Professional Documents
Culture Documents
INTRODUCTION
The insurance industry affect the whole economy of a nation, so as to ensure
complete progress of a country, necessary to make insurance as a facility.
Insurance industry has strategic importance for any country because it contributes
to the financial sector as well as confers social benefit to the society. At micro
level, insurance protects the buyer against financial losses arising from a specified
set of risks at some cost. It thus reduces anxiety and promotes financial stability
by providing much needed social security net, especially in times of crumbling
family ties and nuclear households in developing countries. Despite the obvious
advantages of insurance, India was one of the least insured countries in the last
few decades of the 20th century. In 1999 per capita insurance premium in
developed countries was very high, whereas in India it was very low.
It was evident that something fruitful is to be done to tap the untapped potential
for further growth in India. With privatization, traditional public sector businesses
like banking, power, telecom and airlines starts gaining momentum in 1991,
government also realized that opening up of the insurance sector could lead to
Assistant Professor, Faculty of Law, Qila Road, Aligarh Muslim University, Aligarh - UP, India,
Pin-202002, E-mail : roshniroshni11@gmail.com
The government appointed IRDA, a whole sole regulatory body to regulate the
whole insurance business. (Mishra, 2006)
The result is that there seems improvement in business standard of insurance
because most of the private players as per the guidelines of IRDA are taking two
steps; one is appointment of Actuary Enquiry Officer. The Actuary is responsible
for any kind of business transaction, fraud, stability and solvency of insurance
business. The other is appointment of agents who complete 100 hours training
class from any Insurance Training Institute and possess certificate of this training.
After that they must clear the exams conducted by Insurance Institute of India.
(Dhar, 2007)
Privatization increases resource allocation efficiency
In India there is multiplicity of authorities, each one of which with its different rules
and norms, sometimes complicates the decision in relation to investment, instead
of this there is emphasis on strict prudential supervision of investment by
government insurance entities. Naturally, it is obvious that fund managers should
have the freedom within certain parameter to select both the asset allocation
policy and choice of investment. (Plande, 2003)
So IRDA has been established as a parent authority for regulating insurance
companies and to remove the governmental monopolistic barriers among the
insurance players. The insurance players today are expected to invest funds
judiciously with the combined objectives of liquidity, maximization of yield and safety
by confirming the prescribed guidelines on investment for efficient resources
allocation. At last, insurance shifts from monopolistic attitude towards privatization
to improve the operating profitability, investment yield, marketing and actuarial
efficiency ratios of insurers over the past years.
Privatization Bring Changes in Consumer Outlook
The various aspects of economic policy affect growth of insurance market such
as taxation policy of government deeply affect to the insurance sector, particularly
to life insurance and inculcate among the policy-holders the habit of saving. But
high tax on investment returns will discourage the desire to save. In India, there
were complaints that rates of return on life policies are not what they could be.
Therefore, tax incentives played a vital role in determining attractiveness of such
policies. Best consumer favour risk products over purely saving oriented policies.
(Plande, 2003)
Due to this reason the government privatizes the insurance companies and charge
tax only on life insurance policies rather than general insurance policies. The
result is the role of insurance is undergoing a phenomenal change today as is
evident from product bouquet and product advertisements. The emphasis lies on
insuring oneself and ones close family member for more self reliance. To meet
varying needs of various individuals, insurance players have a vast foray of
products in their bouquet. Besides this, almost all companies offer flexibility to
customers to choose most suitable product for themselves by combining features
of a number of products together, thus the product can be customized to suit
customer as per their needs. (Plande, 2003)
Kindler Vol. XV l No. 1 l January-June 2015
11
are also some typical customer requirements of getting something back on survival,
they believes that if they bought an investment plan then they do not have any
need to review their insurance needs frequently. This thing leads the agents to
sell the insurance as saving plan. But the reality is that insurance needs change
as per changes in income, life stages and life style of each individual and these
needs have to be addressed frequently. However, customer treats insurance as
an investment plan which is not revisited leading to phenomenon of underinsurance.
Inadequate Role of Intermediaries
The practice of selling insurance as an investment has perpetuated over a long
period of time and is fed by an agents obvious need to maximize his income.
Under such situation agents educational position having a long-term relationship
with clients which resulting in much more income than maximizing income in the
first sale. With this recognition, agents may recommend right investment and
insurance products which suit individual specific needs at different stages in their
lives. Agents will first have to imbibe this behaviour and then convince their clients
that whatever is being recommended is in their best interest. Building a long term
relationship is a lengthily and cumbersome process but with significant long term
benefit. But under Indian insurance industry instead of proper guidelines regarding
the educational qualification and training programmes, agents are appointed
through fraudulent process. (Jhanaveri, 2005)
Inefficiency of Banc-assurance Alternative Channel
Insurance is not a business of banks. Banks start this business due to the reasons
of shrinking in banking business and by insurance business revenue of bank may
increase. Banks generally have a service oriented culture as against insurance
companies that have an aggressive need based selling attitude. The rubbing-off
of this selling culture on bank definitely helps in its core business but increase
the problems in the actual regulation of insurance. How do banks and insurance
companies have the same business objectives? (Krishnamurthy, 2005)
Inappropriate regulations
The IRDA has done a very good Job of ensuring a smooth transition from a
single player to a competitive one. It plays a major role in ensuring that each and
every Indian citizen is approach with right advise to cover risk to his/her life and
protect their family from adverse financial circumstances. But certain basic principles
such as regulations regarding governing the training, licensing of agent, selling
process, product and price etc. are not yet properly defined through which real
goal of insurance can be achieved.
Expansion of Distribution Costs
Increase in distribution of insurance and its reach to less populated areas increases
costs of insurance. Such costs will have to be estimated and priced into products
and issues relating to cross subsidization may arise. Alternatively, insurers could
introduce new products for these specific market segments and price then to
12
13
towards a free market rating regime with adequate safeguard is yet to be put in
place. This, when it happens, will determine the future structure of general
insurance market in India, and this will happen when public sector does business
in the cooperation with private sector. But in public sector companies, fear of
competition, their remunerability in terms of observing price discipline and conduct
of their field force and support staff are anxieties that cannot be wished away
and public sector is not cooperating with private sector, so there is need of well
directed measures that must be taken.
Removal of Structural Inefficiencies of Public Sector Corporation
Since privatization, new players have set a completely new paradigm of service in
both life and general insurance sectors. All companies have come up with
benchmarks on each aspect of service and also internal measurement of quality.
The best practices aimed at informing customer in a transparent manner have
indeed been brought in. This practice is more evident in life insurance possibly
because of long term nature of business. But Indian insurers in public sector
respond slowly due to their structural inefficiencies with pervasive attitude. So to
compete with private sectors, the need on the part of public sectors first improve
their attitude and to maintain the transparency in claim handling by set up a
separate claim handling office of few managers which provide the required service
to the customers with check and balance on their internal quality measurement.
Promote Professionalism among Intermediaries
Some of the significant requirements introduced by IRDA are to promote
professionalism among intermediaries related to minimum qualifications, mandatory
training and passing an examination before a license to be issued to an agent or
a broker. But there is no evidence to show that agents in the new paradigm show
higher level of professionalism. The uglier aspects of competition can be seen in
the training, examination, and consequently in performance of agents. Drop-out
rates are still very high and productivity is quite low. Intermediaries such as agents
and brokers from all parts of the country will help to play a significant role if
insurance is to be spread to all segments and regions of India. The present
trend does not seem to show significant improvement in the quality of the
distribution force to achieve higher penetration. Insurance agency is not yet seen
as a viable career in terms of income security and social acceptance. Structure
of remuneration, limits imposed by law, flexibility of ownership and transferability
of agency are some of the legal rigidities that stifle development of professionalism
among intermediaries.
Insurance industry has licensed brokers in market and expands their role; increase
importance of banc- assurance, introduce corporate agency as a distribution arm
which are significant development in insurance industry. So many corrective
measures are being introduced as reaction to lack of compliance. But further it is
needed that insurance industry should observe rules and regulations and avoid
a situation where regulator is obliged to introduce on the spot or ad-hoc directions
instead of looking for systemic solutions that have a better chance of success in
strengthening market.
14
Bhat Ramesh (2005), Insurance Industry in India: Structure, Performance, and Future
Challenges, Vikalpa (Journal of IIM Ahmadabad), 30 (3)
2.
Bakshi Sandeep (2005), Integrated Approach: Key to Growth and Development, Vikalpa
(Journal of IIM Ahmadabad), 30 (3)
3.
Dhar Runa,
Rastogi Shilpa
15
Indian Life Insurance Industry, Paper Presented in Conference organized by IIT Kanpur,
on Global Competition and Competitiveness of Indian Corporate
4.
Ghosh Jayanti (2002), The Stranger Behaviour of the Insurance Business in India, Policy
Watch, Macro-scan, Economic Research Foundation, New Delhi
5.
Jhanaveri Nani (2005), Are Indian Families Adequately Insured, Vikalpa (Journal of IIM
Ahmadabad), 30 (3)
6.
7.
Mishra, M.N. (2006), Insurance Principles and Practice, S. Chand and Comp., New Delhi
8.
9.
Sinha Tapen (2002), Privatization of Insurance Market in India: From British Raj to
Monopoly to Swaraj, Centre for Risk and Studies, Paper Discussion Series, University of
Nottingham
10. Sony, M. V. (2005), New Initiatives in the Insurance Sector: Opportunities and Challenges.
Vikalpa (Journal of IIM Ahmadabad), 30(3)
11. Surendra, Lesson from Insurance Sector (2002), Frontline, Colum Section, 19 (1)
12. The Hindu, 22th December2008
13. The Hindu, 26th December2008
14. William, L., Megginson (1998), Impact of Privatization Economic Reform Today, 11(1), Centre
for International Private Enterprises, Washington DC
Websites
1.
2.
3.
4.
5.
6.
16
ABSTRACT
In the open economy structure, the life insurance industry has witnessed a radical change
with the influx of private life insurance players. The challenges in selling services are in the
marketers ability to convince customers about a product that cannot be touched, felt or seen.
Hence, success in selling insurance is driven more by establishing trust and empathy in the
relationship rather than on the product features. Past research suggest that personality traits
of the sellers of insurance are aligned with the job characteristics to ensure person-job-fit and
thus influence higher levels of performance (Osipow, 1990). Through an empirical study of
200 life insurance advisors from the public and private sector, in Kolkata, the researchers
seek to identify the impact of personality on their performance. This study may have far-reaching
implications on the managerial decision in recruiting and selecting life advisors. The front-line
salespeople are one of the most significant pillars of an organization because they bring in
direct revenue to the organization. The research work may provide guidelines in future for the
HR professionals in the recruitment and selection and performance management of the sales
personnel.
Key Words : Personality, Performance, Life Insurance, Service sector
INTRODUCTION
Previously, researchers considered cognitive ability as the only predictor of job
performance. People high on intelligence quotient were considered to be smarter
and more likely to succeed in the job. But then, with research, it was understood
that intelligence is one aspect of job performance. The other aspect is creativity,
leadership, integrity, cooperation at the workplace which plays major roles in
person-job fit and person-organization fit. Thus it impacts productivity as well.
This led the researchers to identify the trends in business organizations wherein
it was found that presently, in every job, a lot of attention is given today to
individual personality traits to predict job performance (Dosajh & Gandhi, 2008).
The present structure of Indian economy shows a significant contribution of the
service industry. The uniqueness of the service sector is in the focus it lays on
the human element of an organization. Thus it has set a new trend in the way
researchers look at performance or productivity of an organization. Psychologists
*
**
17
are trying to look at the various human factors that may drive and or sustain an
organization, specifically in the service sector. Performance being a dependent
variable, researchers have explored and identified many independent variables
which have an impact on performance. Of this, personality has been found to be
the key determining factors governing employee performance. In this given
background, this study explores the relationship between personality and
performance of the life insurance advisors of the Kolkata region especially because
insurance is one of the oldest and still growing parts of Indian service sector. The
front-line salespeople face the competition on the field and those few who have
the ability to withstand this pressure and rebound are the ones who can retain
their position in the business and eventually learn and grow.
REVIEW OF LITERATURE
The process by which organizations align their resources, systems and employees
to strategic objectives and priorities is known as performance management. It
also helps to overcome the barriers to performing the job tasks. It also helps to
clearly identify the kind of assistance the incumbent expects from the supervisor
to contribute to overcome the difficulties of goal achievement and contribute to
the organization. Consequently, performance management at the individual level
is essential and every business is keen to build a robust performance management
system to develop performance to meet the organizational goals and add value
to the system. Hence, competency-based performance management is becoming
the choice of the industry rather than the traditional performance appraisal process.
Competency-based performance management evaluates the capabilities and
knowledge of an individual employee which can significantly improve organizational
productivity than just evaluating the existing skill-sets. The present research
focuses on frontline sales people, so the study further proceeds to understand
the individual factors which may play a determining role in enhancing the
performance of frontline sales executives. Since decades, researchers have been
intrigued to determine the variables that affect sales performance (Churchill et al.
1985). An in-depth study in this field led the researchers to identify personality as
one of the significant behavioural competencies required to succeed in various
jobs for this study. Kerr and Jermier (1978) identified personality as an important
source for predicting success in jobs. Plotkin (1987) stated that the best
salespeople are not talkative but they enjoy and want to be with people. Personality
is found to be a determining factor governing employee performance. Personality
plays a significant role especially for executives in the service sector where the
job demands that they have to be sensitive to understand the needs of the
customer as they have to deal with the intangible products. According to Schneider
(1987), the people make the place. Personality holds utility as a predictor of job
performance, specifically the conscientiousness dimension (Behling, 1998).
Motowidlo and Van Scotter (1994) and Van Scotter and Motowidlo (1996) explained
that personality specifically, extraversion and agreeableness were strongly related
to interpersonal skills. Hurtz and Donovan (2000) found that emotional stability
and agreeableness were also significant predictors of interpersonal abilities. Barrick
and Mount (2005) conclude, Research, based on a construct-oriented approach
18
primarily using the Big Five traits, has consistently shown that personality predicts
job performance across a wide variety of outcomes (Judge & Erez, 2007).
Personality is defined as the way a person thinks, feels and behaves and that
makes a person unique. Personality strongly influences the behaviors and actions
of individuals i.e. the way a person responds to situations. Past research suggests
that, earlier to the liberalisation period, personality was not viewed as a predictor
of job performance (Ghiselli, 1973; Guion & Gottier, 1965; Locke & Huh, 1962;
Reilly & Chao, 1982; Schmitt, Gooding, Noe, & Kirsch, 1984). Earlier classification
of personality traits was not available. Consequently, researchers had difficulty to
determine the relationships between the personality constructs and performance
criteria in different occupations. Then the researchers came up with the five robust
factors of personality (Digman, 1990). The initiation of the 5-Factor Model of
personality McDougall (1932) wrote that, Personality may to advantage be broadly
analyzed into five distinguishable but separate factors, namely intellect, character,
temperament, disposition, and temper... Then Cattell (1943, 1946, 1947, and
1948) developed a personality model consisting of 16 factors. A significant study
by Norman (1963) suggested the following labels of personality viz. Extraversion,
Emotional Stability, Agreeableness, Conscientiousness and Culture. These have
been referred in the past research work as Normans Big Five or as the Big
Five. Following this, literature provides a powerful evidence for the 5-factor model
(Goldberg, 1981). This study utilizes Barrick and Mounts (1991) Big Five factors
of personality as the theoretical bases for the constructs of personality. Barrick
and Mounts (1991) Big Five factors represent a widely accepted approach to
conceptualizing personality. The Big Five factors consist of an individuals openness
to experience (proactive seeking, toleration for and exploration of the unfamiliar),
conscientiousness (thorough approach, hard-working, organized), extraversion or
sociability (the need for stimulation, desire for activity levels with interpersonal
interaction), agreeableness (cooperative nature, likeability),and emotional stability
or adjustment (calm and secure, low in anxiety). Thus a large body of literature in
the domain of performance management is available. Empirical studies on the
influence of personality on performance in different sectors have contributed to
the rich body of work.
But a gap in the available literature is noted, which is the study of personality in
the performance of life insurance advisors in India. This area attracted the attention
of the researchers because with liberalization, privatization and globalization,
amongst all the industries in the service sector, the insurance industry has
undergone a sea-change. This substantial change in the life insurance industry
was initiated by the people of the industry and it continued favourably. In this new
era of open market, innovative skill sets are required to bear the pressure of
competition, to understand customers better and solve problems rather than just
to sell products (Cron & DeCarlo,2009; Hodge & Schachter, 2006). Given this
background, the present study explores the relationship between personality and
performance of life insurance advisors, one of the oldest and continuously growing
service sectors in India. Since, 1972-73 till 2009-10 services has shown a steady
increase in its share employment from 14.8 per cent to 26.7 per cent (Economic
Survey, 2010-11, published by GOI).
Kindler Vol. XV l No. 1 l January-June 2015
19
OBJECTIVES
The behaviours and actions of an individual are strongly influenced by individual
traits and characteristics which actually regulate how a person responds to a
situation. This channelized the researchers attempt to explore and establish the
relevance of studying the relationship of personality and employee performance.
Hence, this research work has been able to bridge this gap in the literature and
act as a guiding factor for identifying and analyzing the critical personality factors
of performance in a life insurance advisor.
In the given Indian insurance sector and its opening up, the study would also
deals with a comparative discussion between the public and private sectors
insurance advisors.
METHODOLOGY & SCOPE
In order to operationalise the research issue, which is to study the impact of
personality on the performance of life insurance advisors, primary data was gathered
through a questionnaire-based survey method.
Research Design
This study has been systematically designed to address the research issue. A
questionnaire based survey has been undertaken to collect data from the
respondents. Around 350 life insurance advisors, of the public and private sector,
were approached, of which the analysis for the present study has been carried
out based on 200 complete responses. Of these 109 responses are from the
employees of Life Insurance Corporation of India and 91 are from selected private
life insurance companies. The Big Five Model questionnaires have been
administered to collect data. The data collected have been analyzed using
standardized statistical techniques with the help of statistical software.
The Big Five Model of personality questionnaire has been adapted from Managing
Self Assessing the Big Five: The Big Five Locator Questionnaire (Hellriegel,
Slocum and Woodman, South-Western, 2001). The Big Five personality traits are
the best accepted and most commonly used model of personality in academic
psychology. The questionnaire deals with five variables of personality e.g.
Adjustment, Sociability, Openness, Agreeableness and Conscientiousness. Each
variable is measured by five pairs of terms ranging on a numerical scale from 1
5. The summation of the score of each of the five pairs of terms is converted to
a Big Five Locator Score Conversion Sheet to get the Norm score of each of the
variables of personality followed by an interpretation of the scores through the
Big Five Locator Interpretation Sheet.
Sample Selection
The sample of 200 advisors has been studied, spread across 17 branches in
and around Kolkata. Out of them, 109 were from LICI and 91 respondents were
from the private insurers. There are total 43 females (21 LICI & 22 private) and
157 males (88 LICI & 69 private) in the sample. The detailed sample design is as
follows (Table 1):
20
Approximate
number
of life insurance
advisors (West
Bengal)
Proportion of
advisors from
each company to
total number of
advisors
Sample
1,18,062
109.39*
109
ICICI Prudential
16326
15.19**
15
HDFC Life
14200
13.21
13
SBI Life
3312
3.08
Reliance Life
10827
10.07
10
12538
11.66
12
13237
12.31
12
Max Life
2073
1.92
Kotak Life
1177
1.09
Aviva Life
1777
1.65
22317
20.76
21
97,784
91
2,15,846
200
B. Private Sector
Sample Profile
The life insurance sector has a different way of judging an advisors performance.
The varying parameters of performance are, total business target to be achieved
for a particular financial year in terms of total sum assured of the new policies,
total first-premium income, total number of lives insured, total number of lives inforce and the total amount of commission earned in a given period of time. In
order to set standardized levels of the performance achieved by the insurance
advisors, this research has presented five levels of performance specifically
designed to cater to both public and private sector with the total business target
to be achieved in terms of the total sum assured as a reference point. The 5
different levels of performance identified are namely, Level 1 (Needs Improvement),
Level 2 (Fair), Level 3 (Good), Level 4 (Very Good) and Level 5 (Excellent),
Kindler Vol. XV l No. 1 l January-June 2015
21
wherein Level 1 is at the bottom of the performance order and Level 5 indicates
the best performers. These levels have been designed based on the given business
targets, for a particular financial year. According to the primary survey conducted,
the present sample has been segregated as per the following performance levels
(Table 2).
Table 2 : Distribution of respondents as per the performance levels
Performance Levels
Sample Size
Public
Private
Sector
Sector
Business Target 1
(INR in lakhs)
(in a year)
43
< 1
Fair (Level 2)
29
37
>= 1 < 3
Good (Level 3)
17
34
>= 3 < 7
15
13
>= 7 < 12
Excellent (Level 5)
>= 12
109
91
Demographic Variables
The demographic variables chosen for the study, which have been captured
through the survey, are age, gender, qualification, tenure of service and tenure
in the current position.
FINDINGS & ANALYSIS
Relationship between the demographic variables and performance
A Chi-square test is applied on the sample to quantitatively measure and determine
whether any significant association exists between two categorical variables.
Following the chi square test on the overall sample of 200 life insurance advisors,
it was inferred that amongst the five demographic variables, as captured through
the survey, only two, that is, gender and tenure of service have been found to be
associated with performance (Table3).
Table 3 : Relationship between Gender and Tenure of Service and Performance
Sample Demographic
Variables
Gender
Tenure of Service
Pearson
Chi-Square
11.348
36.258
Significance
0.023
0.000
22
further to test the association of the personality variables with that of performance.
Relationship between Personality variables and Performance
As stated earlier, The Big Five Model of personality questionnaire has been
adapted from Managing Self Assessing the Big Five: The Big Five Locator
Questionnaire (Hellriegel, Slocum and Woodman, South-Western, 2001). The
questionnaire deals with five variables of personality e.g. Adjustment, Sociability,
Openness, Agreeableness and Conscientiousness. The instrument shows a
reliability measure with a Cronbach alpha value of 0.734. A sampling adequacy
test was also done which gave a KMO value of 0.719. The study revealed that
only Agreeableness has an association with performance (Table 4). Agreeableness
refers to an individuals behavior towards others while interacting with them. The
behavior may range from warm, cooperative and close (high agreeableness) to
cold, distant and antagonistic (low agreeableness).
Table 4 : Relationship between Personality variables and Performance
Sample Personality
Construct
Pearson Chi-Square
Significance
Adjustment
14.664
0.549
Sociability
22.457
0.129
Openness
15.264
0.505
Conscientiousness
25.239
0.066
Agreeableness
34.123
0.005
23
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26
INTRODUCTION
The Government of India, in a bid to popularize the Make in India initiative to the
global level, is showcasing India as a business friendly destination to attract foreign
businesses to invest and manufacture in the country. One of the major reasons
highlighted is availability of cheap labour. In most of the manufacturing units in
India, labour can be categorized broadly into permanent and contractual irrespective of their being skilled, semi-skilled or unskilled. By definition, a workman
is deemed to be employed as contract labour in or in connection with the work
of an establishment when he is hired in or in connection with such work by or
through a contractor, with or without the knowledge of the principal employer.
(Contract Labour (Regulation & Abolition) Act, 1970). Principal Employer means:
(a)
In a factory the owner or occupier of the factory and includes the managing
agent of such owner or occupier, the legal representative of a deceased
owner or occupier and where a person been named as the Manager of the
Factory under the Factories Act 1948 (63 of 1948), the person so named;
(b) In any establishment under the control of any department of any Government
in India, the authority appointed by such Government in this behalf or where
no authority is appointed, the Head of the Department;
*
**
27
(c)
In any other establishment, any person responsible for the supervision and
control of the establishment. [Source: Contract Labour (Regulation &
Abolition) Act, 1970]
Contract workmen are indirect employees. They differ from direct labour in terms
of employment relationship with the establishment and method of wage payment.
Contract labour, by and large, is not borne on pay roll nor is paid directly. Contract
workmen are hired, supervised and remunerated by the contractor, who, in turn,
is remunerated by the establishment hiring the services of the contractor.
This employment of contract workers has led to increased wage inequality and
job insecurity in the labour market. The number of contract labourers engaged
by licensed contractors was 14 lakh in central departments and PSUs and 46
lakh at the state level as on March 2009. (VV Giri National Labour Institute).
West Bengal also employs a lot of contract workers in its manufacturing units.
Contract workers, who receive worse pay than those in permanent roles, comprised
30% of the work force in West Bengals factories in 2011-12, compared with only
5% in 1995.
The Government of India promulgated the Contract Labour (Regulation & Abolition)
Act, 1970 with the objective of preventing the exploitation of the Contract workers
and to introduce better conditions of work.
REVIEW OF LITERATURE
The Contract Labour (Regulation & Abolition) Act, 1970 applies to every
establishment in which twenty or more workmen are employed or were employed
on any day of the preceding twelve months as contract labour and to every
contractor who employs or who employed on any day of the preceding twelve
months twenty or more workmen. The appropriate Government is further
empowered to extend the provisions of the Act to every establishment or contractor
employing such number of workmen being less than twenty to be specified in the
notification.
The Act does not apply to establishments where the work performed is of
intermitten or casual nature. The Act applies to establishments of the Government
and local authorities as well.
The Central Government and the State Government are required to set up Central
Advisory Board and State Advisory Boards which are authorised to constitute
committees as deemed proper. The functions of the Boards would be advisory on
matters arising out of the administration of the Act as may be referred to them.
The Boards are also to carry out the functions assigned to them under the Act.
Every establishment covered under the Act will have to be registered by the
principal employer. In case of non-registration of an establishment, which should
have been registered, the employment of contract labour is prohibited and in
case of breach have to face penal consequences. Likewise, every contractor to
whom the Act applies shall obtain a licence and shall not undertake or execute
any work through contract labour except under and in accordance with the licence
issued.
28
The Act authorises the appropriate Government to make rules for the establishment
of canteens. For the welfare and health of contract labour, provision is to be
made for rest-rooms, first-aid, wholesome drinking water, latrines and urinals. In
case of failure on the part of the contractor to provide the said facilities, the
principal employer is made liable to provide the amenities.
The contractor is required to pay wages and a duty is cast on him to ensure the
disbursement of wages in the presence of the authorised representative of the
principal employer. In case of failure on the part of the contractor to pay wages
either in part or in full, the principal employer is liable to pay the same. The
principal employer is authorised to recover the amount either by deductions from
the amount due to the contractor or as debt payable by the contractor.
The Act makes provision for the appointment of an inspecting staff, for maintenance
of registers and records, for penalties for the contravention of provisions of the
Act and rules thereunder, and for making rules for carrying out the purpose of
the Act.
Apart from the regulatory measures provided under the Act for the benefit of the
contract labour, the appropriate government is authorised, after consultation with
the Central Board or State Board, as the case may be, to prohibit, by notification
in the Official Gazette, employment of contract labour in any establishment.
In order to carry out the purposes of the Act, rules have to be framed both by
the Central and the State Governments. If any government fails to frame rules,
the provisions of the Act would be ineffective.
OBJECTIVES
To identify and analyse if the manufacturing industry in West Bengal is facing
any problems in utilising the skills of Contract Labour, from the point of view of:
(a)
(b)
(c)
SCOPE OF STUDY
The study covers a limited industrial zone in the state of West Bengal. Industrial
areas, viz. in & around Kolkata, were selected for this study. Some Government
establishments have been included in this study because there is a good proportion
of contract labour in such Government establishments. Thus this survey is restricted
to workers appointed as contract workers and on whom the said Act is applicable.
The scope includes:
(a)
(b)
Committees like
(i) Cement Manufacturing Industry, Cement Related Mines & NTPC 2000
- 2001 ordered by Labour Bureau, Ministry of Labour & Employment,
Govt of India.
29
this study. The other constituents were also interviewed like Contractors supplying
labour, Industrialists or owners of the businesses, Officer in charge of
administration and welfare in business, Labour advisors/consultants, Trade Union
officials and Association of employers. In addition, the officials of the Labour
Commissioner who are entrusted with the task of implementation of the Act were
also contacted. Discussions were held with the Assistant Commissioners,
Government Labour Officers and the Inspectors working under them. It was also
necessary to obtain authentic information in this context from the Government
authorities. Offices of the Assistant Labour Commissioners were visited a number
of times and efforts were made to obtain the necessary information. Unfortunately,
no response could be collected from them.
The contract workers were contacted at the following places:
(a) Their actual places of work.
(b) In or out of the premises of work, but at the time of their lunch break
or after their work hours were over.
(c) Offices of the Trade Unions.
(d) Offices of the Assistant Labour Commissioners.
(e) Their residences.
The major limitation of the study was contacting these labourers and eliciting
information from them was the most difficult task of this study. These labourers
were afraid that if they provide the information asked for, they may lose their
jobs. They were afraid of the intimidation by the contractors. Hence, they were
required to be contacted in a number of ways.
In this entire study, secondary sources of data through library research were also
equally important. The literature available in respect of the Act was carefully gone
through. Similarly, the reports of the discussions in the Lok Sabha in this regard,
were also studied. This study being related to the state of West Bengal, Labour
Policy of the state was also studied. Efforts were also made to collect information
about the case studies related to this subject. For this purpose, the offices of the
Trade Unions as well as the Assistant Labour Commissioners and other such
authorities were contacted. No case information could be collected for the detailed
study. Information about the movements organised by various Trade Unions in
this context of laws concerning contract labour, the resolutions passed, efforts
made for the regulations and various cases raised by them has also been collected
for this study. This is because the role of the Trade Unions was very important
for the successful implementation of the Act and as such it was obligatory to take
a note of the same for this study. It was also absolutely essential to obtain the
details of the decisions of the various courts in this regard. Effort was made for
carrying out comparative study of the main judicial decisions in this matter during
this survey.
FINDINGS
The broad findings of the study are as follows:(a) Contract Labour can be employed as Unskilled, Semi skilled and Highly skilled labourer.
Kindler Vol. XV l No. 1 l January-June 2015
31
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(j)
ANALYSIS
The extent of reliance on Contract Labour
In manufacturing industries in West Bengal, on an average the ratio of Permanent
Employees to Contract Labour is 38 : 62. The cost of maintaining Contract Labour
is much cheaper than what is being paid to the Permanent Employees. In case of
permanent employees, the Cost to Company is about Rs 35,000/-, that is four
times more than what is being paid to Contract Labour.
The table below gives an idea about the difference in wage structure between
permanent and contract employees.
The table makes it very clear as to why companies have a tendency to rely more
on contract workers than permanent workers.
Table1 : Wage & Allowances of Permanent and Contract Labour
Allowances Applicable
to Permanent Employees
Basic Pay
32
: 9400.00
Allowances Applicable to
Contract Labour
Daily Wages
(i) Unskilled @ 353/-pd x 26 days :
Rs. 9178.00
(ii) Semiskilled @ 390/-pd x 26 days :
Rs. 10140.00
(iii) Skilled @ 430/-pd x 26 days :
Rs. 11180.00
(iv) Highly Skilled @ 467/-pd x 26 days:
Rs 12142.00
Kindler Vol. XV l No. 1 l January-June 2015
Allowances Applicable
to Permanent Employees
DA
: 3158.00
HRA
: 2700.00
Fringe Benefit
: 1076.00
Medical Allces
: 980.00
OT
Leave Encashment
Gratuity
PF
Pension
Free Canteen Food
Shift Allowances
Double Pay on working on a holiday
No hire & fire but proper disciplinary
procedure
Allowances Applicable to
Contract Labour
Leave with Wages - One day leave after
20 days of week.
OT On very rare occasions
33
(h)
(h)
there are any shortcomings in it that is resulting in such problems which in turn is
deteriorating the work environment.
Shortcomings in the Contract Labour Regulation & Abolition Act
The Act was enacted in the year 1970 with a view to regulate the contract labour
and to provide for its abolition in certain circumstances. Generally, it is considered
that the practice of engaging contract labour is pernicious, beset with exploiting
tendencies and resulted in unwholesome labour practices coming in the way of
proper working conditions. However, it is not possible to eliminate engaging of
contract labour altogether, in that there are several fields of employment where it
is not possible to have a continuous employment. The process, operation or other
work incidental to or necessary for the industry, trade or occupation may be of
such a nature that a permanent work force would not be practicable and necessary.
In such a situation, it is inevitable for the employer to engage contract labour for
a short period or during the intermittent periods of work. The Act provides for the
continuation of contract, labour wherever it becomes necessary and where it is
not possible to have permanent labour force. If engaging contract labour is
inevitable, as a necessary consequence thereof, their working conditions will have
to be properly regulated. These are provided for in the Act. Thus, the Act has
two main aspects:
(a) To prohibit the employment of contract labour; and
(b) To regulate the working conditions of the contract labour wherever such
employment is not prohibited.
CONCLUSION
The increased use of contract labour has adverse consequences both for the
workers and for the industries that they work in. It is also important to note that
the effects and problems associated with contract labour affect all countries. This
is not simply a problem for either developing or developed countries, nor is it
linked to any particular political or economic philosophy, neither to any one industry
or trade. Contract labour is a global issue.
Contract labour often arises in situations where an enterprise hires workers for
the normal work of its business through another person or intermediary. This
does not include situations where a worker is hired through a recruitment agency.
The enterprise will have the supervision and control of the workers but the
intermediary will pay the workers or retain some degree of control over them.
This form of labour sub-contracting is very common in the building and construction
industries. In many countries these labour suppliers or intermediaries have a
special name and a recognised place in the labour market. Labour sub-contracting
can be very informal, such as the case where a bus or van picks up people
looking for work and delivers them to a site for a days work; or it can be more
formal such as where a builder has a team of labourers for whom he/she regularly
finds general work on local sites.
Traditional or normal employment relationships are based on a contract of
employment under which the worker agrees to perform certain work for the
Kindler Vol. XV l No. 1 l January-June 2015
35
employer. The employer undertakes to provide the material and resources, with
which the worker performs the work, and to pay for the work. Typically, the worker
provides nothing more than the skills or qualifications with which the task is
performed. This relationship is characterised by economic and organisational
dependency and is commonly seen as a master-servant or employer-employee
relationship.
REFERENCES
1.
2.
http://pblabour.gov.in/pdf/acts_rules/contract_labour_regulation_and_abolition_act_1970.pdf/
last accessed on 19.08.2015
3.
4.
5.
36
INTRODUCTION
The Micro, Small & Medium Enterprise [MSME] sector is a very important driving
force of the Indian economy. This sector, besides acting as a catalyst in bringing
about balanced industrialization of the nation, possesses some immensely
beneficial aspects like high employment generation capacity, significant contribution
to the GDP and foreign exchange earnings. Moreover MSME units cater to those
markets which remains inaccessible to or ignored by large industries. However,
these units suffer from certain inherent weaknesses which render them vulnerable
to external adversities. Studies have been done by researchers and scholars who
have identified certain generic weaknesses which render the MSME units prone
to business failure. However the risk profile of the MSME units are likely to be
dynamic in nature as the business environment and the attributes of the
entrepreneurs change over time. This study is to probe into the risk profile of
MSME units in and around the city of Patna and to see whether there has been
any shift in the risk profile from what had been found out by the earlier studies in
this context.
*
**
37
LITERATURE SURVEY
Constituents of MSME sector in India
The coverage of the MSME (Micro, Small & Medium Enterprises) Sector in India
has been defined by The Micro, Small & Medium Enterprises Development (MSMED)
Act, 2006 which became operational from October2, 2006. The Act identifies Micro,
Small & Medium Enterprises on the basis of level of investments in plant &
machinery for manufacturing enterprises and of investments in equipments for
service enterprises.
The nomenclature and classification of MSME units on such basis are as follows:
Types of Enterprises
Classification of
enterprises
Manufacturing Enterprises
[Ceiling of investment in
Plant & Machinery]
Service Enterprises
[Ceiling of investment
in Equipments]
Micro
Rs.25 lakh
Rs.10 lakh
Small
Rs. 5 crore
Rs. 2 crore
Rs. 10 crore
Rs. 5 crore
Medium
(Source : http://www.and.nic.in/C_charter/indust/MSMED_classification.pdf)
1992-93
1993-94
1994-95
1995-96
1996-97
38
Production at
Current Prices
[Rs. Crore]
Exports
Production
Employment
[Lakh Persons] [Rs. Crore]
at Constant
Prices (1993-94)
[Rs. Crore]
84413
92246
174.84
17784
(4.71)
(5.60)
(5.33)
(28.10)
98796
98796
182.64
25307
(17.04)
(7.10)
(4.46)
(42.30)
122154
108774
191.40
29068
(23.64)
(10.10)
(4.79)
(14.86)
147712
121175
197.93
36470
(20.92)
(11.40)
(3.42)
(25.46)
167805
134892
205.86
39248
(13.60)
(11.32)
(4.00)
(7.62)
Year
1997-98
1998-99
1999-00
2000-01
2001-02
Production at
Current Prices
[Rs. Crore]
Exports
Employment
Production
at Constant
[Lakh Persons] [Rs. Crore]
Prices (1993-94)
[Rs. Crore]
187217
146262.90
213.16
444.42
(11.57)
(8.43)
(3.55)
(13.23)
210454
157525.10
220.55
48979
(12.41)
(7.70)
(3.46)
(10.21)
233760
170379.20
229.10
54200
(11.07)
(8.16)
(3.88)
(10.66)
261297
184401.40
238.73
69797
(11.78)
(8.23)
(4.21)
(28.78)
282270
195613
249.33
71244
(8.03)
(6.06)
(4.44)
(2.07)
At 2001 02 prices
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
314850
306771
260.21
86013
(11.54)
(8.68)
(4.36)
(20.73)
364547
336344
271.42
97644
(15.78)
(9.64)
(4.31)
(13.52)
429796
372938
282.57
124417
(17.90)
(10.88)
(4.11)
(27.42)
497842
418884
294.91
150242
(5.27)
(15.83)
(12.32)
(4.37)
709398
NA
594.61
182538
(166.20)
NA
(42.49)
(101.62)
790759
NA
626.34
202017
(11.47)
NA
(5.34)
(10.67)
880805
NA
659.35
NA
(11.39)
NA
(5.35)
NA
The figures in brackets show the % growth over the previous year. The data for the period up
to 2005-06 is only for small-scale industries (SSI).
(Source : MSME Annual Report 2009-10 Ministry of Micro, Small & Medium Enterprises,
Government of India. pp 13-14)
It may be mentioned that data with respect to MSMEs have been collected/compiled
for the first time in 2006-07 and hence include both the industry and service sectors.
Kindler Vol. XV l No. 1 l January-June 2015
39
As per the 4th Census with reference year 2006-07, there were about 261 lakh
enterprises providing employment to about 595 lakh persons. The projected
corresponding figure for the year 2008-09 was 285 lakh enterprises generating
employment for about 659 lakh persons. The data clearly indicates an improvement
in employment elasticity in the MSME sector. This fact has been corroborated by
a study on the Indian MSME sector by Shambhu Ghatak.
The MSME sector has maintained a higher rate of growth than the overall industrial
sector as would be clear from the comparative data on growth rates of production
for both the sectors during the period of six years from 2002-03 to 2007-08. The
details are given in Table 2.
Table 2 : Comparative Data on Growth Rates of MSME Sector
Year
Growth Rate of
MSME Sector
Growth rate of
Overall Industrial Sector
2002-03
8.68%
5.70%
2003-04
9.64%
6.90%
2004-05
10.88%
8.40%
2005-06
12.32%
8.10%
2006-07
12.60%
11.50%
2007-08
13.00%
8.00%
(Source : MSME Annual Report 2009-10 Ministry of Micro, Small & Medium Enterprises,
Government of India. pp 15)
The contribution of MSMEs in the GDP has increased from 5.86% in 1999-2000
to 8% in 2007-2008 at 1999-2000 prices. Its contribution to total industrial
production has also increased from 39.74% in 1999-2000 to 45% in 2007-2008
at 1999-2000 prices as is evident from Table 3.
Table 3 : Contribution of MSMEs in GDP and Total Industrial Production
Year
1999-2000
2000-2001
2001-2002
2002-2003
2003-2004
2004-2005
2005-2006
2006-2007**
2007-2008**
Gross Domestic
Production
5.86
6.04
5.77
5.91
5.79
5.84
5.83
7.44
8.00
(Source : MSME Annual Report 2009-10 Ministry of Micro, Small & Medium Enterprises,
Government of India. pp 16)
40
MSME units play a vital role in reducing income inequality in a nation and India is
no exception. Over 90% of the MSME units in India being proprietorship concerns
(2009-10), it is imperative that such units are vital vehicles for self employment
and there is distinct and strong correlation between self-employment and equality
of income. In states, where self-employment is high, inequality is low. So selfemployment and entrepreneurship should be highly promoted in a country like
India (Debroy & Bhandari, 2007). MSMEs provide a natural habitat for
entrepreneurs. Through this platform, the latent/ raw talent available locally can
hone their skills and talents, to experiments, to innovate and transform their ideas
into goods and services needed by the society.
Dispersion of MSMEs in all parts of the country can help in removing regional
imbalances by promoting decentralized development of industries.
Challenges facing the MSME sector in India causing sickness / business failures
The MSME sector, in spite of its prominence in the Indian economy, suffers from
a number of weaknesses. Considering three yardsticks to measure sickness in
the MSME sector in India, i.e. [a] delay in repayment of loan over one year, [b]
decline in networth by 50% and [c] decline in output in last three years, about
14.47% of the registered MSME units were identified to be either sick on insipient
sick15. The reasons for such sickness are contained in Table 4.
Table 4 : Reasons for sickness / incipient sickness in registered MSME
units in India
Reasons for sickness
/ incipient sickness
Lack of demand
Shortage of Working Capital
Non-availability of raw materials
Power shortage
Labour problems
Marketing problems
Equipment problems
Management problems
:
:
:
:
:
:
:
:
Proportion of sick /
incipient sick units@
71.60%
48.00%
15.10%
21.40%
7.40%
44.50%
10.60%
5.50%
@ The total exceeds 100% as some units have reported more than one reasons.
(Source : Quick Results, Fourth All India Census of Micro, Small & Medium Enterprises 200607, Government of India, Development Commissioner (MSME), Ministry of Micro, Small &
Medium Enterprises. pp 37)
Almost the same reasons were found to be the causes for sickness in a sample
of units coming under PMRY scheme in some districts of Orissa in a study by Dr.
Rabi N Misra and Dr. Sudhansu Sekhar Nayak (2008).
In another study, factors like improper project planning and formulation, entry of
unmotivated and inefficient entrepreneurs, lack of demand for products, procedural
wrangling and infrastructural bottlenecks were found to be the main causes of
sickness in small scale industries at Jagatpur New Industrial Estate in Cuttack
Kindler Vol. XV l No. 1 l January-June 2015
41
importance which have been based on the number of studies identifying them.
Nature of the
factors identified
External to the organization
banks
l Absence of smooth and timely supply of raw
materials
l Power shortage
l Inappropriate infrastructural support
l Uncongenial government policies
Internal to the organization
diversification
Obsolete technology, faulty production methods
and improper capacity utilization
Human resources related problems including
faulty recruitments and high labor turnover
Improper marketing management
Faulty planning
Improper product mix
Faulty demand analysis and forecasting
Doubtful integrity of entrepreneurs
Incompatible constitution of business
Improper knowledge management
It is observed from the above studies that the MSME units are vulnerable to
almost a similar set of risk factors not only in India but also in other countries, as
found by Owens & Beynon-Davis (2001), Asian Development Bank (2002), Temtime
& Pansiri (2004), Wong (2005), Wong & Aspinwall (2005), Narayanasamy & Shetty
(2008), Philip (2010), Valmohammedi (2010), The World Bank (2011), Chittithaworn
(2011) and Medrano (2011). Moreover, in India, the problems identified to plague
medium and small scale units in various parts of the country, displays a striking
similarity. It is also noticed that the nature of the said risk factors for the MSME
units remained static during the period from 1992 to 2011. However with the
passage of time and concurrent development of information technology,
implementation of Electronic Commerce and Enterprise Resource Planning (ERP)
emerged as new key success factors for the development of this sector.
It transpires from the above studies that the internal problem factors to MSME
units outnumber that of external problem factors. The reasons basically stem from
the ownership structure and low capital base of such units.
Kindler Vol. XV l No. 1 l January-June 2015
43
The ownership pattern of the MSME sector units in India as per the fourth all
India census of micro, small & medium enterprises in India (reference year 200607) reveals that 91.57% of the registered MSME units, 94.67% of the unregistered
MSME units and 94.49% of the total MSME units are proprietary concerns. Private
and public companies together account for only 0.80% of the total MSME units in
India. The other forms of such units include partnerships (0.68% of the total MSME
units), co-operatives (0.51% of the total MSME units) and others (3.51% of the
total MSME units). This obviates four inferences :
l
Secondly, due to the same reason, the management of such units, being
mostly a one-man show, is essentially narrow-based. This is corroborated
by the findings of scholars cited above who have identified inefficient
management, low equity base, strained financial resources and very
limited power to withstand the adversities of changing business
environment due to small size and market of operation as significant
factors causing business failures in the Indian MSME sector units;
Thirdly, the MSME units run on a thin margin. This fact coupled with low
equity base, magnifies the adverse effect of disruption in cash flow
position on the business operations of such units; and
Fourthly, the life span of a person being limited, the MSME units, run
mostly as proprietorship concerns, come to an abrupt end with the
demise of the proprietor.
These four factors severely deprive the MSME sector to withstand any unfavorable
situation for long, making them vulnerable to such situations. This makes
sustainable development of this sector difficult. Thus it is imperative that the issue
of curbing the factors contributing to the weakness of MSME units in India is of
paramount importance.
OBJECTIVE OF THIS STUDY
This study has been done with the twin objectives of:
1.
Probing into the risk profile of MSME units in and around Patna city;
and
2.
Identifying shift (if any) of the risk profile from the profile identified earlier
44
1.
2.
The area of study has been the city of Patna and adjacent area;
3.
The data has been collected in the months of June and July 2015;
4.
As risk profiles vary from sector to sector, the study has been done on
manufacturing units only
Kindler Vol. XV l No. 1 l January-June 2015
Industry Risk :
Management Risk :
Business Risk :
Sub-Parameters
l
l
l
l
l
l
l
l
l
l
l
l
l
l
l
l
l
l
l
45
The four parameters of Finance Risk, Industry Risk, Management Risk and
Business Risk have 29, 10, 34 and 24 points allotted which total up to 97 points.
The performance of the units are assessed against these parameters are points
are assigned accordingly. Better performance carries higher points. Higher the
total score of an unit, less risky it is from the viewpoint of the bank.
The scoring of the selected four units were collected and the difference from the
maximum points were taken to be the measure of risk. Lower the score on any
parameter, higher would be the difference and hence higher would be the riskiness.
Accordingly the units were assessed for total risk and the components thereof for
a comparative analysis.
FINDINGS OF THE STUDY AND ANALYSIS THEREOF
The assessment of riskiness of the four selected units with the break-up of the
same is appended below.
RISK
FINANCIAL RISK
INDUSTRY RISK
MANAGEMENT RISK
BUSINESS RISK
Unit 1
9.80
1.00
1.60
1.00
Unit 2
23.00
0.00
9.70
1.80
Unit 3
8.00
10.00
12.40
0.00
Unit 4
9.40
10.00
17.00
11.00
TOTAL
13.40
34.50
30.40
47.40
The findings reveal that there is a high degree of difference between the total
riskiness of the units though they all are manufacturing units, belong to the same
area and cater to almost the same market.
The comparative analysis of the four components of total risk for the selected
units on a common scale of 100 leads us to the following situation:
RISK
FINANCIAL RISK
INDUSTRY RISK
MANAGEMENT RISK
BUSINESS RISK
Unit 1
73.13
7.46
11.94
7.46
Unit 2
66.67
0.00
28.12
5.22
Unit 3
26.32
32.89
40.79
0.00
Unit 4
19.83
21.10
35.86
23.21
TOTAL
100.00
100.00
100.00
100.00
The above situation reveals that even among the four components of total risk,
there is wide degree of variability. However, Management Risk was found to be a
prominent risk factor for all the four units.
CONCLUSION
From the findings of this study it can be inferred that that no generic risk profile
can be developed for the MSME units even if they belong to the same sector.
The only risk factor which is found to be present in all the Units is the Management
Risk.
46
Thus it has been observed in this study that Management Risk, which was found
to be lower in weightage compared to Business & Industry Risks in the earlier
studies, has currently assumed almost equal importance.
The appropriate authorities constituted for the development of MSME units should
formulate policies to address the issue of Management Risk which an inherent
risk of MSME units.
FURTHER SCOPE OF RESEARCH
The findings of this study encourages further studies to probe into the causes of
variability among the constituents of total risk among units. These studies may be
done sector-wise and even industry-wise. Such studies would facilitate formulation
of policies for sustainable development of MSME Units.
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50
INTRODUCTION
Today it is a world of uncertainty in the economic environment of business. The
current Euro crisis has affected the financial health of the economy of India. As
we all know the Euro is the second largest currency in the world and presently
has 27 member states. The Euro area consists of 17 member states that accounts
*
**
51
for over 75% of the European Unions GDP. It all started in 2009 when Greece
one of the prominent members revealed fiscal debts that shook the entire economy.
Gradually, Ireland, Portugal, Spain and Italy also witnessed a severe debt that led
to rise in borrowing costs.
The current global financial crisis is due to trade cycles which affects levels of
employment, prices, output and overall economic growth as J M Keynes rightly
says, a trade cycle is composed of periods of good trade characterized by rising
prices and low unemployment percentages, shifting with periods of bad trade
characterized by falling prices and high unemployment percentages. It has been
said that the European sovereign debt crisis is due to factors such as globalization
of finance, trade imbalances, fiscal debts, high spending, trying to bail out sick
industries resulting in slow pace of economic progress affecting employment and
trade adversely. To understand the scenario better, study of the history of formation
of the Euro currency becomes vital.
FORMATION OF EURO CURRENCY
The Euro is the currency used by the Institutions of the European Union and is
the official currency of the Euro Zone which consists of 17 members of the
European Union namely Austria, Belgium, Cyprus, Estonia, Finland, France,
Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal,
Slovakia, Slovenia and Spain. But Denmark, Sweden and the United Kingdom
chose not to join the Euro zone.
The name Euro was officially adopted on 16th December 1995. It was introduced
to the world financial markets on 1st January 1999. Euro coins and bank notes
were circulated in the year 2002 on 1st January. It has been equally powerful
traded currency but off late, it has weakened due to crisis in Greece, Italy, Spain
and Germany.
The Euro is administered by the European Central Bank (ECB) and consists of
Euro system which comprises of the central banks of the Euro Zone members.
The Euro was the outcome of the 1992 Maastricht treaty. The Maastricht Treaty
formally known as the Treaty on European Union was signed on 7th February
1992 by the members of the European Community in Maastricht, Netherlands.
The European Council drafted the treaty which came into force on 1st November,
1993 that created the European Union and the outcome was the introduction of
the currency Euro. This treaty has been amended by the treaties of Amsterdam,
Nice and Lisbon. This Maastricht established the three pillars of the European
Union known as the European Community (EC), Common Foreign and Security
Policy (CFSP) and the Justice and Home Affairs (JHA). This treaty enabled the
European Union to function as a single market that would ensure the free
movement of capital, goods and services. The name Euro was officially adopted
in Madrid on 16th December 1995.
ROOTS OF EURO ZONE CRISIS
The inter-links among the world economies lead to adversity as well as prosperity
to all investors involved or immensely active in global financial markets. With no
52
hints of doubt, one with even very little financial knowledge can claim that the
markets across the globe have not yet recovered from the shocks that 2008-09
economic crisis had. It left the banking, corporate financial and government sectors
in a great state of tumult and disorder.
The crisis saw its roots as the export oriented growth and enormous capital outflows
and transactions coming from the OPEC and the East Asian nations. However,
rather than causes, they were handmaidens of the crisis (Allington, McCombie
and Pike, 2012). The blame is partly pointed at China, which with its low valued
currency as compared to that of the US, invested heavily keeping interest rates
low and fuelling housing and asset bubble. But any East Asian or OPEC country
cannot be out rightly blamed for it. Most of the countries were in desperate need
to increase the boost their growth and sustain an export-led path of growth.
This reflected heavy capital inflows into the US, keeping interest rates low and
leading to high credit capacity that financed household consumption and budget
ventures in the US, these low rates of interest caused high levels of leverage in
financial institutions (obligations and securities). These financed subprime housing
loans precipitated the financial crisis of inadequate regulation of financial
institutions (Kaminsky and Reinhart, 2008).
Consequently, the US was seeing a hike in real estate prices. This was precipitated
by developing East Asian and oil-exporting countries running substantial current
account surpluses. The cheap credit fuelled the asset price boom. And every
boom is volatile and short lived. The greater the boom before the crisis, the
greater is the impact of the crisis on the economy, negative impact that is. In
case of the 2007 by the collapse of Lehman Brothers, the US investment bank.
This was followed by massive deleveraging by banks, unprecedented decline in
prices and accumulation of nonperforming assets.
Figure 1 : World Map showing the real GDP growth rates for 2009, where
green represents growth and brown represents recession
Source : Wikipedia
Kindler Vol. XV l No. 1 l January-June 2015
53
complex factors, developments and fiscal indiscipline among the member nations
have contributed to aggravating the current debt crisis.
REASONS FOR THE EURO ZONE CRISIS
The European sovereign debt crisis can be attributed to factors such as
globalization of finance, trade imbalances, fiscal debts, slow economic growth, high
spending and trying to bail out sick industries. Germanys trade balance improved
later but its counterparts Portugal, Ireland, Italy, France and Spain had trade deficits.
The economy of Greece was one of the fastest growing in the Euro zone
community in which the Government took advantage that resulted in deficit that
has been observed mainly due to high spending and not so good relations with
Turkey. The prime industries of Greece namely shipping and tourism were adversely
affected due to fluctuations in trade cycles. The Euro debt crisis began in 2009,
when the new Greek Government announced that its predecessors had wrongly
reported the data on Government budget which eventually had deficit at high
levels and its extravagance spending during 2004 Olympic Games.
As a result, the countrys debt began to increase rapidly. Consequently, this
created a panic amongst the Euro countries. On 23 April 2010, the Greek
Government requested an initial loan of 45 billion from the EU and International
Monetary Fund (IMF) and in May 2010, Greece received a financial assistance
package (loans) from other Euro zone Governments and the IMF, though the
Government expenditure increased by 87%, its revenue grew by only 31%.
Euro being second foreign exchange reserve currency, there were hedge funds
against Greece that the crisis spread to countries like Portugal, Ireland, Italy and
Spain. Starting from Greece, Ireland, Italy, Portugal and Spain (GIIPS), these Euro
zone economies have witnessed a severe downgrade in the rating of their
sovereign debt, fears of default, and a sudden rise in borrowing costs. Greece,
Ireland and Portugal have lost access to international capital markets and are
now getting bail-outs by the IMF, European Financial Stability Facility. The major
reasons may be listed:
1. Fiscal Policy :
The European Monetary Union conducts its economics very uniquely. It binds all
the member countries to a single monetary policy. Thus, these countries alone
have no power to decide the rate of exchange or change money supply. However,
the fiscal policy, although governed by the Stability Growth Pact (SGP), is executed
independently. Therefore at country level, the fiscal policy becomes important.
Spillovers are also caused for other economies because of the independence
given to the countries in exercising the fiscal policy. The proper fiscal policy
implementation by the respective national government thus becomes convoluted
and can be considered a game of non-cooperative behaviour (Costa, 2010).
This means that if the implementation of a particular policy stimulates a short-run
growth for a particular member economy, it might even cause a negative result
(spillover) for another one. The Stability Growth Pact, to a certain extent, tries to
put limits and restrictions on the members deficits (up to 3%) and debt-GDP ratio
Kindler Vol. XV l No. 1 l January-June 2015
55
(up to 60%). However, the indiscipline in its implementation and its lack of
enforcement have owed to its violation by several members.
2. Easy availability of credit and high risk borrowing and lending:
European banks other than just the US monetary structure also played a significant
role in financing credit and asset price booms. Their increasing need to leverage,
expand balance sheets and generate more leverage from less capital caused
them to gravitate toward assets that carried low risk and attractive returns. Thus,
they invested heavily in US securities and in some countries of the Euro Zone,
subsequently giving rise to the real estate price bubble in many countries of Euro
Zone like Spain and Ireland as well as the US. There were two main reasons for
high risk taking. The first was asset price and exchange rate appreciation, which
improves balance sheets of households and firms, thereby improving not just their
creditworthiness but also the loan quality of the bank portfolio. The other was the
introduction of the euro, which reduced risk premium not just on sovereign debt
but also on private debt in countries with weaker growth and weaker banking
systems. In turn, the reduced risk premium can promote more risk taking and
lending by banks because of perceived improvements in loan portfolios (Borio
Claudio and Zhu, 2008; Bruno and Shin, 2012b). Empirical studies now validate
the fact that these high risk lending practices led to housing prices boom and
careless monetary policies due to easy availability of cheap credit at low interest
rates.
3. Poor Economic Performance:
Moreover, since the onset of the crisis, the growth in European economies has
not been very high. Developed European powers like Germany and France are
growing at sluggish pace whereas less prosperous nations are under tremendous
debt and deficit. Poor economic performance leads to nonperforming loans and
lower tax revenues. Nonperforming loans shrink bank balance sheets, which in
turn has real effects on economic growth through the balance sheet channel
(Bernanke and Gertler, 1995). In extreme cases, nonperforming loans can end in
bank failures, leading to bailouts by the respective sovereigns (in the form of
recapitalization of existing banks, redemptions on publicly funded deposit insurance,
or both, Reinhart and Rogoff, 2009).
4. Large Bailouts:
After being exposed to speculative attack, Greece was given many aids, of which
was a notorious 750 billion euro aid given by International Monetary Fund,
European Commission and member states. Also, German and French banks have
offered numerous bailouts and have bought Greek securities, indicating their
interest in keeping the EMU and single currency system intact. Large bailouts
coupled with lower tax revenues put extreme stress on public finances. In turn, a
higher debt burden reduced economic growth because of weaker incentives (higher
impending tax rates) or reduced public investment (Reinhart and Rogoff, 2010
and 2012). Moreover, if sovereigns default on their debt, it can affect the health
of financial institutions with sizable sovereign debt holdings. As per research,
bailouts created more pressure on sovereign debt service. Also, the countries
56
offering bailouts to distressed countries place themselves at risk too and the central
banks of those countries face pressure as they use their public money to pull the
distressed countries out of the crisis.
5. Other reasons:
Some causes for Euro debt crisis also include large pension obligations and poor
demographics/ageing population, high safety net and social services, cyclically
weak tax receipts resulting from higher unemployment, lower property values and
lower business activity, high business tax rates and uncompetitive minimum wage
levels.
The Euro zone banks have failed to adjust their balance sheets to the new postglobal financial crisis environment. These banks continue to have weak capital
ratios. Therefore, the fragility of European banks has been magnified in the current
environment. Due to this crisis, unemployment rates have increased since 2009
in Spain and Ireland. In Spain, unemployment increased, from 8% to 18%, and in
Ireland, from 5% to 12%. In Germany also unemployment increased to 9.5% and
similar increases in Portugal, Greece and France.
SOVEREIGN DEBT CRISIS IN GREECE
The Transatlantic Banking Crisis (2007- 2009) brought in tremors in OECD
countries. Originating as Subprime crisis due to poorly managed financial markets
in US, it has spread as a financial and banking crisis in West Europe. The twin
crises have increased Greeces debt-GDP ratio and have created a plot for an
impending banking crisis. The net consequence- interest rates have to increase,
tax cuts have to be lowered-stimulating inflation in Europe.
It was in 1981 that Greece joined the EU in order to kick start some complementary
reforms. It had to do this because of its prior reluctance to practice supply side
economics and extravagant public expenditure, leading to high debts.
Since Greece had been following an upward trend in debt and deficit, it had to
increase its interest rates and withdraw tax cuts and subsidies to increase the
Euros in its coffers (Cobb-Douglas Production function). Consequently Greece
had a high risk premium attached to it, making it difficult for the government to
obtain high funding. Hence, a reduction in fiscal revenues was seen due to the
depreciation in value of real estate markets newly burst asset bubbles.
Although rapid growth of household debt over a long period ensured gains for
domestic demand, it led to massive losses when it was interrupted. Greece spent
extravagantly on government workforce and Olympics, 2004 increasing its
expenditure and thereby pressurizing itself with more debt burden. Lowering in
revenues of the government and increment in its expenditures between 2008 and
2010 led to further problem. Credit expansion was nullified by the financial and
sovereign debt crisis, leading to rapid growth of household debt. This development
caused a shift of the net injection contributed by household debt to domestic
demand from the highly positive levels experienced up to then to levels considerably
below zero (Athanassiou,2012). The rate of credit expansion in Greece was 31%
in 2005, which dropped to 12.8% in 2008, after which it was brought to halt by
Kindler Vol. XV l No. 1 l January-June 2015
57
prevailing crises and high debt levels of Greece. The decline of domestic demand
of Greece resulted in the attenuation of private consumption and gross fixed capital
formation. Eventually, this main growth driver till 2008 became Greeces weakening
factor after the crisis. Because of the negative net injection from the household
debt, domestic demand and economic growth have to face severe challenges in
Greece. The problems arising from the crisis are not just concentrated in the
economics or finances of the nation. Unemployment and fall in production have
acted as catalysts in creating social unrest among people, with many strikes and
rallies becoming the order of the day. And due to the inter-connectedness of the
economies, negative effect in a countrys capital market, if any, is likely to reach
other countries as well. Hence any negative policy change or announcement in
Greece, at this moment, can be disastrous not only on Greece but also for the
other countries that have been exposed to Greek markets.
Figure 2 : Real GDP growth in Greece and contributions to growth (%)
Private capital flight away from Greece and into the more developed, stable and
powerful country in Europe has been a chief cause of concern for Greece. This
is because it causes imbalances (Target2) and leads to shifting of capital from
one nation to another, pushing Greece (which is already heavily indebted) in a
situation of liability. And that too is happening at the time of ongoing crisis in
Greece. Coupled with high debt and deficit of public sector, Greece is now in a
position to face more outflows from its economy, at a time when it needs them
the most, due to such imbalances.
With the implementation of proper policies, enough austerity measures and bailouts
from the IMF and Euro Zone, it is expected that the Greek economy might
resurface from the crisis of sovereign debt. Till then, it has to drastically cut down
on its expenditures and deal with the deficit at national level.
The Greek crisis, in the long run, can trigger a domino effect like the Lehmann
Brother collapse and can be the root of an imminent banking crisis. This is also
possible as Euro Zone is not an Optimum Currency Area and the EU policy makers
58
59
As evident from figure 3 above, India is more resilient today than in 2014 or
2013 not only because of greater reserves, but more importantly, due to a healthier
macroeconomic position. While complacency is never warranted, over-anxiety should
also be kept at bay.
3. Indian economy:
Ever since the Greek crisis first unfolded India has made the most progress in
keeping the domestic economy steady. India has taken the biggest strides on
fundamental macroeconomic indicators, particularly by way of tabilizing external
imbalances and accumulation of foreign exchange reserves, so the RBIs capability
to defend the rupee against big capital outflows is much better now.
A simple way to compare the relative economic situation is to supplement the
macro-economic vulnerability index with a Rational Investor Ratings Index (RIRI).
The RIRI is computed by averaging a countrys GDP growth rate and its macroeconomic indicators; the latter measured as the average of the fiscal deficit, current
account deficit, and inflation (all with negative signs). Thus, equal weight is given
to growth and macroeconomic stability. The greater the number, the better should
be its investor rating In assessing the risks and rewards of competing destinations,
rational investors take into account not just macroeconomic stability (which proxies
for risks) but also growth which crucially determines rewards and returns. In figure
4 below, this index is depicted for India and a number of comparator countries,
including the BRICS, other major emerging markets (Turkey) as well as countries
in Indias investor rating category (BBB) and category (A) that is above Indias.
Regardless of whether Indian growth is measured according to the old methodology
or the new methodology, India exhibits a dramatic improvement in the index.
60
5. Consumption:
Indias Per Capita Income has tripled from Rs. 19,040 in 200203 to Rs. 53,331
in 201011, averaging 13.7% growth over these eight years peaking 15.6% in
201011; however growth in the inflation adjusted Per capita income of the nation
slowed to 5.6% in 201011, down from 6.4% in the previous year and as of
2010, according to World Bank statistics, about 400 million people in India, as
compared to 1.29 billion people worldwide, live on less than $1.25 (PPP) per day.
These are individual or household consumption levels. Compared to 2001
household consumption patterns of India, consumption trends as per the Census
of 2011 represent moderate to significant improvements. As per the 12th Indian
five year plan, the GDP is set to grow at a healthy rate, accompanied by a rise in
per capita income. Middle classs composition in the population will increase manifold
till 2025, making it the predominant catalyst in increasing the money the consumers
spend (it will account for up to 59 % of the nations consumption).
The real household disposable income has more than doubled since 1985. With
the rise in income, consumption patterns have changed and a new middle class
has emerged, which is growing at a fast pace. The economic growth, changes in
tastes and preferences and urbanization has resulted in changing consumption
pattern away from traditional commodities to processed and high value commodities
(Murty, 2000; Meenakshi, 1996; Rao, 2000). The high growth performance of Indian
economy is expected to result in higher household expenditures. This is possible
only if different classes of Indian society shared the growth of wealth and if a
significant part of it is allocated towards consumption expenditure.
Kindler Vol. XV l No. 1 l January-June 2015
61
Seeing this, it is highly unexpected that a Euro Zone crisis may impact Indian
consumption patterns, which have been on a constant rise. Any shocks or crises
in the Euro Zone are not that critical or harmful for the consumption in Indian
economy in the long run. However in the short run, it can alter commodity prices
for the negative and can afflict a little damage on the consumption.
Table 1 shows estimates of all-India average Monthly Per Capita Consumption
Expenditure, uniform reference period (MPCEURP) from four full-scale surveys of
consumer expenditure including the 68th round survey. The table clearly shows
that Indian household consumption in urban and rural areas has been increasing
since 1987-88. It can be seen that over the 7 year period, since 2004-05 the
growth in real rural MPCE has been about 26% and the growth in real urban
MPCE about 29%.
Table 1 : Growth in MPCEURP at current and
constant prices since 1887-88, all India
Year
Characteristic
1887-88
1993-94
2004-05
2009-10
2011-12
158.10
281.40
558.78
927.70
100
176
319
494
580
158.10
159.89
175.17
187.79
220.51
249.92
458.04
1052.36
1785.81
2399.24
100
173
338
503
599
249.92
264.76
311.35
355.03
400.54
1278.94
*derived from CPI for agricultural labourers with base 1886-87 = 100
#derived from CPI for urban non-manual employees with base 1884-85=100
(Source: NSS 68th round survey)
6. Investment:
In economic theory or in macroeconomics, non-residential fixed investment is the
amount purchased per unit time of goods which are not consumed but are to be
used for future production (i.e. capital). Examples include railroad or factory
construction. Investment in human capital includes costs of additional schooling
or on-the-job training. Inventory investment is the accumulation of goods
inventories; it can be positive or negative, and it can be intended or unintended.
In measures of national income and output, gross investment (represented by
the variable I) is a component of gross domestic product (GDP). Indian Investment
(gross fixed): 30% of GDP (2012 est.)
62
63
7. Government Spending:
Indias total expected government spending for the financial year 2013 and past
expenditures as per the India Economic Survey and Union Budget, Indian spending
hovers constantly around $302 million. India thus has a 27.2% expenditure-GDP
ratio. India has a balanced public expenditure, for high government spending
usually equates to large debt and high taxes and low government spending leads
to compromises in infrastructure, human resource development and development.
India has a healthy spending rate, which hasnt been severely affected due to
the Euro Zone crisis as per the data.
8. Exports:
Indias merchandise exports reached a level of US $ 312.61 billion during 2013-14
registering a growth of 4.06 percent as compared to a negative growth of 1.82
percent during the previous year. Despite the recent setback faced by Indias export
sector due to global slowdown, merchandise exports still recorded a Compound
Annual Growth Rate (CAGR) of 15.79 per cent from 2004-05 to 2013-14.
Exports recorded a growth of 4.06 per cent during Apr-Mar 2013-14. The
Government had set an export target of US $ 325 billion for 2013-14. The
merchandise exports have reached US $ 312.61 billion in 2013- 14. Export target
and achievement from 2004-05 to 2013-14 is given in figure 7 below.
Figure 7 : Export Targets and Achievements
(Source : commerce.nic.in)
Although, the Indian balance of payments stands at a deficit, Indian exports have
been constantly increasing, even after the crisis period. This shows that the crisis
had a minimal impact on the Indian exports too. However since India is a big
importer, it stood at a risk of exposure to the crisis. But this also did not pose a
problem for India as it has meagre trade relationships with Greece and EU.
CONCLUSION
The Euro Zone crisis has indeed been a cause of concern for the analysts and
conomists all over the world. It has impacted growth in Europe, US and other
countries. However for India, it did not bring a period of extremely dampened
growth. All the above-explained characteristics of a GDP, whose robustness is
64
essential for a good growth rate, are very healthy for the Indian economy. The
consumption pattern, investment levels, government spending and exports did not
see a major downside during the crisis period and remained on a balanced, if not
growth, trajectory. The Indian growth has successfully encapsulated itself from
the Euro Zone crisis and it is not wrong to conclude given the above information
that the Euro Zone crisis has had no significant negative impact on either the
GDP or the fast growth rate experienced by India; though, Euro zone debt problem
is likely to remain a concern in the near future in India.
The world still holds the US-$ as the majority of their foreign exchange reserves,
the Euro is a close second (about 25% of holdings) Since the world reserve
currency also acts as the international pricing currency for oil, gold, and other
products traded on world markets, the decline of the value and the confidence in
the Euro could have a devastating impact on all aspects of global trading. The
impact of aggravating international business uncertainty and volatility in the stock
market will at length affect the businesses and economy of India. The Government
can emphasize more on exports, as exports act as an important means to measure
the competitiveness of a countrys industries. India needs to safeguard itself from
the Greece crisis by guarding its financial institutions and limiting exposure to
countries where the impact of the crisis could be felt more. India needs to expedite
the approvals on the big-time investments and projects so that the money may
continue to flow in the country.
There have been substantial foreign inflows well over $60 billion into the
Indian debt and equities market over the last 18 months. Indian policy has been
very prudent on foreign inflows.
REFERENCES
1.
2.
3.
Baba, Naohiko; McCauley, Robert, N. and Ramaswamy, Srichander (2009), U.S. Dollar
Money Market Funds and Non-U.S. Banks, BIS Quarterly Review, March, pp. 65-81.
4.
Bernanke, Ben, S. and Gertler, M. M(1995), Inside the Black Box: The Credit Channel of
Monetary Policy Transmission, Journal of Economic Perspectives, 9(4), pp. 27-48.
5.
Bruno, V. & Shin, H. S., (2014), Cross-Border Banking & Global Liquidity, http://
www.princeton.edu/~hsshin/www/capital_flows_global_liquidity.pdf.
6.
Borio, Claudio and Zhu, Haibin (2008), Capital Regulation, Risk-Taking and Monetary
Policy: A Missing Link in the Transmission Mechanism?, BIS Working Paper No. 268,
Bank for International Settlements, 2008.
7.
Kaminsky, G.L., and Reinhart, C.M. (2008), The Twin Crises: The Causes of Banking
and Balance of Payments Problems, American Economic Review, 89 (3), pp. 473500.
8.
Lewis, M., (2011) Boomerang Travels in the New Third World. Norton ISBN 978-0-39308181-7.
9.
Meenakshi, J.V. (1996). How important are Changes in Taste? A State-Level Analysis of
Demand.
65
66
INTRODUCTION
Life is uncertain, with full twists and turns and ups and down. An individual can
protect himself against such uncertainty through life insurance.This work is a
descriptive study of a particularULIP in India. ULIPs is one of the most significant
innovation of life insurance.ULIP is an abbreviation for Unit Linked Insurance Policy.
A ULIP is a life insurance policy which provides a combination of risk cover and
investment.ULIP is also considered as a combination of financial products likes
Insurance and Mutual Fund.Prior tothe introduction of ULIPs, different wants of
an individual were addressed with different products.ULIPs is a one stop solution
for an individuals financial goals that are designed to enable consumer plan and
fulfill all his/her long term financial goals itmay be child educationor marriage.The
study is primarily based on the return of individual funds and proportion or
weightage of that fund in the portfolio. The key element in the fund is both risk
and return since exploring the relationship between return and risk is always in
the interest of the investor.This work evaluates the performance of the selected
funds with respect to the index (NIFTY) by selecting relevant variables, viz. beta,
market return, stock return, systematic risk, unsystematic risk and downside risk.The
amount invested in ULIPsis indicated by no. of units and the value is determined
by the Net Asset Value (NAV) of the relevant fund.
*
**
67
LITERATURE REVIEW
To understand the ULIPs, a review of existing literature has beencarried out.
Mr.Anant Gupta (2012)found that, the new IRDA guidelines are aimed at reducing
mis-selling of ULIPsand making the policies customer-friendly. ULIPs business had
fallen by 15% in the financial year 2010-11 after new stricter guidelines rendered
such products less attractive for sales agents. In the first quarter of financial year
2010-11 the ULIPs new business premiums (nbps) have fallen by 61.5% when
compared with financial year 2009-10 nbps. The main issue is the lower
commissions to the agents in first year which was the agents selling incentive for
the ULIPs for past so many years since the ULIPs were introduced in India.With
ULIPs first year commission falling from as high as 35% of nbp to 5%, the agents
are not willing to sell the ULIPs. This has led to a sharp fall in ULIPs business.
Dr. Anshuja Tiwari and Ms. Babita Yadav(2013)in their paper analysed that ULIPs
are widely preferred by the investors as they serve multiple purposes-give high
returns, tax benefits, life insurance, critical illness cover and have admirable
flexibility for paying premium amount.
Prof. K. Raji Reddy(2012) in his paper compared the traditional funds andULIP
funds. The unit linked fund has started to grow rapidly since its inception, as a
result, 2004-05 and 2005-06 showed tremendous
growth for the unit linked
insurance funds. In the same period, the growth in the traditional funds
has been steady. Apart from that the fund options, liquidity and transparency
have made the ULIP cake in the market. After opening up of the insurance sector,
ULIPs have become increasingly popular.
Mr. Manvendra P.S. (2011) in his paper gave an effort on finding whether ULIPs
are investment products or insurance schemes. Since More than 80% business
comes from only ULIPs in the current scenario of insurance business environment.
ULIPs are now governed by a new set of guidelines that may change the whole
ULIPs story. According to the regulator, ULIPs launched after 01 September, 2010,
would have lower charges, guaranteed returns and larger insurance cover. But
future will acknowledge the fate of ULIPs.
Navneet Seth (2012) in his report explained the factors behind continuous fall in
demand of ULIPs. not fraudulent in nature but it is a case of BUYERs BEWARE.
It offers huge front-loaded commission to the sales persons and agents.The
advantage of the ULIP s is that if the unit holder dies,the nominee gets a certain
sum assured as in any term plan.
Dr. Deepti Maheshwari (2014) gave emphasis on how to buy smart ULIPs.Instead
of buying any ULIP in order to save tax, it would be better to align it to a future
requirement and then select a suitable plan. It is also equally important to monitor
the performance of ones investments, especially in case of ULIPs.
Miss. Kantesha Sanningammanavara (2013) in her study finds that the sale
of ULIPs in the SBI Life Smart has improved over 2-years period from its inception
as the market conditions and economy have improved over these years globally.
The rate of return on the investment (3.71%) is much lower than the fixed deposit
which is considered as the safest investment option.
68
Mr. Himanshu Puri (2010) in his study gave one important outcome that the
balanced-growth schemes have given better results as compared to balanceddividend schemes.The Sharpe measure of balanced-growth plans and the
corresponding balanced-dividend plans stands testimony to the relatively better
performance of balanced-growth plans as 13 growth plans out of 15 (approximately
87%) had better risk adjusted excess returns highlighting the fact that the balancedgrowth plans are more likely to reward the investors for the extra risk they are
assuming. The analysis points to the fact that the investment style does matter
as performances are driven by investment styles.
Chokri Mamoghli and Sami Daboussi (2009) found that the comparison of Sharpes
ratio to Sortino ratio, to upside potential, and to omega measure, they noticed
that the ranking of hedge funds strategies according to these alternative
performance measures is different from that of Sharpes ratio. Indeed, this change
in the ranking of hedge funds strategies between Sharpes ratio and these
alternative performance measures is due to the asymmetric returns of hedge funds
strategies and to the risk perception of investors not captured by the measure of
variance used in Sharpes ratio. They also noticed that the performance of hedge
funds strategies decreases when the target rate of return increases for each of
these alternative performance measures.
OBJECTIVES OF THE STUDY
The objectives of the study are:
1. To understand the features and policies of ULIPs.
2. To evaluate the performance of selected funds of a particular ULIP, using
Return-Risk Analysis, Sharpe Measure, Treynor Measure, Jensen alpha,
Sortino measure and omega.
3. To analyse the excess return per unit of risk evidenced by the various
fund schemes of the ULIP under study and to identify whether the
measures guide the investor in the same direction or provide significantly
different options.
PERIOD OF THE STUDY
The study comprises of comparison of traditional methods, viz. Sharpe Measure,
Treynor Measure, Jensen alpha vis-a-vis modern method viz. Sortino ratio. For
the purpose of analysis the period of study is from 01 April, 2012 to 31 March,
2015 (3 financial years).
METHODOLOGY
This work is a descriptive study of ULIP. The study is based on secondary sources
of data collected from published sources such as company annual report, books,
journals and web. Five funds from the Smart Wealth Builder Plan of ULIPs have been
taken for study of the performance of the fund.After collecting the data of NAV of
the fund selected and the corresponding NIFTY values, various measures of return
/ risk and portfolio performance were applied, including computation of the six ratios
namely Beta, Jensens Alpha, Treynor ratio, Sharpes ratio and Sortino ratio.
Kindler Vol. XV l No. 1 l January-June 2015
69
Apr12Jun12
Apr12Sep 12
Apr12Dec 12
Apr12Mar 13
Apr12June13
Apr12Sep 13
Apr12Dec 13
Apr12Mar 13
Apr12Jun 14
Apr 12Sep 14
Apr12Dec 14
Apr12Mar 15
-0.73%
7.25%
11.04%
6.86%
9.86%
7.85%
18.54%
26.69%
43.13%
49.77%
55.75%
55.75%
1.44%
7.13%
10.22%
9.59%
12.65%
10.52%
17.25%
22.06%
32.47%
37.09%
43.04%
43.04%
-0.68%
5.99%
10.12%
6.82%
10.20%
9.40%
20.05%
26.19%
41.53%
48.43%
53.27%
53.27%
-0.40%
8.85%
14.20%
10.50%
15.10%
15.12%
27.81%
35.21%
55.80%
64.59%
72.95%
72.95%
2.01%
3.90%
5.98%
7.89%
9.87%
12.38%
14.76%
17.04%
19.40%
21.97%
24.91%
24.91%
-0.01%
6.09%
10.09%
7.95%
11.29%
9.46%
17.94%
24.03%
38.76%
45.22%
52.50%
52.50%
During first quarter of the study period w.e.f. 01April, 2012 -31 June, 2012, it is
observed that all the funds except money market and balanced funds have given
negative return, during that quarter the market hasalso shown negative return.
For the remaining all quarters, all the funds havegiven positive average quarterly
return. Further analysis shows that equity fund has outperformed the market by
providing better returns. The top performer as per average quarterly mean return
is equity fund. All other funds except equity fund havereturn lower than that of
the market, during all time horizon under study. The equity optimiser fund is giving
good return throughoutthe time period. The worst performer is moneymarket
fundhaving very less return compared to market return.
Beta
Table 2 depicts the beta of fund selected for the period of study, i.e.,01 April,
2012 to 31 March, 2015
Apr
Apr
12Mar
15
Apr1
2-Dec
13
Apr1
2Mar
13
Apr1
2Jun
14
Apr1
2Sep
14
0.438
6
0.46
45
0.463
7
0.46
32
0.46
74
0.47
23
0.473
1
0.4
725
0.78
95
0.789
2
0.77
75
0.775
0
0.77
61
0.78
01
0.78
56
0.788
6
0.7
915
0.89
96
0.90
97
0.912
3
0.93
01
0.933
3
0.93
39
0.94
04
0.94
66
0.948
9
0.9
469
0.0
039
0.00
16
0.00
09
0.000
3
0.00
01
0.000
3
0.00
02
0.00
05
0.00
09
0.000
8
0.0
007
0.6
685
0.66
65
0.66
70
0.668
2
0.67
73
0.676
8
0.67
72
0.68
33
0.68
71
0.688
6
0.6
905
12Sep
12
Apr1
2Dec
12
Apr1
2Mar
13
Balance
d Fund
0.4
336
0.4
218
0.42
97
0.43
77
Equity
Optimis
er Fund
0.7
805
0.7
765
0.77
93
Equity
Fund
0.9
088
0.8
914
Money
Market
Fund
0.0
026
Growth
Fund
0.6
684
70
Apr1
2Apr1
4
Apr1
2Sep
13
Apr
12Jun
12
Period
Apr1
2June
13
While analysing the beta it is observed that the beta of money market fund is
negative for the initial quarters. The fund is having the least beta value that
means the funds return are less volatile and thus less risky for all the time horizon
under study. The growth fund is having low to moderate risk factor, the fund is
showing an increase in risk with a continuous rise in return.The beta ratio for
balanced fund is also very low, hence it is less risky, and the return generated
from this fund is also not so exciting. Unlike the other fund equity fund is having
high risk factor but the risk is below the market risk of 1. Equity optimiser fund is
having relatively high risk with high return but the proportion is less than the
equity fund as it invest comparatively more in debt market which reduces its risk.
Sharpes ratio
Table 3 depicts the Sharpes ratio of fund selected for the period of study, i.e.,01
April, 2012 to 31 March, 2015
Apr1
2Jun1
2
Apr
12Sep
12
Apr1
2Dec
12
Apr1
2Mar1
3
Apr1
2June
13
Apr1
2-Sep
13
Apr1
2Dec
13
Apr1
2Mar
13
Balance
d Fund
0.12
2
1.1
40
2.33
7
0.66
3
1.12
2
0.407
0.56
6
4.96
6
Equity
Optimis
er Fund
0.32
3
0.4
09
1.98
7
0.18
8
0.07
6
0.783
0.79
6
Equity
Fund
0.69
6
0.5
00
1.81
5
0.76
7
0.37
3
1.180
Money
Market
Fund
0.29
3
0.5
20
2.40
6
0.03
5
0.37
9
Growth
Fund
0.22
4
0.7
19
2.53
5
0.43
2
0.94
4
Period
Apr1
2Sep
14
Apr1
2-Dec
14
Apr
12Mar
15
4.497
4.45
3
25.48
6
17.
342
3.64
5
4.771
5.28
0
37.99
2
64.
936
6.86
9
9.93
6
79.14
1
13.2
09
10.92
7
9.3
43
0.664
0.58
3
5.60
2
4.383
4.73
6
52.15
9
40.
503
0.927
1.74
2
6.18
9
5.751
6.34
0
453.8
61
862
.97
1
Apr1
2-Jun
14
Sharpe Measure is one of the most common tools of evaluating the portfolio
which has been used extensively in many of such papers. The Sharpes ratio is
the average return earned in excess of the risk-free rate per unit of volatility or
total risk. Generally, the greater the value of the Sharpes ratio, the more attractive
the risk-adjusted return.
The Sharpes ratio for the period under study shows different results in short
term and long term.In the short term i.e., first half tenure of the study, the higher
positive value is found in balance fund and equity fund. But after that tenure or
in the second half, the growth fund and equity fund is showing a highest Sharpes
ratio. The equity fund has positive Sharpes ratio during the full study period
which shows adequate return as against the level of risk involved. The ratio of
Kindler Vol. XV l No. 1 l January-June 2015
71
Period
Apr1
2Jun1
2
Apr1
2Sep
12
Apr
12Dec
12
Apr12
-Mar
13
Apr12
June1
3
Apr12
-Sep
13
Apr12
Dec1
3
Apr1
2Mar
13
Apr1
2Jun
14
Apr1
2Sep
14
Apr1
2Dec
14
Apr1
2Mar
15
Balanc
ed
Fund
0.01
2
0.07
83
0.10
25
0.040
8
0.064
2
0.030
5
0.068
5
0.12
56
0.30
10
0.34
77
0.424
0
0.45
55
Equity
Optimi
ser
Fund
0.03
4
0.02
79
0.05
52
0.012
5
0.004
6
0.032
6
0.077
1
0.12
86
0.29
64
0.35
34
0.384
2
0.43
64
Equity
Fund
0.02
6
0.05
63
0.09
31
0.029
6
0.057
7
0.034
3
0.147
2
0.20
34
0.39
76
0.46
40
0.526
7
0.60
42
Growt
h
Fund
0.02
9
0.03
39
0.06
41
0.002
2
0.021
8
0.036
6
0.057
1
0.11
51
0.29
78
0.35
73
0.428
7
0.48
52
Money
Market
Fund
0.21
5
0.18
77
0.99
52
0.947
9
1.095
4
63.89
5
23.42
5
36.4
29
20.1
97
14.0
08
22.94
7
32.6
30
The Treynor ratio relates excess return over the risk-free rate to the additional
risk taken, however, systematic risk is used instead of total risk. The higher the
Treynor ratio, the better the performance of the portfolio under analysis. Here
equity fund mirrors the similar findings as in Sharpe ratio with some minimum
differentiation. The top performer is the equity fund since money market fund
showed laggard performance in short run with negative value .the balanced fund
and growth fund also performed well with the measure. The equity optimiser fund
showed the minimum Treynor ratio and money market fund is the worst performer
with this ratio.
72
Jensens alpha
Table 5 depicts the Jensen alphaof fund selected for the period of study, i.e., 01
April, 2012 to 31 March, 2015
Apr1
2Jun1
2
Apr1
2Sep
12
Apr1
2Dec
12
Apr1
2Mar
13
Balance
d Fund
0.00
57
0.05
55
0.07
08
0.06
26
Equity
Optimis
er Fund
0.00
04
0.14
66
0.09
61
Equity
Fund
0.00
26
0.08
71
Money
Market
Fund
0.01
34
Growth
Fund
0.00
16
Period
Apr1
2June
13
Apr1
2-Sep
13
Apr1
2Dec
13
Apr1
2Mar
13
Apr1
2Jun
14
Apr1
2Sep1
4
Apr1
2-Dec
14
Apr
12Mar
15
0.084
0
0.087
3
0.13
96
0.17
60
0.24
41
0.265
5
0.292
4
0.3
128
0.07
03
0.098
2
0.092
2
0.17
08
0.22
31
0.32
76
0.353
9
0.390
7
0.4
170
0.10
49
0.07
30
0.103
2
0.094
7
0.18
67
0.24
69
0.37
04
0.399
4
0.440
6
0.4
678
0.02
69
0.03
95
0.05
29
0.066
3
0.079
9
0.09
30
0.10
64
0.11
94
0.132
4
0.145
4
0.1
587
0.07
21
0.08
80
0.06
76
0.093
3
0.090
6
0.16
10
0.20
82
0.30
17
0.326
1
0.359
5
0.3
840
73
Sortino ratio
Table 6 depicts the Sortino ratio of fund selected for the period of study, i.e.,01
April, 2012 to 31 March, 2015
Apr1
2Jun1
2
Apr1
2Sep
12
Apr
12Dec
12
Apr
12Mar
13
Apr
12Jun
e13
Apr1
2Sep
13
Apr1
2Dec
13
Apr1
2-Mar
13
Apr1
2Jun
14
Apr1
2Sep
14
Apr1
2Dec
14
Apr1
2Mar
15
Balanc
ed
Fund
1.58
19
10.1
581
16.
575
3
1.2
364
2.1
801
0.68
01
1.64
59
3.220
8
8.26
09
10.1
638
13.0
228
14.5
93
Equity
Optimis
er Fund
1.44
41
1.18
61
2.8
839
0.3
210
0.1
321
0.87
68
2.23
15
3.985
6
9.79
39
12.3
967
14.1
868
16.8
92
Equity
Fund
1.44
78
3.09
35
6.3
210
0.8
484
1.8
503
1.11
45
5.19
13
7.672
3
16.0
226
19.8
395
23.6
721
28.3
06
Growth
Fund
0.01
95
1.68
80
3.8
952
0.0
628
0.6
850
0.95
57
1.61
03
3.471
0
9.61
22
12.2
223
15.4
147
18.2
68
0.23
58
1.07
21
2.9
071
1.1
815
0.2
708
4.32
76
7.20
59
9.423
9
11.9
410
16.4
664
25.6
103
30.7
37
Period
Money
Market
Fund
Sortino ratio is a modification of the Sharpe ratio but penalizes only those returns
falling below a user-specified target or required rate of return, while the Sharpes
ratio penalizes both upside and downside volatility equally. Initially all the funds
showing negative value except, money market fund. The money market fund has
positive Sortino ratio during the full study period.Money market outperformed the
market as per this measure. Equity fund, initially in the first quarter w.e.f. 01April,
2012 to 31June, 2012,has a negative value but later a continuous growth is
observed with an increase in time horizon. It is the second top performer under
study. During the time horizon of eighteen months w.e.f. 01April, 2012 to 31 Sep,
2013, balanced fund, equity optimiser fund and growth fund showed negative
Sortino ratio. Equity optimiser fund and growth fund performed well with the
measure. Balanced fund is having less Sortino in all time horizons under study
except for the time period of six and nine months w.e.f.1st April 2012. Thereforethe
performance of the balanced fund is found to be inferior when compared with
other funds.
Friedmans two way ANOVA test
Friedman two way ANOVA test has been done to test whether all the ratios
considered in this paper are giving similar decisions or providing significantly
different options.
H0: No difference in the ranking of different measures by selected funds of the
ULIP under study.
74
H1: Difference in the ranking of different measures by selected funds of the ULIP
under study.
Table 7: Ranking of different measure by selected funds of ULIP.
Fund
Ratio
Equity
Fund
Balanced
Fund
Money Market
Fund
Sharpes Ratio
Treynor Ratio
Jenson Ratio
Sortino Ratio
75
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india,Journal of Business Management and Social Science Research, pp. 70-76.
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Yadav A., Tiwari B. (july-sept 2013), A Comparative analysis of investors risk perception
towards public & selected private life insurers in jabalpur district of Madhya pradesh,Gian
Jyoti E-Journal , Volume-3, pp. 10-22.
10. Arora, K. (2015), Risk adjustment performance Evaluation of indian mutual fund scheme.
http://par.sagepub.com, pp. 79-94, Retrieved from Sagepub.in/home_nav: http://par.
sagepub.com
76
INTRODUCTION
Human resources are one of the essential resources in an organization. To become
a successful company, only money will not do. Organization need trained and
experienced manpower. Today we are moving from traditional company to service
sector, where human resource plays an important role.
Taking lesson from the past, companies are now investing a good amount of
money on employee recruitment, training, compensation etc. and in return
companies are getting profit. It is the only assets which appreciate with time.
But in India still we dont show human resource as an asset and investment on
them is not taken into books of accounts in majority. There are a very few
companies who disclose human resource as assets in their balance sheet and
subsequent annual reports. All though various experts through out the world have
proposed different models on human resource accounting, but companies are
very reluctant to use them. Therefore a proper system should be followed to
disclose human resource as an asset in the companys balance sheet.
*
**
77
78
Showing human resource as an asset will appraise the value of manpower and it
will act as a motivational factor for an employee. Psychologist, Economist and
Accountant through out the world have developed various models on accounting
of physical assets, but there is very little contribution on human resource
accounting model.
Our study made an attempt to evaluate the contribution of human resource
valuation towards wealth maximization through EPS. Research was done through
literature survey and based on secondary data. It explores effect of presenting
HRV in annual report of a randomly chosen IT company, Infosys Technologies
Limited.
This paper attempts to find possible impact of value per employee over
shareholders wealth. It is observed on review of many financial statements
across the industry vide respective annual reports, despite charging the employee
cost (eg:- T&D expenses) as a revenue charge off item in the profit and loss
account every year, there is no mandatory discloser system maintained by
most of the companies in the final statement of affairs on regular basis. We
all know that higher level of debt indicates higher level of fixed interest burden.
Under this favorable environment it helps to magnify EPS, however, the business
becomes more risky in this instance. Higher level of equity indicates lower level of
EPS and subsequently lower level of financial risk. Thereby it becomes a notable
contributing variable towards share holders wealth. Hence it is one of our selected
variables for the study along with some other notable parameters of share holders
wealth (namely ANPAT and ROTA). This paper thereby attempts to establish an
association of variables between shareholders wealth (namely EPS, ANPAT, ROTA)
and value per employee to test that if there is any link between employee valuation
variable and wealth maximization variables in the selected companies across the
industry. It is done to determine the necessity of mandatory discloser of VPE in
Final Statement of Affairs on regular basis.
REVIEW OF LITERATURE
Literatures found in this area are discussed hereby. Rahamen, Hoosain and Aktar
(2013) in their study on problem with human resource accounting and a possible
solution they compared different existing models on HRA by proposing a framework
in line with existing models to implement HRA practice. Further Kaur, Raman and
Singhania (2014) studied human resource accounting disclosure practice in Indian
companies and stated that a handful of company in India are practicing and making
voluntary disclosure related to human resource accounting. Again Bullen and Eyler
in their study of human resource accounting and international development:
implication for measurement of human capital stated that internationally many
organizations show the willingness towards human resource accounting and its
reporting. Earlier Mirvis and Macy (1976) made a study on accounting for the
cost and benefits of human resource development programs and highlighted on
cost- benefit analysis on human resource development. Further, Edmonds and
Rogow discussed about possible inclusion of value of human resource in balance
sheet as recognized assets of a business. They have also explored that true
Kindler Vol. XV l No. 1 l January-June 2015
79
The present paper throws light on inclusion of Value per Human Resource as a
mandatorily declared asset in financial reports on regular basis. It does so by
evaluating impact of value per employee over shareholders wealth. This paper
thereby attempts to establish an association of variables between shareholders
wealth (namely EPS, ANPAT and ROTA) and value per employee to test that if
there is any link between employee valuation variable and wealth maximization
variables in the selected companies across the industry. On favorable outcome of
the said instance, objective of the study thereby becomes to determine the
necessity of mandatory discloser of VPE in Final Statement of Affairs on regular
basis.
METHODOLOGY
This paper is based on secondary data obtained from various sources. To name
a few annual reports of respective companies, capital line neo and some published
journals and periodicals as mentioned in bibliography for a time period of five
years throughout a company cluster of 4 (Four) Number of Companies. Further
to this, SPSS software was used for statistical analysis. Bivariate correlation
coefficient test was conducted for the said purpose. This paper primarily establishes
two basic research objectives.
First, it attempts to establish an association between shareholders wealth (namely
EPS, ANPAT and ROTA) and value per employee to test that if there is any
strong link between employee valuation variable and wealth maximization
variables in the selected companies across the industry for the study. It is done
on this convention that if any strong association is found then it portraits the
necessity for mandatory discloser of VPE in Final Statement of Affairs on regular
basis.
On the other hand, based on above financial analysis; this paper also attempts
to suggest an HR policy to be introduced towards valuation of human resource
as a motivational tool and performance indicator. It is essential for encouragement
of the employees to give their best performance.
ANALYSIS AND FINDINGS
Gap between our study and literature review which leads us to aforesaid research
objective are established as below
Table 1 - Disclosure of Selected Variables for HR related information for
given PSUs.
D= Disclosure & ND=Non Disclosure of variable
Status showing
Disclosure of variable
BHEL
ONGC
NTPC
Value add
ND
EVA
ND
ND
81
Status showing
Disclosure of variable
BHEL
ONGC
NTPC
Value of HR
ND
ND
ND
ND
Number of employee
ND
ND
ND
Discount rate
(Generation
per employee)
Employee Remuneration & Benefit
(Expend on
employee)
(Source : Kashive, Neerja, 2011)
Value of
production
(Rs.)
Manpower
(in Numbers)
Value
peremployee
(Rs.)
Value
added
(Rs.)
2001-2002
586.66
9502
0.062
1 53.09
2002-2003
501.53
7865
0.064
1 47.37
2003-2004
534.43
5995
0.089
2 12.3
2004-2005
631.24
5665
0.111
328.53
2005-2006
1053.34
5583
0.189
385.39
2006-2007
1909.18
5451
0.350
7 81.08
2007-2008
1991.24
5405
0.368
7 26.12
2008-2009
1344.28
5440
0.247
4 02.06
2009-2010
1506.04
5300
0.284
7 01.82
For the purpose we had conducted the study through analysis of annual reports
on following aspects.
82
EPS
Adj ANPAT
ROTA
6.66
9.49
55.82
12.24
16.83
1677.17
2413.99
2858.37
3133.73
4310.44
0.37
0.46
0.44
0.4
0.44
EPS
Adj ANPAT
ROTA
2005-06
2006-07
2007-08
2008-09
2009-10
4.44
4.7
5.39
5.95
7.3
6.67
7.85
8.4
9.34
9.95
6500.1
6871.83
7423.38
8221.43
8739.97
0.16
0.18
0.18
0.15
0.15
EPS
Adj ANPAT
ROTA
2005-06
2006-07
2007-08
2008-09
2009-10
79
84
88
117
131
15.81
17.1
72.65
17.49
18.24
14003.11
15327.87
16701.65
16083.41
16767.56
0.36
0.33
0.32
0.27
0.25
EPS
Adj ANPAT
ROTA
2005-06
2006-07
2007-08
2008-09
2009-10
18.9
35
36.8
24.7
28.4
0.72
2.04
3.21
0
1.67
94.18
332.59
240.49
-7.46
154.15
0.25
0.44
0.32
0.03
0.21
(Source: Sharma, S., Shukla, R. K.,2010 and Capitaline Neo The Corporate Database)
83
On analysis of above tables, this paper attempts to find possible impact of value
per employee over shareholders wealth. As it is observed on review of financial
disclosers across the industry vide respective annual reports, despite charging
the employee cost as a revenue charge off item in the profit and loss account
every year, there is no mandatory discloser system maintained by most of
the companies in the final statement of affairs on regular basis.
As we know that higher level of debt indicates higher level of fixed interest burden.
Under this favorable environment it helps to magnify EPS, however, the business
becomes more risky in this instance. On the other hand, higher level of equity
indicates lower level of EPS and subsequently lower level of financial risk.
Thus it becomes a notable contributing variable towards share holders wealth.
Hence it is one of our selected variables for the study along with some other
notable parameters of share holders wealth (namely ANPAT and ROTA).
This paper thereby attempts to establish an association of variables between
shareholders wealth (namely EPS, ANPAT, ROTA) and value per employee to
test that if there is any link between employee valuation variable and wealth
maximization variables in the selected companies across the industry. It is done
to determine the necessity of mandatory discloser of VPE in Final Statement of
Affairs on regular basis.
For the above purpose, on pursuit of exploring possible impact of value per
employee on factors influencing shareholders wealth, bivariate correlation
coefficient test was conducted. The hypothesis for the purpose was taken as
detailed below:H0 : There is no significant association between VPE and EPS
Ha : There is significant association between VPE and EPS
H0 : There is no significant association between VPE and ANPAT
Hb : There is significant association between VPE and ANPAT
H0 : There is no significant association between VPE and ROTA
Hc : There is significant association between VPE and ROTA
The test results are shown as below and then analyzed subsequently.
Correlations - BHEL
VPE
EPS
84
VPE
EPS
ANPAT
ROTA
.101
.872
5
.997**
.000
5
.424
.477
5
.174
.780
5
.358
.555
5
Pearson Correlation
Sig. (2-tailed)
N
Pearson Correlation
Sig. (2-tailed)
N
.101
.872
5
VPE
ANPAT
ROTA
**
EPS
ANPAT
ROTA
.458
.438
5
Pearson Correlation
Sig. (2-tailed)
N
.997
.000
5
.174
.780
5
Pearson Correlation
Sig. (2-tailed)
N
.424
.477
5
.358
.555
5
.458
.438
5
1
5
EPS
ANPAT
ROTA
EPS
ANPAT
*
ROTA
.936
.019
5
**
.972
.006
5
-.604
.280
5
.980**
.003
5
-.472
.422
5
-.617
.268
5
Pearson Correlation
Sig. (2-tailed)
N
Pearson Correlation
Sig. (2-tailed)
N
.936*
.019
5
Pearson Correlation
Sig. (2-tailed)
N
.972**
.006
5
.980**
.003
5
Pearson Correlation
Sig. (2-tailed)
N
-.604
.280
5
-.472
.422
5
-.617
.268
5
1
5
85
Correlations - ONGC
VPE
EPS
ANPAT
ROTA
VPE
EPS
ANPAT
ROTA
-.258
.675
5
.659
.226
5
-.979**
.004
5
.481
.412
5
.141
.821
5
-.773
.125
5
Pearson Correlation
Sig. (2-tailed)
N
Pearson Correlation
Sig. (2-tailed)
N
-.258
.675
5
Pearson Correlation
Sig. (2-tailed)
N
.659
.226
5
.481
.412
5
.141
.821
5
-.773
.125
5
Pearson Correlation
Sig. (2-tailed)
N
-.979
.004
5
**
1
5
EPS
ANPAT
86
VPE
EPS
ANPAT
ROTA
.847
.070
5
.791
.111
5
.597
.288
5
.822
.088
5
.732
.159
5
.955 *
.011
5
Pearson Correlation
Sig. (2-tailed)
N
Pearson Correlation
Sig. (2-tailed)
N
.847
.070
5
Pearson Correlation
Sig. (2-tailed)
N
.791
.111
5
.822
.088
5
VPE
ROTA
Pearson Correlation
Sig. (2-tailed)
N
.597
.288
5
EPS
.732
.159
5
ANPAT
.955
.011
5
ROTA
1
5
87
To calculate ROTA:
The greater a companys earnings in proportion to its assets (and the greater
the coefficient from this calculation), the more effectively that company is said to
be using its assets.
This paper thereby makes an attempt to establish an association of variables
between shareholders wealth (namely EPS, ANPAT, ROTA) and value per
employee to test that if there is any association between employee valuation
variable and wealth maximization variables in the selected companies across the
industry. It is done to settle on the prerequisite of mandatory discloser of VPE in
Final Statement of Affairs on regular basis.
As we know that till date most of the companies calculate their earning based on
tangible assets, but they neglect the major asset that is the talented employees,
their knowledge and their experience. Which the company creates by investing in
training, salary and other HR activities. So to calculate the value per employee
company can consider
VPE = Operating profit+salary+payroll expenses+training expense/ average
number of employee
VPE - Value per employee
Operating Profit Profit earned during the year before adjustment of interest,
depreciation, tax and amortization
Salary and Payroll expenses Staffing expenses
Training expenses Cost incurred on training of employees
Average number of employees employed during the year
FINDINGS AND CONCLUSION
As per the above financial analysis it is found that majority of the selected
companies are showing positive effect on establishment of association between
VPE and related variables of share holders wealth.
Thereby following policy matter is recommended in this context.
Financial and non financial reward leads to improved performance. Companies
used a variety of financial and non-financial performance measures. These
included cash flow, customer satisfaction, value added per employee, employee
satisfaction, employee turnover, gross profit percentage, market share, number
of new customers, productivity, profitability, quality, sales and shareholders total
return.
88
It was found that management accountants were working closely with their HR
colleagues to support the HRM function in improving organizational performance.
Areas of collaboration included strategic planning, budgeting, development of
performance related bonus schemes and decision making.
When employees are viewed as assets rather than simply costs, this has a positive
impact on an organizations performance. Overall, those employees who considered
themselves as assets were in no doubt that this view helped to improve their
organizations performance in the long-term.
Human resource accounting can be used to improve the management of human
resources from an organizational perspective by increasing the transparency of
human resource costs, investments and outcomes in the management accounting
rituals, such as profit and loss accounts, balance sheets and investment
calculations. It can also be used to improve the bases for investors. When trying
to implement HRA, efforts should focus on
1. Knowledge of human resource costs, values and outcomes and
how to calculate these
2. Top management demands, as well other ingredients in the reward
system
3. It is necessary to implement HRA from a strategic-management
perspective
Many companies do cost income evaluation of HR function. When new information
sets are available decision would be of good quality. In this paper it is seen that
incorporation of EPS, ANPAT and ROTA has an impact on shareholders wealth
maximization. So HRA becomes decisive factors for managerial decision making.
LIMITATIONS
1. Time series chosen for the period of study is only indicative
2. Data point selected across the industry calls for inclusion of further
industry by nature
3. Interview of HR manager could be conducted for direct feedback about
the policy matter
4. Other wealth maximization parameters such as EVA is left to be tested
for the purpose
REFERENCES
1.
Bikki, J. and Hon, S.L. (1974), Toward a Model for Human Resource Valuation, the
Accounting Review, PP. 321-329
2.
Edmonds and Rogow, Should Human Resources Be Reflected on the Balance Sheet,
Journal of Auburn University, PP. 42-45
3.
Enyi Patrick and Oladipupo Akindehinde (2014), Human Resource Accounting and
Decision Making in Post-Industrial Economy, American International Journal of
Contemporary Research, Vol. 4 No. 2, PP. 110-118
4.
89
Mirvis and Macy (1976), Accounting for the costs and benefits of Human resource
development programs: an interdisciplinary approach, Accounting, Organizations and
Society, Vol. 1, No. 2-3, PP. 179-193
6.
Rajalakshmi and Gomathi (2015), Cost Effective Metrics through HRA, Mediterranean
Journal of Social Sciences, Vol 6 No 3, PP. 251-256
7. Reza, K. Rishma, V., Takeo, Y. and John, I., Human resource policies, accounting and
organizational performance, Research executive summaries series, Vol 5 Issue No 4, PP.
1-12
8.
9.
10. Ulf, J. Gunilla, E. Mikael, Holmgren and Maria, M, Human Resource Costing and Accounting
Versus the Balanced Scorecard: A Literature Survey of Experience with the Concepts, PP.
2-62, published in School of Business, University of Stockholm A Project report
90
INTRODUCTION
One of the most important problems in modern finance is finding an efficient way
to summarize and visualize the stock market data to give individuals or institutions
useful predictive information about the market behavior for investment decisions.
The enormous amount of data generated by the stock market has attracted
researchers to explore this problem using different methodologies. Stock markets
have been studied over and over again to extract useful patterns and predict
their movements. There are various available techniques for modeling these
financial time series data for forecasting. Novel techniques for such modeling are
emerging as a result of continuous research in the field by scholars all over the
world. Most investment decisions in capital market and money markets are
influenced heavily by the movements of these national stock market indices. Thus
the need for predictive modeling of these indices is of utmost importance for proactive investment decisions. In this era of financial linkages between national
economies, movements of stock markets are also interrelated. Moreover, such
transmission of effects nowadays is almost spontaneous due to electronic
movement of funds. Hence, the need for predictive modeling of these indices
considering movements of other prominent indices cannot be undermined. This
study envisages an attempt to study the interrelation between movements of CNX
*
91
Nifty and sixteen prominent national broad-based indices and predictive modeling
of CNX Nifty based on the movements of the other indices on three short-term
prediction horizons i.e. next day, next 2nd day and next 3rd day by Linear Multivariate
Regression technique.
LITERATURE SURVEY
Babu (2011), Panahian (2011), Khan (2011), Pissarenco (2002), Krollner (2010),
Kumar (2009), Singh (2009), Kutsurelis (1998), Hajizadeh (2010) and Hajek (2012)
utilized the technique of neural network in modeling financial time series with
satisfactory results. Dablemont & Verleysen (2005), on the basis of their study,
opined that this method can be applied to all types of time series but is particularly
effective when the observations are sparse, irregularly spaced, occur at different
time points for each curve, or when only fragments of the curves are observed.
Kunst (1997), Claessen & Mittnick (2002) found ARCH model to be effective.
Zhuang (2004) found the combination of GARCH model and Hidden Markov Model
effective in modeling financial time series.
Among scholars who found ARMA model effective are Fuh (2003), Thalassinos
and Tolvi (2002) who did a study on OECD countries.
Among scholars who found fuzzy logic models effective in modeling financial time
series are Chu (2009), Souto-Maior (2011), Chen (2011) & Aznarte (2012).
The results revealed that all individual forecasting methods used in the study and
their combinations, performed poorly. The results indicated that although combining
forecasting method produced gains in accuracy for forecasting stock price or stock
market index value, it failed in providing accuracy for forecasting index movement
direction.
OBJECTIVES OF THE STUDY
The study has been done with the following two basic objectives:
l
l
Whether there is any association between movements of major broadbased stock market indices across the globe and CNX Nifty.
Whether Linear Multivariate Regression technique can be effectively used
to predict CNX Nifty over a short prediction period (from 1 day to 3
days) by using movements of prominent broad-based stock market
indices of other countries as predictor variables.
92
Regions
Indices
Abbreviations
used in the Dissertation
North America
S&P500
S&P
Europe
CAC40
DAX
FTSE
SMI
CAC
DAX
FTS
SMI
Latin America
Bovespa
Merval Buenos Aires
BOV
MER
Asia-Pacific
CNX NIFTY
HANG SENG
NIKKEI
KOSPI
S&PASX200
NIF
HSG
NIK
KOS
ASX
Russia
RTS
RTS
Middle East
TA-25
MSM30
TAI
MSM
Africa
MASI
MSCI SA EZA
MAS
EZA
Daily opening, high, low and closing values of the selected indices have been
taken for the period from 12 January 2011 to 22 September 2014 i.e. 929 data
points.
METHODOLOGY OF THE STUDY
In the study, Linear Multivariate Regression technique has been used to assess
the association between movements of selected broad-based indices across the
globe and to predict movement of CNX Nifty using the movements of other indices
as predictor variables.
For next-day predictions, the opening, highest, lowest and closing values of all
the indices of the previous day are used as the initial set of predictor variables.
For 2nd next-day predictions, the opening, highest, lowest and closing values of all
the indices of the day immediately preceding the previous day are used as the
initial set of predictor variables.
For 3rd next-day predictions, the opening, highest, lowest and closing values of all
the indices of the day immediately two days before the previous day are used as
the initial set of predictor variables.
Kindler Vol. XV l No. 1 l January-June 2015
93
The regression equation is formulated by considering the data for the period
January 12th 2011 to September 22nd 2014.
The constant term as well as the regression coefficients are tested for their
statistical significance using t test at 5% Level of Significance by framing the
following hypotheses:
H0: The coefficient is statistically insignificant
H1: The coefficient is statistically significant
Only those predictor variables have been considered for formulating the regression
equation, for the coefficients of which, the corresponding Null Hypotheses have
been rejected. The same principle has been used to test the statistical significance
of the constant term to decide whether such constant term should be considered
in the regression equation.
The overall association of the dependent and the predictor variables are assessed
by testing the following hypotheses using F test at 5% Level of Significance.
H0: The association between the dependent & predictor variables is statistically
insignificant
H1: The association between the dependent & predictor variables is statistically
significant
The model is accepted only if the Null Hypotheses is rejected.
Though the Autocorrelation in the model was tested by the Durbin-Watson D
statistic, the Autocorrelation measures have not been considered in forming the
inferences in this study due to the following reasons:
a. The DurbinWatson test is based on the following assumptions:
i. Regressor Variables should be non-stochastic in nature;
ii. Error terms should conform to a Normal Distribution;
iii. The model does not include lagged values of the Regress; and
iv. Only first order serial correlation is taken into account.
The conditions mentioned above have not all been met in the constructed models
in this study.
b. A significant D statistic does not necessarily indicate Autocorrelation (Gujrati et
al 2012). It might be due to omission of relevant variables from the model.
The constructed models in this study have not been tested for problems of
Multicollinearity due to the following reasons:
i. Multicollinearity does not violate any assumption for Regression (Achen);
ii. Even in case of high Multicollinearity, the OLS estimators retain the BLUE
property;
iii. If prediction is the sole purpose of forming Regression Equations, as in
the case of the present study, Multicollinearity is not a serious problem
as a high R2 value indicates a better prediction;
iv. Multicollinearity is basically a data-deficiency problem which becomes
unavoidable in case of secondary data available for empirical analysis,
as in this study.
94
The value of the dependent variable as predicted by the model is compared with
the actual values for the period from April 1st 2013 to June 30th 2013 to calculate
the Mean Absolute Percentage Error (MAPE).
The threshold value of an acceptable MAPE has been kept at 1%.
The robustness of the regression equations have been tested by verifying whether
the error terms in the equations as obtained by comparing the predicted values
with the actual ones, are distributed normally. The tests of normality have been
done by using Kolmogorov-Smirnov, Shapiro-Wilk tests using the following
hypotheses:
H0: The error terms are distributed normally
H1: The error terms are not distributed normally
Any regression equation for which the Null Hypotheses is rejected for two or more
out of three tests, is not considered to be a robust one.
FINDINGS AND ANALYSIS
Prediction Horizon - 1 Day Lag
For predicting the 1 Day Lag Daily Closing Value of the dependent variable i.e.
CNX NIFTY, the independent variables have been taken to be the high, low and
closing values of all the other sixteen indices of the previous day. Thus in total
there were forty eight predictor variables.
The statistical significance of the relation between the dependent variable and
the predictor variables has been assessed by testing the following hypotheses at
5% Level of Significance using F test:
H0: The relation between the dependent variable and the predictor variables is
statistically insignificant
H1: The relation between the dependent variable and the predictor variables is
statistically significant
The coefficients of the constant term as well as those of the predictor variables
are assessed for their statistical significance by testing the following hypotheses
at 5% Level of Significance using t test:
H0: The coefficient is statistically insignificant
H1: The coefficient is statistically significant
Any absolute value of the t statistic greater than 2 indicates that the coefficient is
statistically significant.
The portion of the change in the dependent variable as explained by the predictor
variables is measured by calculating the Adjusted R2.
Autocorrelation between the residuals is tested by calculating the Durbin-Watson
D statistic.
The summary of the model is appended hereinafter:
Kindler Vol. XV l No. 1 l January-June 2015
95
Model Summary b
Model
R Square
Adjusted R
R Square
Std. Error of
the Estimate
Durbin
-Watson
.921 a
.848
.847
289.3284
.132
Sum of
Square
df
Mean
Square
1 Regression
4.300E8
6.143E7
Residual
7.701E7
920
83710.923
Total
5.070E8
927
Sig.
.000 a
733.827
Coefficients
Standardized
Coefficients
Std. Error
Beta
Sig.
-1.623
.105
-389.387
239.956
S&PHG
3.642
.131
1.199
27.856
.000
FTSLW
-.428
.064
-.286
-6.712
.000
HSGHG
.170
.011
.401
14.977
.000
NIKLW
-.108
.013
-.393
-8.068
.000
ASXHG
2.013
.448
1.317
4.491
.000
ASXCL
-2.109
.448
-1.386
-4.704
.000
.185
.036
.147
5.150
.000
MSMHG
The F statistic warrants rejection of the Null Hypotheses regarding the relation
between the dependent and the predictor variables as evidenced by the
corresponding p value being lower than the Level of Significance.
The Durbin-Watson d statistic indicates a positive autocorrelation among the
residuals, which has been ignored for reasons discussed in the chapter containing
the methodology of the study.
To test the validity of the model, it has been used to predict the values of the
dependent variable i.e. CNX NIFTY closing values at 1 Day Lag for the period
from September 23rd 2014 to November 3rd 2014 i.e over 30 data points.
The predicted values and the actual are plotted in Chart 1.
Chart 1: Actual vis--vis Predicted Values of NIF at 1 Day Lag
Mean Absolute Percentage Error (MAPE) is calculated from the predicted values
and the corresponding actual values. The MAPE comes to 1.85.
The validity of the model is tested by subjecting the error terms i.e. the differences
between the predicted and actual values, to the testing of the following Hypotheses
at 5% Level of Significance, using Kolmogorov-Smirnov and Shapiro-Wilk Tests:
H0: The Errors follow a Normal Distribution
H1: The Errors do not follow a Normal Distribution
The Null Hypotheses was accepted by both Kolmogorov-Smirnov and ShapiroWilk Tests.
Prediction Horizon - 2 Days Lag
For predicting the 2 Days Lag Daily Closing Value of the dependent variable i.e.
CNX NIFTY, the independent variables have been taken to be the high, low and
closing values of all the other sixteen indices of the day before the previous day.
Thus in total there are forty eight predictor variables.
The statistical significance of the relation between the dependent variable and
the predictor variables has been assessed by testing the following hypotheses at
5% Level of Significance using F test:
H0: The relation between the dependent variable and the predictor variables is
statistically insignificant
H1: The relation between the dependent variable and the predictor variables is
Kindler Vol. XV l No. 1 l January-June 2015
97
statistically significant
The coefficients of the constant term as well as those of the predictor variables
are assessed for their statistical significance by testing the following hypotheses
at 5% Level of Significance using t test:
H0: The coefficient is statistically insignificant
H1: The coefficient is statistically significant
Any absolute value of the t statistic greater than 2 indicates that the coefficient is
statistically significant.
The portion of the change in the dependent variable as explained by the predictor
variables is measured by calculating the Adjusted R2.
Autocorrelation between the residuals is tested by calculating the Durbin-Watson
D statistic.
The summary of the model is appended hereinafter:
Model Summary b
Model
R Square
Adjusted R
R Square
Std. Error of
the Estimate
Durbin
-Watson
.920 a
.846
.845
291.46681
.091
Sum of
Square
df
Mean
Square
1 Regression
4.287E8
1.072E8
Residual
7.833E7
922
84952.900
Total
5.070E8
926
Sig.
.000 a
1.262E3
Coefficients
Standardized
Coefficients
Std. Error
Beta
Sig.
.400
.689
1 (Constant)
90.273
225.709
S&PHG
3.619
.120
1.189
30.283
.000
FTSLW
-.430
.064
-.287
-6.707
.000
HSGHG
.174
.008
.411
21.693
.000
NIKLW
-.089
.012
-.324
-7.513
.000
98
The model has identified four predictor variables with statistically significant
coefficients. The constant term has been found to be statistically insignificant.
The Null Hypotheses regarding statistical significance in all the cases have been
rejected with corresponding p values less than the value of the Level of
Significance.
The Adjusted R 2 value indicates that 84.50% of the change in the dependent
variable is explained by the changes in the predictor variables.
The F statistic warrants rejection of the Null Hypotheses regarding the relation
between the dependent and the predictor variables as evidenced by the
corresponding p value being lower than the Level of Significance.
The Durbin-Watson d statistic indicates a positive autocorrelation among the
residuals, which has been ignored for reasons discussed in the chapter containing
the methodology of the study.
To test the validity of the model, it has been used to predict the values of the
dependent variable i.e. CNX NIFTY closing values at 2 Days Lag for the period
from September 23rd 2014 to November 3rd 2014 i.e over 30 data points.
The predicted values and the actual are plotted in Chart 2.
Chart 2 : Actual vis--vis Predicted Values of NIF at 2 Days Lag
Mean Absolute Percentage Error (MAPE) is calculated from the predicted values
and the corresponding actual values. The MAPE comes to 1.71.
The validity of the model is tested by subjecting the error terms i.e. the differences
between the predicted and actual values, to the testing of the following Hypotheses
at 5% Level of Significance, using Kolmogorov-Smirnov and Shapiro-Wilk Tests:
H0: The Errors follow a Normal Distribution
H1: The Errors do not follow a Normal Distribution
The Null Hypotheses was accepted by both Kolmogorov-Smirnov and
Wilk Tests. (Table 105).
Shapiro-
99
R Square
Adjusted R
R Square
Std. Error of
the Estimate
Durbin
-Watson
.922 a
.851
.850
286.53204
.092
Sum of
Square
df
Mean
Square
1 Regression
4.314E8
1.078E8
Residual
7.561E7
921
82100.611
Total
5.070E8
925
F
1.314E3
Sig.
.000 a
The constructed regression model showing the constant term, the coefficients along
with the values and corresponding t statistic as well as their p values are appended
below:
Coefficients a
Unstandardized
Model
1 (Constant)
Coefficients
Standardized
Coefficients
Std. Error
Beta
Sig.
.672
.502
149.239
221.961
S&PHG
3.689
.118
1.209
31.326
.000
FTSLW
-.469
.063
-.312
-7.418
.000
HSGHG
.177
.008
.418
22.452
.000
NIKLW
-.089
.012
-.324
-7.641
.000
101
Mean Absolute Percentage Error (MAPE) is calculated from the predicted values
and the corresponding actual values. The MAPE comes to 2.00.
The validity of the model is tested by subjecting the error terms i.e. the differences
between the predicted and actual values, to the testing of the following Hypotheses
at 5% Level of Significance, using Kolmogorov-Smirnov and Shapiro-Wilk Tests:
H0: The Errors follow a Normal Distribution
H1: The Errors do not follow a Normal Distribution
The Null Hypotheses was accepted by both Kolmogorov-Smirnov and ShapiroWilk Tests.
The CNX NIFTY index for the three predictions horizons of 1 day lag, 2 days lag
and 3 days lag, has been found to be associated with the movements of the S&P
500 index of USA, FTSE 100 index of Europe, Asia-Pacific indices of HSG, NIKKEI
225 and S&P ASX 200 and the Middle-East index of MSM 30. The MAPE showed
a cup shaped trend of 1.85, 1.71 & 2.00 from 1 day lag to 3 days lag indicating
a cap-shaped accuracy as the prediction horizon got increased.
CONCLUSION
However, from the above, it becomes evident that the study has been successful
in accomplishing the objectives of the study.
Firstly, the study has successfully proved the association between movements of
major broad-based stock market indices across the globe and CNX Nifty.
Secondly the study has conclusively proved that Linear Multivariate Regression
technique can be effectively used to predict CNX Nifty over a short prediction
period (from 1 day to 3 days) by using movements of broad-based stock market
indices of other countries as predictor variables.
FURTHER SCOPE OF RESEARCH
The success of Multivariate Linear Regression technique in predicting broad-based
stock market indices on a short prediction horizon opens up the possibility of
further research in the following areas:
I. Extension of the scope of the current study:
a. Extension to other national broad-based indices: This study has
envisaged only seventeen broad-based indices. Further research may
be undertaken to test the validity of this technique to other important
broad-based national stock market indices which have not been
considered in this study e.g. Dow Jones Industrial Average (DJIA) and
NASDAQ of the United States of America, other European Stock market
indices, SENSEX in India, Taiwan Exchange Index, Belgian Stock Market
Index etc.
b. Validity for different time periods: The present study has been based
on data for the period from January 12th 2011 to November 3rd 2014.
The validity of the findings of this study may be tested for periods both
before and after the period considered for the study. An exercise of
particular interest would be to test the validity of the findings of this
102
study in turbulent times e.g. before, during and after the global meltdown
and other crisis e.g. the Greek crisis.
II. Applicability to other financial time series data
a. Applicability to indices other than broad-based indices: The present study
has been carried exclusively on broad-based indices. However other types
of stock market indices i.e. sectoral indices and thematic indices are
gradually gaining importance. The applicability of linear multivariate
regression approach for predicting these indices may be explored.
b. Applicability to commodity prices with special emphasis on precious metals
(particularly gold) and crude oil: The applicability of linear multivariate
regression technique may be tested for prediction of commodity prices,
specially precious metals which are usually associated with high volatility.
The technique may also be tested for prediction of prices of another
commodity associated with high volatility i.e. crude oil.
c. Applicability to particular stock prices: The applicability of linear
multivariate regression technique may be tested for prediction of
individual stock prices also.
d. Applicability to Foreign Exchanges: The applicability of linear multivariate
regression technique may be also be explored for prediction of Foreign
Exchange Rates which are high-frequency time series data and which
usually require prediction over very short periods to periods upto six
months at the maximum.
III.
Possibility of using other Predictor variables for same dependent variables
as in this study as well as other dependent variables
The technique of linear multivariate regression may be tested by including
the following macro-economic variables as predictor variables i.e.
l Interest Rates,
l Inflation rates,
l Commodity Prices,
l Gross Domestic Product (GDP),
l Forex Rates etc.
IV. Applicability to higher and lower frequency data
The present study has been carried out only on data at daily intervals. The
technique used in this study may be tested on data taken at lower
frequencies i.e. to data at weekly, monthly and quarterly intervals. The
technique may also be tested on higher frequency data i.e. hourly data or
tick-by-tick data for relevant variables.
Applicability to longer and shorter prediction Horizons
V.
The present study has envisaged a Prediction Horizon of 1, 2 & 3 days.
Further research may be undertaken for assessing the predictive accuracy
of the technique for longer prediction horizons i.e. more than 3 days. The
technique may also be used for shorter prediction horizons e.g. hourly or
tick-by-tick periods.
Kindler Vol. XV l No. 1 l January-June 2015
103
VI.
REFERENCES
1.
Aznarte, Jos Luis; Alcal-Fdez, Jess; Arauzo-Azofra, Antonio and Bentez; & Jos
Manuel. (2012). Financial time series forecasting with a bio-inspired fuzzy model. Expert
Systems with Applications 39 (2012) 1230212309
2.
3.
Chen, Tai-Liang. (2011). Forecasting the Taiwan Stock Market with a Novel Momentumbased Fuzzy Time-series. Review of Economics & Finance, 1923-7529-2012-01-38-13,
2011
4.
Chu, Hsing-Hui; Chen, Tai-Liang; Cheng, Ching-Hsue and Huang, Chen-Chi. (2009). Fuzzy
dual-factor time-series for stock index forecasting. Expert Systems with Applications 36
(2009) 165171
5.
Claessen, Holger and Mittnik, Stefan. (2002). Forecasting Stock Market Volatility and the
Informational Efficiency of the DAX Index Options Market. Center for Financial Studies, an
der Johann Wolfgang Goethe Universitt, Taunusanlage 6, No. 2002/04,D-60329, Frankfurt
6.
Dablemont, S.; Van Bellegem, S. and Verleysen, M. (2005). Forecasting High and Low
of financial time series by Particle systems and Kalman filters. Universit catholique de
Louvain, Machine Learning Group, DICE
7.
Fuh, Cheng-Der. (2003). Financial Time Series - ARMA and Time Series Modeling. Institute
of Statistical Science, Academia Sinica, Spring 2003
8.
Hajek, Petr. (2012). Forecasting Stock Market Trend using Prototype Generation Classifiers.
WSEAS Transactions On Systems, E-ISSN: 2224-2678, Issue 12, Volume 11, December
2012
9.
Hajizadeh, Ehsan; Ardakani, Hamed Davari and Shahrabi, Jamal. (2010). Application of
data mining techniques in stock markets: A survey. Journal of Economics and International
Finance, Vol. 2(7), pp. 109-118, July 2010
10. Khan, Zabir Haider; Alin, Tasnim Sharmin and Hussain, Md. Akter. (2011). Price Prediction
of Share Market using Artificial Neural Network (ANN). International Journal of Computer
Applications (0975-8887), Volume 22 No.2, May 2011
11. Krollner, Bjoern; Vanstone, Bruce and Finnie, Gavin. (2010). Financial Time Series
Forecasting with Machine Learning Techniques: A Survey. ESANN 2010 proceedings,
European Symposium on Artificial Neural Networks - Computational Intelligence and
Machine Learning. Bruges (Belgium), 28-30 April 2010, ISBN 2-930307-10-2
12. Kumar, Manish. (2009). Nonlinear Prediction Of The Standard & Poors 500 And The Hang
Seng Index Under A Dynamic Increasing Sample. Asian Academy of Management Journal
of Accounting and Finance, Vol. 5, No. 2, 101118, 2009
13. Kunst, Robert M. (1997). Augmented ARCH Models for Financial Time Series: Stability
conditions and empirical evidence. Applied Financial Economics, 1997, 7, 575586
14. Kutsurelis, Jason E. (1998). Forecasting Financial Markets Using Neural Networks: An
104
Analysis Of Methods And Accuracy. Thesis submitted for the degree of Master of Science
in Management. Naval Postgraduate School, Monterey, California, September 1998
15. Panahian, Hossein. (2011). Stock Market Index Forecasting by Neural Networks Models
and Nonlinear Multiple Regression Modeling: Study of Irans Capital Market. American
Journal of Scientific Research ISSN 1450-223X, Issue 18(2011), pp.35-51
16. Pissarenko, Dimitri. (2002). Neural Networks For Financial Time Series Prediction:
Overview Over Recent Research.
17. Singh, Jang Bahadur. (2009). Current Approaches in Neural Network Modeling of Financial
Time Series. Working Paper NO.280, Indian Institute of Management Bangalore, March
2009
18. Souto-Maior, Cesar Duarte; Borba, Jos Alonso and da Costa Jr, Newton C. A. (2011).
S&P 500 Index Direction Forecasting from 1976 to 2010: A Fuzzy System Approach, The
International Journal of Digital Accounting Research, Vol. 11, 2011, pp. 111 - 134, ISSN:
1577-8517
19. Thalassinos, Eleftherios and Pociovliteanu, Diana-Mihaela. (2008). A Time Series Model
For The Romanian Stock Market. Annals of the University. Constantin Brncui of Tg-Jiu,
No. 1/2008, Volume. 1, ISSN: 1842-4856
20. Tolvi, Jussi. (2002). Outliers and Predictability in Monthly Stock Market Index Returns. LTA
4/0 2,pp 369380
21. Zhuang, Xiong-Fei and Chan, Lai-Wan. (2004). Volatility Forecasts in Financial Time Series
with HMM-GARCH Models. IDEAL 2004, LNCS 3177, pp. 807812, 2004
105
106
INTRODUCTION
Present world scenario forced social science researchers to focus on identifying
the basic psychological unit of Peace and Violence. The past decade has seen
growing movement towards a view of empathy as a multi-dimensional construct of
PEACE. If empathy is the basic unit peace then to control and eliminate violence
empathy teaching should be given priorities. Empathy teaching should become
cardinal aspect of the curriculum of any institution. Empathic attributes enhance
leadership acumen.
A leader is one, who leads the group because of his decision making skills, problem
solving ability, effective interpersonal relationship, perseverance and high social
skills. The most important aspect of a leader is, he/she always keeps the group
interest ahead his own interest and is sensitive towards others problems. It is
*
Research Scholar, Utkal University, Vani Vihar, Bhubaneswar 751004; Email : sasmit991@gmail.com
107
evident from the history that all charismatic leaders like Mahatma Gandhi, Martin
Luther King Jr, Mother Teresa, Nelson Mandela came in to prominence because
of their humanitarian approach. They are apostle of human cause and dignity.
They all displayed splendid leadership acumen where empathy for fellow human
being was profound. In fact all charismatic leaders exhibited empathic discourse
as their key functional skill.
Homosepeans are designed to be empathetic to fight and sustain survival
impediments of evolution process. Their compassion and solidarity, cohesion, unity,
fellow- feeling are all life -skills and Species Specific Behavior to fight back
extinction process. Without these qualities it would had been difficult for them to
evolve through the tyranny of eon. The presence of oxytocin, mirror neurons,
and research in evolutionary biology all suggest that our brain circuitry has evolved
with empathy as its core element.
The role of empathy in education, human development and leadership has
been the subject of in-depth study in a wide range of fields from sociology,
psychology and, to neuroscience to evolutionary biology, economics and civic
engagement. This research clearly shows that empathy matters, whether youre
talking about leadership, development and the ability to function within a team.
There are numerous evidences in our country where Indian Army showed exemplary
bravery to handle challenging situations. As a lay man we have a stereotyped
notion towards army that is, Army is synonymous of killing, violence, destruction
etc. Although army men and women are trained to be aggressive to handle severity
of wars and violent conflicts but they are the undaunted leaders who sacrifice
their lives and show altruism for the fellow citizens.
Leadership is an important aspect of personality and organizations all around the
globe are highly concerned to understand, develop and explore various parameters
of good leadership. Regardless of the size of the organization, leadership plays a
vital role in building high performance teams. Leaders influence followers to
understand and agree about individual or collective task-completion by investing
collective efforts to accomplish a shared objectives. So the researcher thought to
study their empathic acumen and leadership dynamism. Army training procedure
is strict, rigorous, meticulous, difficult, psychologically and physically pressing. But
army discipline, training, hardship and life-style teaches Officers to be disciplined,
alert, diligent, caring, compassionate, co-operative, tolerant, and accommodative
individuals who can even sacrifice his/her life for others. Their motivation levels
are high and their empathic acumen ought to be more because they go through
a process of indoctrination where empathic acumen get instilled.
REVIEW OF LITERATURE
The psychologist Edward Titchener (18671927) introduced the term empathy
in 1909 into the English language as the translation of the German term
Einfhlung (or feeling into), a term that by the end of the 19th century was in
German philosophical circles understood as an important category in philosophical
aesthetics.
Salovey and Mayer (1990, p. 194) reported that empathy may be a central
108
109
111
tune into the person were with and activate in our brain what theyre feeling,
what theyre doing, what theyre intending. So we get a detailed sense of whats
going on with the other person. This is what creates chemistry and you need that
for any interaction. According to Goleman the third kind of empathy is empathic
concern. This refers to the kind of leader who actually cares about you, who
actually tunes into you, who will help you by creating a situation whereby you can
be at your best. So, all three of those are very important for leaders.
In-Depth Interview
In-Depths interviews were taken from senior Army Officers. They all got vast service
experiences with high altitude postings, postings in counter insurgency areas and
attended prestigious courses like Commando, Junior Command, Senior Command,
Defence Services Staff Course, Technical Staff Course etc. These courses are of
high value generation as they train officers on varied cutting edge technologies
pertaining to warfare, counterinsurgencies, man management, logistic supply, missile
operation, tele-communication and cyber war fare.
According to these high profile officials, army follows excellent man management
skills. When officers get in to the academy i.e Indian Military Academy, they are
all imparted various military skills along with empathy, altruism, co-operation,
solidarity all these inter -twined with military training skills.
Commemorating with the Chetwode Hall Inscription in IMA, the ethos of Indian
Army takes shape, where in the oak panelling at the Eastern entrance of the
Hall is the Academys credo, excerpted from the speech of Field Marshal Phillip
Chetwode at the inauguration of the Academy in 1932:
The safety, honour and welfare of your country come first, always and every
time.The honour, welfare and comfort of the men you command come next. Your
own ease, comfort and safety come last, always and every time.
This Credo teaches Altruism to the Gentlemen Cadets. They enter in to the Hall
of Fame with unparallel devotion and dedication. This credo installs respect, care,
commitment and empathy in the minds of officers towards their country men and
men they command.
Man management Skills followed during the Regimentation that intents socialization
skill development, group cohesion, empathy and bonding.
1. When an officer gets commissioned to regiment as per the provision he
is attached to the jawans barrack for a month so that he understands
the actual ground reality of his men he is going to command.
2. Proper documentation is done in company level where the details of Jawans
are given.
3. A junior commissioned officer every day takes grievances in detail and
takes immediate action.
4. An empathic behavior module got incorporated in the system to enrich
bonding and fellow feeling and comradeship.
5. BADA KHANA where all officers and jawans share a meal together.
6. Mandir Parade- Every one get assembled at Sarv Dharm Sthal
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113
REFERENCES
1. Ashkanasy, N. M., & Tse, B. (2000). Transformational leadership as management of emotion: a
conceptual review. In N. M. Ashkanasy, C. E. J. Hartel, & W. J. Zerbe (Eds.), Emotions in the workplace:
research, theory and practice ( pp. 221235). Westport, CT: Quorum Books.
2. Cooper, R. K., & Sawaf, A. (1997). Executive EQ: emotional intelligence in leadership and organizations.
NewYork: Grosset/Putman
3. Goleman, D. (1995). Emotional intelligence. New York: Bantam Books.
4. Goleman, D. (1998a, NovemberDecember). What makes a leader? Harvard Business Review, 93102.
5. Goleman, D. (1998b). Working with emotional intelligence. New York: Bantam Books.
6. House, R. J., & Aditya, R. N. (1997). The social scientific study of leadership: quo vadis? Journal of
Management,23(3), 409473.
7. House, R. J., & Podsakoff, P. M. (1994). Leadership effectiveness: past perspectives and future
directions for research. In J. Greenberg (Ed.), Organizational behavior: the state of the science (pp.
4582).
8. Plutchik, R. (1987). Evolutionary bases of empathy. In N. Eisenberg, & J. Strayer (Eds.), Empathy and
its development ( pp. 3846). New York: Cambridge Univ. Press.
9. Rogers, C. R. (1951). Client-centered therapy. Boston: Houghton Mifflin.
10. Rogers, C. R. (1975). Empathic: an unappreciated way of being. The Counseling Psychologist, 5(2),
210.
11. Ross, L. (1977). The intuitive psychologist and his shortcomings: distortions in the attribution process.
In L. Berkowitz (Ed.), Advances in experimental social psychology, vol. 10 (pp. 173220). San Diego:
Academic Press.
12. Salovey, P., & Mayer, J. D. (1990). Emotional intelligence. Imagination, Cognition and Personality, 9(3),
185211.
13. Stogdill, R. M. (1948). Personal factors associated with leadership: a survey of the literature. Journal
of Psychology,25, 3571.
14. Stogdill, R. M. (1965). Managers, employees, organizations: a study of 27 organizations. Columbus, OH:
Bureau of Business Research, Ohio State University.
15. Stogdill, R. M. (1974). Handbook of leadership (1st ed.). New York: Free Press.
16. Yukl, G. (1998). Leadership in organizations (4th ed.). Upper Saddle River, NJ: Prentice Hall.
17. Yukl, G. (2001). Leadership in organizations (5th ed.). Upper Saddle River, NJ: Prentice-Hall.
ANNEXURE
Research Questions
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
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116
STUDENT CONTRIBUTION
INTRODUCTION
The project deals with the Enhancement of Service Quality by Bank of India
through Technology. A study was conducted at Bank of India, Dobson lane branch,
Howrah to understand the customer perception about e-banking services and its
efficiency. For the project the technology studied was only the one used at
customer interface that is e-banking facilities. Thus, a description of Service
Quality and e-banking services as Service Quality enhancer is being provided
in this section in order to make it easier to understand the project.
Service Quality
Service quality is a business administration term used to describe achievement in
service. It reflects both objective and subjective aspects of service (Dr.Manasa
Nagabhushanam).
Quality is a concept which requires concern both in product as well as in services.
To market a product, quality plays a pivotal role to sell a product. In fact, quality
is considered as the most important factor that influence on the buying behaviour
of the customer.
One strategy that has been related to success of service industries is the delivery
of high service quality. Therefore that makes service quality an important aspect
of study for the service industries.
As customer becomes sophisticated it becomes essential to consider the use of
technology to respond to their continuous needs. Banking is an industry highly
involved with customers. Customers in developing economies seem to keep the
technological factorsof services as the yardstick in differentiating good and bad
services.
*
119
scale to customers are more reputed in the eyes of customers. But at the same
time technology based product is different in public and private sector banks.
Bank automation and electronic banking is fast in private sector comparative to
public sector.
E-banking is an improvement over traditional banking system because it has
reduced the cost of transaction processing, improved the payment efficiency,
financial services and also has improved the banker-customer relationship. The
relationship between e-banking and service quality can be studied with the level
of satisfaction. E-banking plays a pivotal role in giving satisfaction to the customers
because e-banking fills the gap between the expected and perceived service
quality. So in order to fill this gap, banks should find ways of making electronic
services more accessible and by allowing the customer to verify the accuracy of
the e-banking transactions.
There are number of reasons due to which service efficiency on account of ebanking has improved. The reasons are as follows:
1. Customer can withdraw funds, transfer funds anytime, anywhere they
want.
2. Accessibility has been extended through technological development as
it allows customers to do business from their home and office.
3. It makes the banking activities and transaction very simpler to understand
4. There is no requirement of direct control with bank, as services can be
operated wherever customer want
E-Banking
A sound and effective banking system is the backbone of an economy. The
economy of a country can function smoothly and without many hassles if the
banking system backing it is not only flexible but also capable of meeting the new
challenges posed by the technology and other external as well as internal factors.
The importance and role of information technology for achieving this benign objective
cannot be undermined. There is an urgent need for not only technology up
gradation but also its integration with the general way of functioning of banks to
give them an edge in respect of services provided to the customers, better
housekeeping, optimizing the use of funds and building up of management
information system for decision making. The technology has the potential to change
methods of marketing, advertising, designing, pricing and distributing financial
products and services and cost savings in the form of an electronic, self-service
product-delivery channel. The technology holds the key to the future success of
Indian Banks. Thus, Electronic Banking is the need of the hour, which cannot
be lost sight of except at the cost of elimination from the competition. The existence
of Electronic banking also becomes inevitable due to the standards required to
be matched at the international level. Thus, the domestic as well as the
international standards mandates the adoption of Electronic banking at the earliest
possible moment.
In India, from the early I990s, electronic banking is gaining in popularity as an
Kindler Vol. XV l No. 1 l January-June 2015
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123
would induce higher customer loyalty. It also highlights that there is significant
difference in e-banking facilities of public, private and foreign banks (Navneet
Kaur, 2015).
OBJECTIVES
1.
2.
3.
4.
SCOPE OF STUDY
The study encompasses the respondents only of Dobson Lane Branch, HowrahBank of India only. The study deals only with the perception of the customers
regarding the enhancement of service efficiency using e-banking services. The
questionnaire also covers the demographic profile of the respondents.
RESEARCH METHODOLOGY
To conduct the survey a questionnaire was prepared to get all the relevant
information from the customers of the bank. The questionnaire prepared is a
structured one and has only closed ended questions. The questionnaire was so
prepared to get information regarding
l the demographic profile of the sample
l the type of e banking services used by the customers
l the perception of the customers regarding the service efficiency of various
e banking services and also the overall experience of the e-banking
facilities provided by the bank
The survey is to be conducted from the customers of the Dobson lane branch
only. The survey conducted would be an undisguised survey.
Kindler Vol. XV l No. 1 l January-June 2015
125
The sample size to be covered for the study is 90. Sampling involves following steps:
l Firstly equal number (30) of respondents from each income group i.e.
high, middle and low were to be obtained
l For high income group customer database of bank is to be used.
l For middle and low income group customer combination of judgemental
and convenience sampling is to be used.
Research method was quasi descriptive research. The problem was well defined
and the study aimed at discovering the composition of the sample and
understanding the characteristics of the sample and reasons for such
characteristics.
Chi Square test to be performed using SPSS tool to find the association between:
l The demographic profile and the frequency of customers visiting the
bank.
l The frequency of usage of various e banking service and perception of
the customers regarding the service efficiency of that e banking service.
l The demographic profile and the overall experience about the service
efficiency of the e banking facilities provided by the bank
Before applying the test, hypothesis needs to be framed to check the validity of
the tests result. The hypotheses framed are as follows:
Null hypothesis H0: There is no association between the two attributes.
Alternate hypothesis H1: There is association between the two attributes
The level of significance taken is 5% for the tests. The p value is 0.05, which
means if the chi square test value comes below 0.05 then null hypothesis would
be rejected and alternate hypothesis would be accepted. If the chi square test
value comes more than p value then null hypothesis is accepted.
All the options of each question have been coded and the detail of the codes
has been listed down in the annexure.
Data Collection
During my internship I collected the data from both the primary as well as
secondary sources. It involved collection of primary data through structured
questionnaire and secondary data gathered through internet.
Primary Source primary source included data gathered through structured
questionnaire.
l For the high income group customers: the database from the bank
was provided, so to collect responses from them calling was done
according to convenience and the response was recorded.
l For the middle and low income group customers: the data was
collected by visiting the branch of the bank and there through personal
one to one communication the responses were noted. A combination of
judgemental and convenience sampling was adopted.
Secondary Source secondary source include various websites. The database
126
from the branch of the bank was also used for the collection of responses from
the high income group customers.
A sample questionnaire has been provided at the end of the report, in the annexure
for the sake of better comprehension.
Data Representation
INCOME PROFILE
The pie chart reflects the break-up of the income profile of the data. The sample
was chosen intentionally so as to have equal proportion of all the income groups.
l 33.33% of the customers are high income group.
l 33.33% of them belong to middle income group.
l 33.34% are from low income group.
OCCUPATION PROFILE
The pie chart reflects the break-up of occupation of the data. It can be observed that:
l 35% of the customers are servicemen / women.
l The business men/ womenform the 32% of the customers.
l The rest 33% are divided as follows: 13% of housewives, 11% belongs
to retired ones and the rest 9% are the students.
127
EDUCATIONAL PROFILE
The pie chart reflects the break-up of the educational qualification of the data. It
can be observed from the chart that:
l The maximum i.e. 37% of the customers are graduates.
l The next 20% are 12th pass, then it is followed by 18% of them who are
10th pass.
l The customers below 10th standard comprises of 15% of the total.
l Postgraduate forms just the 7% of the total customers.
l The rest 3% are the ones who never went to school.
GENDER PROFILE
The pie chart reflects the break-up of the gender of the data. It can be observed
from the chart that:
l 69% of the customers are male and
l The rest 31% are female.
128
AGE PROFILE
The pie chart shows the break-up of the age profile of the data. It can be observed
from the chart that:
l 54% belongs to the age group 25yrs-45yrs.
l The next 26% belong to the age group 45yrs to 60yrs.
l The age group above 60yrs forms 11% of the customers.
l The least are below 25yrs who form just 9% of the customers.
129
DATA ANALYSIS
Table 1 :
Q2: Income group of the respondent
Q8: Frequency of visiting the banks
Q8
A
Total
B
Q2
H
16
14
0
0
30
L
6
14
10
0
30
M
15
13
1
1
30
Total
37
41
11
1
90
From the above table it can be inferred that the frequency of low income group
visiting the bank is more than the middle and high income group. Approximately
54% of the high income group .
Customers visit the bank once or twice and none of them visit more than 5 times
in a month. Out of 11 customers, 10 are from the low income group that visit the
bank more than 5 times in a month.
Null hypothesis H0: There is no association between the income group of the
respondents and the frequency of respondents visiting the bank
Alternative hypothesis H1: There is association between the income group of
the respondents and the frequency of respondents visiting the bank
Chi-Square Tests
PearsonChi-Square
Value
Df
23.513
.001
The p value comes to 0.001 which is less than the set value of alpha at 0.05.
Hence, we reject the null hypothesis and infer that there is a statistically significant
association between income group and frequency of visiting the bank.
As it is statistically also proven that there is relation between the income group
and frequency of visiting the bank. So the low income group should be targeted
by the bank to make them aware of the e banking services and its utilities.
Table 2 :
Q3: Occupation of the respondents
Q8: Frequency of visiting the bank
Q8
Total
A
B
C
D
Q3
H
R
SR
ST
Total
130
B
6
5
15
6
37
5
6
4
14
1
41
16
0
1
2
0
11
8
0
0
0
1
1
0
12
10
31
8
90
29
From the above table it can be observed that out of 37 customers that visit the
bank just once or twice in a month majority that is 41% of them belong to service
class and the least 14% belong to retired class. 11 customers visit the bank 5 to
10 times out of that 72% belong to business class. Out of 8 student customers, 6
visit the bank just once or twice. Therefore this indicates that service class and
student do not visit the bank frequently. The business class visits the most
frequently. Majority of the retired and housewives visit 2 to 5 times.2Null
Hypothesis H0: no association between the occupation of the respondent and
the frequency of respondent visiting t There is he bankAlternate Hypothesis
H 1: There is association between the occupation of the respondent and the
frequency of respondent visiting the bank.Chi-Square Tests
Pearson ChiSquare
Value
Df
28.885
12
.004
The p value comes to 0.004 which is less than the set value of alpha at 0.05.
Hence, we reject the null hypothesis and infer that there is a statistically
significant association between occupation of the respondent and their
frequency of visiting the bank.So, it can be inferred that the business class
need to be targeted and make them aware of the e -banking facilities.
Table 3 :
Q4: Educational qualification of the respondents
Q8: Frequency of visiting the bank
Q4
G
N
PG
TN
TW
Total
BT
16
3
6
4
5
37
Q8
A
Total
B
3
15
0
0
7
11
41
8
1
0
0
5
2
11
3
1
0
0
0
0
1
0
33
3
6
16
18
90
14
From the above table it can be observed that 100% of the post graduate qualified
customers visit the bank just once or twice in a month. Approximately 48% of
graduate qualified customers visit the bank once or twice,45% of graduated visit
the bank 3 to 5 times in a month and the rest 6% more than 5 times. Most of the
customers around 46% visit the bank 3 to 5 times in a month and few approximately
12% visit 5 to 10 times. Out of these 12 % that visit 5 to 10 times, 45 % are
class ten pass. This reflects that as the educational qualification increases the
customers visit the bank lesser times as they try to use e banking facilities.
Null Hypothesis H0: There is no association between the educational qualification
of the respondent and the frequency of the respondent visiting the bank
Kindler Vol. XV l No. 1 l January-June 2015
131
Pearson Chi-Square
Value
Df
27.454
15
.025
The p value comes to 0.025 which is less than the set value of alpha at 0.05.
Hence, we reject the null hypothesis and infer that there is a statistically
significant association between educational qualification of the respondent
and their frequency of visiting the bank.So it is proved statistically also that
frequency of visiting the bank is related to educational qualification.
Table 4:
Q5: Gender of the respondents
Q6: Frequency of visiting the bank
Q5
M
Total
F
20
37
Q8
A
Total
B
17
30
41
11
11
11
0
1
1
0
62
90
28
From the above table it can be observed 61% of the female customers visit the
bank just once or twice in a month and the rest 39% visit 3 to 5 times. None of
them visit the bank more than 5 times in a month. But 32% of the male customers
visit just once or twice, 49% of them visit 3 to 5 times and approximately 12 %
visit more than 5 times in a month. This shows that male customers visit the bank
more often than the counterpart.
Null Hypothesis H 0 : There is no association between the gender of the
respondent and the frequency of the respondent visiting the bank
Alternate Hypothesis H 1: There is association between the gender of the
respondent and the frequency of the respondent visiting the bank
Chi-Square Tests
Pearson Chi-Square
Value
Df
9.569
.023
The p value comes to 0.023 which is less than the set value of alpha at 0.05.
Hence, we reject the null hypothesis and infer that there is a statistically significant
association between gender of the respondent and their frequency of visiting the
bank
132
So it is statistically also proven that there is a relation between the gender of the
customer and their frequency of visiting the bank. From the table we can say that
bank needs to target male customers to use e banking facilities more as they are
the ones who come to bank more often. But on the other hand the bank should
also try and convince the female customers by making them aware that e banking
facilities can be used from home.
Table 5 :
Q6: Age of the respondents
Q8: Frequency of visiting the bank.
Q6
B
C
D
Total
A
19
7
5
37
Q8
A
Total
B
6
23
13
4
41
1
7
3
1
11
0
0
0
0
1
1
49
23
10
90
From the above table it can be observed that 75% of customers belonging to
age group below 25yrs visit the bank just once or twice. Approximately 47% of
the customers belonging to age group 25yrs to 45yrs visit the bank 3 to 5 times
in a month, 15% visit the bank more than 5 times, and the rest 39% visit just
once or twice in a month.57% of the customers belonging to age group 45yrs to
60yrs visit the bank 3 to 5 times in a month, around 13% visit the bank more
than 5 to 10 times and the rest 30% visit just once or twice. Approximately 50%
of the customers belonging to age group above 60yrs visit the bank just once or
twice in a month, and the rest visit more than 5 times in a month. This shows that
the customers belonging to age group 25yrs to 45yrs are more frequent to banks
than others. The customers of age below 25yrs visit the bank least.
Null Hypothesis H0: There is no association between the age of the respondent
and the frequency of the respondent visiting the bank.
Alternate Hypothesis H1:There is association between the age of the respondent
and the frequency of the respondent visiting the bank.
Chi-Square Tests
Pearson Chi-Square
Value
Df
17.196
.046
The p value comes to 0.046 which is less than the set value of alpha at 0.05.
Hence, we reject the null hypothesis and infer that there is a statistically
significant association between age of the respondent and their frequency
of visiting the bank. So it is statistically also proven that there is an association
between the age group and frequency of visiting the bank.
Kindler Vol. XV l No. 1 l January-June 2015
133
Table 6 :
Q10a: Frequency of usage of ATM by the respondents
Q10c: Perception of the respondents regarding the service efficiency of ATM
Q10a
B
C
D
Total
A
4
17
4
24
Q10c
AG
DS
NO
SA
SD
Total
0
0
0
0
5
5
0
0
0
31
31
4
14
10
28
0
1
0
0
1
0
9
31
14
90
36
From the table it can be observed that the customers whose frequency of usage
of ATM is zero, out of them around 87% do not have any opinion regarding
ATMs service efficiency. The ones who use ATM just once or twice among them
around 45% agrees and also 45% strongly agrees that service efficiency of bank
increases due to ATM. 72% of the customers who visit the bank more than 10
times strongly agrees. Hence as the frequency of usage of ATM increases the
opinion also changes from no opinion to strongly agree.
Null Hypothesis H0: There is no association between the frequency of usage of
ATM by respondents and their perception regarding the service efficiency of ATM.
Alternate Hypothesis H 1: There is no association between the frequency of
usage of ATM by respondents and their perception regarding the service efficiency
of ATM.
Chi-Square Tests
Pearson Chi-Square
Value
df
111.991
15
.000
The p value comes to 0.000 which is less than the set value of alpha at 0.05.
Hence, we reject the null hypothesis and infer that there is a statistically
significant association between frequency of usage of ATM and their
perception regarding the service efficiency of ATM. As it is statistically also
proven therefore the bank should try and convince their customers that they use
the ATM facility more and hence that would ultimately add to the service efficiency
of bank.
Table 7:
Q11a: Frequency of usage of internet banking by the respondents
Q11b: Perception of the respondents regarding service efficiency of internet
banking.
134
Q11B
Q11A
B
C
Total
A
5
5
10
AG
0
1
0
78
Total
NO
77
0
2
2
SA
0
6
7
90
77
From the table it can be inferred that out of 90 customers 77 are not using this
service therefore they have no opinion about its service efficiency. But around 13
customers use it and out of them 77% agree and 15% strongly agrees that service
efficiency increases due to internet banking. Just 7% of them have no opinion.
This shows that higher the usage of this facility higher the positive perception
about its service efficiency.
Null Hypothesis H0: There is no association between the frequency of usage of
internet banking by the respondents and their perception regarding the service
efficiency of the internet banking.
Alternate Hypothesis H 1: There is no association between the frequency of
usage of internet banking by the respondents and their perception regarding the
service efficiency of the internet banking.
Chi-Square Tests
Pearson Chi-Square
Value
Df
94.396
.000
The p value comes to 0.000 which is less than the set value of alpha at 0.05.
Hence, we reject the null hypothesis and infer that there is a statistically
significant association between frequency of usage of internet banking
and their perception regarding the service efficiency of internet
banking.So it is also statistically proved that there is a relation in frequency of
usage of internet banking and the perception of customers regarding its service
efficiency. The more the usage the more the perception that service efficiency
increases using internet banking.
Table 8 :
Q12a: Frequency of usage of mobile banking by the respondents
Q12b: Perception of the respondents regarding the service efficiency of mobile
banking.
Q12b
Q12a
Total
A
B
D
9
AG
0
9
0
78
Total
NO
76
2
0
3
SA
0
2
1
90
76
13
1
135
From the table it can be observed that approximately 84% of the customers do
not use mobile banking service. But the customers who are using it majority (86%)
of them agrees or strongly agrees that service efficiency increases by using mobile
banking. The rest 14% of them have no opinion. This shows that if the facility is
not used then they have no opinion regarding its service efficiency. Therefore it
can be said that if mobile banking is used it will increase the service efficiency of
the bank.
Null Hypothesis H0: There is no association between the frequency of usage of
mobile banking by the respondents and their perception regarding the service
efficiency of mobile banking.
Alternate Hypothesis H1:There is association between the frequency of usage
of mobile banking by the respondents and their perception regarding the service
efficiency of mobile banking.
Chi-Square Tests
Pearson Chi-Square
Value
Df
99.586
.000
The p value comes to 0.000 which is less than the set value of alpha at 0.05.
Hence, we reject the null hypothesis and infer that there is a statistically
significant association between frequency of usage of mobile banking by
the respondent and their perception regarding the service efficiency of
mobile banking.It is statistically also proven from the above test that there is
association between the frequency of usage and perception of customers regarding
its service efficiency.
Table 9:
Q13a: Frequency of usage of RTGS/NEFT by the respondents
Q13b: Perception of the respondents regarding the service efficiency of RTGS/
NEFT.
Q13b
Q13a
Total
A
B
C
D
25
AG
0
22
3
0
63
Total
NO
62
1
0
0
2
SA
0
1
0
1
90
62
24
3
1
From the table it can be observed that approximately 69% of the customers do
not use RTGS/NEFT facility so they have no opinion regarding its service
efficiency. But approximately 96% of the customers who are using the facility agree
that the service efficiency increases by using RTGS / NEFT service. As the
136
frequency of usage of this service increases the perception regarding its service
efficiency also increases. The customers who use it more than 5 times all of them
agree that service efficiency increases by using RTGS/NEFT.
Null Hypothesis:There is no association between the frequency of usage of RTGS/
NEFT by the respondents and their perception regarding the service efficiency of
RTGS/NEFT.
Alternate Hypothesis: There is no association between the frequency of usage
of RTGS/NEFT by the respondents and their perception regarding the service
efficiency of RTGS/NEFT.
Chi-Square Tests
Pearson Chi-Square
Value
Df
128.906
.000
The p value comes to 0.000 which is less than the set value of alpha at 0.05.
Hence, we reject the null hypothesis and infer that there is a statistically significant
association between frequency of usage of RTGS/NEFT and their perception
regarding the service efficiency of RTGS/NEFT.
Table 10 :
Q14a: Frequencies of usage of e-pay service by the respondents
Q14b: Perception of the respondents regarding the service efficiency of e-pay
service
Q14a
Total
A
B
5
Q14b
AG
0
5
85
Total
NO
84
1
90
84
6
From the table it can be observed that approximately 93% of the customers do
not use e pay service facility. But 83% of the customer who uses it agrees that
the service efficiency increases by using this facility. Therefore it can be said that
if e-pay service is used then it would increase the service efficiency of banks.
Null Hypothesis H0:There is no association between the frequency of usage of
e pay service by the respondents and their perception regarding the service
efficiency of e pay service.
Alternate Hypothesis H1:There is association between the frequency of usage
of e pay service by the respondents and their perception regarding the service
efficiency of e pay service.
Chi-Square Tests
Pearson Chi-Square
Value
Df
74.118
.000
137
The p value comes to 0.000 which is less than the set value of alpha at 0.05.
Hence, we reject the null hypothesis and infer that there is a statistically
significant association between frequency of usage of e pay service by
the respondents and their perception regarding the service efficiency of
e pay service.As we can see from the above test it is proved that frequency of
usage of e pay service affects the perception of customer regarding the service
efficiency of e pay.
Table 11 :
Q2: Income group of the respondents
Q10c: Perception of the respondents regarding the service efficiency of ATM.
Q2
L
M
Total
H
0
12
24
Q10C
AG
Total
DS
NO
SA
SD
12
4
1
5
0
26
2
31
3
0
14
29
15
0
1
1
0
30
30
90
30
From the above table it can be observed that 90% of the customers belonging to
high income group strongly agree that service efficiency increases through ATM.
Approximately 87% of the middle income group customers also agree that service
efficiency increases through ATM.
But the 87% of the low income group customers have no opinion regarding the
service efficiency of ATM facility. This reflects that income group is associated
with the usage of ATM service. Higher the income greater the usage of ATM
service due to availability of resources and awareness among them. When the
usage is high that helps the customer to understand its service efficiency. Therefore
the customers who are not using it will have no say regarding its service efficiency.
Null Hypothesis H0: There is no association between the income group of the
respondents and their perception regarding the service efficiency of ATM.
Alternate Hypothesis H1: There is association between the income group of the
respondents and their perception regarding the service efficiency of ATM.
Chi-Square Tests
Pearson Chi-Square
Value
Df
69.429
.000
The p value comes to 0.000 which is less than the set value of alpha at 0.05.
Hence, we reject the null hypothesis and infer that there is a statistically
significant association between income group of the respondents and their
perception regarding the service efficiency of ATM.From the above test
138
performed it is proved that the income group affects the perception of the
customers.
Table 12 :
Q3: Occupation of the respondents
Q10c: Perception of the respondents regarding the service efficiency of ATM.
Q3
H
R
SR
ST
Total
B
3
2
8
1
24
Q10C
AG
Total
DS
NO
SA
SD
10
2
0
1
0
5
2
7
7
6
0
31
11
0
1
15
7
29
6
0
0
1
0
1
0
12
10
31
8
90
29
From the above table it can be observed that 38% of the business holding
customers has no opinion, but approximately 55% think that ATM increases the
service efficiency of the bank. The customers who are service occupied majority
of them that is 74% think that service efficiency increases due to ATM. Only 19%
of service class have no opinion and the rest 7% disagree with the fact that
service efficiency increases due to ATM. 100% of the student customer strongly
agrees that service efficiency increases by using ATM. 70% of the customers who
are retired have no opinion regarding the service efficiency and the rest 30%
agrees that service efficiency increases due to ATM. Approximately 58% of the
housewives have no opinion , 25% of them agrees that service efficiency increases
and the rest 16% disagrees with the fact that service efficiency increases due to
ATM.
Null Hypothesis H 0: There is no association between the occupation of the
respondents and their perception regarding the service efficiency of the ATM.
Alternate Hypothesis H1: There is association between the occupation of the
respondents and their perception regarding the service efficiency of the ATM.
Chi-Square Tests
Pearson Chi-Square
Value
Df
34.683
16
.004
The p value comes to 0.004 which is less than the set value of alpha at 0.05.
Hence, we reject the null hypothesis and infer that there is a statistically
significant association between occupation of the respondents and their
perception regarding the service efficiency of ATM.As it is statistically also
proven that occupation of customers affect their perception regarding service
efficiency.
Kindler Vol. XV l No. 1 l January-June 2015
139
Table 13:
Q4: Educational qualification of the respondents
Q10c: Perception of the respondents regarding the service efficiency of ATM
Q10C
Q4
G
N
PG
TN
TW
Total
BT
15
0
0
4
5
24
Total
AG
DS
NO
SA
SD
0
1
0
0
3
0
5
1
1
3
0
7
7
31
13
15
0
6
2
6
29
0
1
0
0
0
0
1
0
33
3
6
16
18
90
14
From the table it can be observed that customers having education below tenth,
93% of them have no opinion regarding the service efficiency of the ATM service
this indicates they are not aware of the facility and they dont use it also. The
customers having education till tenth, just 37% of them agrees that ATM increases
the service efficiency, this indicates that due to lack of proper knowledge of the
usage of ATM facility they are not able to properly use it. For the graduates and
postgraduates, 91% and 100% respectively agrees that service efficiency increases
with the ATM facility. This is because due to their proper knowledge about its
utility they use it efficiently.
Null Hypothesis H0: There is no association between the educational qualification
of the respondent and their perception regarding the service efficiency of ATM.
Alternate Hypothesis H 1 : There is association between the educational
qualification of the respondent and their perception regarding the service efficiency
of ATM.
Chi-Square Tests
Pearson Chi-Square
Value
Df
66.611
20
.000
The p value comes to 0.000 which is less than the set value of alpha at 0.05.
Hence, we reject the null hypothesis and infer that there is a statistically significant
association educational qualification of the respondents and their perception
regarding the service efficiency of ATM.
Table 14 :
Q5: Gender of the respondents
Q10c: Perception of the respondents regarding the service efficiency of ATM.
140
Q10C
Q5
M
Total
F
17
24
Total
AG
DS
NO
SA
SD
7
3
5
2
23
31
8
18
29
11
1
1
0
62
90
28
From the above table it can be observed that approximately 64% of female
customer and 55% of the male customer agrees that ATM increases the service
efficiency of the bank. 28% of female customer and approximately 32% of the
customer have no opinion regarding the service efficiency of ATM.
7% of female customer and 6% of female customer disagrees with the fact that
ATM usage increases the service efficiency of the bank.
Hence it can be said that gender does not have much effect on the perception
regarding the service efficiency of the bank.
Null Hypothesis H0:There is no association between the educational qualification
of the respondent and their perception regarding the service efficiency of ATM.
Alternate Hypothesis H1:There is association between the educational qualification
of the respondent and their perception regarding the service efficiency of ATM.
Chi Square Test
Pearson Chi-Square
Value
Df
1.715
.788
The p value comes to 0.788 which is more than the set value of alpha at 0.05.
Hence, we accept the null hypothesis and infer that there is a statistically
no significant association between gender of the respondents and their
perception regarding the service efficiency of ATM.It is statistically also
proven from the above test that there is no relation in between gender profile of
the customers and their perception regarding the service efficiency of ATM.
Therefore the bank should take generalise step towards promoting he ATM facility
in regard to gender.
Table 15 :
Q6: Age of the respondents
Q10c: Perception of the respondents regarding the service efficiency of ATM.
Q10C
Q6
B
C
D
Total
A
14
7
2
24
Total
AG
DS
NO
SA
SD
1
3
2
0
5
0
14
10
7
31
0
18
3
1
29
7
0
1
0
1
0
49
23
10
90
141
From the above table it can be observed that 100% of the customers who belong
to age group below 25yrs strongly agree that usage of ATM increases the service
efficiency of bank. Approximately 64% of the customers belonging to age group
25yrs to 45yrs agree that service efficiency increases due to ATM, 29% have no
opinion and the rest 7% disagree with the fact that service efficiency increases
by using ATM. 43% of the customers belonging to age group 45yrs to 60yrs
agrees that service efficiency increases, 8% disagrees and the rest 43% have no
opinion. For the customers above 60yrs only 30% agrees that service efficiency
increases the rest 70% have no opinion.
Therefore it is observed that the age increases the perception regarding the
service efficiency due to ATM also changes.
Null Hypothesis: There is no association between the age of the respondents
and their perception regarding the service efficiency of ATM.
Alternate Hypothesis: There is association between the age of the respondents
and their perception regarding the service efficiency of ATM.
Chi-Square Tests
Pearson Chi-Square
Value
Df
24.823
12
.016
The p value comes to 0.016 which is less than the set value of alpha at 0.05.
Hence, we reject the null hypothesis and infer that there is a statistically significant
association between age of the respondents and their perception regarding the
service efficiency of ATM.
Table 16 :
Q2: Income group of the respondent
Q15: Overall experience of the respondents about the service efficiency of the ebanking facilities.
Q15
Total
GD
NU
Q2
H
21
9
30
L
0
30
30
M
22
8
30
Total
43
47
90
From the above table it can be observed that 100% of the low income group
customers have neutral opinion regarding the overall experience of e banking
facilities because they dont use it an therefore cannot comment on its service
efficiency. Approximately 73% of the middle income group customers find the
overall experience to be good and the rest have neutral opinion. For the high
income group customers 70% of them find the overall experience good. Hence
for both the middle and high income group the perception regarding the e banking
facilities provided by the bank is same, but for the low income group it is far
different.
142
Df
of the
the eof the
the e-
Pearson Chi-Square
41.237
2
.000
The p value comes to 0.000 which is less than the set value of alpha at 0.05.
Hence, we accept the null hypothesis and infer that there is statistically
significant association between the income of the respondents and their
overall experience about the service efficiency of e banking facilities.
Table 17 :
Q3: Occupation of the respondent
Q15: Overall experience of about the service efficiency of the e-banking facilities.
Q15
Total
GD
NU
Q3
B
12
17
29
H
2
10
12
R
1
9
10
SR
21
10
31
ST
7
1
8
Total
43
47
90
From the above table it can be observed that almost 59% of the business class
customers find the overall experience of e-banking facilities to be neutral and the
rest 41% find it good. But for the service class around 68% of them find it good.
88% of the customers who are student find the overall experience about the service
efficiency of the e-banking facilities to be good. Only 16% of the housewives and
10% of the retired customers find the overall experience to be good.
Null Hypothesis: There is no association between the occupation of the
respondent and their overall experience about the service efficiency of the ebanking facilities provided by the bank.
Alternate Hypothesis: There is association between the occupation of the
respondent and their overall experience about the service efficiency of the ebanking facilities provided by the bank.
Chi-Square Tests
Pearson Chi-Square
Value
Df
20.862
.000
143
The p value comes to 0.000 which is less than the set value of alpha at 0.05.
Hence, we reject the null hypothesis and infer that there is statistically
significant association between the occupation of the respondents and
their overall experience about the service efficiency of the e-banking
facilities.
Table 18 :
Q4: Educational qualification of the respondent
Q15:Overall experience of the respondents about the service efficiency of the ebanking facilities.
Q4
Total
BT
G
N
PG
TN
TW
Q15
GD
0
23
0
6
3
11
43
Total
NU
14
10
3
0
13
7
47
14
33
3
6
16
18
90
From the above table it can be observed that 100% of the customers who are
below class ten qualified and never went to school have neutral opinion about
the overall experience of the service efficiency of the e banking facilities.
Approximately 19% of the customers who are 10 th qualified find the overall
experience to be good and the rest 81% have neutral opinion. 61% of the
customers who are 12th qualified find the overall experience to be good and the
rest 39% have neutral opinion. The customers who are graduate, 70% out of
them find the overall experience about the service efficiency of the e banking
facilities to be good and the rest 30% find it neutral. 100% of the post graduate
customers find the overall experience to be good.
Null Hypothesis H0: There is no association between the educational qualification
of the respondent and their overall experience about the service efficiency of ebanking facilities
Alternate Hypothesis H 1: There is association between the educational
qualification of the respondent and their overall experience about the service
efficiency of e-banking facilities.
Chi-Square Tests
Pearson Chi-Square
Value
Df
35.152
.000
The p value comes to 0.000 which is less than the value of alpha at 0.05.Hence,
we reject the null hypothesis and infer that there is statistically significant association
between the educational qualification of the respondents and their overall
experience about the service efficiency of the e-banking facilities.
144
Table 19 :
Q5: Gender of the respondents
Q15: Overall experience of the respondents about the service efficiency of the ebanking facilities.
Q15
Total
GD
NU
Q5
F
15
13
28
M
28
34
62
Total
43
47
90
From the above table it can be observed that 53% of the female customer finds
the overall experience good and the rest 47% finds it neutral. Approximately 45%
of the male customer finds the overall experience good and the rest 55% find it
neutral.
So we see that there is not much difference in the perception of male and female
customers. Hence the gender profile does not affect the perception of the customer
regarding the overall experience about the service efficiency of e banking facilities.
Null Hypothesis H 0 : There is no association between the gender of the
respondent and their overall experience about the service efficiency of the ebanking facilities provided by the bank.
Alternate Hypothesis H 1: There is association between the gender of the
respondent and their overall experience about the service efficiency of the ebanking facilities provided by the bank
Chi square test
Value
Df
Pearson Chi-Square
.547
1
.460
The p value comes to 0.460 which is more than the set value of alpha at 0.05.
Hence, we accept the null hypothesis and infer that there is statistically no
significant association between the gender of the respondents and their overall
experience regarding the service efficiency of the e banking facilities.
Table 20 :
Q6: Age of the respondents
Q15: Overall experience of the respondents about the service efficiency of the ebanking facilities.
Q15
Total
GD
NU
Q6
A
7
1
8
B
28
21
49
C
7
16
23
D
1
9
10
Total
43
47
90
Kindler Vol. XV l No. 1 l January-June 2015
145
From the above table it can be observed that 88% of the customers who belong
to age below 25yrs find the overall experience to be good. Approximately 57% of
the customers who belong to age 25yrs to 45yrs find the overall experience of to
be good and the rest 43% have neutral opinion. 30% of the customer of age
group 45yrs to 60yrs thinks that the overall experience is good and the rest 70%
have neutral opinion. Only 10% of the age group above 60yrs find the overall
experience good and the rest 90% finds it neutral. So we see that as the age
increases perception regarding the overall experience about the service efficiency
of e banking facilities moves from good to neutral.
Null Hypothesis H0: There is no association between the age of the respondent
and their overall experience about the service efficiency of the e-banking facilities
provided by the bank.
Alternate Hypothesis H1: There is association between the age of the respondent
and their overall experience about the service efficiency of the e-banking facilities
provided by the bank.
Chi-Square Tests
Pearson Chi-Square
Value
Df
15.274
.002
The p value comes to 0.002 which is more than the set value of alpha at 0.05.
Hence, we reject the null hypothesis and infer that there is statistically significant
association between the age of the respondents and their overall experience about
the service efficiency of the e banking facilities.
FINDINGS AND CONCLUSION
The major findings from the study are as follows:
The demographic profile of the customers of Dobson lane branch, Bank of India
comprises majority of them 69% as males, the occupation of majority of them is
business and service, the age group 25yrs to 45yrs forms 54% of the customer,
the educational qualification of majority of them is graduation and 3% have never
went to school.
The maximum used e-banking service is ATM, followed by RTGS/NEFT and the
least used is e-pay service. The mobile banking and internet banking is also
used by very low percentage of the customers. It was found out that around 24%
of the customers do not use any of thee-banking service.
It was found that both the frequency of usage of various e-banking services and
the demographic profile affects the perception of the customers regarding the
contribution of e banking facilities towards the enhancement of service quality of
bank.
The frequency of usage of the e banking service directly associates with the
perception of the customer. It was observed that as the frequency of usage of
ATM increases, the perception also changes accordingly. The customer who do
not use it they have no opinion, who uses 2-5 times they agree that service
efficiency increases and the one who uses more than 5 times strongly agrees
146
with the fact that service efficiency of bank increases with the usage of ATM.
Likewise similar pattern was found out with all the other facilities that is internet
banking, mobile banking, RTGS/NEFT and e pay. So it can be concluded that as
the frequency of usage of e-banking services increases, the attitude of customers
also becomes more positive towards the fact that usage of e-banking services
increases the service efficiency and the service quality of the bank.
After the analysis it was found that certain demographic profile like income group,
occupation, educational qualification and age has strong association with the
perception of customers regarding the enhancement of service efficiency through
e banking services.
High income group and middle income group customers have positive perception
about the e-banking services and they agree that it increases the service efficiency
and quality of the bank. Whereas the low income group customers have no opinion
as they do not use the facility.
The customers who are students and those who belong to service class,they
have the most positive attitude towards the perception that e-banking services
increases the service efficiency of the bank.
The educational qualification also has strong association with the perception of
the customers. It was observed that as the educational qualification increases the
perception of the customers that service efficiency of bank increases due to usage
of e banking facilities also becomes more positive. The entire post graduate
customer strongly agrees with the above fact.
The age profile also affects the perception of the customers regarding the usage
of e-banking services to increase the service efficiency of the bank. As the age
increases the opinion of the customer changes from positive to neutral. The
customers belonging to age group below 25yrs are the majority of them who
have positive perception.
The gender do not have much effect on the perception of customers regarding
the fact that service efficiency of bank is increased by using e banking service.
Hence it can be concluded from the data collected and analysis that the frequency
of usage of various e-banking services and the different demographic profile are
the factors that contribute to positive perception about enhancement of service
quality of banks through technology that is e banking facilities.
CONSTRAINTS & LIMITATIONS
l As whole of my project and my findings are based on the information
gathered through the questionnaire, hence there might be a possibility
that some informations are not fully correct.
l There is a chance of biasness in the survey as it is part of human
nature.
l The time period allotted for the study was only of 8 weeks, which may
provide a deceptive picture in comparison of the study based on long
run.
Kindler Vol. XV l No. 1 l January-June 2015
147
l
l
The sample size considered for the survey does not give a holistic
picture.
The respondents chosen were on the basis of judgemental and
convenience sampling, hence once again does not give us a complete
picture of the status of the bank.
The study was limited to just the branch which was allotted to me.
RECOMMENDATIONS
Based on the findings from the study conducted at Dobson Lane Branch, HowrahBank of India, I would like to give the following recommendations:
l First of all the bank should increase the awareness of their e-banking
facilities among the customers and potential customers. They should
conduct awareness programs and promote through different media
channels.
l The bank should train their staffs because that is very important to build
relationship with their customers and help them in using the e banking
facilities.
l The online portal that provides the e-banking services need up gradation
and needs to be more users friendly.
l Penetration of E-banking corners needs to be improved.
l There should be personal assistance available at e-banking corners.
REFERENCES
1.
Fatima, S., & Edwin, M. (2011, October). Impact of Service Quality in Commercial Banks
on the Customers Satisfaction: An Empirical Study.
2.
3.
4.
5.
6.
http://www.ukessays.com/dissertation/examples/information-systems/the-convenience-of-ebanking.php. (n.d.).
7.
8.
Kaur, N., & Kiran, R. (2015). E-Banking Service Quality and Customer Quality: Changing
Dynamics of Public, Private and Foreign Bank Consumers in India. Global Business and
Management Research: An International Journal, VII(1).
9.
Lovelock, C., & Writz, J. (7th Edition). Services Marketing: People, Technology, Strategy.
Pearson Education.
149
ANNEXURE 1
NAME:-
2)
3)
4)
5)
6)
45YRS TO 60YRS
ABOVE 60YRS
7)
SAVINGS ACCOUNT
FIXED DEPOSIT
RECURRING DEPOSIT
8)
3-5 TIMES
5-10 TIMES
9)
10)
RTGS/NEFT
e-PAY
a) HOW OFTEN DO YOU USE ATM IN A MONTH?
NEVER
1-2 TIMES
NONE
3-5 TIMES
WHICH SERVICES DO YOU AVAIL OF AT ATMs? (Please rank the facilities by putting
one number from 1 to 5 against each facility. 1 means the facility used most by you
and 5 means the facility least used by you)
CASH WITHDRAWAL
BALANCE ENQUIRY
CHEQUE BOOK REQUEST
c)
OTHERS
SERVICE EFFICIENCY OF THE BANK IS INCREASED THROUGH ATMs.
STRONGLY DISAGREE
DISAGREE
NO OPINION
AGREE
150
STRONGLY AGREE
Kindler Vol. XV l No. 1 l January-June 2015
11)
a)
1-2 TIMES
3-5 TIMES
12)
a)
DISAGREE
AGREE
STRONGLY AGREE
NO OPINION
1-2 TIMES
3-5 TIMES
13)
a)
DISAGREE
AGREE
STRONGLY AGREE
NO OPINION
1-2 TIMES
3-5 TIMES
14)
a)
DISAGREE
AGREE
STRONGLY AGREE
NO OPINION
1-2 TIMES
3-5 TIMES
15)
DISAGREE
AGREE
STRONGLY AGREE
NO OPINION
BAD
GOOD
VERY GOOD
NEUTRAL
151
ANNEXURE 2
CODE SHEET
Q2
Q3
Q4
HIGH
MIDDLE
INT. BANKING
LOW
MOB. BANKING
Q6
Q7
Q8
152
ATM
DISAGREE
NO OPINION
RTGS/NEFT
AGREE
E-PAY
STR. AGREE
NONE
ST
1-2
1-2
BUSINESS
3-5
3-5
RETIRED
>5
>5
OTHERS
OT
POST GRAD
PG
GRADUATION
Q10B
CASH WTHD.
CW
Q13A NEVER
AG
SA
SR
HW
DS
NO
SERVICE
HOUSEWIFE
Q10A NEVER
SD
STUDENT
SD
BAL. ENQ.
BE
DISAGREE
DS
TW
CB
NO OPINION
NO
TENTH
TN
OTHERS
OT
AGREE
AG
BELOW TEN
BT
STR. AGREE
SA
TWELFTH
Q5
Q9
NEVER
MALE
FEMALE
Q10C
Q11A
STR. DISAGREE
SD
DISAGREE
DS
Q14A NEVER
1-2
NO OPINION
NO
3-5
AGREE
AG
>5
STR. AGREE
SA
BELOW 25
NEVER
25-45
1-2
DISAGREE
DS
45-60
3-5
NO OPINION
NO
ABOVE 60
>5
AGREE
AG
STR. AGREE
SA
CA
STR. DISAGREE
SD
VERY BAD
VB
SAVINGS
SA
DISAGREE
DS
BAD
BD
FIXED
FA
NO OPINION
NO
NEUTRAL
NU
RECURRING
RD
AGREE
AG
GOOD
GD
STR. AGREE
SA
VERY GOOD
VG
1-2
A
B
Q12A NEVER
1-2
Q15
SD
CURRENT
3-5
Q11B
A
B
5-10
3-5
>10
>5
BOOK REVIEW
This comprehensive text provides an engaging look into new and traditional strategic
management topics. Hunger and Wheelens thorough coverage of topics helps
students develop an understanding of the wide range of theories and research
available in this field, from competitive strategy and industry analysis to environmental
trends and ethics. Integration of international issues throughout provides an essential
understanding of global economics and its impact on business activities in any
location. This edition includes a new theme, environmental sustainability dealing
with issues of climate change, global warming, energy crisis etc. Each chapter
contains a boxed insert dealing with an issue in environmental sustainability. Each
chapter ends with Eco Bits, interesting tit-bits of ecological information, such as the
number of plastic bags added to landfills each year.
This book contains a Strategic Management Model that runs through the first 11
chapters and is made operational through the Strategic Audit, a complete case
analysis methodology. The concepts are furtjer clarified through 35 Cases included
in this book, 22 of which are exclusive and do not appear in other books. Special
chapters deal with strategic issues in managing technology and innovation,
entrepreneurial ventures and small businesses, and not-for-profit organizations.
Kindler Vol. XV l No. 1 l January-June 2015
155
This edition is divided into seven parts, the first four focusing on Introduction to
Strategic Management and Business Policy, Scanning the Environment, Strategy
Formulation, Strategy Implementation and Control respectively. A separate part of
WEB CHAPTERS dedicated to Strategic Issues in Managing Technology & Innovation,
Entrepreneurial Ventures & Small Businesses and Not-For-Profit Organizations make
this text a unique one. An experiential exercise focusing on the material covered
in each chapter helps the reader to apply strategic concepts to an actual situation.
Reviewed by:
Dr Malini Majumdar
Associate Professor
Army Institute of Management
Alipore, Kolkata
Email: malini_majumdar@hotmail.com
156
MOVIE REVIEW
157
her to and fro flights between Boston and New York, Kate does not have the time
for her daughters bake sale or her husbands problems, leading to turn her life
into living hell. Her sons first words are Bye, Mom which highlights her lack of
maternal skills and makes her an easy target for her mother-in-law and her other
nemeses. Being exceptionally good and innovative at her job, Kate bears the
wrath of several of her competitors and tries to carve a niche for herself despite
all the treachery. Parallel to the household chores is her tasking job in a finance
firm under Jack Abelhammer (Pierce Brosnan) who keeps Kate on her toes.
Abelhammer is a suave, calm and chivalrous head of the finance company who
warms to Kates chaos and frenzy. Impressed by her persistence and dedication,
Abelhammer gradually develops a soft corner for Kate which makes matters worse.
Richard is exhausted with Kates affair with her Blackberry and the kids are tired
of seeing their mother off all the time.
In all this juggling, one would expect Kate to give up and be a stay-at-home mom
but much to the viewers surprise, Kate decides to take things in her stride and
continues to balance both her lives. Even though every triumph is offset by an
embarrassment: she is caught adjusting her skirt, develops lice right before a
business meeting or carries a bag full of pretzels, Kate does not cease her fight.
With the support of her husband and her best friend Allison (Christina Hendricks),
Kate manages to host her daughters birthday party as well as give a brilliant
presentation to clients in New York.
The movie subtly shows the dilemma that working women face, when starting a
family. Momo (Olivia Munn), Kates assistant is troubled with being pregnant as she
worries it will damage her career. Kate swoops in and convinces Momo against and
abortion as kids are the only true joy and not cash.
By the end of the movie, Kate emerges victorious as she is successful in keeping
her marriage steady, meets her promise of making a snowman in the first snowfall
with her kids and does not let the office figures take a plunge. It is the ending every
woman dreams of and touches the heart of many in the same boat. The big
revelation, trying to be a man is a waste of a woman is the hard truth but Kates
non defeatist attitude should be an inspiration for every girl out there trying to be
a career woman.
Reviewed by:
Mahima Chawla
Student, MBA, 2nd Year
Batch 18 (2014-16)
Email: mahima.chawla4@yahoo.co.in
158