december, 2017 - ksom · december 2017 contents l ifrs and its impact on indian companies: 1-16 an...

PARIKALPANAKIIT Journal of Management

December, 2017

December 2017CONTENTS

l IFRS and its impact on Indian Companies: 1-16an Empirical StudySurajit Das, Tapash Ranjan Saha

l Training Evaluation and Motivation to Transfer 17-28Training - A Review of LiteratureMalabika Sahoo, Sumita Mishra

l Causal linkage among Business Analytics, Supply Chain 29-36Performance, Firm Performance and Competitive AdvantageJamshi. J, Ganeshkumar C

l Determining association between age, occupation and usage 37-46of online banking services among customersHiteksha Joshi Upadhyay, Payal Rajani & Saloni Surani

l Understanding Role of service and value co-creation 47-57in Sales FunctionsKumar Mohanty

l Television advertisement and its impact on Teenagers 58-66Buying Behavior- A study in Barasat City KolkataGouranga Patra, Chinmaya Kumar Dash, Rabinarayan Patnaik

l Pension plans Awareness among private sector employees- 67-78An empirical studyS. Ramesh

l Socio-economic aspects as potential moderator on relationship 79-96between workplace spirituality and organizationalcitizenship behavior- an empirical studyTulika Singh, Sasmita Mishra

l Pradhan Mantri Mudra Yojna: A Critical Review 97-106Manish Agarwal, Ritesh Dwivedi

l An Enquiry into effect of capital structure on firm value: 107-117A study of power sector comanies in IndiaAbhijit Sinha

Parikalpana: KIIT Journal of Management

l Review of Monetary policy of India since Independence 118-124Ruchi Priya Khilar

l Impact of Collective Bargaining in Mining Industry in Odisha: 125-144A Hallmark for peace in Industrial RelationsBeyat Pragnya Rath, Shikta Singh, Biswajit Das

l The Impact of organizational factors on 145-153Financial PerformanceChandrika Prasad Das, Rabindra Kumar Swain

l Non-performing assets of scheduled commercial 154-162Banks in India: Its regulatory frame workRabindra Kumar Swain, Muna Sahoo, Anjali Prava Mishra

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Parikalpana, the peer-reviewed Management research journal, beingpublished by the KIIT School of Management, has been a wellappreciated journal among academicians, research scholars andpractitioners. The strength of the journal is of its soft boundary, that isencompassing, inviting papers from management as well as relateddomains of importance.

Having a well-established process of selecting papers for publicationputs the journal among the set of quality journals that professionals,academicians and students look for.

The current edition of this journal with 14 number of papers, bring inthe works of 27 researchers drawn from 11 institutes, covering our entirenation. It covers the emerging themes, in the areas of Marketing, Finance,HRM, General Management and Operations Management.

I wish the researchers and professionals will find the articles helpful fortheir research and call upon all to contribute their works to the nextedition of the journal. This journal is listed/ indexed with many data-bases of international repute. We look for its continuous up-gradationand higher academic appreciation.

Prof. Hrushikesha Mohanty

Vice Chancellor, KIIT and Journal Advisor

Mail: [email protected]

Foreword by Vice Chancellor

1Parikalpana - KIIT Journal of Management (December, 2017)

IFRS AND ITS IMPACT ON INDIAN COMPANIES:AN EMPIRICAL STUDY

SURAJIT DASResearch scholar, Institute of Management Study, Kolkata

e-mail: [email protected]

TAPASH RANJAN SAHADirector-IMS Group, Kolkata

e-mail:[email protected]

DOI # 10.23862/kiit-parikalpana/2017/v13/i2/164516

ABSTRACTWhen a new accounting standard adopt by a country for its own domesticcompanies for reporting their financial statement, it may be impact on thequantitative as well as qualitative attributes of financial statements. IFRS becomea global reporting language. Therefore India is keen to adopt it and make itmandatory for its own interest. In this study, the main purpose is to make aparallel comparison between IFRS and Indian GAAP and documented the basicdifference between these two standards. It helps to find out the effects of IFRSadoption on the financial statements and market value, prepared by IndianCompanies. To find out the statistical significance of the above stated activities,appropriate statistical test (Wilcoxon Signed Rank, regression, correlation) hasbeen applied.

Key Word: Comparison, IFRS, Indian GAAP, Wilcoxon Signed Rank, regression

INTRODUCTION

In the present era of globalization,distances are not important any more. Asthe world is now being referred to as aglobal village, one of the most importantprerequisite for existence is to operate abusiness successfully and also to have agood financial reporting system. In thisregard, it is essential to have universallyset standards in all domains to overcomeconflicts and discrepancies across differentcountries and have a uniform framework

of policy which will be well defined andstructured. In order to make companyaccounts comparable and understandable,International Financial Reporting Standards(IFRS) have been crafted as a commonglobal language for business affairs aroundthe world.

Concept of IFRSInternational Financial Reporting Standards(IFRS) have formulated as a commonglobal platform for business affairs so that

Parikalpana - KIIT Journal of Management2

entity accounts are understandable andcomparable across internationalboundaries.

It consists of

• International Accounting Standards(IASs)—adopted by the IASB.

• International Financial ReportingStandards (IFRSs)—developed by theIASB.

• Standing Interpretations Committee(SICs).

• Interpretations originated from theInternational Financial ReportingInterpretations Committee (IFRICs);and

IFRS in India:

International accounting standard is not anew idea.The concept was first arose inthe late 1950 when industrialized nationwant to create a standard that could beused by developing countries and smallernations. But after globalization whenbusiness world more global, largecompanies, global auditing firm start torealized the importance of having a singleglobal accounting standard. In the year of2007 International federation ofaccountant (IFAC) conducted a survey onone forty three (143) nations around theworld on the subject of need of singleaccounting standard; near about 90%respondents gave positive response for thegrowth of their country.

In India, when the former Prime MinisterNarashima Rao and his government

announced the modern policy of Indianeconomy, that is liberalization privatizationsand globalization, the importance ofinternational accounting standard came intothe picture. A survey, conducted by Ernst&Young (2009), reveals that 79% of theIndian corporate are looking forward tothe IFRS convergences for itstransparency, accountability and globalacceptability. On the basic of this, in 2010,First time MCA officially proposed phaseapproach regarding IFRS adoption inIndia. In the first phase they haveconsidered the conversion of openingbalance sheet as at 1st April 2011 bygrouping the Indian companies in to threebroad heads. These are:Group A- Companies that are part ofNSE 50 (Nifty 50).Group B- Companies that are part of BSESensex (BSE 30).Group C- Companies whose shares orother securities are listed on a stockexchange outside India.Group D- Companies, listed or not,having net worth exceeding INR1, 000crore.

But due to some legal difficulties and somemajor changes in International standard,up to 2014, it was not possible to make itmandatory in India. At 16th February2015, the Ministry of Corporate Affairs(MCA) has notified the revised guide linefor implementing Ind AS which is relativelyconverged with IFRS for Indian companiesother than Banking and Non bankingfinance companies and Insurance.

3IFRS and its imapct on Indian Companies: An Empirical Study

LITERATURE REVIEW:

When a company adopts any newaccounting standard to prepare theirfinancial statement it may be positively ornegatively impact on financial indicators.Sometimes it remains unchanged. Severalresearches around the globe shows thatIFRS adoption changed the financialindicators like equity position, solvencyposition, profitability position, total assetsvaluation and liquidity position [(Callao. etal,2007; Lantto & Sahltrom,2009;Beke,2011; Sovbetov.,2013; Terzil et.al,2013].On the other hand some researchreveals that adoption of IFRS does notaffect on Financial Indicators. Theseremain unchanged. [(Akta, 2007;Dimitrios. et al, 2013; Ibiamke et al.,2014;Jindrichovska & Kubickova,2014].Onestream of research around the world revelthat adoption of IFRS improved theearning quality of the companies(Jeanjea&Stoly,2008; Houge & Ziji,2010; Mercedes, 2014). Earning qualityof an organization can be classified asDiscretionary accrual(DA) and Non-discretionary Accruals(NDA).Someresearch concluded that Impact of IFRSadoption on earning quality remainunchanged [(Gancharov &Zimmarman,2007; Major, 2009; Ton, 2011)]. All thestudy considered post and pre adoptionyear of IFRS and then compare thefinancial figure. The Core Group ofMinistry of Corporate Affairs of India(MCA) has recommended convergenceto IFRS in a phased manner from April 1,2011.But they failed to meet the target.

Still it is not a mandatory criterion. Onestream of study reveals some challengingas well as beneficial factors for IFRSimplementation. Challenging factors likeLegal system, External environment, hugetransaction cost, lack of training,Amendment of existing law. [(Ball.,2005;Irvine&Lucas,2006; Gyasi,2009;Cohen.,2010; Rai.,2013; Yadav &Sharma,2012; Aurva & Chauhan.,2013;Anabalgan,2013; Dhankeret.al,2014;Kulkarni & Hydrabad,2014; Das,2015)].Beneficial factors are better access toglobal capital market, easier access tofinancial reporting, Better quality ofFinancial reporting, helps in decisionmaking process, Reliability of Information.[Kavita. et al, 2010; Ikpfor&Akande,2012; Akintola& Francies,2012]. Gray (1980) had developed aformula [1-(RNew standard-ROld standard)/ RNew

standard]to measure the conservativeness ofinformation. Later, It has been used byseveral subsequent studies to interpret thelevel of information quality between twoaccounting standard. One line ofresearchers have worked on the originalscaled proposed by Gray and found somechanges in accounting number like equityownership. (Istrate., 2012), profitability,liquidity [Ibiamke et.al, 2014; Punda,2011; Lemes, 2013; Lopes & Viana,2008]. On the other hand one stream ofresearcher have applied the modifiedscaled proposed by Gray.(1980)and foundthat there is no material effect on liquidityposition ,solvency position Profitabilityposition and equity position (Danifoo


et.al,2012).Some researcher also appliedthis index to measured the nature of theorganization, whether it is pessimistic,optimistic or belong in neutrality region(Patricia & Viana, 2008) and found thatmost of the firm carried a pessimisticcharacteristic.

OBJECTIVES:

The objectives of this study are:

1. To analyze the impact of voluntaryIFRS adoption on financial indicators

2. To study the impact of voluntary IFRSadoption on market value of thecompanies.

METHODOLOGY:

Sample Design:

For attaining the different objectives basedon secondary data, the researcher focusedon MCA announcement regarding IFRSconvergence in India early 2010. Andfound that Indian technology sector leadsthe path of voluntary adoption of IFRS.Compare to other sectors (Infrastructure,Tele- communication, Pharmaceuticals),

Indian IT Companies like Infosys, Wipro,TCS have already field financial statementin accordance with IFRS as per therequirement of US Stock Exchange. Toanalyze objectives 1 & 2 researcherconsidered top thirty (30) Indian ITcompanies as per their sales volume 2014-15.

To know the impact of mandatoryadoption of IFRS on the qualitative factorsof financial reports, the researcher haveused Stratified random sampling methodand try to obtained the expert opinion inthe form of closed ended questioner(usedfive point likert scale), developed byliterature review and expert Interview.Researcher has issued questioners toqualified working Chartered accountantsand Cost accountants, Tax consultant,Company Accountant and Academicianby equal distribution.

Sample Size:

As per the report, disclosed by Moneycontrol 2014-15, Top Thirty Indian OriginIT companies as per their sales volume andNet worth are:

Sl No Company Name Net Sales(Rs Cr) Voluntary Adopter Net worth (Rs Cr)

1 TCS 85,863.85 # 9654.70 2 Infosys 53,983.00 # 8795.28 3 Wipro 41,209.80 # 9825.24 4 Tech Mahindra 19,162.70 12815.8 5 HCL Tech 17,153.44 6420.583 6 Mindtree 3,547.40 # 2163.50 7 Oracle Fin Serv 3,341.10 3552.23 8 Mphasis 3,026.45 5899.85

Table 1: List of IT Companies

5

The above table shows that out of this topThirty IT Companies, Five companiesvoluntarily adopted IFRS and preparedtheir financial statement simultaneously withIGAAP. To attain the first objectives,researcher considered these fivecompany’s annual report from 2010-11 to2014-15.Source Of data: Secondary data havebeen collected from the company’s annualreport from 2010-11 to 2014-15.Period of Study: Initially MCA announcedthe date of convergence for Indian

companies was 1st April 2011.For thatreason, to compared IGAAP and IFRSadopted by Indian IT companies, theresearcher analysis the data of Companiesannual report from 2010-11 to 2014-15.

Data Analysis Technique: Whenfinancial data are collected, there are twosets of information, one for IGAAP andother for IFRS for Five years (2010-11to2014-15) each. Due to small sample size(5 IT companies), the data set may not befollowed the rules of normality. For thatreason, Wilcoxon Signed Rank test is being

8 Mphasis 3,026.45 5899.85 9 Rolta India 1,871.50 # 6963.01 10 Polaris Consult 1,678.21 493.29 11 NIIT Tech 1,346.09 642.31 12 Cyient 1,294.01 1389.97 13 Persistent 1,242.50 1414.92 14 Zensar Tech 1,079.93 1041.14 15 Hinduja Global 1,070.40 813.30 16 Tata Elxsi 849.4 283.35 17 Mastek 665.12 144.26 18 Intellect Desig 453.1 50.10 19 Infinite Comp 415.24 285.69 20 3i Infotech 400.72 2262.52 21 Geometric 381.49 227.25 22 Sasken Comm 346.76 407.88 23 Ramco system 222.97 179.10 24 SQS India BFSI 214.16 68.87 25 Financial Tech 161.03 2079.62 26 Hinduja Venture 110.43 648.11 27 Mindtrack 80.17 2010.80 28 Saksoft 46.61 82.83 29 Bodhtree Cons 42.82 26.59 30 Ducon Infotech 35.96 29.32

Source: www.moneycontrol.com

IFRS and its imapct on Indian Companies: An Empirical Study


used for testing hypotheses at 5% level ofsignificance(Punda,2011) , but before that,Gray Conservative Index method has beenapplied to know the conservativeness ofall the financial positions. If the index valuelay in between 0.95 to 1.05, means thereis no significant impact of new accountingstandard on financial position. To study theeffect of Voluntary IFRS adoption onmarket value of the firm MultipleRegression Equation has been usedbetween adopter and non-adopter ITcompanies in India.

Operational Definitions:

The basic motive of this research is to drawa parallel comparison between IFRS andIGAAP and try to find out significantdifference between this two. Financialstatement basically helps to measure acompany’s different parameter like

profitability position, liquidity position,leverage position, assets position and cashflow position. When a company adoptsnew rules for preparing financial statementthat can directly affect on company’sfinancial parameter (profitability position,liquidity position, leverage position, assetsposition and cash flow position).

On the other hand new standard indirectlyeffects on company’s qualitativecharacteristic like Comparability,transparency, Accuracy and reliability andunderstandability and these effect may bebrings some benefits from investors pointof view. In this research, the researchertry to identify the impact of IFRS onquantitative and qualitative Characteristicsof financial statement, prepare as per IFRSas well as IGAAP and what kind ofbenefits derives out of this effect.

AREA Ratio FORMULA Liquidity

Current Ratio (CR) Current Assets/Current Liabilities Quick Ratio (QR) Quick Assets/Current liabilities

Profitability

Return on Assets (RA) Net Profit/Total Assets Return on Equity (RE) Net Profit/Total Equity Net Profit Margin (NP) Net profit/Total Net sales Return on Capital Employed (ROCE) Net profit/Capital Employed EPS valuation Actual Value

Leverage & Net worth

Proprietary Ratio (PR) Equity fund/Total assets Debt-Equity ratio (DE) Total Debt/Total Equity Total Liabilities to Net Worth (TL-NW) Total liabilities/Net worth Current Liabilities to Net Worth (CL-NW) Current Liabilities/Net Worth

Table 2: Quantitative Areas

7

Worth (CL-NW) Current Liabilities/Net Worth Fixed Assets to Net Worth Fixed Assets/Net worth

Assets position

Goodwill To Assets Ratio (GAR) Goodwill/Total Assets Degree of Depreciation & Amortization (DD&A) Depreciation/Fixed Assets Valuation of Fixed Assets (VFA)

Cl.Balance of FA- Log transformation

Cash Flow Position

Operating cash flow ratio (OCF) CFO/Current Liabilities Financial Policy ratio (FPR) CFA/Total Assets Cash Flow Margin (CFM) CFO/Sales

HYPOTHESIS:Hypotheses I:

Ho: Voluntary IFRS adoption has noimpact in improving the financial positionin terms of indicators.H1: Voluntary IFRS adoption has impactin improving the financial position in termsof indicators.To test the hypothesis I, the researcherassumes five sub hypotheses. These areH0,1: Liquidity position did not changedafter adoption of IFRS voluntarilyH0,1: Profitability position did not changedafter adoption of IFRS voluntarily.H0,1: Net worth and Leverage position didnot changed after adoption of IFRSvoluntarilyH0,1: Assets valuation did not changed afteradoption of IFRS voluntarily.H0,1: Cash flow position did not changedafter adoption of IFRS voluntarily.

Hypotheses II:

Ho: Market value of the firm will not

increase after voluntary adoption of IFRS.H1: Market value of the firm will increaseafter voluntary adoption of IFRS.

TESTING OF HYPOTHESES:

Hypothesis I

Hypothesis I aim to test the effect onfinancial indicators after voluntary IFRSadoption by Indian companies. Financialindicators define the financial position of acompany like liquidity position profitabilityposition, assets position, cash flow positionand leverage position.

Liquidity indicates to a entity’s ability tomeet its continuing obligations as they arise.Short term assets and liabilities areconsidered for defining this position. Onthe other hand Profitability positionmeasures a company’s ability to generateearnings relative to sales, assets and equityand capital. Net worth position defines thathow much an entity worth in the marketand leverage position defines company’sdebt and equity position. Valuation ofGoodwill, Depreciation treatment on



tangible assets and evaluation of the fixedassets are the major area for evaluatingfixed assets position of a company.

On the other hand cash flow positionshows cash flow from operating activities,

cash flow from financial activities and cashflow from investment activities. Treatmentof Bank overdraft, Interest and Dividendare the major areas affected to cash flowposition of the Indian Companies by IFRSadoption.

Table 3: Test statistics for liquidity position

YEAR Ratio

2014-15 (p value one

tail)


tail))


tail)


tail)


tail)

Current Ratio

0.023 0.040 0.023 0.023 0.250

Quick Ratio

0.021 0.042 0.020 0.023 0.250

p values for 2014-15,2013-14,2012-13and 2011-12 of liquidity ratios lay in thecritical region and as per the proportionateprincipal, it proves that the results of allthe ratios are significant at 5% level ofsignificance. So we can say that reportingof liquidity position has been changedunder IFRS voluntary consideration ascompared to IGAAP.The main reason for this significantimprovement in liquidity ratios may bereduced current liabilities and strengthened

current asset. When Indian GAAPconsiders proposed dividend beforeapproved it by shareholders, IFRS saysthe approval before payment of dividend.This effect may reduce provision forliability to a considerable extent. IFRSsays, lease rentals and advance as currentassets where Indian GAAP considerslease rentals and advance in PPE. Thisreporting difference has boosted currentasset in IFRS and resulted in a betterliquidity position.

Table 4: Test statistics for profitability position

YEAR 2014-15 (p value one

tail)


tail)


tail)


tail)


tail) Ratio ROA 0.50 0.25 0.15 0.34 0.25 ROE 0.11 0.20 0.34 0.11 0.04 NP 0.35 0.34 0.11 0.50 0.17 ROCE 0.34 0.17 0.20 0.07 0.17 EPS 0.50 0.20 0.165 0.20 0.46

9

All the p values of profitability indicators(except 2010-11 for ROE) fall in theacceptance region and so H0 getsaccepted. Thus, there is no statisticalsignificant at 5% level of significance, to

prove that Profitability position has beenchanged under IFRS compared toIGAAP. The differences can be observedin absolute terms, but there is not enoughevidence to prove the same statistically.

Table 5: Test statistics for Net Worth &Leverage position

YEAR 2014-15 2013-14 2012-13 2011-12 2010-11 Ratio PR 0.25 0.22 0.25 0.21 0.11 DER 0.32 0.31 0.31 0.30 0.03 TL-NW 0.25 0.23 0.25 0.24 0.02 CL-NW 0.04 0.062 0.04 0.04 0.43 FA-NW 0.34 0.25 0.25 0.31 0.02

All the value of leverage ratios does notlie in the critical region (except CL-NWfor 2014-15, 2012-13, 2011-12, 2010-11.DER-2010-11, TL-NW-2010-11,FA-NW-2010-11), but lies in the nonsignificant area and so H0 gets accepted.Thus, there is no statistical prove at 5%level of significance, to prove thatReporting leverage position under IFRS

is changed as compared to IGAAP.Therefore, even though differences can beobserved in absolute terms, there is notenough evidence to prove the samestatistically. Jindrichovska & kubickova(2014) found the same things that IFRSdoes not significantly impact on keyfinancial ratios of the Czech RepublicCompanies.

Table 6: Test statistics for Assets position

YEAR Ratio

2014-15 2013-14 2012-13 2011-12 2010-11

GAR 0.34 0.35 0.07 0.03 0.14 DD&A 0.11 0.17 0.03 0.13 0.28 VFA 0.054 0.07 0.03 0.02 0.05

All the value of Assets valuation ratios doesnot lie in the critical region (except DD &A 12-13,GAR 2012-13,2011-12,VFA2012-13,2011-12), but lies in theacceptance region and so H0 getsaccepted. Thus, there is no statistical prove

at 5% level of significance, to prove thatReporting Assets under IFRS is changedas compared to IGAAP. Although thedifferences can be seen in absolute terms,but there is not enough proof to prove thesame statistically.



Table 7: Test statistics for Cash Flow position

All the value of Cash Flow ratios does notlie in the critical region (except FPR 2010-11), but lies in the acceptance region andso H0 gets accepted. Thus, there is nostatistical prove at 5% level of significance,to prove that Reporting cash flow underIFRS is changed as compared to IGAAP.Although the differences can be seen inabsolute terms, but there is not enoughproof to prove the same statistically.

Overall interpretation as perhypothesis IThe aim of hypothesis I is to tested theimpact of IFRS on the financial indicators

of the Indian Companies. To prove this,the researcher formulates another five subhypotheses as per different financialposition of the Indian companies who haveadopted IFRS voluntarily. The test resultreveals that:

Hypotheses I:

Ho: Voluntary IFRS adoption has noimpact in improving the financial positionin terms of indicators.

H1: Voluntary IFRS adoption has impactin improving the financial position in termsof indicators.

Sub Hypothesis Decision

H0,1: Liquidity position did not changed after adoption of IFRS voluntarily. Rejected

H0,1: Profitability position did not changed after adoption of IFRS voluntarily.

Accepted

H0,1: Net worth and Leverage position did not changed after adoption of IFRS voluntarily

Accepted

H0,1: Assets valuation did not changed after adoption of IFRS voluntarily. Accepted

H0,1: Cash flow position did not changed after adoption of IFRS voluntarily Accepted

Out of Five Sub hypotheses, one is rejected,means IFRS have significant impact onliquidity position of selected IndianCompanies. In case of other four positions,although there is a difference in absolutevalue but these are not good enough to proveit statistically. It leads to the conclusion that

Discloser of Financial position did notimprove after the adoption of IFRSvoluntarily by selected Indian companies.

Hypothesis II:

To know the impact of voluntary IFRSadoption on firm valuation, the researcher

YEAR Ratio

2014-15 2013-14 2012-13 2011-12 2010-11

OCF 0.043 0.080 0.043 0.138 0.345 FPR 0.465 0.785 0.721 0.276 0.312 CFM 0.431 0.465 0.423 0.715 0.895

11

adopted Tobin’s Q as representative offirm market value (Kim &Koo, 2013).Tobin’s Q ratio is a ratio devised by JamesTobin of Yale University to estimate the firmmarket value; later several researchershave modified it and applied it in theirresearch. The traditional formula tocalculate Tobin Q is Total Market valueof the firm/Total assets value. Wang &Campbell (2012) applied modified formulaof Tobin Q ratio. That is Total Marketvalue of the firm/Net Worth. In thisresearch, revised formula has been appliedfor calculating Tobin Q ratios. Priorresearch suggested that the level ofdisclosure of accounting information havesignificant effect of the firm size (Owusu-Ansah 1998; Alsaeed 2005). On the otherhand Profitability, ownership structure andCompany’s growth influence the market

value of the firm (Kim &Koo, 2013). Toknow the impact of explanatory variables(company size, growth, profitability,ownership structure and the set ofaccounting standards) on therepresentative variables, a linear regressionequation is being developed.

Tobin’s q =β 0 + β 1 *ROE + β 2 *Δ SALES+ β 3 *ln(ASSET) + β 4 *DEBT + β 5 * Dummy + ε

Where:

ln(ASSET): natural log of Assets

Δ Sales: Change in sales

ROE: Return on Equity

DEBT: Debt to Equity ratio

Dummy: indicator of IFRS. Adopter=1,Non adopter=0

Table 8: Tests of Normality Kolmogorov-Smirnova Shapiro-Wilk

Statistic df Sig. Statistic df Sig. roe .088 71 .200* .935 71 .120 Chnginsales .058 71 .180* .967 71 .071 Inassets .122 71 . 140 .922 71 .070 DEBT .445 71 .000 .572 71 .000 tobinq .059 71 .180* .975 71 .095 Dummy .074 71 .200* .965 71 .081 *. This is a lower bound of the true significance. a. Lilliefors Significance Correction

Table 9: Correlations Results Roe Chnginsales lnassets DEBT Tobinq Dummy

Roe

Pearson Correlation 1 -.076 .033 -.106 -.095 -.190

Sig. (2-tailed) .527 .785 .374 .425 .111 N 72 72 72 72 72 72



Roe Chnginsales lnassets DEBT Tobinq Dummy

Roe

Pearson Correlation 1 -.076 .033 -.106 -.095 -.190

Sig. (2-tailed) .527 .785 .374 .425 .111 N 72 72 72 72 72 72

Chnginsales

Pearson Correlation -.076 1 .324** -.352** .655** -.015

Sig. (2-tailed) .527 .006 .002 .000 .898 N 72 72 72 72 72 72

lnassets

Pearson Correlation .033 .324** 1 -.119 .136 .044

Sig. (2-tailed) .785 .006 .319 .253 .716 N 72 72 72 72 72 72

DEBT

Pearson Correlation -.106 -.352** -.119 1 -.572** .358**

Sig. (2-tailed) .374 .002 .319 .000 .002 N 72 72 72 72 72 72

Tobinq

Pearson Correlation -.095 .655** .136 -.572** 1 -.025

Sig. (2-tailed) .425 .000 .253 .000 .834 N 72 72 72 72 72 72

Dummy

Pearson Correlation -.190 -.015 .044 .358** -.025 1

Sig. (2-tailed) .111 .898 .716 .002 .834 N 72 72 72 72 72 72

**. Correlation is significant at the 0.01 level (2-tailed). According to Table – 9, Two out of fourindependent variables are havingsignificant correlations with the dependentvariable which is “Tobin q”. The firstvariable, Chang in Sales are havingpositive correlation (0.655) with marketvalue of the company and significant at

5% level of significant. On the other handDebt to Equity ratio is negativelycorrelated (-0.572) with the market valueof the company. But for other twovariables, they does not show anysignificant relation which can provestatistically with Tobin q.

Table 10: Model Summary

Model R R Square Adjusted R Square

Std. Error of the Estimate

Durbin-Watson

1 .776a .602 .566 .90755 1.508 a. Predictors: (Constant), Dummy, lnassets, ROE, DEBT, Chnginsales b. Dependent Variable: Tobinq

13

The above table shows the regressionmodel fit summary, the R value which is.776, signifies that 77.6% of correlation ispresent between the dependent andindependent variables. Next, the R2 valuewhich is .602, it depicts that the linearregression explains 60.2% of thevariance in the dataset when all theindependent variables in the model affectsthe dependent variable, and the AdjustedR2 value which is .566 shows that 56.6%

of variation is explained by only thoseindependent variables that in actualityaffect the dependent variable. Then, theDurbin-Watson d = 1.508, which isbetween the critical value of 1.5 < d <2.5 It shows that there is no first orderlinear auto-correlation in the dataset.On The other hand, Durbin-Watson valueof 1.508 indicates that the data has noserial correlation or autocorrelationproblem.

Table 11: ANOVA

Model Sum of Squares

df Mean Square

F Sig.

1 Regression 67.657 5 13.531 19.246 .000b Residual 46.402 66 .703 Total 114.059 71

a. Dependent Variable: Tobinq b. Predictors: (Constant), Dummy, lnassets, ROE, DEBT, Chnginsales

According to Table –11, the F-test valueis 19.246 with degree of freedom (df) 71and the p value is less than 0.05 (0.00).Inregression equation, F-test has always anull assumption that there is no linear

equation between the variables (in otherterm, R²=0).Above F value and p valueindicates that, F-test is significant and thereis a linear relationship between thevariables in the model.

Table 12: Multiple regression analysis results (multi-co linearity check)Model Unstandardized

Coefficients Standardized Coefficients

t Sig. Collinearity Statistics

B Std. Error Beta Tolerance VIF

1

(Constant) .355 1.185 .299 .766 ROE -.016 .014 -.101 -1.147 .256 .951 1.051 Chnginsales .072 .014 .500 5.060 .000 .755 1.325 lnAssets .096 .085 .103 1.136 .261 .898 1.113 DEBT -.330 .284 -.459 -4.677 .000 .764 1.309 Dummy .108 .105 .093 1.029 .308 .906 1.104

a. Dependent Variable: Tobinq



The above model indicates that the averagevariable inflation factor (VIF) is 1.15.Therefore; it can be considered that thereis no multi-co linearity problem for thismodel. As per Neter et al. (1989), if thevalue is excess of 10, it is an indication ofmulti-co linearity and the regressioncoefficients are poorly estimated.According to Table – 12, the 1 st

independent variable “ROE” is having abeta value of -0.016. It implies that 1 unitincrease in the X (ROE) will decrease0.016 units in the Y (Tobin q).Which isvery negligible and not statisticallysignificant (0.766) at 5% level ofsignificance. Mensah(2013) have got thesame result when he conducted a study inGhana.2nd independent variable “Change in sales”is having a beta value of 0.072. It impliesthat 1 unit increase in the X (Chnginsales)will increase 0.072 units in the Y (Tobinq).Which is statistically significant (0.00)at 5% level of significance.3rd independent variable “assets” is havinga beta value of 0.096. It implies that 1 unitincrease in the X (Assets) will increase0.096 units in the Y (Tobin q).Which isvery negligible and not statisticallysignificant (0.261) at 5% level ofsignificance.4th independent variable “DEBT” is havinga beta value of -0.330. It implies that 1unit increase in the X (DEBT) will decrease0.330 units in the Y (Tobin q).Which isstatistically significant (0.00) at 5% levelof significance. It indicates that increasing

long term debt by a company willnegatively impact on shareholderperception.

5rd independent variable “Dummy” ishaving a beta value of 0.108. It impliesthat 1 unit increase in the X (Dummy) willincrease 0.108 units in the Y (Tobin q).Butthis result is not statistically significant(0.308) at 5% level of significance. Maybe the reasons are small number ofadopter; simultaneous present of IGAAPbased and IFRS based statement, lack ofawareness. But the indicator shows apositive sign towards IFRS adoption.

CONCLUSION:

The present research contributes to theliterature by investigating the basicdifferences between IFRS and IndianGAAP. Then it further analyzes the impactof these differences on Indian Companieswho have adopted it by analyzing annualreports of the Indian IT companies. Theabove analysis shows that, although thereis absolute difference in the quantitativeindicators, calculated as per financialstatement which is prepared as per IFRSand IGAAP rules simultaneously, there isno statistical evidence (except liquidityposition) to prove this difference. On theother hand the regression analysis showssome indicative result that adoption IFRscan increase market value by way offoreign investors, foreign acquisition etc.This research would help the policy makersin formulating more appropriate rules andregulations towards IFRS harmonizationin India.

15

REFERENCES:Ahmet Agca, Rafet Akta., 2007. FirstTime Application of IFRs and Its Impacton Financial Ratios: A Study on TurkishListed Firms, Problems and Perspectivesin Management / Volume 5, Issue 2.Balios Dimitrios, Eriotis Nikolaos,Paraskevopoulos Konstantinos , VasiliouDimitrios., May, 2013. The impact ofIFRS on ratios of listed and new listedcompanies of Athens Exchange,International Journal of Business andSocial Research (IJBSR), Volume -3,No.-5.Ball R.”International Financial ReportingStandards (IFRS): Pros and Cons forInvestors”. PD Leake Lecture. Institute ofChartered Accountants in England and Wales.Beke, J. (2011). International accountingstandardization practice in Hungary.Regional and Business Studies, 3(1), 9-24.Blanchette, M. Racicot, F.-E. Girard, J.-Y. (2011)’’ The effects of IFRS in FinancialRatio: early evidence in Canada’’ CertifiedGeneral Accountants Association ofCanadaC.A. Ton (2011). IFRS and EarningsManagement: aggregate accrualsapproach on Dutch listed companies.Working paper, Erasmus School ofEconomics.Callao, S., Jarne, J. I., & Lainez, J. (2007).Adoption of IFRS in Spain: Effect on thecomparability and relevance of financialreporting. Journal of InternationalAccounting, Auditing and Taxation.

Dani Foo , Lei Q, Davey.H(2012) Enterthe Dragon: China’s Convergence withRest of the World; AccountingPerspectives and Empirical Evidence.Global Review of Accounting andFinance Vol. 3. No. 1. 1 – 17.Gaston, S. C., Garcia, C. F., Jarne, J. I.,& Gadea, J. A. (2010). IFRS adoption inSpain and the United Kingdom: effects onaccounting numbers and relevance.Advances in Accounting, IncorporatingAdvances in International Accounting,Goncharov, Igor and Zimmermann,Jochen, (2006), Do Accounting StandardsInfluence the Level of EarningsManagement? Evidence from Germany,Working paper University of AmsterdamBusiness School.Gray, S. (1980). The impact ofinternational accounting differences froma security-analysis perspective: someEuropean evidence, Journal ofAccounting Research, 18(1): 64-76.Gyasi, A. (2010): “Adoption ofInternational Financial Reporting Standardsin Developing Countries - The Case ofGhana”, BSc Dissertation, University ofApplied Sciences.Houqe.,M.n & Zijl.,T.V ( 2010) The effectof IFRS Adoption and Investor Protectionon Earnings Quality around the World.Working paper No. 70.Ibiamke, Nicholas Adzor, Ateboh-Briggs,Patricial B., March 2014. Financial RatiosEffect of International Financial ReportingStandards (IFRS) Adoption in Nigeria,International Journal of Business and



Management Invention ISSN (Online):2319 – 8028, ISSN (Print): 2319 –801X, PP.50-59.Irena Jindřichovská, Dana Kubíčková .,February 2014. Impact of InternationalFinancial Reporting Standards (IFRS)Adoption on Key Financial Ratios: TheCase of the Czech Republic, Journal ofModern Accounting and Auditing,ISSN: 1548-6583, ISSN: 1548-6583,Vol. 10, No. 2, 133-146.Irvine, H. and Lucas, N. (2006): “Theglobalization of accounting standards: thecase of the United Arab Emirates”,working paper,3rd InternationalConference on Contemporary Business,Charles Sturt University, Australia.Jeanjean, T., Ding, Y. and Stolowy, H.(Janv 2009) ”Observations on measuringthe differences between domesticaccounting standards and IAS: Areply” Journal of Accounting andPublic Policy,N. 28(2), p. 154-161.JeongYeon Kim & ChangJin Koo (2013)Market Reaction to the adoption ofIFRSin South Korea. Recent Advancesin Business Management and MarketingISBN: 978-960-474-306-3.Lopes.T.P & Viana.C.R, 2008. “Thetransition to IFRS: disclosures byPortuguese listed companies,” FEPWorking Papers 285.

Majors,E & Marques,A (2009).IFRSintroduction,corporate governance andfirm performance:Evidence fromPortugal.JAMAR,55-70.Manzano M.P , Conesa I.M.” Assessingthe impact of ifrs adaptation on earningsmanagement: an emerging marketperspective”. Transformations inbusiness & economics .Vol. 13, No 1(31).21-40.Pazarskis, M. Alexandrakis, A.Notopoulos, P. Kydros, D. (2011) “IFRSAdoption Effects in Greece: Evidence fromthe IT Sector” Management ofInternational Business and EconomicsSystemsPunda P. (2011): The impact ofInternational Financial Reporting Standards(IFRS) adoption on Key Financial Ratios– Evidence from the UK. Aarhus Schoolof Business, Master’s Thesis.Terzi, S., Oktem, R. & Kiymetli Sen, I.(2013) “Impact of Adopting InternationalFinancial Reporting Standards: EmpiricalEvidence from Turkey”, InternationalBusiness Research, vol. 6, no. 4.Yhlas Sovbetov., September 2013. THEImpacts of IFRS Adoption on KeyFinancial Ratios in U.K Market- OverFTSE 100 Firms Through 2003-2007Years, Unpublished.

qqq

17

TRAINING EVALUATION AND MOTIVATION TOTRANSFER TRAINING - A REVIEW OF LITERATURE

MALABIKA SAHOOResearch Scholar, School of Management, Kalinga Institute of Industrial Technology (KIIT)

Bhubaneswar, Odisha, India-751024;Email:[email protected]

SUMITA MISHRAAssociate Professor, School of Management, Kalinga Institute of Industrial Technology (KIIT)

Bhubaneswar, Odisha, India-751024;Email: [email protected]


ABSTRACTIn the current scenario training plays a vital role for employeedevelopment. The worth of training can be assessed by evaluation.The training is said to be effective when the trainees will apply thelearning back to their job and life. Transfer of training in soft skilltraining is not possible without motivation to transfer. The purposeof this literature review is to explore different models theories andconcept of training evaluation, motivation to transfer training. Alsodifferent factors contributing to motivation to transfer training hasbeen studied. Basing the extant literature study, a conceptual modelhas been developed evaluate the factors before and after trainingwhich influence motivation to transfer training in soft skill trainingprogrammes.Key Words: Training, Training Transfer, Motivation to Transfer,Training Evaluation, Soft Skill Training

INTRODUCTION

Modern management gives importance toemployee development. In the currentscenario training plays a very important rolefor enhancing individual and organizationalperformance. Training is defined as anactivity which helps in changing people’sbehavior. It encourages the enhancementof the knowledge, skill and attitude of the

people for a specific objective. Bramley(2004) defines training as “a process whichfacilitates learning so that people canbecome more effective in carrying out theirwork”.

Research shows that organizations areinvesting huge amount of money on training(Holton, Bates & Ruona, 2000) with theanticipation that it leads to better individual

Parikalpana - KIIT Journal of Management (December, 2017)


as well as organizational performance, andproductivity at work, more revenues,reduction in employee turnover, bettercustomer satisfaction and enhancedmotivation level of employees (Velada etal, 2007). Effective application of thelearning back to the work setting is bigconcern for the organisations. Training hasno value until and unless it is beingpracticed by the trainees to their job aswell as personal life. Currently, the focusof organisations is on soft skill/life skilltraining programmes apart from technicaltraining programmes, because a happy andsatisfied employee can perform better thanan unhappy and dissatisfied one. Bradley,(2011) argued that trà³n³ng should facilitateemployees to perform well in their work,as well as lessen frustration and overanxiety created due to unfamiliar workhassle. Soft skills are defined as importantjob-related skills that that have little or zerointeraction with machines and it can beapplied to multiplicity of job contexts.

The principal objective of the presentliterature survey is to understand theexisting literature on the concept of trainingevaluation, motivation to transfer trainingand soft skill training programmes , differentmodels and theories and the mostinfluential factors accountable formotivation to transfer training .

Evaluation of the Training

Evaluation is defined by Bramley (2004)as a process to detremine the values ofsomething. The purpose of evaluation isto know whether training investments are

justified in terms of money and time.Evaluation helps in assessing and enhancingthe quality of content ,delivery and alsothe decision concerning the continuity ofthe training programme, it bindsaccountability of training practitioners(Griffin, 2012). According to Jain &Agrawal (2007) the important steps oftraining are analysis, design, development,implementation, and evaluation. Santosand Stuart (2003) also described fourstages of training such as “identifying needs,planning, delivery, and evaluation. Themost problematic part of training functionis the evaluation part. Organizations usuallypay little attention to assess theeffectiveness of the training programmes.The purpose of evaluation is mainly toexhibit and enhance training effectiveness(Ogundeji, 1991).

Phillips (1996), defines evaluation oftraining as ‘a systematic procedure to findout the value of training and its effect onthe organization’. Broadly evaluationprocess includes all the measures to put avalue on people, events, processes orthings (Rossi & Lipsey, 2004). Scriven(1999) recommended three basicquestions to be focused while doingevaluation such as is it worth of doing, isthere any better approach for conductingit and whether the evaluation lead to theexpected impact.

Different Models of TrainingEvaluation

There are many models of trainingevaluation develoed by different

19

researchers. Five emerging models arepresented in this section.

Kirkpatrick’s Training EvaluationModel

Kirkpatrick, (1979) has established fourstage criteria (Reaction, Learning,Behaviour and Results) for trainingevaluation. Reaction data reflects thelikeliness of a particular trainingprogramme. Learning focuses on assessingthe knowledge gained during the training.Behaviour measures application of learningback to job and results deal behaviouralchanges at work. Level- 3 (behavior) isconcerned with training transfer. Resultsindicate the extent of improved individualand organizational performance.

Among all the evaluation modelsKirkpatrick’s training evaluation model isone of the widely accepted model(Kaufman & Keller 1994; Bramley &Kitson, 1994; Phillips 1997). Cascio(2014) also said, it is the widely acceptedmodel in the field of organizationalpsychology. Many studies conducted inthis field support the Kirkpatrick Modelof training evaluations (e.g. Fromkin etal.,1975; Latham et al., 1975, Clement,1978 cited by Noe & Schmitt, 1986).However in later parts, the model getscriticized by many (Swanson & Holton1999; Holton, 1996 ). The model wasopposed by Holton (1996) and he arguedthat the association between the levels isnot strong. Other researchers found thattrue hierarchical relationship does not existbetween the levels (Clement, 1982;

Brewer, 2007). The reaction of thetrainees (Level 1) is not bound to bepositive for experiencing knowledgeacquisition (Level 2). Behaviour change(Level 3) in the job, might also happenwithout learning from the training (level-2). Warr, Allan, & Birdi (1999) arguedthat significant relation exists amongreaction, benefits of the training, motivationto apply and Learning (Level 2). Nosignificant relationship exists job behaviour,learning and reaction. But Performancein the job and learning are positively related(Warr & Bunce, 1995). HoweverKirkpatrick (2009) argued that theassociation between constructs of hismodel is linear: for the effectiveness oftraining programme trainees should reactfavourably and behaviour change will nothappen without learning.

Kaufman’s Evaluation ModelKirkpatrick’s innovative four-level modelhas been expanded by other evaluators.(Kaufman & Keller, 1994a) added a fifthlevel which addresses societal issues. Theytried to justify that the main rationale ofthe model by Kirkpatrick was to assesstraining and now companies are interestedfor evaluating other kind of developmentalevents. Kaufman level 5 which addressessocietal issues extend evaluation beyondthe scope of the organisation and intendedto find how the evaluation process affectsthe society and the surroundings near ofthe organisation.

ROI Model by Phillips Return on investment (ROI) concept is

Training Evaluation and Motivation to Transfer Training –A Review of Literature


applied in industry to determine thefinancial worth of an investment (Phillips,1996). There is much similarity betweenPhillips’s evaluation model andKirkpatrick’s model. ROI as the fifth levelis a new addition in his model. To capturethe financial value of the trainingprogramme the ROI must be calculated(Phillips & Phillips, 1997) The differentphases of Phillips’s evaluation model areReaction and Planned Action (level-1),Learning (level-2), Job Application (level-3) Business Results(level-4) and return onInvestment(level-5). The first level dealstrainees reaction about the programmesand their planning regarding the materialof the training. Level-2 (learning) assessesthe magnitude of improvement inknowledge, skill and attitude afterattending the programmes. Level-3(Jobapplication) assesses whether the traineesapplied the learning in their job. Level-4(Business result) measures the whether thetraining leads to any tangible results andlevel-5 (Return on Investment) deals withthe cost benefit analysis. ROI assesseswhether the monetary values exceed thecost of the training programme.

The first level of evlaution of ROI model,is similar to reaction measure ofKirkpatrick’s model. Phillip’s modelincorporates the application of learning bythe participants from the trainingprogramme. Few other researchersexplained that ROI is already embodiedin level 4 results of Kirkpatrick’s model,hence there is no need of the fifth level(Lanigan, 1997). In response it has been

argued that the fifth level is based on acost-benefit analysis which is mandatoryto calculate ROI, which in turn helps tocalculate the monetary worth of the trainingprogramme (Phillips, 1996).

CIRO Model by Warr, Bird, &RackhamThe phases of CIRO model are Context,Input, Reaction, and Outcome (Warr, Bird,& Rackham, 1970). The purpose ofcontext evaluation is proper training needanalysis. There are three objectives in thecontext level i.e ultimate, intermediate andimmediate. The input evaluation deals witheffective planning, design of the training,delivery and management to achieve theeffectiveness of the training programme.Reaction evaluation deals with thesatisfaction of the trainees about thetraining. And finally outcome evaluationmeasures the results of the trainingprogrammes.

In this model context and inputs analysisare considered to be mandatory beforereactions and outcome assessment (Santos& Stuart, 2003). The basic differencebetween CIRO model and Kirkpatrickmodel is the CIRO evaluation modeltargets the activities both before and afterthe training programme. This model getcriticized because it does takes in toaccount the behaviour. The model issuitable to managerial levels than for lowerlevel employees.

CAIPO Model by Easter- SmithAnother model was developed by Easter-Smith in 1986 which includes: context,

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administration, inputs, process andoutcomes (Easterby-Smith, 1994) .Context evaluation looks out differentaspects out of the box of the trainingprogram i.e. work place supports to thetrainees. The main goal of administrationevaluation are pre and post trainingactivities such as nomination, selection,briefing of training, and follow-up actionand post-course evaluation. InputsEvaluation critically analyses methodology& subject matter. Evaluation concernedwith process deals with experience of thetrainees and the actual procedure appliedthroughout a training programme andexperience of the participants. Outcomeevaluation measures the change inknowledge, skills, attitudes and behaviourof the person and overall performance ofthe organization. The techniques used inCAIPO evaluatio may be alike to otherevaluation models. But here, the evaluatorgets a series of options for conductingevaluation.

In spite of the criticism put by manyKirkpatrick model is the most widelyaccepted model because of its simplicity.Toole (2009) opined that in the year 2009Kirkpatrick model celebrated its 50th

anniversary and still it is the highly influentialapproach being used across the world forinstructor led and content based training.It is made an outstanding contribution tothe field of evaluation. In spite of thecriticism this model has proved to be highlysignificant and influential (Santos & Stuart,2003).

Major Gaps

Literature on training evaluation shows thatthe different procedures for assessingtraining are not simple rather appearscomplex and confusing. There are manymodels or methods which often createspanic among practitioners. According toSpitzer & Conway (2002) the causes forlack of training evaluation are inappropriate methods, lack of focus on pretraining assessment, lack of clarityregarding linking training to businessresults. Hence evaluating the transfer oftraining is mostly overlooked, in spite ofmany training transfer models beingpresented by researchers (Noe &Schmitt, 1986; Baldwin & Ford, 1988;Thayer & Teachout, 1995; Holton III,1996; Tracey, J et al., 2001).

Motivation to Transfer Training

In the field of training transfer , motivationto transfer plays a very vital role. In spiteof many efforts transfer problem is of greatheadache for organizations (Baldwin &Ford, 1988). Training transfer is theeffective implementation of attitude,knowledge and skills back to theprofessional life after attending the trainingprogramme (Baldwin & Ford, 1988).Training transfer therefore, is concernedwith actual learning from training. Hencetraining transfer is considered as behaviorchange in work place and the new learningform the training must be relevant to thecontext of the job, and there should becontinuity in application of the learning overa period of time. Kirkpatrick (1996)



stated that training transfer is possible tomeasure and it can be done by measuringparticipants learning and reaction.Motivation to transfer is the pre conditionfor actual transfer of training.

According to Bates, Kauffeld, & Holton(2007) ‘motivation to transfer training isthe magnitude, direction and continuouseffort to implement the knowledge andskills gained from the training in the workplace. In other words the interest of thetrainees to use the new learning in the jobis called motivation to transfer training.

Factors Influencing Motivation toTransfer Training

There are many factors that can facilitateor hinder motivation to training transfer.Most of the researchers and practitionersin training field have highlighted threemagnificent factors influencing trainingtransfer such as a) design of training :training programmes must be designed insuch a manner, the trainees will becomfortable to learn the content, b)relevance and reinforcement: the newlylearned knowledge, skill and attitude mustbe relevant to the work and reinforcedpositively; and c) motivation of the traineesto apply the new learning in the workplace(Polanco, 2013).

Tziner, Haccoun, & Kadish ( 1991)explored a positive correlation amongpersonality of the trainee and trainingtransfer. Following the theory of Locusof control (Rotter, 1966) they found thatlocus of control and training transfer aresignificantly connected. The rate of

transfer is more with individuals havinginternal locus of control than external locusof control. Motivation and transfer oftraining together supports to create a bestpossible learning atmosphere. If thetrainees feel that the learning is importantand can be applied in their life they willconsider learning worthy, and will bemotivated to obtain the new skill orknowledge. For effective transfer oftraining the trainees must be aware of theopportunities for transfer and must bemotivated to utilize those opportunities(Prawat, 1989).

Perception of trainees about a suitablework atmosphere greatly influence theirmotivation to gain knowledge of and applythe newly learnt skill from the trainingprogramme (Noe & Schmitt, 1986).Transfer of training is greatly affected whentrainees do not find a conducive workatmosphere and lack of support from theirmanagers/supervisors the supervisors,work pressure (Baldwin & Ford, 1988;Broad & Newstrom, 1992; Cheek &Campbell, 1994). In addition, the traineedoes not show any interest to apply thenewly learnt skill when they found noopportunities to use the acquired learningfrom the training activities. Lack ofperformance feedback from the supervisoralso restricts the transfer (Velada et al.,2007). Performance feedback helps thetrainees know whether they are rightlyapplying the learnt skill. Furthermore,pressure from peer reduces transfer,particularly when peers have notundergone the similar training or they don’t

23

give importance to the new skill (Marx,1982). One more external factor is theincentives by organizations to encouragethe transfer and how these incentives meetthe expectations of the trainees (Facteau,Dobbins, Russell, Ladd, & Kudisch,1995). Reward is also found to be apositive determinant of transfer of training.Among the plethora of barriers found inpast studies, the most prevalent barrier totransfer of training is lack of reinforcementat the workplace (Broad & Newstrom,1992; Cheek & Campbell, 1994). Asupportive work atmosphere motivates thetrainees to apply newly learnt skill whereas an unsupportive work atmosphereprevents transfer of training (Rouiller &Goldstein, 1993) .

Holton, Bates, Seyler, & Carvalho (1997)in their study on transfer climate at workplace revealed that support fromsupervisor , rigidity to accept change ,scope to utilize the newly learnt skill haveimpact training transfer. Perceivedsituational limitation in the workplacenegatively affects pre-training motivationand ultimately training effectiveness(Mathieu et al. 1992).

According to Kozlowski & Salas(1997)opined that pre-training environment alsoaffects transfer of training. The motivationlevel of the trainees to use the learned skillis low when the context does not support.

Soft Skill Training

Soft skills are the the inter and intrapersonal skills, necessary for self-development, socialisation, and achieving

excellence in workplace (Kechagias,2011). Soft skills are usually referred aspeople skills and attributes which influencean individual’s capability to be interactivewith co-workers and customers. The skillsconsidered as soft skills arecommunication, conflict resolution andproblem solving. Coaching is also termedas a soft skill for supervisors. These skillshelp one stay employed, survive in a job,perform better on the job and have betterinterpersonal relationship

Soft skills are essential for getting successin professional life. These skills help theorganisation function smoothly andincrease the productivity. NowadaysOrganizations expect that their employeesmust possess both soft skills and hard skillsfor serving better customer satisfaction. Ithas been argued that hard skills contributeto growth in organizations but down fallsare because of lack of soft skills.

Major Gaps

On the basis of above study of literature,it has been found that though there arestudies concerning training evaluation andits effect motivation to transfer training,there is dearth of studies with regards tosoft skill training programmes(Charoensap-Kelly et al., 2016). In spiteof the heavy importance evaluation of softskill training are mostly ignored by theorganizations. So there is a demand tostudy the impact of training evaluation onmotivation to transfer in soft skill trainingprogrammes.



Table 2. Summarization of the Literature ReviewTraining Evaluation

Contributors Major Findings Major Gaps Identified

Cascio (2014), Toole (2009), Brewer (2007), Santos & Stuart ( 2003), Spitzer & Conway (2002),Warr, Allan, & Birdi (1999), Phillips (1997), Lanigan (1997), Holton (1996), Kirkpatrick (1996), Holton III (1996), Warr & Bunce (1995), Thayer & Teachout (1995), Kaufman & Keller (1994), Easterby-Smith (1994), Baldwin & Ford, (1988),Noe & Schmitt, (1986), Clement (1982), Warr, Bird, & Rackham(1970).

• The four levels of Evaluation are reaction, learning . behaviour and result.

• Importance of Evaluation is highlighted • Kaufman added 5th level concerning societal

issue • Phillips added Return on Investment (ROI) • Phillip’s model is similar to Kirkpatrik

model.

• Though on an average results show that Kirkpatrick model has been widely utilized but such evaluation did not show realistic results

• Moreover organizations mostly used the first two levels but did not venture beyond that

• Lack of awareness on training evaluation in training communities

• Lack of budget for evaluation of training programme

Motivation to Transfer Training and Soft Skill Training

Charoensap-Kelly et al., (2016), Polanco (2013), Bates, Kauffeld, & Holton (2007), Velada et al., (2007), Kozlowski & Salas (1997), Kirkpatrick (1996) , Facteau et al., (1995),

Tziner, Haccoun, & Kadish ( 1991), Prawat (1989), Baldwin & Ford( 1988), Noe & Schmitt (1986), Rotter (1966).

• The need of transfer of training studied • The factors such as trainees characteristics,

training design and work environment given by Baldwin and Ford model mutually affects training transfer

• Freedom of choice for attending the training programmes results better achievement scores

• Positive correlation among personality of the trainee and training transfer exists

• Motivation is very important for transfer of training

• Perception of trainee about suitable work atmosphere affects the motivation to transfer

• External factors such as incentive by the organization also affects motivation to transfer of training

• Perceived situational limitation affects pertaining motivation and training effectiveness

• Soft skills the important job-related skills that that has little or zero interaction with machines .

• Soft skills are crucial for better performance, present and future leaders

• In comparison to hard skills, soft skills contributes more in the success of an organization.

• Training does not lead to change in behahivaour always

• It is very difficult to measure motivation to transfer training and actual transfer of training

• The transfer of training is very low

• Evaluating motivation to transfer of training is not a common practice and is overlooked in spite of many models and transfer problem still persists in organisations

• Dearth of studies in measuring the transfer of soft skill training

• In comparison to hard skill evaluating the effectiveness of soft skill training is very difficult

• No simple models for evaluating the transfer of soft skill training programmes

Conclusion

From the above literature, it has been foundthat there are different factors which

impact motivation to transfer training in softskill programmes. Those factors can becategorized as factors related to

25

characteristics of trainees and situationalfactors. The most important individualfactors are self efficacy, work motivation,desire to learn, pre motivation to transfer,locus of control etc. The situational factorsinfluencing motivation to transfer aresupport form organization, work culture,work atmosphere, rewards, managerialsupport, supervisory support, peer supportetc. Evaluation of these factors willenhance motivation to transfer among thetrainees.

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CAUSAL LINKAGE AMONG BUSINESS ANALYTICS,SUPPLY CHAIN PERFORMANCE, FIRM

PERFORMANCE AND COMPETITIVE ADVANTAGE

Jamshi. JInnovation Fellow, National Innovation Foundation, Gandhinagar-38272, India

[email protected]

Ganeshkumar CAssistant Professor

Indian Institute of Plantation Management, Bangalore - 560056, [email protected]


ABSTRACT

The research work examines the causal linkage among businessanalytics, supply chain performance, firm performance andcompetitive advantage. The conceptual model and hypothesis wasdeveloped through literature review and collected data from industrieswere empirically tested using structural equation modeling technique.The finding suggest that companies that support their analyticalcapabilities with good information system are likely to be more capableof performing better and better understanding of the factors ofbusiness analytics that influences the organizational competitiveadvantage

Key words: Business Analytics, Supply Chain Performance, FirmPerformance Competitive Advantage

INTRODUCTION

Supply chain managements play animportant role in this modern world sincethe competition is no longer between theorganizations but between the supplychains(Narasimhan & Jayaram, 1998;Trkman, McCormack, De Oliveira, &Ladeira, 2010). The supply chain(SC)

achieves its competitive advantage byincreasing the efficiency of SC analyticsand the techniques for the optimization hasbeen an integral part of the organizationalbusiness process.(Wang, Gunasekaran,Ngai, & Papadopoulos, 2016). Over theyears, interest in research of BusinessAnalytics (BA) has been increasing since



it provides the correct decision in businessbased on the amount of data.

Here based on the Supply-ChainOperation Reference (SCOR)-Plan,source, make, and deliver. We consideranalysis of BA on different parts of theSupply Chain (Trkman et al., 2010). Thispaper thus analyses the causal linkageamong business analytics, supply chainperformance, firm performance andcompetitive advantage. This is importantin achieving competitive advantage byenhancing the effectiveness and efficiencyof supply chain analytics .The optimizingtechnique and business analytics playingan important role in organizational businessprocesses by using business analytics. Wecan take important and crucial businessdecisions based on bundles of very largevolumes of both internal and externaldata(Rao & Holt, 2005).

Structural equation modeling (SEM) refersto a diverse set of mathematical models,computer algorithms, and statisticalmethods that fit networks of constructs todata (Tenenhaus, Vinzi, Chatelin, & Lauro,2005) . The methods of SEM helpresearchers to incorporate unobservablevariables measured indirectly by theindicator variables (Vinzi, Chin, Henseler,& Wang, 2010). It includes confirmatoryfactor analysis and path analysis(Ganeshkumar & Nambirajan, 2013). Forthis paper, we used partial least squarespath analysis to check the hypotheticalmodel. While examining the model. Thestructured of paper is as follows: Initially

the relationship of supply chainperformance, firm performance, andcompetitive advantage are consideredalong with a conceptual model andhypothesis. Secondly, we consider themethodology that is being used in thisresearch work. Next, the results anddiscussion are explained. The conclusionreflects the main implication of researchand scope for future study.

LITERATURE REVIEW ANDCONCEPTUAL MODEL

Supply chain and the mathematicalequations cannot effectively capture thedynamics that occur within these valuesystems. Improving and monitoring theperformance of a supply chain has becomean increasingly complex task and includesmany management processes such asidentifying measures ,defining targets ,planning ,communication ,monitoringfeedback(Handfield & Bechtel, 2004).Business analytics analysis the bundles ofvery large volumes of data. Largecompanies may have thousands of differentsuppliers, the use of such frameworks isimpossible without business analytics(Limam Mansar & Reijers, 2007).Business analytics improves supply chainperformance through analyticalmeasurement system.it promotes theefficiency within an organization, improvedbusiness analytics capabilities reduces thecosts and achieves higher profit margins.Many organization that already havesystem in place to collect data and gatherinformation often find themselves in a

31

situation where they do not have a suitableapproach to put their vast data andinformation into use for strategic decisionmaking.it is also critical that theorganization constantly evaluate its modelsto ensure their predictive validity(K.McCormack et al., 2009). The supplychain management is quite a broad termand encompasses the integration oforganizational units and business processes

along a supply chain to coordinatematerials, information and financial flowsin order to fulfill customer demands (K. P.McCormack & Johnson, 2016). SinceSCOR (Plan, source, make, deliver) hasbeen widely employed for supply chainoptimization it was used as a frameworkfor our study (Lockamy III & McCormack, 2004)..

Make

Plan

Source

Deliver

Supply chain performance

Firm performance

Competitive advantage

H1

H2

H3

H4

H5

H6

Fig 1: Conceptual Model

H1: There is a positive relationship between make and supply chain performance, H2:There is a positive relationship between plan and supply chain performance, H3: Thereis a positive relationship between source and supply chain performance, H4: There is apositive relationship between deliver and supply chain performance, H5: there is apositive relationship between supply chain performance and firm performance, H6:there is a positive relationship between supply chain performance and Competitiveadvantage and H7: there is a positive relationship between firm performance andCompetitive advantage.

.

Causal linkage among business analytics, Supply chain performance, Firm.......


3. RESEARCH METHODOLOGYThis study investigates the casual linkagesince it aims to study the impact of analyticsin organizational performance andcompetitive advantage. The surveyembraced questions regarding the keypractices in supply chain and itsapplications in the supply chain. Thedeliberations and interviews were basedon the SCOR (plan, source, make, delivermodel).All the construct is related to theperceived performance as determined bythe survey performance, as determined bythe survey respondents. It is representedas a single item for each decision area. Theparticipants are asked to give theirsuggestions in five point Likert scale(1=Strongly disagree; 5 Strongly agree).

The sample includes 31 companies fromdifferent industries and the respondentcame from different positions (sales, IS,planning and scheduling, marketing,manufacturing, engineering, finance,

distribution, and purchasing (Ganeshkumar& Nambirajan, 2013) .

RESULTS AND DISCUSSION

To test the hypothetical model andevaluate the influence of BA variables onsupply chain performance, firmperformance and competitive advantageusing, structural equation modeling hasbeen used (partial least square; PLS) wasused to test the hypothesis. The constructof analytics capabilities in the plan , source,make and delivery areas of SCOR areawere considered as latent variables of thereflective construct related withperformance, the research results showthat the use of BA in critical process areacan affect supply chain performance , firmperformance and competitive advantage.The different sample of companies fromdifferent industries inculcate the findings.Our result provides a preliminary indicationthat an investment in BA brings mostsignificant improvement.

Fig 2: Results of Proposed Conceptual Model with T-Statistics Values

33

When it comes to making process, the Tstat value is 2.633 which have a positiveinfluence on supply chain performance, thecompanies are adopting constraint-basedplanning methodologies which includecustomer planning and schedulinginformation and they can improve upon thelead time information updates also. Delivercomponents have greater impact on supplychain performances. The T stat value ofdeliver component is 3.901 which

influence the supply chain performances.The supply chain performance has a T statvalue of 3.143 on firm performance, whichshows that supply chain performance hasa greater impact on firm performancewhich enhances the competitive advantage.The price, quality, delivery dependability,product/service innovation, time to marketincorporates the competitive advantages.Fig 3 represents the Beta value of thecomponents

Fig 3: Results of Proposed Conceptual Model with Beta Coefficient Value

Table 1: Result of Hypothesis-testing

RELATIONSHIPS Beta Value

S.E T stat

Value

Hypotheses Results

H1:Make to Supply chain Performance 0.158 0.06 2.633 Accept at 0.01 significant level

H2:Plan to Supply chain Performance 0.05 0.09 0.624 Reject

H3:Source to Supply chain Performance 0.232 0.13 1.802 Accept at 0.10 significant level

H4:Deliver to Supply chain Performance 0.590 0.16 3.901 Accept at 0.01



H4:Deliver to Supply chain Performance 0.590 0.16 3.901 Accept at 0.01 significant level

H5:Supply chain Performance to Firm Performance

-0.234 0.08 3.143 Accept at 0.01 significant level

H6:Supply Chain Performance to Competitive Advantage

-0210 0.21 1.021 Reject

H7:Firm Performance to Competitive Advantage

0.77 0.22 3.41 Accept at 0.01 significant level

Fig 2. shows that the T stat value of plancomponent is 0.624. It had value less than1.96 which implies that the planningcomponent has less impact on supply chainperformance. Many companies are notusing analysis tools to examine the impactbefore a decision-making, but if they usethem, then the companies can have betterplanning. The forecast accuracy value is0.701. Even the usage of mathematicalmethods for forecasting the demand is alsoless. These all factors affect the supplychain performance in a broader way.

Studies reveals that the usage of analysistools to examine the decision-making, theusage of mathematical model forforecasting demand and good strategiesinfluences the planning processes. Socompanies can improve their panningprocess by concentrating on these aspectsthereby by it can improve the supply chainprocesses.

Further gathering of enough data may bedifficult and time consuming. It is notedthat a company is unable to makesimultaneous efforts in each of the fourSCOR areas (Plan, source, make,deliver).

CONCLUSION ANDIMPLICATIONS

The analytical capabilities have greaterimpact in guiding towards precise decisionsand impart automated decisions in sometasks in organizations. The companies thatsupport their analytical capabilities withgood information system are likely to bemore capable of performing better. Theresult provide limited support for theimpact of analytics in the deliver area, it isbecause delivery is often outsourced anddecision take place at the end of thedecision process where their effect maybe limited but after reaching a certain levelin plan, source and make areas ,Businessanalytics has greater impact onperformance in deliver area. Businessanalytics can bring a larger improvementin performance, the investment in businessanalytics plays a greater impact inorganization performance; further gatheringof enough data may be difficult and timeconsuming. It is noted that a company isunable to make simultaneous efforts in eachof the four SCOR area (Plan, source,make, deliver). But the proper investingsequencing depends on the characteristicsof the supply chain, and firm performance

35

as treated as a single construct in this paper.It also investigates how Business Analyticsin various areas of supply chain impactdifferent performance metrics such as on-time delivery quality, costs, reliability, andflexibility.

REFERENCES:

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redesign: use and impact. BusinessProcess Management Journal, 13(2),193-213.

Lockamy III, A., & McCormack, K.(2004). Linking SCOR planning practicesto supply chain performance: Anexploratory study. International journalof operations & productionmanagement, 24(12), 1192-1218.

McCormack, K., & Lockamy, A. (2005).The impact of horizontal mechanismswithin sales and operations planningprocesses on supply chain integrationand performance: a statistical study.Paper presented at the 4th GlobalConference on Business & Economics,Oxford, UK.

McCormack, K., Willems, J., Van denBergh, J., Deschoolmeester, D., Willaert,P., Indihar Štemberger, M., . . . PauloValadares de Oliveira, M. (2009). A globalinvestigation of key turning points inbusiness process maturity. BusinessProcess Management Journal, 15(5),792-815.

McCormack, K. P., & Johnson, W. C.(2001). Business process orientation:Gaining the e-business competitiveadvantage: CRC Press.

McCormack, K. P., & Johnson, W. C.(2016). Supply chain networks andbusiness process orientation: advancedstrategies and best practices: CRCPress.

Meixell, M. J., & Gargeya, V. B. (2005).Global supply chain design: A literature



review and critique. TransportationResearch Part E: Logistics andTransportation Review, 41(6), 531-550.

Muylle, S., & Basu, A. (2008). Onlinesupport for business processes byelectronic intermediaries. DecisionSupport Systems, 45(4), 845-857.

Narasimhan, R., & Jayaram, J. (1998).Causal linkages in supply chainmanagement: an exploratory study ofNorth American manufacturing firms.Decision sciences, 29(3), 579-605.

Rao, P., & Holt, D. (2005). Do greensupply chains lead to competitiveness andeconomic performance? Internationaljournal of operations & productionmanagement, 25(9), 898-916.

Röglinger, M., Pöppelbuß, J., & Becker,J. (2012). Maturity models in businessprocess management. Business ProcessManagement Journal, 18(2), 328-346.

Stefanovic, N., & Milosevic, D. (2017).Developing Adaptive BusinessIntelligence Systems for Agile SupplyChain Analytics. Paper presented at theProceedings of the 2017 InternationalConference on E-commerce, E-Businessand E-Government.

Tenenhaus, M., Vinzi, V. E., Chatelin, Y.-M., & Lauro, C. (2005). PLS pathmodeling. Computational statistics &data analysis, 48(1), 159-205.

Trkman, P., McCormack, K., De Oliveira,M. P. V., & Ladeira, M. B. (2010). Theimpact of business analytics on supply chainperformance. Decision Support Systems,49(3), 318-327.

Vickery, S. K., Jayaram, J., Droge, C., &Calantone, R. (2003). The effects of anintegrative supply chain strategy oncustomer service and financialperformance: an analysis of direct versusindirect relationships. Journal ofoperations management, 21(5), 523-539.

Vinzi, V. E., Chin, W. W., Henseler, J., &Wang, H. (2010). Handbook of partialleast squares: Concepts, methods andapplications: Springer Science &Business Media.

Wang, G., Gunasekaran, A., Ngai, E. W.,& Papadopoulos, T. (2016). Big dataanalytics in logistics and supply chainmanagement: Certain investigations forresearch and applications. InternationalJournal of Production Economics, 176,98-110.

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DETERMINING ASSOCIATION BETWEEN AGE,OCCUPATION AND USAGE OF ONLINE BANKING

SERVICES AMONG CUSTOMERS

Hiteksha Joshi UpadhyayAssistant professor at NRIBM, GLS University, Ahmedabad

[email protected]; [email protected]

Payal Rajani & Saloni SuraniPGDM, NRIBM, GLS University, Ahmedabad


ABSTRACT

Banking is a customer oriented service industry, therefore the customeris the focus and customer services is the differentiating factors.Customer in India and specifically in urban area, no longer want towait in long queues and spend hours in banking transection. So thispaper shows awareness and perception of customers regarding SSBT(Self Service Banking Technology). To conduct this descriptiveresearch, response of 300 respondents is take through questionnairefrom Ahmedabad city. Analysis of respondent’s response done throughSPSS software and chi square test is used to determine association.

Key words: Indian Banking Industry, SSBT, Satisfaction, technology

Introduction

Tremendous Progress in the field ofinformation technology has reduced theworld to a global village and it has causedunprecedented changes in the bankingworld. The Banking industry like manyother financial services industries facing arapid changing market, new technologies,Competition, uncertainties, moredemanding customers and changingclimate has presented noticeable set ofchallenges. Bank have started recognizingthat business depends on client servicesand contentment of customers and this is

compelling them to improve customerservice and build up relationship withcustomer.

Literature review

Internet and Mobile Association of India,(2006) Noted banking transactions areperformed majorly through ATMs i.e. 53%and only 23% of the online users do theirbanking transactions through InternetBanking. It was also found that peopleprefer face to face meet with the bankemployees and get their transactionsprocessed instead of online bankingbecause of reasons like lack of knowledge,



security issues and less user friendlychannels.

Gerrard, Cunningham, and Devlin, (2006)Studied the goal of marketing campaignsis to attract more males as well as moreinternet users who have used internetservices before, educated public, and highincome groups. There are reasons whypeople do not using online services likefirstly that it is risky and secondly, they feelthese services are not needed. The otherdrawbacks of not using Online service isunreachability, lack of understanding,pricing, lack of IT knowledge.

Sohail & Shanmugharn, (2003) Identifiedthe factors that affected the use of Internetbanking some of them are awareness,convenience, trust on the bank, accessible,adopting new changes, etc. more adoptionto internet banking have been witnessedin Malaysia and there are lots of chancesof increase in usage of online services.

Bradley & Stewart, (2002) As per theresearch conducted by Bradley andStewart, it shows that the major issuehindering in retail banking is InternetBanking. Internet Banking is not astandalone strategy i.e. clicks only ratherit is a multi-channel strategy i.e. bricks &clicks. With the help of more accessibilityof internet banking, banks can achievecompetitive advantage through theirservices.

Bandyopadhyay, (2004) Concluded it isseen that in the past three years credit cardindustry is been growing at 3.1%compounded annually. In India 0.6% of

the consumption expenditure is throughcredit cards. The countries in USA andAsia Pacific region shows higher usage ofcredit card usage.

Eriksson & Nilsson, (2007) Proved thatevery coin has two sides, similarly, internetbanking also have its pros and cons. Onone side internet banking is a multi-channelcontext which is useful to the users and onthe other side users are not satisfied withthe service providers and the distributionchannels. Nevertheless, buyers aresatisfied with face to face meets whichcannot be fulfilled through internet banking.One can be satisfied with internet bankingbut it does not guarantee that the user willbe loyal to this service.

Jazeela, (2005) Conducted on perceptionsof banking products and services byJazeela, in urban areas of Kerela showsthat due to rigid systems of book keeping,accounting and legal bank customers aredissatisfied. Moving to or adopting any newtechnology by Indian banks is very slow.Banks are adopting electronic innovationbut are not fully adopted. Due to lack ofavailability of fund, there are problems inautomation of banking functions.

Akinci, Aksoy, & Atilgan, (2004)Conducted a study that revealed thedifferences between attitudes anddemographic profiles of users as well asnon-users. The users of internet bankingwere more techno savvy, convenient &middle aged. While the people who don’tuse internet banking are dragged towards

39

traditional banking structure, lessadaptability to changes, lack of confidencein internet banking. The preferences ofconsumers play an important role inbanking channels.

Lee & Schumann, (2005) stated there arelots of difference between online users andnon-users in terms of attitudes, beliefs,convenience, risk taking ability, etc. thepeople who wanted quick & betterservices always preferred online serviceswhereas, non-users receive lower servicesat better rates.

Goldfinger, (2001) Discussed the majorissue that came across was the safety andsecurity of banks as well as consumers.The consumers hesitated to use onlineservices as they felt it is less secured andtheir personal data can be misused. Onthe other side the banks had unauthorizedaccess in their systems and also cost ofadopting new security tools was high. Tominimize the flaw in the banking systems,they are updating their security techniqueslike smart card, digital signatures,biometrics, etc.

Kimball & Gregor, (1995) Identified thatbranch banking are useful in retainingexisting customers as well as attracting newcustomers for the banks. ATM is the firstalternative channel which is a part of self-service banking channel. It is convenientto customers 24/7. The other channel usedby customers is telephone banking inwhich the customers were able to connect

to an automated channel of their bank bygiving a phone call.

Eriksson & Nilsson, (2007) Exploredbanks started offering various otherbanking chaneels because of developmentof technology and as a result of this theself service banking technology hasreplaced the face to face interactionbetween both, i.e; banks and thecustomers.

Zeithaml & Gilly, (1987) Observed thatthe adoption of self service bankingtechnology depends on various factors likeage, gender, maritial status. This study haslinked age and adoption of self servicebanking technology from which it is foundthat the adoption of self service bankingtechnology is more among youngsters.

Thornton & White, (2001) they madecomparison between seven differentchannels namely ATM, EFT, Cheque,Human Teller, Credit Card, Telephone andInternet from which it was found thatconvenience, knowledge, service, internetare the factors on which the usage ofdistribution channel depends on. Theusage of ATM, EFT and telephone wasincreased due to increase in understanding,alertness and availability of internet.

Daniel, (1999) Founded that “ease of use”is the most important factor for customersin order to accept electronic banking. Shealso found out the reasons for lowacceptance of electronic banking whichwere risk involved in electronic banking,

Determining association between age, occupation and usage .......


security and internet availability. Soaccording to her the customers will notadopt electronic banking until and unlessit is safe and secure.

Lee & Lee, (2000) Reveled that very lesspeople have adopted the technology fordirect bill payments. Due to increase ineducation and income, customers havestarted adopting new technologies. In theresearch conducted before, customersresponse was positive as they find it easyand useful.

Polatoglu & Ekin, (2001) Conductedresearch and identified the factors todetermine the satisfaction level ofcustomers in which it was seen that thecost saving factor is the reason behindsatisfaction of customers. It is easy for thecustomers to use self-service bankingtechnology due to higher knowledge andskills. Even the availabilty of resources wasalso a factor on which the adoption of theseservices is dependent.

Leblanc, (1990) Analyzed the perceptionsof users and non-users towards ATM’s.In this study, author identified variousfactors that attracted ATM users such as24/7 availability, prompt, easy to use andless cost. Customers find ATM servicecomplex, difficult to understand, less secureand risky so they avoid using it.

Research Methodology

Objective

To Study the usage pattern of technology-enabled banking self-services and relationbetween Gender and Usage of Online

Services such as ATMs, internet banking,Tele-banking and mobile banking by bankcustomers.

Scope of the study

This study aims to determine the consumersatisfaction and commitment through Self-service banking technology. Focus isplaced on the bank service fields whichincludes services provided by bank likeATM, online banking, mobile banking etc.and the usage pattern of these services.

Research Type: Descriptive

Sample Size: 300

Sampling Method: ConvenienceSampling adopted.

Research Instrument: Questionnaire

Data analysis and Interpretation

Data is collected through questionnairefilled by 300 respondents and detailedclassification of the respondents in termsof services usages is as follows:

Mode of banking services used berespondents:

• 28% of the respondents used BankBranch service.

• 22% of the respondents used OnlineBanking services.

• 3% of the respondents used TelephoneBanking service.

• 30% of the respondents used ATMservice.

• 17% of the respondents used MobileBanking service.

41

Table:1 Usage of Banking Services

Usage of Banking Services

Bank Branch

Frequency

Online Banking

Frequency

Telephone Banking

Frequency ATM

Frequency

Mobile Banking

Frequency Never 46 75 174 43 84 1 to 5 Times 164 101 82 143 92 5 to 10 Times 56 91 39 86 77 10 or More Times 34

33 5 28 47

Total 300 300 300 300 300

From the data collected and presented intable:1 it is observed that:74% of the respondents use onlineservices and only 26% of the respondentsdo not use online services. Telephonebanking is hardly used by customers.Most preferred banking service amongcustomers is mobile banking andfrequency of mobile banking is highest ina month in comparison of all other banking

services. We can also conclude that ATMservices is also behind mobile bankingwhich shows mobile banking is highlyconvenience and user friendly.Hypothesis

Ho: There is no significant relation betweenGender and Usage of Online Services.H1: There is no significant relation betweenGender and Usage of Online Services.



Chi-Square Tests Value df Asymp. Sig. (2-

sided) Pearson Chi-Square 7.308a 3 .063 Likelihood Ratio 7.321 3 .062 Linear-by-Linear Association 3.458 1 .063 N of Valid Cases 300 a. 0 cells (0.0%) have expected count less than 5. The minimum expected count is 14.74.

INTERPRETATION:

As the Pearson Chi-Square value is 0.063which is more than the significance value0.05. So, we accept the Null Hypothesisand reject the Alternate Hypothesis. So,we can conclude that there is no relation

between Gender and Usage of OnlineServices.

Ho: There is no significant relation betweenOccupation and Usage of Online Services.

H1: There is significant relation betweenOccupation and Usage of Online Services.

Chi-Square Tests Value df Asymp. Sig.

(2-sided) Pearson Chi-Square 27.877a 12 .006 Likelihood Ratio 26.405 12 .009 Linear-by-Linear Association .036 1 .850 N of Valid Cases 298 a. 2 cells (10.0%) have expected count less than 5. The minimum expected count is 2.88.

Annexure

Table:1 Type of Bank

Types of Bank Frequency Percent Public Bank 177 59 Private Bank 159 53 Cooperative Bank 67 22.3 Foreign Bank 34 11.3

43

Table:2 User’s Frequency of Type of Account

Type of Account Frequency Percent Savings Account 272 90.7 Current Account 90 30 Salary Account 59 19.7 Loan Account 37 12.3

Table :3 Bank Branch

Bank Branch

Frequency

Percent Valid Percent

Cumulative Percent

Never 46 15.3 15.3 15.3 1 to 5 Times 164 54.7 54.7 70 5 to 10 Times 56 18.7 18.7 88.7 10 or More Times 34 11.3 11.3 100 Total 300 100 100

Table: 4 Online Banking

Online Banking Online Banking

Frequency


Cumulative Percent

Never 75 25 25 25 1 to 5 Times 101 33.7 33.7 58.7 5 to 10 Times 91 30.3 30.3 89 10 Times or More 33 11 11 100 Total 300 100 100 Table : 5 Telephone Banking

Telephone Banking

Telephone Banking

Frequency


Cumulative Percent

Never 174 58 58 58 1 to 5 Times

82 27.3 27.3 85.3

5 to 10 Times

39 13 13 98.3

10 Times or More

5 1.7 1.7 100

Total 300 100 100



INTERPRETATION:

As the Pearson Chi-Square value is 0.006which is less than the significance value0.05. So, we accept the AlternateHypothesis and reject the Null Hypothesis.So, we can say that there is relationbetween time duration of Occupation andUsage of Online Services.

ConclusionDemonetization is a major factor becauseof which the usage of online bankingservices like ATM’s, Online Banking,Mobile Banking, Tele-Banking is growingrapidly. Branch banking is progressivelybeing replaced by Self - Service BankingTechnology. The Self - Service Banking

Technology services are provided bybanks with the help of automated channelslike ATM, internet banking, mobile bankingand tele banking. The acceptance ofautomated banking among people isgrowing day by day. The consumers arepreferring to do more of their day-to-daybanking activities using ATMs, onlinebanking, or mobile banking without the aidof branch personnel. Consumers want tobe able to do more banking themselves attheir own convenience.

From our study we want to conclude thatgender and online banking services aren’tassociated in any way. Whereasoccupation and usage of banking services

Table:7 Mobile Banking Mobile Banking Mobile

Banking Frequency


Cumulative Percent

Never 84 28 28 28 1 to 5 Times 92 30.7 30.7 58.7 5 to 10 Times 77 25.7 25.7 84.3 10 Times or More

47 15.7 15.7 100

Total 300 100 100

Table:6 ATM ATM ATM

Frequency Percent Valid

Percent Cumulative

Percent Never 43 14.3 14.3 14.3 1 to 5 Times 143 47.7 47.7 62 5 to 10 Times 86 28.7 28.7 90.7 10 Times or More 28 9.3 9.3 100 Total 300 100 100

45

has association. Timing of occupation leadsthe costumers to use online bankingservices.

References

Akinci, S., Aksoy, S., & Atilgan, E.(2004). “Adoption of Internet bankingamong sophisticated consumer segmentsin an advanced developing country. TheInternational Journal of BankMarketing, Vol. 22, No. 3, pp. 2 1 2-232: .

Bandyopadhyay, T. (2004). Credit CardIndustry . Indian Journal of Marketing,June, pp.25-29:.

Bradley, L., & Stewart, K. (2002). “ADelphi study of the drivers and inhibitorsof internet banking”. InternationalJournal of Bank Marketing, Vol. 20, No.6, pp. 250-260.

Daniel, E. (1999). Provision of ElectronicBanking in the UK and the Republic ofIreland. International Journal of BankMarketing, Vol. 17, No.2, pp.72-82: .

Eriksson, K., & Nilsson, D. (2007).“Determinants of the continued use of self-service technology: The case of Internetbanking”. Technovation, Vol. 27, pp.159-1 67: .

Eriksson, K., & Nilsson, D. (2007).Determinants of the continued use ofselfservice technology: The case of Internetbanking. Technovation, Vol. 27, pp. 159-1 67:.

Gerrard, P., Cunningham, J. B., , & andDevlin, J. F. (2006). “ Why consumers are

not using Internet banking: A qualitativestudy”. Journal of Services Marketing,,Vo1.20, No.3,pp. 160-1 68:.

Goldfinger, C. (. (2001, MAY 10).www.fininter.net. Retrieved from Internetbanking issues: www.fininter.net/retailbanking/internet/I~sues/paper/draft.htm:

(2006). Internet and Mobile Associationof India . IAMAI Report.

Jazeela, M. (2005). Customerperceptions of banking products andservices in Kerala with reference tospec$c customer segments in the urbanarea,. Kerela: Department of AppliedEconomics; PhD thesis, , CUSAT:.

Kimball, R., & Gregor, W. (1995). Howdistribution is transforming retail banking:changes leading banks are making.Journal of Retail Banking Services, Vol.17, No. 3, pp. 1-9: .

Leblanc, G. (1990). Customer motivation:use and non-use of automated banking.International Journal of BankMarketing, Vol. 8, No. 4, pp. 3 6-40: .

Lee, E. J., & Schumann, D. (2005).“Segmenting the non-adopter category inthe diffusion of internet banking”.International Journal of BankMarketing, Vol. 23, No. 5, pp. 414-437:

Lee, E., & Lee, J. (2000). Haven’tadopted electronic financial services yet?The acceptance and diffusion of electronicbanking technologies. FinancialCounseling and Planning, , Vol. 1 l, No.l, pp. 49-60: .



qqq

Polatoglu, V., & Ekin, S. (2001). Anempirical investigation of the Turkishconsumers’ acceptance of Internet bankingservices. International Journal of BankMarketing, Vol. 19, No. 4, pp. 156-165:.

Sohail, M., & Shanmugharn. (2003). “E-banking and customer preferences inMalaysia: an empirical investigation”.Information Sciences, Vol. 150, pp. 207-2 17:.

Thornton, J., & White, L. (2001).Customer orientations and usage offinancial distribution channels. TheJournal of Service Marketing, Vol. 1 5,No. 3, pp. 1 68- 185: .

Zeithaml, V., & Gilly, M. (1987).Characteristics affecting the acceptance ofretailing technologies: a comparison ofelderly and non-elderly consumers.Journal of Retailing, Vol. 63, No. 1, pp.49-68: .

47

UNDERSTANDING THE ROLE OF SERVICE AND VALUECO-CREATION IN SALES FUNCTIONS

Kumar MohantyKIIT School of Management, KIIT, Bhubaneswar

[email protected], [email protected]


ABSTRACTIn today’s market a customer buys a product not just for transactionalvalue but for a value in use. Companies tend to look at the customer asa co-creator of value by engaging with the customers through learning,dialogue, mailers, and social media thereby following a collaborativeapproach for customized products and services. Accordingly, companieshave moved from a post sales reactive strategy, to a presales proactiveengagement with the customer leading to reduced dissonance andincreased collaborative value creation. This paper critically analysesthe essence of collaborative value creation and discusses the criticalrole of customers, intermediaries, and communication in current businessscenario.Keywords:Cocreation of value, communication, collaborative value creation

INTRODUCTION

Sales today is primarily a function of valuethat the consumer perceives in the productfeatures, attributes, and the entire valuechain. Today it is important to ensure aholistic approach to marketing that alignsand integrates all stake holders includingthe channels, the sales personnel, theproduct, the pricing and the promotionalaspects towards the company philosophyso that the product/service stands out asdistinct in the minds of the consumers. It isalso important is to understand the internalcustomers - both the intermediaries andthe company sales personnel. The focus

today is to look beyond Segmentation,Targeting and Positioning and focus onvalue or the utility that the product/servicehas to offer so that the customer will beable to make a purchase decision afterclear evaluation of information available tohim/her and the alternatives availablethereby.

Today there is a paradigm shift fromcustomers being just offered a product orservice, to engaging the customer increating a value for the object or service.Engagement in creation of value makes thecustomer a co-creator of value and is beingreferred to as “Prosumer”. To be



competitive, today companies, have tomove from mass customization to aprocess of collaborative productdevelopment, customer innovation,customer empowerment, and customerinvolvement in order to have a competitiveadvantage over the competitors. Todayengaging with the customer pre purchaseand post sales plays an important role increating a win-win situation for both thecompany and the customers.

Pierks et al. (2012) and Hienwarth et al.(2014) focus on the ecosystem, whereinboth business and customers interact andinnovate involving end consumers,distributors, suppliers and the companysales force, as an important thrust area increating value. The Ecosystem plays a vitalrole in the process of co-creation of value.Hence, the focus of most marketers todayis to engage with customers from pre salesto post sales and use various tools likeCustomer Relation Management , onlinefeedback and social media in order toreach out to customers and make themaware of various products and servicesalong with responding to their queries.Accordingly, companies focus in theprocess of creating special task forces towork upon co creation of value throughcollating data and studying the changingpreferences of customers and competitormoves in the market, analyzing customerfeedback, implementing best practicesand reducing customer dissonance.Listening to customers helps companies toengage effectively with the customers andhelp increase the process of affiliation

between the product and the customer.Consumers collaborate with companies orwith other consumers to produce thingsof value. As a result the gap betweenproducers and consumers is blurring(Tapscott and Williams, 2006) and aperson can seamlessly shift from consumerto contributor and creator of product,services, and its value. As a result, it isobserved that a lot of focus has been thereon the word ‘prosumer’ which was firstcoined by Alvin Toffler in 1980, toemphasize the novelty of asking individualsto simultaneously play the role ofconsumer and producer (Kotler, 1986;Tapscott and Williams, 2006). Value isalways co-created with the customer(Vargo and Lusch, 2008). The concept ofvalue co-creation proposes a value systemwhere producer and customer in arelational system create value through theintegration of their resource (Lusch, 2011)and value is realized and determined bythe customer (Ramirez 1999; Grönroos2004; Payne et al., 2008; Vargo andLusch, 2008). Customers do not makepurchases for the sake of making apurchase; rather they seek a “value”through the service.

Studies have argued that customerspossess unique knowledge about theirpreferences (Prahlad and Ramaswamy2004) and so their involvement increasessuccess in terms of product –customerneed fit (Alam, 2002), profit and marketshare (Joshi and Sharma, 2004). Througha process of co creation, firms andcustomers exchange their ideas, obtain

49

solutions (Kristensson et al, 2002)resulting in product innovation and bettercustomer adoption. The process of cocreation is dependent on meaningful andmutual engagement (Prahlad andRamaswamy, 2004) between the firm andthe customer where both stand to benefit.

Frank and Piller (2004) also found thatconsumers are willing to pay a considerableprice for self designed products. Thecompanies by involving the customer in theinnovation process also gets to know moreon their needs and thereby the likelihoodof success of the products increases so asalso the firm’s reputation (Kaplan, 2006,Fuchs, 2011). Customer participation isactivated by communication at the firm-customer interface and through iterativecustomer –company interaction; both sidescan combine their knowledge, enhanceshared understanding and learn about theother’s needs (Sawhney et al, 2005).Satisfied customers shall talk positivelyabout the new product (Hoyer et al, 2010).Secondly, even if the product doesn’tmatch with needs, the firm shall benefitfrom learning during the product’sdevelopment, learning from innovationexperience and improving the firm’sorganizational capabilities thereby ensuringlong term innovation having a positiveimpact on the firm’s performance .Ramirez (1999) says customers createvalue, co create and coinvent it. Byengaging the customers as activeparticipants, these companies createcustomized products for the customer tosee value in it.

Tapscott and Williams (2006) talked aboutFlevog shoes where customers are askedto submit online designs for considerationby the company to produce. Similarly,Virgin Mobiles asked a select group ofcustomers for ideas on how to bettermarket the company’s products andservices and also implemented thesuggestions of the customers in improvingservice levels (Chesborough et al., 2006).Weiner (1992) suggested that in theprocess of co creation the consumerremains attached with the co createdproduct. Similarly, Norton and Ariely(2007) also had similar views on customerplaying the role of the producer today.

Companies have realized that the customerplays an important role not just in thebuying process but beyond. In the ValueChain starting from the productconceptualization/design to the functionalattributes of the product and services thecustomer plays an important role as a CoCreator of the value proposition creatinga win –win situation for both the companyand himself/herself. The company tends tobenefit by engaging with the customer inunderstanding the shifts in preferences ofcustomers and adapting itself to bettertechnology and customization in productsand services to create a competitive edge.Companies today need to gear up to notjust the transactional experience but thepre and post transactional experience, andaccordingly thereby the segmentation,targeting and positioning strategy can beworked out . Staring with Productawareness and subsequent positioning to

Understanding the Role of service and value co-creation.......


the after sales servicing and the positioningthereof. These shall focus around not justValue Positioning but Value in UsePositioning too. Product variants such askitchen gels, liquid hand washes, pre andpost purchase consultancy in case of paintsand electronic goods indicate thatcompanies tend to innovate today bycreating a need /latent need in the mindsof the customer. At the same timecompanies tend to innovate/improvise theirproducts by learning from customers too.Asian paints has come up with many newproduct variants from customer feedbacks

Often customer relationship can be bestmanaged by intermediaries who act as aninterface between the customer and theproducer by understanding themappropriately. The intermediaries interactwith the customers more often and at timescreate attachment with the customer,thereby understanding the role of servicein influencing consumer buying behavior.The role of the firm’s sales force becomesextremely critical as they are the peoplewho frontend with the customer on aregular basis. They cut across theorganization‘s functional areas (Davis,Brady, and Hobday, 2007) and ensure thatthe ecosystem also supports the processof co-creation. Apart from Internalresources like its own sales force, the firmalso engages with external resources likechannel partners/members, consultants intrying to work out a Value Proposition.Customer engagement in product/serviceinnovation today has been made possiblethrough the internet, which now allows

companies to build strong onlinecommunities through which they can listento and integrate thousands of customersfrom all over the world (Dahan and Hauser,2002). The success stories of open sourcesoftware projects such as Linux andApache suggest that customerempowerment also makes senseeconomically (Pitt et al., 2006).Companies have been engaging withcustomers through social media and thefeedback received from customers isanalysed and monitored by companies(many companies have a special task forceto collect, analyse and integrate the data)and is used as a tool for strategy.Companies such as Adidas, BMW,Ducati, Procter & Gamble, and 3M havecreated online platforms that aim tointegrate their customers’ innovative newproduct ideas into processes more actively,more directly, and more systematically(Ogawa and Piller, 2006; Pitt et al., 2006;Sawhney et al., 2005).

It is evident that an area where companiesneed to focus is people where both thecompany personnel and channel membersplay an important role as they need tobelieve in the Value Proposition of thecompany so that they disseminateinformation in a manner where thecustomer sees value and engage with thecustomer in the process of Co Creatingvalue.

Understanding the process of DataAnalysis, and Integration to create acompetitive edge

51

Data analysis as a tool becomes all themore useful today for understandingcustomer preferences, creating a valueproposition, and thereby a differentiationby engaging with the customer. What is ofimportance to companies is to understandthe ways and means of capturing data,careful introspection/analysis of data andintegrating the data in strategy formulation.Leveraging market, customer and internalknowledge is a key function of any salesfunction. Both the sales person andcustomer tend to identify preferences ofcustomers, perceived benefits,identification of needs, both stated andunstated, making the way forunderstanding the value that the customeris looking at and identifying areas wherethe customer can be involved in the processof creating value. Similarly, the entire valuedelivery chain needs to be integratedtowards creating the value in the serviceofferings of the product that shall be adetermining factor in the entiresegmentation, targeting and positioningprocess. Different levels of customizationcan then be made to suit the customer andthe seller and more towards customerbonding.

Understanding the level ofinvolvement and the role of thecustomer in the process of co-creation:It is increasingly important to bridge thegap between the customer’s perception ofvalue and the actual benefits, and the sellerneeds to continuously strive to ensure thatthe value proposition created through theservice offerings needs to be properly

understood. The customer’s perception ofvalue may be influenced by the firm’sactivities and the sale personnel whocommunicate value to the buyer. In thiscontext, it is important that the firm and itssales personnel are able to manage theexpectations of the customer with respectto the tangible and intangible benefits thatthe product/service offers. Hence the seller/sales personnel needs to be highly skilledto ensure desirable satisfaction from thecustomer, as also to harp upon thecustomer that there needs to be a shift fromjust functional attributes of the product tothe service that the product offers to satiatethe needs and wants of the customer.

Business entities such as Titan,Sony and McDonald have started askingconsumers for detailed inputs. Crowdsourcing is another means of getting ideasand feedback to inform customers onproduct design and service delivery. ManyT shirt companies these days allowcustomers to design their own products.IKEA sells unassembled furniture that theconsumers put together. In this processIKEA lowers its operational cost andpasses the benefits to consumers in theform of lower prices. Products likeKurKure in India ask the consumer forrecipes and the same is incorporated withthe customers’ family picture on the packetthereby recognizing the customer’sinvolvement for his collaborativeinnovation. Procter and Gamble’s“Vocalpoint” program is an onlinecommunity of product enthusiasts who arerewarded with coupons and samples in



return for talking to others about theproducts. Companies in India have alsostarted to use social media as a means toreach out to customers. Facebook andTwitter are used an interactive medium toreach out to and engage with the customerand apprise him of product features, newproduct launches and feedback.

Leveraging market, customer andinternal knowledge for profitmaximization and increase in sales:

Leveraging market, customer and internalknowledge is a key function of any salesfunction. Both the sales person andcustomer tend to identify preferences ofcustomers, perceived benefits,identification of needs, both stated andunstated, thereby helping in decidingstrategies both at the macro and micro leveldecision making, thus helping the marketerto redesign his sales strategy. Perceptionsof customers with respect to the productattributes may vary, but the relevance ofservice that the product would offer wouldmore or less be the same. The processwould also help understand the role ofexperiential learning, memory in thedecision making process.

Moving away from functionalities to theservice that the product offers becomesrelevant for both the buyer and the sellerso that the customer perceives andunderstands the value in the product. Theentire value delivery chain needs to beintegrated towards creating the value in theservice offerings of the product that shallbe a determining factor in the entire

segmentation, targeting and positioningprocess. Different levels of customizationcan then be made to suit the customer andthe seller and more towards customerbonding and thereby profit maximization.Exploratory research can help here inidentifying the preferences of the customerand thereby the customization strategy ofthe seller.

Conveying Value Proposition to thecustomer:

It is increasingly important to bridge thegap between the customer’s perception ofvalue and the actual benefits, and the sellershall continuously strive to ensure that thevalue proposition created through theservice offerings needs to be properlyunderstood. Towards this, the customer’sperception of value may be influenced bythe firm’s activities and the sale personnelwho communicate value to the buyer. It isimportant that the firm and its salespersonnel are able to manage theexpectations of the customer with respectto the tangible and intangible benefits thatthe product/service offers. Hence the seller/sales personnel needs to be highly skilledto ensure desirable satisfaction from thecustomer, as also to harp upon thecustomer that there needs to be a shift fromjust functional attributes of the product tothe service that the product offers to satiatethe needs and wants of the customer.

The entire communication process needsto be customized and at the same time thevalue offered in terms of the servicesoffered by the product needs to

53

understood well by the customer. Hence,the channel members and intermediariesalong with the sales personnel need tounderstand the consumer’s values, attitudesand lifestyle and accordingly present to andmake the consumer to see the benefits /services that the product/services offers.Exploratory research would help inunderstanding their perceived benefits inorder of their relevance to the customer inorder of priority after which a descriptiveresearch can be done on the same.Co-creation of value and solutions:

In the concept of understanding sales anddistribution logic, what is important is thatthere has to be a process of meaningfuland mutual engagement. Sales personnelneed to understand that the actual value isdetermined by customer and hence try toput themselves in the shoes of the customerand identify the needs, preferences andidentify more value added customizedpropositions. They should be able tointegrate the organization activities andprocesses with respect to the marketingdecisions taken by customer. In thisprocess, while the customer gets to knowabout the services that the product offers,the seller in the process of understandingthe customer also gets to know aboutcertain unstated or latent needs which ifincorporated in the product/services couldactually result in creating value which cancreate a competitive edge and cocreatesolutions for both the buyer and seller. Inthis process of cocreating solutions, it canlead to a satisfied customer, therebyresulting in a positive word of mouth, repeat

purchase and addition of new customers.Involving customers in the value creationprocess can decrease a company’s costof production which may in turn influencethe price that the company charges. In thisprocess of creating least or no customerdissonance, utmost care is to be taken inensuring that more value propositions arecreated through dialogue andconversations with the consumer/buyerand the seller.Conversation, Dialogue and Learning:

Most customers have unclear needs andthat is where the sales person has to havethe ability to quickly elicit customerpriorities. The seller has to be moreinteractive with the customer and engagehim/her into a conversation, dialogue andthereby learns from the customer the valueperception and should be able to conveyto the customer in clear terms about thebenefits of the services that the productoffers. The process of conversation willhelp in understanding the unmet needs ofthe customer and can be used to explorelatent needs thus help in creating valuethrough customized solutions and therebyresulting in increased sales and acompetitive advantage. Often whileresponding to queries posed by theconsumer, the seller gets to understand therelevance of the services offered throughvarious product attributes and offeringsand in the process the seller gets to explorethe unstated and latent needs, and plansaccordingly to create value to act as adifferentiator in the marketing and sellingprocess.



Building Trust and Long LastingRelationship:

A sales and distribution logic is inherentlyformed in customer orientation and thecustomer loyalty depends on the servicethat the customer receives from the seller.The qualities of customer relationship aredependent on how well it is managed andif not managed properly can bedetrimental. The co-creation of valuethrough the process of dialogue,conversation and learning should not bejust a short term process but should be acontinuous and ongoing process forsustainable competitive advantage throughco-creation of unique value propositions.This would ultimately reduce customerdissonance, increase customer base,repeat purchase of same/modifiedproduct, and foster brand loyalty.

A positive Word of Mouth will ensure thatit is a loyal customer gained who can beinfluential in getting more customers to buythe product ,reference groups can beformed, a competitive advantage can begained and through new productinnovations and strategies. It has to be asustainable strategy and the Product LifeCycle (PLC) needs to be carefullyunderstood and at each stage createbenefits/services that shall hold thecustomer on through the Product LifeCycle.

Service Dominant Logic in Salesfunctions:

Today service can be defined as theintangible element that is exchanged

between the buyer and the seller with thegoods/services being purchased. Whetherin the Fast Moving Consumer Goodssector or the Consumer Durables sector,there is a shift today from the traditionalselling process and, the focus has shiftedto a consultative process where problemrecognition, presentation of solution byunderstanding the customer’s perspective,his expectation, his met and unmet needs,through a process of interactive personalselling by understanding the services thatthe product offers. Whether in ConsumerDurables, FMCGs, or typical serviceindustry it is the level of customization thatultimately creates a bonding between thecustomer and the seller which is built ontrust and fosters brand /product loyalty.

The paradigm shift will be towards asolution based approach towardsmarketing rather than a attribute basedapproach in order to understand acustomer’s needs so that a morecustomized service offering of the product/services can be made , create a strongerCustomer Relationship and thereby acoherent competitive advantage. Todaythe emergence of the service dominant logicin sales has made marketers to rethink theirbranding strategies and focus on thefunctional attributes of the product in howto create value for the product and therebycreate a bonding.

These can be substantiated from the casestudies on select brands as follows:

L’Oreal

The tagline “Because you are worth it” talks

55

about the values the company stands for.Innovation and flexibility are the indicatorsof the relevance of Co-creation and valuein use concept, and a source ofResponsibility towards the customer.L’Oreal focused heavily on educating andtraining the customer on better qualityproducts, and yet being affordable tomiddle economic class people. 50academic institutions train 1.5 lakhhairdressers annually. Apart from this, theyengage with customers on social media,focuses on raw materials that arebiodegradable and believe in betterdistribution channel and strong retailrelationship.

Indigo Airlines

It has a Unique Selling Proposition of “OnTime performance”, low price, andconnectivity targeting the cost consciousprocessing and portions itself as “Low costNo frills” and focus on “Single Class”which is primarily “Economy class”.Continuous innovation to improve on nonprice factors such as ease of ticketing,check in etc has helped the carrier. Tie-upwith hotels creating on holistic package forthe customers (the tie up with SarovarHotels) is another example of valueaddition. Faster turnaround time of lessthan 30 min reinforces the Just In Timeconcept along with empathy resulting inpositive “Word of Mouth” coming fromhighly satisfied customers works for it.

Maruti Suzuki

The differentiating factors for itself areReliability and Responsiveness as rated by

customers (Topped the JD power 2015Costumer Service Index shady as bestafter sales service for the 16th year in arow), and Assurance (Costumer ServiceIndex of 906/1000 point scale with aindustry average of 866, a measure ofCustomer Service Index). Other factorsinclude Empathy, Economy withTechnology and Large distributionnetwork.

Ginger Hotels

It focuses on catering to huge middle classsegment on affordability yet quality hotels.This chain of hotels is present across 29locations in India. Brand image of Tatagroup along with no hidden costs &transparent booking process coupled withempathy results in a strong brand equity.

Dove

Unilever’s biggest personal care brand infour primary groups such as body wash,deodorants skincare lotions and hair careand more than 100 different lines includingfacial wipes, lotions, shampoos, anti agingcleanses, skin nourishing treatment,deodorants, etc. New innovations likeDove firming (to reduce the appearanceof cellulite), Dove silk (a moisturizingrange), Done fresh touch , Dove pro-age(for mature skin and hair) , Dove SummerGlow (with self tanning agers) have helpedits cause.

Whirlpool A/C

It has realignment of its team onRelationship oriented sales drivenapproach. Internal focused strategy on



planning & prioritizing, persuasivecommunication, people management,Innovation & quality is focused. In storepromotion, Innovation like power savingmode, climate control mode, Invertortechnology with 40% energy saving act asvalue addition for the customer. Values ofthe company focuses on respect (throughgreat results built on trust), team work(collaboration of ideas), diversity andinclusion (making every individual toexcel), integrity (maintaining highestpossible standards of personal,professional and legal), and high customerinvestment through blogs, opinions,reviews, online feedback form, and 24X7customer care.

Conclusion

All these point to the fact that companiesthese days are focusing on creating valuefor the customer and the service conceptof the product is being given a lot of focusso that they create a product/service inwhich the customer sees Value (both Valuein Use and transactional Value).

Most importantly in today;s scenariowhere the customer is more Valueconscious , the entire Value Delivery Chainadopted by the Company tries to engagewith the customer in a spirit ofcollaboration where the customer plays animportant role in the process of ValueCreation whether transactional or value inuse.

Hence companies have been trying toengage with customers and the datacollected through listening, conversation

and dialogue with customers throughvarious forums including social media andface to face interviews is integratedeffectively to create a competitive edge.

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TELEVISION ADVERTISEMENT AND ITS IMPACT ONTEENAGERS’ BUYING BEHAVIOR- A STUDY IN

BARASAT CITY KOLKATA

Gouranga PatraAssistant Professor (Marketing), School of Management, Adamas University,

Barasat- Barrackpore Road, Barasat, Kolkata - 700126,[email protected]

Chinmaya Kumar DashProfessor, School of Management, Adamas University, Barasat- Barrackpore Road,

Barasat, Kolkata- - 700126, Contact number – 8336959261,[email protected]

Rabinarayan PatnaikAssociate Professor, Institute of Management & Information Science (IMIS),

Bhubaneswar – 751002, Contact number – 7683987562,[email protected]


ABSTRACTIn the present era as the market has become wider, exchange patternsand complexities have also become huge in terms of number ofofferings and offer -makers. In this context, the role of sellers is todevelop a market sustainable strategy. For this they find the way ofdifferent roots as well as media to reach the customer faster thancompetitors. In purchasing cycle, teenagers as a customer group, playa vital role. Keeping the thought in mind, the present study makes anattempt to find out the role of television advertisement in changingthe mindset of consumers and energizing the inner current ofconsumers, which subsequently convert them into buyers in a tech-savvy modern world. Data have been collected from the students ofthree universities, situated at Barasat city in Kolkata. The resultsindicate that to make the things clear in term of awareness and interest,television advertisement play really big.Keywords: Television, teenagers, brand awareness, product exposure,advertisement

(December,2017)

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INTRODUCTION

The ongoing decade has witnessed theemergence of new media vehicles mostlydominated by social media and its frenzyamong the new generation. Amidst thehype and hoopla of all that happenedaround us, the traditional or mass mediastill has got its own pie. In this form ofmedia, television has remained one of themost effective medium for reaching today’scustomers and it also is the most efficientone for introducing people to brandsthanks to the burgeoning spread of cableand satellites. Advertising throughtelevision allows marketers to show andtell a wide audience the business, product,or service. It allows one to actuallydemonstrate the benefits of ownership.Television appeals to the literate as wellas the illiterate and this is one feature ofTV that makes it unique and different fromother mediums.Television advertising is a fleeting medium;messages flash and vanish, so it requiresmore exposures. Moreover, in TV thereis fragmentation of viewership because ofvariety of channels and programme options(Ramaswami & Namakumari, 2004).Adolescent learn consumer skills primarilyfrom parents and secondarily from mediacontacts (Brand & Greenberg, 1994). Bywatching television, teens may gaininformation about products, brands, storesand shopping as well as information aboutas to how products are used and fit withcertain lifestyle (Moschis, 1978). Asregards liking products such as cold drinks,movies, sports shoes, pens, garments,

shaving creams, soaps, shampoos,deodorants, automobiles, mobile phonesand computers is very much directlyinfluenced by TV commercials. The femalecounterparts show interest in productssuch as cosmetics, jewellery, soap,shampoos, sanitary napkins, footwear,clothes, chocolates, food products,perfumes and watches. It is found that girlsviewed TV advertisements with interestand found them entertaining andinformative (Kotwal et. el.). A consumer’sattitude and assessment and externalfactors construct consumer purchaseintention, and it is a critical factor to predictconsumer behavior (Fishbein & Ajzen,1975). Purchase intention can measure thepossibility of a consumer to buy a product,and the higher the purchase intention is,the higher a consumer’s willingness is tobuy a product (Dodds, et al., 1991; Schiffman & Kanuk, 2000). The majority ofteenagers believe television advertisementsto be informative and most teenagersrespond to them favorably (Cruz, 2004).

Literature reviewIn the present study to judge the teenagersperception, the concept of appeal beingincorporate in the form of quality,packaging, brand and price which are reallya sensual issue in front of consumers’. Thereare various past studies though very limitedin numbers have shown certain instances ofhow TV as a media can cater to thepurchasing intentions and subsequentlyinfluence the teenagers to become customersthrough various advertisements being airedfrom time to time.

Television advertisement and ITS impact on teenagers.......


Saksena (1990) found that teenagers wereinfluenced by TV advertisement and mostlypurchased those brands and productswhich are advertised more on television.Atkin (1978) observed that children oradolescents are most influential when theyare primary customers, for example,clothes, toys, snacks, breakfast cerealsand school supplies.

Past studies reveal that there is substantialvariation in the amount of teenagers’influence in purchase decision for productsfor their own use and for their family (Cotteand Wood 2004). The ability of teenagersto perceive what advertising is and is meantto do depend on such factors as the age,educational attainment level and theamount of influence parents have inmediating and explaining advertising (Hiteand Eck 1987).In the present digitalization era it is veryeasier task to purchase any kind ofproducts through online. The onlinemarketers also supply the information bymail or website which is easier to accessby teenagers. In this situation it is verydifficult task for marketer to find the impactof television advertisement by theteenagers group who fall under highspending pattern group. In this context weare trying to analyze the teenager buyingbehavior in such area which carries a flavorof metropolitan culture and also semiurban outlook. So the basic enquiries fromthe research that in due changingenvironment how young age consumers’support the television advertisement andhow they are taking the television

advertisement as a reference point at thetime of purchase decision and behavior.

Objectives

1. To study how effective are the televisionadvertisements in teenager’s perspectives.

2. To identify the role of advertisement onbuilding consumer perception.

Methodology

The present study is about test thepreference level of teenagers abouttelevision advertisement. The area has beenconfined the Barasat city of west Bengal.For the data collection we have chosenthe teenagers of 3 university students whorepresent different part of west Bengal.Regarding the data collection our basicunits of data are individuals’ i.e. teenagers.Individuals have been randomly chosenfrom different university. Individuals as theprimary unit of the present study have firstbeen selected using random samplingmethod. The information has beencollected by the category from. High levelstands 5, medium level stands-2 and lowlevel stands 1. Total 400 data havecollected. Total 210 samples have beenconsidered for final analysis. The age grouphas been considering in between 19-25.

Relevance

The intrinsic as well as exposed variablesresponsible for operating as responsiveagents on certain stimuli forms the basiclogic of advertising initiatives undertakenby various organizations from time to time.This current study of ours focuses on theimpact of advertisement on the user’s

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behavior. It makes an attempt to explorethe factors which are affected by theadvertisement and ultimately influence thebuying behavior of the consumers. Thestudy will help the readers to understandthe consumer behavior while purchasing thecosmetic products (being mostly regardedas youth products) so that they can deviseappropriate strategy to advertise theirproduct in a best possible way.

Table-1 : The relationship between television advertising exposure andawareness level of teenagers

Findings and analysis

To start with the attempt was made toknow about the relationship betweentelevision advertising and its exposure andsubsequently how television advertisingcreate the awareness level of the teenagersmind. In the survey the responses havebeen counted in the category form.

Awareness Television Exposure P- value

1 2 5 .000 significant

1

18.2% 0.5% 2 22.7% 9.6% 5 100.0% 59.1% 89.9% Total 100.0% 100.0% 100.0%

As shown in Table 1 above, ‘1’ representsthe low level of response, where as ‘2’represents the medium level of responseand ‘5’ represents the high level ofresponse. This is because, the degree ofresponse is always considered to behappening in various levels and can deferfrom individual to individual for the samekind of stimuli/ advertisement (may/ maynot be for the same offering). In this context

the above data represent that there is strongcombination between high level of exposureand awareness. It indicates that theteenagers who spent more time on televisionadvertisement generate more awareness.When the information verified by chi squaretest, it was found significance. That istelevision advertising and its exposure levelamong the teenagers positively associatedwith their awareness level.

Table-2 : Relationship between awareness level and market exposure

Awareness Market Exposure P- value 1 (no answer) 2 (by other help) 5 (by own help)

.024 Significant

1 3.0% .7% .8% 2 14.8% 11.2% 4.6% 5 82.2% 88.1% 94.7% Total 100.0% 100.0% 100.0%



The next enquiry was to know that if theteenagers get sufficient level of exposurebut do they apply this awareness in themarket. In this context here the researchertries to find out the relationship betweenthe awareness level of the teen agers andtheir level of market exposure. Heremarket exposure means the marketinteraction of the teenagers, and how theyuse their idea in the market directly and

indirectly. The above data represent thatawareness level of the teenagers and theirmarket exposure level is high (94.7%). Inconsumer behavior it is an indication ofbuying intension means teenagers have aninterest to verify their learning in reality. Thestatistical result shows the awareness andmarket exposure of the teenagers arestrongly associated and the result issignificant.

Table-3 : Relationship between advertisement awareness and product exposure

Awareness Product Exposure P- value

1 (moderate) 2 (high) 5 (more) .623

significant 1 2.6%

.8% 2 9.0%

11.1%

5 88.4% 100.0% 88.1% Total 100.0% 100.0% 100.0%

The table no 1 and 2 indicates thattelevision advertising create a positivemental space to the teenagers whichdenotes as awareness. This awarenessmakes them more comfortable in gettingproper market selection which denotesmarket exposure. The table no 3delineates the relationship betweenawareness and product exposure. Thecross sectional analysis indicates high

response i.e. 88.1 %. But when we try tofind out their association, it gives negativeindication. This indicates that awarenesslevels of consumers are not positivelyassociated with the product exposure.That gives us some hints that the majoradvantages taken by teenagers fromtelevision advertisement are informationgather and market selection which they canuse as a future purchase reference.

Table-4 : Awareness and its relation with general recognition (Interest)Awareness of television Interest (recognition)

P- value

1 2 5 .002 Significant 1 66.7% 11.9% 11.6%

2 33.3% 50.0% 56.0% 5

38.1% 32.4%

Total 100.0% 100.0% 100.0%

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The above table indicates how deeplyconsumers think about the information. TheElaboration Likelihood Method indicatesthere are two way of information processone is active and other way is passive. Incase of passive the information stored viachannel. Here the objective is to know howawareness of television advertising helpsthe teenagers to recognize the product orbrand for long time. The table no 3 alreadyexamine that awareness are not associatedwith product exposure but here it statesthat television advertising are stronglyassociated with brand or productrecognition of the teenagers. So it is clearthat television advertising help in changingthe attitude of the teenagers in the present

context when internet media stand a bigpillar in front of electronic media.Consumer perception depends on thebrand loyalty, pricing, quality andpackaging of the product.If we look into the present market, it isobserved that there is an internal currentare linking the consumer mind to developfaith on products. In this connection if wesee the role of different media, obviouslythe name come first that is the social mediabut in our study, the matter has beenrepresented to know the impact oftelevision media. The data here try torepresent the impact of differentapproaches of advertisement and theirlevel of influence to the consumer.

Table-5 : Television exposure and price related consciousness

TV Exposure Price P- value

1-can’t say 2- without help 5- with help .000 Significant 1- no channel 45.5% 5.7%

2- one channel

4.5% 2.6% 5- 2 or more 100.0% 50.0% 91.7% Total 100.0% 100.0% 100.0%

The above data represent that there is agood connection between high level oftelevision exposure and priceconsciousness. It is a very debatable resultof the present study because the studyconfined the teenagers but it indicates thatto develop strong persuasion about theproduct or brand, still televisionadvertisement make a stand. The statisticalresults show there is strong associationbetween television exposure and priceconsciousness. The high level of exposure

develops high level of interest among theconsumer about the price. It is a goodreason of marketer and consumer todevelop bargaining power of buyer whichmay convert into the buying decision.

The impact of advertising through differentmedia are different but in general impactof television exposure is more incomparison to other because the differentobjectives of advertising. Packaging is avery interesting issue in marketing andconsumer involvement level towards



packaging is significant. In this connectionthe present study tries to find out therelationship between television exposuresin connection with packaging appeal. Theinner reason of this analysis is thathighlighting packaging appeal inadvertising can make any internal changeto the teenagers or not. The results showhigh level of exposure adopts high level of

information through packaging. Thestatistical results show that there is strongassociation between the level of televisionexposure and packaging. That means heretelevision exposure help teenagers to getmore information about the products orbrand through packaging and packagingappeals also a good direction for themarketer to get response.

Table-6 : Relationship between television exposure and packaging

TV Exposure Packaging P- value

1 2 5 .030 significant 1- no channel 50.0% 13.6% 5.2%

2- one channel

13.6% 8.6% 5- 2 or more 50.0% 72.7% 86.2% Total 100.0% 100.0% 100.0%

Table-7 : Relationship between television exposure and quality consciousness

TV Exposure Quality P- value 1-can’t say 2- without help 5- with help .027

significant 1- no channel 22.7% 5.5% 2- one channel

4.5% 2.9%

5- 2 or more 100.0% 72.7% 91.7% Total 100.0% 100.0% 100.0%

The role of advertiser is to spread a fumeof quality at the time of exposure of theproduct through variety media. If we lookthe present day advertising all the mediahighlight the product information in termof benefit, easy to use and comfortablenessabout the product via repetition.Sometimes they highlight price andcelebrity to develop a string message tothe audience about the quality of theproduct. In this regards the above table

shows that high level of television exposurecreate awareness level and this awarenessconvert into the interest. Interest is thereason to get more involvement about theproduct. More involvement means moreconscious and consumer try to find out thequality of the products in comparison toother. The above data also indicates thathigh level of television exposure make asignificant thought about the quality of theproducts.

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Table-8 : Relationship between television exposure and brand approach

TV Exposure Brand P- value 1-can’t say 2- without help 5- with help .228

significant 1- no channel 22.7% 40.5% 2- one channel

22.7% 19.0%

5- 2 or more 100.0% 54.5% 40.5% Total 100.0% 100.0% 100.0%

The above table finds out the relationshipbetween television exposure and brandapproach. It is very common thought thatadvertising through television play threetypes of role i.e. informative, persuasiveand reminder. But television advertisingalso highlights the brand as a major part.But the present study differ from thetraditional thought, it show there is nopositive association between televisionexposure and brand approach. It is adebatable question but the present studybased on teenagers groups. It gives anotherindication that they get exposure about thebrand from other sources, it may be webmedia, social media etc. The other reasonmay be in the huge crowded marketteenagers gives more importance aboutother approach in spite of brand.

Conclusion

The study gives an important directionabout the presence and sustainability of thetelevision advertisement. The marketvibration about the digital advertisementand promotion has a partial impact onyoung consumers but not whole. From thestudy it is clear that the role of television isno where reduces. The modern age ofmarketing, the marketers are getting

confused about the budget selection ondifferent media vehicle. In this connectionthe present study indicates that to makethe things clear in term of awareness andinterest, television advertisement play a bigto change the consumer attitude. The studyalso established the fact that to change theconsumer mindset television advertisementplays a unique role. From the study it isclear in front of marketer that still there ishuge impact of television advertisement sono question arises to thinks alternativeabout the technological based media.There should be proportionate distributionthe advertisement between digital or onlineand television. Then it would have beenmore facilitating instruments for themarketers to get more success, in term ofbusiness prospective, consumer retentionperspective and return perspective andfinally to develop the competitiveadvantage in the market. The study alsoestablished the fact that to change theconsumer mindset television advertisementplays a unique role even among theemergence of social media and others.

References:Atkin, C. K. (1978). Observation ofParent-child Interaction in Super-market



Decision –Making. Journal of Marketing,42(4), 41-45deChernatony L. From brand vision tobrand evaluation. The strategic process ofgrowing and strengthening brands, 3rd Ed.Butterworth Heinemann; 2010Dodds, W. B., &d Monroe, K. B. (1985).The effect of brand and price informationon subjective product evaluation. Advancesin Consumer Research, 12, 85-90Dubey, J.and Patel, R. (2004). Ads thatWork with Youth. Indian Management,43(10), 68-74Eastman, J.K., Goldsmith, R.E., Flynn,L.R. (1999).Status Consumption InConsumer Behaviour: Scale DevelopmentAnd Validation, Journal Of MarketingTheory And Practice, 7(3):41-52Fishbein, M, & AJZEN I (1975), Belief,attitude, intention and behavior: Anintroduction to theory and research.Reading MA: Addison- Wesley.Kotler P. Marketing management.Englewood Cliffs, N.J.: Prentice Hall; 2000Kotwal, N., Gupta, N. and Devi, A.(2008). Impact of T.V Advertisements onBuying Pattern of Adolescent Girls. Journalof Social Sciences, 16(1), 51-55Kraak, V. and Pelletier, D. L. (1998). HowMarketers Reach Young Consumers:Implications for Nutrition Education andHealth Promotion Campaigns. FamilyEconomics and Nutrition Review, 11(4),31-41Krugman, Herbert E. (1972), ¯WhyThree Exposures May Be Enough, Journalof Advertising Research, 12 (6), 11–14Liebeck, L. (1998). The customer connection:

children under 13. Discount StoreMoschis, G.P. and Churchill Jr. G.A. (1979).An Analysis of the Adolescent Consumer,Journal of Marketing, 43(3), 40-48Nash, A., Pine, K. J., & Messer, D. J.(2009). Television alcohol advertising. Dochildren really mean what they say? BritishJournal of Developmental Psychology, 27,85–104News, No. 26 October: 55-57, [online]Ramalingam, V. P. (2006). Measuringadvertisement effectiveness—a neuralnetwork approach. Expert Systems withApplications, 31, 159-163Ramaswami, V.S. and Namakumari, S.(2004), Marketing Management, 3rd

Edition, MACMILLAN, IndiaRobertson, T. S. and Rossiter, J. R., 1977.Children’s Responsiveness toCommercials. Journal of Communication,24(4), 101-106Saksena, G. (1990). Advertising ThroughT.V., Social Implications. Journal of IndianInstitute of Mass Communication, 25(1),44-49Sashidhar, A. S. and Adivi, S. (2006).Advertising to Kids Is It Justified?Advertising Express, September, 12-16Schiffman, L. G. & Kanuk, L. L. (2000).Consumer Behaviour. 5th Edition, NewDelhi: Prentice HallSellers Patricia (8 May, 1989) “TheABC’s of Marketing to Kids”, Fortune,pp.114-120Verma, S. (2009). Do all advertisingappeals influence consumer purchasedecision: An exploratory study. GlobalBusiness Review, 10 (1), 33-43

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PENSION PLANS: AWARENESS AMONG PRIVATESECTOR EMPLOYEES – AN EMPIRICAL STUDY

S. RameshProfessor, MBA Department

K.S. Rangasamy College of Technology, Tiruchengode, Tamil Naduemail: [email protected]


ABSTRACT

The main aim of the study was to examine the level of awareness ofemployees working in private sector in Salem and Erode districts ofTamil Nadu. The study was conducted with a view to find out thefeasibility for investments in pension / group insurance plans. A well-structured questionnaire was prepared and distributed among 300working people in Salem and Erode and 284 valid responses werereceived and properly analysed through statistical software. It wasfound through the study that the employees do not have the sufficientlevel of awareness about various pension schemes available in theinsurance market and also they do not know much about the benefitsof the pension schemes. However, the study found that there is a fairamount of interest among the employees to know more about pensionplans and was eager to make invest in pension plans / group insuranceplants when they are properly advised on the various schemesavailable in the market. The study concludes with the suggestion tothe insurance companies to run awareness compaign in the State tocreate more awareness among working people to make investment inpension plans and have their lives secured after retirement.

Key words: Pension Plans, Group Insurance, Awareness programmes,Security

INTRODUCTION

In this era of competition wheretechnology and systems are the primaryworking tools for every organization, it isthe manpower who differentiate the goodfrom the great. Are the working peoplesecured enough? Adequately covered to

make good the loss or have regular incomeafter retired life, especially the privatesector employees who burn their midnightoil for the organization they work.

Security, in general, can be thought as apeace of mind and freedom fromuncertainty, whereas insecurity implies



feelings of doubt, fear and apprehension– Tryst with trust. There is a little evidencethat a significant number of individuals willvoluntarily save for their future needs. Withincreasing longevity, changes in the socialpsyche and nature of economy, the needfor a group insurance and a pension planis the need of the hour.

Pension and group insurance are twinsides of the same coin. Pension provideswith the regular income after retirement andGroup insurance provides a mechanism foremployers to provide employee benefitsas part of an employee’s totalcompensation package, as part of onegroup, outside of government-providedbenefit programs.

The people working in government sectorand private before were covered andpension plans and their life after retirementfrom work was secured with earningsthrough pension and they need not dependon others for leading their life afterretirement. However, after theAmendment to the existing PF Act theemployees were not provided withpension after retirement and they may endup with facing problem in leading their lifeafter their retirement. This environmentraised the need for the habit of saving forretired life. People have to invest in somefinancial institutions to make their lifesecured after retirement. Do they havesufficient knowledge on the schemes onpension and group insurance? Are theyaware of the different type of plans ofinsurance companies? Are they havealready started making investment in such

pension plans? To answer all thesequestions, the authors of this paperinvestigated the level of awareness amongemployees working in private sector, asthese people are getting their wages andsalaries comparatively lesser than thepeople working in government sector andthey have the higher risk of running of theirlife after retirement.

Area selected for the study

This study is mainly focuses on employeesworking in private sector organizations inSalem and Erode region to know theirlevel of awareness on various pension plansand group insurance schemes available ininsurance market.

Review of Literature

Praveen Jha and Nilachala Acharya(2013) states that in most countries of thedeveloping world, though the importanceof universal social security is beingincreasingly recognised as an integral partof progressive public policy, only a fractionof population have been covered under thesafety-net of social security. Several stategovernments have designed schemes andprogrammes of social security, aimed bothat organised and unorganised sector. Atpresent, in India, the nature of socialsecurity schemes that benefit people afterthey cross certain ages are different for theorganised and unorganised sectors. Hencethey concluded that the overall magnitudeof public resources available to thegovernment in India has been grosslyinadequate in comparison to several othercountries, mainly owing to the low

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magnitude of tax revenue collected in ourcountry. Hence, it is high time to go for acomprehensive Social Security Scheme (orcombination of schemes / programmes) inplace with appropriate institutionalmechanisms. India’s experience on thewhole has been disappointing withreference to addressing the social securityneeds of the elderly. There have beenhesitant and limited sporadic efforts,instead of a coherent policy approach ofany significance.

Mavlutovaa, et al. (2016) narrating theimportance of pension plan in Latvia. Theyopines that European and other worldcountries are facing changes in theirpopulation age structure. This leads toconclude that intensifying ageing ofpopulation is a global phenomenon. Latviahas introduced a new three-level pensionsystem aimed to reduce the effect ofdemographic risks and demonstrating thecountry’s intention to provide viable publicand private combination in old-ageprovision. The demographic estimates ofEuropean Commission show that by 2060in Latvian population number elderlypeople aged 65 and over will almostdouble. The potential impact ofdemographic change on the age structureand the size of population is dramatic andstill the main problem that cast the doubton the ability of state mandatory non-funded pension scheme to provide a full-fledged social security. Personal financialplanning, personal investments in Privatevoluntary pension schemes are important.The objective of research is to investigate

whether the existing Pension system inLatvia is working effectively underchanging economic environment to reachthe goal of providing appropriate pensionlevel for the retired persons. It analysesthe role of Private voluntary pensionschemes, the current demographicalsituation with a flow of emigration andimpact of new tax incentives foremployees. The research evaluatesefficiency of Private voluntary pensionschemes and Latvian pension managers inproviding appropriate pension level tofuture retirees in actual financial marketssituation. Necessary action scenarios toprovide wholesome standard of living inthe future are analysed.

MacKellar (2009) looks at theexperiences of various Asian countries inexpanding the coverage of the pensionsystem to informal sector workers. Heargues that given aging and growinginformality, a rapid forward-lookingresponse from governments in the regionis necessary to provide protection againstthe risk of poverty in old age. This risk isparticularly acute in the case of informalsector workers, as is the difficulty ofreaching them through traditional formal-sector pension approaches. From theanalysis of various case studies the studyconcludes that expanding coverage toinformal sector workers throughmandatory systems is unlikely to work.Alternative, voluntary arrangements areneed. However, because informal sectorworkers tend to have lower savingscapacity and high discount rates, targeted

Pension plans: Awareness among private sector employees.......


subsidies might be required to encourageenrolment. It discusses some of the issuesrelated to the design of these programsincluding those related to administrationand the collection of contributions, finally,the study emphasizes the need to resolvedifficult trade-offs between the transfersto prevent poverty during old-age andexpenditures in other social programs.

Shafie, et al. (2016) private retirementscheme (PRS) was first introduced in2012 in supporting the private sectoremployees to prepare for their retirement.The main purpose of this exploratory studyis to unveil the level of awareness of PRSand investigating factors influencing theretirement planning practices. This studyapplies quantitative approach with the useof survey questionnaires as the maininstrument of data collection. Private sectoremployees from five private companies inMalacca were selected as respondents ofthis study. Data collected was analysedusing descriptive analysis. In general,findings of this study show that relatively,the level of awareness towards PRS is stilllow. In addition to that, only 77% of thosethat aware about this scheme have aninterest to invest.Various factors were found to have aninfluence on the retirement planningpractices private sector employees inMalaysia. Overall, this study shed someinformation on the awareness towards PRSamong private sector employees inMalaysia and also factors influencing theircurrent state of retirement planningpractices.

Stewart (2007) feels that Pension BenefitGuarantee Schemes are insurance typearrangements with premiums paid bypension funds, which take on outstandingobligations which cannot be met by theinsolvent plan sponsors. Arguments forsuch schemes stem from ‘market failure’with workers not fully understanding thetrade-off between pensions deferredwages and current income, anddiversification as most workers are highlyexposed to the insolvency of the plansponsor in terms of current and retirementincome and cannot properly diversify thisrisk particularly where the pension isfunded by book reserves. Howeverchallenges to these schemes exist mainlyin the form of moral hazard and adverseselection, which are problems for allinsurance contracts, and potentially in theform of systematic risk as bankruptciestend to be correlated, as does pensionunderfunding across schemes, and indeedas are these two factors.

Ayanendu Sanyal (2013) proposed auniversal pension scheme as relief toworking population in the unorganizedsector and insisted that it will increase thecoverage of pension without disturbing thefiscal situation. He reiterated that the mainpurpose of pensions is mitigating longevityrisks, smoothening of consumption andpoverty and inter-intra generationinequality and Universal pension schemewould do this successfully. He felt that oneof the major components of old age socialsecurity is pension and the developedcountries provide pension to those who

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contribute for pension whereas in majorityof the developing countries pensions areprovided in a discretionary manner whichreduces the coverage of pension. India hasa low coverage of pension. The studyrevealed that an introduction of pensionscheme will enhance the welfare of theworking community majority of whosefuture lies in uncertainty.Kanchan Bharati (2015) discussed therole of governments support with respectto economic security of old age people.He insisted the necessity of old aged tolive longer because of their significance intheir family with their valuable experienceand also they should remain healthy. Hencethey should be provided financialindependence and dignity which would bepossible by providing pension to them.Roland, Sigg (2005) emphasized the needfor social security of old age people totackle impending social and demographicchanges. The strategy needs to be basedon a realistic assessment of the situation. Inthis process, social security institutions mightfind it even more difficult to achieve anintegrated approach. A range of differentfunds and government departments areoften involved in areas such as old age,disability, unemployment and family, makingit hard to ensure a coordinated or coherentattitude towards the people concerned. Auniform system involving one-stop-shopsand using current information technologyresources prove that some degree ofintegration is possible and very much in theinterests of both scheme members andother social security beneficiaries.

Goswami, R (2001) reviewed the Indianpension system. The Indian experiencecould potentially influence policy decisionsin other developing countries, especiallythose with similar reliance on the nationalprovident fund system. The paper bringsthe problems that the system is confrontingnow - Demographic aging: The agestructure of the population is changingdrastically with increasing life expectancyand declining birth rates. The result of suchdemographic transition will be a largerproportion of older people.

Research Design, Sample Size andData Collection

The research design used for this study isa combination of descriptive and empiricalresearch. The main purpose of descriptiveresearch is description of the state of affairsas it exists at present.

Descriptive in the nature due to fact findingwith the help of literature survey and theanalysis of demographic profile of therespondents in the particular areaconsidered for this study. The study is saidto be empirical due to the application ofstatistical tools used for data analysis.Data has been analyzed with the use ofreliability of the study, frequency analysis,cross tabulation and the testing ofhypothesis using t-test, ANOVA to arriveon conclusions. The aim of this approachis to portray the employee’s level ofawareness towards the various pensionplans and group insurance plans ofinsurance companies presently operatingin the insurance industry.



Target Population

Target Population for this study has beenselected industrial areas of Salem andErode district in Tamil Nadu state. Themain focus of the present study is theemployees working in private sectorcompanies and hence the employeesworking in the private companies of thesetwo districts have been considered as thetarget population. The reasons forconsidering these areas are that theyindustrially developed as a large numberof industries are located in these twodistricts, low literacy level on future plans,low level of savings for future life, low levelof living standards, unstructured savingpattern, etc.

Sample Size

Sampling is the act of selecting arepresentative part of a population for thepurpose of determining the characteristicsof the whole population. Sample size refersto the number of items to be selected fromthe universe to constitute a sample. Samplesize for this study is 300 customers,comprising of 150 from Salem district and150 from Erode district. The samples wereselected on the basis of researcher

convenience and the availability ofrespondents at the time of visit have beentaken into consideration for this particularstudy. Out of this, 284 questionnaireswere received back, but 16 questionnaireswere discarded as they were not filled upadequately. Hence the analysis has beencarried out on the basis of 284respondents.Primary data collected through conductingPersonal interview by framing a well-structured questionnaire. Thequestionnaire was prepared anddistributed to the respondents andinformation was gathered during April toJune, 2017. The questionnaire consistsof a number of questions printed in adefined order on a form or a set of forms.Tools for the Study: P e r c e n t a g eAnalysis, t-test, ANOVAData Analysis and InterpretationThe data gathered from 284 respondentsin Salem and Erode through a structuredquestionnaire was entered into SPSSsoftware and further analyzed to arrive atmeaningful conclusions. The results of thedata analysis and their interpretations aredescribed in this session.

Table 4.1.1 Demographic details of customers

Demographic variable Area

Salem Erode Total Count Row N % Count Row N % Count Row N

Gender Male 111 59.4% 76 40.6% 187 100.0% Female 29 29.9% 68 70.1% 97 100.0%

Age

Upto 25 years 9 64.3% 5 35.7% 14 100.0% 25-35 years 39 48.1% 42 51.9% 81 100.0% 36-45 years 67 49.6% 68 50.4% 135 100.0%

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45-55 years 19 48.7% 20 51.3% 39 100.0% Above 55 years 6 40.0% 9 60.0% 15 100.0%

Qualification

Upto HSc 4 44.4% 5 55.6% 9 100.0% UG Degree 44 50.0% 44 50.0% 88 100.0% PG Degree 65 51.6% 61 48.4% 126 100.0% Professional 27 44.3% 34 55.7% 61 100.0%

MS Married 112 49.1% 116 50.9% 228 100.0% Unmarried 28 50.0% 28 50.0% 56 100.0%

F_Status Joint 51 48.1% 55 51.9% 106 100.0% Nuclear 89 50.0% 89 50.0% 178 100.0%

F_Income

upto 20,000 2 15.4% 11 84.6% 13 100.0% 20,000 to 30,000 14 73.7% 5 26.3% 19 100.0% 30,000 to 40,000 27 93.1% 2 6.9% 29 100.0% 40,000 to 50,000 15 88.2% 2 11.8% 17 100.0% Above 50,000 82 39.8% 124 60.2% 206 100.0%

It can be seen from the above table thatmore number of female employees inErode area responded to the survey thanthe female employees in Salem area;almost similar kind of age distribution isfound in both Salem and Erode area; onlya handful number of employees both inSalem and Erode area have studied uptoHSc and all others at least hold a UGdegree; majority of the respondents aremarried; more number of families are livingin nuclear families in Salem as well as inErode area; almost 73 per cent of theemployees stated that they have theirfamily income above Rs.50,000 per

month. It exhibits that there is a greaterscope for canvassing their investment inpension plans and group insurance plans.4.2 Level of Awareness – An Analysis4.2.1 Level of Awareness on the Type

of Pension plansThe respondents were asked to rate theirlevel of awareness on the type of pensionsplans through six statements on a 5-pointliker scale, 1 being the lowest level and 5being the highest level of awareness. Themean level of awareness of employees onthese statements are tabulated belowaccording to their Rank in Table 4.21.

Table 4.2.1 : Level of Awareness on Type of Pension plansStatement N Min. Max. Mean S.D. Rank Many private players apart from LIC sells pension products 284 1 5 2.746 1.439 1

Immediate pension plans are available in the market 284 1 5 2.535 1.464 2

The availability of unit-linked pension plans 284 1 5 2.426 1.446 3

Availability of government social security schemes 284 1 5 2.380 1.388 4

Availability of deferred pension plan 284 1 5 2.338 1.456 5 The availability of individual and group pension plans 284 1 5 2.306 1.384 6



It can be seen from the above table thatthe employees are less aware on theavailability of various pension plans in themarket as the means of almost all thestatements are well below the neutral levelof 3. The employees have expressed slightawareness on the various types of pensionplans available; also they have expressedthat they have least level of awareness onthe statement ‘Availability of individual andgroup pension plans’ (2.306).Thisstatement is followed by the statement“Availability of deferred pension plan’(2.338) and “Availability of governmentsocial security schemes’ (2.380). This

further necessitates the awarenessprogrammes to be conducted among theprivate employees to create necessaryawareness about pension plans.Level of Awareness on the benefits ofPension plansThe respondents were asked to rate theirlevel of awareness on the benefits ofpensions plans through seven statementson a 5-point liker scale, 1 being the lowestlevel and 5 being the highest level ofawareness. The mean level of awarenessof employees on these statements aretabulated below according to their Rankin Table 4.2.2.

Table 4.2.2 : Level of Awareness on the benefits of Pension plans

Statement N Min. Max. Mean S.D. Rank Availability of the modes of pension-mly,qly,hly,yly

284 1 5 3.208 1.514 1

Details of maturity of policy 284 1 5 2.975 1.479 2 Change of nomination 284 1 5 2.856 1.583 3 Tax benefits available in choosing pension plan 284 1 5 2.845 1.519 4 Lapse of policy 284 1 5 2.743 1.663 5 Grace Period of payment of premium 284 1 5 2.701 1.599 6 Surrender of policy before maturity 284 1 5 2.662 1.590 7

It can be seen from the above table thatthe employees have low level of awarenesson various benefits of pension plans as themeans of almost all the statements are wellthe neutral level of 3 and only the statement‘Availability of the modes of pension’ hasthe mean value just above 3 (3.208). Theemployees have the least level ofawareness on ‘Surrender of policy beforematurity’ (2.662), followed by the benefit‘Grace period of payment of premium’(2.701). This illustrates that lot awarenessprogrammes have to be conducted by the

pension/insurance companies among theprivate employees to create necessaryawareness to invest in pension plans fortheir secured future, i.e. after-retirement life.Level of Interest on Pension plansThe respondents were asked to rate theirlevel of interest on investing in pensionsplans through ten statements on a 5-pointliker scale, 1 being the lowest level and 5being the highest level of interest. Themean level of awareness of employees onthese statements are tabulated belowaccording to their Rank in Table 4.2.3.

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Table 4.2.3 : Level of Interest on Pension plans

Statement N Min. Max. Mean S.D. Rank

I am ready to open pension policies if someone approaches me 284 1 5 4.011 1.190 1

I may be approached to brief about pension policies 284 1 5 3.812 1.190 2 I don’t know how to open pension policies 284 1 5 3.789 1.173 3 I don’t know the availability of pension policies 284 1 5 3.768 1.448 4 I want to have pension policies for secured future life 284 1 5 3.720 1.028 5 I will never default paying pension premium in spite of all commitments 284 1 5 3.651 1.039 6

I don’t know to whom and where I should contact to open pension policies 284 1 5 3.645 1.258 7

Pension policies are the best choice for my secured after-retirement life 284 1 5 3.595 1.245 8

I will never withdraw any amount from my pension plans before maturity 284 1 5 3.458 1.098 9

I can recommend to my friends also to open pension policies 284 1 5 3.407 1.140 10

It can be observed from the above tablethat the employees have expressed a fairamount of interest to invest in pensionplans; the statement ‘I am ready to openpension policies if someone approaches’has the highest mean (4.011), followed bythe statement ‘I may be approached tobrief about pension plans’ (3.812), ‘I donot know how to open pension policies’(3.789), ‘I do not know the availability ofpension plans’ (3.768), ‘I want to havepension policies for secured future life’(3.720), and so on. This illustrates thatthere is great amount of scope for makingthe employees to invest in pension plans ifthey are made to be aware of pensionpolicies and properly approached byinsurance companies.Impact of demographic variables onthe Awareness of pension plans

The grand mean of awareness on all thethree factors, viz. Type of plans, Benefitsof plans and Interest on pension plans

were analyzed to see whether demographicvariable gender has any impact on theawareness of these factors and the resultsare displayed in the following Table 4.3.1.Table 4.3.1 Impact of Gender onAwareness

Gender Benefits Types Interest Male 2.716 2.192 3.263 Female 3.125 2.900 3.009 F 5.739 21.980 13.747 Sig. 0.017 0.000 0.000

It can be observed there is a significantdifference in the level of awareness of maleand female respondents (p < .05) on eachof the factors taken for study, i.e., Benefitsof pension plans, Types of pension plantsand Interest on pension plans. Also it canbe noted that female employees haveshowed higher level of agreement onBenefits and Types than the maleemployees whereas male employees haveshown more interest in pension plans thanthe female employees.



Table 4.3.2 Impact of Age onAwareness

Age Benefits Types Interest Upto 25 years 2.235 2.031 3.321 25-35 years 2.545 2.176 3.184 36-45 years 3.025 2.600 3.142 45-55 years 3.143 2.667 3.175 Above 55 years 2.838 2.095 3.319 F 2.748 2.480 .607 Sig. 0.029 0.044 0.658

It can be observed there is a significantdifference (p < .05) in the level ofawareness of employees in different agegroups on the factors Benefits and Typesof pension plans, whereas there is nosignificant difference (p > .05) in theawareness of employees in different agegroups as far as their interest in pensionplan is considered. male and femalerespondents (p < .05). The employees inthe age group of 45 to 55 years haveshown more level of awareness onBenefits and Types of pension plans.

Table 4.3.3 Impact of Qualification onAwareness

Qualification Benefits Types Interest Upto HSc 3.651 2.857 3.100 UG Degree 2.573 2.013 3.187 PG Degree 2.976 2.519 3.190 Professional 2.897 2.801 3.144 F 2.621 5.902 0.157 Sig. 0.051 0.001 0.925

It can be observed there is a significantdifference (p < .05) in the level ofawareness of employees with differentqualifications on the factor Types ofpension plans, whereas there is nosignificant difference (p > .05) in the

awareness of employees in differentqualification groups with respect to thefactors Benefits and Interest on plans.The employees with HSc qualificationare well aware of the benefits of pensionplans than others.

Table 4.3.4 Impact of Marital statuson Awareness

Marital status Benefits Types Interest Married 2.879 2.457 3.121 Unmarried 2.763 2.334 3.402 F 0.317 0.418 11.746 Sig. 0.574 0.519 0.001

It can be observed there is a significantdifference (p < .05) in the level ofawareness of married and unmarriedemployees with regard to their intereston pension plans, whereas there is nosignificant difference (p > .05) in theawareness of married and unmarriedemployees on the factors Benefits andTypes of plans. The unmarriedemployees have shown more interesttowards investing in pension plans.

Table 4.3.5 Impact of Family Incomeon Awareness

Family Income (Rs.)

Benefits Types Interest

upto 20,000 3.077 2.615 3.262 20,000 to 30,000 3.045 2.391 3.226 30,000 to 40,000 1.823 1.739 3.236 40,000 to 50,000 2.521 2.294 3.211 Above 50,000 2.997 2.535 3.155 F 5.363 2.771 0.280 Sig. 0.000 0.028 0.891

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It can be observed there is a significantdifference (p < .05) in the level ofawareness of employees with differentlevels of income with regard to the factorsBenefits and Type of plans, whereas thereis no significant difference (p > .05) in theawareness of employees on the factorInterest on pension plans. The employeeswith family income below Rs.20000 permonth have more level of awareness thanthe other employees.

Table 4.3.6 Impact of Type of Familyon Awareness

Type of family

Benefits Types Interest

Joint 2.864 2.605 3.180 Nuclear 2.851 2.331 3.174 F 0.006 3.204 0.007 Sig. 0.938 0.075 0.932

It can be observed there is no significantdifference (p > .05) in the awareness ofemployees on the each of factor Benefits,Type of plans and Interest on pensionplans. This implies that the level ofawareness is not affected by the type offamily in which the employees are living.

Conclusion

The main aim of the study was to examinethe level of awareness of employeesworking in private sector companies inSalem and Erode area on Pension/groupInsurance plans. Out of 284 validresponses received, it was found that inprinciple, there is no desired level ofawareness among the employees onvarious types of pension plans, benefits of

pension plans even though they havecertain amount of interest to know aboutpension plans and to invest in pension planswhen they are made aware of and properlyapproached. Hence the study concludesthat a widespread awareness programmeshave to be conducted by the pension/insurance companies throughout the stateto make the people know more aboutpension schemes and tap a considerablemarket available for pension/insurancemarket and provide the people with asecured retired-life.

References

Inese Mavlutovaa, Stanislava Titovaa,Andris Fominsa, “Pension System inChanging Economic Environment: Caseof Latvia”, Procedia Economics andFinance, Vol. 39, 2016, pp. 219 – 228

Kanchan Bharati, et al., “Social SecuritySchemes : A Case for Universalisation”,IIMB - Working Paper No: 49, 2015.

Landis MacKellar (2009), “PensionSystems for the Informal Sector in Asia”,Human Development Network, TheWorld Bank, No. 0903

Praveen Jha and Nilachala Acharya,“Social Security for the elderly in India –a Note on Old age pension”, HelpAgeIndia-Research & Development Journal,Vol. 19, No.2, May 2013, pp. 3-15.

Ranadev Goswami, “Indian PensionSystem: Problems And Prognosis”, IndianInstitute of Management, Bangalore,2001.



Roland Sigg, “A Global Overview onSocial Security in the Age OfLongevity”, International Social SecurityAssociation, 2005.

Sanyal, Ayanendu and Singh, Charan,Universal Pension Scheme in India(August 15, 2013). IIM BangaloreResearch Paper No. 420.

Shafie Mohamed Zabri, Kamilah Ahmad,Angelina Ann Loy Hui Lian, “TheAwareness of Private Retirement Schemeand the Retirement Planning Practicesamong Private Sector Employees inMalaysia”, International Journal of

Economics and Financial Issues, 2016,Vol. 6, No. 6, pp. 120-124.Stewart, F. (2007), “Benefit SecurityPension Fund Guarantee Schemes”,OECD Working Papers on Insurance andPrivate Pensions, No. 5, OECDPublishing. doi:10.1787/260604113335.Sule, Kehinde Oluwatoyin, and Ezugwu,Christian Ikechukwu, “Evaluation of theApplication of the Contributory PensionScheme on Employee Retirement Benefitsof Quoted Firms in Nigeria”, AfricanJournal of Accounting, Economics,Finance and Banking Research, Vol. 4.No. 4. 2009, pp. 47 – 60.

qqq

79

SOCIO-ECONOMIC ASPECTS AS A POTENTIALMODERATOR ON THE RELATIONSHIP BETWEEN

WORKPLACE SPIRITUALITY AND ORGANIZATIONALCITIZENSHIP BEHAVIOR - AN EMPIRICAL STUDY

Tulika SinghAssistant Professor, Department of MBA, CV Raman Group of Institutions, Bhubaneswar,

E-mail: [email protected],GA193, Niladreevihar chandrasekharpur Bhubaneswar, Odisha-751016

Sasmita MishraAssistant Professor, Department of MBA, CV Raman Group of Institutions, Bhubaneswar,

E-mail: [email protected],KC-28, Kharabela Complex, Aiginia, Bhubaneswar, Odisha-751019


ABSTRACT

Spirituality is the unique inner search for optimum personaladvancement through involvement into inspirational secrecy. Openexpression of spirituality at workplace enables employees toexperience a feeling of completeness at work. Spirituality is ourinternal realization and way of self enlightenment. It is a specific formof job sentiment that stimulates action. It may emphatically contributemore in the formation of more strong position for OrganizationalCitizenship Behaviors to make a way into in a workplace. Each facetof Workplace Spirituality has a positive link with organizationalcitizenship behaviors, (OCB). This paper tries to identify the sagacityof Spirituality and its impact on the employees in private engineeringcolleges in Bhubaneswar by using a self administered questionnaire.

This research intended to find the association between workplacespirituality and OCB by using simple regression analysis. The presentstudy also investigated the moderating effect of socio-economic factorson the relationship between workplace spirituality and OCB by usinghierarchical multiple regression analysis. The study found a positiverelationship between workplace spirituality and OCB. It has been also

Parikalpana - KIIT Journal of Management


found that the select socio-economic factors have a significantmoderating effect on the relationship between workplace spiritualityand OCB.Keywords: Workplace spirituality, organizational citizenshipbehaviors, Hierarchical Multiple Regression Analysis.

INTRODUCTION

The notion of spirituality heightens itsgrowing importance and many scholarshave pointed out its importance.Spirituality does not mean religiousprinciples. It could be beliefs, valuesystems, or meaning of the life of anindividual. Kellehear, & Gawain revealedthat “in the modern society people are lostand a feeling of insecurity exists amongthem because of lack of an inner spiritualstrength.” Spirituality is the actualization ofindividuality; it translates superficial life anddevelops awareness in the people,individual faith and value systems. Isen &Baron and Shaw found that Individualswho are in an authentic spiritual dispositiondemonstrate high-degree of achievementon their respective job. Spirituality in placeof work has a firm impact on employee’svigor and involves an employee in auxiliary-job related behavior which may be knownas OCB. Employees committed in OCBgo very far away from fixed task dutiesand strive to give their best to accomplishorganizational objectives. OCB may resultin several constructive outcomes for theorganizations like enhanced prosperity,

competence, and augmented output.In today’s business condition manifestedby awful competition, a vigorous andstrong commitment from employees is ademanding factor that can greatly assist anorganization to compete efficaciously withits competitors and to acquire superiorperformance in the market. OCB is amongone of the several factors that persuadeemployees to make positive contributionstowards the organization. Ozer Podsakoff“OCB as an idea has been consideredcomprehensively in research”. Studieshave found that OCB has a positive linkto a range of organizational effectivenessand outcomes.Taking into the manifestation of the benefitsthat OCB could contribute to the successof an organization; this study recommendssome workplace situation that can supportOCB of employees. Precisely, thepercussion of workplace spirituality onOCB of employees of Engineering Instituteis the objective of this research. In theliterature, several scholars have writtenabout the benefaction of workplacespirituality on employees individualoutcomes. The teachers who are

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capacitated to take part in the decision-making of the Institute affect the learningenvironment. The empowered workenvironment assists in improving theleadership and professionalism amongteachers.

“Teachers are more devoted towards theirwork when they perceive their work assignificant” Henkin, Dee, & Duemer. “Thework environment where managementprovides superior work-life policies givesmomentum to the education offered in theinstitutes. So that the institute can becomea better learning institute” Yong . A soundacademic system of a nation is treated asthe backbone of that nation andacademicians are the essential premise ofthat academic system.

“The latent and brilliance of theacademicians determines the success of anacademic system “Yeshodhara & Joolideh.Research has shown that the committedteachers give their strong contribution totheir institutions and they also show a highlevel of performance for their institutes.

The present study will facilitate futureinvestigators in understanding the effect ofWorkplace Spirituality and job satisfactionon OCB particularly in the framework ofacademic and non-academic employees.The present study will also demonstratethe importance of OCB in escalating theefficacy of the educational institutes andthe influence of workplace spirituality onOCB of faculties. The current study will

appraise the magnitude of OCB ofteaching and non-teaching staff in thesuccess of educational institutes.

The underlying principle for the presentstudy lies in the fact that all employees ofan academic institution with differentbackground have a spiritual expedition.The purpose is to discover how employeesfrom diverse institutional settings perceivespirituality in their work.

Literature ReviewWorkplace Spirituality

People give their wholeheartedcontribution to their work. Whenemployees give endless efforts to theirwork they will obviously seek to findsignificance and aspiration, a type ofaccomplishment that means at the placeof work employees can find intrinsicpleasure. Spirituality makes satisfaction ofindividual requirements especially a senseof satisfaction. Spirituality in relation to theworkplace can be apprehended as “thepositive reception that workers have aninternal life that is cherished and sustainedby significant work that takes place in theframework of society” Ashmos & Duchon.

Ashmos and Duchon, “There are threedivergent magnitudes of workplacespirituality: a sense of society, purposefulwork internal life. They found that the firstdimension related to connection theemployee has with other human beings inthe workplace, the second dimension dealswith conducting activities at work that gives

Socio-economic aspects as a potential moderator on the relationship.......


meaning to the person’s life, and the thirddimension is concerned with theunderstanding of one’s inner power andits use in the wellbeing of workplace”.Workplace spirituality contributespositively to individual outcomes ofemployees. Kolodinsky noted that thiscontribution can be understood as aperson- organization fit. It may be termedas “judgments in relation to a similaritybetween an employee’s personal valuesystem and the culture of an organization”Cable & DuRue.

Kolodinsky (twentieth century) found thatwhen a constant relation exists betweenthe employee’s values and theorganization’s values, a positiverelationship with individual outcomes willbe seen. For instance, Milliman reportedthat “the magnitude of spirituality at theworkplace is not only positively allied withan employee’s organizational dedicationbut also negatively linked to the intentionto quit.” In addition, Robert stated that itis a positive and close association betweenworkplace spirituality and job satisfaction.

Giacolone & Jurkiewics found that“spirituality means the various aspects ofthe workplace, either in the individual, thegroup, or the organization, that augmentfeelings of satisfaction. To elaborate, thatprocess of work that facilitates a sense ofbeing connected to a nonphysical force thatprovides feelings of completeness andjoy”.

Ashar & Lane-Maher “spirituality is anembedded and wide search for sublimemeaning in an individual’s life”. Theysubmitted that workplace spiritualityincorporate some universal behavioralmechanism and also some kind of devotionto do meaningful work which may servethe society at large”.

According to Neal, “workplace spiritualityis about employees watching their job asa divine pathway, which serves as a scopeto develop individually and to devotesomething to humanity in a purposefulmanner. It may be treated as a learningprocess to become more cautious andsympathetic towards the co-worker, alongwith superiors and subordinates. It is aboutsincerity, reliability, being truthful.

Workplace Spirituality means anindividual’s aspiration to live his values inthe workplace. Or it may also be referredto as the way by which an organizationstransforms themselves to maintain thespiritual growth of its workers”. Kale andShrivastava, narrated that workplacespirituality is not associated with religiouscustom or communication with God and italso not a religious ceremony.

The study is supported by the viewpointof Mitroff and Denton, who argued thatsubsistence workplace spirituality was notassociated with a particular religion, thoughreligion could be a fine o0portunity forintroducing spirituality.

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Table 1:Demographic Profile of Sample of academic and non-Academicemployees (N=280)

Particulars Frequency Percentage Cumulative Percentage

Gender Male Female Total

136 144 280

48.6 51.4 100.0

48.6 100.0

Nature of Job Teaching Non-teaching Total

120 160 280

42.9 57.1 100.0

42.9 100.0

Marital status Married Un-Married Total

88 192 280

31.4 68.6 100.0

31.4 100.0

Age 25-30 31-40 41-50 Total

212 52 16 280

75.7 18.6 5.7 100.0

75.7 94.3 100

Experience Up to 5 years 5 to 10 years 10 to 15 years More than 15 years Total

152 84 28 16 280

54.3 30.0 10.0 5.7 100.0

54.3 84.3 94.3 100.0

Educational Qualification

Matriculation Intermediate Graduation Masters PhD Total

4 12 28 228 8 280

1.4 4.3 10.0 81.4 2.9 100.0

1.4 5.7 15.7 97.1 100.0

Total 280 100.0 Table 2 : Pearson Correlation Analysis – Spirituality and OCB

**. Correlation is significant at the 0.01 level.


Pearson Correlation OCB Spirituality OCB 1.000 0.741** Spirituality 0.741** 1.000 N 280


Ten dimensions of workplace spirituality

Organizational Citizenship Behavior(OCB)

According to Graham, Organ & Ryan,“OCB can be understood as the workerbehaviors which support to endorse theefficient functions of the organization, andthese behaviors are not overtly stimulatedby the ceremonial reward structure of theorganization. Theoretically, the concept ofOCB is developed on the ground of theconcept of social exchange theoryprovided by Blau. According to Lavelle,social exchange relationship can benarrated as “unfair, relationship-orientedarrangements between employers andworkers symbolized by a replacement ofsocial and psychological profit.” OCBinvolves a combination of behaviors, suchas taking and accommodating extra duty,loyalty to system and rules regulations ofan organisation, maintaining a positiveattitude, and avoidance of work-relateddissatisfaction.

OCB is a set of responsible behaviors thatare not exclusively incorporated in the jobdescriptions, but indirectly boost thewellbeing of business. “OCB reflects thethemselves to the organization beyond theirin-role duty” Moorman & Harland. Organ,specified OCB as “personal behavior thatis optional, not documented by theceremonial reward system, and thatpromotes the effective performance of anenterprise”. To get accomplishment intoday’s cutthroat competitive world, OCBsupports enterprises to achieve newnessand more productive measures to achievesuccess. Organizations cannot gain anaggressive advantage just by givingproducts or services. Preservation ofcompetent human resource definitely playsa crucial function in this regard. That’s whymany organizations are putting greaterinterest to worker motivation and theirwholehearted commitment of to achieveorganizational efficiency.

Sl Dimensions Definitions 1. Generatively Continuous focal point, showing an apprehension for the results of

one's actions into future. 2. Integrity Obedience to rules and regulations, implementing unforced authority. 3. Mutuality All employees are unified and jointly dependent; each devotes to the

final output by working together. 4. Accountability Independently works to goal attainment irrespective of difficulty. 5 Justice Equal treatment with all employees; unbiased, honest; rewards and

punishments 6. Respect Consider each employee with respect. 7. Faith Able to depend on the disposition and truth of the organization. 8. Receptiveness Flexible orientation toward risk-taking, and rewards 9. Kindness Orientation to benevolence to develop the happiness of workers 10. Humanism Practices that focus on the self-respect and worth of employee

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Five Dimensions of OCB

Sl Dimensions Definitions 1.. Conscientiousness An example of doing fine with the bare minimum

required of job requirements. 2. Sportsmanship Readinesses to abide by the unavoidable

inconveniences, without any complaint. 3. Courtesy The discretionary performance of purposeful

behaviors that avoid job-related troubles for others. 4. Civic virtue Participation in the events of the organization. 5. Altruism Voluntary actions that may facilitate coworkers in

solving job- related problems.

Workplace Spirituality and OCB

The first element of workplace spirituality,sense of community, could be consideredas an important factor that promptsemployees to perform OCB. The senseof community is about working in a placewhere employees can have an impressionthat there is a strong relationship amongthe coworkers Ashmos & Duchon.

As stated by Schwartz & Bilsky , Workershaving a greater sense of community aremore likely to exhibit prosocial behavior,which is the willingness to help, protect,or promote the welfare of others.Therefore, this prosocial behavior thatemployees have in their workplace canmotivate them to make discretionarycontributions to help their coworker andthe organization beyond their regularresponsibilities. Bartholomew & Manion,pointed when in a place of work sense ofsociety exists; individuals will becharacterized by a confined obligation of

the members, the capacity to outlineconsent, a sense of adherence acontemplative personality, and a sense ofsafety.

According to them, these characteristicswill help create the environment of mutualtrust that encourages employees to devotethemselves to help other employees andthe organization. According to Pandey &Gupta, “Academics of Management hadnever been completely sightless to thespiritual aspects of job”.

Donde and Dennis, advocated thatworkplace spirituality is a very effectiveapproach which is required to stimulateemployee’s inner strength in organizationfunctions. Long and Mills in indicated thatspirituality in the workplace is essentiallynecessary for the effective functioning ofthe organizations and also for thoseemployees who work for them to advancein their career.



Researches in this area of study conservethat organizations which are rated with highspiritual values performs better than thoseorganizations that don’t give importanceto workplace spirituality. On the criterionof intensification, competence and otherrelated benefits. Workplace Spiritualitydoes not hold a conviction or faith in adivinity. When someone approaches his orher work with a sense of importance andrationale that alter the instrumentalities ofwork, one becomes capable of expressinghis spirituality through his or her work.

Though the interrelationship betweenworkplace spirituality and OCB has beenstudied previously Kazemipour, Tepper,the literature is incomplete. Tepperdeveloped a model which shows thatspirituality has indirect effects on OCBthrough three psychological states:indebtedness, sensitivity to the needs, andtolerance for inequality. However, Tepperfocused mainly on how individualspirituality is related to OCB.

However, the present article describes anempirical study targeting on workplacespirituality as an important component ofthe organizational culture. Morespecifically, we recommend that inner life,sense of association, and purposeful workare aspects presented in the organizationalculture and may have an impact on OCB.Therefore, this research paper tries tocontribute to the research in workplacespirituality by providing some practicalsupport that would strengthen itsimportance.

Although the research in the area ofspirituality and OCB has amplifiedoutstandingly in the last few years, littleeffort has given on the comparative studyof OCB of the academic and non-academic workforce of educationinstitutes.

This study will help the other researchersin analyzing the effect of different types ofspiritual behaviours depicted by these twodivergent groups of employees in aneducational institute. It will also representthe importance of OCB in increasing theefficiency of the educational organizationand will determine the factors that createOCB of employees of an Academicinstitution.

Difference between Academic andNon-Academic Employees:

In an education system, there are severaltypes of persons involved. They facilitatein imparting education and learning to thestudents. Such workforce may includeboth academic and non-academicemployees of the institute.

In this perspective, we have frequentlyheard the word ‘faculty’ and ‘staff’ in ourday to day life. Faculty refers to theacademic workforce staff of the institution,whereas a staff simply means theadministrative workforce of the institute .Inthis article excerpt, we are going to throwlight on the difference between theworkplace spirituality and OCB of theacademic and non-academic workforce ofan educational institute.

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Academic workforce or Faculty:

By the academic workforce or faculty, wemean a body of educators, i.e. professors,or teachers, whose aim is to impartknowledge to the learners at the school,college or university. In simple terms, anAcademician means the intellectual assetof an educational institute. The academicemployees are hired with a purpose ofproviding education to the students.

Non-Academic workforce

When we talk about an educational

institution, the non-academic workforceconsists of employees of various levels –

• Top-level staff such as administrators,dean, director, president, etc.

• Middle-level employees include thoseworkers of an institute who carry outin-office tasks and provide supportfunctions like a counselor, cashier,office assistants and so on. They aremainly responsible for admissions,security, and paperwork.

• Low-level staff includes watchman,servants, gardeners, guards, cleaners, etc

Comparison Chart of Academic and Non-Academic workforce

Basis For Comparison

Academic Non-Academic

Meaning A group of academicians who impart education to the students.

They constitute the non- Academic workforce.

Implies Academic group of the institute. Employees of any organization. Working hours Regular Regular What do they do?

They perform a teaching function. They perform administrative and support functions.

It may include Professors, lecturers, researchers, teachers, etc.

Secretaries, assistant, dean, president, registrar, clerk etc.

Educational Requirement

As per the standards set by the institution.

Depends on the designation.

Significance of the study

The present study is being conducted inthe times when private universities aremoving a step ahead in the form of thehighly technological labs and improvedinfrastructure and posing a challenge forthe universities for maintaining their statusand rankings as the leading universities.Higher Education Commission hasdeveloped a criterion for rankinguniversities in different domains.

Employees are one of the significant factorsamong them and their profiles are playinga substantial role in ranking. Therefore themajor challenge for the public and privateuniversities are to retain their competentworkforce and to provide them anenvironment that induces them so that theynot only stay trustworthy but do somethingextra beyond their duty for their university.Hence psychological and behaviouraldimensions of employees of higher learning



institutions are important to study so thattheir implications can be anticipated in thelong run. This study also indirectly exploresthe satisfaction and motivation level of theemployees by the examination of theirvoluntary behaviour and their willingnessto participate informally in the organisation.

Objective of the study:

Following objectives give the impetus toconduct the present study• To evaluate the perception of academic

and non-academic employees on differentdimensions of Spirituality and OCB.

• To determine the impact of WorkplaceSpirituality on OCB of academic andnon-academic employees.

• To identify the moderating effect of age,gender and nature of job on therelationship between workplacespirituality and OCB.

The Model of association betweenWorkplace Spirituality, socio-economic factors and OCB:

As per the objectives, the following modeland hypotheses are proposed. The modelwill try to establish an alliance betweenworkplace Spirituality, socio-economicfactors and OCB.

Workplace Spiritualit

y

Organization Citizenship Behavior

Socio-economic

Research HypothesesH1: Spirituality contributes significantlyto OCB and has a constructiveimplication on OCB.H2: Age moderates the relationshipbetween Workplace Spirituality andOCB.H3: Gender moderates the relationshipbetween Workplace Spirituality andOCB.H4: Nature of job moderates therelationship between WorkplaceSpirituality and OCB.

Research variables are:

1. Independent Variable:

In the present study workplace spirituality,age, gender and nature of job are takenas independent variables. Workplacespirituality is the foundation of principlesand value system in the culture of anorganization to facilitate employees’ toexperience elevation from their job andfacilitate a feeling of community with otheremployees. Age, gender and nature of jobare the socio-economic factors.

2. Dependent variable:

OCB is taken as the dependent variablefor the current study. OCB refers to thekind of behavior is not acknowledged andvalued directly by ceremonial rewardsystem of an organization but it elevateseffective functioning of the organization. Itrefers to the act that employees perform,impulsively and of their own accord, whichis not in their specified contractualobligations. In other words, it is optional.

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Table 3 : Simple Regression Analysis – Spirituality and OCB

Description R2 Value of adjusted R2

Value of beta

Value of C

Sig.

Dependent Variable: OCB Independent Variable: Spirituality

.549 .542 .736 17.937 .000



Research MethodologyThis section describes the samples,measures, and estimating technique usedin the study.SamplesThe current study is based on primary datacollected from 280 teaching and non-teaching employees working in variousB.Tech institutes in Bhubaneswar city. Forthe current study, a simple randomsampling technique is chosen for datacollection. An analytical questionnairebased on Likert’s five-point rating scalewas administered among the 280respondents. The authenticity of theresearch tool was investigated byCronbach’s Alpha. Data AnalysisTable 1 represents the demographiccharacteristics of the respondents. Fromthe present study of 280 employees whoare surveyed, it is found that in Agemajority of the respondents belongs to 25-30 of age (75.7percent) and rest arebetween 31 to 50 years of age(24.3percent). Concerning marital statusmajority of respondents are unmarried(68.6 percent) followed by marriedemployees (31.4). As for years of workexperience is concerned the majority ofrespondents have less than 5 years ofexperience (54.3 percent), followed byemployees having experience of 5-10years in their job. Only (10 percent) ofemployees have 10-15 years ofexperience. Concerning educationalqualification (81.4 percent) of employees

have a masters degree, (2.9 percent) haveDoctoral, (10 percent) of employees haveBachelors Degree and (43 percent) ofemployees have a degree of Intermediate.It is also found that majority of employeesof the institute are female (51.4 percent)followed by their male counterparts whoare (48.6 percent) of the total population.The majority of the population belongs toNon-teaching employees (57.1 percent)whereas the total number of teaching staffis (42.9 percent).MeasuresThe present study employed themeasurement tool of workplace spiritualitydeveloped by Ashmos and Duchon in thetwentieth century. This measure comprisesthree subscales corresponding to the threeworkplace spirituality dimensions: a senseof community, meaningful work, and innerlife. The subscales have a 5-point Likert-type scale (1 = strongly disagree, 5 =strongly agree).In order to measure OCB, the authorsutilized the measurement tool developedby Williams and Anderson in nineteenthcentury. The various dimensions of OCBwere measured on a 5-point Likert-typescale (1 = strongly disagree, 5 = stronglyagree). Items for OCBI are “I help my co-workers when they have been absent”Examples of the items for OCBO are “Idefend my company when other workerstry to employees criticize it”.Construct Reliability Test

Construct reliability test is conducted toensure that a scale consistently yielded the

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same response (Nunnally, nineteenthcentury). Construct reliability is determinedby Cronbach’s alpha (α). A minimumrecommended value for Cronbach’s alphacoefficient is .7 (Chin, nineteenth century;Fornell & Larcker, (nineteenth century).Based on responses from those in thesample, the Cronbach’s alpha value ofspirituality is found to be .851 which isabove the minimum acceptable standard.Further, the Cronbach’s alpha value of theresponses on OCB scale developed byWilliams and Anderson is determined as0.839, which is also above the minimumacceptable standard.

Regression Analysis

Regression analysis is frequently adoptedand used tool, when two variables are saidto be scientifically connected by a linearrelationship. In present study, we havetaken two variables; one is an independentvariable (workplace spirituality) which isrooted in the cause of another behavior,which may be defined as a dependentvariable (OCB). Regression analysis canelucidate that exists in actuality i.e., theremust be a physical approach in which theindependent variable (workplacespirituality) be able to influence adependent variable (OCB). In the presentstudy, researchers have used simpleregression analysis to depict therelationship among Workplace Spiritualityand OCB. The impact of workplacespirituality and OCB may be different fordifferent age groups, male and female aswell as for teaching and non-teachingemployees. To identify this relationship a

hierarchical multiple regression analysis isused in the present study. This tool is usedwhen the independent variables areentered into regression in steps. In thepresent study, the researchers try toexamine the moderating effect of age,gender and nature of job on therelationship between WorkplaceSpirituality and OCB.Correlation Coefficient andRegression Analysis betweenSpirituality and OCB Results:

The hypothesis H1 states that Spiritualitycontributes significantly to OCB and hasa constructive implication on OCB. Tounderstand the correlation betweenworkplace spirituality and OCB.Pearson’s Correlation analysis in Table 2depicted the correlation betweenSpirituality and OCB, R = 0.741. Itrepresents a highly positive correlationbetween the two variables. The currentmodel shows a strong and positivecorrelation between the independent anddependent variable.A simple regression analysis is applied tofind the impact of workplace spiritualityon OCB. Table 3 shows that Spiritualityregressed to OCB with a beta value of.736 and a constant value of 17.937. Theanalysis shows that for every unit increasein Spirituality of individuals there will beapproximately .736 units increase inindividuals OCB. Similarly, for every unitdecrease in Spirituality, there will beapproximately two units decrease in OCBof employees. The coefficient ofdetermination, R2 = 0.549 explains 54.9%



variability in OCB by Spirituality. Themodel is statistically significant as p=0.000.Hence, the null hypothesis is rejected andthe present study has established a highlysignificant and positive interrelationshipamong these two types of variables i.e.Spirituality and OCB of academic andnon-academic employees of anengineering college.

Hierarchical Multiple RegressionAnalysis Results:

H2: Age moderates the relationshipbetween Workplace Spirituality andOCB.

To test the relationship betweenWorkplace Spirituality and OCB amongthe two age groups (25yrs – 40 yrs, 41yrs -55 yrs), a hierarchical regression isexecuted. At the first step, twoindependent variables WorkplaceSpirituality and age are selected. Thesevariables accounted for a significant degreeof variance in OCB, R2 = 0.549, F Value= 40.813, p = 0.000.

In the next step, the interaction termbetween Workplace Spirituality and agewas added to the regression model and itwas found that “R2 = 0.001 and the modelis statistically significant at P=0.000.

Test of the interaction plot in figure 1 showsthat when there is an increase inWorkplace Spirituality, the level of OCBfor both the age groups also increases, butthe rate of increase in OCB among theemployees coming under the age group of41yrs – 55 yrs is more than the employees

coming under the age group of 25yrs to40yrs. Thus the null hypothesis is rejectedand the present study exhibited that thereis a moderating effect of age on therelationship between workplace spiritualityand OCB.

H3: Gender moderates the relationshipbetween Workplace Spirituality andOCB.

To examine whether the relationshipbetween Workplace Spirituality and OCBfor male and female is same or not, ahierarchical regression analysis isconducted. In the first step, gender andWorkplace Spirituality are entered into themodel. These variables accounted for asignificant amount of variance in OCB, R2

= 0.554, F Value =41.590, P = 0.000. Inthe second step, the interaction termbetween gender and WorkplaceSpirituality were added to the regressionmodel, which accounted for a significantproportion of the variance in OCB, “R2 =0.027, F Value = 30.567, P = 0.000.

Test of the interaction plot in figure 2 showsthat when Workplace Spiritualityincreases, the level of OCB of both themale and female employees also increases,but the proportionate increase inWorkplace Spirituality is more amongfemale employees than the maleemployees. Hence, the null hypothesis isrejected and the present study exhibitedthat there is a moderating effect of genderon the relationship between workplacespirituality and OCB.

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H4: Nature of job moderates therelationship between WorkplaceSpirituality and OCB.In order to examine the relationshipbetween Workplace Spirituality and OCBfor both academic and non-academicemployees is same or not, a hierarchicalregression analysis is conducted. In the firststep, Nature-of job and WorkplaceSpirituality are entered into the model.These variables accounted for a significantamount in variance OCB, R2 = 0.008. FValue= 29.216, P= 0.000. In the secondstep, the interaction between workplacespirituality and OCB was added to theregression model which accounted for asignificant proportion of variation in OCB,“R2=0.008, F Value=29.216, p=0.000.

Test of the interaction plot in figure 3depicts that when Workplace Spiritualityincreases, the level of OCB also increasesamong all the employees, but there isremarkable increase in the level of increasein OCB of academic employees incomparison to non-academic employeeswith increase in Spirituality. Thus, the nullhypothesis is rejected and the present studyexhibited that there is a moderating effectof nature of job on the relationshipbetween workplace spirituality and OCB.

Discussion and Conclusion

This study contemplated an augmentationof the workplace spirituality dimensions toOCB. The outcome of the Regressionanalysis revealed a significant contact ofworkplace spirituality on OCB.Specifically, the researchers found that

every dimension of workplace spiritualityis closely and positively associated withboth OCB. Overall, these resultssupported the prior predictions about thelinkages.The results of this study offer an extracontribution to the existing literature. First,the findings provide an extra vision abouta workplace condition that can improveemployee OCB. Discovering newantecedents of employee OCB isimportant since it helps researchers identifymajor factors that can incite this positivebehavior. Previous studies on thedeterminants of OCB focus on factors likedispositional traits, Job characteristics, andworkplace environment Konovsky &Organ (1996), Lavelle (2009), Restubog(2008). In the present study, workplacespirituality has proved to be an importantwork condition that encourages employeesto make extra contributions to theorganization beyond their predefinedresponsibilities. This study has confirmedthat employees who can accommodatetheir spiritual self with their workcommunity and organization are morelikely to develop emotional adornment totheir workplace, thereby motivating themto express OCB to both their organization.Furthermore, since workplace spiritualityis a new concept that still needs moreempirical support, this study makes acontribution to research in this area.The current study has shown a very closeassociation between spirituality(independent variable) and OCB(dependent variable) in case of both the



categories of employees. The results ofHierarchical regression show that with anincrease in age, there is a spurt increase inthe spirituality of employees and theresulted OCB. The model of moderationdepicted that male employees are foundto be more spiritual than the femaleemployees and lastly the results of modelof moderation exhibited that teachingemployees are exhibiting a strongerspiritual behaviour than their non-teachingcounterparts. So, we can say thatdemographic variables of employees playa very pivotal role in shaping the spiritualityof employees as well as the OCB , whichis said to be closely linked with the later.

The results of this research can provideguidance for those institutes that would liketo create or boost employees’ commitmentto their firm. Since OCB is considered apivotal behavior that devotes significantlyto higher organizational performance(Podsakoff et al, 2009), the capacity ofany educational institute to promote OCBcan provide ample benefit to theirperformance. As a result, the studysuggests that the origination orimprovement of workplace spiritualitywithin the institute can be one solution toactualize this objective.

To conclude, we can state that, the presentstudy proposes that spirituality can be oneof the important factors which promoteOCB in educational institutes. Empiricalresults also support the positive contactbetween workplace spirituality and OCB.In general, the results highlight the

importance of organizational leaders inconstituting a work climate that elevatesemployee spirituality at work to encourageboth types of employees in engineeringinstitute to perform OCB.

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PRADHAN MANTRI MUDRA YOJNA:A CRITICAL REVIEW

Manish Agarwal,Amity Business School, Amity University

Email: [email protected]

Ritesh Dwivedi,Assistant Professor, Amity Business School, Amity University

Email: [email protected]

DOI # 10.23862/kiit-parikalpana/2017/v13/i2/164524ABSTRACTFinancial Inclusion is one of the most treasured strategies in India.Our monetary arrangement has dependably been driven by a basicplan of a practical and comprehensive development. The primary pointbehind the monetary consideration is to cover the all segment ofpopulation under monetary administrations. Government of India(GOI) has introduced some of the major steps to “fund the unfunded”micro enterprises segment. One of the initiatives taken by Governmentof India (GOI) is Pradhan Mantri Mudra Yojana (PMMY) which playsan important role in achieving the success of financial inclusion. Theidea behind the scheme is to provide the credit requirement to smallbusiness upto 10 lakh. This research paper includes the overview ofPMMY, performance analysis of the scheme based on state, casteand category, SWOT analysis of the scheme and somerecommendations.Keywords : Financial inclusion, Mudra, Micro Credit,

INTRODUCTION

Finance is one of the most important thingsto fight poverty and provide opportunities.Financial Inclusion is one of the mosttreasured strategies in India. Our monetaryarrangement has dependably been drivenby a basic plan of a practical andcomprehensive development. The conceptof financial inclusion was first introducedby the Governor of RBI Shri Y.V.Reddy

in 2005. Financial Inclusion means processof ensuring access to appropriate financialservices to all the sections of society suchas low income groups and weaker sectionat an affordable rate. Government of India(GOI) has been introduced a number offinancial inclusion initiatives such asPradhan Mantri Mudra Yojana (PMMY),Pradhan Mantri Jeewan Jyoti BeemaYojana (PMJJBY), Pradhan Mantri Jan



DhanYojana (PMJDY), Atal PensionYojana (APY) and Pradhan MantriSurakhsha Beema Yojana (PMSBY) etc.for the small business man, weaker section,low income groups and micro enterprises.PMMY was introduced by the Hon’blePrime Minister Shri Narendra Modi on 8thApril, 2015 along with the introduction ofMUDRA bank. It is also known as theMudra loan scheme. This scheme isavailable from all bank branches acrossthe country.

REVIEW OF LITERATURE

Mol S.TP (2014) has clarified that thereare some issues like money relatedIlliteracy, absence of mindfulness and clientsecuring is high. Reserve Bank of India hasstarted different activities to improvedmoney related consideration. Informationand communication technology offers theopportunities enhancement of financialinclusion.

Mehar L (2014) has showed that thefinancial inclusion in India has increased inthe last few years with new innovations likemobile banking, ultra small branches etc,

Roy, Anup Kumar (2016) has displayedthat the small businesses are the foundationof economic development. A majornumber of initiatives have been taken inthe past few years in the right direction.

Dr. J. Venkatesh and MS. R. LavanyaKumari(2017) has showed that besides theschemes that are being introduced for theoverall growth and development of theMSME sector, initiatives have been

launched which focus solely onentrepreneurs. The schemes will contributeto the well-being of the individuals engagedin small scale industries which willpositively affect the progress of the wholeeconomy.

Verma S. (2015) has explained that thedesign of MUDRA scheme will not onlycaters to the financial problems of MSMEsbut also give moral support to a lot ofyoung population to become anentrepreneur.

Rudrawar, M. A. A. & Uttarwar, V. R.(2016) has explained that PMMY canbring a desired transformation. If it will beapplied properly at the bottom level, it mayact as a game changing idea and boost theIndian economy. It should include lessdocumentation and easily accessible. Incoming few years, MUDRA will play acrucial role for the development ofentrepreneurship, increase in GDP anddevelopment of employment.

R. Rupa (2017) has showed that theMUDRA scheme is very much successfulin Tamil Nadu. It is found that the MFIshave contributed substantially to increasethe number of accounts financed under thePMMY.

THE STUDY

In India the main problem that acts as ahurdle for the development ofentrepreneurship is financing. Microenterprises face many problems so it is verybackward in their position. Other majorproblems faced by micro enterprises, small

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business and entrepreneurs includesfinancial illiteracy, lack of information, lackof financial access, entry level policies,lack of infrastructure, high cost andtechnologies barriers. In budget speech2015-2016, According to FinanceMinister Shri Arun Jaitely, there are about5.77 crore small business units and microunits, majorly sole proprietorship which areinvolved in small manufacturing, trading orservice businesses. 62% are of them areheld by the Scheduled Cast, ScheduledTribe and Other Backward Class. Forthese weaker sections and low incomegroups, it is difficult to approach financialservices and credits easily. The aforesaidreview indicates the importance of microunit sectors and its financial requirementabout credit. Government of India (GOI)has introduced some major scheme to fundthe unfunded micro enterprises segmentknown as Pradhan Mantri Mudra Yojana(PMMY). The data used is secondary andare obtained through journals, articles,research papers and reports available atofficial website of MUDRA scheme.

OBJECTIVES OF THE STUDY

· To get the overview of Pradhan MantriMudra Yojana (PMMY)

· To analyse the performance of thescheme and analyse the state wise listbased on disbursement.

PRADHAN MANTRI MUDRAYOJANA (PMMY) SALIENTFEATURES

PMMY was announced by the Hon’ble

Prime Minister Shri Narendra Modi on 8thApril, 2015 alongside the reporting ofMUDRA bank. PMMY is anotherfinancial inclusion initiative of Governmentof India which aims not only on fundingthe unfunded but also aims to increase thefunding gap to micro enterprises. It alsohelps the existing micro units to enhancetheir activities. GOI makes guidelines,rules and regulations related to PMMY,for all banks and MFIs. MUDRA is Non-banking finance institution for supportingthe micro enterprises segment in thecountry. It provides support to the banksand all MFIs for micro enterprises havingloan necessity up to 10 lakhs.

BENEFICIARIES OF SCHEME

Any Indian Citizen who has a wageproducing plan from small scale businessexercises in exchanging, assembling andpreparing and whose advance prerequisiteis under Rs.10 lakh can approachadvances under PMMY. Loan rate isregulated by Reserve Bank of India (RBI)time to time. Non corporate SmallBusiness Sector (NCSBS) occupied withbenefit division, miniaturized scalefabricating units, natural products andvegetable distributing, support andrepairing, handiworks and workingnourishment administrations and so on arebenefited under the plan.

MUDRA BANK

The Union Budget presented by theHon’ble Finance Minister Shri Arun Jaitley,for F.Y. 2015-16, proclaimed thearrangement of Micro Units Development

Pradhan Mantri Mudra Yojna: A Critical Review


and Refinance Agency or MUDRA Bank.It was enrolled as a Company in March2015 according to Companies Act, 2013.MUDRA Bank is additionally a Non-Banking Finance Institution or NBFI withthe Reserve Bank of India on 07thApril2015 with a target of “funding theunfunded”. MUDRA had propelled by theHon’ble Prime Minister Shri NarendraModi on 08th April 2015. MUDRA Bankis collaboration with banks, MicroFinancial Institutions and other loaningfoundations. MUDRA Bank is anoteworthy monetary incorporationactivity in Indian economy. MUDRA hasbeen fundamentally shaped as a completelyclaimed backup for Small IndustriesDevelopment bank of India or SIDBI with100% capital being committed by it. Theapproved capital of MUDRA is 1000crores and paid up capital is 750 crore.

MAJOR PRODUCT OFFERINGS

MUDRA Bank has divided borrowersinto three categories such as:

Shishu: shelters loans up to Rs 50,000/-

Kishor: shelters loans above Rs 50,000/-to up to Rs 5 lakh

Tarun: shelters loans above Rs 5 lakh toup to Rs 10 lakh

MUDRA: ROLE ANDRESPONSIBILITIES

It will be in charge of creating, upgradingand renegotiating every single Micro-undertaking zone by supporting the MicroFinance Institutions which are occupiedwith the matter of providing loan to smaller

scale/private firms. MUDRA is framed toaccomplish the objective of “funding theunfunded”. It deals with the web-basedinterface for checking the PMMYinformation. It takes different duties orexercises allowed to it. Notwithstandingof renegotiate, MUDRA will likewise givecredit assurance to the qualified advancesgave according to the plan of PradhanMantri Mudra Yojana.

FINANCIAL INCLUSION ANDPMMY

Reserve Bank of India had set up a boardunder Shri Deepak Mohanty, ExecutiveDirector to look the medium term way onmoney related incorporation. The boardof trustees shaped under the direction ofShri Deepak Mohanty examined issue withrespect to credit and protection to themonetarily avoided gathering’s .Towardsaccomplishing full money relatedconsideration crosswise over credit andprotection Government of India hadpropelled Pradhan Mantri Mudra Yojana.There is a significant prerequisite forimproving the monetary motor is MUDRA.Numerous business people of small scaleundertakings have a place with themonetarily weaker area of society so thatis the reason they can’t get to moneyrelated administrations. Subsidizing thisunfunded area of the general public is theprimary point behind the arrangement ofPradhan Mantri MUDRA Yojana(PMMY). It gives renegotiate and creditcertification to the loan specialists whoback further in such sort of exercises.

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MUDRA awards advance such smallscale ventures which occupied withexchanging, assembling and administrationdivision for credit sum up to Rs. 10lakh.Miniaturized scale undertakings build upa noteworthy monetary segment in ourcountry. It gives expansive work afterhorticulture in India. This financial partincorporates smaller scale units, privateventure enroll in assembling, exchangingand other segment. Smaller scale Financeis a monetary advancement device whosegoal is to give wage creating chances tothe general population who are fiscallyrejected. It covers an assortment ofmonetary administrations whichincorporate, notwithstanding thearrangement of credit, numerous othercredit in addition to administrations, moneyrelated proficiency and other social helpadministrations. The overdraft allowed ofRs.5000 under Pradhan Mantri JanDhanYojana (PMJDY) is additionallyregarded as a piece of MUDRA advances.Budgetary consideration through PMMY

expands the open doors for creditnecessity and renegotiate.

DATA ANALYSIS

PROGRESS MADE UNDER PMMY

Government was set to disburse Rs122188 crore loans to micro businessesunder the MUDRA scheme; it has beenaccomplished by March 2016. For themoney related year 2016-2017government was set focus of 180000crore. The accomplishments andadvancement of PMMY is seen on aweek after week premise through aPMMY gateway. Government focuses tosanction Rs 1.22 lakh crore advances tosmall scale organizations under theMUDRA by March 2016. It is plan offunding the unfunded. So far in the F.Y.2015-2016, number of loan sanctionedunder PMMY is 34880924 that includethe sum authorized 137449.27 crores andsum dispensed 132954.73 crores. Initiallythe table.1 demonstrates the progressunder PMMY.

Table.1 PMMY PROGRESS (Amounts in crores)

FINANCIAL YEAR 2016- 2017

FINANCIAL YEAR 2015- 2016

No. of PMMY loan sanctioned

29953852 34880924

Amount Sanctioned 121034.61 137449.27 Amount Disbursed 116820.58 132954.73

Source: (http://www.mudra.org.in/)



STATEWISE PERFORMANCETABLE 2. SHOWING PERFORMANCE OF THE MUDRA SCHEME STATE WISE

*Amount in crores STATES FINANCIAL YEAR : 2015-2016 FINANCIAL YEAR : 2016-

2017

NO. OF ACCOUNT

DISBURSEMENT AMOUNT

NO. OF ACCOUNT

DISBURSEMENT AMOUNT

% CHANGE DISBURSEMENT

1 Andaman and

Nicobar Islands 24719 212.78 3353 78.34 -0.63 2 Andhra Pradesh 795688 5790.79 587569 5731.8 -0.01 3 Arunachal Pradesh 4625 71.62 6109 78.67 0.10 4 Assam 427272 1728.46 1255754 4824.54 1.79 5 Bihar 2451439 7265.91 3756716 11585.63 0.59 6 Chandigarh 22605 204.52 19039 221.26 0.08 7 Chhattisgarh 639711 2156.14 884941 3209.86 0.49

8 Dadra and Nagar

Haveli 1236 21.27 2587 22.61 0.06 9 Daman and Diu 1109 12.02 774 12.08 0.00 10 Delhi 394388 2857.97 224975 3700.51 0.29 11 Goa 45471 376.04 31289 372.78 -0.01 12 Gujarat 1086407 5910.02 1103453 7692.07 0.30 13 Haryana 745535 3152.62 716622 3697.59 0.17 14 Himachal Pradesh 85564 965.7 82851 1214.02 0.26

15 Jammu and

Kashmir 57974 1152.15 89712 1663.51 0.44 16 Jharkhand 872868 2845.66 1023593 3908.99 0.37 17 Karnataka 4459609 16469.43 3933578 17290.7 0.05 18 Kerala 830411 4727.38 982260 6140.44 0.30 19 Lakshadweep 740 5.35 473 4.51 -0.16 20 Madhya Pradesh 2511191 7769.29 2683052 10191.91 0.31 21 Maharashtra 3535065 13372.42 3344154 16976.76 0.27 22 Manipur 24021 120.03 21865 142.47 0.19 23 Meghalaya 19151 162.41 23915 185.74 0.14 24 Mizoram 7772 77.78 6973 90.31 0.16 25 Nagaland 5134 76.54 11051 103.83 0.36 26 Odisha 2343261 5436.26 2606769 7600.68 0.40 27 Pondicherry 82866 331.91 130360 485.49 0.46 28 Punjab 653973 3484.49 705569 4512.28 0.29 29 Rajasthan 1159819 5248.28 1204837 8823.3 0.68 30 Sikkim 6889 54.61 19865 96.54 0.77 31 Tamil Nadu 4781567 15496.86 5309857 17756.39 0.15 32 Telangana 400761 3694.34 482694 3780.49 0.02 33 Tripura 68146 337.26 253807 968.55 1.87 34 Uttar Pradesh 3345382 11880.93 3337547 14753.59 0.24 35 Uttarakhand 360007 1745.08 286579 1913.88 0.10 36 West Bengal 2628548 7740.41 4566505 15480.03 1.00 TOTAL 34880924 132954.73 39701047 175312.13 0.32


From the above, table it is observable thatthe growth rate in the union territories likeAndaman and Nicobar Island andLakshadweep is negative that is declinedby 63% and 16% respectively. Also on

the other hand there is a slow growth ofthe scheme all around the country excepttwo states Assam and Tripura, whichshows a tremendous growth of 179% and189% respectively. States like Rajasthan

103

and West Bengal that consist of a largepopulation and still having the growth of68% and 100% respectively. This showsthat the scheme is having a great successin these states and people are aware ofthe scheme benefits.Chart 1: Representing Difference In TheActual And Target Set For Disbursement.

The government’s micro loan scheme,Pradhan Mantri Mudra Yojana, has

disbursed Rs1.75 trillion worth of loansso far in 2016-17, which shows a 32%growth from the previous year. In fiscalyear 2016, the scheme was firstimplemented and the disbursements hadexceeded the target specified by thatyear’s budget. Beyond the success ofFY16, the government had set the targetof Rs2.44 trillion for disbursements in2017. But with just a week left for the yearto end, disbursements are just 71.4% ofthe target. This reason is not enough tolabel the scheme unsuccessful. To be fair,we can say the government’s target waslofty since it was over 80% higher thanlast year’s actual disbursals.The reason can be the effect ofdemonetization. Due to which the planningthat the department was made was not thatmuch successful as they expected.

CASTE WISE PERFORMANCETABLE 3. CASTE WISE PERFORMANCE *Amount in crores

FINANCIAL YEAR : 2015-2016

FINANCIAL YEAR : 2016-2017

SRNO

CATEGORY

NO.OF A/CS

DISBURSEMENT AMOUNT

NO. OF A/CS

DISBURSEMENT AMOUNT

% CHANGE IN DISBURSEMENT

%SHARE IN DISBURSEMENT IN 2015-16

%SHARE IN DISBURSEMENTIN 2016-17

1 General 16479425 83758.4 17200853 109032 0.30 63.0 62.2

2 SC 6114737 14691.8 7135624 18524.1 0.26 11.1 10.6

3 ST 1678346 4742.03 1792502 5105.55 0.08 3.6 2.9

4 OBC 10608416 29762.5 13572068 42650.2 0.43 22.4 24.3

Total 34880924 132955 39701047 175312 0.24 100 100 Source: (http://www.mudra.org.in/)The table shows that the general categorypeoples are utilizing the scheme at full pacealso OBC category is utilizing it in a healthypace. On the other hand SC and STcategory are lacking behind on the total

actual amount but in terms of their size theyare pretty good. Apart from the share inthe disbursement, growth of the OBCcategory in terms of disbursement in morethan that in general category which is atremendous achievement.



CATEGORY WISE PERFORMANCE

TABLE 4. CATEGORY WISE PERFORMANCE *Amount in crores

Financial Year : 2015-2016

Financial Year : 2016-2017

CATEGORY NO.OF A/Cs

DISBURSEMENT AMOUNT

NO.OF A/Cs

DISBURSEMENT AMOUNT

% CHANGE IN DISBURSEMENT

%SHARE IN DISBURSE MENT IN 2015-16

%SHARE IN DISBURSEMENTIN 2016-17

Women Enterpreneurs 27628265 63190.4 29146894 78249.8 23.8 46.0 46.2 New Enterpreneurs 12474668 58908.1 9989470 69974 19 42.9 41.3 Minority 4088210 13560.3 5154551 19474.2 44 9.9 11.5 PMJDY OD Account 2417219 274.02 1423715 312.62 14 0.2 0.2 Mudra card 517456 1391.25 183924 1515.84 9 1.0 0.9 Total 47125818 137324 45898554 169526 23.4 100 100


• The data present in the table shows thatthe scheme is mostly favoured by theentrepreneurs.Infact women entrepre-neurs are ahead in the disbursementshare. Before this women used to facethe difficulty of getting the loan forbusiness as they are seen as less matureand less capable of doing a business.So this distrust over women leads todifficulty in getting the loan for them.

• There is a share of PMJDY ie. Jan DhanYojana in the MUDRA scheme alsowhich is 0.2 percent.

• The growth in the minority sector is stillnot remarkable. Though the Percentageshare has increased but they need tobe focussed more.

SWOT ANALYSIS STRENGTHS

• The scheme can give support andempower the needy people and smallbusiness

• The scheme having the Interest rateswhich are nominal

• It is very easy to apply for loan.

• It also makes a credit guarantee to theone who has taken the loan. It meansthat the person will not only go intodebts. The government will also haveto bear the responsibility of the loan.

• There are certain agents hired under thecommittee who will guide on how toorganize and process a business so thatthere are minimum risks of getting anegative result.

All the small business units and sectors willbe placed under the surveillance, and aregular evaluation will be made based ontheir performance.

WEAKNESSES

• There can be a potential of conflictof interest due to the nature of roles

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and responsibilities of MUDRABank.

• There can be the promotion of shadowbanking.

• There can be multiple regulators forMFIs.

• There is unawareness about thescheme.

OPPORTUNITIES

• There can be more focus on jobcreation

• There can be an extension of theScheme to personal sector other thanfarms and factories.

• There can be more collaboration withthe MFIs.

• There can be more encouragement forwomen entrepreneurs and can beattached to the scheme.

THREATS• There is a better solution to finance

micro and small businesses.• There are number of already existing

refinancing agencies.• There can be confusion due variable

interest rates.

RECOMMENDATIONS• Scheme can be extended to personal

sector other than farms and factories.They can start a loan funding of lessthan Rs 50,000 so that the gap of 0-50k can be fulfilled.

• There should be more concentration onthe minority sector.

• MUDRA card can be used moreintensively in the future.

• Women entrepreneurs should be moreencouraged to wipe out the difficultiesfaced by them.

CONCLUSION

The study concluded that PMMY is a greatinitiative taken by the GOI. Due to it, thereis a big change in the area of micro finance.The scheme will help the weaker section,low income group and unfundedpopulation and also will increase thecompetition. Financial inclusion throughPMMY increases the opportunities forcredit requirement and refinance.

The introduction of the national planPMMY with other type of financialinclusion initiative, yield a valuable result.The PMMY conspire is certain to take ourcountry forward to the future. MFIscontributed significantly for the financingwomen under PMMY.

It perceives that because of dispatch ofthis plan, monetary consideration hasexpanded towards positive heading. So itcan be say that if it is implemented properly,it may work as a game changing financialinclusion initiative of Government of Indiaand may boost the Indian economy.

REFERENCES

Verma S. Chandra (2015), Mudra Bankto “Fund small Businesses”

Mol, S. TP (2014) Financial Inclusion:Concepts and Overview in Indian Context.Abhinav International Monthly Refereed



Journal of Research in Management &Technology

Mehar, L. (2014). FINANCIALINCLUSION IN INDIA.

Roy, AnupKumar(2016). “MudraYojana- A Strategic tool for Small BusinessFinancing”, International Jopurnal ofAdvance Research in Computer Scienceand Management Studies

Rudrawar, M. A. A., &Uttarwar, V. R.(2016). An Evaluatory Study of MUDRAScheme. International Journal ofMultifaceted and Multilingual Studies

R. Rupa (2017), Progress of MUDRAwith the special reference of Tamil Nadu.

Dr. J. Venkatesh and Ms. R. LavanyaKumari (2017) Performance of MUDRAbank: a study on financial assistance toMSME sector.

qqq

107

AN ENQUIRY INTO EFFECT OF CAPITAL STRUCTURE ON FIRM

VALUE: A STUDY OF POWER SECTOR COMPANIES IN INDIAAbhijit Sinha

DEPARTMENT OF COMMERCE, Vidyasagar University, West [email protected]


ABSTRACTThis empirical study is an effort to the existing field of effect of capitalstructure decisions on firm value. The investigation is made on elevenpower companies selected from the ‘BSE Power’ from Capitalinedatabase for the period 2007-2015. The firm value is proxied by Tobin’sQ and the Enterprise value to profit before interest, depreciation andtaxes ratio. The leverage is measured using debt-equity ratio. Paneldata regression model is employed for analysis which supports theview that there is a negative influence of financial leverage on firmvalue (measured using Tobin’s Q). However, the other measure is notsignificantly impacted by the extent of debt in the capital structure.Keywords - Capital structure, Firm value, Multi-collinearity, Levin-Lin-Chiu test, Panel data

1. Introduction

In the field of corporate finance, there areseveral issues that still seem like a mysterywhich are yet to be resolved. One suchissue is that of capital structure and itsimpact on the firm. Due to this lack ofconsensus, researchers around the worldhave been dealing with it but have not beenable to deliver concrete answers yet.Many theoretical discussions have takenplace over the years with many theories inplace like the Net Income Approach, NetOperating Income Approach, theModigliani and Miller Hypothesis, thetrade-off theory, Pecking Order theoryand the Market timing theory.

The arena of capital structure came to lightwith the Modigliani and Miller theorem(1958) which points to the irrelevancetheorem of capital structure in determiningfirm value. But, the consideration of asymmetric information, imperfect marketsand taxes made Modigliani and Miller torethink after which they proposed therelevance theory. Similarly, the trade-offtheory proposed that since there are twoaspects connected to capital structure viz.tax savings on interest payments versusincreasing bankruptcy costs, it is likely togenerate a situation of optimal capitalstructure as pointed by Kraus andLitzenberger (1973) and Scott (1976). It



therefore suggests that at a particular debtlevel, the firm value can be maximizedwhich will be reflected in the stock price(Fama, 1978). In the same line, Brighamand Houston et al. (2004) recognized theimportance of capital structure decision inimproving company operations andperformance. However, they add a wordof caution mentioning that too much of debtmight increase the chances of bankruptcy.Later, the Pecking order theory of Myersand Majluf (1984) proposed thatorganizational managers resort to financingfollowing a hierarchical order, starting withown funds first and then resorting toexternal funds. However, the point is thatno matter what the theories are, there islack of agreement on the effect of capitalcomposition on corporate performance.The relationship is found to be contingentupon the situation under which the theoryis tested.

2. Literature review

It is known to us that financial managementdecisions hover around three decisionsnamely, financing decisions, investmentdecisions and dividend decisions. All theseare extremely important in the context ofany organization since they have / likely tohave a long-term impact. Capital structurewhich the study deals with is the ratiobetween external funds and total capital(Riyanto, 1999). It is one of the key areasthat aim to improve the efficiency andperformance of a firm. Salvatore (2005)mentions that the main goal behind a firmtracking financial markets and going publicto raise funds is to increase shareholder

welfare by maximizing the firm value. Firmvalue and shareholders wealth are closelyrelated (Bringham and Gapensi, 2006).Hampton (1992) states that the primeobjective of a firm is value maximizationthat is consistent with shareholders’ wealth.One of the ways to achieve it is throughcapital structure decision (Marcus, 1983and Ogbulu and Emeni, 2012). By a capitalstructure decision, we refer to theproportion of debt and equity in the totalcapital such that it minimizes the cost ofcapital (Agliardi and Kousisi, 2013, Kabirand and Nguyen, 2008 and Gersbach,2013) and maximizes firm value. However,results relating capital structure andcorporate performance differ acrossscholars. Solihah and Taswan (2002)demonstrate the positive but insignificantinfluence of leverage on firm value.However, the capital structure measure(measured by debt to equity ratio) finds apositive and significant effect on the price-to-book value ratio (Sujoko andSoebiantoro, 2007). Also, Andawasatyaet al., (2017) points to the study of capitalstructure that acts as a mediator in therelationship between profitability and firmvalue.

There is controversy in literature due tolack of consensus with regard to the effectof these decisions on the valuation of firms.Since, this empirical study focuses on theissue of capital structure, the researcherhighlights a few literatures that have lookedinto the effect of the decision onperformance. This controversial topic hasinterested researchers across the world

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with immense studies carried out in Asia,Europe, America and Africa. Some of thenoteworthy European studies include thenames of Gersbach (2013), Agliardi andKoussis (2013), Margaritis and Psillaki(2010), Kapopoulos and Lazaretou(2006), Bandt et al. (2006) and Iavorskyi(2013). The studies of Abor (2005),Oguna (2014), Anarfo (2015) and Dadaand Ghazali (2016) are popular ones thatstudied the corporate environment inAfrica. In the same light, some prominentnames in the context of Asia includeChowdhury and Chowdhury (2010),Siddik et al. (2017), Singh and Bansal(2015) and Hasaudin et al. (2013). Thereare many other studies that unveiled thecapital structure-performance relationshipsome of which include Ana et al. (2012),Oguna (2014), Memon et al. (2015) andSeetanah et al. (2014). The maincontroversy is the contradictory inferencesdrawn by researchers in different contextsand industry settings. Some of the studiesthat point to a positive effect of leverageon performance include Hadlock andJames (2002), Mwangi (2010), Saaediand Mahmoodi (2011) and Salim andYadav (2012). Similarly, the study ofFadhilah (2011) recognizes a positiveeffect of capital structure leveraging on theprice-to-equity ratio, a measure of firm’smarket value. In two recent studies,Akeem et al.(2014) and Hermuningsih(2013) also find a positive influence ofleverage on firm value.

On the contrary, there are also empiricalevidences to show the opposite

relationship between debt in the capitalstructure and corporate performance. Thecomparatively old studies include the likesof Wiwattanakantang (1999) study onThai firms and Rajan and Zingales (1995)on G7 countries that recognize a negativerelationship. Similarly, Abdul (2012),Mumtaz et al. (2013) and TPV and Phung(2013) note a similar relationship betweenthe two variables. Ogbulu and Emeni(2012) supports the irrelevance theorembased on a Nigerian study. Furthermore,there are also evidences to prove a mixedeffect of financial leverage on corporateperformance. The investigation by San andHeng (2011) on Malaysian constructioncompanies finds changing results withchange in the firm size. Similarly, Salim andYadav (2012) identify a negative influenceof short-term debt on return on equity butrevealed a positive impact on Tobin’s Q.Shah (2014) identifies a negative effect oftotal debt on all forms of accountingmeasures but a positive relationshipbetween proportion of debt and margin.The Fosberg and Ghosh (2006) researchfinds no relationship between leverage andperformance. There are many moreresearch evidences pointing to such results.

3.1 Objective of the study

The research aims to identify the effect ofleverage on firm value.Null hypothesis (H0): There is no effect ofleverage on firm value.3.2 Research designThe empirical investigation focuses on the‘power generating’ or ‘power transmitting’

An Enquiry into effect of capital structure on firm value.....


companies in India. The main point ofinvestigation is to determine the relationshipbetween composition of the capitalstructure and value of the firm. Here, theinvestigator studied a total of seventeensuch companies, but ends up with elevenbecause six companies are not in a truesense in the power sector as they areengaged in producing capital goods /equipments which are required by suchpower producing and / or transmittingcompanies. Based on the sample, analysisis done on a balanced panel consideringdata for the period 2007 to 2015. Thesource is collected from the Capitalinedatabase. Because, the data set is in theform of a panel with both time series andcross-section data merging together, paneldata analytical techniques are employedinstead of ordinary least square method.

Choice of variables:

The regression model that we aim topredict has a dependent variable (proxyfor firm value) and independent variable(proxy for capital structure) and controlvariables which are firm-specific variables.The dependent variables for this study aretwo, used in two separate models viz.

(i) Price to book value ratio (PBV) and

(ii) Enterprise value to Earnings beforeinterest, depreciation and taxes(EVPBIDT)

On the other hand, the capital structure isproxied by debt-to-equity ratio. To negatethe effect of some extraneous factors, somecontrol variables are employed which are

(i) Asset Tangibility (ASSETTANG)measured as fixed asset to totalassets, considered relevant byTehranian (2004) and Suh (2014).

(ii) Size (SZ) computed using the naturallogarithm of total sales, which isconsidered by Abor (2005) andEhikioya (2007).

(iii) Growth (GROWTH) measured bygrowth in total assets employed byAbor (2005 and 2007)

(iv) Age (AGE) calculated as the naturallogarithm of number of years inbusiness.

4. Analysis and findings

4.1 Nature of the data

The table (No. 1) below depicts nature ofthe variables by employing descriptivestatistics. As evident from the results, it isclear that there is a wide variation in thetwo market measures across thecompanies during the time period. Themaximum and minimum values of PBV are9.34 and a negative value of 6.10. Similarly,the EVPBIDT shows the maximum andminimum figures to be 123 and zerorespectively. A look at the capital structurevariables shows that different companieshave employed different tactics offinancing. The maximum is 7.090 whereasthe minimum is nil with the mean scorebeing 0.992. Therefore, on an averagethere is an equal amount of debt and equityin the capital structure. A noticeable pointis that almost 80% of the borrowed fundis long-term debt.

111

Table 1: Descriptive statistics of the variables

Variable Variable

type Mean Standard Deviation Minimum Maximum

P/BV Dependent 1.857 1.849 -6.100 9.340 EV/PBIDT 11.443 13.586 0.000 123.010

ASSETTANG Independent 0.375 0.255 0.002 0.881 Growth 0.675 3.871 -0.175 38.171

SZ 9.671 1.281 5.582 12.062 DER 0.992 1.116 0.000 7.090 AGE 3.420 0.388 2.565 4.111

Current Ratio 1.289 0.671 0.160 3.630 Source: Computed by the author4.1 Testing for multi-collinearityBefore we move into the panel regressionmodel, the researcher tests for multi-collinearity to see whether two or moreindependent variables are highlycorrelated. Generally, the variance inflationfactor of more than 10 suggestsmulticollinearity problem.

Table 2: Testing for Multicollinearity Model Collinearity Statistics

Tolerance VIF 1 ASSETTANG .532 1.881

GROWTH .772 1.295 SZ .431 2.323 DER .086 11.661 LTD .074 13.536 AGE .552 1.812 CR .552 1.812

Source: Computed by the authorSince, DER and LTD have VIF valueexceeding 10, it points to multi-collinearityproblem. Thus, we exclude LTD and keepDER in the model, it being a representativeof the overall capital structure and re-check VIF values which are now found to

be within the desirable limit (see table 3)below.

Table 3: Final test for Multicollinearity Model Collinearity Statistics

Tolerance VIF ASSETTANG .731 1.367

GROW .774 1.292 SZ .456 2.191 DER .632 1.582 AGE .561 1.783 CR .553 1.809

Source: Computed by the author

Thus, we have six independent variablesfor the panel regression model. However,before applying the panel data regressionmodel, the data set is subject to unit roottests to test their stationarity property.This is necessary as the use of non-stationary data gives spurious regressionresults. In the present study, the Levin-Lin-Chu test is applied. The hypothesistested is:

H0: The data is non-stationary.

H1: The data is stationary



Table 4: Levin-Lin-Chu Unit root testresults

Variable t-statistic PBV -18.371* EVPBIDT -20.598* ASSETTANG -11.807* GROWTH 0.000* DER -6.204* AGE -11.824* CR -6.361* SZ -8.044*

Source: Computed by the author* significant at 1% level.Since, the p-values are less than 0.05, nullhypothesis is rejected leading to theconclusion that data are stationary at levels.Thus, the results obtained are not spurious(Gujarati, 2003). Hence, the panel dataregression is carried out.4.3 Application of Panel Data AnalysisThe empirical study considers both timeseries elements for which ‘t’ is used andcross-sectional elements captured using ‘i’.The model that is tested is as follows:FVit = α + β1. ASSETTANGit +β2.GROWTH it +β3 SZ it+β4. DER it+β5.AGEit+β6. CRit+õit, where FVitdenotes firm value.For this investigation, the two modelstested are:Model I:PBVit = α + β1. ASSETTANGit +β2.GROWTH it +β3 SZ it+β4. DER it+β5.AGEit+β6. CRit+õit

Model II:EVPBIDTit = α + β1. ASSETTANGit+β2. GROWTHit +β3 SZ it+β4. DERit+β5.AGEit+β6. CRit+õit

The panel data regression results can beanalyzed only after we finalise the modelthat we can apply. The steps that isadopted are given below:(a) Compare OLS with Fixed effect (FE)

model using Restricted F test. If p-value is less than 0.05 (assuming a levelof significance of 5%), OLS is rejectedand the decision is in favour of the FEmodel.

(b) Compare OLS with Random effect(RE) model using Breusch Pagan test.If p-value is less than 0.05, OLS isrejected and the decision is in favourof the RE model.

(c) In case, OLS gets rejected in both theabove two, we apply Hausman test tomake a final choice. If the nullhypothesis is rejected, decision is infavour of the FE model, else the REmodel is used.

4.3.1 Testing Model 1 results: PBV isthe dependent variableThe following lines show that the restrictedF- test and the Breusch test reject the nullhypothesis. Thus, the Hausman test is theconcluding test. Restricted F –test resultshows that Residual variance is 1.6302 andF(10, 82) = 7.4675 with p-value of 0.000.Hence, the null hypothesis is rejected at5% level of significance and the decisionis in favour of the FE model. Similarly, theBreusch-Pagan test gives the Lagrange

113

Multiplier (LM) statistic value as 6.3879with a p-value of 0.011, thereby rejectingthe OLS model at 5% level. Hence, theHausman test is applied which computes

the H-statistic as 57.6417 with prob (chi-square (6) > 57.6417) = 0.000. Thus, theFE model is the appropriate one in thegiven case. The results are given below.

Table 5: Fixed-effects ModelDependent variable: PBV

Coefficient Std. Error t-ratio p-value Const 37.592 16.867 2.228 0.028** ASSETTANG -29.919 17.499 -1.709 0.091* GROWTH -0.339 0.399 -0.849 0.397 DER 0.445 1.282 0.347 0.729 AGE -2.816 4.919 -0.572 0.568 CR -5.517 3.401 -1.622 0.108 SZ 0.185 2.370 0.078 0.937

Mean dependent var 11.443 S.D. dependent var 13.586 Sum squared resid 12655.48 S.E. of regression 12.274 R-squared 0.300 Adjusted R-squared 0.183 F(14, 84) 2.576 P-value(F) 0.003 Log-likelihood -380.585 Akaike criterion 791.171 Schwarz criterion 830.098 Hannan-Quinn 806.921 Rho 0.054 Durbin-Watson 1.252

For the above model, the researcher findsthat only tangibility of asset has asignificantly negative influence on themarket value. None of the other variablesshow a strong effect on it. Hence, there isa lot of difference in the effect of theexplanatory variables on the two marketmeasures.

5. Conclusions

This study is another effort by theresearcher to re-check the relationship/

effect of leveraging decisions oforganizations on their firm value. The studyinvestigates the power generating /transmitting companies as available fromthe ‘BSE Power’ of the Capitalinedatabase. The study for the period 2007-2015 considers the effect of debt inclusionin the capital structure on the market valueof firms which are measured using twovariables, viz. Tobin’s Q and the ratio ofenterprise value to the profit beforeinterest, depreciation and taxes. Some

Source: Computed by the author * significant at 10% levelNote: the Heteroscedasticity and autocorrelation consistent (HAC) standard errorsare computed.



control variables are also used to generatea level-playing analysis considering thedifferent companies. The result isinteresting and is an addition to the existinglevel of knowledge in this field of research.The analysis uses the balanced panel datafor the eleven companies over a period ofnine years. But, prior to its application,diagnostics checks have been made toidentify if there is any problem ofmulticollinearity (using variance inflationfactor) or unit root (using the Levin-Lin-Chiu test). Since, the method corrects forautocorrelation and heteroscedasticityusing HAC estimates, it does not pose anyproblem to our estimates. Thecomputation shows the significantlynegative effect of DER, AGE and SZ onthe price-to-book value ratio. But, themeasure of growth reflects a positive effecton the performance measure. The negativeeffect of leverage on the PBV ratio isconsistent with the findings of Soumadi andHayajneh (2012) who reported a similarnegative influence on Tobin’s Q, a marketmeasure. Moreover, the effect of size is inline with the conclusions drawn by Loncanand Caldeia (2014). With regard to theeffect of tangibility, the insignificant effectis in line with the studies of Majumdar andChhibber (1999) and Margaritis andPsillaki (2007) but goes against the findingsof Zeitun and Tian (2007), Weill (2008)and Nunes et al. (2009). But, the resultrelating to effect of growth contrasts thefinding of Andawasatya et al. (2017). Agehas no significant effect on performance.In the second model that we employ, only

one variable represented by tangibility ofassets has a positive effect on theEVPBIDT measure but negatively. Noneof the other independent or controlvariables have a significant effect on thismarket measure. Thus, this study is anaddition to the controversial findings ofearly researchers which will give furtheropportunity for exploration with new linesof thought.

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REVIEW OF MONETARY POLICY OFINDIA SINCE INDEPENDENCE

RUCHI PRIYA KHILARResearch Scholar, KIIT School of Management

KIIT University Bhubaneswar, [email protected]


ABSTRACT

Monetary Policy is the policy which looks after the supply of moneyinto the economy, keeps record of inflation and takes into accountthe economy’s growth. Central bank of a country conducts themonetary policy of that country. Reserve Bank of India (RBI) is thecentral bank of India hence regulates the monetary policy of thecountry. RBI formulates implements and supervises all the functionsof monetary policy. Indian Monetary Policy has seen many structuralchanges since independence. During early 1990s, the major monetarypolicy measures were Cash Reserve Ratio (CRR) and Statutory LiquidRatio (SLR). In case of India, it has been seen that the increase ininflationary pressure is mainly due to the money demanded by thecentral government to meet the budgetary deficit of the country. Ifwe talk about the recent development in monetary policy of India, wesee that Monetary Policy Committee (MPC) has been constituted afterthe recommendation of Urjit Patel Committee in the year 2016.Establishment of MPC is considered to be a revolutionary developmentin the area of monetary policy. This paper intends to take a review onthe monetary policy of India, changes that have been made to tacklethe economic instability in the past and the recent developments inmonetary policy of the country. It also intends to test the monetarypolicy with respect to pressure on inflation. This research paper isentirely on the secondary data. Different journals, books and otherresearch papers within the same context have been followed for thispaper.

Key words: Monetary policy, India, Inflation, WPI, CPI, MonetaryPolicy Committee


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Introduction

Money is a very vital aspect in anyeconomy. The quantity of money is one ofthe major determinants of the level ofoverall economic activity. Money whetherin digital form or physical form providesstrength to an economy but if provided inexcess, it can adversely affect the growthof an economy. Money is controlled tokeep economic activity in a smoothcourse. Wrightsman (1983) explains thatif money is not properly controlled, theeconomy will not be able to avoidfluctuation in prices. Therefore in order tohave smooth economic growth, it isrequired to have proper regulation ofmoney supply into the economy. This iswhat monetary policy does, to check themoney supply into the economy and adjustit whenever is needed so as to avoid theundesirable situation such as inflation anddeflation. These two situations occur dueto the frequent fluctuation in the price ofgoods and services. Hence, maintainingprice stability is the main aim of monetarypolicy of a country without hampering thegrowth of the country. Inflation anddeflation are two extreme situations whichdrag down the economy to slower growth.In India, monetary policies are beingformulated and regulated by RBI. UnderReserve Bank of India Act 1934, RBI isthe apex body which is responsible for anychange in such policy of the country. Since1952, monetary policy has been puttingmuch emphasis on following two aims ofthe economic policy. i) To speed upcountry’s economic development, to

increase national income and to increaseliving standard of the people, ii) Adaptingmeasures so as to control and to reduceinflation in the economy. RBI through itsvarious instruments of monetary policyregulates the supply of money into theeconomy. The flow of credit is controlledby RBI by implementing quantitative andqualitative measures.

Before 1991, monetary policy was mainlyanti- inflationary. From 1991onwards,RBI had made many changes in themonetary policy of the country like, earlierRBI had adopted a controlled policy butwhen globalization came it has changed itfrom controlled to decontrolled policy. Thepresent paper intends to take a review onthe monetary policy of India, changes thathave been made to tackle the economicinstability in the past and the recentdevelopments in monetary policy of thecountry.

Inflation and Measures of MonetaryPolicy

Inflation is a situation which occurs whenthe normal price of the goods and servicesincreases which results in decreasing in thereal value of money and therefore leads todecrease in the purchasing power of thecurrency. In order to ensure the smoothrunning of the economy RBI adoptsvarious measures so as to prevent theeconomy from both the extreme situationsof inflation and deflation. Earlier in Indiathe prime indicator of inflation wasWholesale Price Index (WPI) but recentlythe indicator has been changed to

Review of monetary policy of India Since Independence


Consumer Price Index (CPI). Both theWPI as well as CPI measures the averagechanges in the prices of basketcommodities but the difference is theformer reflects the prices for bulk sale atwholesale level of transaction whereas thelatter reflects the changes in prices at retaillevel. Let us discuss the trend of inflationin India and the monetary policy measurestaken by RBI to contain inflation in somedetail.

Since 1955-56 prices have beencontinuously rising putting an inflationarypressure on to the economy of the country.During the period of 1956-64, the priceswere rising heavily although the inflationrate was not the same throughout theperiod. During this period price rises at anannual rate of 5.1 %. During the year1964-1981, the level of price increasesaveragely at 9.5 % p.a. Later on wholesaleprices also increases at an annual rate of8.2 % during the year 1981-1994. Oneof the major reasons for such inflationarypressure may be viewed as the moneydemanded by the central government tomeet the budgetary deficit. When pricesrise and appeared to be out of control,RBI intervene and took decision withregard to change in monetary policy so asto control the rising prices.

During the period 1961-1991, inflationwas rising and to control such inflationarypressure RBI adopted both quantitativeand qualitative monetary measures. Inorder to induce private investment it hadadopted cheap money policy till 1961 butthis was given up by RBI as the inflation

rises during the period. To contain theinflation, bank rate remained at 9 % in July,1974. It was further increased to 10 % inJuly, 1981 to curb inflation. During 1980s,RBI used another monetary policymeasure called Cash Reserve Ratio(CRR) to take back the excess capacityof lending money by commercial banks.In the year 1984 CRR was raised to 9 %from 7 % in 1983. Later on StatutoryLiquid Ratio (SLR) also raised by RBI to35.5 % in July, 1984. SLR was againincreased up to 37.5 % in the month ofApril, 1987. Cash Reserve Ratio wasincreased up to 15 % in month of July,1989. The Statutory Liquid Ratio rises tothe tune of 38.5% in September month of1990. To curb down excess liquidity withthe commercial banks, Bank rate againrevised at 12 % in October month of 1991by RBI. After this the government decidednot to rely only on CRR and SLR to curbinflation as per the recommendation ofNarsimham Committee. Accordingly RBIreduced the Cash Reserve Ratio andStatutory Liquid Ratio. Statutory LiquidRatio was reduced till 25 % in the monthof October, 1997.

During late 90s, Indian economy had seena little monetary change as the foreignexchange reserve rise sharply with RBIsince 1992-93. This had impacted on thecomposition of reserve money. As RBIfeared that this will create domesticmonetary expansion and will lead toinflationary pressure, it decided to controlthe monetary expansion by selling out theaccumulated reserve by the way of open

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market operation. RBI sold thegovernment securities worth ¹ 27,782crore during 1993-1998. In the year1995-96 inflation came down to 5.50 %.But again during September, 1998 rate ofinflation rose to 8.8 %. In the year 1998-99 net sales alone on account of the openmarket operation generated by RBI wasworth ¹ 29,669 crore. Open marketoperation steeply rose to ¹ 53,402 croreduring 2002-2003. Therefore we can saythat the open market operation come outas one of the very important tool ofmonetary policy.

During the year 2005-06, inflation rateaveragely stood at 4.4 %. It goes up to5.5 % during the year of 2006-07. Itfurther increased to 12.6 % in Augustmonth of 2008. However governmentmanaged to pull it down to 2.43 % inFebruary, 2009. But the average rate ofinflation in 2010 again rose to 12.11 %.The CPI inflation rate has increased sinceJune 2008, the main cause for increasingthe inflation were rising in the prices of foodarticles, fuel and services. This had reacheda range of 16.2 – 17.6 % during the monthof January 2010. RBI continued to tightenthe monetary policy in order to containinflation since 2010. Repo rate wasincreased by 50 bps in the month of July2011 and again by 25 bps in Septembermonth of 2011 by RBI. The main cause ofinflation was due to the supply constraint.In order to regulate and control the moneysupply, RBI has always been criticized thatthe regulatory framework is anti-inflationary as well as anti-growth.

Therefore the major challenge before RBIis to control inflation without hampering thegrowth of the economy. Beside this, themain challenges to effective monetarypolicy management were fiscal pressuresand global uncertainty.

During November 2012, headline inflationdecreased to 7.2 % resulted in decliningin the prices of vegetables, minerals andfuel. However, in contrast to thedevelopment of WPI inflation, CPI inflationwas on the higher side. The new combined(rural and urban) CPI (Base: 2010=100)inflation rose in the month of November,reflecting an increase in food inflationpressures, particularly the price ofvegetables, cereals, pulses, oils and fatsgone up. The non-food component of theindex also reflected inflationary pressures.In order to curb down the liquidity deficitat reasonable levels, open marketoperations (OMOs) was conducted by thecentral bank on December 4 and 11,injecting primary liquidity of two thirty twobillion. Repo rate was kept unchanged at8.0 %.

Recent developments in IndianMonetary Policy

Indian monetary policy has gone intovarious changes during the recent years.During September, 2013 Raghuram G.Rajan took over the charge and becamethe 23rd governor of RBI. During his tenureof 3 years Indian Monetary Policy hasgone into very unusual changes. When hejoined the office, the Indian economy wasstruggling with an alarming rate of inflation.



At this point of time the retail inflationstood at 9.49 %. As a governor, theprimary concern of Rajan was to curbdown the inflation. He was able to containinflation at 3.78 % in the month of July,2015- the lowest since 1990s. Headlineinflation also declined from 5.98 % inSeptember, 2013 to its lowest which is at-4.05 %. Earlier the key indicator ofinflation was Wholesale Price Index (WPI)but during Rajan’s tenure, as per the globalnorm RBI adopted Consumer Price Index(CPI) as the key indicator of inflation. Letus see in some detail the performance ofmonetary policy measure during his tenure.

During 2013-14, WPI inflation moderatedat 5.98 % whereas CPI also moderatedto 9.49 % from 10.21 % in 2012-13. Inorder to contain inflation, the monetarypolicy of RBI remained tight throughoutthe year. During the year RBI changed therepo rate four times with the rate standingat 8 % at the end of March, 2014 whichwas 50 bps higher than the rate standingat the end of March, 2013.

In April, 2014 RBI published its first bi-monthly monetary policy report. During theyear 2014-15, headline inflation in termsof WPI moderated to an average of 3.4%. It was high during the first quarter dueto increased prices of food and fuel butgradually declined in the second and thirdquarter to 3.9 % and 0.5 % respectively.Inflation in terms of CPI which was around9-10 % during 2012-2014 also camedown significantly since the second quarterof 2014-15. The CPI inflation stood at 5.1% (base year 2012) in January, 2015. The

negative slope in inflation was more quickthan expected. This was due to thedeclining in the prices of crude oil, coaland global tradable which positivelycontributed to the declining of inflationmuch faster. The tight monetary policyhelped in containing inflation, kept checkon the volatility of rupee. In January, 2015with the softening inflationary conditionrepo rate was also decreased by 25 bpsto 7.75 %. RBI also reduced SLR to 21.5% from 22 %. As recommended by Dr.Urjit R. Patel Committee, CPI (Combined)inflation is adapted by RBI as the keymeasure of inflation.

During 2015-16, Indian economycontinued to experience a moderateinflation. Headline CPI (Combined for ruraland urban area) stood at 4.9 % which waslower than that of 5.9 % in 2014-15. Thedecline in CPI (Combined) inflation wasmainly due to decrease in the prices of foodarticles and non-food non-fuel category.Headline WPI inflation remained negativesince November, 2014 and was at -2.8% in 2015-16. With the ease of inflation,RBI decreased the repo rate by 100 bpsto 6.75 % in September, 2015 and kept itunchanged in February, 2016.

Monetary Policy Committee (MPC)

In the Union Budget for 2016-17, uponthe agreement between government andRBI, the government proposed to amendthe Reserve Bank of India (RBI) Act, 1934for giving statutory backing to theMonetary Policy Framework Agreementand setting up a Monetary Policy

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Committee (MPC). MPC has beenconstituted for maintaining price stability,inflation targeting while keeping in mind thegrowth objective. MPC has beenentrusted with the task of fixing thebenchmark policy rate (repo rate) requiredto curb inflation within the specified targetlevel. It came into force on June 27, 2016and it is mentioned under the amended Actthat government of India after consultingthe central bank (RBI) would decide theinflation target once in every five years andthe amended Act further provides for astatutory basis for the constitution of anempowered Monetary Policy Committee(MPC). The inflation target has been fixedby the government at the rate of 4 per centwith tolerance level of +/- 2 per cent forthe period beginning from August 5, 2016to March 31, 2021.

The government notified the constitutionof MPC on September 29, 2016.Meanwhile on September 5, 2016, Dr.Urjit R. Patel took over the charge as 24th

RBI governor. RBI in its fourth bi-monthlymonetary policy statement published inOctober 4, 2016 the MPC has reducedthe policy repo rate from 6.5 % to 6.25%. Bank rate stood at 6.75 %. Theheadline CPI (Combined) inflation hasbeen reduced to 4.5 % during 2016-17.Earlier there was a huge gap between theWPI and CPI inflation in about 10 %agesduring September, 2015 but now in May,2017 there is no gap between the two asboth stands at 2.2 %. CPI inflation hasbeen below to 4 % since last eight monthsand reached at its lowest to 1.5 % in June,

2017.The MPC held three meetings duringthe year 2016-17. MPC in its latestmeeting held at August 2, 2017 have cutthe repo rate by 25 bps to 6 %. The reverserepo rate stands at 5.75 %.

Conclusion

Price stability, ensuring adequate flow ofcredit into the economy and simultaneouslycontrolling the inflation keeping in mind thegrowth prospect of the economy are themain objective of monetary policy. RBI isthe regulator of the monetary policy inIndia. RBI is the supervisor of the financialsystem of the country. Monetary policy hasgone to the tremendous change sinceindependence and has helped theeconomy to contain inflation. Earlier themain measures of monetary policy usedby RBI were CRR and SLR but later onfocused slowly shifted to other measuresafter the recommendation of NarsimhamCommittee. The RBI Act, 1939 has beenamended; it has given RBI a statutorymandate where there was no suchprovision earlier. Recent development inthe area of monetary policy also includeschanging the indicator of inflation fromWPI to CPI (Combined) and setting upMonetary Policy Committee (MPC) afterthe recommendation of Urjit PatelCommittee during the year 2016. .Establishment of MPC is considered to bea revolutionary development in the areaof monetary policy.

At present the inflation is fluctuating withinthe range of 1 to 4 % which is a good signas the inflation is within the acceptable limit.



Now the major challenge before RBI is tomaintain inflation within this range keepingin the mind the growth of the economy.

References:

Ahluwalia, I. J., & Little, I. M. D.(2012). India’s economic reforms anddevelopment: Essays for ManmohanSingh. Oxford University Press.

Aleem, A. (2010). Transmissionmechanism of monetary policy inIndia. Journal of Asian Economics, 21(2),186-197.

Chowdhry, V. (2002). Monetary Policy inIndia. Deep and Deep Publications.

Debabrata Patra, M., & Ray, P. (2010).Inflation expectations and monetary policyin India: An empirical exploration.

Damji, B. H. (2012). Monetary Policy ofIndia.

Fry, M., Julius, D., Mahadeva, L., Roger,S., & Sterne, G. (2000). Key issues in thechoice of monetary policyframework. Monetary policy frameworksin a global context, 1, 1-216.Misra-Puri, ‘Indian Economy’ (2010),Himalaya Publishing House, New Delhi.Mohan, R. (2005, May). Globalisation,financial markets and the operation ofmonetary policy in India. In Participantsin the meeting (p. 161).Rangarajan, C. (2009). India: MonetaryPolicy, Financial Stability, and OtherEssays. Academic Foundation.Reddy, Y. V. (2002, January). Parametersof monetary policy in India. In LectureDelivered at the 88 th Annual Conferenceof Indian Econometric Society.Singh, A., Shetty, S. L., & Venkatachalam,T. R. (1982). Monetary policy in India:issues and evidence. MeenakshiTyagarajan.

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IMPACT OF COLLECTIVE BARGAINING IN MININGINDUSTRY IN ODISHA: A HALLMARK FOR

PEACE IN INDUSTRIAL RELATIONS

Beyat Pragnya RathPh.D. Scholar in KIIT School of Management, KIIT, Bhubaneswar

[email protected]

Shikta SinghAsst. Professor, KIIT School of Management, KIIT, Bhubaneswar

[email protected]

Biswajit DasProfessor, KIIT School of Management, KIIT, Bhubaneswar, [email protected]


ABSTRACTArticle revolves around the collective bargaining process of selectedmining industry of Odisha. The complexities of industrial relations havebeen increasing in a habitual basis. The problem of mis-match has beenidentified in the negotiation process and have been reviewed throughthe literature survey pertaining to collective bargaining ,work cultureand various benefits availed by the workers since antiquities. It hasbeen accolade with the Dunlop model to resolve on the issues. Hence, ithas argued that the three players in the industrial relations have to resolvedisputes through flexible interaction in the worker’s participation in themanagement, as collective bargaining ultimately ends with thereconciliation that is acceptable to both the parties. Article is aqualitative study into the research approach of collective bargaining.Paper uses ideal model of Collective Bargaining, identifying the gapand determining the objectives of employing tools and techniques viz.reliability statistics, frequency distribution, factor analysis in acomprehensive manner. The findings of the study indicate that collectivebargaining has a positive impact on the mining industry in Odisha fromthe empirical data deduced from the analysis and data interpretation.The genuine co-operation of workers to achieve higher productivity canbe gained only by mutual understanding through the process of collectivebargaining which is ultimately proven method in the scenario ofmaintaining peaceful industrial relations.Key words: Collective Bargaining, Condition of employment,Employment Relations, Trade unions



1.1 Introduction

Collective bargaining is the process bywhich the parties conduct the search for asuitable solution for varied interests,acceptable to both the parties. Collectivebargaining involves the involvement of boththe parties who are interested in theindustrial relations as a matter of jointregulation. Collective bargaining aims atreaching some settlement, but going by itsnature it implies some awareness ofnecessity. Collective bargaining meanssome amount of settlement reaching.

The behavioural scientists describecollective bargaining in terms of social,economical, political implications for thesociety. Collective bargaining directlyaffects trade union members through thesetting of wages, working hours andconditions of employment. It indirectlyaffects large number of bread winners andencourages their employers to maintaingood employment relation if only to avoidunionization. It also affects the consumer,through the production or the withholdingof goods and services, the stock holder,through profits or losses of the enterprises,and the government in an attempt tostakeholders and alleviates or preventsindustrial conflict.

Collective bargaining is one of the mosteffective instruments in the hands of theworkers to better their conditions. It is justnot a method of settling disputes only butalso its prevention. The process ofdiscussion and negotiation between thetwo interested parties, being it an individual

or between groups of persons acting inconcert is called collective bargaining(Encyclopaedia of Social Sciences).

Collective Bargaining is a process ofresolving labour-management conflicts. Itis essentially a recognised way of creatinga system of industrial jurisprudence. It actsas a method of introducing civil rights inthe industry i.e. management should beconducted by rules rather than arbitrarydecision making. The term “collectivebargaining” was first used by the economictheorist Beatrice Webb in Britain in1891.The concept was first used in U.S.Aby Gompers. The collective bargaining ismade up of two terms. Collectiveindicating an activity by a group of peopleand bargaining means negotiation. The twokey ILO conventions- convention no-87on freedom of association and conventionno-98 on the right to collective bargainingare the key aspects of Industrial Relations.The labour policy is determined by thecomplex interplay of three main actors(Dunlop 1958).They are:

1. The government both central and state

2. The employers and their associations

3. The workers and the trade unionsrepresenting them.

In order to have harmony in industrialrelations the government played an activistrole by instituting a variety of labour laws.In the early post independence period thetrade unions lacked cohesion .But in recenttimes the trade unions have becomepoliticised and the powerful leaders of the

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major political parties promote their ownunions. Strike activity, measured byfrequency, days lost or workers involved,has declined significantly in most countriesduring the past 50 years, although the ratesof decline differ between countries andsectors. Trade unions take issues on thebehalf of their members and negotiate withthe management. With the emergence ofthe trade unions, the concept of CollectiveBargaining has been originated.

When there were no trade unions, workerswere at a disadvantage as an individualworker had no power to influence theemployer to listen to the problems and toaccede the demands. This was the genesisof collective bargaining. Significance ofcollective bargaining has been portrayedby Supreme Court in Ram PrasadVishwakarma vs. Industrial tribunal (1961SCR (3) 196).

1.2 Mining Industry Overview

Mining Industry in Odisha is geographicallylocated in remote places and it is labourintensive industry; even with certainimproved mechanisation. The capacities ofcollective bargaining of the employees arelimited. The phenomenon is as old whichdates back to early phase of 20th Century.Similarly Mining industry in Odisha startedin the fag end of the 19th Century with rawmaterials which are unique to the ecosystem.Mining industry deals with theprocess or business regarding extractionof ore or minerals from mines. The act ofextracting is normally done by the

government authority, individualentrepreneurs and business owners. Theeconomy of India is endowed with themining industry which contributessignificantly as mining is a major economicactivity. The total industrial sectorcontributes around 10% to 11% of GDPout of which the mining industry itselfcontributes for 2.2% to 2.5%. Odishabeing rich in constitute 28% iron ore, 24%coal, 59% bauxite and 98% chromite ofIndia’s total deposits Odisha has emergedas a key state with regards to the mineraland metal based industries.

The state leads in iron, steel, Ferro alloyand aluminium production and has a strongbase for coal based power generation. Themineral belt is spread over an area of morethan 6,000 sq km. During 2014-15, miningwas underway in nearly 173 mines.Thishas opened up immense possibilities forlocating mineral based industries formanufacturing Steel, Cement, Alumina andAluminium and Titanium etc.

Currently there are 596 mining leases inOdisha. Out of which public sector undergovernment of India have 44 leases, publicsector under government of Odisha holds49 leases and rest 503 leases inprivate sector.

1.3 Government’s Role for the MiningSector

For governing the mining sector there arelaws i.e. The Mines and Minerals(Development and Regulation) Act, 1957,(MMDR) and the Mines Act, 1952.

Impact of collective bargaining in mining industry in Odisha.....


Furthermore, the government hasformulated the National Mineral Policy, forgranting permission to the privateinvestment for exploration of 13 specifiedminerals. This policy was again revised inthe year 1994. The government’s role isto provide a framework against whichnegotiations can be conducted.

2.1 Problem Identification

For social, economic and potentialprogress to happen, the essential conditionis to maintain harmonious relation by thehuman beings. Due to the rise in thecomplexity of the modern industrial system,numerous problems arise in the industrialrelations scenario. The gap between theowners of the industry and the employeeswho work in it keeps on increasing due tothe complexities. This gap gives rise toconflict in labour management relations. Asa result of the conflict there is drastic fall inthe level of production which further addsto hardship of the community. From thevery beginning these difference of opinionhas been existing. Workers keep hiscompetence and exert effort to achievehigher wages and other economic benefits,great amount of job security in the courseof employment. Workers feel that theyshould be provided with freedom anddignity at the work place. The employerson the other hand view this asencroachments upon their profitability, theirfreedom to hire and fire and to control theoperation of their enterprises as a whole.There has been existence of conflicts anddifferences which leads to disputes

between the employers and theemployees. It would be wrong to presumethat the disputes between the two leadscan be halted. The present study addressesthis issue and also examines the impact ofcollective bargaining between employeesand employers to determine the conditionof employment and study the benefitsavailed by the workers in terms wages andother fringe benefits (real benefits) throughcollective bargaining.

3.1 Literature Review

Collective Bargaining has been animportant academic research topic sincethe term evolved in the year 1891. Fromthen on, there have been research studiesundertaken to address the issues ofCollective Bargaining. The reviews onsome of the researchers in the domain aregiven:

Literature Review has been categorized inaccordance to the following:

• Studies concerning about CollectiveBargaining.

• Studies concerning work culture.• Studies concerning various benefits

availed by the workers.

Studies concerning Collective Bargaining:• Perlman (1936): Believes that

collective bargaining is not just meantto demand to raise wages,improvement in working condition andterms of employment or to establishdemocracy at workplace rather itserves a bigger purpose.

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• Spinrad William (1960): Examinesabout comparing the participant andnon-participant members of tradeunions, inter relationship between thevariables.

• Beaumont P.B.,ThomsonA.W.J.,Gregory M.B. (1980) : Thereare multi-employer versus singleemployer, company versus plant levelbargaining ,and the various publicpolicy issues involved and alsomanagement decision on thebargaining structure.

• Moberly Robert B. (1983): The studyemphasis on worker ownership, theconcept of employee stock optionplan (esop),the weaknesses in the lawof collective bargaining especiallywhere tribunals have limited and theduty to provide information and thescope of bargaining.

• Farber Henry S. (1986): The majorfinding is about the role that unions playin the economy.

• McCall J.B. (1986): This studyexamines on the finding that Collectivebargaining depends upon particular skillsat different stages for its successfuloutcome. Identification of these skillsand an ability to use them accurately isessential for today’s manager.

• Proceedings of the Twenty-SeventhAnnual Winter Meeting of the IndustrialRelations Research Association (pp.150-162)1988: The bargainingprocess is an effective institution for

dealing with issues in industrialrelations.

• Gani A.(1996) : Discusses about thepros and cons of joining the unions.Economic and protective motivesappeal much to workers to join unions,dissatisfaction with the unions and theirleaders, and fear of victimization keepa large number of non members awayfrom unions.

• Schregle Johannes (2000):Introduction of workers’ participationby legislation or agreement, solid andeffective training system as a basis forthe functioning of any scheme ofworkers’ participation, whether in theform of collective bargaining, workscouncils,workers’ representation onmanagement boards or workers’involvement at the shop-floor level.

• Ratnam C.S. Venkata, Jain Harish C.(2002):Examines about the extent offemale participation in trade unions inIndia and the reasons for the low femalemembership and participations in thetrade unions in India.

• Boulanger Marc , Kleiner Brian H.(2003 ):The study examines what bothsides of parties would be thinking atnegotiation time.

• Jordan Lisa, Bruno Robert(2005):The study shows the benefitsif the union gets recognition and gainingcertification. He further elaboratesabout the first contract being the abilityof the union to leverage power..



• Seifert Roger (2015): Examinescollective bargaining, strikes, andpublic policy. Firstly when Marxistssurvived and thrived in industrialrelations departments until after 2000,through closing courses and chokingoff demand. This shows the hypocrisysurrounding notions of academicfreedom, and throws light on thedetermination of those in the labourmovement and their academic allies topush forward wage controls andbargaining regimes, alongsiderestrictions on strikes.

• Nowak Paul (2015): Unions remainpowerful agents of change in their ownright and that a revival of organisedlabour is questionable.

Studies concerning work culture

• Kenneth G. Dau Schmidt (2004): Theresearcher suggest that there arechanges in the methods of productionwhich leads to changes in theemployment relationship and thecollective organization of workers. Dueto change in technology andglobalisation there can be change in therelationship of the employees workingin the industry.

• Bradon Ellem, (2008): Researcherconcludes that the relationship betweenunions and social formations play apivotal role in a company.

• Marelli Enrico, Signorelli Marcello,(2010): The important policyimplication is to have the EU Lisbon

strategy i.e. to create more and betterjobs working effectively.

• Pattanayak Subhrendu , SahaShubhayu, Sahu Pravash, Sills Erin ,Singha Ashok, Yang JuiChen,(2010):The researcher emphasis on thehuman development index.The villageswhich are close to the mines are veryprone to the illness. They also have lessforest benefits because forests aremore degraded.

• Jena Satyajit, Guin K.K, Dash S.B.(2011): This researcher put theimportant of trust between theemployees and the employers workingin the organisation.

• Motsomi Ndala Marobela, (2011):Researcher contributes to the industrialrelations involving diamond miningcompany and between the MineWorkers Union over the issues of paybonus and collective bargaining. Thefinding elaborates on the loss ofemployment and dreams shattered for461 dismissed workers who dependedsolely on this work as their only sourceof income.

• Darlington Ralph. (2012): Researchercontributes to the understanding of themulti dimensional causes of strikeactivity.

• Varkkey Biju, Kumar Randhir.(2013): The researcher concludes thatthe labour hoarding as a strategy forworkforce management for themembers.

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• Sarkar A.N.(2013):The researcherfinding suggest that effective monitoringand evaluation of the provision of theacts relating to mining, minerals, metals,energy, power, environment, etc. willultimate be profitable on the part ofthe company. Transparency in thereview and reforms processes with ahelp to pave the way for the futurestrategy. These two economy are givenundue importance i.e. mining economyvs national economy.

• Boniface Michael ,Rashmi Michael.(2013): In the process of collectivebargaining interest based bargaining isthe connection between thenegotiators. Due to the negotiationtaking place it accentuates tocollaboration.

• Fonsecaa Alberto, McAllisterb MaryLouise, Fitzpatrickc Patricia (2014):The researchers discusses about theminor changes taking place due tochange in the broad framework of themining companies .The researcherfinding suggest that if the minor changesare reported accurately then it helps inthe path of profitability andsustainability.

• Laurent Scaringella. (2016): Thisstudy examines how trust and mutualunderstanding playing a pivotal role inthe framework of industrial relations.

Studies concerning various benefits availedby the workers

• Dunlop (1958): Focussed on theissues involved in the process while

defining collective bargaining as asystem which sets modifies andadministers workplace rules, aprocedure to determine the amount ofcompensation and distribution ofeconomic benefits for employees.

• Beach (1979): Collective bargainingrevolves around the process ofnegotiation backed by administration.These include the collectiveagreements, covering wages, hours ofwork and other working conditions ofemployment.

• Kelly John (2015): The increase ingeneral strikes in parts of WesternEurope and of protest campaignsinvolving unions and civil societyorganizations. The term “outcomes”should be used broadly to refer to theimpact of action on substantive uniongoals, on the organizational capacityof the trade unions, such asmembership and finances, and on thelabour movement more generally, bothtrade unions and political parties.

The above reviews of authors collectedfrom the literature survey empirically reflecton the dimension of research.

4.1 Research Gap

It is observed from the literature surveythat most of the researchers on CollectiveBargaining have focussed on thebargaining process but no relevance isgiven on what impact does it have on theemployees (workers and labourers) inorder to determine the condition of



employment. Limited study has been donein the Mining Industry in Odisha context.This study attempts to find out the benefitsavailed by the workers in terms of wagesand other fringe benefits through theprocess of Collective Bargaining and also

Generic Process of Collective Bargaining

Source-Dunlop, 1958

4.2 Research MethodsThis part discusses the researchmethodology procedure used for thispresent study. It covers the researchdesign, types of data sources, samplingtechnique, data collection process,statistical tools, coverage and theprocedure of analyzing the data in detail.Then, it presents the research objectivesand the appropriate methodology toaccomplish the objectives. Following thisthe research designing and data collectionprocedure is explained.

4.2.1 Research Objectivesi) To study the benefits availed by the

workers in terms wages and otherfringe benefits (real benefits) throughcollective bargaining.

ii) To study the work culture forcollective bargaining.

iii) To suggest measures for successfulworking of collective bargaining in themining industry in Odisha.

4.2.2 Universe of the study

Joda located in the Keonjhar District was

suggest certain measures for successfulworking of collective bargaining in themining industry in Odisha. The researchstudy has a blend of qualitative andquantitative approach of collectivebargaining with pertinence.

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selected as the universe of the researchfor many reasons. First and foremost,Joda, has richest iron deposits in India andis a hub for many big industries in Odisha.Joda has many big industries and has a lotof man power, backed by mechanized andnon mechanized mining ore processingunits. So the process of collectivebargaining happens and impact factor ismore in these mining companies on a largerbasis. Joda Circle has 24 running minesand has a significant production with lot ofman power. Therefore, conductingresearch in this location was of sizeablebenefit and provided useful insights tocollective bargaining for the mining industryas a whole.

4.2.3 Research Design

This research comes under exploratoryresearch type, as it is a preliminary studyof an unknown problem about which theresearcher has limited knowledge andwants to generate new ideas (Saunders,et al., 2011; Krishna swami andRanganatham, 2003). According toEriksson and Widersheim-Paul (1982), thethree types of research are exploratoryresearch, descriptive research, andexplanatory research.

Exploratory research was found to bemore appropriate for this study to explorethe importance of collective bargaining andwhat impact does it have on Odisha’smining industry with reference to Keonjhardistrict.The research is exploratory anddescriptive in nature. It shall blend bothqualitative and quantitative research.

4.2.4 Data collection method

Survey Method in form of questionnaire,in-depth interview i.e. Interview schedulefor employees & Interview guide forworkers and labourers.

4.2.5 Sampling techniquesAccording to Malhotra (2004) in case ofnon-probability sampling method samplingunits are primarily based on researcher’sdecision. Accordingly, this present studyalso used non-random samplingmethodology on the basis of differentgrounds. Convenience sampling wasconsidered to be most suitable for thisstudy as the study addresses to mining areawhich is located in remote places ofOdisha.

4.2.6 Source of Data

The research work is mainly based onprimary data and secondary data sources.Information relevant for the study shall becollected from secondary sources likejournals, magazines, published andunpublished research works and websites.Primary data shall be collected fromquestionnaires applied to samplerespondents, group discussions andstructured and unstructured interviews.

4.2.7 Survey InstrumentA well-structured questionnaire shall bedesigned to gather data required for thisresearch. This study shall be undertakenwith the questionnaire being distributed to130 respondents. The number of questionsdistributed to the managementrepresentatives were 30, trade union



representative were 30,workers were 90in number.My sample unit wereEmployees (workers & labourers),Employers or management representativesand Trade unions representatives of themining industry.

To test the reliability of the researchinstrument, Cronbach’s coefficient alphawas used through SPSS to examine theinternal consistency of items of the scale.

Reliability Statistics

Cronbach's Alpha

Cronbach's Alpha Based on

Standardized Items

No of Items

.749 .726 16 Source: Researcher’s own computation withthe aid of SPSS

5.1 Data AnalysisQuantitative analysis often utilisesdescriptive and inferential statistics as well

as frequency tables, sample size, averagesand measures of variations etc. (Bryman,2008).In contrast qualitative analysis dealswith narrative analysis with words.

Descriptive StatisticsInitially in descriptive analysis, frequencydistributions were performed on selectedsets of socio-demographic data. Severalfrequency distribution tests wereconducted to analyze the demographic aswell as collective bargaining characteristicswhich are highlighted as under:-Table 5.1 Frequency Distribution ofthe Sample on the basis of Gender

Source: Field Survey

Table 5.1 represents that 84.6 percent of total participants are male and also 15.4percent of females.

Figure 5.1 Gender Wise Distribution of Sample Respondents

Frequencies Percentages

Male 110 84.6

Female 20 15.4

Total 130 100.0

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Table 5. 2 Frequency Distribution of the Sample on the basis of Organizational Structure

Source: Field survey

Table 5.2 represent the profile oforganisational structure of the respondents.The table depicts that the respondentscomprises of 69.2% of workers, less

number of trade union representatives and26.2 % of management or the managementrepresentatives were there for theresponses.

Figure 5.2 Organizational Structure Wise Distribution of Sample Respondents

Table 5.3 Age-Wise Distribution of Sample Respondents


18-30 yrs 78 60.0 31-40 yrs 16 12.3 41- 50 yrs 30 23.1 51-60 yrs 4 3.1 60 yrs above 2 1.5 Total 130 100

Table 5.3 represent the frequencydistribution of the age for the respondents.The age has been classified and it is seenthat majority of people are in the age groupof 18-30 years in the mining area.



Worker 90 69.2

Trade Union Representative 6 4.6

Management (Employer) 34 26.2

Total 130 100


Table 5.4 Experience Wise Distributionof Sample Respondents


less than 1 year 20 15.4

1-5 yrs 65 50.0

5+ -10 yrs 36 27.7

10 yrs above 9 6.9

Total 130 100.0

Table 5.5 represent the salary slab of therespondents .The outcome of this table isthat many respondents come under the firstsalary slab i.e. less than 30,000.Exceptfrom the salary they get fringe benefits,medical allowance etc.

6.1 Factor Analysis - Factor Analysisfor measuring Collective Bargaining

To analyse the scope of bargaining ,themeasurement to find out in which area the

Table 5.4 represents the work experienceof the respondents in the mining area ofOdisha. Many respondents come underthe bracket of 1 to 5 years which meansthat those who are working in the miningsector are happy with the work they haveundergone and simultaneously propertraining is being imparted to increase theirefficiency.

Table 5.5 Salary Wise Distribution of Sample RespondentsSource: Field survey


less than 30000 90 69.2

30000- 40000 4 3.1

41000-50000 2 1.5

51000-60000 8 6.2

61000-70000 15 11.5

81000-90000 6 4.6

90000-100000 3 2.3

Above 100000 2 1.5

Total 130 100.0

collective bargaining is being practised inthe mining companies of Odisha’s miningindustry a couple of factors were put todetermine which factor or factors hassignificant importance and impact onCollective bargaining which was thesecond objective in my research study. Theintention of factor analysis was to find outwhich are the factors necessary in the areaof collective bargaining in miningcompanies in Odisha’s mining industry.


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Components Initial Eigen values Extraction Sums of Squared Loadings

Total

% of Variance

Cumulative % Total

% of Variance

Cumulative %

1 2.488 22.620 22.620 2.488 22.620 22.620 2 1.737 15.794 38.413 1.737 15.794 38.413 3 1.356 12.326 50.739 1.356 12.326 50.739 4 1.125 10.232 60.971 1.125 10.232 60.971 5 .981 8.921 69.892 6 .944 8.580 78.472 7 .753 6.842 85.314 8 .636 5.780 91.094 9 .514 4.669 95.764 10 .274 2.492 98.255 11 .192 1.745 100.000

Table 6.1 Total Variance explained

Source: Author’s own computation using SPSSThe Bartlett’s test of sphericity for factoranalysis on Scope of Bargaining is applied.The approximate chi-square statistic was1047.071 with 55 degrees of freedom,which was significant at the 0.01 level. Thevalue of the Kaiser-Meyer-Olkin Measureof Sampling Adequacy (.769) was alsomoderate (>0.1). Thus, factor analysis was

considered an appropriate technique.Factor analysis brought out four factors inall explaining 61.089% of total variance.The extracted communalities rangedbetween 0.400 and 0.661. The factor (Atthe moment, Working Conditions)registered the highest factor loading valueof 0.661.



Table 6.2 : Component Matrix Component

1 2 3 4 Wages .041 -.080 .052 .864 Training .042 -.107 .378 .179 Bonus .614 -.570 .235 .080 Fringe Benefits .637 .036 -.204 -.358 Working conditions .661 .432 .300 -.099 Grievance handling -.469 .496 -.076 .145 Income and profit .077 .398 .724 -.011 Promotion -.457 .593 -.167 -.082 Recruitment -.582 -.250 .237 .085 New technique of production

-.573 -.621 .003 -.283

Discipline .405 .053 -.639 .295 Source: Author’s own computation using SPSS

From the above Table 6.2 of TotalVariance Explained it is clear that out of11 items only 4 factors were extracted.This clearly explains that four factors playa major role in the collective bargainingprocess with reference to the miningindustry in Odisha, i.e. Bonus, FringeBenefits, Working Conditions andDiscipline. From the factor analysis wecome to the conclusion that the workingcondition has a significant impact on theworking of the mine.

7.1 Management’s and Trade Unionopinion regarding the causes of unionrivalry in the mining companies inOdisha’s Mining Industry

In accordance to Objective 3, the researchwas further intended to investigate in tothe causes of union rivalry in mining

companies and also what measure couldbe taken to eliminate it. In two or threemining companies that was surveyed thereis existence to two unions or more thantwo unions. The intention of this questionwas to find out if the primary cause couldbe found out then there can be a scope ofpeaceful work culture in the miningcompanies.To explore this question were asked to therepresentatives of the management and therepresentatives of the trade union on abasis of priorities. The sample size waslarge in number to know the view regardingthe context. The following frequencydistribution tables present the overallassessment framed by the miningcompanies from the perspective of therepresentatives of the management andtrade union.

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Table 7.1 Opinion about the causes of union rivalry in mining companies

Causes

Management/Employer (85)

Trade Unions (26)

Priority Priority 1st 2nd 3rd 1st 2nd 3rd

Political orientation

53 (62.3%)

14 (16.4%)

18 (21.1%)

6 (23.07%)

8 (30.7%)

12 (46.1%)

Multiplicity of unions

32 (37.6%)

25 (29.4%)

28 (32.9%)

7 (26.9%)

9 (34.6%)

Lack of proper

leadership

12 (14.1%)

31 (36.4%)

42 (49.4%)

17 (65.3%)

3 (11.5%)

10 (38.4%)

To gain recognition

17 (20%)

40 (47.0%)

28 (32.9%)

11 (42.3%)

6 (23.07%)

9 (34.6%)

Source: Field surveyIn the Table 7.1, it indicates that from theperspective of the management, around(62.3%) feel that the political orientationis the primary cause of union rivalry inmining companies. On the other hand therepresentatives of the trade union are ofthe opinion that lack of proper leadership(65.3%) is the cause. Trade union is not

merely the sum of the members presentrather the other way round which includesthe power and the strength of the workersinvolved. Trade unions have become theintegral part of the economic system andtheir influence has become a prominentfactor in the terms of employmentrelationship. Political orientation creates themain cause in union rivalry and this can be

Views

Management/Employer (85)

Trade Unions (26)

Priority Priority

1st

2nd

3rd

1st

2nd

3rd To make trade union conscious among workers

41 (48.2%)

23 (27.05)

21 (24.7%)

7 (26.9%)

9 (34.6%)

10 (38.4%)

To allow only one bargaining against in the organisation

56 (65.8%)

18 (21.1%)

11 (12.9%)

19 (73.07%)

3 (11.5%)

2 (7.6%)

To break the tie-up between the union and the political

parties

37 (43.5%)

27 (31.7%)

21 (24.7%)

5 (19.2%)

10 (38.4%)

11 (42.3%)

To eliminate outside leadership

39 (45.8%)

29 (34.1%)

17 (20%)

8 (30.7%)

5 (19.2%)

13 (50%)

Table 7.2 Opinion about the views in eliminating union rivalry in mining companies




maintained by one union in one mine. Asthere is existence of more than one unionso this situation arises in mine. The benefitof one union could be the interest issuescan be bargained in a wide scale and theviews can be taken forward by themanagement seriously. The trade unionrepresentative on the other hand feel thatthere are too many leaders who comeforward for taking the leadership and theworkers are in confusion to which is thebetter candidate elected or selected bythem. In this hassle the best leader issometimes under cover. The next tablefigures out the views in eliminating unionrivalry in mining companies.

In Table 7.2 both the parties agreed onone bargaining agent in the mine. Themanagement representatives alsosuggested eliminating the outside leadershipso that the internal strength would evolve.

8.1 Analysis of Personal InterviewsThe research questions and objectives ofthe research study as mentioned earlier inparticular about the need to find out andthe amount of credibility which could bedone in the available resources (Patton,2002) has given due importance to thecollection of data on the basis of interview.Seven mining companies of Joda circle inKeonjhar district have been taken assample of the study. Accordingly, theinformation collected through interviewing10 executives of mining companies todiscover their valuable opinions towardssuccessful parameters for smooth workingof Collective Bargaining in the miningindustry in Odisha.

The measures suggested by top notchexecutives which are collective bargainingis the only proven method so far evolvedfor bringing co-operation and promotingunderstanding between workers andemployers which is essential for ensuringhigher productivity and betterunderstanding of performance. Collectivebargaining can succeed only if both sidesnegotiate on rational basis. They must havefacts and figures to support their stand.Both parties must decide on the kind ofdata they should have to base theirdiscussions. Management must collect andmake the data available. The data requiredfor discussions will include details such asrates of pay, fringe benefits, manpowerbudget, wages and salaries etc. Data mustbe factual and free from any bias. Also thetrade union must believe in the data andaccept it.

8.2 Benefits of Collective BargainingIn Odisha’s Mining IndustrySince trade unions and associations areone of the stake holders in a collectivebargaining process, it ensures existence ofeffective trade unions and associations aswell. It highlights the benefits of aproductive collective bargaining processwhich will ensure that trade unions andassociations in the mining industry develop.In order to develop an effective trade unionand association it is necessary for theemployees to be aware of the benefits ofa collective bargaining process. Thisawareness among employees will also bea positive development towards formationof trade unions and association of

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employees. It must be remembered thatthe presence of trade unions andassociations of employees in addition totaking care of employees do take activesteps in the interest as a whole. This specificissue is very important in view of the presentscenario in the state involving irregularactivities in the industry. Responsible andeffective trade unions and associations ofemployees with literate and responsibleemployees could have prevented suchactivities. Collective bargaining will alsobenefit the people in the industry as awhole and in turn will help in the growth ofthe industry and as a result the thefts thatin done in the mining industry will also beless.

8.3 Conclusion

There is a trend towards flexibility in acountry like India. But the future offlexibility will depend on the interaction ofthe three players in Industrial Relations.Going by the statistics provided by theIndian labour force participation rate 2011-2016 chart it is 52.50% compared toprevious year which was 50.5%.With theadvent of the new Industrial system ,theworkers and the employers are not in sinkwith each other so as to achieve flexibility.The essential thing about collectivebargaining is the fact that it is a vehicle ofjoint rule-making in an economicorganisation. The ultimate end of collectivebargaining is to reach some settlementacceptable to both the parties involved inlabour-management relations. CollectiveBargaining if properly adopted, then it canpave the way for industrial democracy.

Union and the management are being paiddue attention for the preparation of thenegotiation in the mining sector in Odisha.Collective Bargaining has an positiveimpact on the mining industry in Odishafrom the empirical data deduced from theanalysis and data interpretation. Thegenuine co-operation of workers toachieve higher productivity can be gainedonly by mutual understanding through thementioned process of collective bargainingwhich is ultimately proven method so far.

8.4 Limitations of the Study

Though this study has yielded significantresults and produced substantialcontributions to the existing body ofknowledge in industrial relations research;however, there are limitations related tothe scope of the research. This studyinvestigated only the existing sevennumbers of mining companies in the finalstudy and pilot study included three miningcompanies in Joda circle in Keonjhardistrict. The sample size was adequatelychosen representing the entire workingmines; the data obtained from these sevenmining companies in Odisha’s miningindustry proved adequate and sufficient,with substantial findings and insights beingproduced regarding the process ofcollective bargaining and its impact onvariables taken in the mining sector.

8.5 Scope for further research

This study encompasses tremendousscope and directions for the futureresearch. In the context of collectivebargaining in industrial relations, the further



study can be done to improve the validityof the research model through large sampleof data in form of considering all the miningcompanies in all circles of mining sector inKeonjhar and other districts in Odisha. Acomparative analysis and study can bedone for mining industry and otherindustries regarding the impact of collectivebargaining or certain variables in one andother sector. This research study has oneof the outcome of less female participationand which can be a scope for otherresearchers as to find out the reasonsbehind this and what can be the approachtaken by the employer to increase thefemale participation. Women of today arethe evangelist in all leading sector so whynot in mining sector. An analysis can bedone to identify the ratio of womanparticipation in the process of collectivebargaining in mining industry in Odisha.Researchers also can be encouraged toevaluate the approach of industrial relationsof other districts in Odisha and other states.A cross district comparative study can betaken in order to widen the gamut ofresearch.

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INTRODUCTION

The financial performance of anyorganisation plays an important role inmaintaining the company’s survival andgrowth. This financial performance isinfluenced by many factors which are

known to be the organizational factors.Some factors are positively influencing theperformance while, some are negative. So,examining these factors has immense valuefor the corporate. The corporate shouldpay attention towards the factors in order


IMPACT OF ORGANIZATIONAL FACTORS ONFINANCIAL PERFORMANCE

Chandrika Prasad Das,Lecturer, Department of Commerce, B.B.Autonomous Mahavidyalaya, Jajpur, Odisha,

[email protected]

Rabindra Kumar Swain,Assistant Professor, P.G. Dept. of Commerce, Utkal University, Bhubaneswar, Odisha,

[email protected]


ABSTRACT

The corporate sectors are facing many challenges and cut throatcompetition in the era of globalization. So, in order to sustain in thelong run financial performance is the appropriate yard stick throughwhich sustainability can be measured. Financial performance is acomprehensive term and cannot be convincingly encapsulated in afew lines without compromising with its vastness. But it is an importantphenomenon that conveys the financial health of a company. Hence,financial performance is the barometer of the operation of businessorganization. Our study is an attempt to study the importantorganizational factors to examine the extent of impact of independentvariables on dependent variables. For the purpose of study a sampleof 192 companies are selected which are studied for the period of tenyears by applying multiple regression model. The outcome of the studyis that organizational factors are significantly contributing towardsfinancial performance of corporate.

Keywords: Cut throat competition, Globalization, FinancialPerformance


to minimize the negative influence andmaximize the positive influence on firm’sperformance.

Popularly, profitability is the majorindicator of financial performance. Thisprofitability is measured by manyparameters, i.e. Return on Asset, Returnon Capital Employed, Net profit marginetc. The objective of the organization isno more earning profits but to to increasethe value of the shareholders which in turnincreases the market price of the share ofthe company. Now a day’s investor’sperception towards a companyperformance is good if, it has good marketvalue. So market value is also an importantindicator of financial performance of acompany. Hence, the financial experts,research scholars and students have beengiving more emphasis on the financialanalysis to examine the financial positionand financial performance.


Ali Abbas et.al. (2013) made a study todetermine the financial performance factorsinfluencing the textile sector of Pakistan,with a sample of 139 companies fromtextile sector for the period of 2005-2010.By using regression analysis of Panel dataand hausman test, they found that the firm’sperformance (ROI) in textile sector issignificantly affected by Short termleverage, Size, risk, tax and non-debt taxshield. The above factors of textile sectorsignificantly influence the firm’s financialperformance. Hence, the sector shouldtake those factors into account whilemeasuring the performance.

Sidra Ali Mirza and Attiya Javed(2013) has made an empirical analysisabout the association between financialperformance of the firm and economicindicators, corporate governance,ownership structure, capital structure, andrisk management. The study is made forthe period of study is 2007 to 2011with60 Pakistani corporate firms listed inKarachi stock exchange. By usingRegression & Correlation analysis,Haussmann test, and chi- square test , theresults reveal that there is a potentialrelationship between firm’s financialperformance and economic indicators,corporate governance, ownershipstructure and capital structure. But theintensity of relationship varies acrossdifferent measures of performance. Thestudy finds the evidence in support of thehypotheses that a positive associationexists between corporate governance, andrisk management and performance whilemixed results are found for other variables.

Theiri Saliha, Ati Abdessatar(2011)examined the determinants of financialperformance and association amongperformance, form of control and debt bytaking 40 Tunisian listed and unlistedcompanies for a period of 1998-2006.Performance is measured by the ratiooperating income / equity, Added value /sales. The study has analysed severaldeterminants such as Growthopportunities, size, risk, The profitability,Tax savings not related to debt, structureof total assets, Industry Sector, Consumergoods sector, Services sector, Technology

147

sector. The result shows that debt and theform of control are related with the levelof performance.

Priyanka Aggarwal (2015) empiricallydetermined the factors of corporategrowth in India in the post liberalizationperiod, from 2004-05 to 2013-14 bytaking a sample of 250 private sectorcompanies given in the PROWESSdatabase developed by (CMIE ) .Multipleregression analysis has been used for thestudy. Compounded annual growth rate ofnet sales (CAGRNS) and marketcapitalization (CAGRMC) taken asmeasure of growth. The results states that,size of a company, advertising intensity,age, profitability, and research anddevelopment intensity, solvency, leverage,efficiency, diversification and nature ofindustry are significant in determining thegrowth of Indian firms.

Mowery (1948) examined the impact offirm size and research expenditure onfirm’s growth for a period of 1921-46 bytaking 200 American manufacturing firms.The study used Stepwise regression &correlation and took average annualincrease in firm sales as a dependentvariable while firm size, value of assets,research activity and scientific personnelemployed as independent variables. Thestudy reveals that larger firms ‘are notresearch intensive. Research activity islinked with the firm survival and its growth.

Radice (1971) studied the effects ofcontrol Systems on the growth of largefirms. The period of the study is from

1957-67 and the size of sample is 89 firmsfrom three industries. Simple regression &correlation has been used and the resultreveals that Management control firms arebetter in growth and profit.

STATEMENT OF THE PROBLEM

The review of the literature reveals that alarge number of studies have been carriedout all over the globe on analyzing theorganizational factors, but still there is adearth of literature on this subject in theIndian context. Only a few studies i.e.Kakaniet.al.(2001),kaur (1997),Kalirajan&Bhide (2003), Sanjay JBhayane (2010) and have been carriedout to analyze the organizational factorsthat contributes towards firm’s financialperformance in India. Along with that inthe Indian context, most of the period ofthe studies are up to the year 2004 exceptthe study of , Sanjay J Bhayane (2010).

Thus, the foregoing discussion reveals thatno comprehensive study has beenconducted in India during the last ten years,and the number of studies in the earlierperiod is also limited. Keeping intoconsideration of these facts, there is a sharpdemarcation of research gap in the Indiancontext, which is the main motivation toconduct this study. Hence the presentstudy is undertaken to explore more onsuch area and enrich the literature of thiscontext.OBJECTIVES OF THE STUDY:· To study the relationship between the

organizational factors and theprofitability of the company.

Impact of Organizational factors on Financial Performance


RESEARCH METHODOLOGY:

Data Collection:

The study is based on secondary data only.All the dependent and independentvariables are taken from PROWESSdatabase. The different reputed journals,magazines and newspapers have beenreferred.

Sample Design:

The study is based on Nifty 500companies on the basis of their marketcapitalization. Out of nifty 500 companiesthe following filters were applied to selectthe sample:

• Many companies with inadequate dataare eliminated.

• The companies belonging to the financialservice sector (i.e- banks and financialinstitutions) are eliminated.

Because of the specific nature of theiractivities, companies related to bankingand financial sectors were excluded fromthe sample added to that, firms with missingdata were also removed from the sample.Thus, as a result of these filters, a resultantsample of 192 companies was selected.

Time Period of the study:

The study covers a time span of ten yearsfrom 2005- 2006 to 2014-2015.

Scope of the Study:

The present study is confined to examiningthe seven factors, such as – brand value,employee productivity, marketingexpenses, working capital ratio, company

size, leverage and dividend payout ratioon financial performance. Shareholdervalue creation and profitability are takenas an indicator of financial performance.NSE nifty 500 companies on the basis ofmarket capitalization are the population ofthe study. A sample of 192 companies isconstituted on the basis of filtering criteriaexplained above and studied for the periodof ten years (i.e. 2005-06 to 2014-15).

Tools & Techniques:

In order to analyze the data collected,multiple regression analysis has been doneusing MS excel and multi-co-linearity hasbeen tested through NCSS 11 software.

Variables:

The study examines the determinants offinancial performance from two dimensionsi.e., shareholder value creation andprofitability of sample companies. Differentproxies are taken as the dependent andindependent variables after reviewing theexisting literature. For a betterunderstanding of these variables, these areexplained below.

DEPENDENT VARAIBLES:· PBV· ROA· ROCE· NPM

INDEPENDENT VARIABLES

· Brand value

· Employee productivity

· Marketing Exp

149

· WC Ratio

· Company Size

· Leverage

· Dividend payout ratio

Regression Model:

In order to study the impact of variousorganizational factors, multiple regressionanalysis has been done. The followingmodels have been developed:

PBV = â0 + â1BV + â2EP + â3ME + â4WC+ â5LNTA + â6LVRG + â7DP +å……..Model- 1

ROA= â0 + â1BV + â2EP + â3ME + â4WC+ â5LNTA + â6LVRG + â7DP +å…......Model- 2

ROCE = â0 + â1BV + â2EP + â3ME +â4WC + â5LNTA + â6LVRG + â7DP +å…..Model- 3

NPM = â0 + â1BV + â2EP + â3ME + â4WC+ â5LNTA + â6LVRG + â7DP +å…....Model - 4

Where:

PBV= price to book value

ROA =Return on Asset

ROCE = Return on capital Employed

NPM= Net Profit Margin

â0 = constant or the value of dependentvariable when all values of independentvariables are zero

â1,â2, â3............. â7 = Slope of the independentvariables

BV= Brand value

EP= Employee Productivity

ME= Marketing Exp

WC= WC Ratio

LNTA= Company Size

LVRG = Leverage

DP= Dividend Payout Ratio

Å= The error term

The analysis is based on the linearregression model at 5% level ofsignificance.

EMPIRICAL ANALYSIS

a. Examining the impact ofselected organizational factors on theshare holder value creation

From the regression statistics as givenabove it is found that there is a positiverelationship between value creation (p/bratio) and all independent variables (BV,EP, ME, WC, LNTA, LVRG, DP) asevident from adjusted R2 i.e. 0.066709.This indicates around 7 % (approx.) ofvalue creation is contributed byindependent variables (BV, EP, ME, WC,LNTA, LVRG, DP).

Table no 2 shows the level of significancebetween p/b ratio (value creation) and allindependent variable. Here p value is7.59E-27 (p<0.05) which is less than0.05. It implies that there is significantrelationship between p/b ratio (valuecreation) and all independent variable (BV,EP, ME, WC, LNTA, LVRG, DP)



collectively. However independent variableunder sample contributes to the extent of7% given in regression statistics table.Examining the impact of selectedorganizational factors on ROA:From the regression statistics as givenabove it is found that there is a positiverelationship between ROA and allindependent variable (BV, EP, ME, WC,LNTA, LVRG, DP) as evident fromadjusted R2 i.e. 0.154 . This indicatesaround 15% (approx) of ROA iscontributed by independent variables (BV,EP, ME, WC, LNTA, LVRG, DP).Table no 4 shows the level of significancebetween Return On Asset (ROA) and allindependent variable. Here p value is4.52103E-67 (p<0.05) which is less than0.05 . It implies that there is significantrelationship between Return On Asset(ROA) and all independent variable (BV,EP, ME, WC, LNTA, LVRG, DP)collectively. However, independentvariable under sample contributes to theextent of 15% given in regression statisticstable.b. Examining the impact of selectedorganizational factors on ROCE:.From the regression statistics as givenabove it is found that there is a positiverelationship between ROCE and allindependent variable (BV, EP, ME, WC,LNTA, LVRG, DP) as evident fromadjusted R2 i.e. 0.009828 . This indicatesonly 1% (approx) of ROCE iscontributed by independent variables (BV,EP, ME, WC, LNTA, LVRG, DP).

Table no 6 shows the level of significancebetween return on capital employed(ROCE) and all independent variable.Here p value is 0.000524 (p<0.05) whichis less than 0.05. It implies that there issignificant relationship between Return onCapital Employed (ROCE) and allindependent variable (BV, EP, ME, WC,LNTA, LVRG, DP) collectively. However,independent variable independent variableunder sample contributes to the extent of1% given in regression statistics table.

c. Examining the impact of selectedorganizational factors on Net ProfitMargin(NPM):

From the regression statistics as givenabove it is found that there is a positiverelationship between NPM and allindependent variable (BV, EP, ME, WC,LNTA, LVRG, DP) as evident fromadjusted R2 i.e. 0.488924. This indicatesaround 49% of Net profit Margin (NPM)is contributed by independent variables(BV, EP, ME, WC, LNTA, LVRG, DP).

Table no 8 shows the level of significancebetween net profit margin (NPM) and allindependent variable. Here p value is 9E-275 (p<0.05) which is less than 0.05. Itimplies that there is significant relationshipbetween net profit margin (NPM) and allindependent variable (BV, EP, ME, WC,LNTA, LVRG, DP) collectively. Howeverindependent variable under samplecontributes to the extent of 49% as givenin regression statistics table.

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Table no 1: Regression Statistics of Value creationStatistics Values

Multiple R 0.26479 R Square 0.070114

Adjusted R Square 0.066709 Standard Error 4.286954 Observations 1920

Source: self-compiledTable no- 2: Statement Showing Level of Significance of Relationship

ANOVA

Df SS MS F Significance F (p value)

Regression 7 2649.474 378.4963 20.5951 7.59E-27 Residual 1912 35138.69 18.37797 Total 1919 37788.16

Source: self-compiledTable no 3 :Regression Statistics of ROA

Statistics Value Multiple R 0.397174747 R Square 0.157747779 Adjusted R Square 0.15466422 Standard Error 0.059671654 Observations 1920

Source: self-compiledTable no 4: Statement Showing Level of Significance of Relationship

ANOVA

df SS MS F Significance F

(P value) Regression 7 1.275102614 0.182158 51.15769 4.52103E-67 Residual 1912 6.808070529 0.003561 Total 1919 8.083173142

Table No 5:Regression Statistics of ROCE Statistics Values Multiple R 0.115929 R Square 0.013439 Adjusted R Square 0.009828 Standard Error 0.384707 Observations 1920



FINDINGS:

After the empirical analysis the followingfindings are derived.

• Brand value has a significant positiverelation with p/b ratio (value creation)

• Brand value has positive relationshipwith all parameters of profitability(CFM, ROA, ROCE). But it issignificantly related with CFM &ROAand insignificantly related with ROCEwith a p vale of 0.053, very close to

0.05. So, if the size of sample will bemore it may significantly affect ROCE.

• Size of the firm positively affects salesgrowth.

• Use of more leverage and spendingmore money on marketing increasesvariation in CFM and ROA.

SUGGESTIONS:

• It is suggested that the company shouldfocus more on building brand value,

Table no 6: Statement Showing Level of Significance of Relationship

ANOVA

Df SS MS F Significance F(p value )

Regression 7 3.854846 0.550692 3.72091 0.000524 Residual 1912 282.9748 0.147999 Total 1919 286.8296

Source: self-compiledTable no 7 : Regression Statistics of NPM

Table no 8: Statement Showing Level of Significance of Relationship

Statistics Values Multiple R 0.700563 R Square 0.490789 Adjusted R Square 0.488924 Standard Error 152.6379 Observations 1920

Source: self-compiled

ANOVA

Df SS MS F Significance F (p value)

Regression 7 42934762 6133537 263.2607 9E-275 Residual 1912 44546426 23298.34 Total 1919 87481188

Source: self-compiled

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spending money on marketing activitiesand payment of dividend in order tomaximize the share holder value.

• In order to maintain profitability the firmhas to maintain balance betweenworking capital and profitability.

• Company should try to use less debt inorder to maintain profitability.

CONCLUSION:

This study examines the organizationalfactors of Indian firms

with a sample o f 192 companies for aperiod of 10 years . As per the objectivesit examines the relationship betweendependent and independent variables andfound that brand value, marketing expensesand dividend payout ratio are positivelyrelated with value creation, profitability andits components and sales growth whileleverage is negatively. So, the companyshould make strategic plan in order tomanage the negative influence of profitability and exploit positive influence inorder to maximize performance.

SCOPE FOR FURTHERRESEARCH:

Financial performance and organizationalfactors have always been emerging issues.Though this study adds certain vales to thegrowing body of knowledge on the firmsperformance but it ignores industry wiseanalysis which is open for further research.

REFERENCES

• Ali,A., Zahid,B., Shahid,M. &Nadeem, A.K. (2013). Determinantsof Firm’s Financial Performance: AnEmpirical Study on Textile Sector ofPakistan. Business and EconomicResearch, 3(2), 76-86.

• Mirza, S.A., & Javed, A. (2013).Determinants of financial performanceof a firm: case of Pakistani stockmarket. Jornal of Economics andInternational Finance, 5(2), 43-52.

• Saliha, T. & Abdessatar, A. (2011).The determinants of financialperformance: an empirical test using theSimultaneous equations method.Economics and Finance Review,1(10), 1 – 19.

· Aggarwal,P. (2015). An empiricalevidence of measuring growthdeterminants of Indian firms. Journal ofApplied Finance & Banking, 5(2), 45-66.

· Mowery, D. C. (1948). IndustrialResearch, Firm Size, Survival, andGrowth in American Manufacturing :An Assessment, The Journal ofEconomic History, 43(4), 953-980.

· Radice, H.K. (1971). Control Type,Profitability and Growth in Large Firms:An Empirical Study. Economic Journal,81,547-562.


qqq


NON-PERFORMING ASSETS OF SCHEDULEDCOMMERCIAL BANKS IN INDIA:

ITS REGULATORY FRAME WORK

Rabindra Kumar SwainAsst. Professor, P.G. Department of commerce, Utkal University, Bhubaneswar-751004, Odisha

[email protected],

Muna SahooLecturer in commerce, Mahendra Institute of Management and Technical Studies, Khordha-752055, Odisha. Ph.D Research Scholar, Department of Commerce, Utkal University, Odisha.

[email protected],

Anjali Prava MishraResearch Scholar, Department of Commerce, Berhampur University, Brahmapur-760007, Odisha.

[email protected], Contact No.-9437622604.


ABSTRACTBank plays a vital role in the economic development and growth of acountry. In a developing country like India, there is a need of efficientand healthy banking system. But from past few decades NPA hasbecome a big threat for the growth of banking sector. In the presentscenario, the core financial problem for banks is NPA. Proper recoveryof loans can boost the performance of banks. Therefore, an attemptis made in this paper towards examining the effectiveness of NPArecovery measures. Selected recovery measures like Lok Adalat, DebtRecovery Tribunal and SARFAESI Act are taken to study theeffectiveness of NPA recovery. From the study it is inferred thatrecovery of NPAs is still a measure concern for commercial banks inIndia. One of the reason for the poor recovery from NPAs is that, themechanism created for this purpose are not effective that’s why banksare not able to derive full benefits from these.Key words: Economic development, Non-Performing Assets, RecoveryMeasures, Lok Adalat, Debt Recovery Tribunal, SARFAESI Act.

INTRODUCTION

Economic development of a countrydepends upon an efficient financial system.

In a developing country like India thecommercial banks plays a major role forthe economic development in the financial

155

system. The primary function of acommercial bank is to channelize thesurplus savings of the people to the deficitsector in the form of credit for their growthand development. The efficiency of a bankis determined by its profitability and thequality of asset it possesses. Before 1991asset quality was not a major worry forthe Indian commercial banks rather theimportance was on widening the bankingnetwork, priority sector lending andemployment generation. After therecommendation of NarasimhamCommittee in 1991, it was found thatIndian banks are burdened with hugeamount of Non-Performing Assets due towhich banks had gone financially weak.When RBI issued prudential norms in theyear 1992-1993, the concept of Non-Performing Assets evolved as a presentday issue. Before implementation of thisnorm an asset is considered as non-performing if the interest or installment orboth is unpaid for a term 180 days ormore, but after prudential norms the periodof 180 days is lessen to 90 days beginningfrom 31st March 2004.

The Reserve Bank of India to acceleratethe NPAs recovery has designed severaldebt recovery channels such as DebtRecovery Tribunals (DRTs), Lok Adalatsand SARFAESI-Act, 2002. Every nowand then the government of India is alsotaking various necessary steps forminimizing the non-performing assets.


Sahni & Seth (2017) made a study on

NPAs in Indian commercial banks andthey opined that for improving financialperformance in the banking sector, theNPAs have to be organized. Governmenthas taken different measures to reduce theNPAs. It is in the part of banks to be carefulwhile giving loans. They must be verymuch careful and also ensure the creditworthiness of various customers.

Banana & Chepuri (2017) in their studystated that the growth rate in advances isdecreasing and growth rate in NPAs isincreasing, which is not desirable to thebank. Sufficient and strict stapes areneeded to be taken before sanctioning ofthe loans and effectiveness must be therein the supervision of disbursed loans.

Singh (2016) stressed on recovery aspectof NPAs in the Indian banking sector.Though different measures have beentaken by government to reduce the NPAlevel, but still there is a needed of strongmeasures. No bank can make its NPAlevel at zero. The internal authority musttake necessary steps to speed up therecovery process.

Garg (2016) in his research paperconcluded that the problem of NPAimpacts profitability, liquidity and resultsin credit loss. Proper remedial measuresare needed to be taken to reduce thequantity of huge NPA.

Dubey & Kumari (2016) in their studyopined that if MCAP of banks is taken asa reflection of stock market performanceof banks then advances and indicator inthe post crisis period of the Indian

Non-performing assets of scheduled commercial Bank in India......


economy remaining equity MCAP ofmarket may be taken as a good enoughand may be used for picking bank stocks.

RESEARCH GAP

Looking at the literatures it is found thata lot of study has been done to find outthe reasons of NPAs in Indian bankingsector, impact of NPAs on banksperformance, measures to control NPAs,NPA management and overall efficiency.But very less number of studies has beenmade on the recovery mechanism ofNPAs in Indian banking sector.Therefore, this gap has been identified andexplored in our study.

PROBLEM STATEMENT

The banking sector plays a key role inthe financial system of a country, as itdirectly contributes to the GDP and bybringing forward the savings andspreading the investments. But aftermanaging all kind of challenges, NPAshas been a biggest challenge for them,and its recovery is one of the hardesttasks for the commercial banks. As theincreasing amount of NPA adverselyaffect not only the banking sector butalso to the Indian economy. Properrecovery of loans can boost theperformance of banks. Therefore, anattempt is made in this paper towardsexamining the effectiveness of NPArecovery measures.

OBJECTIVES OF THE STUDY

v To study the concept of Non-Performing Assets in the banking sector.

v To study the effectiveness of regulatoryframework for recovering debts ofScheduled Commercial Banks.

RESEARCH METHODOLOGY

Sources of data: - Data for this study hasbeen collected from secondary sources.These include data from RBI report trendsand progress of banking in India, variouspublished articles, books, journals andresearch papers.

Study period: - Present study covers 9years, from 2008 to 2016 to compare andanalyze the trends of NPA recovery inScheduled Commercial Banks in India.

Tools and techniques used: - Data areanalyzed and presented by the helpdifferent statistical tools like percentages,tables, graphs, etc.

ANALYSIS ANDINTERPRETATION

Concept of Non-Performing Assets

An asset becomes non-performing whenthe borrower is not able to pay eitherinterest or principal or both for a periodof 90 days. Reserve Bank of India fromyear ended 31st march, 2004, to followglobal practices and high degree oftransparency in a view to move towardsinternational practices and greater degreeof transparency, made it applicable for 90days overdue norm for identifying NPA.

Asset classification

According to the asset classification normsof Reserve Bank of India, following arethe different types of assets of a bank.

157

1) Standard Assets

2) Substandard Assets

3) Doubtful Assets

4) Loss Assets

Standard assets: An asset in which thereis no chance of default and which carryonly normal risk attached to the banks isknown as standard asset. These assetsshould not be considered asnonperforming asset. Provision forstandard asset is made at 0.25% of all typeof standard advances.

Substandard assets: If an asset remainsnon-performing for a term up to 12 monthsthen it would be considered assubstandard assets. Provision is made at10% of all type of standard advances.

Doubtful assets: If an asset remains non-performing for a period more than 12months. Provision in these assets are madedifferently, for a term up to 1 year provisionis made 100% of no secured advancesand 20% of secured advances, for a termmore than 1 year but less than 3 yearsprovision is made 100% of unsecuredadvances and 30% of secured advancesand for term 3 years or more provision ismade 100% of both unsecured andsecured advances.

Loss assets: A loss asset is a type ofasset in which an asset remains non-performing for a term more than 3 years.In this type of asset provision is made100% of unsecured and 100% of securedadvances.

As stated by the Reserve Bank of India,in comparison to other Asian countries andU.S., the level of Gross non-performingassets are more than the Net non-performing assets in India. Historically,Indian banks are poor on credit recovery,because of very little legal provisiongoverning foreclosure and bankruptcy,lengthy legal battles, sticky loans made topublic sector undertakings, loan waiverand priority sector lending.

NPAs RECOVERED THROUGHVARIOUS CHANNELS OF SCBs

NPAs recovered through Lok Adalatsof SCBs

Table-1 shows non-performing assetsrecovery by Indian scheduled commercialbanks by the help of lok adalat during ourstudy period. It is found that, the casereferred has been increased to a greatextent in the year 2015-2016 incomparison to 2007-2008. The trend ofNPA recovery by lok adalat is showingan inconsistent trend from 2007-2008 to2015-2016. Though the amount of NPAsrecovery is in an upward trend, but if wesee the percentage of recovery then thetrend is quit fluctuating. After 2012 thepercentage of amount recovered by LokAdalats shows an inconsistent decliningtrend. It is recovering 3200 Crore out of72000 Crore of amount involved in 2016,i.e. only 4.4%. It is much less than otherrecovery channels. Due to its inefficiencyin recovering, the Schedule CommercialBanks searching for other recoverychannel.



NPAs recovered through DRTs ofSCBs

Table-2 disclosing recovery of Non-Performing Assets by ScheduleCommercial Banks through DebtRecovery Tribunal during our study periodof 2007-08 to 2015-16. It is very clearfrom Table 2 that the referred cases forNPAs recovery to DRTs during the periodof study, has been increasingly improved.It recovers highest percentage of involvedamount in NPAs i.e. 81.1% in 2008-09and then it shows the decline trend inrecovery percentage in the subsequentyears. We can see that the Lok Adalatsrecovers very less percentage of NPAs incomparison to the DRTs. So the ScheduleCommercial Banks has been consideredDRTs is best channel of recovery than LokAdalat.

NPAs recovered through SARFAESIAct 2002 of SCBs

Table-3 showing the data related to thestudy period of 2007-08 to 2015-16. Thistable 3 shows the NPAs recovery bySARFAESI Act 2002 of SCBs. Numberof cases referred under Act was 83,942Crore in the year 2008 and increased upto 1,73,582 Crore in the year 2016. Trendin the number of cases referred increasedyear after year from 2008 to 2016. Theabove table exhibited that amount involvedwas Rs.7,263 Crore in the year 2008 andincreased up to Rs.80100 in the year2016. Data related to amount recoveredhighlighted that Rs.4,429 Crore recoveredin the year 2008 and increasing up to Rs.

13,200 Crore in the year 2016. It is alsoshows increasing trends which is good forthe all the banks.

NPAs of SCBs recovered throughvarious channels

Figure 1 depicted that the NPAs recoverypercentage by Lok Adalat (8.2%) is verynegligible in comparison to the percentageof NPA recovery by DRTs (51.9%) andSARFAESI Act 2002 (61%) in the year2008. In 2016 the percentage of NPArecovered has been decreasing to 4.4%in Lok Adalat, 9.2% in DRTs and 16.5%in SARFAESI Act. We can clearlyconclude that SARFAESI Act recovershighest amount of NPA during the periodof study (i.e. 2008-2016). So it is the mostfavorable NPAs recovery channel.

Findings

§ From our study period of 2008 to 2016Schedule Commercial Banks has beenrecovered Rs.2,535 Crores of NPAsby Lok Adalat.

§ From the year 2008 to 2016 ScheduleCommercial Banks has been recoveredRs.37,831 Crores of NPAs by DebtRecovery Tribunals.

§ From the year 2008 to 2016 ScheduleCommercial Banks has been recoveredRs.1,16,044 Crores of NPAsSARFAESI Act 2002.

§ The basic factors responsible forincreasing NPAs are ineffectiverecovery, willful defaults and defectivelending process.

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Table 1- NPAs recovered through Lok Adalats of SCBs

Year Cases Referred (in No.)

Involved Amount

(in crore)

Recovered Amount

(in crore)

Recovered Amount (%)

2007-08 1,86,535 2,142 176 8.20 2008-09 5,48,308 4,023 96 2.40 2009-10 7,78,833 7,235 112 1.55 2010-11 6,16,018 5,254 151 2.87 2011-12 4,76,073 1,700 200 11.8 2012-13 8,40,691 6,600 400 6.10 2013-14 16,36,957 23,200 1,400 6.20 2014-15 29,58,313 31,000 1,000 3.20 2015-16 44,56,634 72,000 3,200 4.40

Source: Reserve Bank of IndiaTable 2- NPAs recovered through DRTs of SCBs (Amount in Crore)

Year Cases

Referred (in No.)

Involved Amount (in

crore)

Recovered Amount

(in crore)


2007-08 3,728 5,819 3,020 51.90 2008-09 2,004 4,130 3,348 81.10 2009-10 6,019 9,797 3,133 32.00 2010-11 12,872 14,092 3,930 27.89 2011-12 13,365 24,100 4,100 17.00 2012-13 13,408 31,000 4,400 14.10 2013-14 28,258 55,300 5,300 9.50 2014-15 22,004 60,400 4,200 7.00 2015-16 24,537 69,300 6,400 9.20

Source: (RBI) Report in Trends and Progress of Banking in India, RBI.

Recommendations

§ Former credit assessment andobserving system should bereconsidered by RBI.

§ Strong loan recapture methods shouldbe employed by all Indian banks.

§ RBI may take initiative against defaulter

through newspaper, media bypublishing their name, which willultimately supports the financialinstitutions.

§ The recovery mechanisms must bestrengthened so that the recoveryamount can be increased.



Year Cases

Referred (in No.)

Involved Amount (in crore)

Recovered Amount (in crore)


2008 83,942 7,263 4,429 61.00 2009 61,760 12,067 3,982 33.00 2010 78,366 14,249 4,269 30.00 2011 1,18,642 30,604 11,561 37.78 2012 1,40,991 35,300 10,101 28.60 2013 1,90,537 68,100 18,500 27.10 2014 1,94,707 94,602 24,402 25.80 2015 1,75,355 1,56,800 25,600 16.30 2016 1,73,582 80,100 13,200 16.50

Table 3- NPAs recovered through SARFAESI Act 2002 of SCBs (Amount in Crore)

Source: (RBI) Report in Trends and Progress of Banking in India, RBI.

Table 4- Percentage of NPAs Recovery through various channels of ScheduleCommercial Banks (Amount in Percentage)

Source:self-compiled

Channel\Year 2008 2009 2010 2011 2012 2013 2014 2015 2016 % of Amount

Recovered by Lok Adalat

8.2 2.4 1.55 2.87 11.8 6.1 6.2 3.2 4.4

% of Amount Recovered by

DRTs 51.9 81.1 32 27.89 17 14.1 9.5 7 9.2

% of Amount Recovered by

SARFAESI Act 2002

61.0 33.0 30.0 37.78 28.6 27.1 25.8 16.3 16.5

Figure 1-Showing Recovery percentage of NPAs of Schedule Commercial Banksthrough various channels (Amount in Percentage)

Source:self-compiled

161

CONCLUSIONThe major problem in Indian bankingindustry is the increasing level of NPAs.As the interest on funds lent is the majorsource for Indian banking sector. Somoney blocked as NPAs has a significantinfluence on effectiveness of banks. Thestudy reflects that the Indian ScheduleCommercial Banks suffering from highlevel of NPAs. The government has beentaken diverse steps to minimize the NPAslevel but still a lot of efforts are to beexecuted to curb this problem. From ourstudy it is inferred that among differentmechanisms made by the government,SARFAESI Act-2002 is the most effectivereform measure in the Indian bankingindustry for NPA recovery. But if wecompare the amount involved and theamount recovered then the amountrecovered is very negligible in comparisonto amount involved. One of the reasonsfor the poor recovery is that, themechanisms created for this purpose arenot effective, that’s why banks are not ableto derive full benefits from these.

LIMITATIONS OF THE STUDYIn this study we have certain limitations,that are- this study is limited to only lokadalats, debt recovery tribunals andSARFAESI Act. The data for the study isconfined to all scheduled commercialbanks during 2008 to 2016. If more yearsof data were added then more accurateresults could have been obtained. Theanalysis can further be done on the basicof categorization of the banking sector onthe basis of ownership structure.

REFERENCES

Garg, A., (2016, November). “A study onmanagement of non-performing assets incontext of Indian banking system”,International Journal of EngineeringTechnologies and Management Research,volume 3, issue-11, PP.15-25.

Sahni, D. & Seth, D.C., (2017, April).“Non-Performing Assets (NPAS) inIndian Commercial Banks”, InternationalJournal of Engineering Science andComputing, volume-7, issue-4, PP.6243-6247.

Dubbey, D.D. & Kumari, P., “Impact ofNon-Performing Assets on stock marketperformance of listed banks stock in Indiaan empirical assessment of how the twostocks NPA and Shares are related”,IOSR Journal of Economics and Finance,PP.16-22.

Banana, K. & Chepuria, V.R.K.R.,(2017, August) “A study on non-performing assets of Indian commercialbanks”, International Journal of ResearchCulture and Society, volume-1, issue-6,PP. 40-45.

Rajeev, M. & Mahesh, H.P., (2010)“banking sector reforms and NPA: a studyof Indian commercial banks”, The Institutefor Social and Economic Change,Bangalore, Working Paper-252, PP. 1-15.

Singh, V.R., (2016, March) “A study ofnon-performing assets of commercialbanks and its recovery in India”, Annualresearch journal of SCMS, Pune, volume-4, PP. 110-125.



Kalvakuntla, J.R. & Reddy, T.K., (2015,March) “non performing assetimpact onbank equity values- a study”, IndianResearch Journal, volume-ii, series: 3.

Siraj, K.K. & Pillai, P.S., (2012, April)“Management of NPAs in Indian SCBs:Effectiveness of SARFAESI Act, DRT&Lok Adalat during 2004-2011”,

International Journal of Business andManagement Tomorrow, volume-2, issue-4, PP.1-10.

www.rbi.org.in.

www.iba.org.in.

h t t p s : / / d b i e . r b i . o r g . i n / D B I E /dbie.rbi?site=publications

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Notes to Contributors

The journal will include thematic and empirical research papers in the field of BusinessManagement and allied areas, with emphasis on pragmatic orientation.

Before submitting the paper for publication, please ensure that this paper has not beensent for publication or published elsewhere, until you receive a communication from ourside. Once a manuscript is submitted for publication, it will be screened by the editorialboard to check:1.fitness of the paper for publication in the journal, & 2.originality/ plagiarism(through software).

After the preliminary screening it will then be blind-reviewed by two independent national/international reviewers, for the scientific merit, readability and interest. Unacceptedmanuscript will not be returned; however, you will be communicated accordingly.

Accepted authors will be given one hard-copy of the journal and one soft-copy.

The manuscript should be neatly typed in double space on an A-4 sheet with 1 inch spaceon all sides in 12 Times Roman size font. The manuscript should be of maximum up to5500 words, or 20 pages.

The references, as illustrated below, should be in American Psychological Association(APA) format, 5th Edition:

Reference from Journal:Alkaike, H. (1987). Factor analysis and AIC. Psychometrica, 52, 317-332.

Reference from Edited book:Browne, M. W. & Cudeck, R. (1999). Effects of Organizational Climate and CitizenshipBehavior on Organizational Effectiveness. In K.A. Bollen & J.S. Long (Eds.) HumanResource Management (pp. 136-147). Newsbury Park, CA: Sage.

Reference from Book:Luthans, F. (2002). Organisational Behaviour. New Delhi: McGraw-Hill International.Booth, W. C., Colomb, G. G., & Williams, J. M. (1995). The craft of research. Chicago:University of Chicago Press.

Reference from online resources:Hacker, D. (1997). Research and documentation in the electronic age. Boston: BedfordBooks. Retrieved October 6, 1998, from http://www.bedfordbooks.com/index.htmlMorse, S. S. (1995). Factors in the emergence of infectious diseases. Emerging InfectiousDiseases, 1(1). Retrieved October 10, 1998, from http://www.cdc.gov/ncidod/EID/eid.htm

Smith, E. E. (2001). Internet term paper mills: The case for mandatory expulsion[Electronic version]. Journal of Crime and Punishment, 6, 123–139.

Newspaper ArticleGoleman, D. (1991, October 24). Battle of insurers vs. therapists: Cost control pittedagainst proper care. New York Times, pp. D1, D9.

Newspaper Article (Online)Markoff, J. (1996, June 5). Voluntary rules proposed to help insure privacy for Internetusers. New York Times. Retrieved April 1, 1996, from http://www.nytimes.com/library/cyber/week/yo5dat.html

Newspaper Article (No Author)Undisclosed settlement reached out of court in Michigan Biodyne civil suit. (1992, March1). Psychiatric Times, p. 16.

Conference Paper (Published):Kuroda, S. Y. (1988). Whether we agree or not: A comparative syntax of English andJapanese. In W. J. Poser (Ed.), Papers from the second international workshop onJapanese syntax (pp. 103–143). Stanford, CA: CSLI.

Dissertation:Downey, D. B. (1992). Family structure, parental resources, and educational outcomes.Ph.D. dissertation, Department of Sociology, Indiana University, Bloomington, IN.

Checklists to be adhered to:1. Cover Letter with a note on Title of paper, with contributor(s)’ complete address.2. Abstract of 100-120 words, with title of paper (in Separate Sheet/ page)3. Full-text of article (with title of paper, but not with authors name/ affiliation)4. Tables and figures/ graphs should be given in the end.

Manuscript Submission:Please email all manuscripts only in MS-word/ RTF format to: [email protected]

Inquiries for current and back issues:The queries can be addressed to:

Editor, Parikalpana (KIIT Journal of Management),School of Management,KIIT University, Bhubaneswar – 751024ODISHA, IndiaOr, email the soft copies to: [email protected]

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