CHAPTER 4:

RESEARCH
METHODOLOGY
57
 4. RESEARCH METHODOLOGY

The present study is just a humble effort to analyze performance of the share broker's

services. Moreover, researcher will also try to analyze customer requirement considering

other dimensions such as amount of investment, mode of trading, broker's experience,

client's experience, etc. The researcher being a resident, by birth and profession, of the

city of Surat, has chosen the district of Surat for conducting an in-depth research study.

4.1. Problem Statement

"An'Evaluation of Performance of Services Offered by Stock Broker"

4.2. Significance of the Study

The development of internet has brought the revolutionary impact for the way of

traditional financial investment. Securities have scrambled to launch online stock.

Therefore, it is directed at online trading investors' demands to understand service quality

. that customers really care, and improve them is becoming increasingly essential topic.

This study attempts to construct importance - satisfaction analysis to become helpful

reference for the existent or new entrant securities in implementing online stock trading

service quality. Also it provides securities industry's objective criteria to evaluate the

performance of implementing service quality. The empirical results show that importance

- satisfaction analysis model can define the quadrant of service quality elements that

contributes to securities industry in administration strategic mean.

1 JO
4.3. Research Questions

The study examines performance of services offered by stock broker. In order to achieve

the above mentioned objective, the researcher addresses the following questions:

1. What is the socio-economic profile of investors using stock broker's services?

2. What are the factors which significantly influences service satisfaction of the,

customer?

3. What are the facilities which are of importance in trading software?

4. Does the socio-economic profile of investor significantly influence service satisfaction

of the customer?

5. Does the socio-economic profile of investor significantly influence facilities required

in trading software?

6. Does the socio-economic profile of investor significantly influence performance of the

stock broker?

4.4. Objectives of the Study

4.4.1. Primary Objectives

Objective 1: To study the socio-economic profile of investors using stock broker's

services [online / offline]

Objective 2: To study the performance of stock broker services according to customers

availing their services.

Objective 3: To identify key factors which affect the performance of the stock broker

services.

59
 4.4.2. Secondary Objectives

Objective 1: To study the influence of the socio-economic variables on service.

satisfaction of the respondent.

Objective 2: To study the influence of the socio-economic variables on the facilities

required in trading software.

Objective 3: To study the influence of the socio-economic variables on the performance

of the services offered by stock broker.

4.5. Identification of Variables

The researcher has identified dependent and independent variables for the present study

which are listed on next page:

4.1. Variables under Study

Independent Variables Dependent Variables

Age [Ganapathi et al., 2007], [Khurana, . Facilities required in trading software
i 2009] [Ganapathi et al., 2007], [Khurana, 2009],,
I, • [Shieh et al., 2006], [Jun-et al., 2004],'
' • - • ' [Sandhu et al., 2006] , .,;
! Gender [Ganapathi et al., 2007],. [Khurana, '• Satisfaction level of services offered by ;
. 2009] stock brokers [Ganapathi et al., 2007], {
: . [Khurana, 2009], [Shieh et al., 2006], [Jun j
• ' i et al., 2004], [Ruyter K. et al., 1997], i
i J [Hudson [Link]., 2000] , J
; Qualification [Ganapathi et al, 2007], Performance of services offered by stock'^
, [Kliurana, 2009] brokers [Ganapathi et al., 2007],-;
• [Khurana, 2009], [Shieh et al.,' 2006], [Jun i
et al., 2004], [Ruyter K. et al., 1997], j
:' . , . . . , u [Hudson R. et al., 2000] J
; Amount of Investment [Ganapathi et al., |
!2oq7] _ l ^_;__ J
\ Mode of Trading[Offline / Online] ''\
I [Ganapathi et al., 2007] .. ^ • ., •. i
I Broker's Experience [Ganapathi et al., I " i
! 2007]^ [Khurana, 2009] \ , j
I Client's Experience [Ganapathi et al., ' . ' i
[2007], [laurana, 2009] • ;; •_ „L ........ ._. .. >/ ,.. . J
(Source: Based on Literature Revieiv)

60
4.6. Research Design

A research design is the specification of the method and procedures for acquiring

the information needed, or we can say it is the plan or framework for a study i.e. use as

guide in collecting and analyzing data. Research design provides the glue that holds the

research project together. A design is used to structure the research, to show how all of

the major parts of the research project - the samples or groups, measures, treatments or

programs, and methods of assignment - work together to try to address the central

research questions. The present study is a two stage research design consisting of

exploratory and descriptive research.

4.6.1. Exploratory research

As per Bhattacharya (2003) exploratory research is carried out when the goal of

study is to document the object completely including earlier researches. Exploratory

research often relies on secondary research such as reviewing available literature and/or

data, or qualitative approaches such as informal discussions with consumers, employees,

management or competitors, and more formal approaches through in-depth interviews,

focus groups, projective methods, case studies or pilot studies.

Focus Group Interview

Focus Group Interview is a qualitative type of research. In recent years focus-group

interviews, as a means of qualitative data collection, have gained popularity amongst

professionals within the health and social care arena. Despite this popularity, analysing

qualitative data, particularly focus-group interviews, poses a challenge to most

practitioner researchers.

J 6,
 The researcher carried focus group interview with stock brokers, investors and

financial securities analysts for the identification of the services offered by them. The

methodology of the researcher for carrying out focus group interview is as below:

1. The researcher selected the pool of participants which formed the part of focus group

interview. The participants included dealer of the broking house and investors availing

broker's services. The total numbers of participants were 20.

2. The researcher invited them for the focus group interview. The researcher acted as a

moderator. The researcher revealed the subject to participants. The elements of focus

group intei-view are given in Table No.4.2.

4.2. Elements of Focus Group Interview

Element Focus Groups

Format Group Sessions
Size 20 participants per session
Length ,, . ; ' 1.5 hours •"
Number of Sessions . 1
Participants Selected by Invitation Only
Forms of Data Conversation
Data Collection Transcribe
Formats of Reporting Analysis of Repeated Themes,
Selected Quotations
On the basis of focus group interview and literature review the services offered by stock

broker can be broadly classified into three categories. In regards to the services a stock

broker can tender there "are three basic levels that include only execution, portfolio

management and stock recommendations (advice). If a stock broker deals only with the

buying and selling of particular shares as per the instructions received from you, this is

generally called as execution only or by dealing only with the more flexible terms. With

this type of service, they do not offer you any advice on any action you want to make.

Generally, investors who are experienced investors or beginner in stock market investing

62 1
will use this type of service. This type of service is cheaper and extremely efficient.

Portfolio management is another important services offered by Stock brokers. Portfolio

management is particularly detailed and the most expensive type of service with the

advice and dealing with advice is usually a little more expensive than execution only

because the stock broker will offer advice and views on what happens in the stock

market. The stock broker, at this level of service will also take time to explain everything

that you may not understand vei-y well.

In the portfolio management service offered by the stock brokers, you can

separate these into two other categories, these are advisory and discretionary. When

under the category of advisory, the stock broker will generate a proposal for your

portfolio, but the stock broker will not take any action without your consent.

Based on literature review and focus group discussion to analyze the performance

of broker's services a pool of 26 statements/items describing the diverse dimensions of

performance was developed on 5 point Likert Like Scale which are given below:

1. Ease of placing order.

2. Viewing exposures [margin account]

3. Viewing positions taken

4. Viewing traded shares

5. Viewing contract note

6.'Alertfacilities for percentage change in price

7. Alertfacilities for percentage change in volume of shares

8. Viewing charts

9. Opening multiple screens

OJ
10. Advisory services provided by your share broker

11. Trading tips provided by your share broker in the morning before 9:55 am

12. Trading tips provided by your share broker during trading time

13. Timely placing of orders

14. Timely sending of ledgers (contract note)

15. Execution of trades by dealer on your behalf

16. Proper response from the dealer

17. Providing exposures properly

18. Informing clients regarding t+5, short margin and span short

19. RMS providing cheque collection facility to clients

20. Timely opening limit for clients

21. Fundamental advice provided by the dealer

22. Technical advice provided by the dealer

23. Number of dealers available to place order

24. Seatingfacility providedfor customers

25. Placing order in the broker's office if there is any difficulty to place the order from

the customer's terminal

26. Attitude of dealer towards clients .

4.6.2. Descriptive Research

Descriptive research utilizes data collection and analysis techniques that yield reports

concerning the measures of central tendency, variation, and correlation. The combination,

of its characteristic summary and correlation statistics, along with its focus on specific

types of research questions, methods, and outcomes is what distinguishes descriptive

64
research from other research types. The researcher identified various variables which

were classified into dependent and independent variables for formulating various

hypotheses.

4.7. Sources of Data

The researcher used primary as well as secondary sources for data collection.

4.7.1. Secondary Sources of Data

The data and infonnation required for the study were collected from various secondary

sources which include research journals, reports and various books. Various online

journals have been referred such as Oxford, Emerald, Springer, Jstor, etc.

4.7.2. Primary Sources of Data

The present study is based on primary data. The relevant data has been collected from a

sample of 535 investors using well drafted and pre-tested structured questionnaire. It was

found that 10 questionnaires had incomplete responses and thus effective sample size was

525. The data was collected from residents of Surat District availing stock broker

services.

4.8. Sampling Plan

In statistics and survey methodology, sampling is concerned with the selection of

a subset of individuals from within a population to estimate characteristics of the whole

population. Sampling plans should be designed in such a way that the resulting data will

contain a representative sample of the parameters of interest and allow for all questions,

as stated in the goals, to be answered. The three main advantages of sampling are that the

cost is lower, data collection is faster, and since the data set is smaller it is possible to

65 1
ensure homogeneity and to improve the accuracy and quality of the data. Researchers

rarely survey the entire population because the cost of a census is too high.

4.8.1. Target Population

All the residents of Surat District Availing Stock Broker Services.

4.8.2 Sampling Unit

Resident of Surat District who is availing stock broker services is a sampling unit

for the research.

4.8.3. Sampling Technique

The data was collected from Surat District by Non-Probabilistic Convenience

Sampling. The survey was conducted during May 2011 and January 2012. As it was not

easy for researcher to have correct estimates of the population in Surat City, the

researcher also employed Snowball Sampling Technique. In Snowball Sampling

Technique participants are approached using previous reference. So this technique works

well as by giving reference the participants willingness to reveal the correct information

increases and honesty of the participants-could be more conducive.

4.8.4. Sample Size

The relevant data has been collected from a sample of 535 investors using well drafted

and pre-tested structured questionnaire. It was found that 10 questionnaires had

incomplete responses and thus effective sample size was 525. The data was collected

from Surat District. The researcher has used his own judgment keeping in mind the

statistical requirement for Data Analysis.

66
4.9. Instrument for Data Collection

The process of instrument development was followed by the researcher as

suggested by Business Research Methods by Cooper and Schindler (2004). The

variables as identified by the review of literature and theoretical foundation based on

research objectives were considered. Depending on the Data. Sensitivity required the

variable was converted into questions with appropriate levels were developed and then

converted into the final instrument as given in Table No. 4.3. A structured questionnaire

with the help of industry experts in the area of stock broking services and academicians

was developed. For testing the reliability of the instrument research carried out Cronbach

Alpha Reliability Test as discussed in Section 4.10.

The researcher had used 5 Point Likert Like Scale to measure importance and

performance of services. As per BIack(2010) 5 Point Likert Scale is ordinal level of

measurement so we can employ only Non-Parametric Test for hypothesis testing. In case

of Likert Scale, the researcher attempts to measure the response of the respondent to each

element with one's ranking of performance. The categories are assigned scores and one's

total score measure the respondent's attitude, which is the sum of the scores of the

categories endorsed by him.

Each respondent is asked to rate each question on five point response scale,

where: l=Excellent, 2=Very Good, 3=Good, 4=Fair, 5=Poor. The reasons for using 5

point Likert Like Scale are given below:

1. Survey respondents might truly feel neutral about a given topic, and presenting to these

respondents a scale without a neutral midpoint can introduce respondent bias as

respondents are forced to chose a more positive or negative response.

67
 2. Neutral is a legitimate opinion that exists among respondents.

3. With a 5-point scale questionnaire has [Link] midpoint. The "3'! rating is right in the

middle and it indicates neutrality or mixed satisfaction. When calculating the mean

weighted average, researcher has a standard point of comparison. One will know instantly

that an average rating of 3.4 is above neutral and a 2.8 is below.

4.3. Item-wise Objective Classification

j Research Independent Variable Dependent Questionnaire

'\ Objective Variable - No.
, Primary Age, Gender, Qualification, Occupation, 3,4,5,6,7,8,9,
1 Objective Broker's Name, Amount of Investment, 10,11.
i No.l Mode of Trading, Broker's Experience,
,- _ _ ^ Client's Experience
'. Primary | Age, Gender, Qualification, Occupation. Services
i Objective \ Broker's Name, Amount of Investment, Offered by 10,11,14
; No.2 I Mode of Trading, Broker's Experience, \ Stock Broker
( > Client's Experience
I Primary Services
! Objective Offered by 9

;__No.3_^ Stock Broker

' Secondary : Age, Gender, Qualification, Occupation, Satisfaction 3,4,5,6,7,8,9,
I • Objective Broker's Narhe, Amount of Investment, Level 10,11,12
I "No.T Mode ofTrading, Broker's Experience,
1 Client's Experience _
; Secondary - Age, Gender, Qualification, Occupation, Facilities 3,4,5,6,7,8,9, .
' Objective - Broker'sName, Amount of Investment, Required in 10.11,13
j No.2 Mode ofTrading, Broker's Experience, Trading
; " • Client's Experience Software
j Secondary \ Age, Gender, Qualification, Occupation, Services 3,4,5,6,7,8,9,
J Objective j Broker'sName, Amount of Investment, Offered by 10,11,14
j No.3 1 Mode ofTrading, Broker's Experience, Stock Broker
i - Client's Experience

68' T
4.10. Attitudinal Scale Development and Refinement

Scale Development: A set of 26 statements assessing the attitude of investors towards

performance of brokers was designed by consulting relevant literature (Ganapathi R.

and Ramasamy T., 2007) and after having interaction and discussion with well-known

brokers, investors and stock analysts. The [Link] is listed in Annexure.

Scale Refinement: The above mentioned scale was refined using reliability analysis with

a view to develop a reliable scale for measuring the attitude of investors towards share

brokers. Reliability analysis was performed for developing a reliable scale. Cronbach

alpha statistics were employed. Cronbach alpha measures the internal consistency of the

items. For the purpose of this research, alpha coefficient has been computed separately to

assess the reliability of the scales adopted in the study. Results of reliability analysis are

given in table below^ If coefficient of alpha is above 0.60, it is considered to be reliable.

All alpha coefficient ranges from 0.72 to 0.80, thereby, indicating good consistency

among the items within each dimension and scale.

4.4. Cronbach Alpha Coefficient

SI. No. Name of the Scale Cronbach Alpha

1 hnportanceof Trading Software 0.72

2 Safisfactionoflnvestor Towards Share broker 0.80

r"""i9"
4.11. Pretesting Procedures

Pre-testing of questionnaire was carried out qualitatively as well as quantitatively in order

to eliminate any ambiguity, and ensure its readability, validity, reliability and flow. For

qualitative testing of questionnaire opinions were sought of five eminent personalities.

Out of seven, four of them are employees of broking firm and remaining are from

academics who carry out research activities at various levels. Feedbacks were collected

about the questionnaire and necessary changes were incorporated to it. For quantitative

testing as already discussed in Section 4.10. Cronbach Alpha Reliability Test was carried

out. Cronbach's alpha is a measure of internal consistency, that is, how closely related a

set of items are as a group. A "high" value of alpha is often used (along with substantive

arguments and possibly other statistical measures) as evidence that the items measure an

underlying (or latent) construct. However, a high alpha does not imply that the measure is

unidimensional. If, in addition to measuring internal consistency, you wish to provide

evidence that the scale in question is unidimensional, additional analyses can be

performed. Exploratory factor analysis is one method of checking dimensionality.

Technically speaking, Cronbach's alpha is not a statistical test - it is a coefficient of

reliability (or consistency).

4.12. Statistical Analysis

• Frequency analysis and weighted average method is employed for data

description-.

• In order to examine significant relationship between independent variables and

dependent variable non-parametric such as Mann Whitney U Test and Kruskal'

Wallis Test is applied.

70 "!_
 • , In order to identify key factors affecting the satisfaction level of the customers

factor analysis, discriminant analysis and logistic regression is carried out.

4.13. Statistical Package

Above data analysis would be carried out with the help of Statistical Package for Social

Science (SPSS).

4.14. Limitations of the Study

This study is by no means an exhaustive one as it has been carried out with many

constraints, some of them arising out of human element. Following are the limitations

and constraints of the present study, under which researcher had to work.

1. Time Constraints

The present study was carried out with the regular job of teaching and other

assignments related to job. Sp there was time constraint for researcher to carry out

research.

2. Non-availability of secondary data

There was non-availability of sufficient literature specific to performance of stock

brokers as a benchmark for comparison. If some published research study would have

been available, it may perhaps have helped in making the study still better. Better

statistical techniques could also have been employed to carry out credit risk assessment

but could not be used as availability of data was constraint.

3. Possibility of bias in respondents answers

There is possibility that the answers given by respondents may be biased, which-

was a further constraint within which a study of this nature had to operate.
4. Non-Generalization of the results

The study was confined to Surat District and its finding may not be applicable to

other areas. Since secondary data have been collected from more than one sources, there

may be slight discrepancies between one source and another on the same variable.

5. Qualitative aspects

Questionnaire focuses more on qualitative aspect of performance of services

rather than quantitative aspect which means that researcher has .only considered

performance qualitatively and not quantitatively which may include profits obtained from

any particular broker.

6. Unanswered questions

Some of the issues in the questionnaire remain answered either due to lack of

understanding of the subject or because of reluctance to share information.

4.15. Presentation of the study

The study has been presented in eight chapters as follows:

• Chapter 1 explains the history and growth of stock market in Indian Context which

includes Pre-Independence, Post Independence Scenario, Pre Liberalization and Post

Liberalization Era. This chapter also discuss broad frame work of National Stock

Exchange, Over the Counter Exchange of India (OTCEI) and its functions.

• Chapter 2 deals with composition and grovv1;h of service sector in India. Moreover,

this chapter also discusses types of stock broker services and its benefits to customer.

• Chapter 3 reviews past literature on performance of stock broker services. The two

specific researches on the topic is done by Ganapathi R. & Ramasamy R. (2007)

and Khurana (2009). Khurana(2009) carried out research with the objectives of

i 72
 identifying customer preferences towards online banking and to find out the various

service quality dimensions which affect the performance. Primary data was collected

from internet bank users of public and private banks in Hissar District with the help

of a structured questionnaire. As per the research it was found people of all age

groups, gender and profession perceive responsiveness as important factor. The

second most influencing factor was reliability and third factor was efficiency.

Ganapathi R. and Ramasamy T.(2007) studied customer's expectations towards

share brokers. The study was initiated in the Coimbatore city. The sample size was

100 respondents.

• Chapter 4 describes the research statement, divulges the need for research,

objectives, type of research, sources of data collection, sample design, instrument for

data collection, scales used, limitations and presentation of the study.

• Chapter 5 deals vvith data analysis segregated into two sections. First Section

includes Data Analysis using Descriptive Statistics and Second Section deals with

Data Analysis using Inferential Statistics. In Inferential Statistics the researcher has

carried out Non-Parametric Test, Factor Analysis, Discriminant Analysis, and

Logistic Regression to identify key service factors requirements which affect the

performance of the stock broker.

• In Chapter 6 the researcher has reported major findings of the research.

• Chapter 7 is the concluding chapter where the whole research work is summarized

and conclusions pertaining to the objectives of the study are described.

• Chapter 8 deals with suggestion for improving performance of stock brokers in The

Surat District Region under study.

73
4.16. Scope for further research

Research is a perennial process. Hence it is pertinent that every research report

should conclude with a write-up on the scope for and contents of further research in the

light of the findings of the present study. According to Goode and Hatt, "finally the

study may end with some suggestions for further research or a statement of further

problems which remain uncovered during investigation."

The scope for further research on this subject can be much more wide

encompassing different areas/interests, but in order to be more precise, it is suggested that

the major areas which can be subjected to further research study may be listed as follows:

1. Intra-state/Inter-state comparison of Performance of Stock Broker Services.

2. Performance of Stock Broker Services can be studied with the total exposure of the

stock broker, total number of clients, returns generated.

3. Comparison of Performance of Stock Broker Services with the Banks offering similar

services.

4. Comparison of trading software used by different broking firm.

5. SERVQUAL model can be applied in bridging the gap between expected and

perceived services of broker. SERVQUAL was developed in the mid eighties by

ZeithamI, Parasuraman & Berry.

6. Comparison can be made between individual investors and institutional investors in

terms of satisfaction derived from the performance of stock brokers services.

74
4.17. Benefits of the Study

The researcher is of the opinion that the present study can make its contribution in

two ways.

1. It describes the customer preferences towards stock broker's services.

2. It explains various quality dimensions that affect customer satisfaction and importance

of each factor. Various stock brokers have to take important steps to improve their

services to give more value and satisfactions to customers. This study attempts to

construct importance - satisfaction analysis which works as guidelines for the existent or

new entrant securities in implementing online stock trading service quality. Also it

provides securities industry's objective criteria to evaluate the performance of

implementing service quality. The empirical results show that importance - satisfaction

analysis can define the gamut of service quality elements that contributes to securities

industry.

3. The findings of the study also hold practical implications for brokers that are currently

offering services as well as banks that are planning to offer such service.

75