SEPTEMBER 2009

INTERDISCIPLINARY JOURNAL OF CONTEMPORARY RESEARCH IN BUSINESS VOL 1, NO 5

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September 2009

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INTERNATIONAL RESEARCH CENTRE
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Editorial Board
IJCRB is a peer reviewed Journal and IJCRB Editorial Board consists of Phd doctors from all
over the world including USA, UK, South Africa, Canada, European and Asian countries.

Lord David K
Oxford University , St Catherine's College, Oxford, OX1 3UJ ww.stcatz.ox.ac.uk/ ,
www.ox.ac.uk/
Phone: +44 1865 271700 , Fax: +44 1865 271768

Dr. Kenan Peker

Department of Agricultural Economics, University of Selcuk, http://www.selcuk.edu.tr/
University of Selcuk, 42079 Konya, Turkey, Tel: 90-332-231-2877

Dr. A. Sathiyasusuman
Senior Lecturer, Dept. of Statistics, University of the Western Cape, South Africa

Dr Mahdi Salehi
Assistant Professor, Accounting and Management Department, http://www.znu.ac.ir/
Zanjan University , D.N 1 Nagilo Alley, Hidaj City, Zanjan Province, Zanjan, Iran ,
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Regional Development Bank of West Sumatra
Jalan Pemuda No. 21 PO Box 111 Padang 25117 West Sumatra Indonesia
Tel: +62-8126771699

Dr. Dave Hinkes

Assistant Professor of Managment & Marketing
Sam Walton Fellow , Lincoln Memorial University , Harrogate, TN ,UK
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Dr. Francis A. Ikeokwu

Sr., Ph.D., MAC, MBA, CFC
Adjunct Professor, American Intercontinental University http://www.aiuniv.edu/

Dr Charles C. Dull
Sr. MBA, Ph.D.
American Intercontinental University http://www.aiuniv.edu/

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Dr Cara Peters
Assistant professor of marketing , Winthrop University , Rock Hill, South Carolina.
PhD in business administration , University of Nebraska
Peer-reviewer of the Journal of Consumer Psychology; Consumption, Markets, and Culture; and
Journal of Academy of Marketing Science.

Dr Mahmoud M. Haddad
PhD in Finance
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Department of Agricultural Economics, College of Agricultural Economics, Extension and
Management Technology, University of Agriculture, P.M.B.2373, Makurdi, Benue State,
Nigeria. Phone: +234-803-607-4434; fax: +234-44-534040

Dr.Rashid Rehman
Associate Professor , College of Business Studies
Al Ghurair University , Dubai, UAE.

Dr Ebrahim Soltani
Lecturer in Operations Management
Kent Business School University of Kent , UK

Dr Pu Xujin
Business School, Jiangnan University,
Jiangsu Wuxi,P.R.China ,214122
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Dr. E. B. J. Iheriohanma
Ph. D. Sociology
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Tel +2348037025980.

Dr Etim Frank
Departmentof Political Science-University of Uyo-Akwa Ibom State-Nigeria
Phd (Political Science/Public Administration) University of Calabar

SL Choi
University Teknologi Malaysia
School of Business Management Southern College Malaysia

Dr. Muhammad Shahbaz Shabbir

PhD , Leadership and Management ,University of Malaya KL Malaysia
Faculty of Management Sciences, IIUI

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Dr Chandan Lal Rohra

Assistant Professor,
Department of Business Administration , SALU , Khairpur(Mirs)

Muhammadi Sabra
Department of Management Sciences, CIIT

Dr. S. I. Malik
PhD Bio Chemistry & Molecular Biology (National University of Athens)
NHEERL. Envrironmental carcinigenei division
RTP Complex NC 27713
US Environmental protection Agency , 919-541-3282

Dr. Bhagaban Das

Reader, Department of Business Management
Vyasa Vihar, Balasore-756019 Orissa

T. Ramayah http://www.ramayah.com
Associate Professor , School of Management
University Sains Malaysia, Tel 604-653 3888

Dr. Wan Khairuzzaman bin Wan Ismail

Assoc. Professor International Business School, UTM International Campus
Jalan Semarak 54100 Kuala Lumpur, MALAYSIA

Zainudin Hj Awang
Faculty of Information Technology and Quantitative Sciences, MARA University Technology
MARA Kelantan 18500, Malaysia ,Tel: 60-9-9762-302

Ravi Kiran
Associate Professor, School Of Management & Social Sciiences, Thapar University.

Dr.Suguna Pathy
Head, Department of Sociology, VNSG University, Surat

Birasnav M
Assistant professor, Park Global School of Business Excellence, Kaniyur, Coimbatore

Dr. C.N. Ojogwu

Phd Education Management - University of Benin, Benin City, Edo state, Nigeria.
Senior lecturer - University of Benin.

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Dr. Nik Maheran Nik Muhammad

General Conference Co-Chair
GBSC 2009
www.nikmaheran.com

Dr Ganesh Narasimhan
Lecturer, Management Sciences ,Sathyabama University
Board of Advisor - AN IIM Alumina Initiative & International Journal Economics, Management,
& Financial Markets Denbridge press
New York, USA

UK CHAPTER: CANTERBURY , KENT , CT2 , 7PE , UNITED KINGDOM

SOUTH AFRICA CHAPTER: WESTERN CAPE , PRIVATE BAG X17, BELLVILLE 7535 , SOUTH AFRICA

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Contents
Title Page

Efficiency Of Community Banks In Nigeria: A Case Study of 8

Community Banks In Ogbomoso Zone of Oyo State, Nigeria.
Ajagbe, F.A., Aworemi, J.R. Ajetomobi, J.O

Social Security System in Nigeria 15

Muftau Adeniyi Ijaiya

A Study of the Effectiveness of IT as a Resource Based Tool 26

Deployed By Nigerian Banks
Dr. J. O. Adewoye, Dr. J.R. Aworemi, Oyedokun A. J.

An Empirical Study of SERVQUAL’S Dimensionalityof Credit 35

and Saving Products in Padang, West Sumatra-Indonesia
Dr Heryanto

Antecedents of Counter Work Behavior in Public Sector 58

Organizations. An Asian Perspective
Sajid Bashir

Portfolio Diversification and Financial Performance of Mutual 69

Funds in India
Nidhi Walia, Dr. (Mrs.) Ravi Kiran

Optimization of Design Constraining Factors to Project 87

Management Success of Public and Private Sector Construction
in Nigeria (An Analytical Approach)
Dr. C.C Nwachukwu ANIVS

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HRD roles and competencies: A comparative study of Pakistan 99

and China using ASTD model
Hassan Rasool, Fuwad Bashir, Muhammad Ismail Ramay

The Effect of Demographic and Academic Backgrounds 112

on Financial Accounting Performance
Wan Faizah Wan Abdullah. Siti Salmah Abu Bakar. Marzlin Marzuki.
Noraini Abdul Rahim. Kamaruzaman Jusoff

Influence of Institutional Pressure and Ownership Structure on 123

Corporate Social Responsibility Disclosure
Faizah Darus, Roshayani Arshad, Suaini Othman, Kamaruzaman Jusoff

The Effect of Problem-Based Learning on Students’ Teamwork 151

Ability in UiTM Trengganu, Malaysia
Noor Liza Adnan , Wan Karomiah Wan Abdullah, Kamaruzaman Jusoff

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Efficiency of Community Banks in Nigeria: A Case Study

of Community Banks in Ogbomoso Zone of
Oyo State, Nigeria.

Ajagbe, F.A., Aworemi, J.R.

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

Ajetomobi, J.O
Department of Agric Economics & Extension,
Ladoke Akintola University of Technology,
P.M.B. 4000, Ogbomoso, Nigeria.
Abstract
This paper examines the determinants of efficiency of selected Community Banks in Nigeria. All
Community Banks in Ogbomosho zone of Oyo state were included in the study and 200 loan
beneficiaries were selected for interview using stratified sampling method. Two sets structured
questionnaires were used for banks officials and customers respectively. In analyzing the data,
regression analysis was used to investigate the relationship between the following variables:
amount of loan obtain, time lag between loan application and loan disbursement, interest rate,
type of loan and type of account kept. The results show that the banks with high liquid assets will
have high earning capacity and thus, high level of efficiency.
Keywords: Community Bank, Efficiency, Ogbomosho Zone, Nigeria.

1. Introduction
The community banking system was introduced into Nigerian sector early in the 1990s
with the primary objectives of catering for the financial services (savings, mobilization and
micro-credit provision) critically needed for the promotion of the development of rural
agriculture and other small-scale business enterprises in both the rural and urban areas ( Ojo,
2001). In 1991, about 1,458 community banks were licensed by the national board for
Community Banks to operate all over the country (NBCB, 1993). However, at the end of 1997,
282 licenses have been withdrawn. Of course, the withdrawals of these licenses are not entirely
due to the fault of operators of these banks.

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Onakoya (1998), quoted by Ayodele(1998), noted that, part of the blames goes to the
federal government and part goes to the National Board of Community Banks (NBCB) which he
describes as “father and mother” oil the community Banks respectively. The NBCB’s failure to
issue share certificates to the shareholders and the activity of the government to recapitalize the
paid up capital of community banks from #250,000 to 3 million caused more disillusion.
Oduwole (1998), quoted by Ayodele(1998), in his view, attributed the decline to the
activities of owners. While some are incompetent, others used it as an avenue to raise capital for
personal projects.
Ogunbiyi (1998), quoted by Ayodele (1998), lays the blame of why some community
banks go under more on the doorstep of the so called “correspondent banks.” This view tallies
with that of Tunde (1998), quoted by Ayodele(1998), that each commercial bank that goes down
pulls some Community Banks along. This is because the government has made it mandatory that
Community Banks should liaise with the Central Bank through the existing Commercial Banks (
who themselves are susceptible to being distress) appointed as correspondent banks.
Layeni(1998), quoted by Ayodele (1998), confirmed that lack of patronage from
government is also one of the reasons why enough confidence wqas not respond community
Banks by the people at the grassroots level. If salaries of government workers at all levels should
be mandated to be paid in community Banks, the banks would be better for it. In order to avert
imminent collapse of community bans in Nigeria there is the need to strengthen the restructuring
and through appropriate policy intervention. This however requires a good understanding of the
efficiency or otherwise of the banks. It is on this background that this paper attempts to examine
the ratio of the output to the input in Community Banks and examine the quality of staff in the
community bank in Ogbomoso Zone of Oyo State, Nigeria
2. Literature Review
The committee on the Nigerian financial system defined the financial sectors as the
congeries of financial institution and arrangements which serve the needs of the economy. The
service is rendered through: the provision of financial recources to meet the borrowing needs
individuals and the households, enterprise, and governments; the provision of facilities to collect
and invest saving fund; and the provision of a sound payments mechanism (CNFS Report, P.6)

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Vitta (1981) suggested that, a basic benefit of enhanced efficiency in banks, is a reduction
in the spreads between lending and deposits rates. This would eventually stimulate loan demand
for investment.
Economic theory suggested that, other things being equal, firms having significant
market position in a highly concentrated market will tend to restrict output, change high prices,
earn higher rates of return and uses their entrenched position to retard the competitive efforts of
other firms (Allardice and Edervige, 1981).
Khartchate and Riechel (1980) opined that, economics scale in financial intermediaries
arises from port-folio diversification and management, the minimization of information and
transaction cost. Thus, the authors were thinking of operational efficiency.
Bryan (1972) found that, the most important single factor explaining the operation
efficiency in terms of profitability performance is the ratio of saving and the time deposits to
total deposit to total deposits. The argument is that, the deposit mix, by determining the liquidity
needs of the banking system affect the volume of the earning assets.
Bourne 91986) has suggested the use of sectorial Gross Gomestic Product (GDP). An
increasing trend in the ratio will suggest allocative efficiency. Operation efficiency refers to the
provision of financial resources to meet the borrowing needs of individuals and households,
enterprises, and governments at least cost. It relates to the minimization of operational costs and
hence operational efficiency.
Howard and Haynes (2001) maintain that, operational efficiency is determined by the
market structure and regulatory framework of financial intermediation. Intermediation cost can
therefore, be used as a measure of allocative efficiency can be measured by the ratio of total
operating cost to average total assets. The lower the ratio the smaller the spreads between net
returns to savers and gross cost to leader.
Revel (1981) defines intermediation cost as sum of non-interest operating cost pretax
profits and other costs like provisions for depreciation and loan loses. Intermediation costs are
identically equal to gross profit margins defined as net interest earning plus other incomes. High
income indicates allocative efficiency. This paper, therefore, utilizes the parameters used to
determine the level of efficiency of Community Banks in the study area.

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3. Methodology
This study was carried out in Ogbomosho Zone of Oyo State, Nigeria. Both questionnaire and
interviewed techniques were used for data collection. The study considered all registered
Community Banks in Ogbomosho Zone as the sampling frame from which 200 clients were
selected via stratified random sampling technique was used in analyzing the data in addition to
conventional descriptive statistics such as tables, frequency distribution and percentages.
The regression in explicit form is
Y = f(X1, X2, X3, X4, X5)
Y = Income (Naira)
X1 = Interest Rates
X2 = Amount Obtained (Naira)
X3 = Time Lag between Loan Application and Disbursement
X4 = Type of loan (short-term = 1, others = 0)
Three functional forms were fitted namely linear, exponential and log-log. Based on theoretical
expectation from signs and magnitudes of coefficients, statistical and econometric criteria given
by R2, f, t tests and correlation matrix, the log-log function had the best fit and hence the basis
for the foregoing report.
4. Estimation Results
The regression results showing the relationship between level of performance measured
by income in naira and the following explanatory variables amount of loan obtained, time lag
between loan application and disbursement, interest rate, type of loan and type of account kept
with the bank were presented in Tables 1.1, 1.2, and 1.3.
The R2 was 43% meaning that about 43% change in income of the loan recipients were
explained by the explained by the explanatory variables. The f value was 8.964 and statistically
significant at 5% probability level. As expected a priori, the amount of loan obtained had
positive and significant relationship with the income of the respondents. The higher the amount
of loan obtained the higher the income generated. This is a welcome development as it is an
indication that the loans were not diverted to consumption but specifically for production
purpose. The relevance of giving loan type (mainly short-term) was positive and significant.

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5. Conclusion
The sampled Community Banks have enough assets to be converted within a short term
into cash to boost their financial capability, and their credit performance were efficient and this
have paved way for high earning capacity.
In order to maintain efficiency level in the community Banks, the directors must adhere strictly
to their resolution and banks policy on credit facility. Besides, the regulatory bodies )NBCB,
NDIC,FGN and CBN) should review their policies on community banks to enhance their
efficiency.

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References
Alladice, D.R. and Evdevig, E. (1981), ‘The Significance and measurement of Concentration.’
Business and Financial Review, Economic prospective, Federal Reserve Bank of
Chicago, March/April 1981, pp. 3-5
Ayodele, G. (1998), ‘Community Banks As Silent Achiever killing Owen Baby.’ The
Searchlight, Octomber, pp. 18
Bourne, C. (1986b), `Structure and Performance of Commercial Banking in Trinidad and Tobago
in 1965-1980` in C. Bourne and Ramsawan (eds.) Money and Finance in Trinidad and
Tobago Published by St. Augustine, Trinidad.
Bryan, W.R. (1972), `The Determinants of Bank Portfolio, Research Report,No. 8. ` American
Bankers Association.
CNFS Report (1976), An overview of the Gambian Financial Sector. Gambian: The Concept of
Financial Sector p.6
Howard M. and Haynes, C. (2001), “Commercial Bank Efficiency in Barbados, `` Savings and
Development. No. 3, Vol. 25.
Khatkhate, D.R. and Riechel, (1980). Multipurpose Banking: Its Nature, Scope and Relevance
for Less Developed Country: IMF Staff Pappers. Vol. 22, N0.8.
NBCB, (1993), Annual Reports and Account. Abuja: National Board for Community Banks.
Ojo, A.T. (2001), The Development and Future of Community Banks in Nigeria. Commissioned
Paper for Presentation to the Lagos State Association of Community Banks, Dec. 12,
2001.
Revel, J.R.S. (1981), The British Finance System. London Macmillan.
Vitas , D. (1991), `Measuring Commercial Bank Efficiency,’ Policy Research Working Papers
Series, Country Economic Development, the world Bank, Washington, D.C. November.

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Annexure
Table 1: The Regression Result (Linear)
Variable Coefficient Std error T T Prob.
Constant 741 0.249 2.972 0.003
X1 -0.0072 0.076 0.948 0.344
X2 0.231* 0.074 3.124 0.002
X3 0.118 0.080 1.476 0.142
X4 0.248* 0.074 3.332 0.001
X5 0.0063 0.067 0.942 0.341
R2 0.424
F 8.517

Dependent Variable = Y * Means significant at 5% Level

Source : Data Analysis, 2005.

Table 2: The Regression Result (Exponential)

Variable Coefficient Std error T T Prob.
Constant -0.0098 0.125 -0.786 0.433
X1 -0.0035 0.038 -0.908 0.365
X2 0.133* 0.037 3.597 0.000
X3 0.0059 0.040 1.469 0.143
X4 0.126* 0.037 3.379 0.001
X5 0.0023 0.034 0.686 0.493
R2 0.45
F 9.75

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

Source: Data Analysis, 2005.

Table 3: Regression Result (Log-log)

Variable Coefficient Std error T T Prob.
Constant 0.200 0.083 2.402 0.017
In X4 0.025* 0.078 3.190 0.002
In X3 0.0088 0.085 -1.060 0.290
In X2 0.283* 0.077 3.681 0.000
In X1 0.0095 0.087 1.091 0.277
In X5 0.0041 0.069 0.593 0.554
R2 0.43
F 8.964*
Dependent Variable = LY * Indicates significant at 5% Level

Source: Data Analysis, 2005.

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Social Security System in Nigeria

Muftau Adeniyi Ijaiya
Department of Accounting and Finance
University of Ilorin, Ilorin. Nigeria.

Abstract
In Nigeria, family provided assistance had continued to play an important role in taking care of
the old. The introduction of small family units (nuclear) among other factors weakened the
informal and traditional types of social security system and government has moved towards the
formal system through the Pay-as-you-go system which is also faced with a lot of problems. This
made government to abandon this and re-introduced the defined contribution which covers only
the federal civil service. The risk here is borne entirely by the individual, and economic stability,
inflation and devaluation of the nation’s currency can also produce a negative return. It is
recommended that government should integrate both the formal and informal types, makes laws
that would make parents educate their children and such children would be responsible to
support their parents when they become old as well as that the fund should be invested in foreign
stocks to save it from the country’s specific risk.
Keywords: Social Security, Nigeria

1. Introduction

As people grow old, work and produce, they earn less but people need a secured source of
income that will see them through life. These incomes are integral part of social security system.
This social security system differs in different parts of the world. In some countries, the old are
catered for by extended family arrangements, mutual aid societies and other informal
mechanism. The informal arrangements are strained by urbanization, mobility, war and famine,
which weakened the extended family and community ties. This strain is felt mostly where old
age population is growing rapidly as a result of improvement in medical facilities and fertility.
These rapid changes have forced several countries to consider fundamental changes in the way
they provide old age security (World Bank 1994).

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In Nigeria, the family-provided assistance had continued to play an important role where
children and extended family members provide income; food, shelter and care for the old people
(see Ekpenyong, Oyeneye and Piel, 1986). As families are becoming smaller and more
dispersed, this informal and traditional arrangements are weakened, and government have moved
towards formal systems of income maintenance without accelerating the decline in informal
system and without shifting more responsibility to government than it can handle. Some of
these formal social security systems are the defined benefits (Pay-as- you-go) and the defined
contribution (Contributory Pension System).
Drawing from the above, this paper therefore examines the Social Security System in Nigeria.
The rest of the paper is organized as follows: Section two discusses the conceptual issues:
Section three examines the Social Security System in Nigeria. The conclusion and
recommendations are contained in the last section.
2. Conceptual Clarification: Social Security Systems
2.1 Definition, Types, Reasons and Significance
Puffer (1988) describes social security systems as publicly administered sets of Programmes
which provide for people in the event of loss of income (due to retirement, disability, death of a
breadwinner, maternity, work-related injury or unemployment) and often in the event of need for
medical care or the expense of raising children. The World Bank (2004) saw social security
system as a developed mechanism to provide income security for older citizens as a part of safety
net.
Schwarz (2002) inferred that social security systems are designed to provide an income to
those individuals who suffer a loss in earnings capacity through advanced age, the experience of
a disability, or the death of a wage earner in the family. While in some cases, the systems are
designed to facilitate direct transfers from the government to these particular target groups, and
the emphasis is on providing a mechanism whereby the individual might insure himself against
the loss of future earnings. The International Labour Organization endorses a minimum standard
of 40 percent of an individual’s wage for 30 years of work (see also Gruber and Wise, 1999).
2.2 Types of Social Security Systems
The World Bank (2004) classification of social security type includes the informal and
traditional arrangement where old people receive food, shelter, and care from their children. As

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the productive capacities of the old decline, they are supported by the work of their children, just
as they once supported their children and parents. Other supporting systems under the informal
social security system are local communities, informal clubs, kinship networks, patrons and
religious, and other nongovernmental organizations. However, children support are still the main
source of support for old age and more than half of the world’s old people are estimated to rely
on informal and traditional arrangements system. The World Bank (2004) averted that the
loosening of family, kinship and community ties, and rise of wage labour add new elements to
the age- old problems of providing for those who lack an income or have medicals needs. It was
this problem that made government assumes the responsibility of providing the formal type of
social security system. (See also Pathak, 1978; Martina, 1990; Knodel, et al, 1992; and Schwarz,
2006).
The formal type of the social security system is divided into two. According to Barr (2001),
the first type is where the workers are required to contribute a percentage of their salaries to the
pension plan, with the employer making up the difference, this type is known as the Mandatory
Retirement Saving Scheme, or the defined Contribution System. This social security type
encourages long-term saving and enhances financial backing for long-term investment, and the
risk is borne by the worker. For instance, if people live longer than expected, they may outlive
their retirement saving. The second type is based on the principle of Pay-as-you-go where
payment usually depends on years of service and the workers’ salaries, such Pension plan usually
covers the civil servants and the military, and it is publicly managed. The risks here are broadly
shared with government or employers.
Roots (1994) also said that annuities is another form of social security system type
where regular payments to an Insurance Company is made during the working life of the
purchaser and this provide him with an annuity during retirements. This type of annuity is
usually marketed as a personal social security system scheme.
Discussing the financing mechanism and the benefit structure of the major types of social
security system, Schwarz (2006) said that under the Pay-as-you-go system, current workers make
contributions based on their current earnings and the contribution is used to pay current
recipients. The worker who is making the contribution only receives a promise from the
government that it will pay benefits related to these contributions when the workers become

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eligible for a pension. Under the second type, the worker contributions are invested, rather than
spent, and the investment earnings are an integral part of the benefits eventually paid. These
investments can be managed by a monopolistic pubic agency or competitively with participation
by the private sector. The benefit mechanism are also of two types: Under the defined benefit
mechanism, the pension received is usually a function of income expressed as a percentage of
income per year of contribution, the benefit provided is specified in some way and if financing
fall short, someone, typically either the government in a public plan or the employer in an
employer-base plan, have the responsibility to provide the pension. On the other hand, under the
defined contribution mechanism, the contribution is specified as a percentage of salary, and rates
are specified for employees, employers, and, potentially, the government, but the final pension is
determined by the amount in one’s pension account at the time of retirement, which includes
both contributions and the investments earnings in those contributions. Under this system, no
specific benefit is promised, the pension is completely dependent on the money in the account,
and there is no need for a guarantor of last resort. (See also Diamond and Hausman, 1984; and
Schwarz, 2005).
2.3 Reasons for Social Security Systems
Giving reasons for social security system, the World Bank (1994) opined that as people
grow old, they may change their preference and wish that they had saved more but then it is
often too late. Even if people try to save when they are young, they may find few reliable savings
instruments or secure financial markets in developing countries. Savings often take the form of
real estate, livestock, or jewelry, all of which suffer from fluctuations in price and potential
misfortunes due to disease, theft, or war. Besides, the absence of insurance markets is also
another reason, since people are always uncertain about how long they will live they may wish to
purchase insurance that will earn them an income, Pension or annuity over their lifetime. The
insurance companies are also not well developed in many developing countries because of
information deficiencies and weak capital markets. For instance, when people have more
information about their life expectancy than the insurance company does, a problem known as
adverse solution occurs, where good and bad risks are pooled, and premiums are charged
according to the average risk of the group. The good risk (those who expect to die young) find
these terms unacceptable. So the insurance company is left with only the bad risks (those who

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expect to live long), the insurance company will raise their premiums leading more good risks to
opt out. For these reasons, the government often takes on the role of regulator or mandator of
social security system (see also Feldstein and Anthony, 1979; Barr, 2001; and Schwarz, 2006).
2.4 Significance of Social Security Systems
Explaining the importance of social security system, the World Bank (1994) opined that social
security system is important to the old and the economy. To the old, it facilitates people’s effort
to shift some of their income from their active working years to old age, by saving or other
means; redistribute additional income to the old who are lifetime poor but avoiding perverse
intergenerational redistributions and unintended intergenerational redistribution, and providing
insurance against the many risks to which the old are especially vulnerable. The importance to
the economy includes minimizing hidden costs that impedes growth such as reduced labour
employment, reduced savings, excessive fiscal burdens, misallocated capital, heavy
administrative expenses and evasion, sustainability based on long-term planning that takes
account of expected changes in economic and demographic conditions. One of which may be
induced by the old age system itself; which enables policy makers to make informed choices,
insulated from political manipulations that may lead to poor economic outcomes. (See also
Munnel and Yoh (1992); , Arrau, (1990); Pesaudo, (1991); Arrau and Klaus, (1993)).
Puffert (1988) also argued that social security systems in most developing countries
have growing reserved funds, which finance much of governments’ deficits, and also,
sometimes, provide a pool of investment capital which furthers economic development. For
instance, the mandatory saving system can be important for increasing long-term saving,
accelerating capital market development, development of modern financial investment and
institutions, boosting investment in productive capital, and monitoring corporate performance.
This advantage is possible because of the way social security funds, most especially defined
contribution are invested particularly the larger ones. The investment consists of three sections,
the first section is a gilt-edged portfolio which provides the basis of the income yield, this is
actively manage by policy switches with the object of maximizing the total return from this
section. The second section is an equity session which is widespread and this includes overseas
stocks, this is done not only to obtain diversification but also to ensure marketability of
individual holdings and the third one is a property folio. The investment policy thus is concerned

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with the employment of often quite large sums regularly arising, in addition to the management
of the existing investments (see also Rowlatt, 1979; Roots, 1994 and Barr, 2001).
Schwarz (2006) also noted that social security systems often have substantial impact on
the economy in which it exists because it can affect poverty among the elderly, they can also
affect relationships between younger and elder cohorts, as well as family living arrangements,
they also have a substantial impact on labour markets and employment, particularly if they are
financed through the contributory systems. The social security system can also impact on
national savings and development of financial markets, they can affect the composition of
government spending by squeezing out other types of spending, and they can even affect the
overall level of government spending (see also Diamond and Hausman, (1984); Disney (1996);
Koitz (1998); Gruber and Wise (1999) and Kakwani and Subbarao, (2005) ).
The World Bank (2004) noted that there are strong advantages from international
diversification of social security system most especially the invested Pension funds, particularly
for countries with small or concentrated domestic economies. Lower risk and sometimes higher
returns are possible over the long term through international investment, which reduces the
exposure of investors to country-specific risks such as inflation. This system also gives country
an opportunity to move their capital to countries that offer the highest return, thus opening up the
domestic economy to become part of the global economy (see also Golf, (1971); Koitz, (1988);
Corsetti and Schmidt-Hebbel, (1997); and Barr 2001).
Empirical evidence on formal social security system are well documented. For example,
the defined contribution was reported to have increased savings in some developing countries
like Chile, Malaysia and Singapore and this has imparted positively on their Gross Domestic
Products. Furthermore, studies have also shown the importance of informal social security
system. For instance in Thailand, a large percentage of married people have children because
they need children support when they grow old. Besides, in China the 1954 Constitution asserted
that parents have the duty to support and assist their parents. While in Bombay, more than 80
percent of the old live with their children; and 95 percent in Nepal.(see Pathak,1978; Knodel,et
al, 1984; Knodel, 1987; Martina,1990; Knodel,et al,1992; Davies 1993; World Bank 1994, ).

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3. Social Security System in Nigeria

Nigeria like other developing countries also depended largely on the informal social
security system, where people have voluntarily saved and invested in their children and other
extended family members expecting to reap the return later. As the productive capabilities of the
parents decline, the children and their extended family members take up the responsibilities of
feeding, clothing and housing their old parents. In fact old parents are seen living with their adult
children. Ekpenyong, et. al (1986) reported that more than 97 percent of the urban old and 93
percent of rural old are receiving some financial or material support from family or kin in
Nigeria. However, modernization, urbanization, migration, secular education and nuclear
families, and the breakdown of traditional social norms have weakened these ties.
In addition to the informal types, Nigeria also introduced the formal type that was based
on the defined-benefit otherwise known as Pay- as- you- go that is mostly unfunded.
Membership of this social security system is voluntary and it is not transferable. It is usually
managed by the state governments and management of the organizations that adopts the type.
This social security system has a limited coverage and benefits are usually bias, payments
depend on years of service and retirement age is put at either 35 years in service or when one
attains 65 years of age whichever one comes first. This system was faced with some bottlenecks
such as lack of adequate funding, discrimination in coverage, poor record keeping; demographic
shifts and weak administration (see Aminu, 2007). These bottlenecks made the government to
abandon the system, and re-introduce another pension system called defined contribution which
covers only the Federal Civil Service. Under this pension system, benefit is attached to workers
contribution and contribution are invested, rather than spent, the invested contribution would be
used to pay workers benefit. The scheme is still new, deductions have started and it is 15 per cent
of emolument. Employees are expected to contribute 7.5 percent of their emolument charged on
basic salary, housing and transport allowances, while the government contributes the balance of
7.5 per cent for public sector. In case of the military, it is 2.5 per cent and 12.5 per cent for
employees and government respectively. This system is also faced with some risks and it is
borne entirely by the individual worker. For instance, the pension system does not protect
workers with interrupted careers, many of whom are women who spend part of their lives doing
household work; low income workers may never accumulate enough in their pensions accounts

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to support themselves in their old age; early generations retirees are not protected because it
takes many years for enough pension capital to build up; economic instability, inflation and
devaluation of the nation’s currency can also produce a large negative rates of return on the
funds which can cause dissatisfaction among the contributors. Besides, some contributors may
outlive their pension contribution, and Government has not also provided a clear cut guideline on
how it would harmonize the Pay –as –you –go with the defined contribution system in the
country.
4. Conclusion and Recommendations
Drawn from the above submission, one can conclude that there are two major types of
social security system in Nigeria namely: informal and formal. The informal type is as old as
mankind and still plays an important role in supporting the old in Nigeria where children,
extended family members, communities’ ties, informal clubs etc play a prominent role. However
because of modernization, urbanization, nuclear families, secular education, etc the
responsibilities of taking care of the old by the system has diminished greatly. The formal system
which includes Pay- as you- go and defined contribution are the major types currently use at
State and Federal level respectively in Nigeria. Both have their limitations as highlighted in the
paper.
Based on the above, it is recommended that government should encourage and integrate
the informal social security system with the formal system. The integration of both forms by the
government should make laws that would make parents educate their children and such children
would be made responsible to support and assist their parents when they become old.
Under the formal system, since Nigeria has adopted pooled fund, government should not
have access to the fund in order not to rub the recipients of the potential benefits; also
government should not force the fund managers to invest in public securities. While prudent
companies and joint ventures companies should be allowed to manage the fund.
Besides, the private institutions vested with power to manage the pension fund should be
advised to diversify their investments, and invest in overseas securities in order to reduce
specific risks associated with such funds in Nigeria.

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References
Aminu, F. (2007) ‘’Overview of the New Pension Reforms’’ in Saliu, H.A.et al. (eds.) (2007)
Nigeria’s Reform Programme: Issues and Challenges, Faculty of Business and Social
Sciences, University of Ilorin, Ilorin.
Arrau, P. (1990) ‘’Social Security Reform: The Capital Accumulation and Intergenerational
Distribution Effect’’. Washington, DC: The World Bank.
Arrau, P. and Klaus, S. (1993) ‘’Macroeconomic and Intergenerational Welfare Effects of a
Transition from Pay-as-you-go to fully Funded Pension Systems’’. Policy Research
Department, Macroeconomics and Growth Division, Washington, DC: The World Bank.
Barr, N. (2001) ‘’The Truth about Pension Reform’’. Finance and Development, International
Monetary Fund, Washington, DC: IMF.
Corsetti, G. and Schmidt-Hebbel, K. (1997) “Pension Reform and Growth’’ in the Economics of
Pensions: Principles, Policies and International Experience, S. Valdes-Prieto ( ed)., Cambridge:
Cambridge University Press.

Davies, E.P. (1993) ‘’The Structure, Regulation, and Performance of Pension Funds in Nine
Industrial Countries’’. World Bank Working Paper No 1229 (December),Policy Research
Department, Washington, DC: The World Bank
Diamond, P. and Hausman J. (1984) ‘’Individual Retirement and Savings Behaviour”, Journal of
Public Economics, 23: (.2 ): 81-114.
Disney, R. (1996) ‘’can we afford to Grow older ‘’? Cambridge, MA: MIT Press.
Ekpenyong, S.O., Oyeneye, O.Y. and Piel, M. (1986) Reports on Study of Elderly Nigerians.
Limited Kingdom : University of Birmingham.
Feldestein, M. and Anthony, P. (1979) ‘’Social Security and Household Accumulation: New
Micro Econometric Evidence’’. Review of Economic Statistics 61:361-68.
Goff, T.G. (1971)‘’Theory and Practice of Investment’’.London:Morrison and Gibbs Ltd.
Gruber, J. and Wise, D.A. (eds.) (1999) ‘’Social Security and Retirement around the World’’,
Chicago: University of Chicago Press.
Kakwani, N. and Subbarao, K., (2005) ‘’Ageing and Poverty in Africa and the Role of Social
Pensions’’. Sector Report, Africa Regional Human Development Network, Washington,
DC: World Bank.

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

Population Development Review 10:297-328.
Knodel, J. (1987) ‘’The Politics of Old Age Security on Comparative Perspective’’. Luxemburg
Income Study Working Paper . Luxemburg
Knodel, J; Saengtienchai, C; and Sttitrai, W. (1992) ‘’ The Living Arrangements of Elderly in
Thailand: View of the Populace’’. Population Studies Centre, Comparative Study of the
Elderly in Asia. Research Report University of Michigan, Ann Arbor.
Koitz, D. (1988) ‘’Social Security: Its Funding Outlook and Significance for Government
Finance’’. Washington DC: Congressional Research Service.
Martina, L. (1990) Changing Intergenerational Family Relations in East Africa, The Annals
510:102-114.
Munnell, A; and Joh, F. (1992) ‘’What is the Impact of Pensions on Savings’’? In Bodie and
Munnell (1992).
Pesaudo, J. (1991) ‘’The Multiple Roles of Private Pensions: Effect on savings, Capital Markets,
and Labour Market Decisions” Presented at the OECD Conference on private Pensions
and Public Policy. Paris.
Pathak, J.D. (1978) ‘’ Our Elderly’’. Bombay : Medical Research Centre.
Puffert, D.J. (1988) ‘’Social Security Finance in Developing Countries’’, World Bank Working
Papers No 36, Washington, DC: The World Bank.
Roots, P. (1974) ‘’Success in Investment’’, London: Cox and Wyman Ltd.
Rowlatt, J. (1979) ‘’ A Guide to Saving and Investment’’, Bugayi : Richard Clay (The Chaucer
Press) Ltd.
Schwarz, A.M. (2005) ‘’Old Age Security and Social Pensions’’, Working Paper, Social
Protection Department of the Human Development Network, Washington, DC: The
World Bank.
Schwarz, A.M. (2006) ‘’ Pension System Reforms’’. Social Protection Department of the Human
Development Network, Washington, DC: World Bank.
See The Nigeria Pension Reform Act, 2004.
World Bank (1994) ‘’ Averting the Old Age Crisis ‘’ New York: Oxford University Press.

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World Bank (2004) ‘’ Mexico: Public Expenditure Review’’. “Report No. 27894-Mx, Latin
America Economic Policy Sector, Washington, DC: The World Bank.

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Listed in ULRICH’S

A Study of the Effectiveness of IT as a Resource Based

Tool Deployed By Nigerian Banks

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

Department of Management Science,

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

Abstract
This study examines the effectiveness of IT investment as a resource based tool deployed by
Nigerian banks. The paper presents two propositions about IT investment in Nigerian banks and
tested them with quantitative and qualitative data from five major banks in Nigeria. Using a
sample of 535 respondents, the result provides insights that IT deployed by Nigerian banks do
not differ significantly from one bank to the other. It was concluded that, IT deployed by
Nigerian banks is more of a strategic necessity to be in business rather than a competitive
advantage.
Key words: Information Technology (IT), Resource based tool, Effectiveness, Operational
processes, Strategic resources.

1. Introduction
Information technology has become critical to the operations and competitiveness of
organization around the world. Today more than ever organization must capitalize on changing
technology to increase profitability, expand market opportunity, and improve customer service
and productivity. Evaluating business value from investment in information technology as a
strategic resource weapon in Nigerian banking industry is the main focus of this paper.
Two propositions about information technology as a strategic resource in the Nigerian
banking operation were proposed. The first proposition is that Nigerian banks have used
information technology to drive their processes and deliver superior performance to meet and
surpass customer expectation. The question then is “Does IT usage has significant difference

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among the performance of the banks?” However a successful IT investment banking operation is
a key strategy that must continue to further strengthen the banks position.
The second proposition based on the resource based theory of strategy is that Nigerian
banks investment in IT has enable higher volume of transactions processing, low turnaround time
and gradual reduction of cash transactions which informs the need to increase investment in IT.
This paper viewed IT as a resource based view strategy (operational processes) using
both quantitative and qualitative data analysis and series of interviews with senior bank
managers.

2. Literature Review of Past Research

Despite the growing recognition on the fundamental impact of information technology in
determining a firm competitive strength for future business performance, most researchers are
yet to specify the underlying mechanism linking it to firms’ operational processes. Several
studies have been conducted in a variety of manufacturing and service industries. Studies by
strassmann (1990) found no correlation between IT expenditure and return on investment in a
sample of 38 service sector firms. Dos santos et. al (1993) complement Strassmann’s findings on
IT spending and returns on investments. He concluded that investment in IT has no significant
effect on firm returns. Similar research by Crons and sobol (1983) found that IT impact was not
significant on firm performances. This perhaps implies that IT has no impact on firm’s
productivity. Brynjolfsson and Hitt (1996) however caution that the findings do not account for
economic theory of equilibrium. In his own view Alpar and Kim (1990) noted that the
methodology used in assessing IT impact can also significantly affect the result. Corroborating
this view Denison (1989) stressed that the over estimation of IT input for any given amount of
output will lessen the unit productivity. This suggest that researcher must endeavor to pay much
attention to the measurement and methodology used in studies before embarking on a thorough
research work bearing in mind that key ratios can be misleading.
On the other hand Lubbe (2004) studies of IT impact on Small and Medium Enterprises
(SME) found a significant correlation between IT and SME performance.
The findings falls in line with the work of Dykman (2003) where a correlation between firms
output and IT investment was established. More recently, studies by Lucas et al (2002) confirms

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that investment in IT create a sustainable competitive advantage. This finding confirms the
argument of Hui and Plant (2001) that the promise of increased advantage in output was the
driving force behind large scale investment in IT since 1970’s.The findings above suggest that
technology and societal changes are moving the global market. Using a different data set, weil
(1990) was able to disaggregate IT by use and found that significant productivity could be
attributed to transactional types IT (Data processing). This support the argument of Santhanam
and Hortono (2003) that resource based view can be used to investigate the impact of IT
investment on organization performance. In this paper attention is restricted to research that has
drawn upon the organization procedure (RBV) of IT investment firms on Nigerian banks
performance.
3. Conceptual Framework
The study is premised on the resource base theory of firms grounded on the perception
that a firm’s internal environment in terms of its resources and capabilities are more critical to
the determination of strategic action than its external environment. Imai (2007) viewed resource
based view as a strategy that emphasizes economic rent creation through distinct capabilities. He
argued that each organization is a collection of unique resources and capabilities that provides
basis for its strategy. This view was supported by barney (1991) that abnormal rent can be earn
from firms resources and sustained competitive advantage that are valuable, rare, imperfectly
imitable and non substitutable.
Ovia (2006) further attest to this in his study on IT deployment on corporate strategy. He
concluded that investment in IT resources boost banks performance. This suggests that the
performance of a firm is shaped by its available resources. The basic logic of resource based
view of a firm starts from the claim that the aim of the firm and the desired outcome of
managerial effort is sustainable competitive advantage as it allows firms to earn economic rent
(kapelko et .al 2005). This theory was supported by Imai (2007), where company’s ability to
assemble and exploit an appropriate combination of resources was identified as a key factor
required to achieving a sustainable competitive advantage. This means that a sustainable
competitive advantage can be obtained if “the firm effectively deploys the resources in his
product market” (Fahy and smithee 1999)

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4. Methodology
The first and the most important step in carrying out the assessment of firms efficiency is the
identification of input–output variable (Thanansoulis 2003). Stingler 1976 noted that “measured
inefficiency may be a reflection of a failure to incorporate the right variables and the right
constraint to specify the right economic objective of a production unit. “ Paradi and schaffnit
(2004) however stressed that no consensus exist on the most appropriate variable to apply in
analysis. For the purpose of the study, the approach taken for the measurement of information
technology as a resource input is to produce a given level of operational procedure where
information technology is deployed to aid banking operations via a medium that makes for
speed, utmost flexibility, accuracy and convenience irrespective of place, time and distance. The
deployment of IT to customer service delivery has made Nigeria banks operations synonymous
to E-banking, as such E-product which covers the services rendered by the banks was used as a
proxy for IT input. The products (input) were however classified in to three broad categories –
payment collection, card solution and reporting tools. The approach help capture how the banks
deploy the resources in their product market (Fahy and smithee 1999).The approach is further
consistent with the works of Miller and Rose (2003) where resource utilization revealed by
efficiency was seen as an important RBV thinking because it reflects productive use of
resources. The used of operating revenue, a single output as a proxy for performance is
consistent with the works of Piesse and Thirtle (2000) and Thore et.al (1994) where technology
perspective was judge against operating revenue (turnover).
The study cut across five (Zenith bank, First bank, Union bank, Guaranty Trust bank and United
bank for Africa) banks that are well spread across major Nigerian commercial and political cities
(Ibadan, Lagos, Abuja, Kano, Enugu, Kaduna and Onitsha)where banking operations was
extremely active . The choice of the banks was due to the huge deployment of IT to aid the
operations the banks coupled with the significant presence of the banks in the identified cities. A
total of 700 respondents were randomly selected in this study. 100 questionnaire comprising 20
for each banks in the identified cities was randomly administered. However 535 questionnaires
(76.4%) were retrieved from the respondent. Data for the study were analysed with the use of
statistical tools (ANOVA and Regression Model) to determine, whether there exist any
significant difference in the IT deployed by Nigerian banks to aid their operations while the

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regression model estimate the value of IT as a resources deployed to aid Nigerian banks. Various
functional models where examined to identify relationship among the data with a view to
selecting the best fit. The multiple R was use to select the model with the best fit, hence linear
regression model with the highest multiple R and R2 value of (.833, .694 ) was chosen. This
approach was consistent with the works of Aworemi (2006).
Analysis of Variance was adopted to test the null hypothesis that IT deployed by Nigerian
banks to aid their operations do not differ significantly from one bank to the other was stated as:
H0 = µ1=µ2=µ3 ….µn
Linear regression model adopted was mathematically represented as:
Y = f(x1, x2, x3, …. xn)
Y = Operating Revenue
X1 =Payment collection
X2 = Card solution
X3 = Reporting tools.
Thus it is explicitly represented as:
Y= α + β1x1 + β2x2 + β3x3 +…µ

5. Result and Discussion

Table 1 showed an F –VALUE of 2.20 .The ANOVA table tested the hypothesis that IT deployed
by Nigeria banks do not differ from one bank to the other.
Table: 1 Analysis of Variance result of IT deployed by Nigeria banks.

The observed F-value of 2.20 was less than the table F-value of 2.38 which was
significant at 5% level of significance. This informed the decision to uphold the null hypothesis

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that IT deployed by Nigerian banks do not differ significantly from one bank to the other. This
outcome implies that information technology deployed by the banks is similar as such it is
viewed more as a strategic necessity rather than a competitive strategy. Each bank should
therefore focus on the developing technology that is flexible and capable of boosting their core
areas of competence relative to the opportunities in the environment they operate.
Table 2 showed the coefficient (β=5.38) of payment collection product.

This means that the operating revenue of the bank will increase by 5.38 for every unit patronage of
payment collection products while holding the effect of other variables constant. This implies that
as the patronage of payment collection product increases the bank operating revenue will increase
by almost triple the rate of increase in the payment collection product and this was significant at
5% level of significance. The suggestion therefore is that payment collection product driven by IT
has gained customers loyalty and acceptance thus signifying the level of confidence the Nigerian
public has on IT deployed by banks to aid their services via payment transaction product marketed
the banks. The coefficient (β= 9458.6) of reporting solutions shows that aggressive unit patronage
of reporting solutions product will increase the operating revenue of banks by 9458units. This is
significant at 5% level of significance thus suggesting that reporting solutions product are of vital
importance to the customers and bank operating revenue. The result further confirmed that every
unit patronage of the product resulted to an operating revenue that double the impact of reporting
solutions product. This evidence further renewed the call for increase investment in IT, especially

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those that are customer driven to boost the banks performance. Availability of card solution
product with a coefficient of (β=172.67) was also seen to have improved the operating revenue by
172.67 for every transaction per card solutions recorded. This was however not significant at 5%
and 10% level of significance.
6. Conclusion
The study aimed at evaluating the effectiveness of information technology as a resource tool
deployed by Nigerian banks. The study revealed that information technology deployed by Nigeria
banks do not differ significantly from one bank to the other and this was significant at 5% level of
significance. In addition, it confirmed that payment collection product marketed by Nigerian banks
increases the operating revenue of the banks by almost triple the rate of payment collection product
effect if sustained this was also significant at 5% level of significance. The study further
discovered that reporting tools also contributed to the operational revenue of the banks at a
significant level of 5%, a reflection of the unique convenience offered customers through IT.
Meanwhile, card solutions were also found to have contributed positively to the bank operating
revenue, but this was significant at 5% and 10% level of significance.
In summary, it was discovered that the Nigerian public has a lot of confidence in the level of IT
deployed by the banks to improve the quality of the service rendered as witnessed in level of
patronage experienced by the banks.

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Strassman, P. (1990): The Business Value of Computers, Information Economics Press, New
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Thanassoulis, E. (2003), “Introduction to the theory and application of Data Envelopment
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Thore, S., Kozmetsky, G., Phillips, F. (1994), “DEA of financial statement data: the U.S.
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Weill, P. (1990) Do computers Pay Off~ ICIT Press, Washington, D.C.

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Listed in ULRICH’S

An Empirical Study of SERVQUAL’S Dimensionality

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

Dr Heryanto
Regional Development Bank of West Sumatra, Indonesia

Abstract
The purpose of the present study are to analyze an SERVQUAL’S dimensionlity between
Minangkabau and Chinese customers. The sample size amount 216 customers consisted of
Minangkabau would amount to 162 persons and Chinese would amount to 54 persons.
Systematic sampling is applied in this study and data analysis technique is use consisted of factor
analysis. The result of factor analysis indicates that there are three dimensions of saving products
and three dimensions of credit products. The dimensions for saving products are labelled
SSERVQUAL-1 (certain time, sympathy and reassurance, dependability, saving service,
accurate records, prompt service, willingness to help consumers, prompt response to consumer
request, trusted employees, and safe feeling), SSERVQUAL-2 (politeness, best interest at heart,
convenient hours, up-to-date equipment and technology, visual appeal, well dressed and neat
appearance and service type), and SSERVQUAL-3 (consumer information, adequate support,
individual attention, personal attention and consumer needs). Whereas, the dimensions of credit
products are labelled CSERVQUAL-1 (certain time, sympathy and reassurance, dependability,
credit service, accurate records, prompt service, willingness to help consumers, prompt response
to consumer request, trusted employees, safe feeling, and politeness), CSERVQUAL-2 (best
interest at heart, convenient hours, up-to-date equipment and technology, visual appeal, well
dressed and neat appearance and service type), and CSERVQUAL-3 (consumer information,
adequate support, individual attention, personal attention and consumer needs).
Keywords: SERVQUAL, Credit and Saving Products, Minangkabau, Chinese
1. Intoduction

The Minangkabau and Chinese form the majority of financial customers, especially as financial
service users at Bank Nagari. The Minangkabau is a faithful community to the kenagarian
(regional) brand. This is proven by the opening of the Jakarta branch office. The bank can attract

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bigger savings from this community (“Salah Satu,” 2001). It means Minangkabau customers tend
to be ethnic bonding. Conversely the Chinese tend to be business bonding.

The value orientation makes Minangkabau customers loyal to the bank. The bank has given them
financial services in personal basis and this has increased their feeling of security in using the
Bank Nagari products. The security feeling further encourage them to use the Bank Nagari
products consistently and continually. The product security is part of security feeling. Consumer
will not buy a product if they do not feel secure. The security feeling influences preference to
buy. The security feeling is obtained from close consumer-business location, close to society,
Bank Nagari commitment (to construct image to develop regional), and kenagarian.

In terms of security of the product, Chinese customers like Minangkabau value security of the
bank products. The consumers are more careful and they have a lot of information especially
bank products. Guanxiwang is an information distribution media among Chinese customers. This
makes them differ from Minangkabau customers.

Bank Nagari has different perception on Minangkabau and Chinese customers in providing credit
facilities. Chinese customers have more knowledge and experience in doing business activities
and they have very strong capital. Due to this reason Bank Nagari has minimum risk to distribute
credit facilities to the Chinese customers. Bank Nagari uses lower technology and provides
simple products compared to other banks, it does not seem to be an influencing factor to the
Minangkabau and Chinese in choosing Bank Nagari. It might be other factors of service quality
that influence both ethnic such as prompt service, feel secure, interest rate, accuracy,
dependability, and attribute. The present study analyzes an SERVQUAL’S dimensionlity
between Minangkabau and Chinese customers.
2. Literature Review
Parasuraman et al. (1988), based on exploratory research to understand the construct of
SERVQUAL and its determinants, defined SERVQUAL as the degree of discrepancy between
customers’ normative expectation for service and their perception of the service performance.
Perceived SERVQUAL is then interpreted from the differences in degree and direction between
perceptions and expectations.

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Using the disconfirmation paradigm as a theoretical basis, Parasuraman et al. (1988) devised the
SERVQUAL scale. This instrument employs a pair of 22-item scales, each identical with the
exception that one assesses the perceived performance of a service provider, and the other is the
consumers’ expectation regarding the level of service to be received. Calculating the difference
between the 22 item each of five dimension forms the SERVQUAL measure. Those five
dimensions, that are proposed to be generalizable to virtually any service provider are: (1) the
reliability of the service provider, (2) the responsiveness of the service provider, (3) the tangible
aspects of the service, (4) the assurance provide by the service staff, and (5) the empathy shown
to consumers.
The SERVQUAL instrument has been productively used for measuring service quality in many
proprietary studies. It has also served as the basis for measurement approaches used in published
studies examining service quality in a variety of contexts such as physicians in private practice
(Brown & Swartz 1989); a dental school patient clinic, a business school placement center, and a
tyre store (Carman, 1990); discount and departmental stores (Teas, 1993); a gas and electric
utility company (Babakus & Boller 1992); hospitals (Carman, 1990); banks, pest control
providers, dry cleaners, and fast food chains (Cronin & Taylor, 1992) and institutions of higher
education (Boulding, Kalra, Staelin & Zeithaml, 1993).

While the SERVQUAL instrument has generated considerable interest in service quality
measurement, it has also raised questions about the need to measure expectations (Cronin &
Taylor 1992; 1994), the interpretation and operationalization of expectation (Teas, 1993; 1994),
the reliability and validity of SERVQUAL’s difference-score formulation (Babakus & Boller,
1992; Brown, Churchil, & Peter, 1993), and SERVQUAL’s dimensions (Carman, 1990).

3. Method
Location of the study area is Padang. Padang is the leading port on Sumatra's West coast and is
now the main city of the Minangkabau of West Sumatra. The population comprised of all
Minangkabau and Chinese customers of Bank Nagari in Padang. To select the respondents, a list
of saving-credit customers were obtained from the bank and names were selected randomly. This
technique is called systematic random sampling. Then type of data is quantitative data. This data
is primary and secondary data. SERVQUAL refer to Bank Nagari service gives reliability,

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responsiveness, assurance, empathy and tangibles to Minangkabau and Chinese customers (Table
1).
Table 1: Variable, Sub-Variable, Operational Definition, and Indicator

SER Sub-Variable Operational Definition Indicator

VQU
AL
Reliability

1.Certain Time When these institutions promise Right transaction

to do something by a certain
time, they should do so
2. Sympathy and When consumers have problems, Concerning to
reassuring these institutions should be consumer
sympathetic and reassuring
3. Dependability These institutions should be Service guarantee
dependable
They should provide their Credit/Saving
4. Product services saving/credit services at the time transaction
they promise to do so
They should keep their records Accurate
5. Accurate records accurately
6. Keep consumer secret They should not be expected to Secret of the
tell their consumers exactly when consumers data
saving/credit services will be
performed
It is realistic for consumers to
expect prompt service from Consumer data
7. Prompt service employees of these institutions secret
8.Willingness to help Their employees do always have Consumer problem
customers to be willing to help consumers decision
9.Prompt response to It is okay if they are too busy to Bank sensitive
customer requests respond to consumer requests
promptly
Assurance

10.Trusted employees Consumer should be able to trust

employees of these institutions Trustee
Consumer should be able to feel Secure transaction
11.Safe feeling safe in their transactions with
these institutions’ employees
12..Politeness Their employees should be polite Employee attitude
13.Adequate support Their employees should get Minimal training

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adequate support from these

institutions to do their jobs well
Empathy

14.Individual attention These institutions should be Bank intention

expected to give consumers
individual attention
15.Personal attention Employees of this institution can Employee intention
be expected to give consumers
personal attention
16.Best interest at heart It is realistic to expect these To have desire
institutions to have their helping
consumers’ best interest at heart
It is realistic to expect employees Employee sensitive
17.Customer needs to know what the needs of their
consumers are
18.Convenient hours They should be expected to have There is no long
operating hours convenient to all queue
their consumers
Tangibles

19.Up-to-date equipment They should have up-to-date Technology

and technology equipment & technology. sophisticated
20.Appeal visually Their physical facilities should be Attractive
visually appealing
21.Well dressed and Their employees should be well Bank attribute
neat dressed and appear neat
Appearance
22.The physical facilities The appearance of the physical Layout
facilities of these institutions
should be in keeping with the
type of service provided

The total population of this study was 514 customers, which was divided into two groups
namely Minangkabau and Chinese. In this study, the researcher wanted to estimate the number
of sample size to be taken with assumption marginal of error 10 %, confidence level 95% and
standard deviation arbitrarily 75%. Thus, c = 10%, s = 75% and Zq = 1.96 (corresponding to a
confidence level of 95%) notice that c and s are expressed in the same unit. The value of
sample size (n) is (1.96)2 (0.75)2 / (0.10)2 = 216 customers, approximately. By virtue of the
ethnic composition within the bank’s saving-credit customers list 75% Minangkabau would
amount to162 persons and 25% Chinese would amount to 54 persons.

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

The KMO test and Bartlett's and correlation anti-image were used to know the feasibility of
these variables. A Variable is feasible if the KMO test and Bartlet's and anti-image correlation
are above 0.50 (Santoso, 2001). If the anti-image correlation from a variable is below 0.50,
hence that variable has to be dismissed, and factor analysis have to be carried out again on the
variable until the KMO and Bartlet's and anti-image correlation are above 0.50. After each
KMO test and Bartlett's and anti-image correlation is feasible, this variable can be accepted in
the form of variable which have been reduced.
4. Saving & Credit SERVQUAL
Research in defining and measuring quality has been mainly developed in manufacturing.
Japan’s philosophy is based on the Zero defects concept, whose definition is ‘doing it right the
first time’. Crosby (1979) defines quality as ‘conformity to needs’. Research on service quality is
however inadequate which has three inherent characteristics: intangibility, heterogeneity, and
inseparability between production and consumption.
Thus, customer intentions to use a service may be limited to the benefits they desire and or
expect from the service. Whether a service or a physical good, customer expectations concerning
a product are beliefs about its performance which act as working hypotheses regarding its nature.
Hence, it is reasonable to use customer expectations as a basis for both formulating purchase
intentions and establishing standards for judging service performance.
The benefits that customers desire (i.e., benefit expectations) are considered to be the
fundamental reasons behind such anticipated buyer behavior and, of course, are the basis for
segmenting the market. Benefit segmentations is perhaps most successful when derived from
measures of what customers believe about product delivery, rather than their emotional
responses toward the offering. Consequently, customer benefit expectation reflect the cognitive
component of attitude and are sometimes labeled cognitive attitude.
Service dimension consist of tangibles, reliability, responsiveness, assurance, and empathy.
Tangibles is looked from physical facility, supply, employees, and communication means used
by a service. Tangible services of banking product are services that have interesting facilities;
presentable appearance of service personnels; the availability of information on credit products
and comprehended easy saving, etc. Reliability is ability to execute and fulfill service, which

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have been promised in accurate figure. This is judged from for instance, if bank employee says
that your loan is being processed and will phone you after half hour, and he actually phones you
half an hour later. Responsiveness is willingness and ability to assist customer and give correct
service. It is evaluated from the bank’s swift action when customer face problem on credit or
saving. Assurance is knowledge ability of employees in giving trusts to customers. A good
indicator is if the bank has the reputation as a good bank. The provision of service warranty to its
product, and empathy as well as attention given are other good indicators.
The discussion of this instrument is of value because SERVQUAL instrument is reasonable
illustration of the programmatic development of a universal list of service quality dimensions.
Research was done to two financial ethnic, known as the merchant ethnics in Padang, West
Sumatra. From results of that research present the strong relations among Saving-SERVQUAL
with Credit-SERVQUAL while weak relations between Saving-SERVQUAL with and Credit-
SERVQUAL and Culture. Figure 1 illustrates this:

Figure 1: The Minangkabau-Chinese Inner Factor in Consumption

Based on the inner factor of consumption above and the factor analysis to financial products of
Bank Nagari, three categories of service expectation are identified. They are different from the

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previous categories developed by Parasuraman, Zeithaml and Berry. Cultural values is very
much influences one’s expectation of service. This is one of the factor differentiating the service
category developed by Parasuraman et al. (1994) with the one obtained in this research. Below is
the service category which has been changed in the form of a linear equation. As for target of
change of presentation of form categorize SERVQUAL is to facilitate or look for root from
SERVQUAL itself.
This equation is interpreted following rel-n where n=1,2,…5 is reliability coefficient, res-n
where n=6,7...9 is responsiveness coefficient, as-n where n=10,11...13 is assurance coefficient,
em-n where n=14,15...18 is empathy coefficient and ta-n where n=19,20...22 is tangible
coefficient. Getting the root from each SERVQUAL can be done by determinant or Cramer’s
Rule (Budnick, 1993; Dumairy, 1993), while Relia, Respon, Assu, Empa, and Tangi is variable.
Cramer’s Rule is given a system of linear equations of the form AX = B where A is an (n x n)
square matrix of coefficients, Cramer’s rule provides a method of solving the system by using
determinants. To solve the value of the jth variable, form the matrix Aj by replacing the jth
column of A with the column vector B. If it denotes the determinant of Aj by ∆j, the value of the
jth variable is determined as xj = ∆j / ∆. If ∆ ≠ 0, the given system of equations has a unique
solution. If ∆ = 0, the compution of equation is undefined. If ∆ = 0 and ∆1= ∆2 = … = ∆n = 0, the
system has infinitely many solutions. If ∆ = 0 and any ∆j ≠ 0, then the system has no solution.
Service Equation According to Parasuraman, Zeithaml and Berry

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

Assul,Empa & Tangi) = B as

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

Relia = ∆1 / ∆ =

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

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

Relia=∆1/∆=(res-6.as-11.em-16.ta-22.Servqual-5)+(ta-19.em-18.as-13.res-8.Servqual-2)-
(Servqual-5.res-9.as-12.em-15.ta-19)-(Servqual-3.res-7.as-10.ta-21.em-18)

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

Respon = ∆2 / ∆ =

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

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

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

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

Assul = ∆3 / ∆ =

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

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

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

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

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Empa = ∆4 / ∆ =

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

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

Empa=∆4/∆=(res-6.as-11.Servqual-3.ta-22.rel-5)+(Servqual-5.as-13.res-8.rel-2)-(rel-5.res-9.as-
12.Servqual-2.ta-19)-(rel-3.res-7.as-10.ta-22.Servqual-5)

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

Tangi = ∆5 / ∆ =

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

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

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

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

Factor analysis conducted to financial products especially to credit and saving. This analysis
recommend that SERVQUAL consist of three factors (SERVQUAL-1, SERVQUAL-2, and
SERVQUAL-3).

5. Saving and Credit Products

In the equation rel, res, as, em and ta are coefficients while f is a variable from each coefficient.
This credit and saving equation show changes to the formation of SERVQUAL. SSERVQUAL-1
represents the result of factor 1 which consists of reliability 1, 2, 3, 4, and 5, responsiveness 7, 8
and 9, and assurance 10 and 11. SSERVQUAL-2 represents factor 2 which consists of assurance
12, empathy 16 and 18 and tangibles 19, 20, 21 and 22, and SSERVQUAL-3 represents result of
factor 3 consisting of responsiveness 6, assurance 13, and empathy 14, 15 and 17.
The linear equation showed as follows:

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

CSERVQUAL-2, and CSERVQUAL3. CSERVQUAL-1 consists of reliability 1, 2, 3, 4 and 5,
responsiveness 7, 8, and 9 and assurance 10, 11, and 12. CSERVQUAL-2: empathy 16 and 18
and tangible 19, 20, 21 and 22 while CSERVQUAL-3: responsiveness 6, assurance 13, and
empathy 14, 15, and 17.

The linear equation showed as follows:

Empathy has a big role in forming customer experience. Intangible service result from what is
felt by the customer, and does not seldom awaken the customer’s memorable experience.
Customers nowadays do not again see product which offer is exclusive the than itself product,
exclusively evaluate feature and benefit (F & B), but also from its consumption situation by
holistic. It means people would use a product not only based on the actual product but also the
situation or miscellaneous consorting the product.

6. Saving and Credit Products: The Service Perspective

The saving and credit behavior usually have different patterns. Customer desire to consume the
saving products generally due to the competitive interest rate, group pushing, excellence service,
location and complete facilities. Conversely, customer desire to consume the credit products due
to the competitive interest rate, group pushing, excellence service, and complete facilities. The
location consideration is not dominant in making credit decision. They can look at some
alternative banks to borrow money as it poses no risk to them. Figure 2 below points that
customer perception for credit products indicates subjective satisfaction average 2-9 points and
saving products of 4-9 points between both ethnics. It means that consumption level of saving
products by both ethnic is better than the consumption level of credit products. There is
significant difference between consumption perception towards saving and credit products
among the Chinese ethnic. This is because the Chinese ethnic only use credit products to scale-

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up their businesses and put their finances some forms of savings in other banks because this bank
is not completely interesting in terms of its facilities. This condition is depicted in Figure 2 and
will be explained further.

10
9
8
7
Perception

6
Saving
5
Credit
4
3
2
1
0
1 13 25 37 49 61 73 85 97 109 121 133 145 157 169 181 193
Customers

Figure 2: The Saving and Credit Average Customer Perception

Figure 3 explains that Minangkabau customers are loyal customers. They have some irrational
considerations e.g., ethnicity, continue customer and insensitive customer. Ethnicity means that
the customers consider using the bank products based on the culture observed in the bank: the
Minangkabau values. Continue customers refer to interactive customers, a son continues from his
father, a father continues from a grandfather and so on. Insensitive customers, refer to customers
who do not know the situation of the banking industry in their region for example matters
regarding interest rate, administration process in using saving and credit products, new banking
products etc in other banks.

A Minangkabau customer is a good customer in using the bank products. From Figure 3, we can
see the customer lines of perception in using the saving and credit products are close. It means
that Minangkabau customers use bank products optimally. They are real customers in using bank
products who demand deposits, saving deposits, time deposits, and all kinds of credits including
working capital credit, investment credit and the combination of both.

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10
9
8
7
Perception

6
Saving
5
Credit
4
3
2
1
0
1 10 19 28 37 46 55 64 73 82 91 100 109 118 127 136 145
Customers

Figure 3: The Minangkabau Perception of Saving and Credit

Average

Figure 4 points that the line of saving product perception is lower from the line of credit
product perception. It means that in this bank the Chinese ethnic only use credit to support their
businesses. They undervalue the saving products. They use the other banks that have given
interesting rate, modern facilities, innovation products, etc.

9
8
7
6
Perception

5 Saving
4 Credit
3
2
1
0
1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49
Customers

Figure 4: The Chinese Perception of Saving and Credit Average

6. The Dimensionality of Credit and Saving Scales

This sub-heading will discuss the dimensionality of the scales. Firstly this sub-heading discusses
about banking marketing location. Banking marketing location are consisted Pondok and Pasar

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Raya in Padang. Location factor very influencing to customer perception in consuming saving
product and credit, for example a Chinese customer will like to save to bank which close to their
location trade. Secondly this sub-heading discusses dimensionality of the credit and saving scale.
Confirmatory factor analysis will be used as a tool for data reduction.
Both banks are located in business center in Padang. Pasar Raya is central of Minangkabau
traders and Pondok is central of Chinese traders. Both of this ethnic have different idea regarding
place of effort like seen in Chinese picture c-f chosen place of effort, which is direct to be made
by residence at the same time. They think that effort direct become that is residence more
effective and is efficient. Very rare once Chinese chosen place of effort separated from its
residence.

A-B

C-D

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E-F
Figure 5: Banking Marketing Location in Pondok and Pasar Raya, Padang
On the contrary Minangkabau chosen place of effort separated from its residence, see Figure b.
This matter is caused by they chosen to be gathered at one place which provided by local
government. Usually in the form of fairish place 'kios-kios' 3 x 3 meter. Therefore such palces
not possible for them to be made as residence at the same time.
Therefore, for Chinese customers apply the adjustment principal and ancestor to modern
condition in Padang. In trading, they still use principles as follow:
1. More and more planning will give the more opportunity to win. Lack of planning will lessen
opportunity to win. What is going on if there no planning is at all. Chinese always think
effectively. They can see to the fore and try to estimate various consequence which possible
happened. They are habit ‘making a map of battlefield’ as does a military general, see map
generally fight and consider various factor. Then, they go forward inch by inch to
‘battlefield’ specific.
2. Recognize your enemy, recognize yourself, your victory even also will not be threatened
(without information, planning become without effect). Recognize its field, recognize its
weather, complete of your victory. Cina information combination people with planning. A
planning can produce fruitful result when having correct information of time, relevant, and
accurate.
3. Speed represent essence a war. Marketing energy of peripatetic Chinese as soon as possible
(time of vital importance). Chinese collect and analyses immeasurablely of information
systematically. They also should be able to project company vision or its production line.
Then, they have to specify marketing strategy and target.

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4. First of all, skillful soldier in epoch first will look for position to themselves so that they do
not seen by enemy (thinking is long-range). They will bide time to attack weak point of
enemy. Chinese have idea that marketing do not only destined today or in short-range. They
pattern have to that marketing is an activity yielding advantage on a long term.
5. A team win the day if him relate to faced enemy it ... adjustment with field is best ally to
soldier in encounter (product). Chinese always comprehend all its customer and know what
in fact they require.
6. A team will win if him braid relation with faced enemy it (price). Chinese in meticulous in
pricing product to sell of. Wisdom price very depend on their customer expectancy, ability
and willingness to pay.

Finally, analyses dimension from saving scale and credit relied on factor analysis. Perception
factor both of this ethnic very influencing at forming of SERVQUAL dimension with financial
product consumption. Product saving dimension divided to the three dimension. As seen in
component plot in rotated space below,

Figure 6: Saving Product Dimension Component Plot

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SSERVQUAL-1 representing combination of reliability, assurance and responsiveness

components. This represents subjective factor push which both ethnic of Chinese and
Minangkabau to consume saving products. The factors are certain time, sympathy and
reassuring, dependability, saving services, accurate records, prompt service, willingness to help
customers, prompt response to customer requests, trusted employees, safe feeling.
SSERVQUAL-2 representing combination of assurance, empathy and tangibles components.
They are politeness, best interest at heart, convenient hours, up-to-date equipment and
technology, appeal visual, well dressed and neat appearance and the physical facilities in
keeping with the type of service provided. SSERVQUAL-3 representing combination of
empathy, responsibility, and assurance components. They are customer information, adequate
support, individual attention, personal attention and customer needs.

Figure 7: Credit Product Dimension Component Plot

Like SSERVQUAL above, CSERVQUAL-1 representing combination of reliability, assurance

and responsiveness components. This represent subjective pushing factor of Chinese and
Minangkabau to consume credit products. They are certain time, sympathy and reassuring,
dependability, credit services, accurate records, prompt service, willingness to help customers,
prompt response to customer requests, trusted employees, safe feeling, and politeness.

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CSERVQUAL-2 representing combination of assurance, empathy and tangibles components.

They are best interest at heart, convenient hours, up-to-date equipment and technology, visual
appeal, well dressed and neat appearance and the physical facilities in keeping with the type of
service provided. CSERVQUAL-3 representing combination of empathy, responsibility, and
assurance components. They are information, adequate support, individual attention, personal
attention and customer needs.
7. Discussion
The dimension SERVQUAL'S was formed by using confirmatory factor analysis. Based on the
analysis, SERVQUAL'S dimension for the product of saving and credit divided to the three.
Dimensions for saving products are SSERVQUAL-1, SSERVQUAL-2 and SSERVQUAL-3 and
for credit products are CSERVQUAL-1, CSERVQUAL-2 and CSERVQUAL-3. The elements
from each dimension are discussed in the sub-heading the dimensionality of credit and saving
scales above.

Thus, from the ethnic graph plot there are differences of the consumption pattern of credit and
saving products. This means that Minangkabau customer have been using bank products
optimally. On the contrary the plot graph of the ethnic Chinese usage of product is very strange.
This means that Chinese customers only use credit products to support business activities. Other
factor which support the difference of dimension is the incorporation of principles like Sun Tzu
principles in the conduct of Chinese customers. Practically this traditional principal is still
apparent in a Chinese customer.
Results obtained from this research with regard to the dimension of ethnic consumption differ
from a former research by Parasuraman, Zeithaml, and Berry. Parasuraman, Zeithaml, and Berry
recommended SERVQUAL'S five dimensions namely reliability, responsiveness, assurance,
empathy, and tangibles. According to this research and by virtue of statistical test, there are three
dimensions to SERVQUAL'S. Such disparity is caused by difference in customer type dealt with
in the former research compared to this present research.

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References
Babakus, Emin and Boller, Gregory W.(1992). An Empirical Assessment of the SERVQUAL
Scale. Journal of Business Research, 24, 253-268.
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Journal of Marketing, 53(April) ,92-98.
Brown, Tom J, Churchil, JR Gilbert A and Peter, J Paul . (1993). Research Note: Improving the
Measurement of Service Quality. Journal of Retailing, 69(1) ,127-139.
Boulding, William, Kalra, Ajay, Staelin, Richard and Zeithaml, Valarie. (1993). A Dynamic
Process Model of Service Quality: From Expectation to Behavioral Intentions. Journal of
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Carman, James M.(1990). Consumer Perceptions of Service Quality: An Assessment of the
SERVQUAL Dimensions. Journal of Retailing, 66(1), 33-55.
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Reconciling Performance-Based and Perception-Minus-Expectations Measurement of
Service Quality. Journal of Marketing, 58(January), 125-131.
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Parasuraman, A., Zeitham, Valarie A & Berry, Leonard L. (1994). Alternative Scales for
Measuring Service Quality : A Comperative Assessment Based on Psychometric and
Diagnostic Criteria. Journal of Retailing, 70(3), 201-230.
Parasuraman, A.,Zeitham, Valarie A , & Berry, Leonard L. (1988). SERVQUAL : A Multiple-
Item Scale for Measuring Customer Perception of Service Quality. Journal of Retailing,
64(Spring), 12-40.
Teas, R Kenneth. (1994). Expectations as a Comparison Standard in Measuring Service Quality :
An Assessment of a Reassessment. Journal of Marketing, 58(January), 132-139.

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Teas, R Kenneth. (1993). Expectations, Performance Evaluation, and Consumers’ Perception of

Quality. Journal of Marketing , 57(October), 18-34.
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Listed in ULRICH’S

Antecedents of Counter Work Behavior in Public Sector

Organizations. An Asian Perspective

Sajid Bashir
Riphah School of Leadership
Riphah International University

Abstract
This study attempts to find out some key factors that determine counter work behavior in public
sector organizations of Pakistan. Data was collected from 427 lower level employees working in
various public sector organizations. Results indicate that insufficient salary, cynical behavior and
work family conflict determine counterwork behavior while supervisor support shows a very
weak negative relationship. Public sector organizations have to seriously address these issues as
they are the root cause of inefficiency in these organizations.
Keywords: Antecedents, Counter Work Behavior, Public Sector Organizations, Asian
Perspective

1. Introduction
For decades organizational researchers are focusing on employee behaviors that affect
organizational prosperity. In this attempt negative behavior are gaining an increased attention. As
Martinko, Gundlach & Douglas(2002) term it as a “proliferation of theoretical explanations for
counter- productive workplace behaviors”. Behaviors like absenteeism, turn over have been
extensively researched while extreme negative behaviors like sabotage, theft, illegitimate politics
have received relatively less attention. These behaviors are intended to hurt organizations or
employees (Miles, Borman, Spector, & Fox, 2002). Apart from explaining the phenomena,
studies also attempted to find out factors which determine counter work behavior like personality
traits (Fox & Spector, 1999; Hepworth & Towler, 2004). Penny (2002) reports a loss of $200
billions in USA alone associated with CWB. Mangers and decision makers are concerned to
reduce frequency and likely hood of these behaviors as it is costly for organizations. While most
of these studies were conducted in developed countries, the developing or underdeveloped
countries received relatively little attention in this regard. The cost of CWB in these countries is
unknown and so are the factors which contribute towards development of such behaviors. The

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employees working in the developing or under developed countries are living in much more
miserable conditions than the developed countries. The economic conditions and poor salaries
definitely increases the likely hood of counter work behaviors like theft, sabotage etc. These
facts necessitate a study which can identify factors causing counter work behavior. Thus we have
identified the public sector organizations in Pakistan for analysis regarding counterwork
behavior. The findings will help the decision makers and the researchers to explore ways which
can reduce counter work behavior in these specific organizational settings.

2. Counter work behavior

Among the various definitions of counter work behavior, Robinson & Bennet(1995) defined it is
as behavior which violates organizational norms in some harmful manner. This harm can be for
organization in form of any behavior like theft, sabotage, absenteeism etc. and for individual in
form of drugs; alcoholism etc. Organizations are increasingly realizing importance of reducing
counter work behavior as cost . They are more interested in identification of factors which
determine such behaviors. CWB is quite a complex phenomena as Spector & Fox(2002)
points that this behavior is normally hidden. Thus we can argue that it is more
dangerous for the organizations. “CWB on the other hand is something which can become
a worse nightmare for an organization’s management, as employees demonstrating such behavior
are not non-productive but are counter-productive, because they tend to play a role which
altogether reverses the organization’s progression”(Bukhari & Ali, 2009).
Researchers have attempted to relate these behaviors with various determinants like organizational
justice (Fox, Spector & Miles, 2001) and other factors. Organizations where employees perceive
injustice, they are more likely to engage in counter work behaviors. “Organizational justice is a
mediator of CWB, as it suggests that individuals who perceived their own workgroup to receive
more justice than other units engaged in less counterproductive work behavior” (Flaherty & Moss,
2007). Some researchers have attempted to relate these determinants with types of CWB which are
personal and organizational. Fox, Spector & Miles(2001) consider organizational injustice and
stressors determine organizational CWB while interpersonal conflict determine personal CWB.
Similarly satisfied employees show their commitment towards organization by engaging in

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behaviors which are beneficial for the organizations rather than engaging in such behaviors which
result in counter work behavior. Miles, Borman, Spector, & Fox(2002) relate work environment
and emotions with CWB. There are various components of work environment, organizations must
attempt to focus each of these components to reduce incidents of CWB. There has been extensive
research on emotions and different studies have established the importance of emotions and their
subsequent impact on employee and organizational performance. Thus emotions play an important
role in determining CWB in the originations thus Spector and Fox(2002) consider negative
emotions as a potential determinant of CWB. The negative emotions like hopelessness, frustration
and disgust are generally referred to as cynicism (Anderson & Bateman, 1997) which can result in
non productive behaviors(Storm & Spector, 1987). Mount, Ilies & Jhonson (2006) consider
personality as a determinant of CWB. It is important to note that though external factors contribute
towards determining CWB, internal factors do play a role in this regard , thus type of personality
also contribute towards explaining the phenomena of CWB. Type and level of employment also
received attention by researchers some attempted to show which type of employees is more
vulnerable to CWB” Temporary workers had lower job performance and exhibited more counter
productive behaviors”(Posthuma,Campion & Vargas,2005).

While CWB is one extreme of employee behavior, the other dimension to continuum is
Organizational Citizenship behavior (OCB) which is described as “defending organization when
it is criticized” (Turnipseed & Rassuli, 2005). Dalal(2005) suggest that these concepts are
opposite as one (CWB) is harmful while other(OCB) is beneficial for the organization. Similarly
Baker(2005) is of the view that CWB and OCB are negatively correlated. Thus the concept of
CWB is important to understand as if organizations are able to reduce or eliminate CWB it will
result likelihood of OCB in the organization which is a beneficial for the organizations.
These diverse findings indicate that a number of factors need to be considered before analyzing
the phenomena of CWB. The determinants of CWB can not be confined to few determinants
rather there is an exhaustive list of factors which determine CWB. However it seems difficult to
analyze all factors in one study especially in a country like Pakistan where these behaviors
already stand under researched. The factors selected for the present study include compensation,
supervisor support, work life conflict and an interesting variable i.e. organizational cynicism.

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These variables have been identified based on findings of different studies relating these
variables with CWB. Based on findings of earlier studies about CWB, the following hypothesis
will be tested in the present study:
H1: Organizational cynicism is positively associated with counter work behavior among civil
servants of Pakistan.
H2: Good compensation practices are negatively associated with counter work behavior
among civil servants of Pakistan.
H3: Supervisor support is negatively associated with counter work behavior among civil
servants of Pakistan.
H4: Work life conflict is positively associated with counter work behavior among civil
servants of Pakistan.

3. Methodology
3.1 Questionnaire
The CWB questionnaire was adopted from Bennett and Robinson (2000), Organizational
cynicism was measured using a scale developed by Brandes, Dharwadkar& Dean (2000), Pay
satisfaction was measured using Heneman and Schwab (1985) Pay Satisfaction Questionnaire,
Supervisor support was measured using a questionnaire developed by Ramus and Steger (2000)
while work life conflict was measured through an instrument developed by Pare, Tremblay &
Lalonde (2001). The questionnaires were tested for reliability value of each scale showed a
satisfactory value.
The response was required on five point Likert scale. The questionnaire was accompanied by a
short request explaining the importance of the study. It was distributed to HR managers/
administrative officers of different government organizations.

3.2 Population & Sample

The data was collected from employees working in various ministries of the Federal government
of Pakistan. The sample included the lower level employees. A total of 500 questionnaires were
distributed out of which 441 were received back but 427 were valid thus making a response rate
as 85%. Following table describes various character tics of sample:

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Table: 1 Sample Characteristics

Description Range Frequency Percentage
Gender Male 308 72%
Female 119 28%
Age(years) 20-29 207 48%
30-39 145 34%
40-49 55 13%
50 and above 20 5%
Tenure (years) 1-9 288 68%
10-19 103 24%
20-29 23 5%
30 and above 13 3%
Native language Urdu 93 22%
Punjabi 225 53%
Pushto 63 15%
Sindhi 22 5%
Balochi 11 2%
Others 13 3%

The sample composition indicates that majority of respondents were male employees. The
percentage of women working in public sector organizations of Pakistan is quite low. There are
certain reasons for this low percentage like a very low literacy rate in Pakistan especially for
women. As a cultural norm in most rural part of the country women are not allowed to have
education while in urban areas the trend is changing. Still the women who get education are
mostly restricted to join organizations as traditionally they are supposed to look after home
affairs. This makes the percentage of women in the organizations quite low. However women are
striving hard to establish their presence in these organizations and now a days we can find
women working at quite decisive positions in the organizations as well. The other factor
considered for data collection is age of respondents. The data was collected mostly from
employees having age less than 40 years. Since studies suggest possibility of counter work
behavior more in younger employees. Similarly the majority of respondents were having tenure
in organizations less than 15 years. To ensure having opinion of respondents from entire country,
the languages section indicates that respondents belong to different geographical areas of
Pakistan. Thus every possible effort was made to collect data from sample which is
representative of population

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4. Results
Table: 2 Correlation Analysis
Variable Mean SD CWB Org Cyn Comp SS WLC
CWB 3.14 0.53 1.00
Org Cyn 2.64 0.58 0.55** 1.00
Comp 2.03 0.78 -0.22** -0.20 1.00
SS 2.09 0.66 -0.039 0.01 0.09** 1.00
WLC 2.33 0.68 0.13* 0.10** -0.06 0.42** 1.00
**p≤0.01 , n =427, SD= Standard Deviation, CWB= Counter Work Behavior, Org Cyn =
Organizational Cynicism, SS= Supervisor Support, WLC= Work Life Conflict

Correlation coefficient matrix indicates a strong and significant relationship between

organizational cynicism and counter work behavior (0.55**, **p≤.01) while the relation ship
between compensation and counter work behavior is significantly negative (-0.22**,
**p≤.01). Though the relationship between supervisor support and counter work behavior is
negative (-0.039) but it is very weak and insignificant. Work life conflict is positively correlated
with counter work behavior (0.13*,*p≤.05), the possible reasons for which will be explained in
discussion.

Table: 3 Regression Analysis

Independent Variable β t-value Sig.

Organizational Cynicism 0.52 12.75 .000
Compensation -11.55 -2.82 .005
Supervisor Support -0.78 -1.76 .078
Work Life Conflict 0.11 2.63 0.09
n =427, R Square = 0.334, Adjusted R Square = 0.327, F =52.85, Significance F = .000,
Dependent Variable = Counter Work Behavior

Regression analysis was used for analyzing various relationships among variables. Value of R
square is 0.33, thus the independent variables explain only 33% variation in the dependent
variable. The value is quite low probably due to the reason that very few determinants of CWB
were selected for the present study. There are number of other factors which affect CWB but the
present study is limited to four factors thus value of R square is relatively low, which can be
improved to a significant level if some other variables are added since 67% variation in the

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dependent variable i.e. CWB remains unexplained. In analysis of variance value of F is

significant at 52.85. Regarding individual impact of independent variables on dependent
variables the t value of organizational cynicism is significant at 12.75; the t value of
compensation is significant at -2.82 while value of supervisor support is insignificant at -1.76.
The t value of work life conflict is significant at 2.63.

5. Discussion
The findings indicate some interesting dimensions of CWB in Pakistan. The strong relationship
between organizational cynicism and CWB indicate that cynicism in any form is a threat for the
organizations. The findings are indicative of the fact that employees in public sector are having
high level of cynicism for which a number of factors can be attributed to this hopelessness or
frustration. During our discussions with public sector employees it was observed that they are
highly dissatisfied with their jobs which ultimately resulted cynicism. The lower level employees
face severe discrimination in the organizations. Their opportunities for development are quite
low ; rewards have no relationship with performance while authority and decision making is
totally centralized at top. The working conditions are quite poor. In extreme hot season when
temperature rises up 45 centigrade, there are no proper cooling arrangements, the office layout
and other facilities are quite poor. Employees are forced to sit in very narrow spaces while senior
management in public sector organizations enjoy a luxurious life. Spacious offices with all the
facilities and a contingent of personal staff(who are also supposed to work at their homes), rapid
career growth, foreign trainings etc. are part of their perks. We believe the major cause of
cynicism in public sector employees is this discrimination. Very high rate of absenteeism clearly
indicates that CWB is among the most volatile issues in public sector organizations of Pakistan.

Compensation and supervisor support are negatively correlated with CWB in public sector
organizations. This relationship indicates that incidents of CWB can be reduced to a large extent
if employees are rewarded fairly. On average a lower level employee earns $100-$120 per month
in which he/she supposed to feed the family, pay the rent, school fees and also survive in a
collectivist society where a big chunk of earnings is spent in social events like marriages etc. The
government provides no subsides thus around 60-70% of this meager income is spent in payment

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of utilities and transportation. These public servants and their families are living miserable lives.
Obviously in these situations we can only expect CWB as an eminent outcome. Supervisor
support is negatively related with CWB but the strength of relationship is very weak. The
possible reasons for this weak relationship can be attributed to lack of trust in leadership in
public sector organizations. The organizations are following a bureaucratic structure with top
management enjoying all the privilege and the mangers are least concerned about the welfare of
lower level employees. The approach of supervisors at any level in these organizations is more
production oriented rather than employee oriented. Employees are not consulted in any decision
making rather they are supposed to follow the orders. Thus supervisors have no role to play to
reduce counter work behavior in employees.

Work life conflict is positively associated with CWB. The increased pressure for down sizing has
made life of lower level employees more difficult. Massive layoffs have enhanced the workload
on the existing employees. Employees have to do a lot of additional tasks and that too without
any additional benefits. The frequent late sittings in the office have badly affected employees
work life balance and economic conditions. Most of lower level employees make both ends meet
by doing some additional job after office hours but now these late sittings do not allow them to
do any part time job. Another major impact has been on the health of these employees as they
can not afford to buy food if they have to work for late hours or they are forced to buy un
hygienic cheaper food from market. Though no such data was available in these organizations
we found a number of employees being patients of hepatitis and such diseases caused by having
un-hygienic food. The health facilities provided to these employees and their families are very
poor. In case any employee or a family member fell ill they have to wait for days to get an
appointment from a government doctor and to get the medicine and other treatment. All these
factors have made the work life conflict quite severe. As a result the employees are forced to
exhibit CWB. For example as per our observation one of the major cause for absenteeism is due
to the reason that employees spent a significant amount of their time standing in queues for
having a medical check up at hospitals, to deposit utility bills in banks to stand in queues to buy
cheaper food items from government stores. Although no one in these organizations have ever

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attempted to calculate cost of this absenteeism, we believe that government is loosing millions of
dollars for this mismanagement by its decision makers in these organizations.

6. Conclusion

The world is changing as so are the public sector organizations around the world but the pubic
sector organizations in Pakistan are still operating following obsolete styles of management
having no concern for employees. There is an urgent need on part of decision makers to address
this issue and to focus on reducing counter work behaviors among employees. Traditional
control system can force them to work in offices but it can not restrict them from exhibiting
counter work behaviors. This can only be done if employee behaviors are controlled through
consideration and employee orientation otherwise the CWB will remain an integral part of public
sector organizations of Pakistan.

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Listed in ULRICH’S

Portfolio Diversification and Financial Performance of

Mutual funds in India

Nidhi Walia
Faculty – PURCITM
Thapar University, Patiala
Dr. (Mrs.) Ravi Kiran,
Assosiate Professor,SOMSS, Thapar University

Abstract
Financial innovations have become the central driving force taking any financial system towards
economic efficiency. Indian Capital market has shown a spurt growth with financial innovations
becoming a regular feature leading to change in investor’s preferences for newly fangled
financial innovations. Mutual fund has become an obvious choice for most of the investors
because of its performance in terms of providing higher returns at low risk. Although past
performance of fund is an important parameter in selecting a particular Asset Management
Company (AMC) for investment yet some other parameters that should be considered involves
knowledge and diligence of fund managers in deciding asset mix for funds as it results in
significant difference in financial performance of fund as compared to other funds. This paper
employs Beta (β), Fama, Sharpe (Si), Treynor (Ti) as a risk measure that measures the variability
of fund in terms of return provided and if fund manager was able to provide return over and
above risk free return and expected return. Results of the study show that funds under study vary
to some extent in terms of risk level assumed and returns generated from investment. Difference
in investment style adopted by various funds managers in designing portfolio with updated
market knowledge certainly yields them superior returns in comparison to other funds.
Keywords: Net Asset Value (NAV), Asset Management Companies (AMCs), Asset mix,
Portfolio risk, Financial return, Investment portfolio
1. Introduction
Mutual fund industry in India has already entered in the world of exciting innovations that has
lured investors to invest in Mutual funds as a preferred investment. Intense competition put forth
by private players in this industry has forced fund managers to foster innovations in existing
schemes that can satisfy the investment objectives of investors. Reduced complexities, strong

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integrated network and decreasing market imperfections are luring Indian investors to invest
their domestic savings into capital markets but risk averse attitude of Indian investors do not
allow them to directly participate in this race. Thus, investment through mutual fund is most
suitable option that provides them with maximum return at minimum risk. Mutual funds industry
has moved from offering a handful of schemes like equity, debt or balanced funds to liquid,
money market, sector specific funds, index funds and gilt edged funds. Beside this recently
mutual funds have introduced some special specific funds like children plans, education plans,
insurance linked plans, and exchange traded funds. This is the reason that over the time Indian
investors have started shifting towards mutual funds instead of traditional financial avenues.
Automated approaches designed by new technology and data mining is helping Asset
Management Companies (AMCs) of mutual funds in strategic planning and investment decision
making by uncovering the hidden patterns and predict future trends and behavior in financial
markets.
Mutual fund AMCs take care of every specific need of investors especially their risk appetite and
accordingly design well-diversified portfolio that can provide returns to match investor’s
expectations. Thus, complete focus of fund managers is on striving to achieve not less than rate
of return consistent with risk level they assume. On the other side investor’s are generally more
careful while investing and presence of rationality among investors demand more returns at low
risk. Absence of perfect knowledge about financial markets create problem for investors on the
issue of evaluating mutual funds. As a result most investors select AMC on the basis of word of
mouth advertisement and sometimes over tempting returns by a particular fund lure them.
However, fund managers vary in investment styles and knowledge they possess that leads to
different outcomes even for same fund run by different AMCs. This ultimate difference between
investment style opted by fund manager in designing portfolio and investment objective set by
investors poses a serious threat. Thus, it becomes imperative for investors to thoroughly
investigate fund before investing and should not use past returns as only mean in selecting a
particular fund scheme.

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2. Literature Review
Mutual fund industry in India although working at excellent pace is still far behind from the
heights it should have touched as it is still ranked at 19th position among worldwide mutual fund
markets. Despite the reason that Indian Mutual fund industry possesses high potential, very few
researches have been conducted to study the working of mutual funds and which relative
measure should be used to measure their performance. Huge literature available on predicting
stock market returns has proved that generally investors consider stock’s past returns to decide
future returns (De Bondt, 1993) and past returns are positively correlated with investor’s
expectations from future return (Fisher et. al, 2000) but return alone cannot be used as a measure
of evaluating the performance of mutual funds as most commonly some highlighted stocks are
taken into portfolio for cosmetic purposes (Neal, 2001). Return ambiguity and changes in risk
perception of individual investor affect action taken in risky financial market. Computational
complexities are not only the reason why rationality assumption is challenged rather challenges
also come from cognitive reasoning (Anderson 1991) where question is how optima human
beings are. Based on different investment objectives fund managers have to use their specialized
skills and adopt varied investment styles. Gottesman & Morey (2006) conducted research to find
relationship between manager’s education and mutual fund performance and concluded that
certainly managers with higher intelligent level acquire advance knowledge on market
movements and can use these skills to get superior performance.

Analyzing the performance of mutual fund is a critical issue. Different researchers have used
varied parameters to evaluate fund schemes with respect to their ability to generate returns and
skills to reduce risk. Haslem (1988) used fund’s systematic risk, beta coefficient to compare
portfolio risk relative to market risk. Investment in equity funds is the obvious choice of high-
risk profile investors. Treynor (1965) and Sharpe (1966) provided a specialized index to measure
superfluous returns by equity funds. In this regard they differ in their evaluation criteria as
Treynor used only systematic risk to measure portfolio performance but Sharpe used total risk to
evaluate fund Performance. Fama (1972) provided a different approach to measure performance

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of mutual funds and accordingly he developed a measure in the form of comparing actual
realized return and expected portfolio return.
Financial innovations have become the central driving force taking any financial system towards
economic efficiency. Similarly innovations in Indian mutual fund industry have completely
given it afresh look. Study by Kane (1978) has described the process of avoiding regulations, as
“loophole mining” which suggests that when regulatory constraints are so burdensome that large
profits can be made by avoiding them, financial innovations is more likely to occur. These
financial innovations may look for searching either entirely new product or making some
structural changes in already built financial products to focus on investor’s requirement. In
Indian context very few studies have been conducted on mutual funds to measure their
performance. Gupta & Sehgal (1997) performed benchmark comparison of 80 mutual fund
schemes during the period from 1992-1996 and concluded that industry performed well during
this period. Bello (2005) matched a sample of socially responsible funds with randomly selected
conventional funds to investigate difference in characteristics of assets held, degree of portfolio
diversification and effect of diversification on fund performance and concluded that socially
responsible mutual funds does not differ significantly from conventional funds in any of these
attributes. Panwar & Madhumati (2006) studied sample of public sector sponsored and private
sector sponsored funds to investigate the differences in characteristic of asset held, portfolio
diversification and variable effect of diversification on fund performance during 2002-2005 and
concluded that private sector funds do not differ significantly in terms of mean return but differ
significantly in terms of average standard deviation and average covariance.
3. Research Objectives
With Mutual fund luring investors with innovative schemes to satisfy investor’s quest, it has
become imperative to study the working of mutual funds in India with reference to strategies
opted by fund managers of different AMCs that result in different return for investors. Moreover
investors are also required to analyze some key parameters of fund they are selecting to invest
besides looking into the historical returns provided by the fund scheme. To address this issue
present study was initiated to analyze various parameters of funds that highlight and disclose the
operational efficiency of funds along with different type of risks associated with the fund. The
study was conducted with following objective:

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To study the investment style and distinguished strategies of mutual funds in India those help a
particular AMC to yield superior return than other funds.
To compare the operational performance of selected funds in term of return benefits provided to
the investors.
To analyze the risk level assumed by investors that help fund managers to get return above risk
free return.
To conduct this study only four mutual funds were taken under study that are most commonly
preferred by a common investor either because of their strong fundamentals or because of their
aggressive marketing that include UTI mutual fund, SBI Magnum mutual fund, Reliance mutual
fund and ICICI Prudential mutual fund. Although all these four AMCs have already launched
varied fund schemes to suit individual investors but only equity, income and balanced funds
were taken under broad research purview.

4. Performance evaluation of Mutual funds

A rational investor generally hand over their savings to mutual fund AMCs in the anticipation of
yielding abnormally high return, assuming fund managers possess updated market knowledge
and professional skills. However, despite the fact that fund managers make every possible
attempt to design fund schemes according to investor’s objectives, yet they vary in deciding the
proportion of asset mix and their stock selection abilities. These differences in investment style
and market knowledge of fund manager yield different returns even to the funds categorized
under same umbrella. This study endeavors to identify the hidden practices that fund managers
follow and uses as a key differentiator. The study initially compares the important parameters of
four funds under study for their performance evaluation and simultaneously provides a
comparable choice of fund managers for deciding asset-mix.

4.1 Analysis Of Equity-Growth Funds

Table 1 compares the basic parameters of four mutual funds under our study. Expense ratio of all
the four funds when compared shows that SBI Magnum equity fund-Growth has got top position
with Ep=2.50% and UTI Equity fund takes the next lead with Ep=1.94%. With regard to

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volatility in NAV UTI seems to be performing well with 52 week highest on 37.88 whereas
Reliance equity fund has a slow move with 13.46. UTI seems to be playing well with healthy
strategies of investment as the 52 week low NAV in this fund was 23.63 in comparison to
Reliance Equity Fund at 8.21. As a general practice a fund with higher portfolio turnover rate is
not accepted to be excellent but in case of Reliance Equity Fund-Growth highest level of
portfolio turnover rate i.e 114% should not be given a negative look as it is providing higher rate
of return than all other funds under our study. The only negative aspect about higher portfolio
turnover rate is that it adds to transaction cost but if this increased return is offsetting the
increased transaction cost it cannot be considered negative. SBI magnum Equity fund has got the
lowest portfolio turnover rate and along with it is also providing the highest rate of return, which
reveals that with minimum shifting of funds SBI Equity plan is performing absolutely excellent.
Table 2 unveils the comparative returns of four Mutual funds that are known for their excellent
performance and most commonly preferred by general investors because of several reasons. SBI
Magnum Equity fund-Growth has been proved to be highly volatile because of higher level of
risk assumed by it, thus, as expected it has been providing high rate of return in comparison to
other three funds under our study. Average results of one-month performance shows that SBI
Magnum equity fund-growth has highest return of 27.31% whereas ICICI Prudential Aggressive
Plan-Growth has lowest return 15.03%. Performance of previous three months average return is
pretty appreciable in case of SBI and UTI Equity fund growth with 77.31% and 50.86%
respectively. Results of return during last one year are negative for all mutual fund plans under
the study and the condition was quite obvious, escapeless and threatening. This particular
negative trend during last one year’s result shows that financial crisis has also put its shadow on
Mutual fund industry in India and as a result all top class mutual funds had to suffer despite the
best strategies adopted by them. Data of last three years performance again declare SBI Magnum
equity fund as a champion among other three funds under the study with highest return of
19.59% followed by Reliance Equity Fund-Growth with 15.06%.

Table 3 highlights the various risk estimations that depict the variability or fluctuations in the
return generated by various funds. Data estimates suggest that among four Mutual funds that
were selected for this study, highest variation is shown by SBI Magnum equity fund-Growth

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with σ 5.48 whereas least fluctuations are shown by ICICI Prudential Aggressive plan -Growth.
As standard deviation is a measure of total risk assumed by securities i.e both systematic and
unsystematic risk it means there must be some specific security present in SBI Magnum Equity
fund and Reliance Equity fund that is causing more variability in returns. Beta is used as a
measure of systematic risk only and as shown in table above again SBI magnum equity plan-
Growth is showing higher level of β=0.92 whereas ICICI prudential Aggressive plan has been at
least level with β= 0.59. Data given in above table can not infer that SBI mutual fund are most
risky, however it can be interpreted that this plan is suitable particularly for those investors who
want to avail the superlative advantage of market movements as beta signify fluctuation in NAV
of a fund vis-à-vis market. Higher level of Beta in case of SBI and Reliance equity plan signify
that their NAVs are more responsive to market.
Treynor index of all the four equity fund schemes is showing unfavorable performance as this
particular measure signify the ratio of return generated by fund over and above risk free return.
With regard to this parameter all the four funds are showing negative performance with a
negligible difference. Reliance and ICICI Prudential equity funds are showing their equating
underperformance with negative Ti= –0.69. Similarly Sharpe ratio shown in table 3 is showing
the underperformance of all mutual funds taken under sample. Sharpe ratio depicts reward per
unit of total risk and in our results all the four funds are showing underperformance with a very
thin ignorable difference as Reliance equity fund has an Si=-0.12 and SBI Equity fund has Si=-
0.10. Fama as a quantitative measure of risk is here depicting the compared performance of
return with required return corresponding to total risk associated with it. SBI Magnum equity
fund with highest level of Fama indicates that fund manager has earned returns well above the
return corresponding to level of risk taken by him whereas UTI Equity fund with lowest level of
Fama = 0.02 concludes the poor stock selection skills of fund manager in comparison to other
funds taken under sample. This particular comparison reveals the fact that out of these four
Equity funds taken under sample SBI Magnum Equity fund is performing reasonably well by
providing excess return over and above required rate of return to compensate total risk assumed.
However, Lower level of Fama in case of UTI Equity fund-Growth signify lower level of risk
assumed by fund manager and thus it will be suitable more for risk averse investors.

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4.2 Analysis of Income Funds

Income funds are especially designed for conservative investors who want to get regular periodic
income from their investment instead of capital appreciation with least risk bearing securities in
their portfolio. Majority of investments that comprise of the portfolio of income fund ranges
from preferred stock, money market instruments, bonds and government securities. Investment
of these funds in low risk bearing securities does not assure average return higher than risk free
return. Analysis of four income funds under our study show that ICICI Prudential income fund-
Growth provides highest variation in NAV during preceding 52 weeks with Range (R) band
6.67. UTI Bond fund-Growth are also showing even higher level of variation R= 4.90 (Table 1).
Comparison of Expense ratio, which highlights the operational efficiency of fund, also shows
that SBI Magnum Income fund-Growth bears highest expense ratio of 1.85% whereas UTI Bond
Fund-growth bears the lowest expense ratio of 1.40% among the four funds under our sample
study. Table 2 provides the detailed comparison of historic as well as current returns provided by
selected sample funds under the study. An analysis of these returns are clearly depicting that
financial crisis putting its impact on all industries has resulted into negative returns for all the
funds during last one year. However in case of income funds private sector funds i.e Reliance
income fund –Growth and ICICI Prudential income fund-Growth are providing pretty good
returns than public sector funds with ICICI providing highest return of 22.68% during last one
year and SBI Magnum income fund growth providing lowest return of 3.64%. Analysis of
average returns during last three years and five years also declare ICICI Prudential and Reliance
income funds providing higher returns than public sector funds. Table 3 highlights the
comparative risks assumed by different fund schemes. Although comparison of standard
deviation of four funds under study does not reveal any significant difference however ICICI
Prudential income fund- growth shows highest fluctuations in returns provided to investors with
σ = 1.47 whereas SBI Magnum Income fund-Growth shows lowest fluctuations with σ = 1.03.
Unlike balanced and equity funds Sharpe ratio in this case does not show negative results.
Highest Si =0.25 as shown by ICICI Prudential income fund- growth highlights the superior
performance of fund in comparison to other four funds whereas SBI Magnum income fund with
Si= 0.02 shows the underperformance of fund. ICICI prudential income fund-growth with β=
11.85 and Reliance income fund-Growth with β= 10.57 explains the intense ability of fund’s

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responsiveness to market changes whereas SBI Magnum income fund with β= 6.73 explains
that this fund is least responsive to market fluctuations. Comparative analysis of Treynor (Ti)
shows that any fund is not able to provide extreme superior returns over and above risk free
return and all the funds are ranging in a domain of little significant difference. Risk measure in
terms of Fama provides negative results for all the four funds that explain that any fund is not
able to provide return above the required rate of return.

4.3 Analysis of Balanced Funds

Balanced fund is a perfect choice for the investors who wish to invest in scheme that can provide
them a blend of capital appreciation along with income. Funds collected from unit holders in this
case are invested in stock, money market instruments and bonds. Although balanced funds are
assumed to be less risky than equity funds because of less proportion of funds invested in equity
shares yet they are subject to market fluctuations. Balanced funds select some stocks of well
performing sector and some designated proportion is invested in government securities and
bonds making it a well-diversified portfolio. Data in Table 1 highlight the most important
parameters that are evaluated before selecting a particular fact. Among these four funds under
our study UTI balanced fund is considered to be performing well with highest NAV but it also
show higher volatility with Range= 22.52, whereas Reliance balanced fund seem to move slowly
with highest NAV 16.30 during last 52 weeks whereas it also show less volatility as compared to
other funds with range of variation being 6.99. SBI Magnum Balanced Fund-Growth bears
maximum expense ratio of 2.50% whereas Reliance balanced fund has expense ratio of 2.25%
that makes it clear that all funds do not show any meaningful variation with respect to expense
ratio. Comparison of portfolio turnover ratio of these funds reveal that Reliance Balanced fund
has highest portfolio turnover ratio of 157% which at some time restrict investors willing to
invest in this fund but comparison of returns provided by this fund highlight that this fund is
providing highest returns to investors as compared to other funds under our study that will sub
set the extra cost born by fund. Secondary data compiled in table 2 provides a detailed
comparison of historical and current returns provided by selective funds under our study that
reveals that during past performance SBI Magnum balanced fund outperforms all other funds
with highest return however during last one month Reliance Balanced fund provides highest

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return of 22.30%. ICICI Prudential Balanced fund is not showing a positive working style with –
4.51% return during last one year and 15.69% return during last one month, which is
comparatively awfully less than other funds.
Data in table 3 reveals the various risk estimations of four funds under the sample study that
highlights the variation in returns generated by these funds. Most widely accepted measure of
variation in data is σ and a comparative estimations of selected funds show that UTI balanced
fund-growth has least fluctuations in returns provided by them to the investors with σ=3.61.
Reliance Balanced fund-growth shows highest variation in returns with σ = 4.35. Beta (β) as a
risk measure estimates only systematic risk present in securities held by individual fund scheme.
Analysis of (β) of these four funds does not show a significant difference except only Reliance
Balanced Fund-Growth least risky among four funds with β= 1.08. Global crisis putting its
impact on mutual fund industry in India is clearly reflected from negative Treynor (Ti) in all the
four funds. This particular measure signifies the ratio of return generated by fund over and above
risk free return. UTI Balanced fund-Growth and ICICI Prudential fund-Growth are showing
similar Ti =-0.48 whereas Reliance Balanced fund shows Ti =-0.16. Sharpe ratio depicts reward
per unit of total risk and in our results all the four funds are showing underperformance with a
very thin ignorable difference. Fama as a quantitative measure of risk is here depicting the
compared performance of return with required return corresponding to total risk associated with
it. Reliance Balanced fund –Growth with high Fama implies that fund manager is able to prove
his managerial skills in order to tap market returns whereas UTI Balanced fund-Growth with
negative Fama signifies that fund manager did not performed well to avail the recent up trends in
market.

5. Portfolio diversification: Analysis of Asset mix

Different investment styles of fund manager are reflected from the diversified portfolio designed
by them. These sophisticated strategies adopted by fund managers help them in outperforming
their performance in comparison to their competitors. Aggressive style of fund managers force
them to design portfolio with highly risky securities that have tendency to provide high returns
whereas conservative fund managers select securities for their portfolios with minimum expected
risk and expected calculated returns. However fund managers have to match their knowledge and

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investment skills in accordance of investment objectives set by investors. A comparative analysis

of portfolio designed by fund managers reveals that among equity-growth fund scheme as per the
investor’s expectations majority proportion is invested in equity stock that may be risky but has
high growth potential in terms of regular return and capital appreciation (Table 4). Among four
funds under study SBI magnum equity fund growth invests majority of funds in equity stock i.e.
88.34% whereas ICICI Prudential equity fund growth seems to be taking calculated risk by
investing only 70.86% funds in equity stock but this high level risk taken by SBI magnum equity
fund seems to be paying it highest return 27.31% during last one month whereas ICICI
Prudential equity fund- growth gets only 15.03% during same period. In addition to this analysis
also provide that additional risk borne by SBI magnum equity fund- growth has resulted in
highest negative returns –1.85% during last one year when bearish trend was following Indian
stock market whereas ICICI Prudential equity fund- growth with its strategy of assuming
calculated risk resulted in –1.03% returns in the same period. Reliance equity fund seems to be
adopting a different investment style by assuming high risk for 76.44% investment whereby
23.56% investment is held completely risk free as liquid current asset. Ability of fund manager
to maintain equilibrium in risk return trade off under this fund resulted in comparatively high
return of 22.54% during last one month and during negative trends following global financial
markets Reliance equity fund proved to be least risky with –0.52% returns. UTI equity fund-
growth also seems to follow a same pattern of SBI magnum equity fund investing more in equity
stock (86.36%) but stock selection abilities of fund manager are doubtful in this case as they
provided 19.04% return during last one month which was comparatively pretty less than 27.31%
provided by SBI magnum-equity fund for same proportion of equity stock held in their portfolio
whereas comparison of returns during last one year also show that fund provided highest
negative return (-4.73%) among four fund funds under study.
Analysis of balanced growth scheme (Table 4) reveals that UTI Balanced fund held maximum
proportion of their stock in equity shares (79.50%) and ICICI Prudential balanced fund held less
proportion in equity stock (57.28%) and a significant gap of returns earned by two funds 20.93%
and 15.69% respectively during last one month can be reasoned out as high risk assumed by UTI
Balanced fund. Reliance balanced fund again adopts a completely different investment style with
67.21% investment in highly risky equity stock and holding remaining funds as a complete risk

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free investment. This investment style adopted by Reliance fund manager have resulted them
yielding highest return 19.39% during last one year in comparison to SBI Magnum that invested
71.69% of total portfolio funds in highly risky equity stock but yield only 6.7% return during
same period. These results reveal that stock selection capability of fund manager and his
investment style decides the extent up to which a particular fund can satisfy investor’s
investment objectives. Comparison of SBI magnum balanced fund and UTI balanced fund also
reveal that although both the fund manager believed in putting more proportion of fund in equity
securities yet fund manager of UTI Balanced fund seem to be less sharp and analytic as
compared to SBI Balanced fund as difference in stock selection philosophy of fund managers
result in significant gap between the returns provided by these funds with respective risks
assumed.
Comparison of income funds of these four AMCs reveals that as per the fund scheme these funds
are designed for risk averse investors so no proportion of fund is held in equity stock. Fund
portfolio is invested in either debt or liquid current assets that are known to be completely risk
free. Among these funds under study ICICI Prudential invst huge proportion of funds in debt
securities (97.15%) whereas UTI Bond fund with similar vision invest only 63.18% in debt.
Comparison of return during last one month yield negative returns for all the funds but returns
calculated during last one year reveals that ICICI Prudential income fund was able to gain pretty
well (22.68%) for the level of risk assumed whereas UTI Bond fund yield 8.83% return during
the same period. SBI magnum Income fund has been showing underperformance as compared to
other funds under study with 75.04% investment in debt it yields lowest return 3.64% during last
one year. Again this poor performance of SBI magnum Income fund can be attributed to the in
competencies of fund manager’s stock selection capabilities. Reliance income fund with 72.46%
investment in debt securities performs well with its well - designed strategies and yield 15.38%
return during last year. Thus, overall investment styles of these selected funds reveal that fund
manager’s vision, investment style and stock selection capability make a significant difference in
returns they offer at a calculated risk.

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6. Conclusion
Increased risk appetite of investors along with improved regulations of financial market has
attracted the attention of investors towards mutual funds. Comparative analysis of selected funds
operating in India reveals that a fund manager with different investment style of deciding asset
mixes for their portfolio certainly yields higher returns. A general assumption of assuming high
risk by investing in equity stock to yield higher return does not sound valid in absence of
diligence of fund managers’ knowledge. Financial performance of Reliance Mutual funds reveals
that dissimilar style adopted by fund managers have yield higher return with least calculated risk
because of their precision in deciding asset mix for their portfolios. SBI magnum fund seems to
be performing well with highest returns offered by them in case of equity-growth and balanced-
growth funds but analysis of their investment style and asset mix reveals that they assumed
maximum risk by investing maximum funds in equity stock. To conclude investors should not
only consider past performance of funds in order to select AMC for their investment but
portfolio evaluation with regard to fund manager’s thoroughness in deciding asset mix is an
important criteria that will eventually match vision of fund managers with investor’s satisfaction.

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References
Anderson, J. (1991), Cognitive Architecture in a rational Analysis, Page1-24, Lawrence Erlbaum
Associates, Hillsdale.
Bello, Zakri.Y., (2005) “Socially responsible investing and portfolio diversification”, The
Journal of Financial Research, Vol.XXVIII, No.1, pp. 41-57.
De Bondt, Werner (1993), “Betting on trends: Intuitive forecast of financial risk and return”
International Journal of forecasting, 9(3), Pages 355-371.
Fama, E.F., (1972) “Components of Investments Performance’, Journal of Finance, (June), pp.
551-567
Fisher, Kanneth, and Meier Statman (2000). “Investor sentiments and stock returns” Financial
Analyst Journal, March/April, Pages 16-23.
Gottesman, Aron.A. & Morey, Matthew.R(2006) “ Manager Education & Mutual Fund
Performance”, Journal of Empirical Finance, Vol.13, pp. 145-182.
Haslem, J.A., (1988) “Investor’s Guide to Mutual Funds’, Prentice Hall International, USA. pp.
24-98.
Kane, Edward (1978), “Interaction of financial and regulatory innovation”, American Economic
Review, May issue, No. 2.
Neal,Edward.S.,(2001) “ Window dressing and Equity mutual funds”,(Accessed online)
(www.papers.ssrn.com)
Panwar,Sharad & Madhumati, R.(2006) “ Characteristic and Performance evaluation of selected
mutual funds in India”(Accessed online) (www.papers.ssrn.com)
Sharpe, W.F. (1966) `Mutual Fund Performance’, Journal of Business, XXXIX, Part-2 (January),
pp.119-138
Treynor, J.L., (1965) “How to Rate Management of Investment Funds’, Harward Business
Review, January-February, 1965, pp.63-75.

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Annexure

Table 1 Fund Facts

Fund NAV 52-week NAV 52-week Expense Ratio Portfolio

High low (Ep) (%) Turnover
ratio(%)
UTI equity fund 37.88 23.63 1.94 58.65
Income - Growth Balanced - Growth Equity - Growth

SBI magnum Equity Fund 32.84 17.51 2.50 48

Reliance equity Fund 13.46 8.21 1.89 114

ICICI Prudential Aggressive plan 23.1 15.72 0.64 NA

UTI Balanced fund 62.8 40.28 2.07 43.14

SBI magnum Balanced Fund 42.05 25.55 2.50 70

Reliance Balanced Fund 16.30 9.31 2.25 157

ICICI Prudential Balanced 36.38 23.17 2.29 1.48

UTI Bond fund 28.12 23.22 1.4 1010.6

SBI magnum Income Fund 22.9 20.35 1.85 NA

Reliance Income Fund 14.65 11.88 1.48 NA

ICICI Prudential Income 30.02 23.35 1.7 NA

Source: AMFI

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Table 2 Fund Performance-Return (%)

Fund 1 month 3 Month 6 Month 1 Year 3 year 5Year

UTI equity fund 19.04 50.86 45.03 -4.73 14.23 21.97

Income - Growth Balanced - Growth Equity - Growth

SBI magnum Equity Fund 27.31 77.31 62.14 -1.85 19.59 27.47

Reliance equity Fund 22.24 56.36 39.28 -0.52 15.06 NA

ICICI Prudential Aggressive plan 15.03 42.11 37.43 -1.03 12.4 19.56

UTI Balanced fund 20.93 51.34 39.2 6.23 11.18 17.03

SBI magnum Balanced Fund 22.03 60.02 44.69 6.7 15.17 26.48

Reliance Balanced Fund 22.30 70.87 54.47 19.39 14.30 NA

ICICI Prudential Balanced 15.69 40.09 31.39 -4.51 8.25 18.24

UTI Bond fund -0.62 2.93 -2.13 8.83 6.99 6.33

SBI magnum Income Fund -0.73 2.57 -1.03 3.64 4.02 3.16

Reliance Income Fund -0.92 3.07 1 15.38 10.5 7.7

ICICI Prudential Income -0.71 6.54 3.49 22.68 12.12 8.14

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Table 3 Analysis of Systematic & Unsystematic risk

Fund Mean SD Si β Ti Correlation Fama

UTI equity fund -0.39 4.07 -0.12 0.68 -0.73 0.68 0.02
Equity - Growth

SBI magnum Equity Fund -0.46 5.48 -0.1 0.92 -0.61 0.92 0.13

Reliance equity Fund -0.4 4.33 -0.12 0.73 -0.69 0.72 0.05

ICICI Prudential Aggressive plan -0.3 3.6 -0.11 0.59 -0.69 0.58 0.04

UTI Balanced fund -0.34 3.61 -0.12 0.91 -0.48 0.93 -0.05
Balanced - Growth

SBI magnum Balanced Fund -0.34 4.08 -0.11 1.05 -0.42 1.06 0.01

Reliance Balanced Fund -0.07 4.35 -0.04 1.08 -0.16 1.10 0.30

ICICI Prudential Balanced -0.35 4.01 -0.11 0.96 -0.48 0.98 0.02

UTI Bond fund 0.23 1.36 0.09 8.48 0.02 8.32 -1.65
Income - Growth

SBI magnum Income Fund 0.13 1.03 0.02 6.73 0 6.6 -1.32

Reliance Income Fund -0.36 1.32 0.19 10.57 0.02 10.38 -1.47

ICICI Prudential Income 0.48 1.47 0.25 11.85 0.03 11.59 -1.55

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Table 4 Portfolio Allocation

Fund Equity(%) Debt(%) Others(%)

UTI equity fund 86.36 3.20 10.44
Equity –
Growth

SBI magnum Equity Fund 88.34 1.49 10.17

Reliance equity Fund 76.44 Nil 23.56
ICICI Prudential Aggressive plan 70.86 29.14 Nil
UTI Balanced fund 79.50 17.12 3.38
Balanced –
Growth

SBI magnum Balanced Fund 71.69 13.52 14.79

Reliance Balanced Fund 67.21 Nil 32.79
ICICI Prudential Balanced 57.28 8.15 34.57
UTI Bond fund Nil 63.18 36.82
Income -
Growth

SBI magnum Income Fund Nil 75.04 24.96

Reliance Income Fund Nil 72.46 27.54
ICICI Prudential Income Nil 97.15 2.85

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Listed in ULRICH’S

Optimization of Design Constraining Factors to Project

Management Success of Public and Private Sector
Construction in Nigeria (An Analytical Approach)

Dr. C.C Nwachukwu ANIVS

FCRMI, Lecturer, Project Management Technology Department, Federal University of
Technology, Owerri, Imo State, Nigeria, West Africa.

Abstract
The failure of many capital projects in the construction sector in Nigeria seems to have emanated
from poor design. Looking at it as a virus silently eating into the fabrics of the growth of
construction industry in particular and the economy in general called for this analysis. The aim is
to identify these factors, determine their individual effect to construction project management
success in Nigeria. Issues that concerns design in any project cannot be undermined as they
provide perfect guide to the system and the initiators of the project proposals. The study of
design related factors to project success is therefore very relevant as any constrain to the success
in the construction sector has a significant effect on the overall economic growth of the nation.
Data analyses on the subject were computed based on their Relative Relevance Indices of
Attributes. Factor analysis was used to collapse the variables to fewer but interrelated variables.
The major finding is that the design factors exact high level negative influence to success in the
construction project management in Nigeria.
Key Words: Analysis of Design, Relative Relevance, Constraints to Project Success

1. Introduction
Systems design is like a compass that guide developmental process in both the construction and
production sectors of the economy. The role of design in the construction industry cannot be over
emphasized as it gives direction to the implementation process. The conception stage of any
project proposal anchors on the effectiveness of design. A good design is always clear on
material and time specifications which enables the Quantity Surveyor and other project planners
determine realistic time and cost of the project proposal. The client and the financiers rely
heavily on appraisal guide for the initial decision to embark on the project proposal. Therefore,
any ambiguity will send the wrong signal that will result to an eventual failure or abandonment

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of the implementation process. The findings will help project planners and implementers to
design and execute successful construction projects thereby reducing the rate at which projects
fail, abandoned and or collapse in Nigeria. However, design related factors on its self can not
assure project management success in the construction industry as an index without a holistic
analysis of other constraining factors from other subsystems.

2. Objective of the Study

The study is aimed at identifying and analyzing design factors constraining project management
success of private and public sector construction in Nigeria. The analysis will reflect the strength
of each factor and the rate at which it influences failure, abandonment and collapse of
construction projects in Nigeria. The result of the findings if implemented is expected to reduce
the rate at which projects fail in Nigeria environment.
3. Methodology
Data for the analysis was through direct and indirect sources. A five point-Likert scale format
was used in the questionnaire design. Factor analysis was used to collapse the variables to fewer
but interrelated variables; the ANOVA was used to confirm the differences in the level of
relevance of these factors constraining project success. The analysis focused on clients related
problems in the construction of Imo State secretariat by ten different construction firms, the
construction of Owerri Onitsha road and the construction of Oceanic bank building along
Douglas road Owerri, all in Eastern Nigeria, West African Sub-Region. The analytical formula is
RRId = ∑di/DI x 100
4. Literature Review/ Historical Background of the Study
Construction industry has been ranked among the top four out of about twenty economic sectors
in terms of inter-sector linkages. The importance of this sector as an agent of development is
enhanced by its ability to provide gainful employment for the teeming population of the nation.
According to Roy (2005) “it is evidenced that noticeable development and the aesthetic
transformation of the environment is bound up with and predicated on the construction industry”.
Construction industry is a major index as a factor in the social and political integration of the
society and ranks as one of the major budgetary areas of developing economies (Nwachukwu,
2008). The construction industry is proven to be the corner stone and bedrock of rapid economic

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growth of any nation (Bhavesh, 2006). The products of construction industry are desired not for
their own sake, but for the services, which they help to create as any business; social, religious,
economic, industrial activities etc must have a base in form of structure (Nwachukwu, 2008).
According to Eric, 2003, “the industry is likely to remain a major area of development activity as
the need for the provision and replacement of infrastructure become more important in the years
ahead”. The factors that constrain success in project management implementation process, which
include time, cost, quality and material as direct factors and indirect factors of Environment,
Client, Project management, Design and construction seems not to have been addressed
holistically using systems approach. The end result is huge capital expenditure with few or no
successful projects to show for it. This research is limited to the design factors as part of the
indirect factors constraining project management success of public and private sector
construction in Nigeria. Project success constrains as a system are inter-related and have
significant effect individually and collectively on both public and private sectors of the economy,
therefore, no subsystem should be underrated.
5. Design Subsystem Factors
The system designers could be in-house (from the client’s organizations) or consultants from
outside organizations and these make-up the project team. Variables of the design organization
relevant to success include the following: The inability of choosing the right team of designers,
poor payment strategies in paying designers, Designers are not given adequate authority and
freehand to perform effectively, Some designers do not use modern planning techniques in
designing complex projects, the use of ill-experienced design team in major construction
projects, Some clients inability to be realistic and thorough in the definition of the scope of
project before execution, Lack of commitment to the implementation process by the design team,
Inability of the client to show commitment in motivating the design team, Implementing
ambiguous design which can not help in achieving cost schedule and quality objectives, ease in
approving or giving change orders (variations) without thorough consideration of effects on
project objectives by the design team and the client, design not frozen once there is an agreement
on cost, time and quality control system by the design team, bribery and corruption of the design
team in case of public projects in producing quality and environmental friendly design,
specification of unsuitable and foreign imported materials that may not be environmentally

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friendly, recommendation of unsuitable contractors by the design team in relation to some

special works, Lack of effective communication among the design team and other project
stakeholders, managerial competence of the Architect if he leads the design team especially in
handling conflicts within the design team, location problems that prevent designers from
attending to project briefing on site, and design team’s timely response to request for
information and approvals by the project manager.
6. Research Model
The model below was developed as a holistic systems approach to solving the problem of project
failure, abandonment, and frequent collapse of constructed structures in Nigeria. The arrows in
the model show how the variables interrelate and are intra-dependent. However, this study
concentrated on design subsystem factors as an integral part of the whole system constraints to
project success.

TIME
SUBSYSTEM

PROJECT
CLIENT
MANAGEME
SUBSYSTE
NT
SUBSYSTEM

SUBSYSTEM
MATERIALS

ENVIRONMENTAL
COST

SUBSYSTEM

CONSTRUCTION DESIGN
SUBSYSTEM
SUBSYSTE

QUALITY
SUBSYSTEM

Figure 1: The Construction Project Management Success Interactive Model

composed by the researcher based on existing literature.

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7. Public Sector Design Principal Factor Analysis Results

Public sector construction principal factor analysis results show that the factors extracted from
the public sector construction accounted for 90% of the total variance. One of the major factors
accounted for 51.0% of the variance and the next factor for only 10% of the total variations, the
third factor accounted for about 11%, while the remaining factor accounted for only 9%. The
strongest factor in the design subsystem variable loadings are communication gap between
project team, availability of designers to attend to the project and designers timely response to
request for information, approvals, etc. most of the variables load highly and these include- time
and quality control system, recommendation of unsuitable contractor, managerial competence of
the architect, and conflict within design team, adequacy of remuneration of designers and their
authority and responsibility, adequate use of modern planning techniques by designers, detailed
and their authority and responsibility, adequate use of modern planning techniques by designers,
detailed scope definition, build-ability of design, attitude towards and adequacy of cost. The third
variable, planning efforts using modern planning techniques loads high. This factor is therefore
identified as the adequacy of authority and remuneration of design team and their use of modern
planning techniques. The last serious factor is the method and adequacy of remuneration of
design team and the adequacy of the authority free hand giving to them.
TABLE 1: DESIGN SUBSYSTEM EIGEN VALUES PERCENTAGE VARIANCE
FACTORS

A – PUBLIC B – PRIVATE
Factors Eigenvalues Percentage Cumulative Eigenvalues Percentage Cumulative
variance percentage variance variance percentage
variance
1. 1.00280 51.0 51 1.00590 55.0 55.0
2. 0.00340 10.0 61 0.00530 16.0 71.0
3. 0.00190 11.0 72.0 0.00470 18.0 89.0
4. 0.00630 09.0 90.0

Source: Derived From Computer Analysis Result

The success of the design subsystem in the public sector construction is determined by the
following factors: - specifying unsuitable and imported materials and ease of giving variations

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and the adequacy of the authority and remuneration design team and their use of modern
planning techniques, competent design teams commitment to detailed scope definition, economic
design and the achievement of cost, schedule and quality objectives, design team’s
recommendation of unsuitable contractors, the efficiency and effectiveness of the design team
and the adequacy of cost, time and quality control system by the design team.
In the design subsystem, the variables that load moderately and were choosing for this subsystem
analysis are; the right team of designers, ease of approving or giving change orders, bribery and
corruption of the design team and the specification of unsuitable and imported materials. This
factor is represented by seventeen variables and was identified as efficient, responsible and
committed design team, detailed scope definition, recommending competent contractors, all
working together with the overall purposes of achieving cost, time, quality and material
specification standards as an integral aspect of the construction project management success
imperatives.

8. Public Sector Design Subsystem Orthogonally Varimax Rotated Factors

The public sector design subsystem orthogonally varimax rotated factors shows that the strongest
factor in this subsystem that exerts great influence on project success is the efficiency and
effectiveness of the design team and the adequacy of cost, time, quality and material
management control systems. The most highly loading variables are conflict within the design
team and the availability of the designers to attend to the project needs. The other highly loading
variables are the communication gap between the project team and the adequacy of cost, time,
quality and material control system by the design team. The moderately loading variable is the
design team’s timely response to request for information, approvals. The last but not the least is
the managerial competence of the design team’s leader. The next factor is the ability to choose
the right team of designers and commitment, attitude, and responsibility of designers in
achieving cost, schedule and quality objectives loading very high. One variable, realistic and
through definition of scope load highly. The last variable is the build ability of design, load
moderately. This factor is regarded as competent design team’s commitment to detailed scope
definition, economic design, quality objective, achievement of cost and schedule initiatives.

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TABLE 2: DESIGN SUBSYSTEMS

Factor Variable grouping into Dimensions No of Factor Name
variables
loaded per
factor
1. D1 D2 D3 D4 D5 D6 D7 D8 Efficient, responsible and
0.00233 0.00022 0.00869 0.00383 0.00975 0.00766 0.00626 0.00212 14 committed design team, detail
D9 D10 D11 D12 D13 D14 D15 D16 scope definition,
0.00995 0.00996 0.00500 0.00813 0.00052 0.00918 0.00786 0.00641 recommending competent
contractors all working
amicably together with the
overall purpose of achieving
cost, time & quality standard
2.
NIL NIL NIL
3. NIL NIL NIL
4. NIL NIL NIL

Source: Computer Analysis Result

VARIABLE GROUPING INTO DIMENSIONS USING PRINCIPAL FACTORS;
Table 3: Public Sector Construction and B - Private Sector Construction
Factor Variable grouping into Dimensions No of Factor Name
variables
loaded per
factor
1. D1 D4 D5 D6 D7 D8 D9 D10 Managerial capability,
0.00375 0.00516 0.00995 0.00685 0.00247 0.00805 0.00286 0.00518 technical competence &
D11 D12 D13 D14 D15 D16 D17 15 commitment towards
0.00595 0.00352 0.00403 0.00801 0.00593 0.00270 0.00143 achieving cost, schedule
& quality control targets
by the design team
2. D2 D3 Adequate authority and
0.00774 0.00289 2 remuneration of design
team
3. NIL NIL NIL

Source: Computer Analysis Result

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DESIGN VARIABLE GROUPING INTO DIMENSIONS

Table 4: Public Sector Construction
factor variable grouping into dimensions no of factor name
variables
loaded per
factor
1. D9 D13 D14 D15 D16 D17 The efficiency and effectiveness of the design
0.00650 0.00617 0.00459 0.00052 0.00279 0.00648 5 team & adequacy of cost, time and quality
control systems by the design team
2. D1 D5 D6 D7 4 Competent designers committed to detailed
0.00062 0.00169 0.00572 0.00233 scope definition on, economic design &
achieving cost, schedule and quality objectives
3. D8 D10 D11 D12 4 Designers recommendation of unsuitable
0.00816 0.00654 0.00599 0.00123 contractors, imported materials & the ease of
giving variations
4. D2 D3 D4 1 The adequacy of the authority & remuneration
0.00793 0.00052 0.00159 of designers & their modern planning
techniques

Source: Computer Analysis Result

TABLE 5: PRIVATE SECTOR CONSTRUCTION
Fact Variable grouping into Dimensions No of Factor Name
or variables
loaded
per
factor
1. D4 D5 D6 D7 D9 D12 D13 D14 Detailed scope definition, economic
0.00962 0.005790 0.00586 0.00053 0.00292 0.00040 0.00242 0.00855 5 design & commitment towards
achieving cost, time & quality
targets
2. D8 D10 D11 D15 D16 D17 5 Bribery and corruption, specifying
0.00107 0.00051 0.00496 0.00774 0.00507 0.004962 unsuitable materials, variation
conflict resolution & the availability
of the designers to attend to the
project
3. D1 D2 D3 4 Competent designers with adequate
0.00500 0.0015 0.00681 authority and remuneration

Source: Computer Analysis Result

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9. Private Sector Design Subsystems Factor Analysis Results Using Principal Factors
The private sector design subsystems factor analysis results using principal factors shows that the
factors extracted in construction in design subsystem accounted for about 89.0% of the total
variance. One of the dominant factors accounted for 55.0% of the variance; the second for only
16% of the total variation in data input; the third for 18%. The first and strongest factor describes
almost all the design subsystem variable, except the method and adequacy of remuneration of
design team and the adequacy of authority and free hand giving to them which loaded on the
second factor. Some of the variables load very high, others loads high and moderately
respectively. The variables that load very high include: commitment, attitude and responsibility
of design team in the achievement of cost, schedule and quality objectives, the adequacy of
planning efforts using modern planning techniques, the adequacy of cost, time and quality
control by the deign team, communication gap between the project team and the managerial
competence of the design team leader. The variables that loads high includes; choosing the right
team of designers, build ability of design, specification of unsuitable and foreign imported
material, recommendation of unsuitable contractor, conflict within the design team,
distance/location/availability of the design team and the design team’s timely response to request
for information, approvals etc. the three variables that load moderately include; realistic and
thorough definition of the scope of the project before site work. Ease of approving or giving
change orders and the bribery and corruption of the design team. The next variables that load
moderately are method and adequate remuneration of design team and the adequacy of authority,
and freehand giving to the design team. The last factor is defined by no variable and the loadings
of all these variables are relatively low. In summary, the principal factors that cause design
subsystem failures are directly and indirectly affected by the cost, time, quality and material
management. The target of private sector construction include how to achieve technical
competency, optimal in achieving cost, time, quality and materials specifications by the design
team, enhancing managerial skills, and given adequate authority commensurate with
remuneration.

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10. Private Sector Design Subsystem Factor Analysis Using Orthogonally Varimax Rotated
Factors
Private sector design subsystem Factor analysis using orthogonally varimax rotated factors
shows that the three factors having Eigen value greater than 0.01 are extracted from the factor
matrix. The first and dominant factor, is defined by eight out of fifteen variables, the second is
defined by six variables and third factor by one variable only. Some of the variables loaded very
high, others loaded high, moderately and low respectively. The two very high loaded variables
are the build ability of design and commitment, attitude and the responsibility of design tem in
achieving cost, schedule and quality objectives. The two highly variables are the realistic and
thorough definition of scope of project before site works are communication gaps between team.
The three moderately loading variables are the adequacy of planning efforts using modern
planning techniques, adequacy of cost, time and quality control system by the design team. And
the recommendation of unsuitable contractor’s .The last variables, loading low is the managerial
competence of the design team leader. This facto is termed “detailed scope definition, economic
design and commitment towards achieving cost, time and quality targets.
The variables loading highly are bribery and corruption of design team and specification of
unsuitable and foreign imported materials. The next set of variables that load highly are ease of
approving or giving change order, conflict with the design team, distance, location and the
availability of the design team. The only variable that loads moderately is the design team’s
timely response to request for information. This factor is identified as “bribery and corruption,
specifying unsuitable materials, variations, conflict resolution and the availability of the design
team to attend to the project.
The last factor from the design subsystem is the ability to choose the right team, methods,
prompt remuneration of the design team, the adequacy of authority and free hand giving to the
design team. In summary, the success of the private sector construction project management
from the design subsystem, using orthogonally varimax rotated factor are determined by:-
specifying unsuitable materials, giving variations, conflict resolution and the availability of the
design team to attend to the project and competent design team with adequate authority and
remuneration, detailed scope definition, economic design and commitment towards achieving
cost, time, quality and materials management targets and finally bribery and corruption.

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11. Conclusion
Construction sector is seen as the pivot on which every other activity in the economy rotates. The
significance of this sector is evidenced in the fact that every business or services must have an
address, a location in the environment which must be constructed. Therefore, any effort towards
reducing or eliminating the noticeable and silent constrains that directly or indirectly affect
project management success in this sector is a right step in the right direction. Most of the
constraining factors from the design in the public sector came as a result of the systems
inefficiency in employing competent personnel, consultants and contractors to handle design as a
major activity. There should be a thorough scope definition of the project with a clear analysis of
real cost, time, quality and material targets at the conception stage.
12. Recommendations
Competent professionals from the design sub-sector should be giving free-hand to perform
especially in the public sector construction. Attempt must be made to divorce political issues
from purely technical and managerial issues involved in construction project management
success. The conception stage which houses the design should handle subsequently any problem
of thorough scope definition of project details before or after the commencement of site works.
The managerial functions of project management should be separate from the technical function
of the design team. A project manager should be appointed early enough in the project life cycle
to handle the management from inception to completion. This project manager, in conjunction
with the design team members should define the scope of the works in detail in terms of what the
construction project will cost.The use of modern project management planning and control
technique methods should be used especially in designing complex projects to achieve the
required quality and environmental targets.

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References
Ashley, D.B and Lurie, L.S. (2004) Determination of Construction Project Success, Project
Management Journal, Vol. XVII No. 2. PP146
Baker, M .L (2002) Materials Management Systems Analysis and Project Management, Vol 4.
No 8.PP 45.
Bhavesh, .M. P (2006) Project Management Strategy Financial Planning,Evaluation and
Control, New Delhi, PTV Ltd.
Cleland, D.I. and King, W.R. (1988) Project Stakeholders Management, Project
Management Journal, Vol. 17, No.4. PP 36
CLELAND, D.I (1986) Project management Handbook, Second Edition, New York, U.S.A Van
Nostrand Reinhold, PP 964
Dugun, S.L. and Barry, B.U. (2006), Construction Planning Effects. Journal of
Construction Engineering and Management. Vo. 115 No. 1 PP 70.
Eric, C.E., (2003) Facility Design and Management Hand book, London, McGraw-Hill, PP 531
Harold, K. R (2004) Project Management A Systems Approach to Planning Scheduling and
Controlling, New Delhi, India. S.K Jain Publishers,pp68
Hayfield, F. (2006) “Basic Factors for a Successful Project” Proceedings of 6th
International Congress, Garmisch Partenkirchen, Federal Republic of Germany.
Macomber, E.A (2008) “Reforming Project Management”
http:///weblog.halmacomber.com// 5/4/2006
Milosevic, D.Z. (2007) Systems Approach to Strategic Project Management.
International Journal of Project Management. Vol.7 No.3. PP57
Ninos, G.E. and Wearne, S.H (2005) “Control of Projects During Construction”.
Proceedings of Institute of Civil Engineers, Part 1, 8th August 80 Engineering
Management Groups:PP 913.
Nwachukwu, CC (2008) Analysis of Factors that Constrain Project Management Success of
Public and Private Sector Construction in Nigeria, An unpublished Ph.D Thesis, Federal
University of Technology, Owerri.
Roy, P.D. (2005) the Construction Project Manager and Human Group Theories Cost Engineering,
vol. 31 No. 7PP10

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Listed in ULRICH’S

HRD roles and competencies: A comparative study of

Pakistan and China using ASTD model
Hassan Rasool
University of Agriculture
Fuwad Bashir
University of Agriculture
Muhammad Ismail Ramay
International Islamic University

Abstract
This study provides an in sight to the roles and competencies exhibited by HRD professionals in
Pakistan. Results show that ASTD model is helpful in the development of HRD in Pakistan. There
are similarities between HRD practices of Pakistan and China. For Pakistan, dominant work role
for HRD professionals is of an Administrator and associated competency is relationship building
skill. Organizational change agent, instructor and evaluator roles are perceived important in future.
Keywords: Roles, Competencies, HRD

1. Introduction & Literature Review

In Pakistan, many public and private organizations have started understanding the significance of
human resource development. As Human resource function has started gaining importance,
existing HRD practices are transforming and new roles have been emerging. HRD roles studies
have become critical for the professionalization of HRD practices in Pakistan.
Professionalization and standardization of HRD can be assisted with the examination of HRD
roles. (Xie, 2005). Professionalization of an occupation may come about in four phases. In first
phase, different job tasks are centralized. Then differentiation of jobs occurs and boundaries of
the occupation are established. In third phase occupation is standardized. In fourth phase,
emergence and development of the new occupation goes off. (Odenthal & Nijhof, 1996). In
Pakistan, for professionalization of HRD, it is of great importance to conduct role studies and
identify task boundaries to standardize the profession. Furthermore it is also helpful in
determining training requirements for HRD professionals.

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The criteria for defining HRD roles has varied from a focus on activities (what do HRD people
do) to time (where do HRD people spend time) to metaphors (what identity do HRD people
have) to value creation (what value do HRD people create).(Conner et al 1996).

A major study in the area of HRD roles and competencies was conducted by ASTD Mclagan
(1989). In this study, 35 areas of knowledge and skill or competencies were identified. These
competencies were grouped into four categories: technical, business, interpersonal, and
intellectual. Technical competencies include adult-learning understanding, career development
theories and techniques understanding, competency identification skill, computer competence,
electronic-systems skill, evaluation skill, media selection skill, objectives preparation skill,
training and development theories and techniques understanding and research skill. Business
competencies include budget and resource management skill, business understanding,
organization behavior understanding and organization-development theories and techniques.
Interpersonal competencies include coaching skill, feedback skill, group-process skill,
presentation skill, questioning skill, relationship-building skill and writing skill. Intellectual
competencies include Data-reduction skill, information-search skill and visioning skill.
Important HRD roles include administrator, evaluator, HRD manager, HRD materials developer,
career development advisor, instructor/trainer, marketer, need analyst, organization change
agent, program designer and researcher. Many HRD roles and competencies studies have been
conducted in different countries. In America representative works include Mclagan (1983, 1989)
and Rothwell (1996). In Europe among others, HRD role studies have been conducted by Ginkel
et al. (1997), O’Brien, Thompson (1999) and Valkeavaara (1998). In Asia representative work
on HR roles and competencies include Yang (1994) Lee (1994), Xie (2005), Chen et al. (2005)
and Kuo (2002). Using ASTD model, various country level studies are replicated to explore roles
and competencies of HRD professionals.
These studies, over the years, have contributed towards the Professionalization of HRD in
respective countries. There is no such study of Pakistan that may explore the work roles and
associated competencies of HRD professionals. This study would be helpful in understanding
the applicability of ASTD model in Pakistan. Furthermore it may help in the professionalization
and standardization of HRD practices in Pakistan.

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Xie (2005) studied HRD roles, required competencies, and outcomes in China. Using ASTD’s
HRD model as a reference, he examined HRD roles in seven provinces of China. The dominant
HRD role identified is of an administrator. The ASTD model is found effective in a Chinese
setting, and its application can help to promote the standardization of HRD work. While
comparing with German studies he found that fewer HRD roles are practiced in Chinese
organizations than in Germany. Our research has used Xie’s study as a reference to find
similarities between Pakistani and Chineese HRD professionals.

2. Research Questions
a. Whether ASTD’s 1989 model fits well in context of Pakistan?
b. What is the profile of HRD professionals in Pakistan?
c. What job tasks or roles HRD professionals perform?
d. What competencies they perceive are important to perform these roles?
e. What future roles HRD professionals expect to be important?
f. What similarities/dissimilarities exist between roles/competencies of HRD professionals
of China and Pakistan?
3. Methodology
Since there is no HRD role study of Pakistan, so there is no benchmark to compare with.
Research carried out by Xie (2005) is used to develop comparison of HRD roles between
Pakistan and China. A questionnaire modeled after ASTD’s McLagan (1989) was pilot tested to
find appropriateness, gap of understanding some terms existed and was eradicated with the use
of description of the terms with the questionnaire. The McLagan model was selected because it is
now mature enough and being tested in many countries. In Pakistan HRD profession is emerging
and it is the right time to test the effectiveness of ASTD model. Furthermore same model is used
in Chinese Study by Xie (2005). So it would be helpful in comparing HRD roles in China and
Pakistan.
The questionnaire was filled from HRD professionals. As there is no nationally recognized
organization of HR professionals, respondents were selected through the following procedure.
Four main sectors of the economy were selected - - financial, communication, textile and public
sector. These sectors were selected because of largest contribution in employment and GDP of

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Pakistan. To have a better representation, each sector was further divided into three groups
based on employment size—large companies, medium size companies and small businesses. It is
believed that this selection resulted in better representation of HRD professionals in Pakistan.
From all sectors, a total of 110 representative organizations were selected. These include
organizations with less than 100 employees to more than 10000 employees. With a response rate
of 72.72%, 80 valid questionnaires were short listed for analysis. The study collected information
on profile of HRD professionals, their roles and associated competencies.
4. Research Results

4.1 Personal information of practitioners

4.1.1 Gender
HRD function is dominated by males in Pakistan where 72.5 males perform HRD activities.
Keeping in view the cultural context of Pakistan, female participation of 27.5% is an
encouraging participation rate. HRD jobs are generally back office jobs that are preferred by
females in Pakistan. As compared to Chinese female participation of 46.8%this is a low
percentage.

4.1.2 Age
Age of surveyed HRD professionals mostly range between 25 and 34 as 50% respondents belong
to this category. Individuals in age range 35-44 constitute 32.5 %, while 17.5 % respondents
belong to 45-54 age range. However professionals below the age of 25 and above 54 years are
non-existed in the surveyed sample. This is an indication that HRD work in Pakistan is executed
by young individuals. Like Chinese counterparts, HRD people in Pakistan are moderately
experienced. Furthermore, in Pakistan like China, the profession poses certain entry barriers to
age groups of less than 25 years.

4.1.3 Education level

Pakistani HRD professionals, like Chinese counterparts, are highly qualified as 62.5% of the
surveyed professionals possessed master’s degree and 35% are holding bachelors. This indicates

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that HRD profession in Pakistan is ruled by a learned talent pool and future development of HRD
profession is bright in Pakistan
4.1.4 Qualification certificates
Pakistan has not a well established HRD qualification system. However business schools have
started recognizing the need for offering HRD programs. Only 20% of practitioners surveyed had
certificates in HRM.

4.2 Company information

4.2.1 Ownership of enterprises
Out of 80 surveyed professionals, 15% were from state owned enterprises, 15% from foreign
invested companies, 12.5% from joint venture companies and 57.5% from private companies.

4.2.2 Industries
The study covered four sectors of the economy that are largest contributor to employment and
GDP of Pakistan. The public sector accounted for 10.0%, banking and finance for 25.0%, textile
for 50% and communication services for 33.9%.

4.2.3 Size
The number of employees in the organizations surveyed ranged from fewer than 100 to more
than 10,000. Organizations with fewer than 100 employees accounted for 7.5 %, while those
with between 100 and 499 employees accounted for 17.5 %. Organizations with 1000-4999,
5000-9999 and greater than 10000 employees accounted for 35 %, 10% and 20 % respectively.

4.2.4 Department carrying out HRD functions

17.5 % of the surveyed organizations had separate HRD department, while 27.5 % had HRM
department. 27.5 % companies had personal department that take on HRD functions.

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4.2.5 Position carrying out HRD tasks

Designation of surveyed professionals that perform HRD tasks vary vastly. 20 % had title of HR
manager, 17.5% hold designation of personnel manager, 27.5% had tag of training managers and
20% had other titles.

4.3 Profile of HRD practice

4.3.1 Number of HRD positions
43.5 % of the surveyed professionals belong to organizations that had 1-5 HRD positions and
31.5 % organizations had 6-10 HRD positions. Numbers of HRD positions generally depend on
the size of the organization. Results infer that every surveyed organization had significant
number of HRD positions. This indicates that HRD function has started gaining importance.

4.3.2 Training time

Time spend on training by surveyed HRD professionals is mostly short as 60 % of the
respondents spend 1 to 4 days training per year and 27.5 HRD practitioners spend 10 to 19 days
training per year. More than 19 days training is non-existent in the surveyed professionals.
Chinese HRD professionals, spend more time in training as most practitioners (53.8%) attend
training for 5 to 19 days per year, 26.3% spend more than 19 days per year on training.

4.3.3 HRD experience of practitioners

The experience level of Pakistani HRD practitioners surveyed is almost confined to less than one
year (31.2%) to a maximum of 9 years (12.5 %). Most participants (52.5%) like Chinese HRD
professionals (48.2%) have one to four years of experience.

4.3.4 Time spent on HRD activities

In Pakistan, most HRD practitioners (80 %) do not spend more than 50% of their work time on
HRD activities. This may be due to inconsistent recognition of HRD importance in
organizations. Another reason for this lack of attention towards HRD activities is due to more
involvement in HRM activities by professionals.

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4.3.5 Forms of HRD activities

Table 1 show that most HRD practice in Pakistan takes the form of training (77.5%).
Organizations have a fair understanding of career development. (62.5%). 37.5 % and 35 % of
HRD practice is in the area of organizational development and management development
respectively. This indicates that few Pakistani organizations have established systems for human
resource development. Management development is another area that needs attention by
Pakistani organizations. However HRD activities like organizational development (52.3 %) and
management development (48.9 %) are relatively well practiced in China.

Table 1: Forms of HRD Activities (Pakistani vs. Chinese respondents)

Pakistani Respondents Chinese Respondents
Freq. % Freq. %
Training 62 77.5 163 93.7
Career development 50 62.5 46 26.4
Organizational development 30 37.5 91 52.3
Management development 28 35.0 85 48.9

4.3.6 Roles practiced

A limited number of roles (from Mclagan roles) are practiced in Pakistan. Results show that in
Pakistan, five roles are relatively more in practice. These include administrator (90 %), evaluator
(77.5 %), career development advisor (40%), instructor (52.5%) and organizational change agent
(42.5 %). It means that HRD professionals are involved in communication and support services,
evaluating impact on individual or organizational effectiveness, helping individuals to assess
personal competencies, presenting information and directing structured learning experiences and
influencing and supporting change in organizational behavior. Similarly, in the majority of
Chinese organizations (70.1%), the administrative role plays an important part in leading teams,
coordinating departments and providing support for HRD projects and services. The high ratings
of administrator and evaluator indicate that Pakistani professionals pay great attention to the
delivery of HRD activities and its impact on organizational and individual effectiveness, but lack
of understanding the importance of the role of need analyst (35%) which is crucial to ensuring
the success of HRD activities.
The survey revealed that roles like HRD materials developer (25 %), marketer (15 %), program
designer (25 %), researcher (7.5 %) and HRD manager (27.5 5) do not receive much attention in

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Pakistan. It can be inferred that HRD professionals are less involved in supporting and leading
work groups, producing written or electronically mediated instructional materials, marketing and
contracting of HRD view points, preparing objectives, defining contents and identifying,
developing or testing new techniques for human resource development.

4.3.7 Roles thought to be important

Three future roles are considered important by the surveyed respondents. These include
evaluator (75 %), instructor (75 %) and organizational change agent (55 %). A significant change
in the role of instructor (from 52.5% to 75%) indicates that directing structured learning is going
to be the key feature of HRD activities in future. To facilitate this phenomenon HRD
professionals expect to serve as change agents (from 42.5 % to 55%). However diminishing
perceived importance of roles like HRD materials developer, program designer and career
development advisor, indicates that HRD professionals are not clear about the implementation
criteria of the selected future roles. However most of practitioners believe that administrator role
(from 90% to 32%) is less important in future. This indicates a transformation in HRD practices
in Pakistan.

4.4 HRD Competencies

8 competencies are considered significant by HRD practitioners. These include competency
identification skill (62.5%), computer competence (57.5%), evaluation skill (77.5%), training
and development theories and techniques understanding (52.5%), budget and resource
management skill (67.5%), business understanding (67.5%), organization behavior
understanding (67.5%) and relationship building skill (80%).

4.5 Relationship between roles and competencies

Respondents were asked to select the role/roles they practice as a part or whole of their work.
Then role holders were asked to select competencies that are used to perform the role. Hence a
result matrix for roles and competencies was formed. Most practitioners practiced more than one
role. Performing a role may require one or more competencies. The mean value and standard
deviation of all competencies and roles are shown in the Table 2. A comparison of mean values

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indicates that Pakistani HRD practitioners use competencies like evaluation skill (mean value
28.9), relationship building skill (mean value 26.3) and business understanding (mean value
26.1) most while performing work at their organizations. Standard deviation for business
understanding is lowest (13.0) as compared to the other two competencies. This shows a
consistent recognition of this competency in the selected sectors of the economy. For China
HRD practitioners, comparison of mean values indicates that Chinese HRD practitioners ranked
four competencies highest: Intellectual versatility (mean value 104.33),
Observing/collecting/processing data and module building skill (100.22), Industrial and
organizational behavior understanding (93.67) and Competency identification skill (91.56).These
rankings highlight the importance of intellectual ability for Chinese HRD practitioners. (Xie,
2005.)
A comparison of mean values of roles performed by Pakistani HRD practitioners indicate that
most practitioners hold work role of administrator (28.6), evaluator (27.7), instructor (21.1),
career development advisor (18.2) and organization change agent (17.6). Standard deviation for
the role of career development advisor is lowest (8.7). While for the role of evaluator it is highest
(15.2).

4.5.1 30% --50% --70% analytic method

In Pakistan HRD is evolving, so a variation to the 50%–70% analytic method was used to
include 30 % values (Table 3). This may ensure better representation of the relationship between
roles and competencies in Pakistan. To analyze the role/competency matrix conveniently,
competencies mentioned more than 32 times and 40 times by respondents (30% & 50% of the 80
qualified questionnaires) were marked , as were competencies mentioned more than 56 times
(70% of the 80 qualified questionnaires).
For the role of Administrator, the most important competencies were found to be relationship
building skill, evaluation skill, competency identification skill and budget and resource
management skill.
More than 30% of the practitioners identified 17 competencies and more than 50% of
participants identified 7 competencies, while only 2 were identified by more than 70% of the
respondents. Competencies mentioned by more than 30% of respondents, were rated important

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for seven different roles. These include administrator, evaluator, HR manager, career
development advisor, instructor/trainer, need analyst and organizational change agent.
Competencies mentioned by more than 50%, were rated important for only administrator and
evaluator roles. Competencies (evaluation skill and relationship building skill) mentioned by
more than 70% of respondents, were identified important for the role of administrator and
evaluator.
5. Conclusion
The results show a profile of HRD practitioners as a young male with experience of 1-5 years in
HRD, well educated, dealing mostly with administrative assignments. The practitioner invests
time in training to keep him or her prepared for HRD tasks. Like China, Pakistani HR
professionals have non-HRD responsibilities, and spend even more time on those activities. The
dominant HRD role he or she played is of an administrator. HRD in Pakistan is still in the early
stages of its development. One indication of this is the fact that training is still the dominant form
of HRD in Pakistani organizations. Furthermore, there is an inconsistent recognition of HRD
importance among various sectors of the economy.
The ASTD model is effective in a Pakistani setting, and its application can help to promote the
standardization of HRD work. But there are some differences in Pakistan. There are fewer HRD
roles practiced in Pakistani organizations than in developed countries and even China. The
perceived importance of roles is somewhat similar between Pakistan and China. Administrator,
evaluator, career development advisor and organizational change agent are the main roles
practiced in Pakistani organizations.
Like China, HRD as an independent academic field of learning has not yet gained national
recognition in Pakistan and there are no HRD degree programs offered at Pakistani colleges and
universities.
There are some limitations to this research. First, there is no national association of HRD
practitioners in Pakistan, so probability sampling is not possible; second, not all sectors of the
economy were covered in this research and keeping in view a national study, sample size is
small. Due to the limitations of the research, the results cannot be generalized. However, this
research may provide a base for future research on roles and competencies in Pakistan.

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References
Chen, A., Bian, M. and Hom,Y (2005)“Taiwan HRD practitioner competencies: an application
of the ASTD WLP competency model” International Journal of Training and Development
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Netherlands” International Journal of Training and Development 1:1, 22-33
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Unpublished doctoral dissertation, the University of Minnesota, Twin Cities.
Lee, S. H. (1994), A preliminary study of the competencies, work outputs, and roles of human
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Centrum, De Lier.
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Schuler, R. S. (1994). The Changing Role of Human Resource: Systematically Linking with the
Business. Unpublished paper.
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doctoral dissertation, University of Minnesota, Twin Cities.

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Table 2: Result matrix of the relationship between roles and competencies

ROLES
Administrator Evaluator HRD HRD Career Instructor Marketer Need Organization Program Researcher Mean S.D.
Manager Materials Development /Trainer Analyst Change Designer
Developer Advisor Agent
Adult-Learning Understanding 10 8 4 4 8 10 0 8 6 4 0 5.64 3.56
Career Development theories and 24 26 18 14 20 22 10 22 22 12 6 17.82 6.42
techniques understanding
Competency identification skill 48 44 20 18 26 28 8 22 26 14 4 23.45 13.45
Computer competence 40 42 22 20 30 30 10 26 28 18 6 24.73 11.15
Competencies: Technical, Business, interpersonal & intellectual

Electronic- system skill 30 30 16 16 24 20 10 22 22 12 6 18.91 7.76

Evaluation skill 54 62 22 20 30 36 12 24 32 20 6 28.91 16.81
Media selection skill 16 16 8 8 14 12 8 14 12 6 4 10.73 4.13
Objectives preparation 26 28 16 12 20 24 10 22 18 12 6 17.64 7.09
T& D theories and techniques 34 36 20 18 28 42 12 26 30 18 6 24.55 10.85
understanding
Research 4 6 4 6 6 6 6 6 6 4 6 5.45 0.93
Budget and resource management 48 40 14 16 24 30 12 22 20 14 6 22.36 12.61
skill
Business understanding 46 46 22 18 30 36 12 26 30 16 6 26.18 13.07
Organization behavior 46 46 20 16 26 34 12 26 28 18 6 25.27 12.88
understanding
Organization-development 26 30 20 18 24 24 10 20 24 16 6 19.82 7.07
theories and techniques
Coaching skill 28 24 10 12 16 22 6 12 12 8 4 14.00 7.69
Feedback skill 30 30 14 12 20 26 8 18 16 12 4 17.27 8.59
Group-process skill 12 10 6 4 6 8 4 8 6 2 6.60 2.99
Negotiation skill 28 28 12 10 16 16 8 12 12 6 2 13.64 8.19
Presentation skill 32 24 10 6 14 18 4 14 12 8 2 13.09 8.92
Questioning skill 8 4 0 0 0 0 0 0 0 0 0 1.09 2.59
Relationship-building skill 56 50 18 16 28 36 12 24 30 14 6 26.36 15.82
Writing skill 26 18 8 6 8 10 4 12 10 8 2 10.18 6.72
Data-reduction skill 20 18 12 12 16 14 6 14 18 10 4 13.09 5.01
Information-search skill 18 20 10 10 14 16 10 14 12 8 6 12.55 4.30
Visioning skill 6 8 6 6 8 8 4 8 8 8 4 6.73 1.62
Mean 28.64 27.76 13.28 11.92 18.24 21.12 7.92 16.88 17.60 11.08 4.40
S.D. 15.11 15.26 6.50 5.70 8.78 11.14 3.67 7.42 9.27 5.21 2.00

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Table 3: Result matrix of the relationship between roles and competencies (recognized by more that 30% of respondents)
ROLES
HRD Career Instructor Organization
Development Need Change
Administrator Evaluator Manager Advisor /Trainer Analyst Agent
Adult-learning understanding
Career development theories and techniques understanding ♦ ♦
Competency identification skill ♦ ♦ ♦ ♦ ♦
Competencies: Technical, Business, interpersonal & Intellectual

Computer competence ♦ ♦ ♦ ♦ ♦ ♦
Electronic-systems skill ♦ ♦ ♦
Evaluation skill ♦ ♦ ♦ ♦ ♦ ♦
Media selection skill
Objectives preparation skill ♦ ♦ ♦
T& D theories and techniques understanding ♦ ♦ ♦ ♦ ♦ ♦
Research
Budget and resource management skill ♦ ♦ ♦ ♦ ♦
Business understanding ♦ ♦ ♦ ♦ ♦ ♦
Organization behavior understanding ♦ ♦ ♦ ♦ ♦ ♦
Organization-development theories and techniques ♦ ♦ ♦ ♦ ♦
Coaching skill ♦ ♦
Feedback skill ♦ ♦ ♦
Group-process skill
Negotiation skill ♦ ♦
Presentation skill ♦ ♦
Questioning skill
Relationship-building skill ♦ ♦ ♦ ♦ ♦ ♦
Writing skill ♦
Data-reduction skill
Information-search skill
Visioning skill

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Listed in ULRICH’S
The Effect of
Demographic and Academic Backgrounds
on Financial Accounting Performance

Wan Faizah Wan Abdullah.

Siti Salmah Abu Bakar.
Marzlin Marzuki.
Noraini Abdul Rahim.
Faculty of Accountancy, University Teknologi MARA Kedah, PO box 187, 08400
Merbok, Kedah, Malaysia
Kamaruzaman Jusoff (Corresponding author)
TropAIR, Faculty of Forestry, Universiti Putra Malaysia, 43400 Serdang, Selangor.
Malaysia

Abstract
The main objective of this study is to compare the Financial Accounting performance
between students with and without Sijil Pelajaran Malaysia grades and their demographic
background. The study was carried out among the Diploma in Accountancy students at
Universiti Teknologi MARA Kedah campus. 190 usable data were obtained from the
Academic Affairs Department at the campus. Independent t-test was used to analyse the
data. The finding shows that the performance of students with SPM Accounting is
significantly higher for FAR 100 and FAR 200. The same result is true for those with
SPM Commerce on FAR 100. On the other hand, there is no significant difference
between those with and without SPM Additional Mathematics and SPM Economics
performances in all Financial Accounting courses. In terms of gender, females performed
significantly better in FAR 200 only. For school location, there is no difference between
students from urban and rural schools on the performance of Financial Accounting.

Key words: Financial Accounting performance, Demographic background, Academic

background

1. Introduction

Diploma in Accountancy (DIA) programme offered by University Teknologi MARA

(UiTM) is a semi professional course. Candidates are required to obtain a credit each in
any five subjects in their Sijil Pelajaran Malaysia (SPM) including English and

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Mathematics. The current open system implemented by the Malaysian Ministry of

Education on SPM examination allows a student to register and sit for any subjects
offered by the ministry. This leads to a situation where students have to decide on the
subjects that should be taken at SPM level. For those who plan to take DIA programme,
they may need to evaluate the suitability of the subjects taken at SPM level. The results
of this study may benefit those students in making their decisions. This study would also
be of great help to institutions offering accounting programme at diploma level
particularly the Faculty of Accountancy to determine entry requirements. In addition to
that, it may also help lecturers to understand the differential performance among students
and thus are able to evaluate various teaching methods.

Studies have shown that the performance of undergraduate Accounting students was
affected by their academic background. Mitchell (1985) found that there is a positive
relationship between students’ high school grades and performance in the quantitative
aspects of their first year examination. Baldwin and Howe (1982), Bergin (1983), Canlar
(1986), Eskew and Faley (1988), and Bouillon (1990) also found that students who had
studied Accountancy at high school had superior performance initially in university
Accounting courses, but this early superiority diminished overtime and was completely
eroded by the end of the first year. On the other hand, Keef (1988), Keef (1992), Moses
(1987) and Bartlett, Peel and Pendlebury (1993) reported that prior study of Accounting
has no significant advantage for students in the first and third year of the Accounting
degree programme.

Similarly, previous knowledge of Mathematics has positive and significant effects on

student performance in introductory Accounting courses [(Bartlett et al. (1993), Gul and
Fong (1993), Lai Mooi Tho (1994) and Eskew and Faley (1988)]. English and
Economics have also been found to have positive effects on student performance in
introductory Accounting courses. Gul and Fong (1993) found that certificate level
English grade appears to be a significant variable in first year Accounting students’
performance. The study by Bartlett et al. (1993) also showed that the most consistent
explanatory variable of first and third year examination performance is the prior study of
Economics at ‘A’ Level. A Malaysian study by Lai Mooi Tho (1994) found that Sijil

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Tinggi Pelajaran Malaysia (STPM) Economics influences the performance in

introductory Accounting courses.

Besides the academic background, studies on demographic background have also been
carried out particularly on gender and school location. Buckless, Lipe and Ravenscroft
(1991) showed that females are perceived to be better than male students. Mutchler,
Turner and William (1987), Lai Mooi Tho (1994) and Minga Negash (2002) found that
gender has no significant impact on lower Accounting division courses. There is no
difference in performance between rural and urban status as reported by Lai Mooi Tho
(1994).

Unlike previous studies which has been carried out at the undergraduate level, this study
focuses on diploma level. The main objective of the study is to compare the performance
in the Financial Accounting courses between students with and without SPM grades for
Accounting, Additional Mathematics, Economics and Commerce and their demographic
background that is gender and school location.

2. Methodology

The study was carried out at the UiTM Kedah. Data were collected from the students’
record at the campus. A research form was used to gather information related to
demographic information such as gender, previous school; grade history in Accounting,
Additional Mathematics, Economics and Commerce at the SPM level; and students’
grades for Financial Accounting courses at UiTM (FAR100, FAR150, FAR200 and
FAR250). According to the Malaysian Education Department, schools located in
Municipal Councils are considered as urban school whereas schools outside Municipal
Councils are considered as rural. Samples were selected from the DIA population in Part
5, 6, 7 and 8 in the November 2008 - April 2009 semester. Students with incomplete
record in their personal files were excluded from the study.

Data were analyzed using the Statistical Package for Social Sciences (SPSS) version
15.0. Descriptive statistics were used where appropriate and data were summarized as
percentages. The differences in the performance of students who had studied each SPM
subject and the students’ demographic background were tested using independent t-test.
A p value < 0.05 was considered significant.

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3. Result and Discussion

3.1 Demographic

The total number of samples selected for the study was 195 (100% of the total
population) and 5 were excluded due to incomplete data for SPM. The total usable data
were 190. The demographic data of the students are given in Table 1.

3.2 The performance in Financial Accounting courses between students with and without
SPM grades and their demographic background.

The performance in Financial Accounting courses between genders is given in Table 2.

The results showed that female students performed better than the male students.
However, the difference is not significant except for FAR 200. This corresponded to
studies by Mutchler et.al. (1987), and Lai Mooi Tho (1994) where he found that gender
has no impact on lower accounting division courses.

The performance in Financial Accounting courses between students from different school
locations is given in Table 3. There was no significant difference in the performance for
all Financial Accounting courses between students from different school locations where
the students studied for their SPM. The finding corresponded to the study by Lai Mooi
Tho (1994), which found no significant difference in the performance between students
from rural and urban areas. However, Lai Mooi Tho (1994) studied the students’
residence and not the location of their school.

The performance in Financial Accounting courses between students with and without
SPM Accounting is given in Table 4. The performance of students with SPM
Accounting was significantly better than students without SPM Accounting for FAR 100
and FAR 200. The findings on SPM Accounting on the performance of FAR 100
correspond to previous studies by Baldwin and Howe (1982), Bergin (1983), Canlar
(1986), Gul and Fong (1993), Rohde and Kavanagh (1996), and Moy Yin Koh and Hian
Chye Koh (1998) which found that the performance of students with basic Accounting
are better than those without basic Accounting for introductory Accounting.

The performance in Financial Accounting courses between students with and without
SPM Additional Mathematics is given in Table 5. There is no significant difference in

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performance between students with SPM Additional Mathematics and students without
SPM Additional Mathematics for all Financial Accounting courses. This finding did not
correspond to the findings of previous studies by Eskew and Faley (1988), Barlett et al.
(1993), Gul and Fong (1993) and Lai Mooi Tho (1994). In Lai Mooi Tho’s study in
Malaysia, she obtained a positive and significant effect of Mathematics on student
performance in introductory accounting courses. The difference in the result could be due
to the streaming system which has been transformed to the open system implemented by
the Malaysian Ministry of Education. In the streaming system, students who performed
better are placed in Science stream and the rest are placed in Arts stream. Additional
Mathematics is a compulsory subject for the science students. Those with Additional
Mathematics (science students) perform better because they have a greater affinity for
quantitative courses. Under the new system, a student is allowed to register and sit for
any subjects offered by the ministry. Therefore, any student may be able to sit for
Additional Mathematics.

The performance in Financial Accounting courses between students with and without
SPM Economics is given in Table 6. Students with SPM Economics perform better in
Financial Accounting courses than those with SPM Economics but the results are not
significant. This finding contradicted the study by Lai Mooi Tho (1994) where she found
that Economics in STPM lead to a better performance in introductory accounting at the
undergraduate level. The difference in the finding could be due to the different level of
coverage in SPM Economics and STPM Economics.

The performance in Financial Accounting courses between students with and without
SPM Commerce is given in Table 7. The result showed that students with SPM
Commerce performed significantly better than those without SPM Commerce for FAR
100 only. This could be due to the topics covered in Commerce at SPM level are being
included in the syllabus in FAR 100.

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4. Conclusion

The performance of students with SPM Accounting and SPM Commerce in FAR 100
were better than those without the subjects in their SPM. Besides FAR 100, those with
SPM Accounting also performed better in FAR 200 than those without the subject. On
the other hand, there is no significant difference between students with SPM Additional
Mathematics and SPM Economics in the performance of all Financial Accounting
courses. For demographic background, females performed significantly better in FAR
100 only. On the other hand, there is no significant difference in Financial Accounting
performance between students from urban and rural schools.

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References

Baldwin, B.A., and Howe, K.R.. 1982. Secondary-Level Study of Accounting and
Subsequent Performance in the First College Course. Accounting Review. 57 (3):
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Bartlett, S., Peel,M.J., and Pendlebury, M. 1993. From Fresher to Finalist: A Three
Year Analysis of Student Performance on an Accounting Degree Programme.
Accounting Education 2(2): 111 122.

Bergin, L.J. 1983. The Effect of Previous Accounting Study on Student Performance in
the First College –Level Financial Accounting Course. Issues in Accounting
Education: 19 28.

Bouillon, M.L., Doran, B.M., and Smith, C.G.. 1990. Factors that Predict Success in
Principles of Accounting Classes. Journal of Education for Business 66(1): 22 27.

Buckless, F.A., Lipe M.G. and Ravencooft, C. G., 1991, Factors that Predict Success in
Principles of Accounting Classes, Journal of Education for Business, 6: 248 261.

Canlar,M. 1986. College-Level Exposure to Accounting Study and its effects on Student
Performance in the MBA-Level Financial Accounting Course. Issues in
Accounting Education 1:13 23.

Eskew, R.K., and Faley, R.H.. 1988. Some Determinants of Student Performance in the
First College-Level Financial Accounting Course. The Accounting Review
LXIII(1):137 147.

Gul, F.A., and Fong, S.C.C.. 1993. Predicting Success for Introductory Students: Some
Further Hong Kong Evidence. Accounting Education 2(1): 33 41.

Keef, S.P.. 1988. Preparation for a First Level University Accounting Course: The
Experience in New Zealand. Journal of Accounting Education.6(2), Fall, 293 307.

Keef, S.P. 1992. The Effect of Prior Accounting Education: Some Evidence from New
Zealand. Accounting Education 1(1): 63 68.

Lai Mooi Tho. 1994. Some Evidence on the Determinants of Student Performance in the
University of Malaya Introductory Accounting Course. Accounting Education
3(4): 331 340.

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Minga Hegash. 2002. Demographic Factors, Accounting grades and Maths Skills:
Evidence from a South African University. Paper presented at South African
Accounting Association Regional Conference, Grahamstown.

Mitchell, F., 1985. School Accounting Qualifications and Student Performance in a First
Level University Accounting Examination. Accounting and Business Research
15(58): 81 86.

Moses, O.D. 1987. Factors Explaining Performance in Graduate-Level Accounting.

Issues in Accounting Education 2(2): 281 291.

Moy Yin Koh and Hian Chye Koh. 1998. The Determinants of Performance in an
Accounting Degree Programme. Accounting Education 8(1): 13 29.

Mutchler, J.F., Turner, J.H., and William, D.D. 1987. The Performance of Female versus
Male Accounting Students. Issues in Accounting Education. 2(1):103-111.

Rohde, F.H., and Kavanagh, M. 1996. Student Performance in the First MBA-Level
Financial Accounting Course. Issues in Accounting Education 1(1): 13 23.

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Annexure
Table 1: Demographic Data
Parameters Number of students Percentage (%)
Gender
Male 79 41.1
Female 113 58.9
School location
Rural 84 43.8
Urban 103 53.6

Table 2: Performance of each Financial Accounting course between genders

Significant
Gender N Mean Std. Deviation
(2 tailed)

FAR male 79 2.85 0.869 0.221

100
Female 113 2.99 0.725

FAR male 79 2.23 1.059 0.519

150
female 113 2.32 0.987

FAR male 76 2.70 0.912 0.021

200
female 112 3.01 0.875

FAR Male 68 2.04 1.022 0.484

250
female 106 2.15 1.003

Table 3: Performance of each Financial Accounting courses between students from

different school locations
School Significant
N Mean Std. Deviation
Location (2 tailed)

FAR Rural 84 2.86 0.683 0.187

100
urban 103 3.02 0.840

FAR rural 84 2.34 0.975 0.581

150
urban 103 2.26 1.044

FAR rural 82 2.83 0.924 0.428

200
urban 101 2.94 0.900

FAR rural 75 2.27 1.016 0.121

250
urban 94 2.03 0.975

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Table 4: Performance of each Financial Accounting course between students with

and without SPM Accounting.
SPM Std. Significant
N Mean
Accounting Deviation (2 tailed)

FAR Without 90 2.63 0.805 <0.001

100
With 102 3.21 0.669

FAR Without 90 2.15 1.055 0.109

150
With 102 2.40 0.971

Without 87 2.74 0.915 0.035

FAR
200 With 101 3.01 0.872

FAR Without 81 2.03 1.054 0.317

250
With 93 2.18 0.968

Table 5: Performance of each Financial Accounting course between students with

and without SPM Additional Mathematics
SPM Significant
N Mean Std. Deviation
Add. Math (2 tailed)

FAR Without 12 3.25 0.669 0.164

100
With 174 2.92 0.795

FAR Without 12 2.27 0.734 0.931

150
With 174 2.30 1.020

FAR Without 12 3.20 0.578 0.231

200
With 170 2.87 0.909

FAR Without 12 2.31 0.644 0.540

250
With 156 2.12 1.030

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Table 6: Performance of each Financial Accounting course between students with

and without SPM Economics.
SPM Std. Significant
N Mean
Economics Deviation (2 tailed)

FAR Without 159 2.92 0.787 0.451

100
With 33 3.03 0.801

FAR Without 159 2.28 1.015 0.861

150
With 33 2.31 1.033

FAR Without 156 2.88 0.926 0.885

200
With 32 2.91 0.777

FAR Without 142 2.10 1.019 0.831

250
With 32 2.15 0.979

Table 7: Performance of each Financial Accounting course between students with

and without SPM Commerce
SPM Std. Significant
N Mean
Economics Deviation (2 tailed)

FAR Without 166 2.89 0.801 0.049

100 With 26 3.22 0.646

FAR Without 166 2.26 1.016 0.417

150 With 26 2.44 1.018

FAR Without 163 2.89 0.888 0.788

200 With 25 2.84 0.996

FAR Without 151 2.09 1.017 0.403

250 With 23 2.28 0.962

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Listed in ULRICH’S
Influence of Institutional Pressure and Ownership
Structure on Corporate Social Responsibility Disclosure
Faizah Darus
Roshayani Arshad
Suaini Othman
Faculty of Accountancy, Universiti Teknologi MARA, Malaysia, 40450, Shah Alam,
Selangor, Malaysia

Kamaruzaman Jusoff (Corresponding author)

TropAIR, Faculty of Forestry, Universiti Putra Malaysia, Serdang, 43400 Selangor.
Malaysia

Abstract
A clear understanding of the effectiveness of regulation is crucial to regulatory bodies in
their efforts to improve corporate transparency. This study examines the effects of the
introduction of regulatory requirements relating to Corporate Social Responsibility (CSR)
disclosure, and the impact of institutional pressure and ownership structure on
management’s disclosure decisions. Using the annual reports of 144 Malaysian listed
companies, this study investigates the effects of regulatory efforts in promoting CSR
disclosure in periods of uncertainty before (2005 and 2006) and with the introduction of
regulatory requirements (2007), and the association of ownership structure on the extent
of CSR disclosure. The regulatory disclosure environment, managers’ imitation strategy
through board interlock and ownership structure (proxy by family, government and
foreign ownerships) relating to CSR disclosure were investigated. Results of this study
provide evidence that regulatory efforts are important mechanism in promoting greater
corporate transparency in CSR disclosure. This is reflected in the significant association
between government ownership and the extent of such disclosure. However, the findings
demonstrate that such efforts do not appear to promote disclosures of CSR activities in
family owned companies. Nevertheless, the findings indicate strong possibility of raising
investors and other stakeholders’ expectations towards expecting more detailed
disclosure of CSR activities in companies’ annual reports through the influence of
regulatory efforts. An implication of these findings is that regulatory efforts have the

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prospect of becoming a significant force in promoting the extent and quality of CSR
disclosure.

Key words: Mandatory disclosure, institutional theory, ownership structure, corporate

social responsibility, financial reporting regulation.

1. Introduction
There is growing concern world wide regarding corporate social responsibility (CSR)
issues amongst companies. One aspect of CSR that is of concern is the state of CSR
reporting. This is because traditional financial reporting does not adequately capture CSR
activities of companies (Yongvanich & Guthrie, 2006) and currently there are various
frameworks that companies could adopt. Given this setting, CSR activities reported in
companies annual reports may not facilitate investors and other stakeholders in assessing
whether corporate social activities are in line with their interests. More detailed
disclosure of CSR activities will thus provide useful information to a range of
stakeholders. However, according to Gray (2006), recent years have witness a substantial
increase in reporting on corporate social responsibility issues by major corporations in the
world. In East Asian countries, the issue of CSR is particularly important because CSR is
still at an infancy stage and there is a relatively low level of transparency amongst
companies (Thompson & Zakaria, 2004).

In Malaysia, the issues of CSR have attracted increasing attention from the government,
practitioners and academia (Hackston & Milne, 1996, Mustafa et al., 2006). This is
evidenced by the recent government efforts requiring all public listed companies to
disclose CSR activities in their annual reports for financial year ending 31 December
2007. However, management are still given the discretion of deciding on the extent of
disclosures to be made. Prior to this, the government has also launched a guide to
companies with substantial government ownership known as the ‘Silver Book’ in 2006.
The ‘Silver Book’ provides the principles and guidelines on how these companies can
manage their contributions to society in an effective and sustainable manner (The Edge,
September, 2006). The launching of the ‘Silver Book’ is expected to improve their CSR
disclosure and in turn will encourage other companies to follow their lead. In addition,

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the Federal Government’s 2008 and 2009 budget have also incorporated some incentives
such as tax deductions for companies who provide public facilities and ‘green theme’
(such as biomass energy, biodiesel and biogas plants, sale of certified emission reduction
or carbon credit etc). The overall regulatory efforts are expected to increase managers’
awareness to make detailed disclosure of CSR activities in their companies’ annual
reports and consequently affect investors and other stakeholders’ ability in making
informed judgements regarding such activities. Hence, an improved understanding of
influences on management’s decisions to disclose more or less CSR information would
therefore be sought by outside investors and other stakeholders such as debt holders,
employees and regulators.

Empirical evidence in Cheng and Courtenay (2006) indicates that regulatory efforts are
associated with more detailed corporate disclosure. However, Nazli and Weetman (2006)
found that the culture of secrecy in owner-managed and family-controlled companies of
Malaysian businesses outweighed the reforming efforts of government to establish a
climate of greater accountability and transparency following reforms that emerged from
the Asian economic crisis of 1997 -1998. Their results are consistent with several other
prior empirical evidence that indicate companies in East Asian region have lower
transparencies due to the culture of relative secrecy in owner-managed and family
controlled companies. These studies show that there is an association between ownership
structure and the level of corporate disclosure (e.g. Eng & Mak, 2003; Haniffa & Cooke,
2002; Ho & Wong, 2001). While the presence of substantial family ownership in
companies is associated with lower corporate disclosure, other forms of ownership
structure are associated with more detailed corporate disclosure. Given the varying forms
of corporate ownership structure, it is important to include the influence of ownership
structure on CSR disclosure.

The aim of this study is to examine the effects of external forces as imposed by
regulatory authorities, the effects of social influences in situations of uncertainty
following the introduction of regulatory requirements relating to CSR disclosure and the
impact of ownership structure on managers’ incentives to disclose CSR activities. It is

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based on the expectation that new coercive forces through the regulatory efforts and the
period of uncertainty to have an impact on CSR disclosures by Malaysian companies.
Two theoretical perspectives are used in this study. First, under the institutional theory,
managers have incentives to increase CSR information to comply with regulatory
requirements and social norms in order to justify their actions and to deflect criticisms
regarding their CSR activities and reporting practices. Second, under the agency theory,
managers’ CSR disclosure decisions are influenced by the ownership structure of their
companies as well as their desire to signal that they are acting in the interests of the
shareholders.

2. Motivation for the Study

There is a paucity of empirical evidence on issues related to CSR, in particular regarding
the impacts of institutional forces and ownership structure in relation to CSR disclosures
in the East Asian countries. Therefore, this study aims to provide new evidence on how
external forces, social pressures and the ownership structure of Malaysian companies
influence CSR reporting practices. Such an understanding is useful to regulators, policy
makers, the professional bodies and to other users of financial information.

The context chosen for the study is the CSR disclosure environment in Malaysia during
2005, 2006 and 2007. The setting is conducive to the study of incentives for management
to disclose CSR information as public listed companies in Malaysia are required to
comply with the mandatory requirements of CSR activities in their annual reports for the
financial year ending 31 December, 2007.

3. Literature Review and Hypotheses Generation

3.1 Isomorphic Pressure and CSR Disclosure
Of late, institutional theory has become one of the dominant theoretical perspectives in
organizational theory and increasingly being applied in accounting research to study the
practice of accounting in organizations (Dillard et al, 2004). DiMaggio and Powell (1983)
identify three forms of institutional isomorphism: coercive, normative and mimetic. This
study focuses on the influence of coercive and mimetic isomorphism on CSR disclosure.

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3.2 Coercive Isomorphism and CSR Disclosure

Coercive isomorphism results when an organization adopts certain practices due to
formal and informal pressures exerted on organizations by other organizations upon
which they depends on externally, such as government’s regulations, resource providers
or head offices control, and by cultural expectations of the society in which the
organizations operate (DiMaggio & Powell, 1983). Coercive isomorphism can influence
management to conform to certain disclosure practices through formal and informal
pressures (Carpenter & Feroz, 2001; Clemens & Douglas, 2006). While empirical
evidence suggest that legislation plays a significant form of formal pressures (Clemens &
Douglas, 2006), a company’s dependence on financial resources from key stakeholders
plays a significant informal pressure on management to conform to certain practices
(Carpenter & Feroz, 2001).

The introduction of mandatory disclosure requirement by the Malaysian Government, the

launching of the Silver Book and the Stock Exchange Guidelines on CSR disclosure are
efforts exerted on companies by the regulatory authorities to improve transparency and
CSR disclosure in Malaysia. It is expected that following the budget announcement in
2006, companies in Malaysia will increase their CSR disclosure in their annual reports.
Chalmers (2001) provides evidence that the quantity of voluntary derivatives disclosure
made by firms progressively increases over the period leading to the introduction of the
mandatory disclosure requirements, and that there is a significant increase in voluntary
disclosure in the year when the mandatory disclosure requirements became effective.
Chalmers and Godfrey (2004) and Taylor and Darus (2006) confirm these findings. Thus,
it is hypothesized that:

H1: The likelihood of a disclosure requirements becoming mandatory is

significantly positively related to the voluntary disclosure on CSR.

As the mandatory disclosure requirements relating to CSR disclosure give management

the discretion of deciding on the extent of disclosures to be made, it is expected that the
extent of CSR disclosure will increase with the introduction of the mandatory disclosure

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requirements. Management are coerced to increase their disclosure relating to CSR with
the regulatory requirements. It is also hypothesized that:

H2: An increase in the regulatory disclosure requirements relating to CSR

is significantly positively related to an increase in the extent of CSR
disclosure.

3.3 Mimetic Isomorphism and CSR Disclosure

Mimetic isomorphism is a response to a situation of uncertainty, whereby social influence
processes lead an organization to imitate or benchmark those firms that are viewed to be
more legitimate and successful than others (Aerts, Cormier, & Magnan, 2006). In
situations of uncertainty, the managers of organizations are more likely to adopt the
benchmark firms, which are either the organizations that exercising the same activity, or
the leaders or the most talented organizations (Touron, 2005).

Prior studies provide evidence that board interlocks allow focal company to imitate
specific and multiple policies of other companies (Brandes et al., 2006; Westphal et al.,
2001). Board interlock refers to appointment of director, either executive or independent
non-executive director, on multiple boards. Imitation is possible through board interlock
since the directors can learn decision-making processes through monitoring management
decisions and also from direct participation in decision making of other boards. Through
direct participation, the directors can rehearse specific behaviors in the decision-making
process in other similar situations and reenact the specific decisions at the focal company
(Westphal et al., 2001). According to Westphal et al. (2001), this imitation strategy is
also known as second-order imitation. Brandes et al. (2005) find strong support for
imitation strategy by managers through board interlocks in relation to imitation of
voluntary recognition of stock option costs within the income statement.

Besides imitation of a specific content of disclosure items, board interlock also has the
prospects of facilitating managers to imitate the mimetic decision process of other
companies. Hence, it is contended in this study that the presence of board interlocks will

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facilitate managers’ imitation strategy of other companies’ CSR disclosure practices.

Manager’s imitation strategy may result in direct imitation of other companies’ CSR
disclosure practices or indirectly through second-order imitation of the CSR disclosure
decision processes of other companies. Irrespective of the imitation strategy, it is
expected that board interlocks will increase managers’ incentives to increase CSR
disclosure in annual reports. Based on this reasoning, the following hypothesis is
formulated:

H3: The percentage of board interlocks is significantly positively related to

the extent of CSR disclosure.

3.4 Ownership Structure and CSR Disclosure

The effect of the agency theory on managers’ decisions to disclose CSR information in
this study is examined by independent variables related to various elements of corporate
ownership structures. Prior studies provide evidence that various elements of corporate
ownership structures influence managers’ disclosure decisions in companies’ annual
reports (e.g. Chau & Gray, 2002; Chen & Jaggi, 2000; Eng & Mak, 2003; Gabrielsen et
al., 2002; Haniffa & Cooke, 2002; Ho & Wong, 2001). This study focuses on the effects
of family ownership, government ownership and foreign ownership on managers’
decisions to disclose CSR information.

3.5 Family Ownership and CSR Disclosure

Several studies focus on family owned companies in examining the impact of controlling
owners on corporate disclosures (Chau & Gray, 2002; C. J. P. Chen & Jaggi, 2000;
Haniffa & Cooke, 2002; Ho & Wong, 2001; Nazli & Weetman, 2006; D. Wang, 2006).
These literatures suggest that gaining control of the company is possible because family
members usually hold important positions on both the management team and the board of
directors. Further, this can also suggests the existence of dominant group of shareholders
or a substantial shareholder with strong influence who can nominate family members
representations on the board. Either argument implies that the company is being managed
by family owners and less diffused in terms of ownership structure. As owner managers

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have greater access to internal information, they have less incentive to disclose detailed
CSR information to outside investors and other stakeholders.

Gaining control of the company also enable the owners to influence the appointments of
independent non-executive directors (C. J. P. Chen & Jaggi, 2000; Ho & Wong, 2001;
Wang, 2006). Such influence could impair the directors’ independence and could lead to
higher risk of collusion between independent non-executive directors and family owners
(Patelli & Prencipe, 2007). In such situation, the family members may limit the
monitoring effectiveness of the board of directors and engage in corporate social
activities that are not in the interests of outside investors and other stakeholders. Prior
empirical evidence suggests that independent non-executive directors appointed through
the influence of family owners support major decisions in favour of family owners rather
than outside investors (C. J. P. Chen & Jaggi, 2000; Leung & Horwitz, 2004).

The potential entrenchment effect of family owners on corporate disclosure can be

mitigated by greater demand for detailed disclosure of CSR information in the annual
reports by contracting parties (Wang, 2006). In Malaysia, this demand can come from the
minority shareholder watchdog group (MSWG), a group that represents outside investors
interests. However, the MSWG role in mitigating this entrenchment effect may be an
ineffective control mechanism as outside investors’ activism is still developing in
Malaysia. Hence, the overall arguments suggest that the existence of higher percentage of
family members on the board is expected to reduce managers’ incentives to disclose CSR
information to outside investors and other stakeholders. Hence, this study formulates the
following hypothesis:

H4: The percentage of family members on the board is significantly

negatively related to the extent of CSR disclosure.
3.6 Government Ownership and CSR Disclosure
In Malaysia, government owned companies are companies owned by government
institutions or government controlled companies. Examples of government institutions
include Employees Provident Fund (EPF, a pension fund), Khazanah Nasional Berhad

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(Khazanah, an investment fund), Permodalan Nasional Berhad (PNB, an investment

fund) and Kumpulan Wang Amanah Pencen (KWAP, an investment fund). Government
controlled companies comprises of companies that are controlled by the respective State
Governments and State-level agencies. The source of finance for these companies is
generally provided through government funding. Given the government’s role in
promoting more detailed disclosure of CSR activities in Malaysia, it is important to
examine the disclosure tendencies of managers in government owned companies.

In line with the government efforts, it is expected that managers in these companies have
higher incentives to disclose CSR information to reduce agency conflicts. Prior literature
on corporate disclosure orientation in government owned companies suggest that agency
conflicts in these companies are relatively higher than private owned companies (Eng &
Mak, 2003; Luo et al., 2006). These studies argue that while government owned
companies are run similar to other private commercial enterprises, their main objectives
differ. The primary objectives of enhancing the national welfare and other non-profit
considerations may not be consistent with value maximization objective of other private
commercial enterprises, thus contributing to the high agency costs. In such situation,
managers in these companies have higher incentives to disclose more detailed
information to signal the state’s commitment in achieving the various objectives to
outside investors and other stakeholders (Eng & Mak, 2003). Following these arguments,
higher disclosure of CSR information is expected among government owned companies.

In contrast, where government ownership is substantial, managers can have lower

incentives to disclose more detailed information to outside investors, and other
stakeholders (Nazli & Weetman, 2006). As substantial state ownership suggests
availability of high government funds and increase monitoring by the government,
managers are required to disclose more detailed disclosures to the government.
Consequently, this can lower managers’ incentives to disclose more detailed information
to outside investors and other stakeholders. However, it is contented in this study that the
state’s commitment to improve transparency in corporate CSR activities will lead to some

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increase in managers’ incentives to disclose CSR information to outside investors and

other stakeholders. Based on this reasoning, the following hypothesis is formulated:

H5: The percentage of government ownership is significantly positively

related to the extent of CSR disclosure.

3.7 Foreign Ownership and CSR Disclosure

Agency theory suggests that ownership by foreign owners increases dispersion of
corporate ownership. In such situation, these owners may demand more detailed
disclosure of CSR in order to aid their decision-making (Haniffa & Cooke, 2002). In
response to this, managers may have higher incentives to disclose more detailed
information to reduce agency conflicts (Barako et al., 2006; D. K. K. Fan, Lui, & So,
2005; Firth, Fung, & Rui, 2007; Haniffa & Cooke, 2002; K. Wang, Sewon, & Claiborne,
2008). In addition, Haniffa and Cooke (2005) argue that managers in Malaysia have
higher incentives to disclose CSR information due to geographical separation between
the managers and owners. Overall, these arguments suggest that managers have
incentives to disclose CSR information that will allow foreign investors to monitor
managers’ disclosure practices and activities are aligned with their interests as owners.

Besides reducing agency conflicts, recent empirical studies suggest that managers in
developing countries have higher incentives to increase CSR disclosure in order to induce
and maintain foreign investments (Firth et al., 2007; Haniffa & Cooke, 2005; K. Wang et
al., 2008). The overall arguments lead to the following hypothesis:

H6: The percentage of foreign ownership is significantly positively related

to the extent of CSR disclosure.

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4. Methodology
4.1 Sample and Data Collection
The sample was drawn from non-financial companies listed on the main Board of Bursa
Malaysia for the year 2005, 2006 and 2007. 144 companies with financial year ending 31
December were randomly selected. This is to eliminate the element of bias in the
selection process. A three-year window period enables an examination of the trends in the
disclosure practices on CSR disclosure of public listed companies in Malaysia from an
unregulated environment (2005 and 2006) to a regulated environment (2007).
The finance companies were excluded due to different regulatory requirements and also
material difference in their types of operations (e.g. Ahmed & Courtis, 1999; Cheng &
Courtenay,2006; Depoers, 2000; Gray et al., 1995; Raffournier, 1995). In addition,
companies were also dropped from the sample due to missing data related to the variables
of interests in this study.
The research approach involves the content analysis of listed companies’ published
annual reports. Content analysis has been widely employed in prior studies to measure
CSR disclosure (Hackston & Milne, 1996; Adams et al., 1998; Tsang, 1998; Imam, 2000;
O’Donovan, 2002; Rahaman et al. 2002; Al-Tuwaijri et al., 2004; Kuasirikun & Sherer,
2004; Hamid, 2004; Smith et al., 2005; Clemens & Douglas et al., 2006).
4.2 Empirical Schema
The relationships developed in the six hypotheses are depicted in an empirical schema as
given in Figure 1. The dependent variable (CSRD) is based on the aggregate number of
words related to CSR disclosure in annual reports. Various recording units have been
used by content analysis researchers to measure the extent of corporate disclosures. For
example Deegan & Rankin (1996) and Wilmshurst & Frost (2000), use word count while
researchers such as Guthrie & Parker (1989) use number of pages. Other researchers such
as Deegan et al. (2000), Deegan et al. (2002), and Tsang (1998), use number of sentences
as the unit of analysis. According to Gray et al. (1995), there is some uncertainty as to the
optimal measure of the extent of disclosure, with words, sentences and pages being the
preferred units of analysis for written communication. Unerman (1999)’s findings
indicate that testing content analysis of using words, sentences and pages has no
significant difference among those methods. Following Haniffa and Cooke (2005),

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graphical presentation of CSR activities were excluded from the word count in this study.
In addition to the identified independent variables, this study also includes two firm
characteristics identified in prior research as determinants of management disclosure
decisions (e.g. Botosan, 1997; Chau & Gray, 2002; Haniffa & Cooke, 2002) as control
variables. These variables are size and profitability.

The relationships developed in the hypotheses can be depicted in an empirical schema as

given in Figure 1. The definition and measurement of variables used in this study are
listed in Table 1.

Figure 1: Empirical Schema of Proxies for the Institutional and Agency Theory on
Corporate Social Responsibility Disclosure

Determinants Extent of Disclosure

Proxies for Institutional Theory:

Coercive Isomorphism
̇ Anticipation of Government Regulation
– AGREG H1 (+ve)
̇ Existence of Government
Regulation – EGREG H2 (+ve)
Mimetic Isomorphism
̇ Board Interlock – B LOCK H3 (+ve)

CSR Disclosure
(CSRD)
Proxies for Agency Theory: (-ve)
H4
Ownership Structure
(+ve)
̇ Family – FAM H5

̇
(+ve)
Government – GOV H6

̇ Foreign – FOR

Control Variables – SIZE,

PROFITABILITY

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Table 1: Definition and Measurement of Variables

Variable Definition Measurement

Acronym
CSRD The extent of CSR Number of words counted. (Deegan &
disclosure Rankin, 1996 and Wilmshurst & Frost,
2000).

AGREG Anticipated Regulation – Difference in the mean of CSR disclosure

one year before the (words) in voluntary year (2005) versus
existence of mandatory the anticipated year (2006)
disclosure requirements
EGREG Existence of Regulation – Percentage difference in the number of
the year mandatory words of CSR disclosure in anticipated
regulation on CSR year (2006) versus mandatory year (2007)
disclosure was introduced

B LOCK Board interlocks Percentage of total number of independent

non – executive directors with
appointments on other boards divided by
the number of total board members
GOV Government ownership Percentage of shares owned by
government institutions listed in the top
thirty shareholdings to total number of
shares issued
FAM Family members as Percentage of family members on board to
defined by S122A of the total number of directors on the board
Malaysian , CA (1965)
FOR Foreign ownership Percentage of shares owned by foreign
owners listed in the top ten shareholdings
to total number of shares issued
SIZE Size of company Total assets
ROA Profitability Proportion of profit after tax over total
assets

5. Analysis and Results

5. 1 Descriptive Statistics
Table 2 provides descriptive statistics of the CSR disclosure (CSRD) and the independent
variables. The mean of CSRD measured by number of words in 2005, 2006 and 2007
were 286, 353 and 835 respectively. As expected, the greatest increase in CSRD occurred
in 2007, the year of the mandatory disclosure requirements became effective. These

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values suggest that the mandatory requirements imposed by the regulatory authorities in
2007 have coerced companies to increase the comprehensiveness of CSR disclosure in
their annual reports.

Table 2: Descriptive statistics for the dependent and continuous independent variables

Label Minimum Maximum Mean Std

Deviation
CSR Disclosure 2005 CSRD 05 0.00 6,276.00 286.14 778.63

CSR Disclosure 2006 CSRD 06 0.00 4,803.00 353.91 702.18

CSR Disclosure 2007 CSRD 07 10.00 4,410.00 835.09 981.79

Government EGREG -95.70 4,313.00 385.41 685.29

Regulation
Board Interlock B LOCK 0.00 75.00 25.67 15.95

Government GOV 0.00 92.38 17.90 24.58

Ownership
Family Ownership FAM 0.00 100.00 17.66 23.81

Foreign Ownership FOR 0.00 61.14 6.63 11.31

Size SIZE 66.00 67,724.60 3,399.39 9,029.39

Return on Asset ROA 44.00 36.07 6.14 8.47

The extent of CSRD in words ranges from 0 to 6,276 in 2005; 0 to 4,803 in 2006, and 10
to 4,410 words in 2007 respectively. The minimum number of words disclosed improved
from 0 in 2005 to 10 in 2007, indicating that companies abide by the new regulation of
disclosing some information relating to their CSR activities in their annual reports.
Interestingly, the maximum number of words decreased from year to year. This could
possibly be due to the introduction of the CSR Framework by Bursa Malaysia in late
2006, requiring CSR disclosures to be more focused based on certain themes. In
complying with this Framework, companies’ CSR disclosure became more structured.

With regards to board interlock, the percentage of independent non-executive directors

with board membership on other public listed companies ranges from 0% to 75%. Of the

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ownership variables, the results in Table 2 reveal almost similar values for government
ownership and family ownership. Percentage of government ownership ranges from 0%
to 92.38%, while family ownership ranges from 0% to 100%. The average values of
17.90% for government ownership and 17.66% for family ownership indicate significant
presence of these forms of owners among the sampled companies. Relative to these two
forms of ownership structure, foreign ownership (FOR) has the lowest average value of
6.63%. Finally, the size (SIZE) of the companies in the sample ranges from a minimum
of 66 million to a maximum of 67,724.60 million while profitability (ROA) of the
companies on average is 6.14%.
Figure 2 presents the trend of CSR disclosures from 2005 to 2007. CSR disclosures have
improved from year to year. In 2005 and 2006, out of 144 samples, 104 (72.2%) and 68
(47.2%) companies respectively made zero CSR disclosure. A marked improvement was
shown in 2007 whereby; all companies made CSR disclosures, with 19 (13.2%)
companies disclosed their CSR information in less than 100 words. The number of words
disclosed in companies’ annual reports in 2007 have improved substantially as compared
to those of 2006’s and 2005’s. As in previous literature (Clements & Douglas, 2006; and
M. Tsamenyi et al, 2006), the findings in this study support that argument that coercive
pressures by regulatory authorities encourage companies to embrace new reporting
practices. When coerced by government, companies conscientiously disclose their CSR
activities in the annual reports.
Figure 2: CSR Disclosures Year 2005, 2006 and 2007
CSR Disclosures in Year 2005, 2006, and 2007

120
Number of companies

100

80
2005
60 2006
2007
40

20

0
1 100 1000 10000
Numbe r of words

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To test the effects of anticipation of and the existence of mandatory disclosure

requirements – tests of H1 and H2 an analysis based on descriptive statistic is undertaken
of the CSRD between the years 2005, 2006 and 2007. The first hypothesis tests the
relationship between voluntary disclosure on CSR (CSRD 05) and the CSR disclosure in
the anticipated year of regulated disclosure environment (CSRD 06).

In testing H1, which predicts that the likelihood of a disclosure requirements becoming
mandatory increases the voluntary disclosure on CSR, a comparison was made between
the means of the CSR disclosure in the unregulated period (CSRD 05 and CSRD 06).
Results from Table 2 shows that the means of CSRD increased from 286.14 (CSRD 05)
to 353.91 (CSRD 06) indicating that the likelihood of a disclosure requirements
becoming mandatory encouraged companies to improve their CSR disclosures in
preparation of the impending introduction of the mandatory disclosure requirements by
the regulatory authorities. A paired sample t-test was then undertaken to compare the
means over the two-year period. Table 3 presents the comparison of means for CSRD
during the pre-regulation years.

Table 3: CSR Disclosures- Comparison of Means for Pre-Regulation Years

Mean number of words of disclosure t-value Sig
Year 2005 Year 2006
CSRD 286.14 353.91 1.125 0.262

Results from Table 3 indicate that during the pre-regulation period, there is an increase in
disclosure even though the increase is not significant. The increase could be related to the
anticipation of legislation, increase awareness through media communication and
introduction of CSR awareness through awards by professional organisations. However,
such factors are insufficient to significantly promote CSR disclosure during this
voluntary period. Hence, H1 is not accepted.

H2 predicts that the introduction of regulatory disclosure requirements in 2007 will result
in an increase in the extent of CSR disclosure. To test H2, a comparison was made

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between the means for the CSRD during the anticipated year (CSRD 06) and the means
of CSRD for the post-regulation year (CSRD 07). Results from Table 2 show that the
means of CSRD increased from 353.91 (CSRD 06) to 835.09 (CSRD 07) indicating a
substantial increase in disclosure between the two years due to the introduction of
regulation. To compare the means, a paired sample t-test is again undertaken to compare
the means over the two-year period. The result of this analysis is shown in Table 4.

Table 4: CSR Disclosures - Comparison of Means between the Pre and Post-Regulation
Years

Mean number of words of disclosure t-value Sig

Year 2006 Year 2007
CSRD 353.91 835.09 8.308 0.000**
** Significant at the 0.01 level

Results from Table 4 shows that there is a significant increase in CSR disclosure from the
pre- to the post-regulation year. While such disclosure is mandatory and there is no
specific requirement regarding the content of disclosure, the results indicate significant
differences in the extent of disclosure for the two years. This suggests external regulatory
forces from the government are an important mechanism to promote CSR disclosure. At
the same time this points to the possibility that more detailed and stricter enforcement
regarding CSR disclosure could further enhanced the quality of CSR disclosure. CSR
disclosure quality could also be improved by having auditing and assurance certification
of such disclosure.
5.2 Multivariate Analysis
In this study linear multiple regression is used as the basis of analysis for testing H2 to
H6. The hypothesized relationships are modeled as follows.
CSRD = β0 + β1 EGREG + β2 B LOCK + β3 FAM + β4 GOV + β5 FOR β6
SIZE + β7 ROA + εt
where CSRD represents the extent of CSR disclosure while definitions for
independent variables are given in Table 1.

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In the above regression model, multicollinearity was tested using the variance inflation
factor and tolerance levels, and found to be well within the satisfactory range. The results
of the regression analysis are presented in Table 5 and are now discussed in terms of tests
of each of the hypotheses established in this study.

Table 5: Multiple Regression Results for Factors Affecting the Extent of CSR Disclosure

Dependent Variable: CSRD (Extent of CSR disclosure)

R Square = 0.445, Adjusted R2 = 0.419, F = 16.485, Sig. = 0.000
Variables Beta t Sig.
(Constant) 0.936
EGREG 0.329 4.814 0.000* * *
B LOCK 0.050 0.688 0.493
FAM -0.154 -2.256 0.026* *
GOV 0.125 1.737 0.085*
FOR 0.063 0.947 0.345
SIZE 0.414 5.762 0.000* * *
ROA 0.162 2.483 0.014* *
Coefficient for each variable is shown with t – statistics in parentheses
* Significant at 10% level (1-tailed test); * * Significant at 5% level (1-tailed test);
* * * Significant at 1% level (1-tailed test)

Results of the multiple regression analysis report that the F-statistic is 16.485 and the
adjusted R2 is 0.419 and the p-value is significant. The adjusted R2 value is within the
range as reported (0.389, 1996 disclosure and 0.453, 2002 disclosure) by Haniffa &
Cooke (2005). H2 predicts that the presence of regulatory disclosure requirements
relating to CSR will result in an increase in the extent of CSR disclosure. The results in
Table 5 show that the change in the extent of CSR disclosure from the pre- to the post-
period is significant (EGERG). This result confirms the findings from the paired-sample
t-test as reported in Table 4. Therefore, H2 is accepted.

Table 5 also reveals that of the ownership variables, the family and government
ownership variables (FAM) are significant. However, variables relating to board interlock

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(B LOCK) and foreign ownership (FOR) reveal insignificant results. As such, only H4
and H5 are accepted.

The insignificant relationship of B LOCK indicates that independent non-executive

directors with multiple directorship does not facilitate managers’ disclosure strategies by
imitating other companies practicing detailed CSR disclosure. A possible explanation
could be related to the strong influence of family owners on CSR disclosure. In the
presence of significant family ownership there is a high risk of collusion between the
independent non-executive directors and these owners. In such situation, they are more
likely to support the family owners in disclosing less detailed information on CSR
disclosure rather than facilitating managers by re-enacting the CSR disclosure strategies
of other companies of which they are board members.

The negative effect reported for family ownership on CSR disclosure is consistent with
previous studies, for example, Ahmed and Nichols (1994), Ho and Wong (2001), Haniffa
and Cooke (2002) and Nazli and Weetman (2006). In these companies, the high
proportion of family members on the board indicates the existence of a dominant group
of shareholders or a substantial shareholder that could influence the board’s decision to
nominate family members to the board (Nazli & Weetman, 2006). Accordingly, these
companies are likely to be closely held or owner managed (Claessens, Djankov, and
Lang, 2000). In such situation, the demand for published CSR information by the owners
is less as they have better access to internal information.

The above results also suggest that family owned companies limit CSR information flows
to outside investors and other stakeholders. This indicates potential entrenchment effect
of family owners on CSR disclosure because lower disclosure potentially creates greater
information asymmetry between inside owners and outside owners and other stakeholders
(D. Wang, 2006). The lower extent of CSR disclosure reduces the ability of outside
investors and other stakeholders to monitor corporate social activities of family owned
companies.

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With regards to government ownership (GOV), the results indicate that companies with
higher government ownership disclose more CSR information. The results provide
support to the argument that agency conflicts in these companies are relatively higher
than privately-owned companies and are consistent with the findings by Eng and Mak
(2003). The high agency conflicts are potentially associated with the government’s
commitment to enhance the national welfare and other non-profit considerations. These
considerations may not be directly consistent with value maximization profits of
companies with lower government ownership. Accordingly, managers in these companies
have higher incentives to disclose CSR information to reduce the high agency conflicts.

Finally, the insignificant result reported for foreign ownership variable is inconsistent
with the findings in Haniffa and Cooke (2005). A possible explanation is that because
there is a relatively low percentage of foreign ownership (mean = 6.63%) in the sample
(as reported in descriptive statistics in Table 2). As such, this group of owners would
have low shareholder voting power and would not be able to formally demand greater
public disclosure of CSR from their company. Alternatively, the incentives to attract and
maintain foreign funds can induce close working links between management and foreign
owners. Accordingly, these managers have higher incentives to supply CSR information
through private channels. Where foreign owners can gain informal access to CSR
information from management in order to aid their decision-making, then they would not
need to push for greater public disclosure of CSR.

6. Conclusion and Limitations

This study makes a contribution to the corporate disclosure literature by providing new
evidence that regulatory efforts are important mechanism in promoting greater corporate
transparency in CSR disclosure. The results revealed significant increase in CSR
disclosure in 2007 relative to such disclosure in 2006. This infers that when regulatory
bodies emphasize CSR disclosures, managers align their CSR disclosure strategy with
those of the regulatory bodies. An implication of these findings is that regulatory efforts
have the prospect of becoming a significant force in promoting the extent and quality of
CSR disclosure.

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In line with the regulatory efforts, the regression results show that companies with
significant government ownership are positively associated with the extent of CSR
disclosure. The availability of CSR disclosures of these companies to the public and the
emphasis by regulatory bodies and policy makers are important mechanisms that can shift
investors and other stakeholders’ expectations toward expecting more adequate
disclosure of CSR activities. This is also consistent with the argument that higher
disclosure of CSR activities are important mechanism in reducing agency costs in these
companies. Managers in these companies disclose more detailed CSR information to
signal government’s commitment in enhancing the disclosure of CSR activities to outside
investors and other stakeholders (Eng & Mak, 2003).
In contrast to government ownership, the regression results revealed significant negative
association between family ownership and the extent of CSR disclosure. This result
should be of interests to regulatory bodies as it demonstrates that the regulatory efforts do
not appear to promote disclosures of CSR activities by these companies. In addition, it
indicates potential entrenchment effect of family owners by disclosing less detailed CSR
information to outside investors and other stakeholders. The insignificant results reported
between board interlock and the extent of CSR disclosure further corroborate the
dominant influence of family owners on corporate disclosure. Instead of promoting
higher CSR disclosure through their participation on other boards, the results indicate the
prospect of these directors colluding and supporting the disclosure strategies of family
owners. Hence, these findings provide regulatory bodies with enhanced understanding in
their efforts to improve corporate transparency.

In summary, the findings in this study contribute to a better understanding of the

relationships between various institutional pressures and ownership structure on
management CSR disclosure decisions. The findings also have practical implications to
regulatory bodies in promoting and improving corporate transparency, other policy
makers in strengthening capital market environment, to investment community and other
stakeholders who rely on corporate social disclosures in making their decisions.

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There are some limitations in this study. First, this study focused only on CSR disclosures
in companies’ annual reports. Other forms of communication channels such as the
company’s web site, newspapers and in-house magazines have been used to communicate
corporate social responsibility activities. Hence, future research may consider such
disclosures.

Second, the empirical model adopted in this study may not capture other dimensions that
influence managers’ CSR disclosure decisions. Specifically, data collected to measure the
variables are limited to information disclosed in annual reports. Future research could
include data collection through more extensive interviews with preparers of the annual
reports in order to gain more insights into the determinants of their disclosure decisions.

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Listed in ULRICH’S
The Effect of Problem-Based Learning on Students
Teamwork Ability in UiTM Trengganu, Malaysia

Noor Liza Adnan

Faculty of Accountancy, Universiti Teknologi MARA, Terengganu, Dungun Campus,
Dungun 23000, Malaysia

Wan Karomiah Wan Abdullah

Faculty of Information Technology and Quantitative Science, Universiti Teknologi
MARA, Dungun Campus, Dungun 23000, Terengganu, Malaysia

Kamaruzaman Jusoff (Corresponding author)

TropAIR, Faculty of Forestry, Universiti Putra Malaysia, 43400 Serdang, Selangor.
Malaysia

Abstract

One of the criteria looked for by the employers in employing a staff is the ability to work
in a team, especially when employees of an organization could come from diverse
background and culture as a result of globalization. However, many of our graduates do
not possess this ability, which later contributes to poor work performance. Many parties
blame the higher institutions as they fail to expose the students to real working
environment, since the teaching method used is more centered on delivering knowledge
without inviting active participation from the students. Hence, this paper attempts to
examine whether Problem-Based Learning (PBL) would give positive effects to teamwork
ability (TWA) and to determine whether students of different gender and CGPA would evaluate
TWA differently. A preferred learning approach was also sought. The respondents consisted
of 48 graduating accounting students from UiTM Terengganu. It was discovered that
PBL did affect teamwork ability as measured by Paired Samples t-Test before and after
the PBL session. They felt that their teamwork ability had been enhanced after a semester
of PBL. Independent Samples t-Test showed that both genders did not differ
significantly in their views of TWA as a result of PBL. However, students with lower
CGPA of below 3.00 felt that PBL had improved their TWA better than students with
higher CGPA of 3.00 to 3.49. When further probed, many preferred a combination of

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PBL and lecture approach rather than learning solely based on lecture. However, this
study was conducted on a rather small sample size which limits the scope of the study.
Hence, another study which uses bigger sample size, across the whole UiTM campuses
and various faculties would give a better picture on the effect of PBL on TWA.
Comparison with other universities implementing PBL would provide a more holistic
result.

Keywords: Problem-Based Learning, Generic competencies, Teamwork, Student

1. Introduction
Unemployment among graduates in Malaysia has still been discussed heatedly by
many parties. To prove just how serious this phenomena is, Quek (2005) cited the
results of a study conducted by the Higher Education Ministry of Malaysia on this matter,
which revealed that only 57 per cent of graduates were successful in securing jobs, 29 per
cent remained jobless while another 14 per cent went on to further their education.
Previous researches carried out by Asma and Lim (2000); Lee (2000); Quek (2000) and
Kanapathy (2001) attempted to obtain feedback from various employers in Malaysia on
the contributing factors to this issue. They pointed invariably to the deficiencies of
tertiary education in equipping students with generic competencies to meet the needs of
the workplace as the lack of it can add liabilities to the corporations. Repeatedly, Quek
(2005) cited a press release from the Human Resources Ministry of Malaysia which
expressed that many graduates are good only in theory and many are unable to meet the
expectations of the corporate sector. Jacobsen (1993) described generic competencies as
success skills in employees that are needed to transfer learning from the classroom to the
workplace for fulfilling work demands. In other words, Quek (2005) cited from various
researchers that employers prefer workers who have generic competencies like
interpersonal skills, leadership skills, teamwork and oral and written skills for work
performance.

Albrecht and Sack (2000) had strongly urged accounting educators to take greater
effort to devise new pedagogical approaches by stating that, “Students forget what they
memorize. Content knowledge becomes dated and is often not transferable across
different types of jobs. On the other hand, critical skills rarely become obsolete and are

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usually transferable across assignments and careers.” In addition, Duch, et al. (2001)
suggested that accounting educators need to “design educational experiences for students
that require them to be active, independent learners and problem solvers rather than
passive recipients of information.” A few years before, Woods (1997) pointed out that
PBL is the most effective teaching method in the most recent 30 years since the learning
environment in PBL includes every kind of factors currently known to improve the
efficiency of learning, hence equipping students with the generic competencies required.
Moreover, according to Haghparast et al. (2007) PBL challenges students to ‘learn to
learn’ and work cooperatively in groups to seek solutions to foster effective learning,
while Woods (1994) concluded that PBL is more than an extremely effective
environment to learn subject knowledge as it can be used to help students develop skill in
lifetime learning, change management, teamwork, conflict resolution and problem
solving. They learn through experience, through the benefit of working together and they
learn best from teaching each other and in the context of compelling problems (Cross,
1998; Annis, 1983; McKeachie et al. 1986; Cross, 1999).

Similar outcome was revealed by Margetson (1996) who stated that PBL can
change students’ role from being knowledge receivers to knowledge seekers as students
are to develop their own plan of direction. However, she added that it can disturb their
comfort zone that leads to the building of tension among them. A key intention of PBL,
cited by Alessio (2004), is that such tension may lead to learning material in a different
way, creating opportunities for self-directed and deep learning. Dahlgren & Dahlgren
(2002) discovered that deep learning can occur when students work together in small
groups and in self-directed learning, where independent thinking is encouraged.

Apart from that, Prince (2004) stated that in a PBL environment, students
experience working as part of a team which provides a natural environment that promotes
effective team work and interpersonal skills. Dishon & O’Leary (1994) defined a team
as "a group of two to five students who are tied together by a common purpose, to
complete a task and to include every group member." While Moy (1999) defined
interpersonal or team working skills as “the ability to work, adapt and interact with
people of varied background or discipline, within or across organisations.” This will

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obviously form an important experience as part of their preparation for work life in the
modern business world. The same opinion was expressed by Krajcik et al. (1999) who
suggested that in order to succeed in the real world; students need to know how to work
with people from different background. This finding conformed to another research
finding by Cockrell et al. (2000) who discovered that collaborative groups foster students'
sense of ownership of the knowledge that is created over the semester and within the
groups, leadership moves from student to student as situations arise and resolve.

Similarly, Challenger (2008) in his online newsletter asserted that one of the most
important requirements for success in today’s job market is the ability to be a team
player, especially now, when companies are beset on all sides by increasing competition.
A major measure of what kind of an employee the candidate will be is whether the
individual has demonstrated teamwork ability. Of the same opinion is Firth-Cozens
(1998) who stated that major change continues to occur in all successful organizations
and partly as a means of dealing with the changes, there is an increased emphasis on team
working. Team working is seen as a way to tackle the potential fragmentation of services
and improve service quality, to widen skills, and acts as an essential part of the need to
consider the complexity of modern services.

However, as many researches had discovered, despite their potential benefits, it is

clear that not everyone wants to work in team since it can cause some people within them
dissatisfaction and unhappiness. Furthermore, not all team are effective, proving that
teamwork has to be trained and is not a byproduct. In the Malaysian context, tertiary
institutions should consider the implementation of new curriculum pedagogy that can
instill teamwork ability among the students rather than letting the students getting lost in
the process of acquiring it.
The purpose of this study is to urge accounting educators to seriously consider
PBL as a pedagogy that can better prepare accounting professionals effectively for the
challenges of the 21st century, though Hansen (2006) states that PBL is still a relatively
new approach in accounting education. Therefore, this study aims to examine whether
PBL would give a positive effect to teamwork ability of accounting students of UiTM
Terengganu and to determine whether students of different gender and CGPA would

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evaluate TWA differently. A preferred learning approach was also sought. It is hoped
that the positive outcome of PBL will lead to the wide implementation of this approach
by the management. Suggestions on the best way to conduct the PBL approach in
classrooms will also be looked into.

2. Method

Data were collected from all 50 first degree students from the Faculty of Accountancy,
UiTM Terengganu undergoing PBL approach for the subject of Strategic Management
for one semester. The Accounting Faculty was chosen as this was the only faculty that
fully implemented the PBL approach in its teaching of Strategic Management. The PBL
approach was implemented partially in handling other subjects; hence these subjects did
not meet the requirement of the study. After excluding two questionnaires due to missing
information, the final response rate was 96% (48 students).

Only one researcher was directly involved in the data collection. In the first session of
the semester, students were explained about the PBL approach and were briefed on what
were required and expected of them. The students were to form their own groups
consisting of three to five members per group. Work and tasks were also assigned, of
which initially each group was assigned six case studies (known as Do-It-First project,
DIF) that would cover the whole syllabus of Strategic Management. In the second and
third sessions, the researcher gave the enabling lectures that covered the overall syllabus.
The class was conducted twice a week and each session lasted for two hours for a 14-
week semester. In the fourth session, students began to brainstorm in order to solve the
case studies given which marked the beginning of the PBL session. At the beginning of
week six, each group was to submit their written reports of DIF project which would be
followed by group presentations and a quiz. As the semester progressed, more case
studies were assigned and in every session, the groups presented the outcome of their
discussions and the researcher and other students participated in a question and answer
(Q&A) session at the end of each presentation. Each group was allocated 15 minutes for
presentation and 5 – 10 minutes for Q&A session. Hence, students learned to defend
their thoughts and were trained to reach a solution within a short span of time.

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The questionnaire developed was adapted from a few previous researches done
that consisted of two different sections - section A consisted of 6 items on students’
background while section B consisted of 23 items evaluating the effect of PBL on the
students’ teamwork ability. These items were evaluated using Likert Scale from 1, which
represented ‘strongly disagree’ to 7, which represented ‘strongly agree’. There were
several steps that guided items selection. First, all items which were related to the issues
arose in teamwork were pooled from Khoiny (1995), Bauer (2003) and Haslam et al.
(2005). Each item was then scrutinized and only the most appropriate ones were selected
to be included in the questionnaire. However, items which were not that appropriate
were restructured or reworded to suit the course content and the learning experience the
students had gone through. This was important as most of the items referred to were
related to nursing or medical studies. Researchers had to use their own expert judgment,
considering the long years in teaching experience, to ensure the content validity of the
items measured, guided by theory from several literatures. Data entry and analyses were
carried out using SPSS. Paired Samples t-Test and Independent Samples t-Test
were used to meet the objectives.The above researcher also made observation on the
whole process of PBL approach especially during group discussions and presentations
that took place in the classroom, noting down the students’ reactions, opinions and
remarks.

3. Results and Discussions

The findings on the effect of PBL on students’ teamwork ability are discussed
below.
3.1 Does PBL Affect Team Work Ability?

Most researchers like Parker (1990) and Cohen (1994) agreed that teamwork
seems to be a central characteristic of PBL. Therefore, it was hypothesized that
students’ teamwork ability will be enhanced after a PBL session. Before further
analyses were conducted, an internal reliability test was done to determine if the 23 items
evaluated were internally reliable to measure teamwork ability. The outcome with the
high positive value of alpha of 0.925 confirmed that all items did measure the teamwork
ability. Based on Kolmogorov-Smirnov Test, p-values of 0.560 and 0.404 (which were

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greater than 0.05) for before and after the PBL session respectively denoting the
distribution of both teamwork ability before and after the PBL session were normally
distributed. Paired Samples t-Test was then conducted to see how students evaluated
their teamwork ability, before and after the PBL session. The test conducted showed that
the evaluation after the PBL session generated a mean of 5.799 as compared to before the
PBL session with a mean of 5.657. Though it is not significant at a confidence level of
95% (p-value of 0.057), but considering that this was the first time the students were
being exposed to fully PBL approach throughout their learning period, then it would be
fair to reduce the confidence level to 90% which would make it significant, indicating
that there was a slight improvement to their team work ability after the PBL session, as
shown in Table 1.

Table 1 : Mean Comparison of TWA Before and After

PBL

Team work ability Mean Std. Deviation

Before PBL 5.657 0.533
After PBL 5.799 0.604
Significant level (2-tailed) 0.057

Upon seeing that PBL did give some positive impacts on students’ teamwork ability,
further detailed investigations were carried out on how students by different genders and
CGPAs perceived teamwork ability as a result of PBL as exhibited in Table 2; and also in
respect of 23 items related to students’ teamwork ability after the PBL session. Table 3
listed the 23 items evaluated with the mean value and standard deviation for each item.

3.2 PBL and Teamwork Ability Perceived by Gender and CGPA

Table 2 shows how students of different genders and CGPAs perceived their
teamwork ability as a result of PBL. Independent Samples t-Test conducted discovered
that both male (mean value of 5.68) and female respondents (mean value of 5.84) gave
almost the same scores, indicating that both genders did not differ significantly in their
view of teamwork ability with a p-value 0.492.

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However, when examining their perceptions based on their CGPAs, the result
showed that as a result of PBL approach, teamwork ability was better perceived by
students with CGPA below 3.00 (mean value of 5.96) as compared to students with
higher CGPA of 3.00 to 3.49 (mean value of 5.48). This was significant at 99%
confidence level, with a p-value of 0.008. From the researcher’s observation (who was
directly involved in the data collection), this could be due to the teamwork discussion in
which each team member was expected to contribute ideas equally and this discussion
also ensured that every student in the group would gain the knowledge from the work
done. Therefore, weaker students would feel more at ease learning from their peers for
peer learning tends to eliminate the barrier to ask questions. However, smarter students
might feel that the process would slow them down especially when they felt that they
could not really rely on their weaker counterparts to complete their tasks satisfactorily
and this would require more time and commitment from them.

Table 2: TWA Perceived by Gender and CGPA

Background No. of Mean *Std. **Std.

Students Dev Error
Gender Male 8 5.68 0.89 0.31
Female 40 5.84 0.54 0.09
CGPA Up to 2.99 33 5.96 0.53 0.09
3.00 – 3.49 15 5.48 0.62 0.16
*Std. Dev = standard deviation; **Std. Error = standard error mean

3.3 Students Evaluation on Their Team Work Ability as a Result of PBL

Further analysis on 23 items related to students’ teamwork ability as the effect of going
through a semester of PBL pedagogy was carried out and listed in Table 3. Mean values
can be categorized as ‘slightly agree’ when it falls within the scale of 4 to <5,
‘moderately agree’ when it falls within 5 to <6 and ‘strongly agree’ for the scale of 6 to 7
out of possible 7.00. A mean value of 6.13 out of 7.00 for item no. 5 showed that
students strongly preferred to work in groups in solving a problem rather than working
individually for group work would facilitate the completion of a given task as measured
by item no. 4 with a mean value of 6.15. It might be due to the fact that each team
member would try their best to contribute ideas in team discussions (mean of 6.19) which
would result in better alternative solutions. Haghparast, et al,. (2007) discovered that

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students with experience in both PBL and traditional pedagogy preferred the PBL
pedagogy, stating greater independence, more flexibility, self-responsibility, teamwork,
more student involvement, better understanding and integration of subjects and an
enhanced learning environment working in groups. This satisfaction could be due to
several factors, such as a more active role of students in a small group-based PBL
pedagogy which offers a more holistic view. Conforming to this statement, students
moderately agreed that team interactions had certainly enhanced their learning (mean of
5.81).

With a mean value of 5.80, the respondents moderately agreed that they felt at ease
sharing their ideas with the team as each team member would prefer to discuss one's idea
even though it sounds silly rather than totally rejecting it in the first place (mean of 5.96).
They would carefully explore alternatives in order to attain maximum group benefit
(mean of 5.68). This had somehow made them felt that their team members were
supportive to each other (mean value of 5.77) resulted to stronger ties among them (mean
value of 5.77). Seaberry (2002) reported similar teacher observations of face to face
interactions and active discussions among the PBL student groups, during class time.
This was supported by Alessio (2004) who observed students using resources other than
the required text, to search for answers and information designed to fill in gaps and
confirmed statements made by group members making students in the small PBL groups
engaged actively in the learning process and formed a type of learning community, with
each making a meaningful contributions, as they tackled the problems. The second lowest
mean at 5.26 was scored for item no. 23 when students moderately agreed that they could
visualize what was expected of them by their team members, hence enabled them to
complete the task assigned by their team on time (mean of 5.56).

Table 3: Students Evaluation on Their Teamwork Ability as a Result of PBL

Standard
No. Items Mean Deviation
1 I always respect my team member's opinions or ideas. 6.30 0.68
2 I would try my best to contribute ideas in team discussions. 6.19 0.73
3 I can respect my team members' strength. 6.17 0.63
I think it's easier to complete the given task in a group rather
4 than working alone. 6.15 0.90

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I would prefer to work together in a group in solving the

5 same problem rather than working individually. 6.13 1.01
6 Through team work, I learn how to be responsible to others. 6.02 0.84
I adapt well with any new changes/ideas agreed by the team
7 members. 5.98 0.79
8 When working in a team, I can control my emotion. 5.98 0.81
I would prefer to discuss one's idea even though it sounds 5.96
9 silly to me rather than totally rejecting it in the first place. 0.91
I can take rejections and accept comments from my
10 team members positively. 5.92 0.90
11 My team members respect me well. 5.88 0.89
12 I feel the team interactions enhance my learning. 5.81 0.98
13 I feel at ease sharing my ideas with the team. 5.80 1.20
14 I don't mind working with people with different school of thought. 5.79 1.03
15 I feel strong ties with my group. 5.77 0.86
16 I feel my team members are supportive to each other. 5.77 1.27
I would carefully explore alternatives in order to attain
17 maximum group benefit. 5.68 0.86
18 I can generate positive effect to my group. 5.58 1.03
19 I can always balance my team's interest and my personal interest. 5.57 1.11
20 I can complete the task assigned by my team on time. 5.56 1.15
Should there is a clash in schedule; I normally give
21 priority to my team rather than my own affair. 5.42 1.13
I think I can clearly visualize what is expected of me
22 by my team members. 5.26 0.98
I am able to motivate my team members to solve difficult
23 problems. 5.19 1.04

Basically, respondents strongly agreed that through teamwork they learnt how to
be responsible to others (mean value of 6.02). Respondents moderately agreed (mean
value of 5.88) that their team members respect them well. As a result, they admitted that
they could respect their team member's opinions or ideas (mean of 6.30), accepted their
strengths (a mean of 6.17) and took rejections and comments positively (mean of 5.92).
These have somehow trained them to be successful team players as described by
Challenger (2008) who stated that an effective team member could sense what
contributions need to be made, and how he or she can best support the group in achieving
its goals through asking key questions at the appropriate time, or making observations
based on the statements of others, melding differing views into a cohesive whole and

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providing the perspective that is needed to establish a plan of action. In addition, he

added that by respecting others, the team player has sensitivity to the needs of others for
recognition and does not propose any course of action without at first considering the
views of all parties who will be concerned with the decisions.

Due to the ability to tolerate, working with others with different school of thought
should not be a problem to them (mean of 5.79). They also admitted to being able to
adapt to any new changes or ideas agreed by other team members (mean of 5.98) as they
believed that they could control their emotion when working in a team (mean value of
5.98). These traits are highly needed in a successful teamwork as stated by Yalcin et al.
(2006). They reiterated that an effective and democratically structured small PBL group
may benefit from its relation with psychotherapeutic principles (listening and tolerating
hostility) where group members themselves determine the rules resulting to improving
students’ communication skills. As a result, students can acquire abilities to work
together, take initiative, share knowledge, and show mutual respect.

Realizing the benefit and effectiveness of the PBL approach, 20.8% of the students
chose the PBL approach, while another 50% chose a combination of PBL and lecture
when asked of their preferred learning approach. Only 29.2% of them chose lecture
method alone (traditional method). It showed that the majority of the students preferred a
combination method of PBL and lecture, indicating that students did recognize the
effectiveness of PBL, but somehow, a few lecture sessions were required to clear some
ambiguities and put things in the right path, especially when this was their first
experience being exposed to the full PBL approach. PBL was still seen as very essential
to equip them with some soft skills like improving their communication skills, boosting
their confidence level, stimulating their thinking process and others as shown in the
above tables. Therefore, combining both methods was expected to greatly contribute to a
more effective learning.

4. Conclusion

Team work is not a natural process arising from a meeting of a group of people.
Obviously it needs to be trained and developed. One way to instill teamwork ability
among the students is through the implementation of PBL sessions since teamwork seems
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to be a central characteristic of PBL. It trains the students to work in teams, both before
and during the project. Different genders did not evaluate PBL differently, suggesting
that the method is accepted by all. PBL approach is also suitable to help weaker students
who can learn more from their peers as it eliminates the barrier to ask questions and be
asked as compared to traditional approach. A combination of PBL and lecture is most
preferred by students who feel that both methods actually complement each other towards
a more effective learning. Besides encouraging deep-learning and life-long learning,
students also acquired generic skills when working in group, like communication skills,
problem solving, etc which are believed necessary to increase their self confidence and to
win the employers’ attention. This will prepare them to cope with conflicts among team
members, to make group decisions and to accomplish tasks for the necessary
organizational preparations.

This study was conducted on a rather small sample size which limits the scope of the
study. This was also the students’ first experience learning under the PBL approach
which might distort their evaluation. Hence, another study which uses bigger sample size,
if possible across the whole UiTM campuses, and various faculties would give a better
picture on the effect of PBL on TWA. Comparison with other universities implementing
PBL would also provide a more holistic result.

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