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The Research Journal of United Institute of Management, Allahabad, U.P., India
Volume II No. 2 July - Dec 2011
SAMIKSHA
United Institute of ManagementAllahabad
ISSN No. 0975-7708
Bi – Annual Journal
An Empirical Study of Organizational Climate with Reference to Employee’s MotivationProf. S. K. Singh, Vivek Tiwari
Construction of Equity Portfolio of Banking Sector with reference to The Sharpe Index ModelP. Varadharajan, Dr. P Vikkraman
Factors influencing Seller Communication StyleVinay Kumar Chaganti, Dr. K. S. S. Rama Raju, Divya Kumar
A Study of The Marketing Practices of Farmers at Uzhavar SandhaiDr. T. Ramasamy
360-Degree Feedback Performance AppraisalProf. Amit Kr. Jain, Prof. Shrankhla Jain
Role of Microfinace in Development of Indian EconomyProf. (Dr.) Amit K. Srivastava, Dr. Gyan Prakash Upadhyay
Stress-Job satisfaction Relationship: Impact of Personality Variable: An Empirical study on Private Sector ManagersDr Shalini Srivastava
Performance Evaluation of Mutual Funds on Tax Saving Schemes In IndiaS. Durga
Global trend in consolidation of Stock Exchanges:An analysis of NYSE Euronext Inc.Dr. Shweta Anand
Rural Consumer’s Buying Behavior towards Insurance PolicyDr. Maithili R.P. Singh, Dr. Sanjeev Kumar, Jagdeep Kumar
EDITORIAL BOARD
Printed and Published by Dr. Jagdish Gulati on behalf of the United Institute of Management, UPSIDC Industrial Area, Naini, Allahabad (U.P.) India. Printed by Shantanu Publishers, Mumfordganj, Allahabad, 211002.
Email- uimresearchcell@gmail.com, uimresearchcell@yahoo.com
Editor: Prof. T.B. Singh
Volume II, No. 2, July-Dec 2011United Institute of Management, Allahabad
Copyright © UIM, Allahabad
SAMIKSHA
Journal of UIM Allahabad is published bi-annually. All edition correspondence and article for publication should be addressed to the Editor Samiksha at United
Institute of Management, UPSIDC Industrial Area, Naini Allahabad U.P.
Views expressed in the article are those of the respective authors. Neither Journal (Samiksha) of UIM Naini nor the Institute can accept any responsibility for, nor
do they necessarily agree with the view expressed in the articles. All the copyrights are respected. Every effort is made to acknowledge source material relied upon
or referred to, but ‘UIM’ does not accept any responsibility for any inadvertent omissions.
Except as authorized, no part of the material published in The Journal ‘Samiksha’ may be reproduced, or stored in retrieval systems, or used for commercial or
other purposes. All the Rights are reserved.
EDITOR IN CHIEFProf. T.B. Singh
PrincipalUIM - Allahabad
Bi – Annual Journal
CHIEF PATRONMr. Girdhar Gopal Gulati
ChairmanUnited Group of Institutions
PATRONDr. Jagdish Gulati
PresidentUnited Group of Institutions
EDITORIAL REVIEW BOARD
Mr. Gaurav GulatiVice-President, UGI Allahabad
Mr. Vikas MehrotraAsst. Prof. (HR & Supply Chain Mgmt.)
Dr. Rahul RajanAsst. Prof (Accounting & Finance)
Dr. Vishnu Prakash MishraAsst. Prof (Marketing & I.T.)
Mr. Amitabh SrivastavaAsst. Prof (Operation Research)
Mr. Arindam BanrjeeLecturer (Accounting & Finance)
Mr. Prakash KundnaniLecturer (Accounting & Finance)
Mr. Om Prakash VishwakarmaLecturer (Marketing)
Ms. Sarika YadavLecturer (Strategic Management)
Mr. Rohit Kumar VishwakarmaLecturer (Marketing)
ADVISORY BOARD
Prof. S.K. SinghHead & Dean, FMS, BHU
Prof. A.K. TripathiProfessor, Computer ScienceInstitute of Technology, BHU
Prof. K.M. SharmaFormer Director, MONIRBA,University of Allahabad
Prof. A.S. SahayProfessor of Eminence, BIMTECH
Mr. M.P. GargExecutive DirectorRecron Synthetic Ltd., Allahabad
Prof. B.N. Asthana Former Vice ChancellorKanpur University
Mr. Naresh AgrawalChairman, Sunstar Overseas Ltd.
Mr. A.K. JainChairman & Managing DirectorBPCl, Naini, Allahabad
SAMIKSHAJournal of UIM, Allahabad
From the Editorial Board
ducation has become fundamental right of the people. Rights are always
accompanied by duties. When a common man starts understanding this, Eonly then India can become a super power. Learning is a basic tool for being
educated, hence consistent efforts will always be ensured to develop effective
learning process. We are always in search of excellence.
We are privileged to present before you the new issue of ‘SAMIKSHA’ which
contains a rich blend of research and case papers. The Journal focuses attention on
new ideas, creativity, innovation, and experience by academicians and
professionals in multidimensional streams of management and information
technology.
The Editorial Board is committed to re-establish a landslide say of the Indian Ethos
within the managerial discipline worldwide. We further seek a similar patronage of
the Advisory Board in actualizing the goals set before ‘SAMIKSHA’.
I would like to express my indebtedness to all the contributors to the present issue of
‘SAMIKSHA’ and hope they will continue their relationship with us. I am also
grateful to the eminent reviewing panel for selecting such quality papers for
inclusion in the Journal.
Our special thanks to the Patron who has been an encouraging source and
strength.
We shall be highly obliged if the readers send us their valuable
suggestions, observations, and comments to improve our future
endeavors.
Prof. T.B. Singh
Editor-in-Chief
An Empirical Study of Organizational Climate with Reference to
Employee’s Motivation 01
Prof. S. K. Singh, Vivek Tiwari
Construction of Equity Portfolio of Banking Sector with reference to
The Sharpe Index Model 11
P. Varadharajan, Dr. P Vikkraman
Factors influencing Seller Communication Style 17
Vinay Kumar Chaganti, Dr. K. S. S. Rama Raju, Divya Kumar
A Study of The Marketing Practices of Farmers at Uzhavar Sandhai 22
Dr. T. Ramasamy
360-Degree Feedback Performance Appraisal 28
Prof. Amit Kr. Jain, Prof. Shrankhla Jain
Role of Microfinace in Development of Indian Economy 36
Prof. (Dr.) Amit K. Srivastava, Dr. Gyan Prakash Upadhyay
Stress-Job satisfaction Relationship: Impact of Personality Variable:
An Empirical study on Private Sector Managers 45
Dr Shalini Srivastava
Performance Evaluation of Mutual Funds on Tax Saving Schemes In India 52
S. Durga
Global trend in consolidation of Stock Exchanges:
An analysis of NYSE Euronext Inc. 57
Dr. Shweta Anand
Rural Consumer’s Buying Behavior towards Insurance Policy 61
Dr. Maithili R.P. Singh, Dr. Sanjeev Kumar, Jagdeep Kumar
Volume II, No. 2, July-Dec 2011
SAMIKSHA
Contents
*Head/Dean, Faculty of Management Studies, Banaras Hindu University. Email-id: cpsksingh@rediffmail.com.
**Research Scholar, Faculty of Management Studies, Banaras Hindu University. Email-id: vivtiwari2006@gmail.com.
INTRODUCTION
Management plays an important role in shaping the
climate of an organization, which in turn helps to keep the
employees motivated. It does so by determining
organizational goals, laying down organizational structure
and pattern of communication and decision making processes
and also shaping of the organizational norms and values.
Managements control over these components means that
management has the ability to affect changes in the climate
through adjustments in any of the components. Management
must take the initiative in improving the subordinate-manager
relationship and thus the organizational climate.
G. James Francis and Gene Milibourn (1988) opined that
‘Climate for an organization is somewhat like personality for a
person and includes relatively constant variables in a work
environment (Guion, 1973; Steers And Porter, 1979). Just as
every individual has a personality that makes each person
unique, each organization has an organizational climate that
clearly distinguishes its personality from other organizations.
Organizational climate conveys the impressions people have
of the organizational internal environment within which they
work. It may refer to the extent to which the people are treated
as “human beings” rather than cogs in a machine (Joe Kelly,
1998).
For an organization to function properly it should
continuously get the resources (human, Informational,
material and financial) required by it. The human element is
the most critical one, because it is the one which is directly
linked with deriving the other resources for the organization
(O. Nicolescu, I. Verboncu, 1999). This shows how important it
becomes to keep the employees motivated for maintaining a
healthy organizational climate. Organizational climate seems
to be having a positive impact on the motivation and
performance level of the employees (George Litwin and Robert
Stringer, 1968). According to Stringer (1974), climate is the
perception about the corporate environment that the people
carry in their minds and it is demonstrated to influence their
motivation and behavior.
The present study deals with the study of organizational
climate with reference to motivation. The study was conducted
in the HR department of the NTPC, a Maharatna company
and one of the public sector giants of India. This paper tries to
find out the basic features of motives prevailing in the
organizational climate of the organization and their
contribution in its success. Data of both types i.e., primary and
secondary has been used for the study. Secondary data has been
collected through company’s HR Policy Manual and its
website (www.ntpc.co.in), while the Primary data has been
collected from 135 executives belonging to different
departments, executive levels and age groups through a
standard questionnaire. Respondents were asked individually
to rank-order the six statements within each separate category
according to their perception of how much each statement is
like the situation in their organization. After receiving the
responses from the respondents the researcher discovers which
motives are indicated by the responses. He then sums the ranks
indicated by the respondents and finally calculates the MAO-
C index number. This index no. has been used for further
statistical analysis to arrive at the conclusions and findings.
The results show that in all cases the Achievement Motive
comes out to be the dominant motive, while, Dependency and
Expert Influence are the favorites as back-up. In the light of the
results, it may be inferred that providing some degree of
autonomy and making the job more challenging will further
motivate the employees.
Keywords: Organizational Climate, Motivation,
External Influence, Dependency, Achievement, Control,
Affiliation, Extension etc.
An Empirical Study of Organizational Climatewith Reference to Employee’s Motivation Prof. S. K. Singh*
Vivek Tiwari**
REVIEW OF LITERATURE
The concept of Organizational Climate has been the
subject of many studies and research endeavors in the past.
Some of the findings of other researchers which seem to be
related to present study are being presented here.
Literature in organizational climate credits the first
systematic analysis of this problem to Chris Argyris (1958). In
his attempt to systematically describe the factors which
comprise organizational climate in a study of organizational
relationships among staff members of a bank, Argyris saw a
conflict between the individual, who seeks activity and
independence through psychological development, and the
bureaucratic, formalized organization which keeps the
individual in an infantile state of passive dependence. Argyris
suggests that it is important to find ways to manage this
inevitable conflict and keep it within tolerable bounds. He
further contends that an interpersonal atmosphere of truth,
openness and low threat needs to be created. Without such an
atmosphere, people feel they must attempt to hide conflict,
which makes the problem that much more difficult to identify
and deal with.
Katz and Kahn (1966), in their book, social psychology of
organizations state that organizational climate is developed by
the organizations. They say it reflects the struggles, both
internal and external, the type of people who compose the
organizations, the work process, the means of communication
and the exercise of authority within the individual
organization.
Friedlander and Margulis (1969) define climate as a
dynamic phenomenon, which may release, channel, facilitate
or constrain the organization’s technical and human resources.
It can be viewed as a moderating variable between the
organizations’ input like capital, resources, equipments and
products and the outcomes like profit, quality, satisfaction and
productivity (Ekvall, 1983).
Different theories about the development of
organizational climate exist. Schneider and Reichers (1983)
published an influential theory about how climate arises. In
their opinion three sources are essential, which are:
(a) The common exposure of organizational members to
the same objective structural characteristics,
(b) Attraction, selection and attrition of organizational
members so that a homogenous staff develops and
(c) Social interaction leading to shared understanding of
meanings (Schneider and Reichers, 1983)
According to Schneider (1987) organizations choose those
individuals as members who are compatible with the working
environment and fit to the organization’s personality.
Mismatch will lead to resignation and dismissal, thus in the
end homogeneity in the staff exists.
Anderson and West (1989) support this approach and state
that shared climate arises when:
(a) individuals interact,
(b) common goals exists and
(c) tasks are interdependent (Anderson and West, 1989)
Organizational climate has been defined as the way in
which organizational members perceive and characterize their
environment in an attitudinal and value-based manner (Moran
and Volkwein, 1992). Organizational climate has been asserted
as an important and influential aspect of satisfaction and
retention, as well as institutional effectiveness and success in
an organization. As per Moran and Volkwein (1992),
Organizational Climate is defined as "a relatively enduring
characteristic of an organization which distinguishes it from
other organization, hence,
(a) Embodies members’ collective perceptions about
their organization with respect to such dimensions
as autonomy, trust, cohesiveness, support,
recognition, innovation and fairness;
(b) Produced by member interaction;
(c) Serves as a basis for interpreting the situation;
(d) Reflects the prevalent norms and attitudes of the
organization's culture; and
(e) Acts as a source of influence for shaping behavior."
Toby Marshall Egan, Baiyin Yang, and Kenneth R. Bartlett
(2004) examined the effects of organizational learning culture
and job satisfaction on motivation to transfer learning and
turnover intention. This study examined the relationship of
organizational learning culture, job satisfaction, and
organizational outcome variables with a sample of information
technology (IT) employees in the United States. It found that
learning organizational culture is associated with IT employee
job satisfaction and motivation to transfer learning. Turnover
intention was found to be negatively influenced by
organizational learning culture and job satisfaction.
Mihail Aurel Þîtu and George Balan (2009) in their study
carried out at an industrial organization which produces
electricity, regarding the influence of organizational climate on
the organization management. They found that there is a
strong connection, a mutual determination between the
general management of the organization and the state of the
organizational climate. On the other hand, the employees
notice both positive and negative aspects in connection with
the organization of their work, interpersonal relationships,
management styles and the motivational system in their
organization. Most of them tend to perceive the organization as
a whole in a positive way, but there are also employees who
notice certain deficiencies.
Imran Rabia et al. (2010) examined the predicting role of
organizational climate (competing values model) in innovative
work behavior (IWB). Additionally, the study examined the
effect of organizational size on IWB. The results revealed
significant positive impact of organizational climate measure
and rational goal model on IWB. Moreover, the results did not
show significant role of organizational size in IWB.
In a study done by Sanguansak Bhaesajsanguan (2010) to
find the relationships among organizational climate, job
02 SAMIKSHA - Volume II, No. 2, July-December 2011
the scales of measurement as there are various scales available
according to various theories. According to Litwin and
Stringer an organization’s climate has seven dimensions.
Zammuto and Krakower (1991) measured climate using seven
different dimensions, while koys and Decotiis (1991) gave
eight dimensions. Considering on all the dimensions a total of
12 relevant dimensions of organizational climate were taken
for the present study and each dimension has been
accompanied with six motives. Respondents worked
individually to rank-order the six statements within each
separate category according to their perception of how much
each statement is like the situation in their organization.
DATA COLLECTION
Both primary and secondary data have been used:
(a) Primary data has been collected through a
questionnaire which consists of 12 questions and
circulated among executives (E1-E9) of NTPC Ltd
chosen at random from corporate office, SCOPE,
Badarpur Plant, Dadri Plant and PMI.
(b) Secondary data has been collected through
company’s HR Policy Manual and its website
(www.ntpc.co.in).
SAMPLE
The sample includes 135 employees from different
Departments and different Executive Levels (E1-E9). The
sample includes 30 executives from Human Resource
Department, 31 from Finance and 74 from Operations.
Majority of the employees are from the Operations because the
main function of the organization is to produce power so it is
important to identify the dominant motive prevalent among
the Operations personnel.
Of the entire sample 63 people belong to 36-45 age group,
36 belong to 25-35 age group while 36 belong to 45 above age
group. Among the executive levels the E1-E3 level is
represented by 40 people, E4-E6 is represented by 65 and
remaining 30 are from E7 and above. The executive levels are as
follows: E1-Asstt. Officer, E2-Officers, E3-Sr. Officer, E4-
Department Manager, E5-Mnager, E6-Sr. Manager, E7-DGM,
E7A-AGM, E8-GM, E9-Exectutive director.
SAMPLE PROFILE
satisfaction and organizational commitment in the Thai
telecommunication industry found that the behavior of
technicians in private telecommunications company in
Thailand had organizational climate go hand in for a positive
relationship with job satisfaction. It also disclosed that
organizational climate is a positive relationship with
organizational commitment through job satisfaction. The
results from this study provide significance knowledge for top
executives and human resource departments to execute and
enhance The Organizational Climate, Organizational
Commitment, and Job Satisfaction in Telecommunications
business sector in the future.
RESEARCH METHODOLOGY
Statement of the problem:
The review of literature presented above shows the
importance of maintaining a good organizational climate and
what all positive impacts it can have on various factors
responsible for the smooth functioning of an organization. As it
has already been discussed that organizational climate
represents the personality of an organization G. James Francis
and Gene Milibourn (1988), which seems to have a positive
impact on the motivational level and the performance of the
employees (George Litwin and Robert Stringer, 1968). This
show how critical is the organizational climate for an
organization and hence also justifies that it is an important
factor to be studied from organizational as well as researcher’s
point of view.
This study is a small step in trying to understand the
relevance of organizational climate and motivation in an
organization.
OBJECTIVE
The present research aims at exploring the Organizational
Climate of an industrial set up with reference to Motivation of
the employees. The objective of the study has been given
below:
• To understand the basic features of motives
prevailing in the organizational climate of NTPC Ltd
and their contribution in the success of NTPC Ltd.
VARIABLES
There are six motives that are particularly relevant for
Organizational Climate:
1. Achievement
2. Influence
3. Control
4. Extension
5. Dependency
6. Affiliation
The climate is divided into 12 parts so as to be able to
measure each part separately. This helps in measuring the
different components individually and collectively. This will
also help in comparing the organizational climate existing at
various organizations provided that organizations have used
Managing Changes Through Continuous Upward Improvements 03
Table 1: Age-wise category ofSample Respondents
Age (Years) No. of Employees %age
25-35 36 26.5
36-45 63 47
45 above 36 26.5
Table 1 clearly indicates that maximum no. of the
employees fall in the age group of 36-45 i.e., 47%. Also,
employees above 45 are 26.5%, which further indicates that
majority of the employee base consists of experienced
employees and this combined figure sums up to 73.5%. The
remaining 26.5% of the employees belong to the 25-35 years age
group.
and f). Each of these categories corresponds to one of the 12
climate dimensions and each of the six statements represents
one of the six motives. Respondents work individually to rank-
order the six statements within each separate category
according to their perception of how much each statement is
like the situation in their organization. Its reliability has been
checked through test-retest method and validity through
Factor Analysis.
DATA ANALYSIS, INTERPRETATIONAND FINDINGS
The data collected was tabulated and analyzed by using a
step-wise systematic method as elaborated in the Annexure 1
and Annexure 2. Firstly, the scoring key (shown in Annexure 1)
was referred for each respondent, to discover which motives
were indicated by the responses. Secondly, the ranking of
motives were transferred to the final matrix appended
(Annexure 2), for each respective employee. Thereafter, the
numbers in each vertical column of the matrix were added and
the totals were written in the appropriate blanks: Each of these
totals represented the score for the related motive or
motivational climate. Finally, the MAO-C index number was
calculated through the following formula:
Index = (S - 12) 100 / 60
Finally, each respondent’s index number was totaled for
each motive and then averaged for an overall organizational
index of each motive. The reason this index no. was used, was
to show the relative strength of the climate with regard to
motives; the cutoff point was taken to be 50. If the index
number for a particular motive was found to be greater than 50,
the climate was considered to be relatively strong for that
motive; if the index number was found to be less than 50 then
climate was considered to be relatively week for that motive.
The completed matrix provides scores for all six motives
assessed by MAO-C. The highest of these scores represents the
perceived dominant within an organization. The general
connections between dominant motives and particular types of
organizations are shown below in table 4:
04
Table 2: Department-wise category ofSample Respondents
Department No. of Employees %age
HR 30 22
Finance 31 23
Operations 74 55
It can be easily seen from the table 2 that majority of the
respondents were from the operations group i.e., 55%. It was
done intentionally, because the main function of the
organization is to produce power so it is important to identify
the dominant motive prevalent among the Operations
personnel. The remaining percentage of respondents was
almost equally distributed among the people from the HR and
Finance Departments.
Table 3: Executive Level-wise category ofSample Respondents
Executive Level No. of Employees %age
E1-E3 40 30
E4-E6 65 48
E7 and above 30 22
Table 3 depicts that 48% of the employees were form the
E4-E6 group and 30% from E1-E3 group and the top level
executives i.e., E7 and above consisted of 22% of the
respondents. This shows that the sample consists of a good
ratio of executives from all the levels.
MEASURING INSTRUMENT
Motivational Analysis of Organizational Climate (MAO-
C) designed by Dr. Udai Pareek has been use to study
organizational climate, with special regard to motivation. The
instrument employs 12 dimensions of Organizational Climate
(Orientation, Interpersonal Relationship, Supervision,
Problem Management, Management of Mistakes, Conflict
Management, Communication, Decision Making, Trust,
Management of Rewards, Risk Taking, Innovation and
Change) and Six Motives (Achievement, Expert Influence,
Extension, Control, Dependency and Affiliation). It consists of
12 categories each of which includes six statements (a, b, c, d, e,
Table 4: Relationship between Motiveswith types of Organization
Motive Type of Organization
Achievement (A) Industrial And Business
Organization
Expert influence (B) University department and
scientific organizations
Control (D) Bureaucracies such as
government departments
and agencies
Dependency (E) Traditional or Autocratic
Organizations
Extension (C) Working for society as a
whole
Affiliation (F) Community-service
organizations
SAMIKSHA - Volume II, No. 2, July-December 2011
As the graph 1 depicts, in the HR department the
dominant motive is Achievement while the back-up motive is
Expert Influence. Similar is the case with operation’s people.
In the finance department, dominant motive is the same as in
the other two departments, but the back-up motive here is
Dependency. It is clear from the graph, that on achievement
05
DEPT. FREQ. MOTIVES
A B C D E F DOMINANT BACK-UP
HR 30 58 57 48 39 54 43 A B
FINANCE 31 62 54 45 39 57 45 A E
OPERATIONS 74 59 57 51 36 53 44 A B
Table 5: MAO-C for Different Departments
Graph 1: MAO-C for Different Departments
Motivational Analysis - Department Wise
58 5748
39
5443
6254
4539
57
45
59 5751
36
5344
0
10
20
30
40
50
60
70
A B C D E F
Motives
Scores HR
FINANCE
OPERATIONS
motive all the three departments have crossed the cut-off value
of 50 and the case is same for expert influence as well, but in the
case of extension motive only operations department has been
able to clear the cut-off mark. We can similarly read the values
easily from the graph for other motives as well.
Table 6: MAO-C for Different Executive Levels (E1-E8)
EXECUTIVE
LEVELS
FREQ. MOTIVES
A B C D E F DOMINANT BACK-UP
E1-E3 40 58 55 53 34 57 44 A E
E4-E6 65 59 56 46 40 54 43 A B
E7-ABOVE 30 64 57 50 33 52 44 A B
An Empirical Study of Organizational Climate with Reference to Employee’s Motivation
relatively week. In the executive level E4-E6, climate for
achievement, expert influence and dependency is relatively
strong and for extension, control and affiliation is relatively
week. In the level E7 and above climate for achievement, expert
influence and dependency is relatively strong and for that of
control and affiliation is week. Here the climate for extension is
exactly on the cut-off mark and hence there is an uncertainty.
06
Graph 2: MAO-C for Different Executive Levels (E1-E8)
MAO-C at different Executive Levels
5855 53
34
57
44
5956
4640
54
43
6457
50
33
52
44
0
10
20
30
40
50
60
70
A B C D E F
Motives
Score
s E1-E3
E4-E6
E7-ABOVE
From the graph 2 it is clear that the levels from E1-E3 have
the dominant motive as Achievement and back-up as
Dependency. In the level E4-E6, the dominant motive is again
achievement but the back-up is Expert influence. Similar is the
situation for the group E7 and above. In the executive level E1-
E3, climate for achievement, expert influence, extension and
dependency is quite strong but for control and affiliation is
Table 7: MAO-C for different Age-Groups
AGE
GROUPS
FREQ. MOTIVES
A B C D E F DOMINANT BACK-UP
25-35 36 57 53 52 37 56 42 A E
35-45 63 58 57 46 40 52 44 A B
45-ABOVE 36 66 56 51 31 53 44 A B
Graph 3: MAO-C for different Age-Groups
Achievement and the Back-Up is Expert Influence. Similar is
the case in the 45 above group.
If we talk of age groups, then in the 25-35 age group the
Dominant Motive is Achievement and the Back-Up is
Dependency. In the age group 36-45, the Dominant Motive is
SAMIKSHA - Volume II, No. 2, July-December 2011
It can be easily depicted from the graph 4 that out of total
sample of 135 executives, majority of them perceive that the
dominant and back-up motive prevailing in this large
organization are Achievement and Expert Influence
respectively. The strength of Dependency is also very high,
and the strength of Extension is exactly at the cut-off level i.e.,
50. The climate for Control and Affiliation is relatively week.
CONCLUSION
If we first talk of departments, then, In the HR department
the dominant motive is Achievement while the back-up
motive is Expert Influence. Similar is the case with operation’s
people. In the finance department, dominant motive is the
same as in the other two departments, but the back-up motive
here is Dependency. We can say that respondent from the HR
and Operations Department seems to be quite professional,
progressive and supportive to each other. If we take a look at
the situation in the finance department which shows
dependency as back-up motive, which indicates a bit of
autocratic kind of leadership style adopted in this particular
department.
If we talk of different executive levels, then respondents
from E1-E3 have the dominant motive as Achievement and
back-up as Dependency. In the level E4-E6, the dominant
motive is again achievement but the back-up is Expert
influence. Similar is the situation for the group E7 and above.
This means that at almost all the levels, the executives like their
work and they are performing well. Its only in the low level
management that there is a bit of dependency on others for
their work, which shows a lack of experience.
If we talk of age groups, then in the 25-35 age group, the
Dominant Motive is Achievement and the Back-Up is
07
Table 8: MAO-C at NTPC Ltd.
Graph 4: MAO-C at NTPC
Dependency. In the age group 36-45, the Dominant Motive is
Achievement and the Back-Up is Expert Influence. Similar is
the case in the 45 above group. It means that all the age groups
show a very positive sign and a keen interest in their work and
organization, except for one concern and that is the
dependency in the respondents in the age group of 25-35,
which may be because of less experience.
In the end if we sum up all and take a look at the overall
analysis of the organizational climate we find it to be very
positive and encouraging for the organization as It looks to be
achievement oriented and as an organization where employees
are motivated to work together and support each other which
is a sign of a progressive organization. It can also be inferred
from the above findings that providing some kind of autonomy
and making the jobs more challenging (since achievement
motive is the dominant in almost all the categories) will further
motivate the employees.
The data also highlights certain strengths and weaknesses
of the climate of NTPC Ltd on the basis of categorization done
in table 4. Some of the major strength and weaknesses are
highlighted below:
STRENGHTS
• High concern for excellence in performance. This can
be inferred from the fact that achievement is the most
dominant motive in almost all the different categories
(Age, Executive Level and Departments)
• Continuous development of work force. Since, the
motive expert influence has also scored heavily in all
the groups, this shows that the senior persons or the
experts play a vital and constructive role in the
development of the workforce of the organization
SAMPLE
SIZE
MOTIVES
A B C D E F DOMINANT BACK-UP
135 60 56 50 38 54 44 A B
6056
50
38
54
44
0
10
20
30
40
50
60
VALUES
A B C D E F
MOTIVES
MOTIVATIONAL ANALYSIS OF ORGANIZATIONAL
CLIMATE AT NTPC LTD.
An Empirical Study of Organizational Climate with Reference to Employee’s Motivation
• No place for displaying personal power. It can be
inferred from Graph 2 that dependency as a back-up
motive indicates that organization set-up does not
provides opportunity for displaying personal power.
• A strong desire for making an impact on others for the
well-being of the organization. Again this can be
inferred from the ranking of the respondents which
indicated clearly that expert influence is one of their
favorites.
WEAKNESSES
• Under-utilization of the decision making power. As
Dependency motive is quite prevalent in all the
categories as a back-up motive.
• Rigid hierarchy level. This can also be inferred from
the presence of dependency motive as back-up at all
the levels.
REFERENCES
• Argyris C. Personality Fundamentals for Executives, New
Haven: Labor and Management Centre, Yale University, 1958.
• Atkinson tom and Frechette Henry (2009), Creating a Positive
Organizational Climate in a Negative Economic One;
Improving Organizational Climate to Transform Performance.
http://www.trainingindustry.com/media/2505214/creatingpos
itiveorgclimate_us_aug09.pdf (accessed on 10 July 2011).
• Bhaesajsanguan Sanguansak (2010), the relationships among
organizational climate, job satisfaction and organizational
commitment in the Thai telecommunication industry.
< h t t p : / / w w w . g - c a s a . c o m / c o n f e r e n c e s / s i n g a p o r e /
papers_in_pdf/wed/Sangu.pdf > (accessed on 12 Sep. 2011).
• Ekvall (1983). Climate, Structure and Innovativeness of
Organizations. The Swedish Council for management and
organizational behavior
• Egan Toby Marshall, Yang Baiyin, Bartlett Kenneth R. (2004),
the effect of organizational learning culture and job Satisfaction
on motivation to Transfer learning and Turnover intention,
human resource development quarterly, vol. 15, no. 3, 2004
• Francis G. James (1988), Adventures in leadership: the
challenges of managing people, Journal of Arboriculture 1 4(1):
January 1988.
• Friedlander, F and N. Margulis. (1969), multiple impact of
organizational climate and individual value system upon job
satisfaction Personal psychology 22: pp 171-183.
• G. Jerald and Baron Robert A.(2009), Behavior in
Organizations, Work-Related Attitudes; Prejudice, Job
Satisfaction and Organizational Commitment, PHI, 9th edi.
P.221-224
• Imran Rabia et al. (2010), organizational climate as a predictor
of innovative work behavior, African journal of business
management Vol. 4 (15). Page 3337-3343, 4 November 2010.
http://uaar.academia.edu/AfsheenFatima/Papers/578645/Orga
nizational_climate_as_a_predictor_of_innovative_work_behav
ior (accessed on 20 Sep. 2011)
• James and James (1989). Integrating work environment
perceptions: Explorations into measurement of meaning.
Journal of Applied Psychology
• Jones and James (1979), Psychological Climate: Dimensions and
relationship of individual and aggregated work environment
perceptions. Organizational Behavior and Human Perceptions.
Jr. of abnormal and social psycho. 67, 1963
• Kahn, R.L. & Katz D., (1978), the social psychology of
organizations (2nd ed.), New York, John Wiley.
• Kelly Joe and Kelly Louise (1998), an existential-systems
approach to managing organizations, Greenwood Publishing
group Inc.
http://books.google.co.in/books?id=3i6xwrNPi6EC&pg=PA15
&lpg=PA15&dq=joe+kelly+on+organizational+behaviour&so
u r c e = b l & o t s = H b S 5 6 v Y Y P o & s i g = -
Ydnt8WY_2Gmyt_dvY59_1igrM&hl=en&ei=zTGEToyFKM
TqrAfQhbThDA&sa=X&oi=book_result&ct=result&resnum
=3&ved=0CCkQ6AEwAg#v=onepage&q&f=fase (accessed on
25 July 2011)
• Locke and Latham (2002). Building a practically useful theory of
goal setting and task motivation. Journal of social psychology, P.
17-24.
• Moran, E & Volkwein J, 1992, the cultural approach to the
formation of organizational climate, Human Relations, 45, 19-
47.
• O. Nicolescu, I. Verboncu, Management, revised 3rdedition,
Economic Publishing House , Bucharest, 1999
• Schneider, B. (1990). Organizational Climate and Culture. San
Francisco, C. A.: Jossey – Bass.
• Stringer Robert, leadership and organizational climate. Prentice
hall. 2001.
• Titu M. et al, Study Regarding The Influence Of Organizational
Climate On The management of most organizations,
Proceedings of the International MultiConference of Engineers
and Computer Scientists 2009 Vol II IMECS 2009, March 18 -
20, 2009, Hong Kong\
http://www.iaeng.org/publication/IMECS2009/IMECS2009_
pp1757-1760.pdf (accessed on 30, sep. 2011)
08 SAMIKSHA - Volume II, No. 2, July-December 2011
09
Annexure 1
The Scoring Key
S.No. Dimensions of
organizational
commitment
Motives
Achievement Expert
influence
Extension Control Dependency Affiliation
1 Orientation 3 6 2 4 1 5
2 Interpersonal
Relationship
4 1 6 3 5 2
3 Supervision 4 5 3 1 2 6
4 Problem
Management
1 2 4 6 5 3
5 Management of
Mistakes
4 6 3 2 5 1
6 Conflict
Management
1 6 5 4 3 2
7 Communication 4 3 5 6 1 2
8 Decision
Making
3 5 6 4 2 1
9 Trust 6 4 5 1 3 2
10 Management of
Rewards
1 2 4 5 3 6
11 Risk Taking 6 3 5 2 4 1
12 Innovation and
Change
5 1 4 2 3 6
An Empirical Study of Organizational Climate with Reference to Employee’s Motivation
10
Annexure 2
Final Matrix
S.No. Dimensions of
organizational
commitment
Motives
Achievement
(A)
Expert
influence
(B)
Extension
(C)
Control
(D)
Dependency
(E)
Affiliation
(F)
Domi-
nant
Back-
up
1 Orientation
2 Interpersonal
Relationship
3 Supervision
4 Problem
Management
5 Management of
Mistakes
6 Conflict
Management
7 Communication
8 Decision
Making
9 Trust
10 Management of
Rewards
11 Risk Taking
12 Innovation and
Change
Total Score Overa
ll
Overa
ll MAO-C Index
SAMIKSHA - Volume II, No. 2, July-December 2011
*Assistant Professor & Coordinator-EMBA, PSG Institute of Management, Coimbatore, Tamilnadu. E-mail: sktrajan@rediffmail.com
**Assistant Professor, Anna University, Coimbatore, Tamilnadu. E-mail: dr.p.vikkraman@gmail.com
INTRODUCTION
The growth in the Indian Banking Industry has been more
qualitative than quantitative and it is expected to remain the
same in the coming years. As far as the present scenario is
concerned the Banking Industry in India is going through a
transitional phase. This research concentrates only on the
banking industry and it aims at providing suggestions for
investors for investments in bank stocks. 15 companies from
the banking industry were chosen for this study. These banks
were chosen based on their market capitalization rate from
S&P CNX 500 index.
An investor can choose to invest in the securities of banks.
Based on the performance of the stocks he can construct his
portfolio. Commonly there are two approaches in the
construction of portfolio of securities viz. traditional approach
and Markowitz efficient frontier approach. In the traditional
approach, investor’s needs in terms of income and capital
appreciation are evaluated and appropriate securities are
selected to meet the need of the investor. The Markowitz model
is adequate and conceptually sound in analysing the risk and
return of the portfolio. The problem with Markowitz model is
that a number of co-variances have to be estimated. Sharpe has
developed a simplified model to analyze the portfolio.
Moreover the performance of the stocks chosen can be
analysed and the investor can choose the portfolio of stocks
that which gives him more return and lesser risk. In Sharpe
index model, the optimum portfolio can be constructed with
the help of return, beta, excess beta ratio and cut off rate. The
portfolio chosen can be continuously analysed for performance
and the portfolio can be revised by adding stocks that perform
well and removing stocks that do not perform well over a
period of time.
Statement of Problem
The investor always likes to purchase a combination of
stocks that provide higher return and has lowest risk. He
always wants to maintain a satisfactory return to risk ratio. An
investor must carefully choose those stocks which yield him
Portfolio is a combination of securities such as stocks,
bonds and money market instruments. The investor always
likes to purchase a combination of stocks that provide higher
return and has lowest risk. He always wants to maintain a
satisfactory return to risk ratio. Sharpe index model of portfolio
construction is an easy and simple model to construct
portfolios with the help of excess beta ratio and cut off rate. The
growth in the Indian Banking Industry has been more
qualitative than quantitative and it is expected to remain the
same in the coming years. This concentrates only on banking
industry and selection of portfolio of bank stocks. This research
on Construction of Portfolio of Stocks with reference to Sharpe
index model, is limited to only 15 banking companies listed in
NSE. There have been sharp differences in the performance of
the banking industry in the last five years. Though the
recession has brought out significant decline in the trends, the
rate of growth is remarkable. Portfolios, which are
combinations of securities, tend to spread risk over many
securities and thus help to reduce the overall risk involved. The
existence of a cut-off rate is also extremely useful because most
new securities that have an excess return-to beta ratio above
the cut-off rate can be included in the optimal portfolio. Thus
this study helps the investors to minimize their overall risk and
maximize the return of their investment over any period of
time.
Keywords: Stock, Sharpe, Beta, Market variance,
Residual Variance, Index and stock price
Construction of Equity Portfolio of Banking Sectorwith reference to The Sharpe Index Model P. Varadharajan*
Dr. P Vikkraman**
good return at lower risk. The banking industry is burgeoning.
The growth in the Indian Banking Industry has been more
qualitative than quantitative and it is expected to remain the
same in the coming years. As far as the present scenario is
concerned investors who invest in bank stocks can earn good
returns. Sharpe index model helps an investor to effectively
construct a portfolio with much ease. In Sharpe index model,
the optimum portfolio can be constructed with the help of
return, beta, excess beta ratio and cut off rate. The portfolio
chosen can be continuously analysed for performance and the
portfolio can be revised by adding stocks that perform well and
removing stocks that do not perform well over a period of time.
Significance the Study
• The Sharpe ratio helps to characterize how well the
return of an asset compensates the investor for the
risk taken.
• Any movement in security prices could be
understood with the help of index movement.
• Sharpe Index model helps in diversification of
investments by spreading risk over many stocks. A
diversification of securities gives the assurance of
obtaining the anticipated return on the portfolio.
• In a diversified portfolio, some securities may not
perform as expected, but others may exceed the
expectation and making the actual return of the
portfolio reasonably close to the anticipated one.
• Keeping a portfolio of single security may lead to a
greater likelihood of the actual return more or less
different from that of the expected return. Hence, it is
better to diversify securities in a portfolio.
Objectives of the study
Primary Objective
• To construct a portfolio of stocks with the selected
companies using Sharpe Single Index Model, that
maximizes the return and minimizes the risk
associated with the individual stocks.
Secondary Objectives
• To analyze the variability of returns associated with
the security more formally.
• To understand the role of beta and standard deviation
in measuring the relevant risk of security.
• To know the proportions to invest in each security,
with the cut-off point, through Sharpe index model.
Scope of the Study
• To compare the performances of 15 selected
companies of the banking sector.
• The application of the Sharpe Index model to perform
risk and return analysis.
• Availability of information to the investors about the
risk and return associated with each of the selected
companies.
Limitations of the study
• The study is limited to only 15 companies from the
banking sector, hence cannot be generalized for the
entire stocks available for trading.
• The time duration of the study is limited which is
about 1 months
• The data remain restricted to the past five years (2005-
2006 to 2009-2010).
Theoretical Framework
Giordano Pola and Gianni Pola (2009), In this paper the
authors propose one approach to optimal portfolio
construction based on recent results on stochastic reachability,
which overcome some of the limits of current approaches.
Given a sequence of target sets that the investors would like
their portfolio to stay within, the optimal portfolio allocation is
synthesized in order to maximize the joint probability for the
portfolio value to fulfil the target sets requirements. A case
study in the US market is given which shows benefits from the
proposed methodology in portfolio construction. A
comparison with traditional approaches is also included in the
paper. Deimante Teresiene and Paulius Paskevicius (2009),
In this paper, the authors have concluded that the main
attention should be paid to portfolio monitoring and updating
the status of instruments and investor‘s needs. Constructions
of different portfolios and calculations of maximum returns
and risk have showed that the best investment for a one year
period was investing in gold and commodities. But such a
portfolio is not suitable for a long time and especially when the
situation of stock markets will be getting better. So the key of
profit from investing is a good monitoring of economics and
the region markets psychology. Superfluous events may well
influence the price, if believed by other participants to do so; it
means that crowd psychology becomes an important
determinant of prices. Usually analysts exclude the factors
such as derivatives, excessive pay for bank officers, poor
government regulation and a lack of transparency about
investments so that risk was not correctly assessed. Gupta, K.
Locke, S. and Scrimgeour, F. (2009), This paper reports on an
investigation of various techniques to optimise momentum
returns from share trading. The aim is to determine whether
one method is clearly superior to other algorithms in
maximising the momentum returns for the synthesised
portfolios over a period of time. The analysis includes varying
lengths of time periods with the longest data set pertaining to
the United States, covering the period 1973-2007 and the
shortest is India ranging from 1993 to 2007. The five countries
under investigation are Canada, India, Japan, United
Kingdom, and the United States. The practical importance of
the research relates to the potential to increase profits from
trading using a momentum strategy through superior
information processing which in turn will generate greater
returns for specified risk levels.
Asmita Chitnis (2010), This paper attempts to construct
two optimal portfolios from two different samples using
Sharpe’s Single Index Model of Capital Asset Pricing and
further to compare the performance of these two portfolios by
Sharpe’s Ratio. Stocks listed on the National Stock Exchange
constitute the population. Two samples each comprising of 26
stocks (most of them being large caps) have been selected.
12 SAMIKSHA - Volume II, No. 2, July-December 2011
be based on the analysis of risk and return associated with each
stock. This paper highlights the creation of optimum portfolio
with the help of calculated return and risks for 25 different
stocks and securities of different listed companies. This paper
also highlights the willingness of the investors to take risks and
also the returns that are expected by them. The returns
expected by different investors and the level of risk they are
willing to take differs from one investor to another investor.
Research Methodology
This is a descriptive study on the construction of portfolio
of stocks with reference to Sharpe’s single index model. This
research is aimed at analyzing the risk and return associated
with different stocks and constructing an optimal portfolio of
stocks that maximizes the overall profit of the investment. The
study is conducted with the past five years data from 2005-2006
to 2009-2010. The study uses the secondary data collected from
various sources such as NSE website and the RBI website. All
the stocks that are listed in the National Stock Exchange
comprise the population of the study. The sampling technique
adopted is ‘purposive sampling’.
Tools for Analysis
Return
Risk - the variability of returns associated with a given asset is
termed as risk.
Beta Coefficient
Correlation - A statistical measure of the relationship between
any two series of numbers representing data of any kind is
known as correlation.
Risk-free Rate of Return (RF) - Risk-free rate of return is the
required return on a risk free asset, typically a three month
treasury bill.
Where, R = the expected return on stock ii
R = the return on a riskless assetf
â = the expected change in the rate of return on stock i
associated with one unit change in the market return.
Where, = variance of the market index
Using Sharpe’s Single Index Model a unique cut off point is
defined and the optimal portfolio of stocks having excess of
their expected return over risk-free rate of return greater than
this cut-off point is generated for both the samples separately.
Percentage of investment in the respective portfolios is further
decided by the standard procedure outlined by Sharpe’s
Model. Finally, performance of these two optimal portfolios is
evaluated by Sharpe’s Ratio. Gerald Kohers, Ninon Kohers,
Theodor Kohers (2006) in the paper “The risk and return
characteristics of developed and emerging stock markets: the
recent evidence” suggests that the higher volatility typically
associated with emerging stock market returns translates into
higher expected returns in those markets. This study compares
the risk and return profile of emerging and developed stock
markets over the period from 1988 through April 2003. The
results show that the risk associated with emerging markets, as
measured by the standard deviation of returns, is higher than
the risk in developed markets in most periods. Also, the returns
in emerging markets have been higher than those in developed
markets for most of the time frames examined. The findings
suggest that risk-averse investors seeking higher returns in
emerging markets have been compensated for assuming the
higher risk associated with these markets.
Jeroen Derwall (2009) in the paper “Portfolio
concentration and the fundamental law of active
management” shows that the observed relation between
portfolio concentration and performance is mostly driven by
the breadth of the underlying fund strategies; not just by fund
managers’ willingness to take big bets. The results indicate that
when investors strive to select the best performing funds, they
should not only consider fund managers’ tracking error levels.
It is of greater importance that they take into account the extent
to which fund managers carefully allocate their risk budget
across multiple investment strategies and have concentrated
holdings in multiple market segments simultaneously. Anna
Morrell (2010) in the paper “The Art and Science of Portfolio
Construction” illustrates that people have portfolios that are
just collections of haphazardly acquired shares. As with asset
allocation, so with portfolio construction, people need to sit
down first and do some thinking. With regards to risk, it has to
be moderately high for a person to consider getting involved in
equity investment, but they are willing to take larger risks.
That's a balance between how many stocks one can research
and keep on top of, and how many stocks one need to achieve
the benefit of diversification reducing the overall risk. Harald
Lohre, Thorsten Neumann and Thomas Winterfeldt, (2007)
Portfolio construction seeks an optimal trade-off between a
portfolio’s mean return and its associated risk. Given that risk
may not be properly described by return volatility we examine
alternative measures that account for the asymmetric nature of
risk. These optimization tasks are successful for most of the
investigated measures when assuming perfect foresight of
expected returns. While the latter assumption is a strong one
we also show that our findings still hold when using more
naive return estimates. The reductions in downside risk are
most convincing for semi-variance, semi-deviation; maximum
drawdown and loss penalty while value at risk and measures
related to skewness appear rather useless for portfolio
construction purposes. Syed A. Basher and Perry Sadorsky
(2007) in the paper “Portfolio construction based on risk and
return” suggests the selection of securities and stocks should
13
Construction of Equity Portfolio of Banking Sector with reference to The Sharpe Index Model
variance of a stock’s movement that is not associated
with the movement of market index i.e. stock’s unsystematic
risk.
Where, = the cut-off point.
Analysis and Discussions
15 companies from the banking industry were chosen for
this study. These banks were chosen based on their market
capitalization rate from S&P CNX 500 index. They are,
• Indian Overseas Bank (IOB)
• City Union bank (CUB)
• Allahabad Bank (ALBK)
• ING Vysya Bank (ING)
• Karur Vysya Bank (KVB)
• Kotak Mahindra Bank
• Orient Bank of commerce
• Union Bank of India
• Syndicate Bank
• State Bank of India (SBI)
• Bank of Baroda
• Canara Bank
• Andhra bank
• Axis Bank
• HDFC bank
Excess Return to Bata Ratio
14
STOCKS
RANK
SBI 35.4 0.09 57.4 327.44 1
Baroda 13.5 0.09 10.36 84.11 2
Union Bank 12.3 0.08 10.24 79.62 3
Axis 19.2 0.27 10.95 49.14 4
Canara 10.3 0.13 9.67 33.61 5
ING Vysya 8.8 0.22 8.58 13.04 6
HDFC 13.4 0.84 6.4 8.89 7
Albk 7.6 0.25 7.56 6.68 8
IOB 7.6 0.25 7.56 3.97 9
Kotak 8.5 0.91 8.7 2.82 10
KVB 6.6 0.32 7.84 2.09 11
Syndicate 7.9 1.01 8.82 1.95 12
CUB 7.2 0.66 16.8 1.92 13
Orient 5.7 0.16 9.12 -1.43 14
Andhra 4.5 0.16 7.3 -8.93 15
Table 1.1: Calculation of Excess Return to Beta Ratio
Cut-off PointTable 1.2 : Calculation of Cut-off Point
STOCKS
SBI 327.44 0.046207 0.046207 0.000141115 0.000141115 0.1625
Baroda
84.11 0.065763 0.11197 0.000781853 0.000922968 0.3928
Union Bank 79.62 0.049766 0.161735 0.000625 0.001547968 0.5662
Axis 49.14 0.327205 0.488941 0.006657534 0.008205503 1.6727
Canara 33.61 0.058749 0.54769 0.001747673 0.009953176 1.8626
ING Vysya 13.04 0.07359 0.621279 0.005641026 0.015594201 2.0731
HDFC 8.89 0.980438 1.601717 0.11025 0.125844201 3.9072
SAMIKSHA - Volume II, No. 2, July-December 2011
The highest value of C is taken as the cut-off point i.e. C*. i
Here the cut-off rate is C*= 3.96. Thus the stocks with C greater i
than C* can be included in the portfolio.
Construction of optimal portfolio
From the C values, the investment is made in the i
following stocks:
15
From the above table, it can be inferred that maximum
investment of 33.68% has to be invested in Axis bank ltd. The
two banks Bank of Baroda and Union Bank of India pave way
for around 21% and 17.9% respectively. 15.3% of the
investment has to be made in SBI ltd and the least of around 12
% is preferred for Canara bank Ltd.
Table 1.3: Stocks to be Included in the Portfolio
Albk 6.68 0.055225 1.656942 0.008267196 0.134111397 3.9620
IOB 3.97 0.068097 1.725039 0.017126214 0.151237611 3.9626
Kotak 2.82 0.268816 1.993855 0.095183908 0.246421519 3.7583
KVB 2.09 0.027347 2.021202 0.013061224 0.259482743 3.7183
Syndicate 1.95 0.22559 2.246791 0.115657596 0.37514034 3.4081
CUB 1.92 0.049893 2.296684 0.025928571 0.401068911 3.3520
Orient -1.43 -0.00404 2.292649 0.002807018 0.403875929 3.3325
Andhra -8.93 -0.03134 2.261307 0.003506849 0.407382778 3.2702
STOCKS CUT-OFF POINT
SBI 0.1625
Bank of Baroda 0.3928
Union Bank of India 0.5662
Axis Bank 1.6727
Canara Bank 1.8626
Proportion of Investment
Table 1.4: Calculation of Proportion of Funds to be invested in Each Stock
STOCKS
SBI 0.507201476 0.153354
Bank of Baroda 0.696270728 0.2105197
Union Bank of India 0.591112391 0.1787248
Axis Bank 1.114163856 0.3368711
Canara Bank 0.398641177 0.1205305
In the table, Z shows the relative investment in each stock. i
X indicate the weights on each security and they sum up to one.i
Portfolio of Stocks
Table 1.5: Portfolio of Stocks
COMPANY PROPORTION OF
INVESTMENT (%)
SBI 15.33
Bank of Baroda 21.05
Union Bank of India 17.87
Axis Bank 33.68
Canara Bank 12.05
Chart No 2: Chart representing percentageof investment in each stock
Findings
• In the study, all the stocks included in the portfolio
have higher â and yield higher returns.
• The excess return to beta ratio of all the steel
companies included in the study is positive except for
Orient bank of Commerce and Andhra bank.
Construction of Equity Portfolio of Banking Sector with reference to The Sharpe Index Model
16
• The stocks with systematic risk â greater than 1 are
riskier since, for 1 % change in market return, the
change in stock return is greater than 1%.
• All the stocks included in the portfolio have lower â
value compared to other stocks.
• The risk associated with the individual stocks is not
the same for all the years. It differs from time to time.
• The greatest proportion of investment of about 33.7%
is made in Axis bank Ltd. which has a lower beta
value of 0.09 among the other stocks included in the
portfolio.
• The optimum portfolio thus constructed is
moderately diversified as securities in the portfolio
represent different companies of the banking sector.
Suggestions
• The maximum proportion of about 33.7% of the total
investment has to be made in the stocks of Axis bank
Ltd.
• About 21.1% of the total investment has to be invested
in the stocks of Bank of Baroda Ltd.
• 17.9% and 15.3% of the total investment have to be
invested in the stocks of Union bank of India Ltd and
State bank of India Ltd.
• The lower proportion of investment of about 12% has
to be invested in Canara Bank Ltd.
• The stocks have to be continuously analyzed and the
portfolio has to be updated periodically.
Conclusion
This research on Construction of Portfolio of Stocks is
limited to only 15 banking companies listed in NSE. There have
been sharp differences in the performance of the banking
industry in the last five years. Though the recession has
brought out significant decline in the trends, the rate of growth
is remarkable. Individual securities, as we have seen, have risk-
return characteristics of their own. Portfolios, which are
combinations of securities, tend to spread risk over many
securities and thus help to reduce the overall risk involved.
This method of construction of optimal portfolio is very
effective and convenient as revision of the optimal portfolio
can be an ongoing exercise. The existence of a cut-off rate is also
extremely useful because most new securities that have an
excess return-to beta ratio above the cut-off rate can be
included in the optimal portfolio. Thus this research helps the
investors to minimize their overall risk and maximize the
return of their investment over any period of time.
References
Books• Fischer, Jordan (2009) Security analysis and portfolio
management, Sixth edition, New Delhi – Pearson Prentice Hall.
• Pandian, Punithavathy (2007) Security analysis and portfolio
management, Fifth edition, Banglore – Vikas Publishing House
• Campbell, David (2005) Portfolio Management, Third edition,
New Delhi – Tata Mc Graw Hill
Research articles• Gerald Kohers, Ninon Kohers, Theodor Kohers (2006) The risk
and return characteristics of developed and emerging stock
markets: the recent evidence, Applied economics letter, Pg 737 –
743.
• Jeroen Derwall (2009) Portfolio concentration and the
fundamental law of active management, Tilburg newsletter, Pg
235-252.
• Anna Morrell (2010) The Art and Science of Portfolio
Construction, Schulich University newsletter, Pg 373-382.
• Giordano Pola and Gianni Pola (2009), A Stochastic
reachability approach to portfolio construction in finance
industry, Business Intelligence newsletter, Pg 154-170.
• Syed A. Basher and Perry Sadorsky (2007) Portfolio
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SAMIKSHA - Volume II, No. 2, July-December 2011
*Assistant Professor, School of Management, MVGR College of Engineering. E-mail: cvk.atreya@gmail.com
**Professor, School of Management, MVGR College of Engineering
***PG Scholar, GITAM University
INTRODUCTION
In a boundary spanning role, salesmen represent an
organizational face to the customers. Thus, sales interactions
are critical to success of any business, for that is where the fate
of organizational bottom-line is drawn. With that premise,
historically, there was an increased emphasis laid on studying
the role of salesman and the ways in which that role can
influence customers’ perceptions about the organization and
its products and/or services. Simply put, fields such as
consumer behaviour are not just trying to learn how the
consumers behave, but also are trying to learn how to feed into
the organizational systems to deliver what the consumer
wants. The role of salesmen becomes pivotal in such feeds. Run
into any organization today, it will not be surprising to find
that sophistication is what catches the attention of customers.
And the fact that every executive of an organization tries to sell
is unignorable. Consider the case of organizations like ICICI
Bank, Big Bazar and the likes-everybody in the organization
tries to sell. Executives are there for selling and serving the
customers. They are trained to do that; and ‘training’ is just one
feed into the system.
Theories aside! A brief look into time reveals that a retail
outlet in a residential colony was more popular just two
decades back, unlike the popularity of shopping malls today.
The secret of success of a retail outlet was in how the retailer
builds his relationships with customers, while malls have a
different formula all together having salesmen merely as
information disseminators, in most cases. This caught the
attention of the authors, and had set a broad theme for a
research pursuit. There are various questions that spring up in
the mind when one thinks of the change in the role of a
salesman as a communicator. First of all, we sought an
understanding of the communication styles of salesmen in an
organized retailing unit. Our learning were not confirmatory,
but was in line with earlier studies-salesmen used precise,
open, and impression leaving communication styles. These are
what one expects from salesmen in any retail setting, and so
was the case with organized retail setting. That did not come as
a surprise, but for the fact that results across various studies
remained consistent over different cultures, and times. Also,
In one of the earlier studies, sellers’ communication style
was observed as precise and open. That finding was consistent
with earlier literature. A more interesting observation was the
finding’s consistency across cultures and countries! Another
observation was that higher education did not necessarily
mean a different communication style. This is then a counter-
intuitive finding, in that, the influence of interactants and
their education seem ignorable compared to--what we now
assume--the influence that one’s job role may have on
communication style; thus warranting further study. One
class of management students were asked to imagine
themselves being salesmen and participate in a survey for the
communication styles they might prefer to use in that job.
Another class was given the same instruction, and
additionally a salary cap for the job of a salesman was given
before they were surveyed. The communication styles of
students from both classes is studied to see if there is any
significant difference that can then be attributed to the ‘salary
cap’ clause. Also, the communication styles of students from
both classes is compared to the sellers’ communication style as
found in earlier studies to find if education and experience play
a role in the differences in communication style, if any. The
study is expected to yield clarity in where further research can
be focused.
Keywords: Communication Style, Literature Review,
Empirical Study, Sales Interactions
Factors influencing SellerCommunication Style
Vinay Kumar Chaganti*Dr. K. S. S. Rama Raju**
Divya Kumar***
the gender of the consumers did not seem to influence the
communication style of these salesmen. This observation had a
bearing on our understanding of the sales interaction. Unlike
an expected case where every interactant affects how other
interactant reacts-and hence builds the interaction-it seemed as
if consumers did not really have any influence on how the
salesmen were going about their job. This gave way to our
second question. What other factors apart from a consumer can
bring out such communication styles in salesmen? Perusal
through communication theory suggests that if not the
interactant, the purpose of interaction might have a significant
influence on the communication style choice. Since the purpose
of interaction of salesmen is rather well-defined, it was
hypothesized then that the very job role might lead to such a
communication style. This paper tested that idea.
Literature Review
The proposed study draws from two streams of literature:
seller-buyer interactions and communication style. These two
streams are not exclusive of each other; however, they have
grown in different directions. Where they converge is in
studying the choice of communication style employed by seller
and how that influences buyers’ buying decision.
Seller-buyer interactions have been studied for a longer
period compared to communication style. Sheth (1976) is
credited to have made first observations in a converging area
such as what this paper proposes. He defined communication
style as "format, ritual or mannerism which the buyer and
seller adopt in their interaction". He presumed style as three
dimensional: task-oriented, interaction-oriented, and self-
oriented. Salesmen would invariably use one of these three
styles; eventually influencing buyers’ decision. One problem
with this theory was an inherent assumption that salesmen can
consistently use any chosen communication style through the
interaction, beginning to end. Later work by Cappella (1984)
showed evidence that interactions are partly automated and
are partly deliberate. Automated part of any interaction may be
seen as: one, the influence of interaction on how interactants
build it further, and two, the influence of biological
constitution of beings on their communication. Sheth’s ideas
could not accommodate this development.
Noonan (1985) defined style as a predictable pattern of
behaviour. This definition seems to draw from Norton’s (1978)
initial conceptualization of communication style, where the
premise was that communicative behaviours of an individual
sufficiently correlate to an extent of studying it as a construct.
The change in perspective from Sheth’s conceptualization to
Noonan’s brought in two changes. Firstly, buyer-seller
interaction studies from a communication style perspective
were now backed up by well-founded theory in Norton’s;
secondly, the theory could be advanced to studying the
interaction at a dyadic level with focus on relationships more
than the sales person. The change had also accommodated the
Cappella’s ideas about interactions, since Noonan spoke about
a pattern of behaviour rather than a choice of style.
Williams & Spiro (1985) have studied communication
styles in salesperson-customer dyad. Though they used
Sheth’s ideas as foundation for their study, they were the first
ones to build an instrument to assess communication styles of
sales personnel, and assess how communication style of sales
personnel affected the sales outcomes. Their study reported
findings that were to establish a stream of specialised study.
Findings in other studies reported by Spitzberg & Cupach
(1984), that successful sales people are competent
communicators who have the knowledge, skill, and
motivation to interact effectively and appropriately, have also
contributed to a heightened increase in this area for research.
There are four studies which generally seem to represent
the range of efforts in this stream post all the earlier
developments. First of all, Miles, Arnold & Nash (1990) studied
seller’s communication style as an adaptive function of buyer’s
communication style; and suggested it is important to study
communication styles given their effect on dyadic
relationships. Second, Notarantonio & Cohen (1990) tried to
determine if any particular style of communication made the
sales performance more effective. In the pursuit, they studied
the influence of ‘open’ and ‘dominant’ communication styles
on judgments and perceptions on sales effectiveness. Their
results showed that the combinations of communication styles
had a significant influence on (1) perceptions of the product
being sold, (2) interaction between sales person and customer,
(3) probability of purchase of the product, and (4) perceptions
of the sales person being depicted in the tape. Low dominant-
low open and high dominant-high open communication styles
were not favoured, while the rest of the two combinations were
perceived to be more subtle and effective in sales performance.
Later Dion & Notarantonio (1992) studied the relationship
between communication style and sales performance of real-
estate agents. They used Norton’s Communication Style
Measure (generally referred to as CSM). Results indicated that
‘precise’ style of communication had a strong association with
sales performance. In another sub-study, they video-taped
buyer-seller conversations and identified that a combination of
‘precise’ and ‘friendly’ communication styles lead to a definite
improvement in sales performance. And fourthly, Comstock &
Higgins (1997) tried to answer to most basic question in this
growing line of research: should the sales person adapt to
buyer’s communication style? They conducted two studies to
answer this question. First study tried to assess the types of
relational messages buyers would prefer in direct sales
interaction, and it was found that trustful and task-relevant
messages are what buyers tended to appreciate most. The
second study tried to identify if sellers are aware of buyers’
preferences for relational messages. The findings indicate that
sellers perceived dominance and formality as buyers’ least
preferred relational messages. These findings tend to be
directing towards preferred sales person communication
styles. The study used Norton’s CSM, but rebuilt richer
communication style profiles suitable for the study. They came
up with styles namely cooperative, apprehensive, social and
competitive. Study concluded with a suggestion that
apprehensive, social and competitive sellers may need more
communication training.
18 SAMIKSHA - Volume II, No. 2, July-December 2011
Data Presentation
Tables 1 and 2 present the Model summary and ANOVA
for one group of students to whom the salary cap constraint
was supplied. There are six communication styles this group of
students chose, and they include dramatic, contentious,
animated, friendly, open, and precise.
Research Design, Sample, Measuresand Methodology
There is sufficient evidence that study of communication
styles in a sales interaction delivers findings that can be used to
influence the bottom-line. Earlier in this paper, the objective of
this effort was stated: it is to test if the job role of salesmen
influences their communication style. Broadly, there are two
factors apart from consumers that can influence such choice:
education and experience. Education can be defined in terms of
the qualification, and experience may be defined as the tenure
of serving in a specific job role. It is important to separate the
affects of education from the affects of experience. To do this by
a regression analysis from one population of working salesmen
was one option. However, we chose to have students pursuing
their masters in business administration with marketing
specialization as one sample, to represent the educated but not
experienced group. And another sample was picked up from
working retail salesmen to represent experienced group. Care
was taken to ensure that the education levels of working
salesmen who took part in the study were comparable with one
another’s, so that the affect of education may be treated
nullified.
Modified Norton’s CSM was used for data collection. The
instrument is used to study the communication style choices
that one would employ in a given setting. With 51-items, it has
questions representing 10-independent communication style
constructs, and 1-dependent variable describing one’s self-
perceived communicator image (Details in Appendix I).
Preferred communication styles are ascertained through a
step-wise regression with communicator image as the
dependent variable.
Study one
Totally, 117 students took part in the study. The students
were split into two groups (58 and 59 each) before the survey.
Both the groups were asked to assume that they were to work
like a retail salesmen in an organized sector before they
responded to how they might choose to interact with their
customers. However, one group was supplied with a ‘salary
cap constraint’, i.e., they were like the other group in all aspects
of imagining their job role and making choices, but
additionally, they were informed that of all their imagination,
salary is one point that was controlled. Comparison of these
two groups (using a t-test) was to give us insights into how the
salary cap constraint might influence the choice of
communication style. Also, it would give us insights into the
choices that this educated but not experience group makes
about their communication style.
Study two
Data was collected from 70-retail salesmen in an organized
FMCG sector about their preferred communication styles.
Choices made by the students’ group and this sample of
salesmen were compared to study similarities and differences.
This should give us how education and experience might
influence communication style choices.
19
Table 1: Model Summary
Model R
R
Square Adjusted
R Square
Std. Error
of the
Estimate
Salary Restricted OR
Unrestricted =
Restricted (Selected)
1 .882a .778 .774 .15801
2 .917b .841 .835 .13487
3 .944c .891 .885 .11279
4 .957d .915 .909 .10024
5 .968e .937 .931 .08754
6 .971f .942 .936 .08428
a. Predictors: (Constant), Dramatic
b. Predictors: (Constant), Dramatic, Contentious
c. Predictors: (Constant), Dramatic, Contentious, Animated
d. Predictors: (Constant), Dramatic, Contentious, Animated, Friendly
e. Predictors: (Constant), Dramatic, Contentious, Animated,
Friendly, Open f. Predictors: (Constant), Dramatic, Contentious, Animated,
Friendly, Open, Precise
Table 2: ANOVAg,h
Model Sum of
Squares df
Mean
Square F
Sig.
1
Regression
4.978
1
4.978
199.381
.000a
Residual
1.423
57
.025
2 Regression
5.383
2
2.691
147.964
.000b
Residual 1.019 56 .018
3 Regression 5.702 3 1.901 149.389 .000c
Residual .700 55 .013
4 Regression 5.859 4 1.465 145.760 .000d
Residual .543 54 .010
5 Regression 5.995 5 1.199 156.459 .000e
Residual .406 53 .008
6
Regression 6.032 6 1.005 141.531 .000f
Residual .369 52 .007
a. Predictors: (Constant), Dramatic
b. Predictors: (Constant), Dramatic, Contentious
c. Predictors: (Constant), Dramatic, Contentious, Animated
d. Predictors: (Constant), Dramatic, Contentious, Animated,
Friendly e. Predictors: (Constant), Dramatic, Contentious, Animated,
Friendly, Open
Factors influencing Seller Communication Style
f. Predictors: (Constant), Dramatic, Contentious, Animated,
Friendly, Open, Precise
g. Dependent Variable: Self-Perceived Communicator Image
h. Selecting only cases for which Salary Restricted OR
Unrestricted = Restricted
Tables 3 and 4 present the Model summary and ANOVA
for the other group of students who were not constrained in
imagining their role as salesmen. There are five
communication styles this group of students chose, and they
include dramatic, impression-leaving, animated, friendly, and
open.
Tables 5 and 6 present the Model summary and ANOVA
for the group of experienced retail workmen who were
currently in that role. There are three communication styles
this group preferred, and they include open, precise, and
impression-leaving.
20
Table 3: Model Summary
R
R
Square
Adjusted
R Square
Std. Error
of the
EstimateModel
Salary Restricted OR
Unrestricted = Not
Restricted (Selected)
1
.543a
.295
.282
.26785
2
.636b
.404
.382
.24842
3 .783c .614 .592 .20192
4 .862d .744 .724 .16601
5 .891e .794 .775 .15006
a. Predictors: (Constant), Dramatic b. Predictors: (Constant), Dramatic, ImpressionLeaving
c. Predictors: (Constant), Dramatic, ImpressionLeaving, Open d. Predictors: (Constant), Dramatic, ImpressionLeaving, Open,
Friendly
e. Predictors: (Constant), Dramatic, ImpressionLeaving, Open,
Friendly, Animated
Table 4: ANOVAf,g
Model Sum of
Squares df
Mean
Square F Sig.
1 Regression 1.679 1 1.679 23.402 .000a
Residual 4.018 56 .072
2 Regression 2.302 2 1.151 18.653 .000b
Residual 3.394 55 .062
3
Regression 3.495 3 1.165 28.573 .000c
Residual 2.202 54 .041
4 Regression 4.236 4 1.059 38.425 .000d
Residual 1.461 53 .028
5 Regression 4.526 5 .905 40.196 .000e
Residual 1.171 52 .023
a. Predictors: (Constant), Dramatic
b. Predictors: (Constant), Dramatic, Impression Leaving
c. Predictors: (Constant), Dramatic, Impression Leaving, Open
d. Predictors: (Constant), Dramatic, ImpressionLeaving,
Open, Friendly
e. Predictors: (Constant), Dramatic, Impression Leaving,
Open, Friendly, Animated
f. Dependent Variable: Self-Perceived Communicator
Image
g. Selecting only cases for which Salary Restricted OR
Unrestricted = Not Restricted
Table 5: Model Summary
R
R
Square
Adjusted
R Square
Std. Error
of the
EstimateModel
Salary Restricted
OR Unrestricted =
Not Applicable
(Selected)
1 .757a .573 .566 .38355
2 .808b .652 .642 .34858
3 .843c .711 .697 .32041
a. Predictors: (Constant), ImpressionLeaving
b. Predictors: (Constant), ImpressionLeaving, Precise
c. Predictors: (Constant), ImpressionLeaving, Precise, Open
Table 6: ANOVAd,e
Model Sum of
Squares df
Mean
Square F Sig.
1 Regression 13.411 1 13.411 91.161 .000a
Residual 10.004 68 .147
2 Regression 15.274 2 7.637 62.851 .000b
Residual 8.141 67 .122
3 Regression 16.639 3 5.546 54.026 .000c
Residual 6.776 66 .103
a. Predictors: (Constant), ImpressionLeaving
b. Predictors: (Constant), ImpressionLeaving, Precise
c. Predictors: (Constant), ImpressionLeaving, Precise, Open
d. Dependent Variable: Self-Perceived Communicator Image e. Selecting only cases for which Salary Restricted OR
Unrestricted = Not Applicable
SAMIKSHA - Volume II, No. 2, July-December 2011
First observation that strikes hard is the number of
communication styles that students thought was important for
a sales interaction. One group chose five and the other six,
compared to three communication styles which evolved for the
working group. This, to an extent, indicates a lack of
knowledge about the job role and what it demands. We do not
intend to suggest that a masters’ student should be trained for
one specific type of communication style. However, this just
explicates the imagination deficit in these students. To know
what communication style suits best to a context is necessary
for those occupying executive positions in the industry. This
just shows the need for training on communication styles more
than communication skills. Having said that, there is another
way of looking at the findings. One could argue that the choices
of students were wise and more useful in a sales interaction-
which we do not deny. If one were to identify the utility of one
communication style in producing an intended outcome, then
we might have a prescription of communication styles suitable
for every context. That would be something in the line of the
efforts put in by Dion & Notarantonio. For example, a friendly
communication style has shown results in increased sales;
‘friendly’ was not a choice of working retail salesmen in this
study, while it was a students’ choice. This indicates a need for
training the salesmen to gear up better; like a feed into the
organization discussed in the beginning of the paper.
Another difference to be marked in the observations is the
choice of contentious communication style by the students
supplied with salary constraint, unlike impression leaving
style chosen by others who were free to imagine the role. For
now, though we do not draw a causal connection, we assume-
21
Observations and Conclusions: and reasonably we think-that salary constraint has influenced
such a change. Salary, one of the prime sources of motivation in
any job; when it does not meet expectations causes a conflict
and a reduced job satisfaction. Such conflict might provoke a
more straight-forward communication than encourage subtle
communication. This finding points towards the use of
different structures of payment methods, and how they can
motivate salesmen to perform better, which is another stream
of research all together. What we did in this study is to use a
primitive method of fixing up one figure to the job role that is
not a reflection of what happens in most cases today. That
however strengthens our hypothesis that job related factors
and job role might influence communication style, more than
interactants.
References
• Sheth, J. N ”The future of buyer behaviour theory” In J. N. Sheth
(ed.) Models of Buyer Behaviour (1974). New York: Harper &
Row.
• Comstock, J., & Higgins, G “Appropriate Relational Messages
in Direct Selling Interaction: Should Salespeople Adapt to
Buyers' Communicator Style” Journal of Business
Communication, 34(4) (1997), pp. 401-418.
• Williams, K. C., & Spiro, R. L. “Communication Style in the
Salesperson-Customer Dyad. Journal of Marketing Research”
Vol. 22, No. 4 (1985), pp. 434-442.
• Noonan, B. “Nothing happens unless someone buys something:
Identifying and responding to your buyer’s communication
style” Health Marketing Quarterly, Vol. 3 (1985), pp. 27-35.
• Miles, M. P., Arnold, D. R., & Nash, H. R. “Adaptive
Communication: The Adaptation of the Seller's Interpersonal
Style to the Stage of the Dyad's Relationship and the Buyer's
Communication Style” Journal of Personal Selling and Sales
Management, Vol. 10 (1990), pp.21-27.
• Notarantonio, E. M., & Cohen, J. L. “The effects of open and
dominant communication styles on perceptions of the sales
interaction” Journal of Business Communication, 27 (1990),
pp.171-184.
• Sprowl, J. P., Carveth, R., & Senk, M. “The Effect of
Compliance-Gaining Strategy Choice and Communicator Style
on Sales Success” Journal of Business Communication, 19(4)
(1994), pp.291-310.
• Dion, A. P., & Notarantonio, E. M. “Salesperson
Communication Style: The Neglected Dimension in Sales
Performance” Journal of Business Communication, 29(1)
(1992), pp. 63-77.
• Norton, R. W. “Foundation of a communicator style construct”
Human Communication Research, Vol. 4, No. 2 (1978), pp.99-
112.
• Evans, Franklin B. “Selling as a dyadic relationship: A new
approach” American Behavioral Scientist, 6 (1963), pp.76-79.
Table 7: Indicating the details of communicationstyles exhibited by different study groups
Group Choice of Communication
styles
Students supplied
with salary constraint
Dramatic, Contentious,
Animated, Friendly, Open,
Precise
Students who were
free to imagine the
role
Dramatic, Impression
Leaving, Open, Friendly,
Animated
Working Retail
Salesmen
Open, Precise, Impression
Leaving
Factors influencing Seller Communication Style
*Associate Professor, Principal Investigator, UGC Major Research Project, Department of Business Administration,
Government Arts College, Paramakudi, Ramanathapuram District, Tamil Nadu. Email: ramasamythangappan@yahoo.com
INTRODUCTION
Indian agriculture has a strong development base. The
first five- year plan gives much importance to the agriculture
since our economy is fully based on the development of
agriculture. The agriculture gives much employment also.
Mostly the rural people are engaging in the agricultural
activities. Such people are called as farmers. The farmers are
cultivating many items of food grains, pulses and vegetables.
The present study is confined to the vegetables and its
marketing.
Importance of The Study
Food is essential to human being. Nobody has life without
food. The human beings are consuming food along with
vegetables. The consumption of food is very difficult without
having vegetables. Hence, the vegetables are taken into
account to conduct a study. India is a second largest country
producing vegetables next to China and contributing 14.45
percent of the total world production of vegetables. At present,
it is estimated that the vegetable production is 109-112 mn
tones. More ever, it is projected that the vegetables will be
required about 124-130 mn tones by 2011. Hence, a study is
conducted to know the marketing practices with regard to
vegetables especially by the farmers i.e. they are actual
produces of vegetables.
Statement of The Problem
The farmers despite facing many difficulties produce the
vegetables. Even though, the farmers are unable to fix the price
for their produce. In the case of trading concern and
manufacturing organization, the merchants and
manufacturers are able to fix the selling price of their products.
But, this type of practice is not possible to the farmers i.e. the
actual producers of vegetables. As a human being, everyone
should understand this situation and come forward to give
some liberty to the farmers. Over the period of time, Uzhavar
Sandhai concept was developed and established all over Tamil
Nadu. The prime objective of establishing Uzhavar Sandhai is
protecting the farmers from the exploitation of middleman,
Uzhavar Sandhai is a place where the farmers are selling
their agricultural produce directly to the end users i.e.
consumers. The customers/consumers are getting the goods at
cheap rate and freshly. The farmers may or may not be
educated. Moreover, they do not know the marketing strategies
and management practices also. But, they are selling their
produce just like a businessman. Government of Tamil Nadu
took steps for the benefit of the farmers in such a way that the
full benefits of selling of the agricultural produce only available
to the farmers. The middlemen commission is also eliminated.
Under this background, a field study was conducted at
Paramakudi in Ramanathapuram District, Tamil Nadu. A
special questionnaire was prepared by the researcher himself to
collect the data from the farmers turned marketers as
respondents. Convenient sampling technique was adopted to
select the respondents and the interested persons are
interviewed for the purpose of data collection. The collected
data were tabulated and apply percentage analysis, chi-square
test and correlation analysis. Some of the fruitful suggestions
are given on the basis of the findings of the study and the
experience of the researcher.
Keywords: Uzhavar Sandhai, Farmer, Agricultural
produce, Middlemen commission, Vegetables, Cultivation,
Food grains and Pulses)
A Study of The Marketing Practicesof Farmers at Uzhavar Sandhai Dr. T. Ramasamy*
commission agents, brokers and traders of food grains and
vegetables. Even in the Uzhavar Sandhai also, the farmers are
not permitted to fix the selling price. Only the Government
Department Officials are fixing the selling price after
consulting the farmers. Even though, the interest of the farmers
is protected to some extent. In this situation, the present study
is conducted to highlight the marketing practices of farmers at
Uzhavar Sandhai. Many shops are located in Uzhavar Sandhai
that will be allotted to the farmers on the basis of first come first
served. The weighing machine is installed in every shop but
weighing stones are given to farmers for their use at the time of
allocating the shop.
Scope of The Study
Most of the farmers are having less education. More over,
they are engaging in the agricultural activities out of their own
experience and information what they have received. There is a
proverb in English i.e. Old wood burns best. It means that
nothing is equal to the experience. Hence, the practical
experiences of farmers are highlighted through this study. The
researcher feels that the practical experience of one farmer is
highly useful to others. Hence the researcher has selected this
topic and conducted from the point of view of farmers.
Area of The Study
The present study is conducted in Paramakudi Uzhavar
Sandhai. The Paramakudi is situated in 75 kms away from
Madurai towards Rameswaram in the National Highways.
The Paramakudi is situated on the riverbed of Vaigai. The
farmers who are doing cultivation around Paramakudi
selected Uzhavar Sandhai to sell their agricultural produce
especially vegetables. The respondents are very close to
Paramakudi. The following are some of the name of resident of
respondents i.e. Munaiventri, Melaikudi, Kamuthakudi,
Ariyanenthal, Perumal koil, Pampoor, Andakudi, Abiramam,
Manja l Pa t t inam, E lentha ikulam, Bothuvakudi ,
Emaneswaram and the like.
Objectives of The Study
The present field study has the following objectives.
1. To know the marketing practices of respondents with
regard to vegetables.
2. To study the factors that influencing the respondents
to cultivate the vegetables and sell the same at
Uzhavar Sandhai.
3. To know the varieties of vegetables cultivated by
respondents.
4. To offer best marketing practices on the basis of
experiences of respondents.
Methodology
The researcher had collected data from the farmers
who are doing cultivation of vegetables and sell the same at
Paramakudi Uzhavar Sandhai. The primary data was collected
from the farmers through a structured interview schedule. The
researcher himself prepared the interview schedule. The
interview schedule was pre-tested for which the questions
were translated into Tamil. Tamil is the regional language. The
interview schedule was systematically arranged and finalized
on the basis of comments given by the farmers.
Sampling
In order to select the samples, first, the researcher
approaches the Government Department Officials to know the
number of farmers selecting the Paramakudi Uzhavar Sandhai
to sell their agricultural produce. One-week information was
collected and decides the sample size as 62. Some farmers are
selling food grains and pulses along with vegetables. The
researcher selects the farmers as respondents who are selling
vegetables with or without food grains and pulses.
Hypotheses
The following null hypotheses have been framed to find
the significant relationship between two variables.
1. There is no significant relationship between the level
of monthly income and customer canvassing
practices of respondents.
2. There is no significant relationship between gender of
the respondents and their knowledge about rules and
regulations of Uzhavar Sandhai.
Statistical Tools
The application of statistical tools is essential for proper
analysis and interpretation of primary data. Simple
percentages, cross tabulation, chi-square test and Karl Person’s
coefficient of correlation are used in this study. Findings of the
study are getting much importance through the application of
statistical tools.
Limitation of The Study
The followings are the limitations of the present study.
i. The responses of respondents are fully taken into
account to know the ground reality of the study area.
The bias of respondents may mislead the findings of
the study.
ii. The researcher on the basis of answers given by the
respondents filled up the interview schedule. The
misunderstanding of researcher may mislead the
findings of the study.
iii. Paramakudi is located in Ramanathapuram District
of TamilNadu. This area is drought hit. Hence,
findings of this study cannot be applied in other areas
even within Tamil Nadu.
Analysis and Interpretation
The collected primary data was analyzed and interpreted
in the following manner. The age group and period of doing
cultivation by the respondents is given in Table1.
23A Study of The Marketing Practices of Farmers at Uzhavar Sandhai
The martial status and pricing strategies of respondents
are presented in Table 3.
Table 1 shows that the age group and period of doing
cultivation by respondents. It is understood that the
respondents are getting dissatisfaction on the cultivation. Only
15 respondents are doing cultivation from 10 to 15 years. But,
nine respondents are alone doing cultivation more than 20
years. There is a declining trend of engaging on the cultivation
activities by the respondents. Moreover, 30 respondents are
coming under the age of up to 30 years but only 19 respondents
are coming above 45 years. It is once again proved that the
respondents give up the cultivation activities during their old
age.
The gender of the respondents and types of problem faced
by the respondents are shown in Table2.
24
Table 1: Age Group and Period of doingCultivation by The Espondents
Period of Doing Cultivation
(Years)
Age Group
Total Upto 30
30- 45 Above
45
Below 5 4 2 5 11
5 to 10 6 2 5 13
10 to 15 7 4 4 15
15 to 20 6 5 3 14
More than 20 7 0 2 9
Total 30 13 19 62
Source: Primary Data
Table 2: Gender of The Respondents andTypes of Problems Faced by The Respondents
Types of Problem Gender
Total Male Female
Demand Low Price 16 13 29
Demand Extra 6 5 11
Damaging the Vegetables
5 4 9
Transport 5 8 13
Total 32 30 62
Source: Primary Data
Table 2 shows that the gender of the respondents and
types of problems faced by the respondents. It is inferred that
nearly 50% of the male respondents are facing the problem of
demanding low price. The reason is that majority of the
Uzhavar Sandhai buyers are female members. Generally,
females are buying any product only on bargaining basis and
demanding low price. While comparing male respondents,
more female respondents are facing transport problem. Female
respondents are unable to bring their vegetables to Uzhavar
Sandhai due to lack of transport. Moreover, adequate bus
facilities are not available to female respondents.
Table 3: Martial Status andPricing Strategies of Respondents
Martial Status
Pricing Strategies
Total Uniform
Price
Variable
Price
Married 41 13 54
Unmarried 2 6 8
Total 43 19 62
Source: Primary Data
Table 3 shows that martial status and pricing strategies of
respondents. It is concluded that majority of the married
respondents are following uniform price while selling
vegetables to consumers. But, majority of the unmarried
respondents are following variable price. The reason is that the
unmarried respondents are considering time and wastages of
vegetables. Hence, they have decided to quick disposable of
vegetables for which they are adopting variable price.
The varieties of vegetables cultivated and sold by the
respondents are given in Table 4.
Table 4: Varieties of Vegetables Cultivatedand Sold by The Respondents
S. No Vegetables No. of
Respondents Percentage
1 Angular 19 22.09
2 Lady's Finger 17 19.77
3 Bottle gourd 8 9.30
4 Brinjal 20 23.26
5 Cabbage 9 10.47
6 Pumpkin 6 6.97
7 Bitter Gourd 7 8.14
Total 86 100
Source: Primary Data
Table 4 shows that the varieties of vegetables cultivated
and sold by the respondents. It is understood that majority of
the respondents (23%) are cultivating Brinjal and sell the same
at Paramakudi Uzhavar Sandhai. The reason is that Brinjal is
highly used in the sampar preparation and mixed with meals
for consumption. The prime aim of respondents is earning the
amount very quickly. Some respondents are culitivating more
than single vegetable in their land
The factors influencing the respondents for vegetable
cultivation are shown in Table 5.
SAMIKSHA - Volume II, No. 2, July-December 2011
Table 5 shows that the factors influencing the respondents
for vegetables cultivation. Soil condition is the main factor
responsible for vegetable cultivation. Hence, it is inferred that
the soil condition cannot be changed by anybody. Everyone
should adjust according to the soil condition. If not so, the
respondents cannot earn anything from the specified soil.
More return is another factor that influences 18 (22.22%)
respondents to cultivate vegetables. It is understood that
everybody prefers more return out of cultivation. Here, 18
respondents are influenced by more return and they are
cultivating and sell the vegetables at Paramakudi Uzhavar
Sandhai.
Testing of Hypotheses
The framed hypotheses have been tested with the help of
chi-square test. In order to find the significant relationship
between the level of monthly income of the respondents and
customer canvassing practice of respondents, null hypothesis
has been framed and tested with the help of chi-square test. The
level of monthly income of the respondents and customer
canvassing practices of respondents are shown in Table 6.
Null Hypothesis: There is no significant relationship
between the level of monthly income and customer canvassing
practices of the respondents
Alternate Hypothesis: There is a significant relationship
between the level of monthly income and customer canvassing
practices of the respondents
Degrees of Freedom : 6
Level of Significance : 5%
Calculated Value : 7.33
Table Value : 12.59
Inference: Since the calculated value of chi-square is less
than the table value, the null hypothesis is accepted. It means
that there is no significant relationship between the level of
monthly income and customer canvassing practices of the
respondents. Hence, it is understood that Uzhavar Sandhai
buyers i.e. consumers are not influenced by the canvassing
practices of the respondents. If the vegetables are kept
according to the expectation of consumers, the consumers have
decided to buy the vegetables. Moreover, the consumers are
watching over the quality of vegetables and the price fixed for
them.
The gender of the respondents and knowledge about rules
and regulations of Uzhavar Sandhai to the respondents is
given in Table 7.
25
Table 5: The Factors InfluencingThe Respondents for Vegetable Cultivation
S.
No Factors
No. of
Respondents Percentage
1 Quick Return 12 14.82
2 More Return 18 22.22
3 Soil Condition 29 35.80
4 Climate 11 13.58
5 Scarcity of Water 6 7.41
6 Less Expenses 3 3.70
7 Less Labour 2 2.47
Total 81 100.00
Source: Primary Data
Table 6: Level of Monthly Income of TheRespondents and Customer Canvassing
Practices of Respondents
Customer
Canvassing
Practices
Level of Monthly Income
Total Low Medium High
Oral Invitation 5 17 14 36
Give Samples 5 2 4 11
Explain Benefits 1 1 3 5
Display of
Vegetables 2 3 5 10
Total 13 23 26 62
Source: Primary Data
Table 7: Gender of The Respondents and Knowledge about Rules and Regulations
of Uzhavar Sandhai to The Respondents
Gender
Knowledge about Rules
and Regulations of
Uzhavar Sandhai Total
Yes No
Male 24 8 32
Female 26 4 30
Total 50 12 62
Source: Primary Data
Null Hypothesis: There is no significant relationship
between gender of the respondents and knowledge about rules
and regulations of Uzhavar Sandhai.
Alternate Hypothesis: There is a significant relationship
between gender of the respondents and knowledge about rules
and regulations of Uzhavar Sandhai.
Degrees of Freedom : 1
Level of Significance : 5%
Calculated Value : 1. 36
Table Value : 3.84
Inference: Since the calculated value of chi-square is less
than the table value, the null hypothesis is accepted. It means
that there is no significant relationship between gender of the
respondents and knowledge about rules and regulations of
A Study of The Marketing Practices of Farmers at Uzhavar Sandhai
Uzhavar Sandhai. It is understood that both male and female
are having equal knowledge over the rules and regulations of
Uzhavar Sandhai.
Karl Pearson’s Coefficient of Correlation
All the farmers are not selecting the Uzhavar Sandhai for
selling their vegetables. Only a few of them have selected the
Uzhavar Sandhai. The reason is that only a few people are
having the talent of attracting others through their speech.
Hence, there may be a relationship between the method of
attracting the consumer and selecting the Uzhavar Sandhai for
selling their vegetables. Therefore, the researcher applies Karl
Pearson’s Coefficient of Correlation to find the prevailing
relationship between the method of attracting the consumers
and the reasons for selecting the Uzhavar Sandhai for selling
vegetables. The researcher asked the respondents to give ranks
for method of attracting the consumers and reasons for
selecting the Uzhavar Sandhai for selling vegetables. On the
basis of ranks given by the respondents, score values are
calculated to apply the Karl Pearson’s Coefficient of
Correlation. The Table 8 shows that the score values of method
of attracting consumers and reasons for selecting Uzhavar
Sandhai for selling vegetables.
26
Findings
The followings are the findings of the study.
• There is a declining trend of engaging on the cultivation
activities by the respondents.
• Nearly 50% of the male respondents are facing the
problem of demanding low price. More female
respondents are facing the transport problem.
• Majority of the married respondents are following
uniform price while selling vegetables to consumers.
• Majority of the respondents (23%) are cultivating Brinjal
and sell the same at Paramakudi Uzhavar sandhai.
• Soil condition is the main factor influencing respondents
to cultivate vegetables.
• There is no significant relationship between the level of
monthly income and customer canvassing practices of the
respondents
• There is no significant relationship gender of the
respondents and knowledge about rules and regulations
of Uzhavar Sandhai
• There is a negative correlation between the method of
attracting consumers and the reasons for selecting the
Uzhavar Sandhai for selling vegetables by the
respondents.
Suggestions
The following suggestions are given on the basis of
findings of the study and experience of the researcher.
• Marketing is an art. Hence, Government Department
Officials should prepare a soft skill development
programme for the farmers and implement the same with
the approval of State Government.
• The soil test can be conducted freely to the farmers who are
selecting the Uzhavar Sandhai to sell their vegetables.
• The farmers are permitted to fix the price themselves
without intervention of Government Department
Officials.
• Transport facility should be arranged to bring the
vegetables to the Uzhavar Sandhai in time. If not so, the
vegetables will be wasted.
• Go down facility should be created within the Uzhavar
Sandhai itself. If so, vegetables are kept in good condition
throughout the day. Moreover, the vegetables can be sold
as fresh in the very next day also.
Table 8: Score Values of Method of AttractingConsumers and Reasons for Selecting
Uzhavar Sandhai For Selling Vegetables
S. No
Method of Attracting Consumer
Reasons for Selecting Uzhavar Sandhai to Sell
Vegetables
1 Display 6 More Profit 16
2 Offer 16 Quick Money 125
3 Neatness 120 Utilize
Opportunity 30
4 Less Weight
and More Goods
33
Cheating of Intermediaries 60
5
Proper
Handling of Vegetables
52
Quick Sales
4
Source: Primary Data
r = -0.32
There is a negative correlation between the method of
attracting consumers and the reasons for selecting the Uzhavar
Sandhai for selling vegetables.
Inference: It is proved that the selected respondents, who
have opted Uzhavar Sandhai to sell their vegetables, are not
able to attract the consumers. The consumers are urban area
people. The respondents are rural area people. The rural area
people are not able to understand the expectation and
psychology of urban area people i.e. consumers.
SAMIKSHA - Volume II, No. 2, July-December 2011
Conclusion
The establishment of Uzhavar Sandhai provides a place
for selling agricultural produce by the farmers directly to the
consumers. In this way, Uzhavar Sandhai is functioning as a
bridge between the farmers and consumers. Everybody
understood that the farmers are freely marketing their
vegetables without middleman involvement and
interruptions. Hence, the researcher is happy if the concerned
authorities consider the above listed suggestions for
betterment of farmers. If so, certainly, the farmers can get high
satisfaction and their interests are properly safeguard.
Moreover, vegetables can be available to consumers at very
cheaper rate with more varieties and quantity.
References
• Acharya.S.S and Agarwal.N.I. Agricultural Marketing in
India, Oxford and IBH Publishing Co. Pvt. Ltd. New Delhi,
1999
• Beri.G.C. Marketing Research, Tata McGraw Hill Publishing
Company, New Delhi, 2005
• Srinivas, Nidhi Nath, The Village People, The Economic Times,
January 14, 2004
• Parthasarathy and Vimala, The Changing face of Indian
Retailing, Marketing Mastermind, April 2004
• Marketing Management, Arun Kumar, N.Meenakshi, Vikas
Publishing House Ltd, 2006
27A Study of The Marketing Practices of Farmers at Uzhavar Sandhai
*Head - Department Of Management, Ideal Institute of Technology, Ghaziabad.
**Department Of Management, Ideal Institute of Technology, Ghaziabad.
INTRODUCTION
The Wilson Fire and Rescue Services, like most other fire
departments, have always utilized the traditional single-
source performance appraisal assessment completed by the
supervisor. Although the forms have changed periodically
over the years, the theories, principals and implementation
have remained the same.
The Wilson Fire and Rescue Services (WF/RS) believes
that in an age where hierarchy is being replaced by teamwork,
participative leadership, empowering employees, improving
customer service and re-engineering have made traditional
single-source assessments illogical and impractical. We feel the
need to look at other alternatives that will support and enhance
personnel development and growth of our organization.
Since the elimination of our shift commander positions,
we have not been able to properly evaluate our officers and
personnel in the utilization of the Incident Command System
during emergency operations.
In a time when hierarchy is being replaced by teamwork,
participative leadership, empowering employees, improving
customer service and re-engineering, employers need to look at
other alternatives that will support and enhance personnel
development. Organizations are asking personnel for more
productivity with less resource. Layers of management are
being reduced causing increased workloads and supervisors
are managing larger work groups with larger spans of control.
The traditional tops down supervisor-only evaluation
systems are no longer practical. Supervisors with increased
workloads and a large number of reporting relationships lack
the opportunity to observe and provide fair, accurate, credible
and motivating performance appraisals.
The purpose of this research project was to gather
information that would assist in the development of a fair,
accurate, honest and objective performance appraisal system.
This research project utilizes an evaluative research
methodology. The following questions were answered while
completing this project.
1. What is a 360-degree feedback performance appraisal?
2. Should 360-degree feedback be used for development or for
management decisions such as raises and promotion also?
3. What are the advantages and disadvantages of 360-degree
feedback?
4. Should the raters providing feedback be anonymous?
The procedures included an extensive literature review of
three research papers located at the National Fire Academy and
several books by noted authors on the subject of multiple source
performance appraisals. An inter-department survey was
conducted to determine how personnel felt about our current
performance appraisal system and the possibility of a multi-
source performance appraisal. Telephone conversations were
conducted with the authors of two of the research papers used
for this project.
360-Degree FeedbackPerformance Appraisal Prof. Amit Kr. Jain*
Prof. Shrankhla Jain**
The results of this research project confirmed that most
organizations are using the traditional supervisor-to-
subordinate appraisal. It also concludes that multi assessors
increase validity and that subordinates and peers are in a better
position to provide accurate feedback to their supervisors and
co-workers. The survey concluded that personnel are
dissatisfied with the traditional performance appraisal and are
willing to evaluate their superiors, peers and subordinates.
The recommendation is that personnel growth and
development will be more probable with the adoption of 360-
degree feedback performance appraisal.
The WF/RS leadership team was introduced to a
performance appraisal system called
360-degree feedback during one of its staff advance
meetings. The qualities seemed to fit into our scheme and we
wanted to research the system in more depth.
The purpose of this project was to research and provide
the information available to assist the departments’ employee
evaluation review committee to develop an evaluation that
would produce a fair, accurate and non opinionated
performance appraisal of our employees during normal and
emergency operations.
This paper uses an evaluative research methodology. The
questions to be answered were:
1. What is a 360-degree feedback performance appraisal?
2. Should 360-degree feedback be used only for development
or for management decisions such as raises and
promotions also?
3. What are the advantages and disadvantages of 360-degree
feedback?
4. Should the raters providing feedback be anonymous?
Background and Significance
The Wilson Fire and Rescue Services went through
reorganization in 1993. The finished product resulted in
adding two deputy chiefs, one over operations and one over
support services. Five battalion chiefs were also promoted to
head fire prevention, training and three shift commanders.
In 1994 the City of Wilson underwent personnel cutbacks.
The WF/RS lost seven positions one in which was a deputy
chief.
In 1996, the remaining deputy chief left the department for
a fire chief’s position in another city. Also, one of the shift
commanders retired.
Due to budget restraints and cutbacks, we felt we needed
to re-engineer our organization. We were faced with being
more productive with less resource. As fire department leaders
we need to periodically examine our management structure.
The management structure should be altered to fit the service
needs of the customer and the management needs of the
employee.
The alternative selected was to make the four remaining
battalion chiefs division heads and place them on a forty (40)
hour work week. At the present time the department has a
division chief over fire prevention, one over support services
(administration) and one over operations. The vacant deputy
and battalion chief positions were eliminated.
The reorganization also eliminated the shift commanders
on all three shifts. More authority, responsibility and
accountability were delegated to the company officer level. By
doing so, our organization has reduced hierarchy by removing
layers of management and putting more emphasis on
empowerment, teamwork, continuous learning, individual
development and self responsibility.
The operations chief has complete management and
responsibility over operations from eight a.m. to five p.m. A
division chief is on stand-by after 5:00 p.m. which is rotated
between the division chiefs one week a month.
The operations chief is responsible, with input from the
other division chiefs, for the performance appraisal of fifteen
(15) company level officers. By working an eight to five work
schedule and doing mostly administrative duties it has
diminished the quality time he has to spend with his officers
which inhibits his ability to provide a fair an accurate
evaluation.
Before being eliminated, the battalion chiefs (shift
commanders) use to respond on most emergency calls
providing ample opportunity to evaluate their officers on the
emergency scene in firefighting strategy, tactics and their
ability to execute proper procedures utilizing the Incident
Command System. Since the reorganization, the division chief
of operations is limited to the amount of emergency calls he
responds on. This has a positive side by providing the
company officer with more empowerment to make decisions
and manage the emergency operations. It as also limited the
operation chief’s ability to observe their skills, growth and
ability. At present, the division chief is dispatched on the
following:
• Church fires School fires Warehouse fires
• Structural collapse/Cave-in confined space
• Mass casualty reports
• Airplane crash
• Train wrecks
• Blowing gas incidents Hazardous material Mutual aid
alarms
• All second alarms
• When requested by incident commander
The emergencies listed above make up less than 5% of the
emergency response calls by the WF/RS. In response to the
company officer who has inherited more responsibility,
authority and an increased workload, the supervisor may not
have sufficient opportunity to observe employee performance.
It is imperative that someone be in a position to observe,
evaluate and point out an employee’s strengths, weaknesses
and needs for his future growth and development.
This research project relates directly to the subject matter
covered in the course Executive Analysis Of Fire Service
Operations In Emergency Management. The concept is based
on the Incident Command System (ICS). 360- degree feedback
will improve our emergency operations, ICS and community
risk assessment which requires teamwork and focus from all
levels of the organization.
The author of this paper feels that 360-degree feedback is a
tool that can be used to give all personnel a fair and accurate
performance appraisal in all aspects of the job. Peers and
subordinates will be providing feedback and evaluating the
29360-Degree Feedback Performance Appraisal
The 360-degree feedback appraisal, also known as multi-
source assessment or full circle feedback, gathers evaluation
data from all of those who work most closely with the person
being evaluated, regardless of position. The collective
intelligence these people provide gives the appraisee a clear
understanding of personal strengths as well as areas that need
further development (Edwards & Ewen, 1996). A prime
advantage is that 360 provides a more comprehensive view of
employee performance. Not only does this method provide
feedback from a variety of viewpoints, it also minimizes the
bias problems that are inherent to evaluations. The more
appraisers an employee has, the more likely the biases of the
raters will tend to cancel one another out, and the more their
perspectives will combine to give a complete, accurate and
honest picture.
In the research paper Subordinate Appraisal Of
Supervisors An Improvement In Appraisal Technique (Simms,
1996) recommended an action plan be developed to implement
a subordinate appraisal system in the Texarkana, Texas Fire
Department. The results of his study indicated that
subordinate appraisal of supervisors could be a viable
accepted system that could improve the overall performance
appraisal process.
David Lobdell in his research project Selecting An
Appropriate Performance Appraisal Program For Spokane
Valley Fire Department, (1997) recommended that 360 degree
appraisal was the most beneficial for a fire department in
today’s work environment. Four basic methods were
identified in his research: (1) the conventional top down, (2) the
peer rating, (3) the bottom up where employees rate their
supervisors, (4) the 360 degree evaluation which he states is a
combination of the other three.
Lobdell recommended that the evaluation be
implemented carefully and that they should be used only for
employee self evaluation and development. The individual
ratings should be kept confidential and should be fairly short.
He recommended that training must be conducted for both
giving and receiving feedback before the program is
implemented, and the program should be evaluated
periodically and modified to meet the changing needs of the
organization.
He recommended the evaluation be fairly short and that it
should be able to be completed in about thirty (30) minutes. The
performance on which the employee is being rated should be
clearly understood and related to the position held. There
should be a minimum of five to six evaluators to protect
anonymity and provide sufficient perspective. The immediate
supervisor of the appraisee should receive the completed
evaluations. He should tabulate them onto a clean form with
the comments interpreted or paraphrased to assure anonymity
before discussing the composite rating with the employee
being evaluated.
Research obtained by Roberto Rivera’s research project
Performance Appraisals A Change From Single Source To
Multi Source Evaluations (1996) indicated that multi source
officers. This will only improve our Incident Command System
which requires knowing strengths and weaknesses of all
participants.
Literature Review
The literature review was to explore a new performance
appraisal model that turns the appraisal process upside down
known as 360-degree feedback. Hopefully it will provide
quality information that can be utilized by The Wilson Fire and
Rescue Services Employee Evaluation Review Committee to
create and implement a new performance appraisal model for
employee assessment and performance improvement. If
implemented, its intended purpose will greatly enhance
personnel development and maximize the utilization by
department personnel of our Incident Command System.
Any company that’s going to make it in the 1990’s and
beyond has got to find a way to engage the mind of every single
employee. If you’re not thinking all the time about making
every person more valuable, you don’t have a chance. What’s
the alternative? Wasted minds? Uninvolved people? A labor
force that’s angry or bored? That doesn’t make sense.
360-Degree feedback is aimed at improving performance
by providing a better awareness of strengths and weaknesses.
The employee receives feedback, in anonymous form, on
performance ratings from peers, superiors and subordinates
(Kaplan & Palus, 1994).
Feedback from multiple sources, such as superiors, peers,
subordinates and others has a more powerful impact on people
than information from a single source, such as their immediate
supervisor. Employees view performance information from
multiple sources as fair, accurate, credible and motivating.
They are more likely to be motivated to change their work
habits to obtain the esteem of their co-workers than the respect
of their supervisors (Edwards & Ewin, 1996).
The supervisor-only performance appraisal is subjective
and relies on the supervisor’s judgment. They are time-
consuming and are generally disliked by those who give and
receive them. They are typically given once a year assessing the
employees work performance from a subjective point of view
and providing management information for decisions on pay
and promotions (Edwards & Ewen, 1996).
360 Degree Feedback improves the quality of performance
measures by using multi- raters providing a more balanced
and comprehensive view. The information is more reliable,
valid and credible because the providers interact regularly
with the employee at work (Edwards & Ewen, 1996).
Many organizations have found that single source
appraisals provide inflated evaluations, giving nearly all
ratee’s high performance ratings. This process creates an
environment in which employees feel entitled to regular raises
and promotions without providing them the information
needed for development. Managers find it difficult to provide
specific and critical feedback so they tend to shy away from
addressing performance problems.
30 SAMIKSHA - Volume II, No. 2, July-December 2011
assessments are the wave of the future. The purpose of his
research project was to evaluate existing performance
appraisals in the fire service and determine their effectiveness.
The El Paso Fire Departments current performance appraisal
system was examined and compared to those revealed in his
research. The results of his research lead to choosing 360-
degree feedback as a replacement for El Paso Fire Departments
performance appraisals.
A telephone interview was conducted with Deputy Chief
Roberto Rivera of El Paso Fire Department and with Assistant
Chief David Lobdell of The Spokane Valley Fire Department to
find out if they had implemented the 360-degree feedback
appraisal system in their departments. Both had recommended
360 in their research projects.
A survey was planned to find out how many fire
departments were using multi source appraisals. The survey
was abandoned due to research obtained from the three
research projects mentioned, through their recent surveys,
revealed that most fire departments are still using the
traditional one-on-one, top down performance appraisals.
Summary
In summary, the wealth of information in the literature
review has stimulated the possibility and the advantages of a
360-degree feedback performance appraisal system. All the
information reviewed has been favorable and positive of 360-
degree feedback. Roberto Rivera had implemented the system,
on a trial basis to portions of his department. The results were
positive and well received by both officers and subordinates.
David Lobdell and Rivera had both recommended it for their
departments.
Many sources were studied but are not listed in the
reference section due to being redundant in their information.
They all seem to agree with each other and favor that 360-
degree feedback is the wave of the future. The only point there
is disagreement on is whether 360 should be used for
development only or should it be used for management
decisions such as pay raises and promotions also.
The information in this research paper will be provided to
The Wilson Fire and Rescue Services Employee Evaluation
Review Committee to examine and consider as one alternative
to our present system.
Procedures
The procedures used in this research project was to
exercise an extensive literature research to obtain as much
information as possible on the most recent type of performance
appraisal being utilized today. It was mostly directed at
exploring information and research pertaining to 360-degree
feedback. The author was searching for other fire departments
that were using the 360-degree feedback system to find out
how successful it was for their organization and any problems
they had encountered.
Three research papers found at the Learning Resource
Center at The National Fire Academy provided valuable
information needed to complete the project. The three paper’s
reviewed are contained in the literature review section of this
paper. Several books written on multi- source evaluations were
also used which are listed in the reference section. Telephone
conversations were conducted with the authors of two of the
research paper’s reviewed in this project.
Roberto Revera of Texas El Paso Fire Department said he
implemented the 360- degree feedback to three different
stations on three different shifts on a trial basis for his research
project. The feedback he received was positive. The
subordinates enjoyed giving feedback to their officers and felt
it improved their relationship. The officers felt they had
improved from the feedback they had received. One officer
said it was too short a period to really benefit from it. Roberto
said it has not been implemented because all city departments
use the same type of evaluation and he has not been able to sell
it to all departments (R. Revera, phone conversation,
November 17, 1998).
David Lobdell of the Washington Spokane Valley Fire
Department, who also recommended that 360-degree feedback
be implemented in their department, said at this time it is on
the back burner. He delegated it to a newly appointed battalion
chief as a probationary project and it never got implemented.
He has not had time to re-delegate it at this time but does have
plans to implement it in the near future (D. Lobdell, phone
conversation, November 17, 1998).
An inter-department survey was conducted to find out
how many were satisfied or dissatisfied with our current
evaluation system. The purpose was also to find out how they
felt about the idea of a multi-source assessment performance
appraisal. The following survey was distributed:
EFOP Research Project Survey
1. What is your current rank?
2. I am satisfied with our current evaluation form and
system.
Strongly agree Agree Disagree Strongly disagree
3. I would be willing to evaluate my superiors, peers and
subordinates.
Strongly agree Agree Disagree Strongly disagree
4. I would be willing to accept an evaluation from my peers
and subordinates.
Strongly agree Agree Disagree Strongly disagree
5. I think evaluations should be associated with pay raises.
Strongly agree Agree Disagree Strongly disagree
6. I think pay raises should be associated with promotions
Strongly agree Agree Disagree Strongly disagree
7. Additional comments:
Sixty four (64) of eighty two (82) personnel employed with
the department were hand delivered a survey form and given a
brief explanation of its purpose. They were told the results
would be documented in this research project and would also
be provided to the employee evaluation review committee.
31360-Degree Feedback Performance Appraisal
Many of the employees were not educated about multi-
source/360 evaluations and a brief explanation of how it
proceeds was given stressing the importance and guarantee of
anonymity.
The sixty four (64) surveys included seventeen (17)
firefighters, twenty five (25) engineers and twenty one (21)
officers. The make up of officers included fire inspectors, three
(3) lieutenants, thirteen (13) captains, four (4) divisions chiefs
and the fire chief. One survey form was excluded due to not
answering all the questions bringing the total number of
surveys used to sixty three (63). This represents seventy six
percent (76%) of the department participating in the survey.
The two secretaries were overlooked and not provided the
opportunity to participate in the survey. Sixteen (16) personnel
were unavailable due to vacation, sick leave or attending
school at the time of the survey.
Limitations
The author was unable to locate any data that spoke out
against the 360-degree feedback performance appraisal. In
order to get a true picture you need to evaluate the pros and
cons. All the literature reviewed was favorable of the 360 even
though a limited amount of disadvantages were covered.
It is questionable whether the respondents of the survey
by The Wilson Fire and Rescue Services personnel had a good
understanding of the 360-degree feedback performance
appraisal. It is assumed respondents answered the survey
honestly. They were given very little time to answer the survey
and a brief definition of the 360 and how it works. The
unavailability of some personnel due to leave time could
possibly skew the results.
Results
This section will provide answers to the original research
questions along with a narrative description of the findings of
the study.
1. What is 360-degree feedback performance appraisals?
From the literature reviewed, 360-degree feedback is a
new model for performance feedback and appraisal. 360 turns
the appraisal process upside down. It assesses employee
performance and development from multi perspectives such
as supervisors, peers, subordinates, customers and clients. It is
aimed at improving performance by providing a better
awareness of strengths and weaknesses. The employee
receives feedback from multiple sources in anonymous form,
compares them with self-ratings, gets limited coaching and
sets goals for improvement. It is a process of feeding back to a
person how others see him or her from people who work most
closely with them and know them best. 360 serves as a
supplement to, not a replacement for, supervisory review.
2. Should 360-degree feedback be used for development or for management decisions such as raises and promotions also?
32
The answer to this question falls into three general
categories: (1) for development only, (2) for performance
appraisal; or (3) for development and performance appraisal.
Victoria Pollman believes in using 360-degree feedback
strictly for development purposes only. She believes that using
it for appraisal supports the “Theory X” philosophy and makes
it punitive by its very nature (Bracken, Dalton, Jako, McCauley,
Pollman and Hollenbeck, 1997).
David W. Bracken believes the full power of 360 is not
maximized when it is used for development only. He states
that multi rater feedback for decision making has worked in
many organizations (Bracken, Dalton, Jako, McCauley,
Pollman and Hollenbeck, 1997).
Studies have shown that when the ratings can influence
another’s career when used for decision making purposes,
both self-ratings and the ratings of co-workers tend to be
inflated (Fleenor and Prince, 1997). Whether 360 is being used
for development only or performance appraisal, the raters
should be held accountable to provide honest, fair and
unbiased feedback.
Whether 360 should be used for management decisions or
development only is the most significant disagreement among
proponents who have provided information on the subject.
Though this has been debated there is no clear right or wrong
answer.
Cynthia D. McCauley (Bracken, Dalton, Jako, McCauley,
Pollman and Hollenbeck, 1997) attended a debate where
Dalton and Pollman presented their views as to why 360-
degree assessments should be used for feedback and
development only while Bracken and Jako expressed these
type of assessments were appropriate for use in administrative
decision-making also. After hearing the wealth of information
and experience from both sides on the topic, she found herself
unable to take one side or the other.
The information obtained leads the author of this research
paper to believe it should be left up to the organization who
wishes to implement 360-degree feedback on what it should be
used for. Each organization must decide what will work best
for them.
3. What are the advantages and disadvantages of 360-degree feedback?
Some advantages and disadvantages are listed below:
Advantages:
The feedback is more honest, reliable and valid than
traditional appraisals from the supervision only.
Feedback from multiple sources has a more powerful
impact than information from a single source.
No action has more power for motivating employee
behavior change than feedback from credible work associates.
SAMIKSHA - Volume II, No. 2, July-December 2011
Employers are more strongly motivated to change work
behaviors to obtain the esteem of their co-workers.
They are typically not as time consuming for the
supervisor as the traditional performance appraisal.
They offer a more balanced and comprehensive view.
When using 360 degree feedback systems work associates
are rarely reluctant to identify poor performance of co-
workers.
One person performance appraisals are subject to claims
of bias or partiality. Multi source offers substantial stronger
legal protection.
Disadvantages:
If co-workers like the individual being rated, they are
concerned about doing or saying anything that may hurt them.
If raters disliked the individual they may decide that this is
a good time to get even. Is the use of anonymous raters legally
practical?
Even when the feedback is anonymous, the recipient may
be able to identify the source. Subordinates often cannot
evaluate the supervisor’s work as it relates to management
objectives
There should be five or six evaluators to provide sufficient
perspective and to protect anonymity.
Raters may lack proper training.
4. Should the raters providing feedback be anonymous?
Many employees will not provide feedback without
respondent anonymity. When anonymity is not guaranteed
their responses tend to be highly inflated.
360-Degree works only when respondent anonymity is
assured. Many times people say, “We must trust one another
around here and be honest with our feedback,” or “We want
people to be able to confront their rater directly, and get all the
information out in the open.” But this approach encourages
people to give only positive information. People are not stupid:
They will not give the difficult feedback if there is any chance
the feedback can be traced to them. No amount of training
changes this aspect of human behavior (Edwards & Ewen,
1996, pg. 158).
All the information reviewed agreed that to address the
issue of retribution and accountability and increase the
likelihood that raters will provide candid feedback that was
accurate , honest and fair anonymity must be assured.
Survey
A survey was conducted of The Wilson Fire and Rescue
Services personnel to determine how they felt about our
current performance appraisal system and what their thoughts
would be on a global type (360) performance appraisal system.
The results, for the most part, was surprising.
The first question on the survey form asked for each
employee to specify his rank. The purpose was so the data
could be compiled separately by rank and also in totality by the
department as a whole.
To the second statement 26.1% of the non-officers
(firefighters and engineers) agreed that they were satisfied
with our current evaluation form and process. 42.8% disagreed
and 30.9% strongly disagreed. 23.8% of the officers (inspectors,
lieutenants, captains and chiefs) agreed that they were satisfied
with our current evaluation form and process. 52.3% disagreed
and 23.8% strongly disagreed. When tallied by the department
as a whole 25.3% agreed, 46% disagreed and 28.5% strongly
disagreed. The closeness of the percentages between the
officers and non-officers was quite surprising as was displayed
throughout this survey.
33
Table 1: Percentage of Satisfaction withCurrent Evaluation System
Non Officers
Officers
Departments
StronglyAgree
Agree Disagree StronglyDisagree
0
0
0
26.1%
23.8%
25.3%
42.8%
52.3%
46.0%
30.9%
23.8%
28.5%
To the third statement 26.1% of the non-officers strongly
agreed that they would be willing to evaluate their superiors,
peers and subordinates. 59.5% agreed, 7.1% disagreed and
7.1% strongly disagreed. 23.8% of the officers strongly agreed,
66.6% agreed, 4.7% disagreed and 4.7% strongly disagreed.
When tallied as a whole 25.3% strongly agreed, 61.9% agreed,
6.3% disagreed and 6.3% strongly disagreed.
Table 2: Percentage Willing ToEvaluate Superiors, Peers, and Subordinates
Non Officers
Officers
Departments
StronglyAgree
Agree Disagree StronglyDisagree
26.1%
23.8%
25.3%
59.5%
66.6%
61.9%
7.1%
4.7%
6.3%
7.1%
4.7%
6.3%
To the forth statement 26.1% of the non-officers strongly
agreed that they would be willing to accept an evaluation from
their peers and subordinates. 73.8% agreed, 2.3% disagreed
and 7.1% strongly disagreed. 28.5% of the officers strongly
agreed, 66.6% agreed, 4.7% disagreed and 0% strongly
disagreed. Tallied as a whole 26.9% strongly agreed, 71.4%
agreed, 3.1% disagreed and 4.7% strongly disagreed.
360-Degree Feedback Performance Appraisal
To the fifth statement 16.6% of the non-officers strongly
agreed that evaluations should be associated with pay raises.
30.9% agreed, 30.9% disagreed and 21.4% strongly disagreed.
19% of the officers strongly agreed, 42.8% agreed, 33.3%
disagreed and 4.7% strongly disagreed. Tallied as a whole
17.4% strongly agreed, 34.9% agreed, 31.7% disagreed and
15.8% strongly disagreed.
34
The author of this paper concludes that multiple assessors
increase validity and that subordinates and peers are in a better
position to observe certain skills of their supervisors and co-
workers such as leadership, guidance, coordination, planning,
training, coaching and work behavior that is often overlooked
by management. Through personal experience supervisors
seldom have sufficient opportunity to observe and provide a
complete performance picture of the individual. Development
depends on the quality of feedback received.
In comparison, the survey of WF/RS personnel that
participated in the survey showed that 74.6% had some degree
of dissatisfaction with our current performance appraisal
system.
87.3% were willing to evaluate their superiors, peers and
subordinates. 98.4% were willing to accept an evaluation from
their peers and subordinates. Again this is assuming the survey
questions were answered with total honesty and with proper
interpretation.
Recommendations
The recommendations concluded from this research
project is based on the data compiled from the research itself.
An overwhelming percentage (74.6%) of WF/RS personnel
that were surveyed (76.8% of WF/RS personnel were
surveyed) showed some degree of dissatisfaction with our
current performance appraisal system. The best time to
implement a change is when people are dissatisfied with the
present method.
The data collected coincides with the purpose of the
recently developed Wilson Fire and Rescue Services
Evaluation Review Committee to develop a evaluation that
would produce a fair, accurate and non opinionated
performance appraisal of our employees.
It is the authors opinion that the growth and development
of personnel and the department will be more probable with
the adoption of 360-degree feedback performance appraisals. It
will enhance the growth of our personnel in all aspects as well
as in emergency operations in the utilization of The Incident
Command System by receiving feedback from their superiors,
peers and subordinates while on and off the emergency scene.
The information contained in this research paper will be
provided to the employee evaluation review committee to
examine and research further for the possibility of
implementation. 360 is the newest alternative for performance
appraisals.
If 360-degree feedback is implemented, the author
recommends that:
1. All participants have comprehensive knowledge of 360
feedback.
2. All raters be assured anonymity.
3. All personnel trained in how to provide feedback.
4. All personnel trained in how to receive feedback.
5. The ratings be kept confidential.
Table 3: Percentage Willing toAccept Evaluation from Peers and Subordinates
Non Officers
Officers
Departments
StronglyAgree
Agree Disagree StronglyDisagree
26.1%
28.5%
26.9%
73.8%
66.6%
71.4%
2.3%
4.7%
3.1%
7.1%
0
4.7%
Table 4: Evaluations AssociatedWith Pay Raises
Non Officers
Officers
Departments
StronglyAgree
Agree Disagree StronglyDisagree
16.6%
19.0%
17.4%
30.9%
42.8%
34.9%
30.9%
33.3%
31.7%
21.4%
4.7%
15.8%
To the sixth statement 9.5% of the non-officers strongly
agreed that evaluations should be associated with promotions.
59.5% agreed, 19% disagreed and 11.9% strongly disagreed.
4.7% of the officers strongly agreed 71.4% agreed, 9.5%
disagreed and 0% strongly disagreed. Tallied as a whole 12.6%
strongly agreed, 63.4% agreed, 15.8% disagreed and 7.9%
strongly disagreed.
Table 5: Evaluations AssociatedWith Promotions
Non Officers
Officers
Departments
StronglyAgree
Agree Disagree StronglyDisagree
9.5%
4.7%
12.6%
59.5%
71.4%
63.4%
19.0%
9.5%
15.8%
11.9%
0
7.9%
Discussion
The conclusion from this study confirms that the majority
of fire departments and the private sector are still using the
traditional top down one-on-one supervisor to subordinate
appraisal. It also concludes that 360 is the wave of the future.
“Like it or not, 360-degree feedback has become an accepted
fact in organizations today, and its use is still growing”
(Hollenbeck, 1997, pg. ix). The U. S. Department of Energy,
Disney, Arizona State University, Monsanto, Florida Power
and Light, Du Pont, Westinghouse, Motorola, Federal Express,
Kino Hospital, Fidelity Bank and McDonnell-Douglas are
some of the innovators of 360-degree feedback.
SAMIKSHA - Volume II, No. 2, July-December 2011
6. The evaluation should be fairly short.
7. Should be able to be completed in thirty to forty-five
minutes.
8. There should be a minimum of three evaluators.
9. The evaluation program be evaluated periodically.
10. Make modifications as necessary.
11. Acquire the services of a consulting firm.
References
• Bracken, D.W., Dalton, M. A., Jako, R. A., McClauley, C.D.,
Pollman, V. A., and Hollenbeck, G.P., (1997). Should 360-
Degree feedback Be Used Only For Developmental purposes?
Greensboro, North Carolina: Center For Creative Leadership.
• Edwards, M. R., and Ewen, A. J., (1996). 360-Degree Feedback:
The Powerful New Model For Assessment And Performance
Improvement. New York: AMACOM
• Fleenor, J. W., and Prince, J. M., (1997). Using 360-Degree
Feedback In Organizations.
An Annotated Bibliography. Greensboro, North Carolina:
Center For Creative leadership.
• Kaplan, R. E., and Palus, C. J., (1994). Enhancing 360-Degree
Feedback for Senior Executives. Greensboro, North Carolina:
Center for Creative Leadership.
• Lobdel, D., (1997). Selecting An Appropriate Performance
Appraisal Program For Spokane Valley Fire Department.
(Executive Development Applied Research Project).
Emmitsburg, MD: National Fire Academy.
• Rivera, R., (1996). Performance Appraisals A Change From
Single Source To Multi Source Evaluations. (Strategic
Management Of Change Applied Research Project).
Emmitsburg, MD: National Fire Academy.
• Simms, H. H., (1996). Subordinate Appraisal Of Supervisors
An Improvement In Appraisal Technique. (Strategic
Management Of Change Applied Research Project).
Emmitsburg, MD: National Fire Academy.
Appendix
Survey• As a student enrolled in The National Fire Academy’s Executive
Fire Officer Program, I am compiling data for an applied
research project pertaining to employee performance appraisals.
• A meeting was held earlier this year to discuss possible revisions
in our present employee forms.
• An employee evaluation review committee was selected to
develop an evaluation form that would produce a fair, accurate,
non opinionated evaluation of our employees based on objective
measures.
• The results of this survey will be documented in my research
project and will be forwarded to the Wilson Fire and Rescue
Service Employee Evaluation Review Committee.
• Please take the time to answer the questions on the attached
survey form.
EFOP RESEARCH PROJECT SURVEY
1. What is your current rank?
2. I am satisfied with our current evaluation form and
process?
Strongly agree Agree Disagree Strongly disagree
3. I would be willing to evaluate my superiors, peers and
subordinates.
Strongly agree Agree Disagree Strongly disagree
4. I would be willing to accept an evaluation from my peers
and subordinates.
Strongly agree Agree Disagree Strongly disagree
5. I think evaluations should be associated with pay raises.
Strongly agree Agree Disagree Strongly disagree
6. I think evaluations should be associated with promotions.
Strongly agree Agree Disagree Strongly disagree
7. Additional comments:
.....................................................................................................
.....................................................................................................
.....................................................................................................
.....................................................................................................
35360-Degree Feedback Performance Appraisal
*Director, KIPM- College of Management. Email-id: amiyyou@yahoo.com
**Head, Department of Management, KIPM- College of Management. Email-id: gpu_ags@rediffmail.com
INTRODUCTION
The microfinance is not a new concept in India, it started
way back in nineteenth century with the establishment of
cooperatives, but the modern form of microfinance emerge in
1970s with the innovation of self help groups, the shifts took
place from credits to savings, and it is also true that there is a
huge expansion in microfinance sector with large client base
and increasing innovative financial services for low income
groups in last forty years. It attracts the researchers to study the
impact of microfinance services on the low income people and
large number of studies has been conducted by individual
researchers as well as government departments like NCAER,
NABARD etc. and also by different organizations like IFMR,
Sa-dhan, ACCESS (State of sector Report) including many
international organizations. There is one common thing in each
report that each report reflects growing number of people, who
financially included in the microfinance services whether it is
through self help groups or through microfinance professional
institutions (NBFCs). NABARD annual report on microfinance
sector, which it is producing for last four years (the data given
by NABARD is considered most reliable data & used by
various researchers and organizations for the analysis of
microfinance sector), shows remarkable growth in the number
of self help groups and also in savings and credits by them.
However some controversies are also attached with the
microfinance institutions, inspite of these controversies, there
is no doubt in saying that microfinance provides the access to
financial services to the low income people which are unable to
approach it due to various reasons. The major issues of
discussion are- what impact microfinance made on the lives of
people involved. As the microfinance is considered a tool to
poverty reduction, is it really contributing in reducing the
poverty? What is the impact of microfinance on the living
standard of the people? Is it able to improve employment and
hence incomes of involved people? And in last but not the least,
does it contributes in the economy of the country?
1.1 Hypothesis of the study
The aim of the present paper is to find the impact of
microfinance on economic development by exploring the
linkages among financial system, microfinance and economic
Microfinance is provision of financial services provided to
low income, poor and very poor self employed people who do
not have access to traditional banking services. These financial
services included credits, savings, insurance, fund transfers
etc. Basically it is considered as poverty alleviation tool,
through which poor people are helped to raise their income.
In India, self help group bank linkage programme is the
largest microfinance programme in the world. NABARD is
the apex body which is facilitating and regulating the self help
group programme on behalf of government and reserve bank of
India. By analyzing the NABARD annual data, it is concluded
that microfinance leads to development of financial services
among the low income group and weaker sections of society.
Further, microfinance has a positive impact on the Economic
development of the country by smoothening the consumption
pattern and improving financial status of the low income
people.
Role of Microfinace in Developmentof Indian Economy Prof. (Dr.) Amit K. Srivastava*
Dr. Gyan Prakash Upadhyay**
development. We use following hypothesis to study the
linkage between microfinance and financial services and hence
leads to economic development. We want to explore the
influence of microfinance on macro environment.
Hypothesis 1: Microfinance leads to development of
financial services
Hypothesis 2: Microfinance has a positive impact on the
Economic development
The first hypothesis analyzes the statistical data of
microfinance sector, and figure out the expansion and outreach
of micro financial services to the low income and financially
excluded people. The second hypothesis explores the various
studies conducted in microfinance sector and observes the
impact of micro financial services in economic development i.e.
impact of microfinance on macro environment.
1.2 Statistical Evaluation of Microfinance
In India self help group model dominates the
microfinance sector. In true words, self help group bank
linkage programme is the largest microfinance programme in
the world. At the end of March 2010, about 60 million poor
households have been assisted under this programme. If we
compare the expanse of Microfinance institutions is quite small
as compared to SHGs, but it is getting pace with many
controversies. Self help group bank linkage programme (SBLP)
is found very helpful to low income groups to smoothening
their consumption, fighting with seasonal liquidity crisis,
establishing micro enterprises, raising savings and incomes.
The SBLP has developed extensively particularly in the
Southern and Western regions of India, where the socio-
economic conditions are more favorable for the growth of Self
Help Group culture. In the other regions of the Country,
particularly Northern, Eastern and North-Eastern regions,
there is vast unsatisfied demand for micro finance from the
financially excluded households. Let’s have a look on
numbers:
1.2.1Contribution of savings by Microfinance Sector
The data of savings by Self Help Groups Bank Linkage
programme with banks are made available by NABARD in the
year 2006 for the first time in the last fifteen years. The data
showing the number of total self help groups linked with banks
and their savings with the different banks with their respective
growth rates are represented in the Table 1.1. This data
includes the total savings of self help groups with Commercial
banks, Regional rural banks and Cooperative banks. As on 31st
March 2010, there are a total of 69,53,250 self help Groups are
linked with the different banks, which grew with the average of
18.73% in last four years from 2006-07 to 2009-10. The amount
of Savings grew from Rs 3512.7 Crore to Rs 6198.71 Crore in
four years with average growth rate of 22%.
The years 2007-08 and 2008-09 have shown remarkable
growth in numbers of self help groups (Table 1.1) linked with
the banks as that was the expansionary period for the sector.
More and more people joined the groups. Maximum number
of low income people linked with the banks through various
linkage programmes.
Table 1.1: Number of SHGs andAmount of Savings
Period Number
of SHG
%
Growth
in
Numbers
Amount
of
Savings(in
Rs Crore)
% Growth
in
Amount
Average
savings per
group
(in Rs)
2006-07 4160584 ------ 3512.70 ------- 8442.81
2007-08 5009794 20.41 3785.39 7.76 7555.98
2008-09
6121147
22.18
5545.62
46.50
9059.77
2009-10
6953250
13.59
6198.71
11.78
8914.84
(i)
01000000200000030000004000000500000060000007000000
Number of SHGs
Chart - 1.1
01000200030004000500060007000
Amounts of Savings (Rs Crore)
(ii)
37Role of Microfinace in Development of Indian Economy
0.00
20000.00
40000.00
60000.00
80000.00
100000.00
20
06
-07
20
07
-08
20
08
-09
20
09
-10
Amount of loan Disbursed per Group (in Rs)
As it is represented pictorially in chart-1.3, there is 11.04%
growth in number of self help groups while loan size increases
by 34.68%, and average loan per group grown by 21,30% from
the year 2006-07 to the year 2007-08. In the year 2008-09, there is
increase of 31.10% in number of self help groups who avail
loans with an increase of 38.47% of total loan disbursed from
previous year, but the average loan per group increased only
by 5.62%.
The average savings per group throughout the four years
is Rs 8493.35, where it increased from Rs 7555.98 to Rs 9059.77
in the year 2007-08 to the year 2008-09, there it showed a
decrease from Rs 9059.77 to Rs 8914.84 in the year 2009-10. This
decrease would be due to the proper utilization of savings for
internal lending. Chart 1.1(i) shows the numbers of self help
groups linked with the banks, chart 1.1 (ii) represents the
amount of savings and the chart 1.1(iii) shows the average
saving per group during the period of four years i.e. 2006-10.
The actual savings of the groups would be higher as banks
do not take into consideration the savings used for internal
lending within the groups.
1.2.2 Loan Disbursement to Self Help Groups
During the year 2009-10, a total of Rs 14453.30 crore is
disbursed to about 15.87 lakh self help groups by different
banks including commercial banks, regional rural banks and
cooperative banks account for an average disbursement of Rs
91,083 per group. (Table 1.2)
38
6500.007000.007500.008000.008500.009000.009500.00
Average Savings per Group (Rs)
(iii)
Table 1.2: Number of SHGsand Amount Disbursed
Number of SHGs
(Loan Disbursed
in Rs Crores)
Amount of loan
Disbursed (in Rs
Crore)
Amount of loan
Disbursed per Group
(in Rs)
% Growth
in no .of SHG
% Growth in
Amount Disbursed
% Growth in
Amount of loan
Disbursed per Group
2006-07 1105749 6570.50 59421.26 2007-08 1227770
8849.26
72075.88
11.04
34.68
21.30
2008-09 1609586
12253.51
76128.33
31.10
38.47
5.62
2009-10 1586822 14453.30 91083.31 -1.41 17.95 19.64
There are 16.09 lakh SHGs who have taken loan of Rs
12253.51 crore in the year 2008-09 and with an average of Rs
76128.33 per group. In the year 2007-08 loan was disbursed to
12.28 lakh SHGs as compared to 11.06 lakh SHGs in the year
2006-07. The amount disbursed in 2007-08 was Rs 8849.26
crore, while it was Rs 6570.50 in the year 2006-07. The average
loan disbursed per group in both years was Rs 72075.88 and Rs
59421.26 respectively. As it is clear from the chart 1.2 (i) that
there was more number of groups, to whom loan was
disbursed during the year 2008-09, but amount of loan
disbursed per SHG is lower than the year 2009-10 chart 1.2(iii).
The year 2009-10 receives highest loan amount disbursed to
each group.
0
500000
1000000
1500000
2000000
Number of SHGs (Loan Disbursed)
(i)
Chart - 1.2
(ii)
0.00
5000.00
10000.00
15000.00
Amount of loan Disbursed (in Rs Crore)
(iii)
SAMIKSHA - Volume II, No. 2, July-December 2011
Year 2009-10, showed a decrease in number of SHGs by
1.41%, but total loan disbursed and average loan per group
increased by 17.95% and 19.64% respectively. In the four years
time i.e. from 2006-10, there is total increase of 43.51% in
number of SHGs who have disbursed loan, while the total loan
amount disbursed in four years is increased by 120%. The
average loan per group is remarkably increased by 53.28%.
It is blamed that microfinance institutions are trying to
dominate the self help group bank linkage programme, and
use self help groups in making them into joint liability groups
and provide credits.
1.2.4 Amount of Loan Outstanding with Microfinance Sector
According to the NABARD report a total of 48.51 lakh self
help groups have loan outstanding with them in the year 2009-
10 which amounts to Rs 28038.28 crore (refer table 1.4) against
the 42.24 lakh SHGs with loan outstanding of Rs 22679.84 crore.
There are 36.26 lakh SHGs having loan outstanding of Rs
16999.91 crore in the year 2007-08 whereas there was a total of
28.94 SHGs with loan outstanding of Rs 12366.49 crore in the
year 2006-07. The loan outstanding per group is highest in the
year 2009-10 with Rs 57,794.73. As it is clear from the chart 1.6
(i) (ii), (iii) that over the four years there is remarkably increase
in number of Self help groups with loan outstanding, amount
of loan outstanding and more importantly amount of loan
outstanding per group. However, numbers of self help groups
are growing, but it is with declining rate (Chart 1.7) i.e from
25.27% growth in number of SHGs from the year 2006-07 to
2007-08, 16.50% growth in number of SHGs in the year 2008-09
from 2007-08 and 14.84% increase in number of SHGs in the
year 2009-10 from the year 2008-09.
39
Chart - 1.3
1.2.3 Total loan disbursement in Microfinance sector (Self Help Groups and Micro Finance Institutions)
Microfinance Institutions are also serving the low income
group with a different strategy, like self help group are saving
oriented while microfinance institutions are credit oriented.
These institutions form joint liability groups, which imparted
each other guarantee, and avail credit from the MFIs for their
needs. These MFIs get funding from the different banks to
serve the low income clients. Table 1.3 shows the Loan
disbursed to MFIs by different banks including commercial
banks, Rural Regional Banks and Cooperative Banks.
Table 1.3: Total disbursement of Loans
Loan Disbursed with SHGs (in
Rs Crore)
Loan Disbursed with MFIs (in Rs
Crore)
Total Loan Disbursed in Microfinance sector(in Rs
Crore)
% Growth in Amount Disbursed with SHGs
% Growth in Disbursed loans
with MFIs
% Growth in MicroFinance Sector loan Disbursed
2006-07 6570.50 1151.56 7722.06
2007-08 8849.26 1970.15 10819.41 34.68 71.09 40.11
2008-09 12253.51 3732.33 15985.84 38.47 89.44 47.75
2009-10 14453.30 8062.74 22516.04 17.95 116.02 40.85
Table 1.3, also represents in detail the total loan amount
provided to microfinance sectors by banks and percentage
growth in loan disbursement for the years 2006-10. The total
loan amount is increased by 191.58% in four years i.e. from 2006
to 2010.
Chart - 1.4
Although MFIs avail very less amount (Chart 1.4) from the
banks as compared to self help groups, but it is growing very
rapidly (chart 1.5) from 71.09% to 89.44% from the year 2006-07
to 2007-08 and again 89.44% to 116.02% in the year 2009-10.
Chart - 1.5
Role of Microfinace in Development of Indian Economy
Percentage growth in amount of loan outstanding is also
follow the declining pattern as from 37.47% growth in the year
2007-08, 33.41% growth in 2008-09 and 23.63% growth in 2009-
10. However, the growth in loan outstanding per SHG is
maximum in the year 2008-09 with 14.51% and lowest growth
percentage in the year 2009-10 with 7.65.
40
Table 1.5 represents the total loan outstanding amount
including the microfinance institutions for the four years time.
There is a total of loan outstanding of Rs 38185 crore with the
microfinance sector including MFIs in the year 2009-10, which
was Rs 27688.93 crore in the year 2008-09.
Number of SHGs (Loan Outstanding)
Amount of loan Outstanding (in Rs Crores)
Amount of Loan Outstanding per Group
(in Rs.)
% Growth in no.of SHG
% Growth in Amount Outstanding
% Growth in Amount of loan Outstanding
per Group
2006-07 2894505 12366.49 42724.02
2007-08 3625941 16999.91 46884.13 25.27 37.47 9.74
2008-09 4224338 22679.84 53688.51 16.50 33.41 14.51
2009-10 4851356 28038.28 57794.73 14.84 23.63 7.65
Table 1.4: Number of SHGs and Amount of Loan Outstandings
(i) (ii) (iii)
0
2000000
4000000
6000000
Number of SHGs (LoanOutstanding)
0
10000
20000
30000
Amount of loan Outstanding (in Rs Crores)
0.0020000.0040000.0060000.00
Amount of Loan Outstanding per Group (in
Rs.)
Chart - 1.6
0.00
10.00
20.00
30.00
40.00
2007-08 2008-09 2009-10
% Growth in no.of SHG
% Growth in Amount Outstanding
% Growth in Amount of loan Outstanding per Group
Chart - 1.7
Table 1.5: Loan Outstanding with SHGs and MFIs
Loan Outstanding with SHGs
(in Rs Crore)
Loan Outstanding
with MFIs (in Rs Crore)
% growth in outstanding loans with
MFIs
Total Loan Outstanding
in Microfinance
sector
% growth in MF loan
Outstanding
2006-07 12366.49 1584.48 13950.97
2007-08 16999.91 2748.84 73.49 19748.75 41.56
2008-09 22679.84 5009.09 82.23 27688.93 40.21
2009-10 28038.28 10147.54 102.58 38185.82 37.91
SAMIKSHA - Volume II, No. 2, July-December 2011
As it is clear from chart 1.8 that total loan outstanding
amount is very less as compared to SHGs but again it is also
clear from the chart 1.9 that it is increasing with a higher
percentage from year to year like 73.49% growth in the year
2007-08, 82.23% growth in the year 2008-09 and 102.58%
growth in 2009-10.
41
Chart 1.8
1.2.5Recovery Performance
In the year 2009-10, out of total 302 banks who reported
data for recoveries, 103 banks have reported recovery
performance more than 95%, which shows increase in the
recoveries from the year 2008-09. In the year 2008-09, 29.5%
banks reported recoveries more than 95% (table 1.6), but in the
year 2009-10, 34.1% banks has reported recovery more than
95%. 33.1% banks has reported the recovery of loans between
80 to 94% in the year 2009-10, whereas 38.2% banks has
reported recoveries in same range in the year 2008-09, which
shows a drop of 5.1% in recoveries.
Chart 1.9
Table 1.6: Recovery Performance
No. of Banks reported recovery data
Recovery Performance
=>95% 80-94% 50-79% <50%
2008-09 267 79 (29.5%) 102 (38.2%) 59 (22.1%) 27 (10.1%)
2009-10 302 103 (34.1%) 100(33.1%) 70 (23.2%) 29(9.6%)
70 out of 302 banks, which accounts for 23.2% of banks
reported in the year 2009-10 has recovery between the ranges
50-79%, which is slightly more than the year 2008-09 where
22.1% banks reported recovery between the range.10.1% and
9.6% banks have reported recoveries less than 50% for both the
years.
If we have a look upon non-performing assets (table 1.7) of
microfinance sector, it hovers around 2.9 percent with Rs
625.86 crores (data reported by 292 banks) in the year 2008-09
while 2.94% with Rs 823.04 crore (data reported by 221 banks)
in the year 2009-10
Role of Microfinace in Development of Indian Economy
Over a decade, the recovery performance of the
microfinance sector is nearly 98%, but now the recovery
performance is declining and the non-performing assets are
shown growth. The main reasons behind it are considered as
the microfinance institutions are growing and trying to
dominate self help groups. The people have approach to
multiple lending, which influenced the recoveries of self help
groups. The microfinance institutions (NBFCs) work as
corporate, so they provide more services to the clients, held
meetings periodically and also have a tight repayment
collection system, which is absent in the formal banks and self
help groups.
1.2.6 Overall Comparison
Table 1.8 represents the comparison of number of self help
groups under the three headings i.e. having saving accounts,
loan disbursed and loan outstanding.
42
The banks sanctions the loans on behalf of saving accounts
i.e. three to four times the amount of savings of the group, but
the chart 1.11 shows that amount of loan disbursed is only
about twice that of savings. But the loan outstanding is quite
high as compared to savings as well as amount disbursed, but it
is considered a normal situation as recoveries are quite good
and NPA shows normal behavior.
Table 1.10 gives a summary of the overall picture of the
microfinance sector, which we have discussed till now. The
figures written below show the percentage change over the
previous years in respective field.
It is clear from the chart that there is large number of
groups having savings accounts as comparative to the loan
disbursed and loan outstanding. However numbers of SHGs
with loan outstanding are more than loan disbursed, but again
it is quite less than having a saving account.
If we compare amount of savings with the amount of loan
disbursed and outstanding (presented in table 1.9), It is clear
from the chart 1.11 that amount of savings is just half than the
amount of loan disbursed.
Table 1.7: Non-performing Assets
No. of Banks
reported data on NPAs
Non-performing Assets
Outstanding Loans against
SHGs
Amount of NPAs
% of NPAs to Outstanding bank loans
2008-09 292 21561.04 625.86 2.9
2009-10 221 28038.28 823.04 2.94
Table 1.8
Number of SHGs having
Saving Accounts
Number of SHGs (Loan
Disbursed)
Number of SHGs (Loan
Outstanding)
2006-07 4160584 1105749 2894505
2007-08 5009794 1227770 3625941
2008-09 6121147 1609586 4224338
2009-10 6953250 1586822 4851356
Chart 1.10
Table 1.9: Amounts of Savings,Loan Disbursed & Loan Outstanding
Amounts of Savings
(Rs Crore)
Amount of loan Disbursed
(in Rs Crore)
Amount of loan
Outstanding (in Rs Crores)
2006-07 3512.70 6570.50 12366.49
2007-08 3785.39 8849.26 16999.91
2008-09 5545.62 12253.51 22679.84
2009-10 6198.71 14453.30 28038.28
Table 1.11
Overall it is concluded that the sector is included more and
more people year by year and provide financial services to low
income groups however there are different opinions of
researchers about the effect of it, but the one point at which all
are agree that the client base is increasing day by day, more and
more people which are financial excluded for long are getting
access to financial services through the microfinance sector.
If we talk about the total number of clients, it is much more
than these figures, because a large number of clients are served
by microfinance institutions. As per state of sector report 2008-
09, Microfinance institutions have a client base of 2.2 crore
households. So, in all microfinance sector serves a total of 80
million clients as per March 2010. Microfinance sector provides
different financial products according to the needs of poor
people. Microfinance sector serves those people with its
customized financial products, which the formal financial
institutions are unable to serve. As services provided by
microfinance sector indirectly come from formal financially
sector in the form of loans and savings, but with a different
strategy, finally it leads to the development of financial
services by included more and more people in the system. So,
in light of above data our first hypothesis comes to be true that
microfinance leads to development of financial services.
SAMIKSHA - Volume II, No. 2, July-December 2011
1.3 Contribution of Financial Services in Economical Development
The economists assume that development in financial
services in the country is among the one of the most important
factors of economic growth. The financial institutions mobilize
the savings and channel them to investment opportunities.
Financial system is something which is responsible for the
efficient distribution of resources among the society. To
channel the funds among society, a strong financial system is
needed, which can provide funds (society savings) to people
who have entrepreneur instinct with the security of funds. A
good financial system improves the allocation of resources
among the society. External funding to businesses and firms
helps the firms to grow and leads to financial development as it
creates assets as well as employment opportunity for the
society. Strong financial system leads to financial
development. Financial development lead to capital market
growth and banking sector growth as both sectors are
necessary for growth and are mutually reinforcing, providing
different functions to economy and each other. Financial
Development can contribute to increase per capita income by
easing the credit constraints to the people. Financial
development is related with economic growth, physical capital
accumulation and economic efficiency improvements.
The key role of the financial sector in economic growth is
introduced by Schumpeter (1911). He argued that the service
provision by financial intermediaries including savings
mobilization, risk management, projects evaluation,
monitoring the managers, and facilitating transactions are
necessary for technological improvement and economic
growth. Financial intermediaries need to be capable of efficient
allocation of resources facilitating in that way higher returns
and desirable risk transformation. The modern literature on
economic growth was actually started in mid 1950s when
Robert Solow (1956) presented his growth model. Some
leading economists like Goldsmith (1969), McKinnon (1973),
Levine (1993) emphasized that finance can be an essential
component for the growth of an economy. Levin (1993) argues
that a better developed financial system reduces transaction,
information and monitoring costs. It increases the efficiency of
resource allocation and in turn spurs the growth. A well
developed financial system promotes investment
opportunities to potential businesses, mobilizes savings,
enables trading, monitors the workings of managers, offers
hedging, and diversifies risk. An efficient financial system
offers improved financial decisions, supports the better
distribution of resources and thereby accelerates economic
growth. A strong financial sector needs to have deep rooted
domestic and international banking system as well as liquid
stock markets.
43
Table 1.10
Brief Snapshot of Microfinance Sector (Amount in Rs Crore)
2006-07 2007-08 2008-09 2009-10
No. of SHGs
Amount No. of SHGs Amount No. of SHGs
Amount No. of SHGs
Amount
Saving with
SHG
4160584 3512.71 5009794 20.4% 3785.39
7.8%
6121147
22.2%
5545.62
46.5%
6953250
13.6%
6198.71
11.6 %
Loan
disbursed
with SHGs
1105749 1411.02 1227770 11% 8849.26
34.7%
1609586
31.1%
12253.51
38.5%
1586822
12.5%
14453.3
17.9%
Loan
Outstanding
with SHGs
2894505 12366.49 3625941 25.3% 16999.91
37.5%
4224338
33.4%
22679.84
33.4%
4851356
(1.4%)
28038.28
23.6%
Loan
disbursed to
MFIS
334 1151.56 518 55.1% 1970.15
71.1%
581 12.2% 3732.33
89.4%
691
18.9%
8062.74
116%
Loan
Outstanding
with MFIs
550 1584.48 1109 101.6% 2748.84
73.5%
1915 72.7% 5009.09
82.2%
1513
(21%)
10147.54
102.6%
Role of Microfinace in Development of Indian Economy
1.4 Relation of Microfinance Services with Economic Development
As per the statistical analysis in section 1.2, it is clear that
microfinance services are including the low income people into
financial system by providing them distinct financial
instruments like small savings and loan accounts, associated
with micro insurance etc., however the total saving and loans
are very small as compared to the total saving and loan
disbursement of the country, but according to economic
growth theories, if a particular economy grows by 1% in a year,
then in 10 years time the income grows by 11%. So, even a
small increase in household incomes and consumptions can
make a difference. The micro financial services are making a
positive impact on the income as well as on the lives of people,
however, the figure reported by the studies is different but all
the studies reported improvements however small. The impact
of microfinance is multidimensional, the access to financial
instrument helping the poor people in one or another way. So,
if in the country where more than one-forth population is
below than poverty line, a small change can contribute in
raising the living standard of people. If employment and
income increases, it definitely contributes to economic
development. There is an another aspect that the growing
microfinance institutions also providing employment
opportunities to the thousands as employees as microfinance
institutions grow by 13 times in four years times i.e. from 2005
to 2009. However, it is very difficult to evaluate the exact
impact of microfinance in isolate situations as there are lot of
another efforts and programs of poverty alleviation are
initiated by the government and other agencies like world bank
etc. and also at the same time some another factors like skills,
knowledge of business & management of funds, liabilities,
individual drive and aspiration are important in raising
incomes. According to modern economic growth theories
innovation and technology enhancement play an important
role in economic development, but it is also true that in absence
of credit access many innovations would not be able to convert
into successful entrepreneurial ventures. Studies shows
microfinance gives access to financial instruments which is
essentially an important factor in success of any enterprises. So,
here our second hypothesis comes to be true that microfinance
has a positive impact on the Economic development.
44
1.5 Conclusion of the Paper
The economic growth is strongly related to efficiency of
financial intermediaries of the country. Microfinance
institutions are acting strong financial intermediaries with a
large client base and channelizing the financial resources
among the lower sector of the society and hence helping the
poor people to increase standard of living. They are also
helping in development of financial markets of country by
employing the funds into productive means. Figures shows
microfinance is growing in the country with a great pace
including the poor and low income people financially. It is
proving much influential in improving incomes and
smoothening the consumption of low income people by
providing them micro finance products like small saving
accounts, micro credits, micro insurance etc. this is a reliable
source rather than informal lending practices. In short, we can
conclude that microfinance is contributing to the growth of
poor sector economically, and with the time, it will help in
eradicate poverty from the country.
Refernces
• Goldsmith, R.W. (1969), Financial Structure and
Development, New Haven, CT:
• Impact study by SIDBI ‘Assessing Development Impact of
Micro Finance Programmes
• King, R. & Levine, R. 1993 Finance and growth:
Schumpeter might be right. The Quarterly Journal of
Economics, 108, 717-737
• Mckinnon, R. (1973) Money and Capital in Economic
Development, Brookings Institution Press
• NABARD Repot-Status of Microfinance in India-2008-09
• NABARD Repot-Status of Microfinance in India-2009-10
• N. Srinivasan, State of Sector Report 2009
• NCAER study on’ Impact and sustainability of self help
group bank linkage programme’ 2008
• Richard Rosenberg,’Does Microcredit Really Help Poor
People?’, 2010
• Schumpeter, J. 1934. The fundamental phenomenon of
economic development.
• Solow, R. 1956. A contribution to the theory of economic
growth. The Quarterly Journal of Economics, 70, 65-94.
SAMIKSHA - Volume II, No. 2, July-December 2011
*Associate Professor (OB & HR), Jaipuria Institute of Management, Noida. E-Mail: shalinisrivastava2@gmail.com
INTRODUCTION
Job satisfaction has been the subject of research at least
since the Hawthorne studies of the 1920s (Roethlisberger &
Dickson, 1939). Job satisfaction is defined as the "pleasurable or
positive emotional state resulting from the appraisal of one's
job or job experiences" (Locke, 1976 p. 1300). Churchill, Ford, &
Walker (1974 p. 225) define job satisfaction for salespeople as
"all characteristics of the job itself and the work environment
which salesmen find rewarding, fulfilling, and satisfying, or
frustrating and unsatisfying.”
An individual's attitude about his or her job should have
meaningful implications about how he or she does it. Many
human-relations era researchers sought to establish job
satisfaction as a driver of performance (e. g. McGregor, 1960).
Brayfield & Crockett (1955), however, cited conflicting
research results and questioned this view. Porter & Lawler
(1968) espoused the contrary view that performance leads to
job satisfaction. This has become the generally accepted view.
Even so, the strength of the relationship appears to be very
weak (Iaffaldo & Muchinsky, 1985).
Greater job satisfaction has also been generally related to
reduced intent to leave the organization (Brayfield & Crockett,
1955; Mowday, Koberg, & McArthur, 1984) and with reduced
rates of absenteeism (Porter & Steers, 1973). In addition, job
satisfaction has been shown to be strongly related to
organizational commitment (Porter, Steers, & Mowday, 1974)
and to organizational citizenship behaviors (Smith, Organ, &
Near, 1983; Organ, 1988).
Stress in the work place is increasingly a critical problem
for employees, employers and the society. Researchers who
study stress have demonstrated the direct and indirect costs of
stress. (Matteson & Ivancevich, 1987). There are many
variables which have been related to organizational stress.
Ivancevich and Matteson (1980) proposed a model of
organizational stress research that outlined the major
antecedents of work stress. They noted the importance of
individual differences as moderators of stress and detailed
possible outcomes of stress at work.
Purpose: Experts have over the years, attempted to
describe the work of all managers by a set of common behaviors
or roles. It was found during the course of reviewing the
literature that there is a paucity of survey research from
psychological point of view on the Private sector managers.
The major objective of the study was to find the moderating
effect of Locus of Control on the relationship between
Organisational role stress and Job satisfaction.
Methodology: The present study was done on a sample
of 250 managers belonging to Private Sector Organizations
Variables in the study were assessed using three validated
Instruments. Descriptive statistics, Pearson Product Moment
Correlation and Hierarchical regression analysis was used to
analyze the data.
Findings: It was found that Organisational Role stress
was negatively related to Job satisfaction and Internal Locus of
Control moderated the Stress and Job-Satisfaction
relationship.
Implications: The findings of this study can assist
administrators and policy makers to provide an attractive
working climate in order to decrease side effects and increase
productivity of managers. An Internally controlled manager
may develop coping strategies to reduce the Stress and thereby
increasing the job satisfaction level. The knowledge of the
relationships undertaken in the present study may be utilized,
by the organisations regarding the enhancement of
effectiveness at individual level in particular and
organizational level in general.
Key Words: Research Paper, Internal Locus of Control,
Organisational Role stress, Job satisfaction, Private sector
managers.
Stress-Job satisfaction Relationship: Impactof Personality Variable: An Empiricalstudy on Private Sector Managers Dr Shalini Srivastava*
Stress is associated with impaired individual functioning
in the workplace. A number of aspects of working life have
been linked to stress. Aspects of work itself can be stressful,
namely work overload (Defrank & Ivancevich, 1998; Sparks &
Cooper, 1999) and role-based factors such as lack of power, role
ambiguity, and role conflict (Burke, 1988; Nelson and Burke,
2000).In the past three decades, empirical researches on the
theme of stress have increased many folds. Researchers have
focused their attention on causal factors of stress, stress
manifestations, moderators of stress-strain relationship, and
types of stresses experienced by diverse work populations, and
various coping strategies adopted by organizational entities to
cope with stress (Pestonjee, 1992).
The large organizations, like other settings, exert its own
set of unique forces on the individual. Through the application
of these forces, the organization is able to channel the
individual’s behavior towards certain goals and to direct
his/her interactions towards certain people and away from
others.
Locus of control is a concept in Psychology, originally
developed by Julian Rotter in the 1950s. The two 'loci', as
established by the theory, are the internal and external loci. The
locus of control represents how a person's decision making
ability is influenced; essentially, those who make choices
primarily on their own are considered to have internal loci,
while those who make decisions based more on what others
desire are said to have external loci. People with external loci
are generally more apt to be stressed and suffer from
depression as they are more aware of work situations and life
strains. Women tend to have more of external locus than men.
(Jones and Page, 1986; Linder, 1986; Doherty and Baldwin,
1985; and Roodin et al. 1974). A more internal locus of control
is generally seen as desirable. Having an Internal locus of
control can also be referred to as "personal control", "self-
determination", etc. Males tend to be more internal than
females; as people get older they tend to become more internal;
People higher up in organizational structures tend to be more
internal. Internal locus of control appears to protect one against
unquestioning submission to authority (Lefcourt, 1982).
Internals are more resistant to influences from other people.
They make more independent judgments and try harder to
control the behavior of others. They tend to assume more
responsibility for their own behaviour and attribute
responsibility to others. As a result, they are more likely to be
punitive and less sympathetic than externals.
Organisational Role stress and Job satisfaction
Most of the research on organizational stress has focused
on its relationship with job satisfaction. Much of this research
has been correlational studies that have used role ambiguity
and role conflict to operationalize stress. These studies
generally indicate that job stress and satisfaction are inversely
related (e.g., Hollon Chesser, 1976; Miles, 1976; Miles & Petty,
1975). Because the relationships between role conflict and
ambiguity, and organizational outcomes have been meta-
analyzed (Fisher & Gitelson, 1983; Jackson & Schuler, 1985)
reviewed (Van Sell, Brief, & Schuler, 1981), and critiqued (King
& King, 1990) elsewhere, our analysis does not include these
previously examined areas. Instead we focus on newer
methods of data analysis and other operationalizations of job
stress and research completed since these meta-analyses.
In addition to these correlational studies, more
sophisticated techniques, such as Lisrel and path analysis, have
been used to examine the stress-satisfaction relationship. For
instance, Kemery, Mossholder, and Bedeian (1987) employed
Lisrel to test three models, (e.g., Beehr & Newman, 1978; Locke,
1976; Schuler, 1982) that postulate causal relationships among
role ambiguity, role conflict, and organizationally valued
outcomes such as job satisfaction, physical symptoms, and
turnover intentions. Using 370 employees, (e.g., faculty,
administrators, staff), from a large southeastern university,
Kemery and associates found that role conflict and ambiguity
exert a direct influence on job satisfaction and physical
symptoms, which in turn influence turnover intentions.
Similar findings of the indirect effect of stress on turnover
intentions through job satisfaction have been reported by
Hendtix, Ovalle, and Troxier (1985) and Kemery, Bedian,
Mossholder, and Touliatos (1985). Hendrix and associates used
a stress assessment package developed by them to measure
organizational stress, job satisfaction and turnover intentions
of employees working for the Department of Defense (n=341)
and a civilian hospital (n=29). They did not find a direct,
significant relationship between organizational stress and
turnover intentions. However, results of a path analysis
indicated that job satisfaction was affected by factors such as
involvement in decision making, skill variety, and whether
work was subject to the whims of supervisors. In turn, job
satisfaction was strongly linked to the intention to quit.
Kemery and associate (1985) used three samples of
accountants, (public n=275, government n=254, industrial
n=459), and a sample of hospital employees (n=66) derived
from Jackson's 1983 study, to replicate the Bedeian and
Armenakis (1981) model of the relationship between role
ambiguity and conflict, as well as job tension, satisfaction, and
intention to leave. Using Lisrel, they found that data from these
three samples of accountants supported the Bedeian and
Armenakis model(1). Stress exerted an indirect influence on
turnover intentions through job satisfaction. However, unlike
the results of Kemery et al. (1985) and Hendrix et al. (1985),
stress also exerted a direct influence not only on job-related
tension and job satisfaction, but on the propensity to leave the
organization. The diversity of job types, (e.g., university,
defense department, hospital employees), as well as the
differences in experienced stress levels and in the measures
employed could explain these conflicting findings.
Relative effects of different sources of stress on job
satisfaction have also been analyzed. Drory and Shamir (1981)
examined the effects of intraorganizational factors, (e.g., role
confl ict , role ambiguity, management support) ,
extraorganizational factors, (e.g., community support, family-
role conflict), and task characteristics on the job satisfaction and
burnout of 266 Israeli prison guards. They found that
extraorganizational factors, especially community support,
made the greatest contribution to explained variance (12%) in
job satisfaction. Task characteristics accounted for 4.35% and
46 SAMIKSHA - Volume II, No. 2, July-December 2011
Rahim (1996) concluded that a person with high internal LOC
believes that they can cope with stress functionally and more
effectively than someone with high external LOC. Other
researchers have suggested that LOC is a significant predictor
of job satisfaction and job performance (Judge, Erez, Bono, &
Thoresen, 2003). As one might expect, people with internal
LOC report higher levels of job satisfaction(Martin, Thomas,
Charles, Epitropaki & Mcnamara, 2005).
Method
Participants in the study consisted of Managers attached
to thirty randomly selected private sector organizations
located in NCR and Delhi region. The data was collected day
administering questionnaires mainly during office hours, with
the consent of relevant representatives of the employer as well
as the respondents. The participants were chosen randomly
from each organization and belonged to different departments
of the organization. Most of the participants showed their
willingness to participate in the study after a short meeting.
Measures
Design: The study employed descriptive survey research
design using the ex-post facto type. In this kind of study, no
manipulation is involved. It is an after fact study.
Participants: Participants in the study consisted of
Managers attached to thirty randomly selected private sector
organizations located in NCR and Delhi region. The data was
collected day administering questionnaires mainly during
office hours, with the consent of relevant representatives of the
employer as well as the respondents. The participants were
chosen randomly from each organization and belonged to
different departments of the organization. Most of the
participants showed their willingness to participate in the
study after a short meeting.
Questionnaire measures were used to obtain data on three
variables included in the study: Job Satisfaction,
Organisational Role Stress and Locus of Control. Job
Satisfaction was conceptualized as dependent variable
whereas, Organisational Role Stress and Locus of Control as
Independent variables. Self-report measures were used to
obtain the data. Job Satisfaction was measured through a
questionnaire adapted from Spector (1983), which consisted of
36 items. Organisational Role stress was measured through a
questionnaire developed by Udai Pareek, (1981) consisting of
50 items. Locus of Control was measured through a
questionnaire developed by Udai Pareek consisting of 30
items.
The measures used in this study were borrowed from their
original source and adapted from Indian work setting.
Instrumentation
Organisational Role Stress (ORS): This scale was
developed by Udai Pareek (1983). The ORS scale is used to
measure 10 role stresses. It is a 5-point scale (0 to 4), containing
organizational variables accounted for 3.4% of the explained
variance. These results suggest that extraorganizational types
of stresses are as important as intraorganizational sources in
determining an individual's levels of job satisfaction in Israel.
These results also emphasize the impact of the non-work
factors on work outcomes in the Israeli context. However, in
explaining job burnout, intraorganizational factors accounted
for 9% and extraorganizational factors accounted for 5% of the
variance. Task characteristics did not add significantly to the
net explained variance in job burnout. Although both intra-
and extraorganizational factors made unique contributions to
the explained variance in burnout, internal factors accounted
for a greater proportion. These results seem to suggest that
though management support may be an important factor in
preventing burnout, it is probably of lesser importance in
preventing job dissatisfaction.
Low job satisfaction can be an important indicator of the
counterproductive employee behavior and can result in
behavior such as absenteeism (Spector, 1982; Martin & Miller,
1986) and turnover intentions (Spector, 1982; Dupre & Day,
2007). Perceived satisfaction on the job is reflected by the needs
of fulfillment and expectation for the job to be interesting,
challenging and personally satisfying (Smither, 1994). Job
satisfaction is also an achievement indicator in career
development tasks (Sidek, 2002) and is associated with the
psychological (Limbert, 2004) and individual well-being
(Nassab, 2008).
Locus of Control and Organizational Role stress
Judge et al. (1999) in their study hypothesized that
managerial responses to organizational change are influenced
by seven dispositional traits (locus of control, generalized self-
efficacy, self-esteem, positive affectivity, openness to
experience, tolerance for ambiguity, and risk aversion). In their
study, the seven traits were reduced to two factors: positive
self-concept and risk tolerance. Both of these trait factors
significantly predicted the self-reports and independent
assessments of coping with change.
Many studies have been conducted on this concept and its
relationship to such concepts as job stress, job satisfaction and
organizational commitment. (Martin, Thomas, Crosby,
Epitropaki & Mcnarmara, 2005). Specifically several studies
have identified the interaction between locus of control and job
stress (Rahim, 1966; Daniels & Guppy, 1994), job satisfaction,
and job performance (Judge, Erez, Bono & Thoresesn, 2003). As
an aspect of personality, LOC measures an individual
expectancies for internal vs. external control of reinforcement
(Rotter, 1966). Specifically, it refers “to the extent to which
people believe they or external factors such as chance and
powerful others are in control of the events that influences their
lives” (Firth, Mellor, Moore & Loquet, 2004). Individuals with a
low LOC score have an internal LOC (internals) and their own
behavior, capacities, or attributes determine the rewards that
they obtain. Individuals with a high LOC score have an
external LOC (externals)and believe that receiving rewards in
life are generally outside of their control (Rotter, 1966). In the
research of the behavior of entrepreneurs and managers,
47Stress-Job satisfaction Relationship: Impact of Personality Variable: An Empirical study on Private Sector Managers
five items for each role stress and a total of 50 statements. The
scale is reported to have satisfactory reliability as well as
validity Udai Pareek (1983). The ten role stressors are as
follows:
Inter-role distance (IRD)
Role Stagnation (RS)
Role expectation conflict (REC)
Role erosion (RE)
Role overload (RO)
Role isolation (RI)
Personal Inadequacy (PI)
Self-role distance (SRD)
Role ambiguity (RA)
Resource Inadequacy (RIn)
Of ten dimensions, only six factors were found to be
significant for this study. These were: Self-role distance
(á=.84), Resource Inadequacy (á=.71), Role ambiguity (á=.82),
Role expectation conflict (á=.83), Role erosion (á=.78) and
Personal Inadequacy (á=.76)
Job Satisfaction survey (JSS): The Scale was developed by
Paul E.Spector (1985). It is a 36 item, nine facet scale to assess
employee attitudes about the job and aspects of the job. A
summated rating scale format is used, with six choices per item
ranging from “strongly disagree” to “strongly agree”. The JSS
Scale had a Cronbach alpha of .80 and good concurrent and
predictive validity and reliability. Nine broad facets of JSS
were covered by this measurement, they were as follows: Pay,
Promotion, Supervision, Fringe benefits, Contingent Rewards,
Operation Procedures, Coworkers, Nature of work,
Communication.
Locus of Control Inventory (LOCO): This scale was
developed by Udai Pareek (1992). The LOCO inventory has 10
items each for internality, externality (others), and externality
(luck). A 5-point scale is used in scoring responses. The scale
has high reliability and validity. The three dimensions of Locus
of control are:
Internal (I)
External (E-O)
External (E-C)
Out of three dimensions only one dimension viz., Internal
locus of control was found to be significant (á=.84)
Hypotheses
H1: Organisational Role Stress is significantly and
negatively related to Job Satisfaction
H2: Internal Locus of moderates the effect of
Organisational Role Stress on Job Satisfaction.
Methods of Analysis
The hypotheses were tested using a three-step hierarchical
regression (Cohen & Cohen, 1975) where the model variables
As seen from Table 1, the instruments used in this study
were reliable, with coefficients ranging from 0.71 to 0.84 .
48
(Organisational Role Stress) were entered in the first step.
Internal Locus of Control was added in the equation in the
Second step. In the final step, the interaction term was added
into the regression equation. The change in the F-value and the
significance of the individual parameter was observed. If
interaction term was found to be significant, Internal Locus of
control is said to moderate the relationship between
Organisational Role stress and Job satisfaction.
Results
Out of 270 questionnaires, 250 usable responses were
obtained from Private Sector Organizations comprising of
BPO, Banks and IT Sectors. The response rate obtained was
88%.The organizations within the private sector were located
in Delhi and NCR. The sample profile is shown in Table 1.
Variables Factors No. of items
Cronbach’s á
Organisational
Role stress
Self-role distance 5 .84
Resource Inadequacy
5 .71
Role ambiguity 5 .82
Role expectation conflict
5 .83
Role erosion 5 .78
Personal Inadequacy
5 .76
Locus of Control
Internal 10 .84
Job Satisfaction 36 .80
Table 1: Reliability Coefficients of the Instruments
Table 2: Means, Standard Deviations, Reliabilities,and Correlations Among the Variables (N=250)
Variable1. SRD2. RIn3. RA4. REC5. RE6. PI7. ILOC8. JS
Mean2.262.323.562.542.542.224.6356.24
SD0.630.710.790.780.760.521.2416.24
1.84.36**.27*.46**.67**.55**.37*-.42**
2
.71
.66**
.45**
.75
.64**
.66**
.33**
3
.94
.76**
.67**
.46**
.47**-.36**
4
.89
.65**
.35*
.66**-.49**
5
.92
.55**
.66**-.55**
6
.76
.45**-.32**
7
.84-.54**
8
.97
Note: ** p < 0.01; * p < 0.05
Coefficient alphas are reported as diagonals. Self-role
distance, RIn=Resource Inadequacy, RA=Role ambiguity
,REC=Role Expectation conflict RE=Role Erosion, PI=Personal
inadequacy, ILOC-Internal Locus of Control, JS=Job
Satisfaction
SAMIKSHA - Volume II, No. 2, July-December 2011
Independent Variables Std Beta (Model 1)
Std Beta (Model 2)
Std Beta (Model 3)
Model Variables
Self-role distance
-.34*
-.58**
Resource Inadequacy
-.37*
-.67**
Role ambiguity
-.56**
-.93*
Role expectation conflict
-.84**
-1.12**
Role erosion
-.78**
-.96*
Personal Inadequacy
-.96**
.1.38**
Moderating Variable
Internal locus of control 3.42** 3.96**
Interaction
Self-role distance× Internal locus of control
.76**
Resource Inadequacy× Internal locus of control
.48**
Role ambiguity× Internal
locus of control
1.132**
Role expectation conflict×
Internal locus of control
1.224**
Role erosion×
Internal locus of control
1.282*
Resource Inadequacy× Internal locus of control
1.164*
R²
0.262
0.568
0.984
Adj. R²
0.238
0.556
0.964
R² Change
0..262
0.306
0.416
Sig. F Change 0.000 0.000 0.000
As shown in Table 3, when the six Organizational stress
variables were entered into the regression analysis in the first
step, the coefficient of determination (R2) was found to be 0.262
indicating that 26.2% of Job Satisfaction is explained by the
Independent variable (ORS) variables. In step 2, to test whether
internal locus of control serves as an independent variable, a
second regression was undertaken. By adding Internal Locus
of control as independent variables, the R2 increased to 56.8%.
This R2 change (0.306) is significant. This implies that the
additional 30.6% of the variation in Job satisfaction is explained
by Internal Locus of control. The F-statistics is significant (p =
0.000) suggesting that the proposed model was adequate. As
can be seen from Table 2, internal locus of control had a positive
relationship with Job satisfaction.
From the first regression model, it can be observed that
Self role distance and resource Inadequacy had a significant
and negative relationship with Job satisfaction at 0.05 level.
Additionally, Role erosion, Personal Inadequacy, role
expectation conflict and Role Ambiguity had a significant
effect on managerial at the 0.01 level. These results provided
full support for the first hypothesis of the study.
To examine the moderating effects of Internal locus of
control, a third regression model was developed by adding the
interaction terms. As shown in Table 3, the R2 increase of 41.6%
is significant. This means that Internal locus of control did
49
serve as a moderator in seeing the effect of organizational role
stress variables on Job Satisfaction. Thus, our second
hypothesis is also proved.
Discussion
It is quite natural that Individuals who perceive stress are
bound to be less satisfied with their jobs. With support from
previous studies (Hollingsworth et. al. 1988; Keller, 1975), the
findings of the present study reveal the same. Managers with
lower job satisfaction were found to experience more stress in
the form of role ambiguity, role expectation conflict, personal
Inadequacy, Resource Inadequacy and role erosion, compared
to those with higher job satisfaction.
The second hypothesis that Internal locus of control
moderates the effect of organizational role stress on Job
Satisfaction is also proved by our results. In other words, when
Internal locus of control acted as a moderator, the impact that
stress had on Job Satisfaction was reduced to some extent.
Manager, who has internal locus of control, will perceive role
stress in a healthy way and try to understand and solve the
conflicting expectations of others in a mature manner. Same
goes for personal inadequacy. If a manager realizes that he is
inadequate, he will try to overcome it and will be more
effective. Recent theory suggests that individual performance
at work is influenced not only by individual effort and ability,
but also by situational constraints. Focusing upon job resources
inadequacy as a specific situational constraint, it was argued
that job resources inadequacy not only mediates the link
between individual effort and ability (on the one hand) and
individual performance (on the other), but also has a more
direct impact on both effort and ability. (Bacharach &
Bamberger’ 2002). This is supported by the study on the
behavior of entrepreneurs and managers, where Rahim (1996)
concluded that a person with high internal LOC believes that
they can cope with stress functionally and more effectively
than someone with high external LOC. Kalbers and Fogarty
(2005) found that individuals with an internal LOC people are
less likely to experience a high level of stress but external LOC
people are to be more vulnerable to stress and are more likely to
perceive certain events as stressful.
Others researchers have suggested that LOC is a
significant predictor of job satisfaction and job performance
(Judge, Erez, Bono, & Thoresen, 2003). As one might expect,
people with internal LOC reports higher levels of job
satisfaction (Martin, Thomas, Charles, Epitropaki &
Mcnamara, 2005).
Singh and Rhoads (1991) found that those with an internal
locus of control experience less role ambiguity, since they tend
to be better informed about their role and task environment.
Similarly, Von Emster & Harrison (1998) argued that
“Internals” have a great sense of control over situations and
experience less role ambiguity as a result.
Conclusion
It can be concluded from the above study that locus of
Table 3: Hierarchical Regression Results
Note: ** p < 0.01; * p < 0.05
Stress-Job satisfaction Relationship: Impact of Personality Variable: An Empirical study on Private Sector Managers
control, which represents an important personality dimension,
is associated with Job Satisfaction. As predicted, internally
controlled managers have been found to be higher on Job
Satisfaction. In order to be effective as managers, it is very
much essential that managers should try to reduce the stress
faced due to organizational variables. The findings of this
study are indeed significant for HR practitioners. The results of
this study also indicate that it is possible to identify the
potentials of existing employees for higher level managerial
jobs based on their locus of control beliefs and accordingly
develop career plans for them. The findings of this study can
assist administrators and policy makers to provide an
attractive working climate in order to decrease side effects and
increase productivity of managers. By better understanding
the current situation, managers may develop coping strategies
to reduce role related stress. There should be more social and
organisational support as well as better resources and
opportunity to extend collaborative relationship among
managers, and to develop appropriate coping strategies and
eventually other forms of possible interventions considered
suitable. The knowledge of the relationships undertaken in the
present study may be utilized, by the organisations regarding
the enhancement of effectiveness at individual level.
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Stress-Job satisfaction Relationship: Impact of Personality Variable: An Empirical study on Private Sector Managers
*assistant Professor, Dept. of Management Studies, Tjps College (P.G Courses), Guntur.
INTRODUCTION
Each one of us need finance at various stages of our life and
to ensure that we have the money available at the right time
and when needed, financial needs of an individual, translating
the needs into monetarily measurable goals at different times
in the future and planning the financial investments that will
allow the financial needs and achieve his life's goals. With the
emergence of capital markets at the centre stage of the Indian
financial system from its marginal role a decade earlier, the
Indian capital market also witnessed during the same period a
significant constitutional development in the form of a
diversified structure of Mutual funds. The large amounts of
money collected by mutual funds from 2004 onwards indicates
that they have emerged as an important savings vehicle of
investors and with their war chests of money they also became
significant institutional investors in the capital market. The
accelerated growth of mutual funds highlights a need for a
study on the performance of Tax saving Mutual fund schemes
in India.
Research Objectives
1. To evaluate the performance of Tax saving Mutual fund
schemes in India.
2. To compare the performance of Tax saving Mutual fund
schemes using different measures like Sharpe, Treynor
and Jensen.
Data
The data used for analysis is mainly the secondary data.
Data on mutual funds is drawn from the respective web-sites.
The sample is restricted to 19 tax saving funds whose data is
available on a daily basis for the sample period. The schemes
considered in the study are only those with the growth option
as this will not warrant any dividend adjustments to the
published NAV data. The sample period spans over the 2003-
2007.
Methodology & Analysis
1,3,5 yrs absolute returns were calculated for all the 19
The objective of this paper is to evaluate the
performance of Indian Mutual fund tax saving schemes
during the period 2003-2007. 1,3,&5 absolute returns
were calculated. Since the absolute returns does not
account for overall market movements during the period
we have calculated Excess returns for 1,3,&5 years. To
evaluate the performance of tax saving mutual fund
schemes various Performance measures like Sharpe
ratio, Treynor ratio and Jensen measure are used.
Performance Evaluation of Mutual Funds onTax Saving Schemes In India S. Durga*
schemes. 1,3,5 yrs Excess returns were also calculated as
absolute returns doesn't account for overall market
movements.we then used have used Sharpe's, Treynor's and
Jensen's measures which takes into account not only the
market performance but also the riskiness of the scheme.
We started the performance evaluation by looking at raw
returns which is defined as under, Where
Rt = Daily return of a mutual fund in the period t
NAVt = Daily net asset value per unit of the mutual fund in
the period t
Since the sample is restricted only to growth oriented
schemes there is no intermediate income and hence no
adjustments for dividends are required. Return alone should
not be considered as the basis of measurement of the
performance of a mutual fund scheme, it should also include
the risk taken by the fund manager because different funds will
have different levels of risk attached to them. Risk associated
with a fund, in a general, can be defined as variability or
fluctuations in the returns generated by it. The higher the
fluctuations in the returns of a fund during a given period,
higher will be the risk associated with it. These fluctuations in
the returns generated by a fund are resultant of two guiding
forces. First, general market fluctuations, which affect all the
securities, present in the market, called market risk or
systematic risk and second, fluctuations due to specific
securities present in the portfolio of the fund, called
unsystematic risk.
The total risk of the mutual funds under consideration is
measured by the standard deviation of the daily returns which
was calculated as follows: Where,
S = Standard deviation (total risk) of the mutual fund
n = Number of daily returns
Rt = Daily returns of the mutual fund
= Mean return of the mutual fund
Systematic risk, on the other hand, is measured in terms of
Beta, which represents fluctuations in the NAV of the fund vis-
à-vis market. The more responsive the NAV of a mutual fund is
to the changes in the market; higher will be its beta. Beta is
calculated by relating the returns on a mutual fund with the
returns in the market.
Empirical Results
1. For 1yr, 3yr and 5yr return analysis, we had considered all
those schemes that had a track record of at least one year in
existence. Consequently we were left with the following
schemes. Their names and their returns were presented in
the following Table:
Calculation of Excess Returns
Since the absolute return does not account for over all
market movements during the period under consideration we
also computed the excess returns defined as under:
ER = SR – MR ,
Where ER = Excess Returns , SR = Scheme Returns, MR =
Market Returns
Calculation of 1-year Excess Returns
The following Table presents the Excess Returns Statistics:
Fund Name 1-YearReturn (%)
3-YearReturn (%)
5-YearReturn (%)
Birla Equity Plan
40.17
50.5
59.26
Birla Sun Life Tax Relief '96
52.53
47.42
50.07
BoB ELSS '96
39.05
35.7
42.97
Canara Robeco Equity Tax Saver
56.5
49.64
43.97
Escorts Tax Plan
45.71
44.66
45.69
Franklin India Index Tax
43.77 43.97 40.46
Franklin India
Taxshield 37.67 45.12 49.51
HDFC LT Advantage
24.53 40.56 53.96
HDFC Taxsaver 31.26 55.03 59.49 ICICI Prudential Tax Plan
12.9 44.68 54.3
LICMF Tax Plan 29.81 29.38 35.91 Magnum Taxgain 48.12 69.01 69.67 Principal Personal Tax Saver
61.48 47.04 46.89
Principal Tax Savings
51.48
51.55
52.64
Sahara Tax Gain
34.95
41.99
44.27
Sundaram BNP Paribas Taxsaver
50.13
53.99
55.1
Tata Tax Saving
34.27
39.87
49.07 Taurus Libra
Taxshield
42.69
33.38
37.05
UTI Equity Tax Savings
35.9
39.55
42.8
Table 1
Table 2
Fund Name
1-Year Excess returns over
Sensex BSE 100 Nifty
Birla Equity Plan 0.2 -2.72 -4.04
Birla Sun Life Tax Relief '96 12.56 9.64 8.32
BoB ELSS '96 -0.92 -3.84 -5.16
Canara Robeco Equity Tax Saver
16.53 13.61 12.29
Escorts Tax Plan 5.74 2.82 1.5
Franklin India Index Tax 3.8 0.88 -0.44
Franklin India Taxshield -2.3 -5.22 -6.54
HDFC LT Advantage -15.44 -18.36 -19.68
HDFC Taxsaver -8.71 -11.63 -12.95
ICICI Prudential Tax Plan -27.07 -29.99 -31.31
53Performance Evaluation of Mutual Funds on Tax Saving Schemes In India
Computation of Sharpe’s, Treynor’s and Jensen’s
For computing Sharpe’s ratio we had taken one year – T
Bill yield as the proxy or rate and ignored those schemes with
out one year of existence accordingly we are left with only
twenty schemes. Calculation of 3-year Excess Returns
The following Table presents the Excess Returns Statistics:
54
LICMF Tax Plan -10.16 -13.08 -14.4 Magnum Taxgain 8.15 5.23 3.91 Principal Personal Tax Saver
21.51 18.59 17.27
Principal Tax Savings 11.51 8.59 7.27 Sahara Tax Gain -5.02 -7.94 -9.26 Sundaram BNP Paribas Taxsaver
10.16 7.24 5.92
Tata Tax Saving -5.7 -8.62 -9.94 Taurus Libra Taxshield 2.72 -0.2 -1.52 UTI Equity Tax Savings
-4.07
-6.99
-8.31
Table 3
Fund Name 3-Year Excess returns over
Sensex BSE 100 Nifty
Birla Sun Life Tax Relief '96 0.54 2.09 3.26
BoB ELSS '96 -11.18 -9.63 -8.46
Canara Robeco Equity Tax Saver
2.76 4.31 5.48
Escorts Tax Plan -2.22 -0.67 0.5
Franklin India Index Tax -2.91 -1.36 -0.19
Franklin India Taxshield -1.76 -0.21 0.96
HDFC LT Advantage -6.32 -4.77 -3.6
HDFC Taxsaver 8.15 9.7 10.87
ICICI Prudential Tax Plan -2.2 -0.65 0.52
LICMF Tax Plan -17.5 -15.95 -14.78 Magnum Taxgain 22.13 23.68 24.85 Principal Personal Tax Saver 0.16 1.71 2.88 Principal Tax Savings 4.67 6.22 7.39 Sahara Tax Gain -4.89 -3.34 -2.17 Sundaram BNP Paribas Taxsaver
7.11 8.66 9.83
Tata Tax Saving -7.01 -5.46 -4.29 Taurus Libra Taxshield -13.5 -11.95 -10.78 UTI Equity Tax Savings -7.33 -5.78 -4.61
Calculation of 5-year Excess Returns
The following Table presents the Excess Returns Statistics:
Table 4
Fund Name 5 -Year Excess returns over
Sensex BSE 100 Nifty
Birla Sun Life Tax Relief '96 7.07 5.83 8.57
BoB ELSS '96 -0.03 -1.27 1.47
Canara Robeco Equity Tax Saver
0.97 -0.27 2.47
Escorts Tax Plan 2.69 1.45 4.19
Franklin India Index Tax -2.54 -3.78 -1.04
Franklin India Taxshield 6.51 5.27 8.01
HDFC LT Advantage 10.96 9.72 12.46
HDFC Taxsaver 16.49 15.25 17.99
ICICI Prudential Tax Plan 11.3 10.06 12.8 LICMF Tax Plan -7.09 -8.33 -5.59 Magnum Taxgain 26.67 25.43 28.17 Principal Personal Tax Saver 3.89 2.65 5.39 Principal Tax Savings 9.64 8.4 11.14
Sahara Tax Gain 1.27 0.03 2.77 Sundaram BNP Paribas Taxsaver
12.1 10.86 13.6
Tata Tax Saving 6.07 4.83 7.57 Taurus Libra Taxshield -5.95 -7.19 -4.45 UTI Equity Tax Savings -0.2 -1.44 1.3
Table 5
Fund Name Sharpe Ratio
Treynor's Ratio
Jensen's Excess
return ( )
Birla Equity Plan
1.78
0.441
9.38
Birla Sun Life Tax Relief '96
1.58
0.381
4.73
BoB ELSS '96
1.25
0.284
-4.25
Canara Robeco Equity Tax Saver
1.58
0.430
8.69
Escorts Tax Plan
1.67
0.411
6.96
Franklin India Index Tax 1.65 0.340 1.17
Franklin India Taxshield 1.63 0.369 3.67
HDFC LT Advantage 1.71 0.446 8.19
HDFC Taxsaver 1.87 0.454 11.22
ICICI Prudential Tax Plan 1.42 0.386 5.32 ING Tax Savings 1.57 0.420 7.93 LICMF Tax Plan 1.1 0.248 -7.27 Magnum Taxgain 2.51 0.687 26.52 Principal Personal Tax Saver
1.59 0.413 7.42
Principal Tax Savings
1.73
0.422
8.53
Sahara Tax Gain
1.55
0.375
3.73 Sundaram BNP Paribas
Taxsaver
1.7
0.417
8.41
Tata Tax Saving
1.41
0.361
2.37 Taurus Libra Taxshield
0.98
0.290
-4.31
UTI Equity Tax Savings 1.46 0.341 1.16
Findings of The Study
1. The sample used to evaluate the performance of Mutual
Funds is confirmed to Tax saving funds with the growth
option over the period 2003-07.
2. To evaluate the portfolio’s performance we used the
important and widely measures like the Treynor’s,
Sharpe, Jensen
3. On the absolute return bases it was inferred that ICICI
prudential tax saving scheme returned the minimum with
12.9% and Principal Tax saver returned a Maximum of
61.48% which is the Max return from the tax saving
schemes.
4. Since the absolute return does not account for over all
market movement excess returns have been computed for
1year, 3year, 5years.
5. For 1year excess returns ICICI Prudential’s tax saving
scheme turned out to be least performer with a negastive
excess returns of 31.31% & Principal Tax saver was the best
performer with excess returns of 17.27%.
SAMIKSHA - Volume II, No. 2, July-December 2011
6. The 3 year excess returns against magnum tax gain turned
out to be the best performer with 24.85% while the LIC MF
tax plan turned out to be the least performed with a
negative excess return of 14.78%.
7. The Sharpe’s ratio is minimum for Taurus Libra fund at
0.98 and is maximum for SBI’s Magnum Tax gain at 2.51.
From Sharpe’s ratio we can infer that excess returns per
unit risk of the scheme are minimum for Taurus and
maximum for Magnum tax gain.
8. In order to evaluate the fund performance in the light of
the overall market performance along with the risk
associated with the scheme, we used Sharpe’s, Treynor’s
and Jenson’s measure.
9. The Sharpe’s ratio is minimum for Taurus Libra fund at
0.98 and is maximum for SBI’s magnum tax gain at 2.5%
10. Treynor’s ratio is maximum for SBI’s magnum tax gain
with a Treynor’s measure of 0.68 while LIC mutual fund is
the worst performer with a Treynor’s measure of 0.25.
11. Jenson’s measure of differential return is used and the
LICMF tax plan was the worst performer with a negative
return of 7.27% and the best performer was again SBI’s
magnum tax gain scheme with 26.52%.
Conclusion
In recent decades, mutual funds have been the fastest
growing type of financial intermediary. The global mutual
fund industry held assets of $17.8 trillion in 2005 almost
doubling those managed in 1998 ($9.6 trillion). Although the
growth of the mutual fund industry started in the U.S., where
the mutual fund industry plays an extremely important role in
the economy, the trend has spread more recently to a
significant number of countries around the world. The
accelerated growth of mutual funds highlights a need for a
study on the performance of Mutual Funds.
The present study has focused on the performance
analysis of the tax saving schemes as these schemes were
becoming an important vehicle for the small savers hence it is
imperative to see how these funds are faring. The sample
period spans over the 2003-2007.
The asset base will continue to grow at an annual rate of
about 30 to 35% over the next few years as investors shift their
assets from banks and other traditional avenues. Some of the
older public and private sector players will either close shop or
be taken over. Out of ten public sector players five will sell out,
close down or merge with stronger players in three to four
years. In the private sector this trend has already started with
two merges and one takeover. Here too some of them will
down their shutters in the near future to come. But this does not
mean there is no room for other players. The market will
witness a flurry of new players entering the arena. There will be
a large number of offers from various asset management
companies in the time to come. Some big names like Fidelity,
Principal, and Old Mutual etc. are looking at Indian market
seriously. One important reason for it is that most major
players already have presence here and hence these big names
would hardly like to get left behind. In developed countries
like the U.S.A there are funds to satisfy everybody’s
55
requirement, but in India only the tip of the iceberg has been
explored. In the near future India too will concentrate on
financial as well as physical funds.The mutual fund industry is
awaiting the introduction of DERIVATIVES.
Indian Scenario
As per Hindu religion, an auspicious start to any event
would be an invocation to the Lord Ganesha. So also, any
discussion on the mutual fund sector in India has to start with
Unit Trust of India (UTI).
UTI was constituted under the UTI Act, 1963. It
commenced operations in July 1964 “with a view to
encouraging savings and investment and participation in the
income, profits and gains accruing to the Corporation from the
acquisition, holding, management and disposal of securities.”
UTI remained the monopoly player in the mutual fund
sector until 1987, when public sector banks and insurance
companies were permitted to enter the fray. Finally, in 1993,
the securities and Exchange Board of India (SEBI) came up with
comprehensive mutual fund regulations, that permitted the
private sector to start mutual fund operations. These were later
replaced by the SEBI Mutual fund Regulations, 1996. In the
past, UTI launched several schemes where income for the
investors was assured. Such assured returns schemes, where
the government is a guarantor, have since been transferred to
“Specified Undertaking of UTI”. Other schemes of UTI, which
are market related, are being managed by UTI Asset
Management Company.
References
1. Sharpe, William F. (1992) Asset Allocation: Management Style
and Performance Measurement, Journal of Portfolio
Management, vol. 18, No. 2 pp 7-19
2. George P. Artikis, (2003) Performance Evaluation: A Case
Study of the Greek Balanced Mutual Funds Managerial Finance
Vol. 29 No. 9 pp 1-8
3. Fischer, E. D. & Jordan, J. R. (1997) Security Analysis and
Portfolio Management; Prentice - Hall of India Private Ltd.
New-Delhi 6th Edition.
4. Christopherson, J. 1995. "Equity Style Classifications," Journal
of Portfolio Management, 21, 32-43.
5. Schwob Robert (2000) Style and style analysis from a
practitioner’s perspective: What is it and what does it mean for
European Equity investors? Journal of Asset Management Vol.
1, 1, 39-59
6. Juan Carlos Matallý´n Sa´ ez (2000) Style analysis and
performance evaluation of Spanish mutual funds Journal of
Asset Management Vol. 1, 2, 151–171
7. Sharad Panwar and R. Madhumathi Characteristics and
Performance Evaluation of Selected Mutual Funds in India
Working Paper SSRN-Id876402
8. S. Narayan Rao , M. Ravindran Performance Evaluation of
Indian Mutual Funds Working paper http://papers.ssrn.com/
sol3/papers.cfm?abstract_id=433100.
9. H. Sadhak , Mutual Funds in India, Marketing Strategies and
Investment Practices, Second Edition, Response Books, A
Performance Evaluation of Mutual Funds on Tax Saving Schemes In India
division of Sage Publications India Pvt. Ltd, 2003.
10. Corporate finance –Theory and practice by Viswanath S.R
11. Indian mutual funds handbook – by sundar sankaran
12. Performance evaluation of mutual funds in India – by Lalith K
Bansal
56 SAMIKSHA - Volume II, No. 2, July-December 2011
*Associate Professor, School of Management, Gautam Buddha University, Greater Noida, UP, India. Email: shweta.anand7@gmail.com.
INTRODUCTION
Stock exchange mergers are all the rage these days. The
NYSE Euronext Group (NYSE:NYX) and Deutsche Boerse AG
have merged. The London Stock Exchange Group PLC and
TMX Group Inc. Canada were also getting together.
There is a consolidation cycle among exchange operators
that has accelerated over the past decade. In 2010, Singapore
Exchange Ltd. (SPXCF.PK) agreed to an $8.3 billion takeover of
Australia's ASX Ltd (ASXFF.PK) to create Asia's fourth-largest
stock exchange. And Intercontinental Exchange Inc. (ICE)
purchased the Britain-based Climate Exchange PLC
(CXCHF.PK) that same year for $597 million.
This paper concentrates on NYSE Euronext, Inc. and its
quest to become the world’s largest stock exchange. NYSE
Euronext, Inc. (formerly NYSE Group, Inc. and Euronext N.V.)
is a Euro-American for-profit corporation that operates
multiple securities exchanges, most notably New York Stock
Exchange (NYSE), Euronext and NYSE Arca (formerly known
as ArcaEx).
Overview
NYSE completed its acquisition of Archipelago Holdings
via a "double dummy" merger on March 7, 2006 in a US$10
billion deal to create the NYSE Group. The NYSE Group
became a for-profit corporation and began trading publicly on
its own stock exchange on March 8, 2006 under the NYX ticker.
Owners of the 1,366 NYSE seats received 80,177 shares of NYSE
Group stock plus US$300,000 in cash and US$70,571 in
dividends for each seat. NYSE Group merged with Euronext
on April 4, 2007 to form the first global equities exchange.
NYSE Regulation subsequently merged with NASD to form
FINRA on July 26, 2007 and is therefore no longer managed by
the exchange.
Mergers
Euronext and NYSE Group
Due to apparent moves by NASDAQ to acquire the
London Stock Exchange, NYSE Group bid €8 billion in cash
Purpose: Every Stock Echange has certain avantages in
terms of customer base, location, time zone, products traded
and settled. Initially the trend was to cross hold certain
percentage of stake in other stock exchanges to benefit in terms
of expertise transfer and profits.
The last decade has seen mergers and acquisitions
amongst stock exchanges. The biggest amongst the same has
been NYSE Euronext, Inc. It is a Euro-American for profit
corporation that operates multiple securities exchanges, most
notably Euronext, New York Stock Exchange (NYSE) and
NYSE Arca (formerly known as AcraEx).
Design/methodology/approach: The methodology
used is to analyze the pre and post merger trend in the Equities,
Debt and Futures and Options segments of the NYSE
Euronext, Inc. The parameters used for analysis are market
capitalisation, total listings, diversification of product
offerings and liquidity.
Findings: The analysis finds that NYSE Euronext, Inc
has become the 1st Transatlantic Marketplace and the largest
exchange by market capitalization of listed companies i.e $28.5
trillion. It has 79 of the 100 largest companies globally. It also
has the world’s largest liquidity pool. It is fast becoming the
listing venue of choice having 3,656 listings from 55 countries.
Originality/value: A lot of stock exchanges around the
world are waiting to analyse the value that this merger brings
about to the financial system and to the participating financial
institions. An unbiased analysis will help them in taking
similar decisions.
Keywords: Global Stock Exchange, Transatlantic
Financial Market, NYSE, Euronext.
Global trend in consolidation of Stock Exchanges:An analysis of NYSE Euronext Inc. Dr. Shweta Anand*
and shares for Euronext on May 22, 2006, outbidding a rival
offer for the European Stock exchange operator from
Germany's Deutsche Börse, the German stock market.
Contrary to statements that it would not raise its bid, on May
23, 2006, Deutsche Börse unveiled a merger bid for Euronext,
valuing the pan-European exchange at US$11 billion (€8.6bn),
€600 million over NYSE Group's initial bid. Despite this, NYSE
Group and Euronext penned a merger agreement, subject to
shareholder vote and regulatory approval. The initial
regulatory response by the U.S. Securities and Exchange
Commission chief Christopher Cox (who was coordinating
heavily with European counterparts) was positive, with an
expected approval by the end of 2007. The new firm, tentatively
dubbed NYSE Euronext, would be headquartered in New York
City, with European operations and its trading platform run
out of Paris. NYSE CEO John Thain, who would head NYSE
Euronext, intends to use the combination to form the world's
first global stock market, with continuous trading of stocks and
derivatives over a 21-hour time span. In addition, the two
exchanges hoped to add Borsa Italiana (the Milan stock
exchange) into the grouping. On June 23, 2007, the Borsa
Italiana was however sold to the London Stock Exchange.
Deutsche Börse dropped out of the bidding for Euronext
on November 15, 2006, removing the last major hurdle for the
NYSE Euronext transaction. A run-up of NYSE Group's stock
price in late 2006 made the offering far more attractive to
Euronext's shareholders. On December 19, 2006, Euronext
shareholders approved the transaction by a 98.2% margin. The
remainder voted in favor of the Deutsche Börse offer. Jean-
François Théodore, the Chief Executive Officer of Euronext,
stated that they expected the transaction to close within three
or four months. Some of the regulatory agencies with
jurisdiction over the merger had already given approval. NYSE
Group shareholders gave their approval on December 20, 2006.
The NYSE consummated its US$11 billion takeover of Paris-
based exchange operator Euronext NV at ceremonies in the
U.S. and Europe on April 4, 2007.
NYSE Euronext operates & holds stake in: the New York
Stock Exchange (NYSE), Euronext, NYSE Liffe, NYSE Arca,
NYSE Arca Europe, NYSE Alternext, NYSE Amex, NYSE Liffe
US, LLC (NYSE Liffe US), NYSE Technologies, Inc (NYSE
Technologies), EasyNext, BlueNext, Free Market (Marché
Libre) and SmartPool.
NYSE Euronext and Deutsche Börse
On 9 February, 2011, Bloomberg reported that the
Deutsche Börse was in advanced talks to buy NYSE Euronext
in a deal that would create the world's largest trading
powerhouse. The shares of both companies were temporarily
frozen on the news due to the risk of large price movements
and clarifications of the deal. A successful deal would see the
new company becoming the world's largest stock exchange
operator with a market capitalisation of listed companies equal
to US$15 trillion.
President and deputy CEO of NYSE Euronext Dominique
Cerutti would become the new company's president and head
of commercial and internal technology. Roland Bellegarde,
also of NYSE Euronext, would become the head of European
cash equities. The new company have €300 million (US$410
million) in cost savings. However, the merger would be subject
to review in both the United States and with the European
Union for concerns it could create a “de facto monopoly.”
Deutsche Börse had also considered an acquisition once in
2008 and again in 2009. MarketWatch's commentator David
Weidner has called the forming of the Euro-American Stock
Exchange “a blow to national pride.”
On April 1, 2011 NASDAQ and IntercontinentalExchange
made a competing hostile bid valued at $11.3 billion with a cash
and stock offering of $42.50 per share. This represents a 19%
premium over the Deutsche Börse offer and a 27% premium
over NYSE's value before that offer was made in February.
The board of NYSE Euronext twice rejected the Nasdaq
OMX-ICE proposal, saying the unsolicited deal would lead to
too much debt and regulatory opposition. NYSE Euronext
shareholders will vote on Deutsche Börse’s all-stock deal,
which the board backs, on July 7, and Deutsche Börse
shareholders have to vote on the deal by July 13.
Formation of NYSE Technologies
NYSE Technologies is the commercial technology division
of NYSE Euronext. NYSE Technologies was launched in
January 2009, incorporating all the internal technology
divisions of NYSE Euronext, NYSE Euronext’s Market Data
division and a number of acquisitions including: The Securities
Industry Automation Corporation (SIAC) in November 2006,
TransactTools in December 2006, Wombat Financial Software
in January 2008, and Atos Euronext Market Solutions in
August 2008. In August 2009, NYSE Euronext announced that
it was acquiring NYFIX - subject to NYFIX shareholder and
regulatory approvals.
NYSE Regulation and FINRA
On May 4, 2010, NYSE Euronext and the Financial
Industry Regulatory Authority (FINRA) announced that
FINRA would assume responsibility for performing the
market surveillance and enforcement functions originally
conducted by NYSE Regulation. The agreement was subject to
review by the Securities and Exchange Commission and
completed by end of June, 2010.
Under the agreement announced, FINRA assumed
regulatory functions for NYSE Euronext’s U.S. equities and
options markets – the New York Stock Exchange, NYSE Arca
and NYSE Amex. FINRA currently provides regulatory
services to the NASDAQ Stock Market, NASDAQ Options
Market, NASDAQ OMX Philadelphia, NASDAQ OMX
Boston, The BATS Exchange and The International Securities
Exchange.
NYSE Euronext, through its subsidiary NYSE Regulation,
remains ultimately responsible for overseeing FINRA’s
58 SAMIKSHA - Volume II, No. 2, July-December 2011
performance of regulatory services for the NYSE markets. The
agreement involved approximately 225 staff, most of whom
will be transferred to FINRA.
Locations
Its family of exchanges, located in six countries, includes
the New York Stock Exchange, the world's largest cash equities
market; Euronext, the Eurozone's largest cash equities market;
Liffe, Europe's leading derivatives exchange by value of
trading; and NYSE Arca Options, one of the fastest growing
U.S. options trading platforms. Below is a list of major NYSE
Euronext locations:
• Amsterdam, Netherlands - Euronext Amsterdam
• Paris, France - Euronext Paris
• Lisbon, Portugal - Euronext Lisbon
• London, United Kingdom - Euronext.liffe
Global trend in consolidation of Stock Exchanges: An analysis of NYSE Euronext Inc. 59
• Chicago, Illinois, United States of America - NYSE Arca
(formerly Archipelago)
• New York City, New York, United States of America -
NYSE, Headquarters
• New York City, New York, United States of America -
AMEX (To be relocated to NYSE headquarters)
• San Francisco, California, United States of America - NYSE
Arca (formerly Pacific Exchange)
• Belfast, Northern Ireland - part of NYSE Euronext
Technologies (formerly Wombat Financial Software)
• Brussels, Belgium - Euronext Brussels
Conclusion
The impact of the mergers is that NYSE Euronext is now
the top ranking Stock Exchange in the world both in terms of
Market Capitalization as well as Trade Value.
Rank Economy Stock Exchange Market
Capitalization (USD Billions)
Trade Value (USD
Billions)
1 United States Europe NYSE Euronext 15,970 19,813
2 United States Europe NASDAQ OMX 4,931 13,439
3 Japan Tokyo Stock Exchange 3,827 3,787
4 United Kingdom London Stock Exchange 3,613 2,741
5 China Shanghai Stock Exchange 2,717 4,496
6 Hong Kong Hong Kong Stock Exchange 2,711 1,496
7 Canada Toronto Stock Exchange 2,170 1,368
8 India Bombay Stock Exchange 1,631 258
9 India National Stock Exchange of India 1,596 801
10 Brazil BM&F Bovespa 1,545 868
11 Australia Australian Securities Exchange 1,454 1,062
12 Germany Deutsche Börse 1,429 1,628
13 China Shenzhen Stock Exchange 1,311 3,572
14 Switzerland SIX Swiss Exchange 1,229 788
15 Spain BME Spanish Exchanges 1,171 1,360
16 South Korea Korea Exchange 1,091 1,607
17 Russia MICEX 949 408
18 South Africa JSE Limited 925 340
Figure 1: List of Stock Exchanges in terms of Market Capitalization and Trade Value
NYSE Euronext combined force offers a diverse array of
financial products and services for issuers, investors and
financial institutions in cash equities, options and derivatives,
ETFs, bonds, market data, and commercial technology
solutions. NYSE Euronext's nearly 4,000 listed companies
represent a combined $ 30.9/ € 19.8 trillion in total global
market capitalization, more than four times that of any other
exchange group. NYSE Euronext's equity exchanges transact
an average daily trading value of approximately $161.9 /
€106.9 billion, which represents more than one-third of the
world's cash equities trading. NYSE Euronext is part of the S&P
500 index and the only exchange operator in the S&P 100 index.
Source: Wikipedia (data as on 31st Dec 2010)
The main driver behind exchange mergers is the dream of
global dominance. The NYSE controls Euronext, which itself is
an agglomeration of several Paris-based European stock
exchanges (including the old Paris Stock Exchange). So a
Deutsche Boerse-NYSE tie-up would give the merged
exchange dominance in all major global markets except Asia.
However, since regulators have forced derivatives trading
increasingly onto exchanges, and since the volume of
derivatives outstanding is a large multiple of world gross
domestic product (GDP), the revenues available from
achieving dominance in the global derivatives markets are
very substantial - even if the fees charged are only a minuscule
portion of each individual trade.
NYSE Euronext (NYX) now operates the world’s leading
and most liquid exchange group, and is now enabled to seek to
provide the highest levels of quality, customer choice and
innovation.
References
• "Annual Results 2010". NYSE Euronext. http://phx.corporate-
ir.net/External.File?item=UGFyZW50SUQ9MzU2NjUzM3
xDaGlsZElEPTQxMjc4MHxUeXBlPTI=&t=1. Retrieved 27
February 2011.
• "NYSE and Euronext 'set to merge'". BBC News. 2006-05-21.
http://news.bbc.co.uk/1/hi/business/5002438.stm. Retrieved
2006-05-22.
• "Deutsche Boerse outbids NYSE for Euronext merger". BBC
News. May 23, 2006. http://news.bbc.co.uk/2/hi/business/
5007230.stm. Retrieved 2006-05-23.
• Lucchetti, Aaron; Macdonald, Alistair; Scannell, Kara (June 2,
2006). "NYSE, Euronext Set Plan to Form A Markets Giant".
The Wall Street Journal. http://online.wsj.com/article/
SB114919826887369084.html. Retrieved 2006-06-02.
• "London Stock Exchange buys Borsa". BBC News. June 23,
2007. http://news.bbc.co.uk/1/hi/business/6233196.stm.
Retrieved 2007-06-23.
• Taylor, Edward; Lucchetti, Aaron; Macdonald, Alistair (2006-
11-15). "Deutsche Börse Is Exiting Euronext Chase". The Wall
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SB116355794762023471.html. Retrieved 2006-11-15.
• Lucchetti, Aaron; Macdonald, Alistair (2006-12-19).
"Euronext Shareholders Approve Acquisition by NYSE". The
Wall Street Journal. http://online.wsj.com/article/
SB116653086274154451.html. Retrieved 2006-12-19.
• "Big Board Holders Back Euronext Deal". The New York
Times. 2006-12-21. http://www.nytimes.com/2006/12/21/
business/worldbusiness/21nyse.html?ref=worldbusiness.
Retrieved 2006-12-21.
60
• "Key Deve lopments" . Reuters . Apr i l 3 , 2007 .
http:/ /www.investor.reuters.wallst .com/stocks/key-
developments.asp?rpc=66&ticker=NYX×tamp=200704
03185600. Retrieved 2007-05-11.
• "BlueNext Shareholders". BlueNext.fr. 2010-08-08.
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(February 10, 2011)
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boerse-are-sa id- to-be- in-advanced-ta lks- to-merge-
exchanges.html
• David Weidner: “Nachtmare on Wall Street. Commentary: An
American institution goes kaput”, MarketWatch, 15 February
2011.
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York Times: DealBook. http://dealbook.nytimes.com/2011/04/
01/nasdaq-ice-make-hostile-bid-for-nyse-euronext/?hp.
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W o u l d P r o f i t F r o m D e a l " . B l o o m b e r g L . P . .
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taking-nyse-bid-directly-to-traders-who-would-profit-from-
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• "NYSE agrees to buy one-third stake in SIAC for $40 mln".
Marketwatch.com. 2006-10-25. http://www.marketwatch.com/
story/nyse-agrees-to-buy-one-third-stake-in-siac-for-40-mln.
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SAMIKSHA - Volume II, No. 2, July-December 2011
*Associate Professor, Department of Management, Central University of Rajasthan, Kishangarh, Ajmer. Email: maithilirpsingh@gmail.com
**Associate Professor, Haryana School of Business, Guru Jambheshwar University of Sc. & Tech., Hisar. Email: sanjeev.aseem@gmail.com
***Research Scholar, Haryana School of Business, Guru Jambheshwar University of Sc. & Tech., Hisar. Email: jagdeeplohan09@gmail.com
INTRODUCTION
Insurance is a US $ 41.6 billion Industry world’s one of the
two fastest growing markets. The Indian Insurance scenario
has undergone profound changes during last decade. Until
1999, there were not any private insurance companies in India,
LIC had monopoly. The industry consisted of only two state
insurers LIC and GIC. GIC had four subsidiaries – National
Insurance Company, New India Insurance Company, Oriental
Insurance Company and United India Insurance Company.
The government then introduced the Insurance Regulatory
and Development Authority Act in 1999, thereby de-regulating
the insurance sector and allowing private companies.
Furthermore, foreign investment was also allowed and
capped at 26 per cent holding in the Indian Insurance
Companies. Global players like AIG, Aviva, Met Life, New
York Life, Lombard have rushed into market by joining hands
with Indian Insurance player for both life and non-life
segment. Today there are 23 Life Insurers, 21 non-insurers and
one reinsurer operating in the country.
The reforms in the Insurance Sector have brought not only
in the design of the product available in the market but also the
manner in which they are marketed. A number of new
products has been introduced in both Life and non Life
segment live single premium mode insurance, micro
insurance, unit linked, add on riders, hospital cash benefit,
weather insurance, credit insurance, product liability, burglary
cover etc. Despite all the development about 80 per cent of
Indian population is without life insurance cover, while health
insurance and non-life insurance continues to be below
international standards. India’s life Insurance premium as a
percentage of GDP is 4.1 per cent far lower than developed
market level of 6-9 per cent.
However the insurance sector has not made much
progress in the rural sector. There are still a number of
opportunities waiting to be tapped. A recent study indicate
that about 73 per cent of population in rural areas does not have
life insurance and the penetration rate for non-life insurance in
rural area is only 14 per cent which is mainly for motor
insurance. The rural segment is still untapped and can be
The Indian Insurance scenario has undergone profound
changes during last decade. Until 1999, there were not any
private insurance companies in India, LIC had monopoly. The
government then introduced the Insurance Regulatory and
Development Authority Act in 1999, thereby de-regulating
the Insurance sector and allowing private companies.
Furthermore, foreign investment was also allowed and capped
at 26 per cent holding in the Indian Insurance Companies.
Global players like AIG, Aviva, Met Life, New York Life,
Lombard have rushed into market by joining hand with Indian
Insurance player for both life and non-life segment. Today
there are 23 Life Insurers, 21 non –insurers and one reinsurer
operating in the country. Despite all the development about 80
per cent of Indian population is without life insurance cover,
while health insurance and non-life insurance continue to be
below international standard. India’s life Insurance premiums
as a percentage of GDP is 4.1 per cent for lower than developed
market level of 6-9 per cent. However the insurance sector has
not made much progress in the rural sector. There are still a
number of opportunities waiting to be tapped. A recent study
indicates that about 73 per cent of population in rural areas
does not have life insurance and the penetration rate for non-
life insurance in rural area is only 14 per cent which is mainly
for motor insurance. The rural segment is still untapped and
can be exploited by insurance companies. The present paper
highlights the rural consumer’s buying behavior towards
insurance policy.
Key Words: Insurance policy, IRDA, Non-insurer,
Reinsurer, Premium, Risk Protection.
Rural Consumer’s Buying Behaviortowards Insurance Policy
Dr. Maithili R.P. Singh*Dr. Sanjeev Kumar**
Jagdeep Kumar***
Table 1: Motivational factors to buy insurance policy
Motivational Factors Frequency Percentage
Long term saving 151 36%
Investment 113 27%
Risk Protection 46 17.8%
Children Edu. & Marriage 7 11.0%
Tax Benefit 21 5%
Retirement benefit 14 3.2%
Total 420 100%
exploited by insurance companies. FORTE research indicates
that rural market is vibrant market and hold tremendous
potential for growth of insurance business, particularly
because of strong saving habit, changing aspiration, closed
integration with economy and unprecedented exposure to
information explosion. However some Insurance companies
have realized the potential of rural market and betting big on
rural market, through strategic partnership with bank, MFI,
N.G.O. etc. LIC has introduced Jeevan Madhur which offers
the option of a minimum weekly payment of the option of a
minimum weekly payment of Rs. 25. This plan is devised both
in terms of payment schedule and delivery for rural area
keeping affordability of rural people in mind. Another attempt
to provide assistance to the rural people, Tata AIG has
introduced micro Insurance plan Navkalyan yojana and
Sampuran Bima Yojna for rural people.
Literature Review
Ramesh H.N., A parna. J. Verma (2011) reveals that
government spending on health care is less than 2 per cent of
GDP. Around 70 per cent of India’s healthcare expenditure is
financed out of pocket with only 15 per cent of Indian
population covered by health related insurance schemes. This
highlights the need for alternative finances like health
insurance at much wider level.
Shahmas Beegum P.P., Dr. Sareeda A.K. (2011) Micro
insurance is low cost health insurance based on a community
or co-operation modal, as distinct from conventional insurance
Micro health insurance covered and estimated thirty six
million people worldwide in 2006.
C 11 Ermst and Young (2010) study projected that health
insurance Premium is lively to touch Rs. 30,000 crore in 2015
from existing Rs. 4000 crore.
Chandera Sekaran David (2009) found that market
initiatives of the new companies have certainly helped enhance
insurance awareness in the country. The corporate agency,
especially where a bank is corporate agent seems to hold much
promise. The full potential of this new channel is yet to be fully
tapped.
Swiss Re Sigma (2007) report reveals that the
Bancassursance is an established and growing channel for
insurances distribution. Current success is built on simple
products and integrated operation. Penetration of
bancassurance is expected to increase in developed and
emerging market.
Devadasan. N. (2006) highlights the need of multiple
strategies to cover the health of poorer section of society in
India. Community health insurance is one of them.
David M. Dror (2006) found that most Indian is willing to
pay 1.3 per cent income or more for health insurance and prefer
holistic benefit package at basic coverage. The need of the poor
and their demand for health Insurance depend on local
conditions.
ILO (2004) Penetration of micro Insurance scheme is very
low anywhere between 5 and 10 million individual. Micro
insurance market is likely to touch Rs. 250 billion by 2008.
Banerjee T.K. (2001) revealed that the scope of growth
offered by rural market is tremendous in India. The size or
rural market is growing. The economy has expanded very fast.
The rural GDP has increased from 6500 crore to 2, 60, 000
approximately four fold increase. Rural GDP constituted 50.35
per cent of GDP as per RBI estimate in 1997-98.
Gopal Swamy, T.P. (1997) elaborated the strategies
regarding market mix in the rural India. Considering the low
per capita income, a rural customer can afford the smaller unit,
a price of small packing in cheaper in comparison. Regarding
distribution, use of public distribution and co-operative
societies in village can play an important role. Product
innovation is key to success.
Sri Lakshmi and Sri Ram Murthy D. suggested four
mantras for success for any company planning to enter in rural
market. Mantra are four A’s- Availability, Affordability,
Acceptance and Awareness.
Objectives and Methodology
The main objective of this research paper is to study
consumer’s behavior towards insurance products in rural
areas. The research design is exploratory cum descriptive.
Primary data is collected with the help of structured
questionnaire and personal interview with respondents. The
universe comprised of all people living in all the villages of
Haryana. It would be an enormous task to study each person
and would escalate the cost, time and efforts required to the
extent of turning entire exercise into unmanageable and futile.
Therefore a representative sample was taken from the universe
in a manner that would not hamper the quality and
representativeness of data facilitating better analysis and
interpretation. The sampling method used is stratified random
sampling. The sample size is 500 policy holders (25 each from
20 villages), the questionnaire was administered, and
substitution of respondents was not allowed. Only 420 of the
returned questionnaires were found suitable for analysis. Data
so collected was analyzed with the help of percentage method.
Results and Discussion
The Result obtained through analysis, have been
presented in the following Tables (Table No 1 to Table No 9 in
this section.)
62 SAMIKSHA - Volume II, No. 2, July-December 2011
Source: Primary Data
Rural Consumer’s Buying Behavior towards Insurance Policy 63
Table 3 reveals assessment of satisfaction level through
various dimensions like risk protection, Tax benefit, saving
investment etc. Around 48 per cent respondents are somewhat
satisfied with risk protection and saving while 28.4 per cent are
very much satisfied with risk protection. High percentage 67 is
neutral with retirement benefit.
Table 1 exhibits motivational factors to buy insurance
products, major persuasion for taking insurance policy are
saving, investment, risk protection and children education &
marriage. About 36.per cent buy insurance product because it
help long term saving, 27 per cent respondents purchase
insurance policy for investment and17.8 per cent for risk
protection.
Table 2 reveals that premium, return, image of company,
and advice from agent play more important role in selecting an
insurance policy than liquidity, investment, risk and
advertisement. Out of 420 respondents, with regard to
premium, 32.1 per cent respondents consider as important and
43 percent consider as most important. With regard to return
on insurance policy more than 30 percent respondents rate
very important and 46.9 per cent respondents rate most
important factor. A big number more than 25 per cent of
respondent think that liquidity and advice from friend play not
important role in selection of policy.
Table 2: Opinion about importance of factorsin selection of insurance policy
Factors Not Imp. Least Imp. Imp. Very Imp. Most Imp. Total
Premium 18(4.3) 11(2.3) 134(32.1) 76(18.1) 181(43.0) 420 (100%)
Investme
nt Risk
53(12.4) 84(20.0)
153(36.5) 98(23.4) 32(7.7) 420 (100%)
Liquidity 117(27.8)
119(28.4)
111(26.4)
39(9.4)
34(8.0)
420 (100%)
Return 3(0.7)
11(2.7)
80(19.1)
130(30.9)
196(46.6)
420(100%)
Insurance Coverage
17(4)
71(17.0)
180(42.8)
104(24.7)
48(11.4)
420(100%)
Image of Company
6(1.3) 9(2.3) 128(30.5) 116(27.5) 161(38.3) 420(100%)
AdviceFrom friend
25(6)
83(19.7)
219(52.2)
53(12.7)
40(9.5)
420 (100%)
Advice From Agent
41(9.7)
131(31.1)
181(43.1)
43(10.4)
24(5.6)
420(100%)
Advertisement
70(16.7) 156(37.1) 139(33.1) 28(6.7) 27(6.4) 420(100%)
Source: Primary Data
Benefit Very much dissatisfied
Somewhat dissatisfied
Neutral Somewhat satisfied
Very much satisfied
Total
Risk protection
11 (2.7)
38 (9.0)
49 (11.7)
202 (48.2)
120 (28.4) 420 (100%)
Tax Benefit 8 (2.0)
21 (5.0)
167
(39.5)
135 (32.1)
89 (21.1) 420 (100%)
Saving 11 (2.7) 13 (3.0) 41 (9.7) 204 (48.5) 152 (36.1) 420 (100%)
Investment 10 (2.3) 117 (23.1)
74 (17.7)
173 (41.1.)
65 (15.4) 420 (100%)
Children education& Marriage
5 (1.3)
14 (3.3)
46 (11.0)
233 (55.5)
119 (28.4) 420 (100%)
Retirement Benefit
13 (3.0) 16 (3.7) 281 (67.2) 93 (22.1) 17 (4.0) 420 (100%)
Table 3: Satisfaction Level regarding various benefits
Source: Primary Data
Table 4 indicates that 52.1 per cent respondents preferred
assured low returned policy followed by unit linked 24.8 per
cent and 23.1 per cent respondents have no knowledge.
Table 4: Opinion about type of policy
Type of policy Frequency Percentage
Unit Linked 104 24.8%
Assured Low
Returned
219 52.1%
Don’t Know 97 23.1%
Total 420 100%
Source: Primary Data
Table 5: Preferred combinations Life Insurance
Combination Rank Frequency Percentage
Life Insurance+ Accidental Insurance
2
114 27.2
Life Insurance+ Health Insurance
4
17 4.1
Life Insurance+
Loan Insurance
3
25 5.9
Life Insurance+ Health+ Loan+ Acc. Insurance
1 264 62.8
Total 420 100%
Source: Primary Data
Table 5 reveals that respondents preferred various
combinations of life insurance like, Life insurance+ Health
insurance, Life insurance + Accidental insurance, Life
insurance + Loan, Life insurance+ Health+ Loan+ Accidental
insurance. 62.8 per cent of respondents preferred combination
of Life insurance+ Health+ Loan+ Accidental insurance
followed by 27.2 per cent of respondents preferred
combination of Life Insurance+ Accidental Insurance.
Feature
Very low
Low
Average
High
Very high
Total
Return 38 (9.0) 57 (13.7) 244 (58.2) 76 (18.1) 4 (1.0) 420 (100%)
Liquidity 62 (14.7) 117 (27.8) 192 (45.8) 42 (10.0) 7 (1.71) 420 (100%)
Safety 11 (2.7) 11 (2.7) 84 (20.1) 231 (54.0) 86(20.5) 420 (100%)
Table 6: Opinion about financialfeatures of insurance products
Source: Primary Data
64
company play important role in a selection of insurance policy.
Respondents preferred various combinations of life insurance
like, Life insurance+ Health insurance, Life insurance +
Accidental insurance, Life insurance + Loan, Life insurance+
Health+ Loan+ Accidental insurance. Most of respondents are
of opinion that return on insurance products is average,
liquidity low and safety is high. Majority of respondents were
found satisfied with risk protection, saving, investment, tax
benefit of insurance policies. About half of respondents
preferred half yearly premium pattern. More than 40 per cent
had intention to purchase insurance policies in future. We may
conclude that there is good scope in rural areas for insurance
companies.
References
• Banerjee T.K. “The Present experience of LIC and The future
prospects of Rural market in India”, FICCI Sixth international
conference on insurance 15th Oct, 2001.
• C11 Ernst and Young (2010) “Indian Insurance sector stepping
into the next Decade of Growth”.
• Devadasen.N. “community Health Insurance Schemes” Yojna,
April, 2006.
• David M. Dror, “Health Insurance for the poor: Myths and
Realities”, Economic and political weekly, Nov 2006.
• David Chandera Savarana “Marketing of Life Insurance”
IRDA Journal, May2009, PP 18-19.
• Gopalswamy, T.P, “Rural Marketing: Environment, Problem
and Strategies” wheeler Publishing, New Delhi.
• ILO (2004) India “Insurance products provided by insurance
companies to the Disadvantaged groups, strategies and tool
against social exclusion and poverty step”.
• MRP Singh, ‘Customers’ Awareness and Perception about
Insurance Products in Rural Areas’, JM International Journal
of Marketing Management, Journal of JM Academy of IT and
Management, Arasaradi, Madurai, Tamil Nadu, India, Vol. 1
No. 3, March, 2011. Print:(ISSN-2230-701X) ; Online: (ISSN-
2229-4570)
• MRP Singh, Sanjeev Kumar and Jagdeep ‘Potential of
Insurance Products in Rural Haryana’, Research Lines, Journal
of Deva Matha College, Kuravilangad, Kottayam, Kerala, India.
Vol. 4 No. 1-C, Jan.-June, 2011(ISSN-0975-8941)
• Ramesh H.N, Aparna. J Verma “An Analysis of Health care
Economics and Health Insurance Industry in India” Research
Lines volume IV No. I-C January June, 2011, P.P. 117-124.
• Shahmas Beegum P.P, Dr. Sarla A.K. “Micro Insurance an
innovation in Insurance”. Research Lines volume IV No. 1-C
January – June 2011 P.P. 117-124.
• Sri Lakshmi K. and Sri Rama Murthy D. “Rural Marketing in
Indian Context” www. Cool avenues. Com.
• Swiss Re sigma 5/2007 “Bancassurances : Emerging Trends,
opportunities and challenges”
• www.irdaindia.org.in
• www.licindia.org.in
• www.indianfoline.com
Table 6 shows about the opinion of respondents about
financial features of insurance policies. Data reveals that 58.2
per cent respondent think that return is average while about 30
per cent are opinion of that return is high, in case of liquidity
45.8 per cent respondents think that it is average, high
proportion (54 percent) of respondent are of opinion that the
safety is high.
Table 7: Opinion about premium charged
Type Low Reasonable High Total
Life insurance
58 (13.7%)
258 (51.6%) 104 (24.7 %)
420 (100%)
Non life insurance
29 (7.1%)
136 (32.4%) 255 (60.6%)
420 (100%)
Source: Primary Data
Table 7 shows that about 60 percent respondents feel that
premium charges by insurance companies for life insurance
products is reasonable, while in non life segment premium is
high.
Table 8: Preferred premium Pattern
Premium pattern Frequency Percentage
Monthly 48 11.4
Quarterly 62 14.7
Half yearly 225 53.5
Yearly 81 19.4
5 year 4 1.0
Total 420 100%
Source: Primary Data
Table 8 indicates that 53.5per cent respondents preferred
half yearly premium pattern followed by yearly 19 per cent and
quarterly 14 per cent premium pattern.
Table 9: Future plan to purchase an insurance policy
Mode Frequency Percentage
Yes 184 43.9
No 236 56.1
Source: Primary Data
Table 9 depicts that about 44 per cent respondents have a
plan to purchase insurance policies in future.
Conclusion
Major persuasion for taking insurance policy are saving,
investment, risk protection and children education &
marriage. Premium, return from policy and image of insurance
SAMIKSHA - Volume II, No. 2, July-December 2011
Volume II, No. 2, July-Dec 2011
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Volume II, No. 2, July - December 2011
SAMIKSHA
1. An Empirical Study of Organizational Climate with Reference to
Employee’s Motivation
2. Construction of Equity Portfolio of Banking Sector with reference to
The Sharpe Index Model
3. Factors influencing Seller Communication Style
4. A Study of The Marketing Practices of Farmers at Uzhavar Sandhai
7. Stress-Job satisfaction Relationship: Impact of Personality Variable:
An Empirical study on Private Sector Managers
8. Performance Evaluation of Mutual Funds on Tax Saving Schemes In India
9. Global trend in consolidation of Stock Exchanges:
An analysis of NYSE Euronext Inc.
10. Rural Consumer’s Buying Behavior towards Insurance Policy
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getting to know the grooves of the industry. The Greater Noida
campus has a great advantage of being in the NCR-region which is the
home ground of the corporate giants making it simpler for the
students to gain a practical work experience along with classroom
education. At United we believe in taking the course of progress in the
fields of technology and administration to the pinnacle. Hence our
motto remains- nurturing the young minds today, who will create
history tomorrow .
www.united.ac.in
United Institute of ManagementA/16, UPSIDC Industrial Area, Naini, Allahabad (U.P.)
Phone #- 0532-2686070
Fax- 0532-2687142
E-mail : uimresearchcell@gmail.com
uimresearchcell@yahoo.com
Website: www.united.ac.in
UNITEDGroup of InstitutionsAllahabad • Greater Noida
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