parentheses indicates percentage; S. D.= Standard deviation

WMS= Weighted Mean Scores

3 Consumer Forum provides

hassle- free disputes redressal.

1

(2)

25

(50)

7

(14)

15

(30)

2

(4)

50

(100) 3.56 64 A.

4

Dispute redressal under

Consumer Forum is

compensatory in nature.

23

(46)

27

(54) --- --- ---

50

(100) 4.46 87 S.A.

5 Consumer Forum is easily

accessible to all.

6

(12)

24

(48)

15

(30)

5

(10) ---

50

(100) 3.74 69 A.

6

Dispute Redressal Procedure

in Consumer Forum is fully

transparent.

8

(16)

24

(48)

14

(28)

4

(8) ---

50

(100) 3.72 68 A.

7 Processing of complaints is

technically very efficient. ---

32

(64)

9

(18)

9

(18) ---

50

(100) 3.46 62 A.

8

Consumer Forum acts very

strongly against frivolous and

vexatious complaints.

1

(2)

6

(12)

8

(16)

17

(34)

18

(36)

50

(100) 2.1 28 D.

9 Proceedings under Consumer

Forum are regular.

6

(12)

35

(70)

1

(2)

8

(16) ---

50

(100) 3.78 70 A.


consensus judgment.

1

(2)

34

(68)

13

(26)

1

(2)

1

(2)

50

(100) 3.66 67 A.

11 Consumer Forum maintains

full accuracy in judgments.

1

(2)

31

(62)

13

(26)

4

(8)

1

(2)

50

(100) 3.54 64 A.


fully impartial judgments.

1

(2)

29

(58)

16

(32)

3

(6)

1

(2)

50

(100) 3.52 63 A.

13 Execution of final orders is

very strong.

6

(12)

32

(64)

4

(8)

6

(12)

2

(4)

50

(100) 3.68 67 A.

14

This Agency is relevant

considering today’s business

environment.

26

(52)

22

(44)

2

(4) --- ---

50

(100) 4.48 87 S.A.

Collective Agreement (%) 14.0 50.57 15.14 12.0 8.29 3.54 63.42 A.

After working out weighted mean scores (WMS) for For interpreting WMS percentage values, a rating

each statement, each weighted mean score was scale was used, according to which WMS percentage

converted into weighted mean score percentage value:-

value, so as to obtain an easily comprehensible • The %WMS score up to 20% was considered as

picture of the agreement level for the contents of that strongly disagreed (S.D.) meaning thereby

particular statement among the advocates. Each ‘consumer forum is ineffective’.

weighted mean score was converted into weighted • The %WMS score from 20.25% to 40% was

mean percentage score through following considered as disagree (D.) meaning thereby

computation; ‘consumer forum is less effective’.

• The %WMS score from 40.25% to 60% was

considered as neither agree nor disagree

(N.A.D.) meaning thereby ‘consumer forum is

moderately effective’.

WMS (%) =Weighted Mean Score – Lowest Point of the Score Range

Highest – Lowest Point of the Score Range

X 100


84

• The %WMS score from 60.25% to 80% was statements i.e. they have opined the procedure at

considered as agree (A.) meaning thereby forums as ineffective. Collective mean score (2.5),

‘consumer forum is sufficiently effective’. collective weighted mean score (3.54), collective

• The %WMS score above 80% was considered as percentage of weighted mean score (63.42%) of all

strongly agree (S.A.) assuming that ‘consumer statements also describes that dispute redressal

forum is highly effective’. procedure of consumer forums is not strongly

effective but it is sufficiently effective.

Table 1 shows the collective agreement/

disagreement with the factors at different scales in The respondents were strongly disagreed on one

last row. It reflects that only 14.0% advocates have factor and rated forums as ‘ineffective’ on basis of

expressed strong agreement with all the factors of that factor namely, (1) Consumer Forum provides

effectiveness. Accordingly, dispute redressal time bound & speedy redressal. They were

procedure at Consumer Forums is very efficient and disagreed on one factor and rated forums as ‘less

effective. A significant number of advocates (50.57%) effective’ i.e. (8) Consumer Forum acts very strongly

expressed merely agreement with said statements against frivolous and vexatious complaints.

concluding thereby that consumer forums are

sufficiently effective. A substantial number (15.14%) The respondents were agreed upon nine factors

of them revealed neither agreement nor about consumer forums (see Table 1), accordingly

disagreement concluding thereby that consumer rated forums as ‘sufficiently effective’ on basis of

forums are indifferent or moderately effective. 12.0% that factors. The respondents were strongly agreed

advocates went with just disagreement with the about three factors of consumer forums (see Table 1)

stated factors. It can be described as consumer and termed theses forums as highly effective on the

forums are less effective. Rests of them (8.29%) basis of these factors.

expressed strong disagreement with these fourteen

Table 2 : Descriptive statistics of dispute redressal procedure effectiveness related factors of Consumer

Forum

Descriptive Statistics One-Sample Test (95%

Confidence level)

S. No. Statement Mean S.D. (Ã) t- value Sig. (2-tailed)

1 Consumer Forum provides time bound & speedy

redressal. 4.48 .909 11.514 .000

8 Consumer Forum acts very strongly against frivolous

and vexatious complaints. 3.90 1.093 5.824 .000

3 Consumer Forum provides hassle- free disputes

redressal. 2.84 1.017 -1.112 .272

7 Processing of complaints is technically very efficient. 2.54 .788 -4.128 .000

12 Consumer Forum provides fully impartial judgments. 2.48 .735 -5.002 .000

11 Consumer Forum maintains full accuracy in judgments. 2.46 .762 -5.014 .000

5 Consumer Forum is easily accessible to all. 2.38 .830 -5.280 .000

10 Consumer Forum provides consensus judgment. 2.34 .658 -7.092 .000

13 Execution of final orders is very strong. 2.32 .978 -4.916 .000


85

6 Dispute Redressal Procedure in Consumer Forum is

fully transparent. 2.28 .834 -6.105 .000

9 Proceedings under Consumer Forum are regular. 2.22 .864 -6.383 .000

2 Consumer Forum provides inexpensive redressal.

(Only Nominal Fees) 1.70 .544 -16.898 .000

4 Dispute redressal under Consumer Forum is

compensatory in nature. 1.54 .503 -20.506 .000

14 This Agency is relevant considering today’s business

environment. 1.52 .580 -18.045 .000

Source: Researcher’s Compilation; S. D.= Standard deviation; towards that statement

Mean score < 3 indicates Agreement

Table 2 presents the mean values of various strongly disagreed by the advocates.

statements asked to get the opinion regarding

dispute redressal procedure effectiveness of To analyse the statistical significance of the

consumer forums. statements, one sample t-test was applied. To decide

whether the statement is statistically significant, the

The top 4 statements in Table 2 having mean value decision rule is t ≥ 1.960 or t ≤ -1.960 at 5% level of

more than 2.5 are not agreed upon by advocates significance. From the Table 2, it was found that only

while other statements having mean score less than one statement having t-value -1.112 is not

2.5 indicate that these were agreed or strongly statistically significant and rest 13 statements are

agreed by advocates. ‘This Agency is relevant statistically significant. The mean value of this

considering today’s business environment’ is most statement indicates that the advocates have

strongly agreed factor while Consumer Forum indifferent opinion regarding this statement.

provides time bound & speedy redressal is most

Table 3 : Chi square Goodness of Fit statistics

Chi Square Value df p-value

Table Value Calculated Value 13 .000

22.362 122.029

Chi Square Goodness of fit statistics is intended to case the null hypothesis is rejected and it can be

test whether the observed data are inconsistent with concluded that the observed data were inconsistent

the fitted model. After assigning the weights to all 5 with the estimated values in the fitted model since

ranks, results shown in the Table 3 are obtained. the p was significant, since p < 0.05. It can be

concluded that there are statistically significant

Ho= All the fourteen statements are consistent for differences in above fourteen statements and these

measuring effectiveness of dispute redressal are not equally important for measuring

procedure at consumer forums. effectiveness of dispute redressal procedure at

consumer forums. Conclusion may be drawn from

The tabulated value of chi square at 13 degree of the analysis that fourteenth statement (This Agency

freedom and at 5% level of significance is 22.362 and is relevant considering today’s business

the calculated value of chi square is 122.029. In this environment) was strongly agreed and most


86

important and first statement (Consumer Forum and may be interpreted as the reliability of the

provides time bound & speedy redressal) was indicator. PCA works on the initial assumption that

considered least important and strongly disagreed all variance is common; therefore, before extraction,

(see Table 2). all the initial communalities are 1. The extracted

communalities reflect the common variance or

Integration of Different Statements of dispute shared variance. If the communality for a variable is

Redressal Procedure Effectiveness into Specific less than 50% than that variable needs to be excluded

Dimensions (Factor Analysis) from the analysis because the factor solution less

than half of the variance in the original variable, and

In order to identify the latent dimensions of dispute the explanatory power of that variable might be

redressal procedure effectiveness, Principal better represented by the individual variable. In

component analysis (PCA) has been carried out current analysis, communalities for all variables

among 14 statements included as above. PCA is a were above 0.50, so none of the variables needed to

multivariate technique for transforming a set of be excluded on the basis of low communalities (see

related (correlated) variables into a set of unrelated Table 4).

(uncorrelated) variables that account for decreasing

proportions of the variation of the original One of the most commonly used criteria for

observations. As prerequisites, Kaiser–Meyer–Olkin determining the number of factors or components to

(KMO) and Bartlett's Test of Sphericity have been include is the latent root criterion also known as the

employed. KMO measure verified the sampling Eigen value one criterion or the Kaiser criterion.

adequacy for the analysis and Bartlett’s test of With this approach, one can retain and interpret any

Sphericity checked the intercorrelation among the component that has an Eigen value greater than 1.0.

statements. The value of KMO Measure of Sampling The latent root criterion was shown to produce the

Adequacy came out to be .668 (‘mediocre’ according correct number of components when the number of

to Field, 2009) which is greater than 0.5 revealing variables included in the analysis is small (10 to 15)

that the factor analysis applied to the scale is (Stevens, 1996; page 366). Alternatively, on the basis

appropriate (Malhotra, 2006). The value of Bartlett’s of proportion of variance accounted for, one can

test of Sphericity χ² (91) = 286.81, p < .001 (Field, retain enough components to explain some

2009), indicates that intercorrelation between scale cumulative total percent of variance, usually 70% to

variables is sufficiently large for PCA. 80%. In this study, five components were identified

which supports the above criteria. Nearly 74% of the

To measure the effectiveness and reliability of scale, variance is explained by the five extracted

Cronbach’s Alpha coefficient was used. The value of components. And initial and final Eigen values for

Cronbach’s Alpha was found to be .785 which is well these five components were found to be more than 1

above the recommended level of .70 (Nunnaly, 1978; (see Table 4). All other components had the Eigen

Gerrard, et al., 2006; Kenova & Jonasson, 2006), values less than 1.

indicating high reliability of the generated scale.

Then, PCA was conducted on the 14 statements with Table 4 shows the factor loadings after rotation. The

Varimax Rotation method. principal component analysis resulted in a five-

factor extraction which indicates five underlying

The value of communalities before and after dimensions/ factors of consumer forums which can

extraction was checked under PCA method. The be generalized as mentioned in Table 4.

communality is the proportion of common variance

within a variable. It measures the percent of variance

in a given variable explained by all the factors jointly


87

aTable 4 : Rotated component matrix

Factor Names

S. No. Statements

Factor Loading

Communa

lities

Eigen value* Variance

Explained

WMS

Fair

Judgments

12


fully impartial judgments.

0.90

.836

2.602

18.582

3.60

(65.0%)

11

Consumer Forum maintains full accuracy in judgments.

0.82

.848

10


consensus judgment.

0.62

.641

13 Execution of final orders is

very strong. 0.56

.542

Consumer

Friendliness

8

Consumer Forum acts very

strongly against frivolous and vexatious complaints.

0.79

.654

2.506

17.900 2.45

(36.25%)1


time bound & speedy redressal.

0.76 .668

5 Consumer Forum is easily

accessible to all. 0.71 .764

Ease of

Disputes Redressal

7 Processing of complaints is

technically very efficient. 0.87 .803

2.173 15.522 3.83

(70.75%)

4 Dispute redressal under

Consumer Forum is

compensatory in nature.

0.74 .644

3


hassle- free disputes

redressal.

0.64

.829

Relevancy

14

This Agency is relevant

considering today’s business environment.

0.82

.809

1.538

10.983

4.39

(84.75%)

2


inexpensive redressal. (Only Nominal Fees)

0.72

.743

Forum

Reliability

9

Proceedings under

Consumer Forum are regular.

0.79

.780

1.499

10.710

3.75

(68.75%)

6 Dispute Redressal Procedure in Consumer Forum is fully

transparent.

0.62 .756

Factor 1- Fair Judgments: The rotated component Factor 2- Consumer Friendliness: It revealed to be

matrix revealed that advocates perceived this factor the second most important factor with explained

to be the most important factor with the highest variance of 17.900%. Three statements were loaded

explained variance of 18.582%. Four out of fourteen on to this factor. Weighted mean score (2.45) and

statements about consumer forums load on percentage of this factor (36.25%) indicates that this

significantly to this factor. Hence it can be concluded factor is disagreed upon by advocates and described

that Fair Judgments at the consumer forums is the that consumer forums are less effective.

most crucial factor considered by advocates.

Weighted mean score (3.60) and percentage of this Factor 3- Ease of Disputes Redressal: This is the

factor (65.0%) indicates that this factor is agreed next important factor, which accounts for 15.522% of

upon by advocates and described that consumer the explained variance. Three statements were

forums are sufficiently effective. loaded on to this factor. Weighted mean score (3.83)


88

and percentage of this factor (70.75%) indicates that subscales had relatively low reliability with

this factor is agreed upon by advocates and Cronbach’s α = .503 and α = .565 respectively.

described that consumer forums are sufficiently

Opportunities/ Threats Analysis of Consumer effective.

Forum

Factor 4- Relevancy: This factor accounts for 10.983%

Opportunities and threats are considered to be of explained variance. Two statements load on this

positive and negative factors in external factor among fourteen statements. Weighted mean

environment. Although Consumer Forum is not a score (4.39) and percentage of this factor (84.75%)

profit making organization, but there are external indicates that this factor is strongly agreed upon by

factors which affect the functioning of Consumer advocates and described that consumer forums are

Disputes Redressal Agencies (CDRA) to a great highly effective with this factor.

extent. It is the need of the hour to have this analysis

as the key for longer and effective existence of Factor 5- Forum Reliability: Two types of statements

CDRAs. Six factors each of opportunities and threats load on this factor and together account for 10.710%

are drawn based on policy documents, websites and of the explained variance. Weighted mean score

other published material along with consultation (3.75) and percentage of this factor (68.75%) indicates

with some experts of consumer laws. The that this factor is agreed upon by advocates and

respondents ranked these factors as per their described that consumer forums are sufficiently

experience with the functioning of CDRAs. First effective.

rank was given highest weight and last rank was

given lowest weight. Reliability analysis (see Table 4) was used to

measure the consistency of a questionnaire. The Fair Opportunities to Consumer Forumjudgments, consumer friendliness and ease of

disputes redressal subscales of the dispute redressal The rankwise identified opportunities are tabulated procedure scale variables had high reliabilities with in the Table 5.Cronbach’s α = .756; α = .707 and α =.701

respectively. However, the relevancy and reliability

Table 5 : Opportunities to Consumer Forum

S. No. Opportunities 1 2 3 4 5 6 Total WS WMS Rank

1 Establishment of CONFONET 23 5 2 4 6 10 50 205 4.10 2

2 Available of frequent and more grants 2 14 12 13 1 8 50 179 3.58 4

3 Strong consumer movement in the

country 10 12 16 7 3 2 50 213 4.26 1

4 Community radio stations 0 0 5 5 14 26 50 89 1.78 6

5 Online registration of complaints 11 11 8 2 16 2 50 193 3.86 3

6 Establishment of consumer protection

councils 4 10 7 17 10 2 50 175 3.50 5

Source: Primary Data; Rank 1: Most Important; Rank 6: Least Important

WS= Weighted Scores; WMS= Weighted Mean Scores


89

Rank 4: Available of frequent and more grants: The opportunities stated in Table 5 are explained

Availability of frequent and more grants by below as per rank given by respondents:

Governments were ranked at number four. New

Rank 1: Strong consumer movement in the country: grant was released from time to time by

Strong consumer movement through consumer governments. This grant was provided for

rights and awareness promotional campaigns was establishing adequate infrastructure and

termed as the biggest opportunity for the Consumer computerizing consumer forums, to make them

Forums. The Department of Consumer Affairs has technically efficient and effective. Implementation of

been taking a number of steps to strengthen released grants will ensure speedy, inexpensive and

consumer movement in the country involving the effective redressal to the consumers.

State Governments, voluntary consumer

Rank 5: Establishment of Consumer Protection organizations, consumer activists, etc. Consumers

Councils: Consumer protection councils were being Awareness measures such as JAGO GRAHAK

established at the district level under the Act to JAGO, SYANI RANI, GRAHAK DOST, Talk Show,

support Consumer Forum in protecting aggrieved Quarterly Magazine ‘UPBHOKTA JAGRAN’, Radio

consumers from malpractices and negligent behavior and video spots, News Paper Advertisements etc.

of sellers. Co-ordination between forums and has become immensely popular and is now being

councils will help in achieving objectives set under used by several departments to aware and

the Act namely, speedy, less expensive and hassle-communicate with consumers.

free justice. This opportunity was ranked at number

Rank 2: Establishment of CONFONET: five. In Haryana, not much consumer protection

Establishment of CONFONET was ranked second councils were formed till now at district level.

best opportunity for Consumer Forums.

CONFONET is an abbreviation of Computerization Rank 6: Community Radio stations: Community

and Computer Networking of Consumer Forum in radio is a radio service offering a third model of

Country. This network is designed to improve radio broadcasting in addition to commercial and

operational efficiency, co-ordination, accessibility public broadcasting. A Community Radio serves a

and speed in judicial administration. Furthermore, particular community, in accordance with the

CONFONET also aims establishment of information locality of the radio station. India's first community

communication technology infrastructure at radio based consumer helpline was launched at

Consumer Redressal Forum all over India. In Nuh, Mewat, Haryana on January 15, 2014. This

addition to this, this network aims at providing e- helpline would be managed by Mewat based

governance, transparency, systematizing of working community radio station ‘Radio Mewat’.

and time bound delivery of justice to the consumers. Community radio was assigned as the least popular

opportunity by advocates.

Rank 3: Online registration of complaints: Online

registration of complaints was described as third Table 6 presents the mean values of various

best opportunity. Online registration of complaints opportunities to consumer forums asked to rank

at district level will reduce paper work and storage according to their importance by the advocates. The

of complaint files, which occupy major space of top four opportunities having mean value more than

Consumer Forums and this process will also be 3 were described as not so important by respondents

helpful in providing speedy, less-expensive and while other two opportunities having mean score

simple redressal to aggrieved consumers. less than 3 indicate that these were important

opportunities. ‘Strong consumer movement in the

country’ is most important opportunity while


90

‘Community radio stations’ is least important opportunity described by advocates.

Table 6 : Descriptive statistics of opportunities to Consumer Forum

Descriptive Statistics

One-Sample Test (95%

Confidence level)

S. No. Opportunities Mean Std. Deviation t- value Sig. (2-tailed)

4 Community radio stations 5.22 .996 15.765 .000

6 Establishment of consumer protection councils 3.50 1.344 2.631 .011

2 Available of frequent and more grants 3.42 1.444 2.057 .045

5 Online registration of complaints 3.14 1.678 .590 .558

1 Establishment of CONFONET 2.90 2.092 -.338 .737

3 Strong consumer movement in the country 2.74 1.322 -1.391 .171

Source: Researcher’s Compilation; Mean score < 3.0 indicates highly ranked opportunities

To check the statistical significance of the stated

opportunities, one sample t-test was applied. To A two dimensional map was selected as the output

decide whether the opportunity is statistically for ease of use. Assessment of reliability and validity

significant, the decision rule is t ≥ 1.960 or t ≤ -1.960 was carried out by examining the Stress value and R-

at 5% level of significance. From the Table 6, it is square. The stress value was found to be 0.0067

found that three opportunities having t-values .590, - which is acceptable (Stress value less than .025

.338 & -1.391 respectively, are not statistically indicates a perfect fit; Malhotra & Dash, 2011). The

significant and rest 3 opportunities are statistically value of R-square was found to be 0.999 which is

significant. The mean values (3.14, 2.90 & 2.74) of again acceptable (R-Square values of 0.60 or better

these non significant opportunities indicate that the are considered acceptable; Malhotra & Dash, 2011).

respondents have indifferent attitude towards these This illustrates that 99.9% of variance in the model is

opportunities. explained by the two dimensions (very good fit).

Since the Stress and R-square values were

Multidimensional Scaling (MDS) for Opportunities acceptable, the study can be termed as reliable and

to Consumer Forum valid.

Multidimensional scaling is a mapping technique by Fig. 1 is the SPSS output of multidimensional scaling.

which researchers can obtain quantitative estimates Stress Value (Badness of fit): Stress value

of similarity among groups of items. The outcome of obtained=0.0067, Stress value needed= 0 to <0.025 is

MDS is a ‘map’ that conveys, spatially, the perfect (Malhotra & Dash, 2011).

relationships among items, wherein similar items are Squared Correlation Coefficient (Goodness of Fit):

located proximal to one another, and dissimilar R square obtained= 0.999, R square needed= 0.6 or

items are located proportionately further apart. more (Malhotra & Dash 2011).

Multi dimensional scaling was used here for finding

out the positioning of various opportunities to The spatial map in Fig. 1 was analyzed by examining

consumer forums taken up for this study. The the relative positions of the opportunities in different

statistical output was the Euclidean map; where in quadrants and the opportunities were categorized as

advocates’ perceptions were visually represented. under:


91

Vertical axis at the top is categorized as High Horizontal axis on the right is labeled as Traditional.

Ranked. High ranked were perceived as Usually, these opportunities were found to be

opportunities which was given the more weight by popular and contemporary. These opportunities

advocates. were practiced for long time.

Vertical axis at the bottom is named as Low Ranked. Online registration of complaints was marked as

It describes the opportunities which were given the high ranked innovative opportunity for the

less weight by advocates. consumer forums while Community radio stations

was low ranked innovative opportunity. Strong

Horizontal axis on the left side is marked as consumer movement in the country was assigned as

Innovative. These were perceived as modern high ranked traditional opportunity while

opportunities which were not much prevalent at the establishment of CONFONET was described as low

time of data collection. ranked traditional opportunity by advocates.

Establishment of consumer protection councils &

available of frequent and more grants could not be

perceived by advocates with any particular

dimension(s). These opportunities with their

positions in middle of map indicate that consumer

forums must regularly check with these

opportunities for consistent performance.

Threats to Consumer Forum

All the consumer forums are bound to work under

certain macro unfavorable conditions, known as

threats. The rankwise identified threats are tabulated

in the Table 6.

Multi Dimensional Scaling

Opportunities to Consumer Forums

Innovative Traditional

1

3

4

6

5

2

Fig. 1: Perceptual mapping of opportunities to Consumer Forum

Low

Ran

ked

Hig

h R

ank

ed

Table 6 : Threats to Consumer Forum

S. No. Threats 1 2 3 4 5 6 Total WS WMS Rank

1 Reluctance of advocates 8 7 2 9 4 20 50 146 2.92 5

2 Filing of frequent fake complaints 2 4 13 14 13 4 50 156 3.12 4

3 Limited funds 2 14 12 10 9 3 50 181 3.62 3

4 Lack of Awareness among consumers 27 10 4 3 2 4 50 245 4.90 1

5 Consumer Organizations are not active 10 12 13 6 7 2 50 206 4.12 2

6 Disobedience with the final orders of consumer forum

1 3 5 8 16 17 50 114 2.28 6

Source: Primary Data; Rank 1: Most Important; Rank 6: Least Important

WS= Weighted Scores; WMS= Weighted Mean Scores

The threats stated in Table 6 are explained below as Rank 1: Lack of awareness among consumers: Lack

per rank given by respondents: of awareness among consumers was the most

prominent threat to consumer forums by advocates.


92

It revealed from many studies that most of the by advocates and to discourage this habit of filing

general consumers were not aware about Consumer fake claims, intensity of fine or punishment need to

Dispute Redressal Agencies established under CPA. be increased.

Moreover, awareness in rural areas was lesser than

urban areas. Although, Government of India has Rank 5: Reluctance of Advocates: Reluctance from

launched many awareness campaigns but still these advocate’s side was cited as another threat that

campaigns are not very successful and need to be could unnecessarily delay the proceeding of

promoted further. consumer forums and this threat was ranked at fifth

place. The finding reaffirms the findings of Singh

Rank 2: Consumer Organizations are not active: It (2012). Although, Consumer forums never asks the

was ranked as second most important threat by consumers to hire services of advocates, but due to

advocates. VCOs form the backbone of consumer advocates hired by opposite party, complainant has

movement. In Haryana, VCOs are not found to be to take services of them because a common man

very active. Consumers are not aware about these cannot argue with advocate in technicalities. Once

organizations in their areas and do not take much the case goes to advocates, they keep it delaying as

help from them for the cases of their exploitation. In long as their interests are served. To deal with this

absence of these VCOs, the seller may not take care practice, some VCOs should be included to expedite

of the consumer rights and keep exploiting them. proceeding for speedy redressal.

Rank 6: Disobedience with the final orders of Rank 3: Limited funds: Limited funds were

Consumer Forum: Non-compliance with the final provided by governments for Consumer disputes

orders consumer forums was the sixth and last redressal agencies agencies. Due to limited funds,

ranked threat for consumer forums. The finding is in they have not got permanent judicial staff and

contrast with the findings of Singh (2012) where this facilities like full time courts. More funds need to be

factor has got the first rank. This habit is prevalent diverted to these agencies to improve facilities and

among big companies who as opponents fail to provision need to be made to appoint the full time

comply with the final orders of consumer forums if judicial staff. Advocates ranked this problem at third

the judgment is made against their interests and place as threat to the functioning of consumer

deliberately keep delaying order as long as possible. disputes redressal agencies.

Consumer Forum were conferred with some judicial

powers, but huge difference seems to have surfaced Rank 4: Filing of frequent fake complaints: There

between theory and practice. Strong action need to are many instances in which consumers filed fake

be taken against defaulting parties for execution of complaints at consumer forums by misusing these

the final orders in prescribed time limits.consumer rights. Hence, filing of frequent fake

complaints was described as one of the major threat

Descriptive Statistics

One-Sample Test (95%

Confidence level)

S. No. Threats Mean Std. Deviation t- value Sig. (2-tailed)

6 Disobedience with the final orders of consumer

forum 4.72 1.310 9.285 .000

1 Reluctance of advocates 4.08 1.947 3.923 .000

Table 7 : Descriptive statistics for threats to Consumer Forum


93

2 Filing of frequent fake complaints 3.88 1.239 5.020 .000

3 Limited funds 3.38 1.338 2.008 .050

5 Consumer Organizations are not active 2.88 1.452 -.584 .562

4 Lack of Awareness among consumers 2.10 1.594 -3.992 .000

Source: Researcher’s Compilation; Mean score < 3.0 indicates highly ranked opportunities

Table 7 presents the mean values of various threats This illustrates that 99.9% of variance in the model is

to consumer forums asked to rank according to their explained by the two dimensions (very good fit).

importance by the advocates. The top four threats Since the Stress and R-square values were

having mean value more than 3 were described as acceptable, the study can be termed as reliable and

not so important by respondents while other two valid.

threats having mean score less than 3 indicate that

these were important threats. ‘Lack of Awareness Fig. 2 is the SPSS output of multidimensional scaling.

among consumers’ is most vulnerable threat while

‘Disobedience with the final orders of consumer Stress Value (Badness of fit): Stress value

forum’ is least important threat described by obtained=0.0122, Stress value needed= 0 to <0.025 is

advocates. perfect (Malhotra & Dash, 2011).

Squared Correlation Coefficient (Goodness of Fit): To check the statistical significance of the stated

R square obtained= 0.999, R square needed= 0.6 or threats, one sample t-test was applied. To decide

more (Malhotra & Dash 2011).whether the threats are statistically significant, the

decision rule is t ≥ 1.960 or t ≤ -1.960 at 5% level of

The spatial map in Fig. 2 was analyzed by examining significance. From the Table 7, it is found that only

the relative positions of the threats in different one threat having t-value -.584 is not statistically

quadrants and the threats were categorized as under:significant and rest five threats are statistically

Vertical axis at the top is categorized as Dissonance. significant. The mean value (2.88) of this non

Dissonance threats indicate the lack of agreement, significant threat indicates that the respondents have

cooperation and harmony between stakeholders of indifferent attitude towards this threat.

consumer protection and consumer disputes

Multidimensional Scaling (MDS) for Threats to redressal system.

Consumer Forum

Vertical axis at the bottom is named as System

As defined earlier, Multi dimensional scaling was Insufficiency. It describes the threats which show the

used here for finding out the positioning of various inability of the redressal system to perform

threats to consumer forums taken up for this study. efficiently due system related deficiencies.

For this, a two dimensional map was selected as the

output for ease of use. Assessment of reliability and Horizontal axis on the left side is marked as High

validity was carried out by examining the Stress Ranked. These were perceived as more important

value and R-square. The stress value was found to be potential threats by the advocates.

0.0122 which is acceptable (Stress value less than .025

indicates a perfect fit; Malhotra & Dash, 2011). The Horizontal axis on the right is labeled as Low

value of R-square was found to be 0.999 which is Ranked. These threats were given less weightage by

again acceptable (R-Square values of 0.60 or better advocates.

are considered acceptable; Malhotra & Dash, 2011).


94

2013). They strongly emphasized that consumer

forum are far behind in providing time bound &

speedy redressal (Jain, 1999; Ali, 2010; Kumar, 2011;

Misra et al., 2013). This observation was in

contradiction to Siddamma, 2013. Advocates

strongly viewed that this agency is very relevant

considering today’s business environment and

provides inexpensive redressal (Siddamma, 2013).

Consumer Forum did not act very strongly against

frivolous and vexatious complaints. The good

features reported were that these forums are easily

accessible (Contradicted to Siddamma, 2013),

Inactive consumer organizations was marked as high provides hassle- free disputes redressal (Jain, 1999;

ranked dissonance threat for the consumer forums Ali, 2010; Siddamma, 2013), fully transparent,

while filing of frequent fake complaints & technically efficient, regular in proceedings,

disobedience with the final orders of consumer consensus judgment, impartial and accuracy in

forum were low ranked dissonance threats. Lack of judgments, and strong in execution of final orders.

awareness among consumers was assigned as high The study was supported by Singh, 2012. It can be

ranked system insufficiency threat while reluctance concluded that dispute redressal procedure

of advocates was described as low ranked system effectiveness at consumer forums was largely

insufficiency threat by advocates. Limited funds influenced by ‘Fair Judgments’, ‘Consumer

could not be perceived by advocates with any Friendliness’, ‘Ease of Disputes Redressal’,

particular dimension. This threat with its positions in ‘Relevancy’ and ‘Forum Reliability’. Relevancy of

middle of map indicates that consumer forums must consumer forums makes them highly effective while

regularly check with this threat for consistent in case of consumer friendliness these were less

performance. effective. Fair Judgments, ease of disputes redressal

and forum reliability were found responsible for

CONCLUSIONS making consumer forums sufficiently effective.

This paper examined the opinion of advocates/ legal Consumer forums are not for profit making

experts towards effectiveness of consumer organizations. But in today’s environment it has its

grievances redressal procedure under Consumer own opportunities and threats. Opportunities can

Protection Act in Haryana. Most of the advocates help these forums to improve their performance in a

were found to be dealing in consumer cases along today’s environment. Perceptual mapping of

with other court cases. There were not any advocates was done. It shows that online registration

specialized legal experts of consumer matters found of complaints was marked as highly ranked

in selected respondents. This fact was also validated innovative opportunity for consumer forums. Strong

by advocates on verbal discussions with them. consumer movement in the country was termed as

Consumer cases were not on their priority as lesser highly ranked traditional opportunity while

monetary incentive is involved in these cases establishment of CONFONET was termed as low

(Krishna & Suganya, 2011). Advocates were ranked traditional opportunity (Misra et al., 2013).

examined about dispute redressal procedure Availability of frequent and more grants,

effectiveness at consumer forums. They reported establishing consumer protection councils (Misra et

that dispute redressal procedure of consumer forums al., 2013) and community radio were termed as low

is sufficiently effective (Singh, 2012; Siddamma, ranked opportunities for consumer forums. These

High Ranked

Dis

son

an

ceS

yst

em I

nsu

ffic

ien

cy

Low Ranked

Fig. 2: Perceptual mapping of threats to Consumer Forum

1

43

56

2


95

findings were opposite to the findings of Singh, 2012. University, Rohtak, Haryana, India.

Threats to consumer forums adversely affect their 6) Kenova V. and Jonasson P. 2006. Quality Online

performance or achievement of its goals. Perceptual Banking Services. Bachelor’s Thesis in Business

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Lack of awareness among consumers was assigned Jonkoping, Sweden.

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fake complaints, reluctance of advocates and Comparative Study of Consumer Courts in

disobedience with the final orders were termed as Tamilnadu & Kerala States- A Statistical Survey

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2012. Limited funds did not reported to be a great 8) Kumar, S. 2011. Functioning of District

threat to the functioning of consumer forums. Consumer Disputes Redressal Forums in

Haryana- A Study of Three Districts

Advocates provide the solutions to consumers’ (Unpublished Ph.D. Thesis). Department of

problems in more efficient way. Ignorance, illiteracy, Public Administration, Maharishi Dayanand

poor knowledge of consumers forces them to take University, Rohtak, Haryana, India.

the assistance of advocates/ legal experts. 9) Malhotra, N. K. 2006. Marketing Research- An

Advocates’ rationality, honesty with profession and Applied Orientation. New Delhi, India: Pearson

fair justice to the aggrieved consumers are most Education.

important attributes to win the faith of consumers as 10) Malhotra, N. K. and Dash, S. 2011. Marketing

complainants. Research. New Delhi, India: Pearson Education.

11) Misra, S., Chadah, S. and Pathania, M. 2013.

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